Friends of WWB India, Ahmedabad, Ahmedabad V. The ADIT,(Exemption), Ahmedabad

CO 6/AHD/2013

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8186 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 24-01-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 18-01-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: RAHUL KUMAR
• Keywords: Depreciation; Charitable institution
• Section: 32; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, A BENCH, AHMEDABAD BEFORE SHRI A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER I.T.A. NO.2658/ AHD/2012 (ASSESSMENT YEAR 2009-10) ADIT(EXEMPTION), AHMEDABAD VS. FRIENDS OF WWB, INDIA, G/7, SAKAR BUILDING, OPP. GANDHIGRAM STATION, ASHRAM ROAD, AHMEDABAD PAN/GIR NO. : AAATF02748B C.O. NO.06/AHD/2013 (ASSESSMENT YEAR 2009-10) FRIENDS OF WWB, INDIA, VS. ADIT (EXEMP), G/7, SAKAR BUILDING, AHMEDABAD OPP. GANDHIGRAM STATION, ASHRAM ROAD, AHMEDABAD (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI RAHUL KUMAR, SR. DR RESPONDENT BY: SHRI SANJAY R SHAH, AR DATE OF HEARING: 21.01.2013 DATE OF PRONOUNCEMENT: 31 .01.2013 O R D E R PER SHRI A. K. GARODIA, AM:- THIS APPEAL IS FILED BY THE REVENUE AND THE CROSS OBJECTION IS FILED BY THE ASSESSEE AND THESE ARE DIRECTED AGAINST THE ORDER O F ADIT (EXEMP.), AHMEDABAD DATED 13.09.2012 FOR THE ASSESSMENT YEAR 2009-10. 2. FIRST, WE TAKE UP THE APPEAL FILED BY THE REVENU E. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER: THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN A LLOWING THE APPEAL OF THE ASSESSEE. I.T.A.NO.2798 /AHD/2011 2 (I). THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) H AS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF DEPRECIATI ON OF RS.11,55,9747- MADE BY THE ASSESSING OFFICER. (II).THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN ALLOWING DEPRECIATION ON THE ASSETS, THE COST OF WHICH HAS A LREADY BEEN ALLOWED AS A DEDUCTION ON ACCOUNT OF APPLICATION OF INCOME AS THIS WOULD AMOUNT TO DOUBLE DEDUCTION IN VIEW OF THE DECISION OF THE HON 'BLE SUPREME COURT IN THE CASE OF ESCORTS LTD., 199ITR 43. (III) WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCE S OF THE CASE, DEDUCTION OF DEPRECIATION U/S.32WHICH FALLS UNDER THE HEAD 'P ROFIT AND GAINS FROM BUSINESS AND PROFESSION' OF THE INCOME TAX ACT, 196 1, WOULD BE AVAILABLE TO A CHARITABLE TRUST WHOSE INCOME IS OTHERWISE NOT ASSESSABLE UNDER THE ABOVE HEAD. (IV) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD CIT (A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. (V) IT IS THEREFORE, PRAYED THAT THE ORDER OF THE L D. COMMISSIONER OF INCOME -TAX (APPEALS) OUGHT MAY BE SET ASIDE AND TH AT OF THE ASSESSING OFFICER BE RESTORED. 3. LD. D.R. SUPPORTED THE ASSESSMENT ORDER AND RELI ANCE WAS PLACED ON THE JUDGEMENT OF HONBLE APEX COURT RENDERED IN THE CAS E OF ESCORTS LTD. VS UNION OF INDIA & ORS. AS REPORTED IN 199 ITR 43. HE ALSO PLACED RELIANCE ON THE JUDGMENT OF HONBLE KERALA HIGH COURT RENDERED IN T HE CASE OF LISSIE MEDICAL INSTITUTIONS VS. CIT AS REPORTED IN 348 ITR 244. HE ALSO FILED WRITTEN SUBMISSIONS, WHICH IS REPRODUCED HEREIN BELOW:- KINDLY REFER TO THE ABOVE. 