ACIT, CHANDIGARH V. THE PUNJABI UNIVERSITY, PATIALA

ITA 359/CHANDI/2024

AI Insights

The case revolves around the Punjabi University, Patiala, which initially claimed depreciation on an asset whose cost was also claimed as a deduction towards the application of income for charitable purposes. This dual claim was disallowed under the amended Section 11(6) of the Income Tax Act, 1961, effective from April 1, 2015. The University, upon realization and after being granted registration under Section 12AA, withdrew its claim for depreciation and offered the income for taxation. The Assessing Officer imposed a penalty for underreporting income, which was later contested and deleted by the CIT(A). The Revenue's appeal against this deletion was dismissed by the Tribunal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 298524 (ITAT-CHANDIGARH)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-04-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2018-2019
• Other Referred Cases: CIT Vs Rajiv Batra 360 ITR 121, CIT Vs Reliance PetroProducts Ltd. 322 ITR 158, Price Waterhouse Coopers (P) Ltd. Vs. CIT 348 ITR 306
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KUSUM BA NSAL
• Assessee Lawyers: ANKIT JAIN
• Keywords: Capital asset; Depreciation; Cost of acquisition; Charitable institution
• Section: 143(3); 11; 12AA; 12

Judgement Text

"आयकर अपील य अ धकरण,च\u0010डीगढ़ \u0014यायपीठ, च\u0010डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, ‘B’ CHANDIGARH BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT AND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER आयकर अपील सं./ ITA No. 359/CHD/2024 नधा\u0011रण वष\u0011 / Assessment Year: 2017-18 The ACIT, Chandigarh. Vs The Punjabi University, Patiala. \u0016थायी लेखा सं./PAN NO: AAAJT2610D अपीलाथ\u001a/Appellant \u001b यथ\u001a/Respondent Assessee by : Shri Ankit Jain, CA Revenue by : Smt. Kusum Bansal, CIT DR Date of Hearing : 17.03.2025 Date of Pronouncement : 22.04.2025 HYBRID HEARING O R D E R PER RAJPAL YADAV, VP The Revenue is in appeal before against the order of the ld. Commissioner of Income Tax (Appeals) [in short ‘the CIT (A)’] dated 06.02.2024 passed in assessment year 2018-19. 2. Though the Revenue has taken three grounds of appeal, but its grievance revolves around a single issue namely, the ld. CIT(A) has erred in deleting the penalty imposed by the ITA No.359/CHD/2024 A.Y.2018-19 2 Assessing Officer under Section 270A of the Income Tax Act, 1961. 3. The brief facts of the case are that assessee has filed its return of income for assessment year 2018-19 on 29.08.2018 declaring total taxable income at ‘Nil’. An assessment order was passed under Section 143(3) of the Income Tax Act determining taxable income at Rs.25,43,66,930/-. It emerges out from the record that assessee has claimed depreciation of Rs.25,43,66,930/-. The AO was of the view that by Finance Act, 2015, sub-section (6) of Section 11 has been brought on the Statute Book which prohibits an assessee to claim depreciation on an asset whose cost of acquisition was claimed as deduction towards application of income of a Charitable Institution. When this fact was confronted to the assessee, it withdrew its claim of depreciation. Accordingly, addition of Rs.25.43 Cr was made to the total income of the assessee. The ld. AO has initiated the penalty proceedings against the assessee under Section 270A and he ultimately imposed a penalty of Rs.18,07,78,378/- which is 200% of the taxable income. ITA No.359/CHD/2024 A.Y.2018-19 3 4. On appeal, ld. CIT(A) has deleted the penalty. 5. With the assistance of ld. Representative, we have gone through the record carefully. It is pertinent to observe that as per Section 11 and 12 of the Income Tax Act, if a Charitable Institution is having registration under Section 12AA of the Income Tax Act and derives income from a property held under such Charitable Institution, then 85% of such income is to be applied on the objective of Charitable Institution. Prior to introduction of sub-section (6) of Section 11, if an assessee has acquired the capital asset and claimed acquisition cost towards application of income contemplated in Section 11(1), then such income would not be brought to tax in the hands of Charitable Institution. Apart from claiming of application of income, Charitable Institution was entitled for claiming depreciation of such capital assets. With effect from 01.04.2015, such double deduction is being disallowed to an assessee once acquisition cost of a capital asset is being claimed towards application of income on charitable objectives. Then assessee will not be entitled for depreciation. ITA No.359/CHD/2024 A.Y.2018-19 4 6. In the present case, when assessee has filed its return of income, it was not having registration under Section 12A, though it has applied for registration on 02.04.2006 but such application was rejected, ultimately registration was granted to the assessee on 06.02.2020 after the adjudication of the issue by the Tribunal. It has filed its return on 29.08.2018. Upto that date, it was not claiming double deduction. Its income would have been determined on commercial principles wherein it would be eligible for claiming depreciation also. Since during pendency of determination of income vis-à-vis filing of the return, it has been granted registration, therefore, it withdrew its claim of depreciation and offered such income for taxation. There is no deliberate attempt at the end of the assessee to misreport the income. The ld. First Appellate Authority has appreciated this issue in right perspective after following the judgement of Hon'ble Punjab & Haryana High Court in the case of CIT Vs Rajiv Batra 360 ITR 121 as well as of the Hon'ble Supreme Court in the case of CIT Vs Reliance PetroProducts Ltd. 322 ITR 158 and Price Waterhouse Coopers (P) Ltd. Vs. CIT 348 ITR 306 ITA No.359/CHD/2024 A.Y.2018-19 5 (S.C.). The claim made in the return was a bonafide claim because at that point of time, assessee was not enjoying registration under Section 12AA of the Income Tax Act. The moment it got registration under Section 12AA, it withdrew its claim for depreciation and offered that amount for taxation. Therefore, it cannot be imputed to the assessee that it has under reported its income and deserved to be visited with penalty. The ld. First Appellate Authority has rightly deleted the penalty and no interference is called for in the impugned order. Accordingly, appeal of the Revenue is dismissed. 7. In the result, appeal of the Revenue is dismissed. Order pronounced on 22.04.2025. Sd/- Sd/- (MANOJ KUMAR AGGARWAL) (RAJPAL YADAV) ACCOUNTANT MEMBER VICE PRESIDENT “Poonam” आदेश क\u0002 \u0003ितिलिप अ ेिषत/ Copy of the order forwarded to : 1. अपीलाथ\u000f/ The Appellant 2. \u0003\u0010यथ\u000f/ The Respondent 3. आयकर आयु\u0014/ CIT 4. िवभागीय \u0003ितिनिध, आयकर अपीलीय आिधकरण, च\u0018डीगढ़/ DR, ITAT, CHANDIGARH 5. गाड फाईल/ Guard File ITA No.359/CHD/2024 A.Y.2018-19 6 आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar "