C I T KOTA V. KRISHI UPAJ MANDI SAMITI GANGAPUR CITY

ITA/645/2011

AI Insights

The case involves multiple appeals by the Commissioner of Income Tax, Kota against various Krishi Upaj Mandi Samitis (Agricultural Produce Market Committees) in Rajasthan. The core issue was the allowance of depreciation on assets under section 32 of the Income Tax Act, despite these assets having been claimed as application of income in previous years. The Tribunal and the lower authorities had previously ruled in favor of the Samitis, treating them as charitable institutions and allowing the depreciation. The High Court's decision followed the precedent of a similar case decided by the Principal Seat at Jodhpur, which supported the Samitis' position.

• Counselvise Citation: [2016] 140 COUNSELVISE.COM (IT) 746120 (HC-RAJASTHAN)
• Appeal Type: Others
• Pronouncement Date: 14-12-2016
• Assessment Year: misc
• Other Referred Cases: Director of Income Tax v. Framjee Cawasjee Institute, CIT v. Institute of Banking Personnel
• Laws Referred To: Section 32 of the Income Tax Act, Section 144 of the Income Tax Act, Section 143(2) of the Income Tax Act, Section 10(20) of the Income Tax Act, Section 12A of the Income Tax Act, Section 11 and 12 of the Income Tax Act
• Result in Favour of: Respondent
• Court: HIGH COURT
• Assessee Lawyers: PARINITOO JAIN
• Keywords: Assessment Year; Charitable Trust; Income from house property; Income tax appeal; Depreciation of Assets
• Section: 144; 143(2); 32; 11; 12A; 12; 10(20)

Judgement Text

"IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B.INCOME TAX APPEAL NO. 645 / 2011 C I T KOTA ----Appellant Versus KRISHI UPAJ MANDI SAMITI GANGAPUR CITY ----Respondent Connected With D.B.INCOME TAX APPEAL No. 587 / 2011 C I T KOTA ----Appellant Versus KRISHI UPAJ MANDI SAMITI BUNDI ----Respondent D.B.INCOME TAX APPEAL No. 588 / 2011 C I T KOTA ----Appellant Versus KRISHI UPAJ MANDI SAMITI BARAN ----Respondent D.B.INCOME TAX APPEAL No. 589 / 2011 C I T KOTA ----Appellant Versus KRISHI UPAJ MANDI SAMITI BUNDI ----Respondent D.B.INCOME TAX APPEAL No. 651 / 2011 C I T KOTA (2 of 5 ) [ITA-645/2011] ----Appellant Versus KRISHI UPAJ MANDI SAMITI GANGAPUR CITY ----Respondent __________________________________________ For Appellant : Ms. Parinitoo Jain __________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE DINESH MEHTA Judgment Per Hon’ble Jhaveri, J. 14/12/2016 By way of these appeals, the appellants have challenged the judgment and order of the Tribunal whereby the Tribunal has confirmed the order of the CIT (Appeals). 2. This court while admitting the appeal on has framed the following substantial question of law: “Whether in the facts and circumstances of the case, the tribunal was justified in law in allowing depreciation of assets u/s 32 even where the same had already been claimed as application of income in the previous years? 3. The facts of the case are that for the impugned assessment year proceedings u/s 144 were carried out due to non filing of return and order dated 31.1.2005 was passed under Section 144 treating Rs. 1,07,31,520/- as income. Against this order the assessee filed an appeal before the CIT (A) and the CIT (A) vide order dated 12.4.2006 enhanced the income of the assessee by Rs. 1,18,104/- and treated a total (3 of 5 ) [ITA-645/2011] income of Rs. 1,08,49,520/-. Against this order of the CIT (A) the assessee preferred an appeal before the Tribunal and the Tribunal vide order dated 30.3.2007 set aside the matter to the Assessing Officer. Thereafter the AO issued notice u/s 143(2) of the Act observing that after amendment of Section 10(20), Krishi Upaj Mandi could not derive benefit of exemption and therefore, the income was assessable to tax. A perusal of receipt and payment account reveal that the assessee Samiti exceeded Rs. 40 lacs and therefore, the accounts were required u/s 44AB which was not done by the assessee. The AO treated the status of assessee as AOP against which the assessee filed an application u/s 12A before the CIT for registration as a trust, which was dismissed by the CIT, against which the assessee filed an appeal before the Tribunal and the Tribunal while allowing the appeal of the assessee treated the status of the assessee as charitable trust. Against this order, the revenue preferred an appeal before the High Court. It was found by the AO that during the impugned assessment year the assessee had received Rs. 20,22,909/- as rent from the shops out of which a deduction of Rs. 6,06,873/- u/s 24 was allowed and rest Rs. 14,16,036/- was assessable as income from house property. Hence the AO assessed the income of the assessee at Rs. 1,08,49,520/- in the status of artificial judicial person vide order dated 28.12.2007. Being aggrieved of the said order, the assessee filed an appeal before the CIT (A). The CIT (A) vide para 7 of its order held that the status of the assessee would be charitable institution and therefore, exemption u/s 11 and 12 (4 of 5 ) [ITA-645/2011] be granted. Thus, the entire income of the assessee was held to be exempt and the AO was directed to accept the return filed by the assessee declaring the nil income in the status of charitable institution. The Tribunal upheld the order of the CIT (A). Hence this appeal. 4. At the very outset, it may be mentioned that the appeal of another assessee being Krishi Upaj Mandi, has already been decided by the Principal Seat at Jodhpur in Tax Appeal No.32/2010 on 16.01.2015 wherein it has been held as under: “The assessee is a charitable institution registered under Section 12-A of the Act of 1961 and 100% capital expenditure was availed by it against the asset concerned i.e. a building. Section 32(1) of the Act of 1961 provides for depreciation in respect of building, plant and machinery owned by the assessee and used for business purposes. Income of a charitable trust like the present assessee derived from the depreciable heads is also liable -4- to be computed on commercial basis, however, while doing so it is to be kept in mind that ultimately assessee is a charitable institution and its income for tax purposes is required to be determined by taking into consideration provisions of Section 11 of the Act of 1961 after extending normal depreciation and deductions from its gross income. In computing the income of a charitable institution/trust depreciation of assets owned by such institution is a necessary deduction on commercial principles, hence, the amount of depreciation has to be deducted to arrive at the income available. In view of the discussions made above, we find ourselves in agreement with the view taken by Bombay High Court in Director of Income Tax v. Framjee Cawasjee Institute (supra) and in CIT v. Institute of Banking Personnel (supra). The substantial question framed in the instant matter, thus, is answered in the terms that the Income Tax Appellate (5 of 5 ) [ITA-645/2011] Tribunal rightly allowed depreciation claimed by the assessee on capital assets for which capital expenditure was already given in the year under consideration. The appeal stands dismissed accordingly.” 5. Following the decision of co-ordinate Bench, all these appeals are dismissed. The issue is answered in favour of the assessee and against the department. A copy of this order be placed in each of the file. (DINESH MEHTA)J. (K.S. JHAVERI)J. bblm 151-155 "