2. THE ABOVE APPEAL WAS HEARD BY THE BENCH ON 21 ST JANUARY, 2013. THE ASSESSEE IS A TRUST AND THE ISSUE INVOLVED IN T HIS CASE WAS WHETHER DEDUCTION OF DEPRECIATION U/S.32 OF THE IT. ACT '61 WHICH FALLS UNDER THE HEAD 'PROFIT AND GAINS FROM BUSINESS OR PROFESSION' OF THE I.T. ACT '61 SHOULD BE AVAILABLE TO A CHARITABLE TRUST WHOSE INC OME IS OTHERWISE NOT ASSESSABLE UNDER THE ABOVE HEAD. HOWEVER, AFTER THE BENCH PROCEEDINGS WERE OVER, A RECENT JUDGMENT IN THE CASE OF LISSIE MEDICAL INSTITUTIONS I.T.A.NO.2798 /AHD/2011 3 VS. CIT, COCHI (2012)24 TAXMAN.COM 9(KER) CAME TO T HE NOTICE OF THE UNDERSIGNED- ACCORDING TO THE SAID JUDGMENT WHEN TH E EXPENDITURE INCURRED FOR ACQUISITION OF DEPRECIABLE ASSETS ITSE LF IS TREATED AS APPLICATION OF INCOME FOR CHARITABLE PURPOSES UNDER SECTION 11(L)(A), SHOULD NOT THE COST OF SUCH ASSETS TO BE TREATED AS NIL FOR THE ASSESSEE AND IN THAT SITUATION DEPRECIATION TO BE GRANTED TU RNS OUT TO BE NIL. HOWEVER, IF DEPRECIATION PROVIDED IS CLAIMED ON NOT IONAL COST AFTER THE ASSESSEE CLAIMS 100 PERCENT OF THE COST INCURRED FO R IT AS APPLICATION OF INCOME FOR CHARITABLE PURPOSES, THE DEPRECIATION SO CLAIMED HAS TO BE WRITTEN BACK AS INCOME AVAILABLE. THE SAID JUDGMENT DEFINITELY IS IN FAVOUR OF THE REVENUE. 3. IN THE ABOVE JUDGMENT, THE HON'BLE HIGH COURT OF KERALA HAS REFERRED TO ALL CASES THAT ARE RELIED UPON BY THE A .R. AND THE LD. CIT (A) IN HIS ORDER. MOST IMPORTANTLY, THE CASE OF GUJARAT HIGH COURT CITED IN 198 ITR 598, WHICH HAS BEEN RELIED UPON BY THE A.R. AS WELL AS THE LD.CIT (A). IN THIS CASE, THE HON'BLE HIGH COURT OF KERALA HAS FOLLOWED THE DECISION OF ESCORTS LTD. (199 FTR 43), WHICH IS SPECIFICALLY THE GROUNDS OF APPEAL FILED BY THE DEPARTMENT. A. 3. DECISION OF KERALA HC THE DECISION IN 348 ITR 344; [2012] 24 TSXMANN.COM 9 (KER,), LISSIE MEDICAL INSTITUTIONS VS. COMMISSIONER OF INCOME-TAX , KOCHI, (DOJ: I.T.A.NO.2798 /AHD/2011 4 17.02.2012) IS THE LATEST DECISION ON THE SUBJECT. IN PARA 2, IT WAS HELD AS UNDER: ''AFTER HEARING BOTH SIDES WHAT WE NOTICE IS THAT I F THE ASSESSEE TREATS EXPENDITURE ON ACQUISITION OF ASSETS AS APPLICATION OF INCOME FOR CHARITABLE PURPOSES UNDER SECTION 11(1 )(A) AND IF THE ASSESSEE CLAIMS DEPRECIATION ON THE VALUE OF SUCH ASSETS, THEN IN O RDER TO REFLECT THE TRUE INCOME TO BE AVAILABLE FOR APPLICATION FOR CHARITAB LE PURPOSES, THE ASSESSEE SHOULD WRITE BACK IN THE ACCOUNTS THE DEPR ECIATION AMOUNT TO FORM PART OF THE INCOME TO BE ACCOUNTED FOR APPLICA TION FOR CHARITABLE PURPOSES. THIS IS OBVIOUSLY NOT DONE BY THE ASSESSE E AND SO MUCH SO, THE INCOME WHICH SHOULD BE AVAILABLE FOR APPLICATIO N FOR CHARITABLE PURPOSES GETS REDUCED BY THE DEPRECIATION AMOUNT, W HICH IS NOT PERMISSIBLE UNDER SECTION 11(1)(A) OF THE ACT. IN F ACT THE NET EFFECT IS THAT AFTER WRITING OFF FULL VALUE OF THE CAPITAL EX PENDITURE ON ACQUISITION OF ASSETS AS APPLICATION OF INCOME FOR CHARITABLE P URPOSES AND WHEN THE ASSESSEE AGAIN CLAIMS THE SAME AMOUNT IN THE FORM O F DEPRECIATION, SUCH NOTIONAL CLAIM BECOMES CASH SURPLUS AVAILABLE WITH THE ASSESSEE, WHICH GOES OUTSIDE THE BOOKS OF ACCOUNTS OF THE TRU ST UNLESS IT IS WRITTEN BACK WHICH IS NOT DONE. WE DO NOT THINK IT IS PERMISSIBLE FOR A CHARITABLE INSTITUTION TO GENERATE INCOME OUTSIDE T HE BOOKS IN THIS FASHION.' I.T.A.NO.2798 /AHD/2011 5 BESIDES, THE SAID DECISION HAS CAREFULLY ANALYZED T HE EXISTING DECISIONS RENDERED BY VARIOUS HON'BLE HIGH COURTS IN THE MATT ER, AND THEN DISTINGUISHED THEM ON A SPECIFIC ASPECT. B, DEMONSTRATION WITH EXAMPLE YEAR 1: LET US SAY, IN YEAR 1, A CHARITABLE ORGANIZ ATION FOR THE WELFARE OF BLIND PEOPLE RECEIVES RS.1000 AS DONATION. IT IS FULLY USED FOR THE PURCHASE OF BRAILLE MACHINES. THUS, RS.1000 IS CLAI MED AS APPLICATION OF INCOME AND EXEMPTION IS CLAIMED FOR ENTIRE RS.10 00 U/S LL. YEAR 2; THIS YEAR, THE CHARITABLE ORGANISATION AGAIN RECEIV ES RS.1000 AS DONATION. HOWEVER, IT SPENDS ONLY RS.800 FOR WELFAR E OF THE BLIND PERSONS, INSTEAD OF SPENDING ENTIRE RS.1000, IN THE IT RETURN; IT CLAIMS DEPRECIATION OF RS.200 (20% OF COST OF BRAILLE MACH INE). THUS INSTEAD OF RS.1000 REACHING THE BENEFICIARY, ONLY RS.800 RE ACHES THE BENEFICIARY EVEN WHILE CLAIMING FULL EXEMPTION UNDE R SECTION 11 OF THE I-T ACT. THUS, THERE IS A LEAKAGE OF RS.200 WHICH M AY BE USED FOR ANY OTHER PURPOSE BY THE TRUSTEE, AND NOT FOR THE WELFA RE OF THE VERY PEOPLE WHOM IT IS SUPPOSED TO SERVE. AN ERRONEOUS INTERPRE TATION OF THE ACT BY GRANTING DOUBLE DEDUCTION HAS RESULTED IN INJUSTICE TO THE VERY DOWN- TRODDEN PEOPLE IN AS MUCH AS THE QUANTUM OF BENEFIT S REACHING THEM HAS REDUCED. THIS IS THE CRUX OF THE DECISION OF TH E KERALA HC. C. NON-APPLICABILITY OF HON'BLE GUJARAT HC DECISION S A. SHETH MANIIAL RACHHODDAS VISHRAM BHAVAN TRUST, 198 ITR 598: I.T.A.NO.2798 /AHD/2011 6 IN THIS CASE, THE FOLLOWING FACTORS HAVE TO BE NOTE D; E. NO ISSUE OF DOUBLE DEDUCTION WAS DISCUSSE D BY THE HON'BLE COURT. F. THE TRUST HAD INVESTED IN IMMOVABLE PROPE RTIES AND DEPLOYING THE RENTAL INCOME THERE FROM FOR THE FURTHERANCE OF THE OBJECT S OF THE TRUST. IT WAS IN THIS CONTEXT THAT HON'BLE COURT HELD THAT THE IN COME TO BE APPLIED HAD TO BE COMPUTED AFTER ACCOUNTING FOR DEPRECIATIO N OF THE SAID PROPERTY. G. THIS IS NOT A CASE OF PURCHASE OF ASSET BEI NG CLAIMED AS APPLICATION OF INCOME IN YEAR 1 AND CLAIM OF DEPRECIATION ON SAME ASSET IN YEAR 2, AGAIN AS APPLICATION OF INCOME. FACTS ARE COMPLE TELY DIFFERENT. H. THE DECISION WAS RENDERED WITHOUT TAKING INTO COGNIZANCE OF THE APEX COURT DECISION IN THE CASE OF JK SYNTHETICS LT D, 199 ITR 43, WHERE HONBLE APEX COURT HELD THAT DOUBLE DEDUCTION COULD NOT BE ALLOWED EVEN IF SPECIFIC PROVISIONS IN ACT DID NOT STATE SO B, SHRI PLOTSWETAMBER MURTI PUJAK JAIN MANDAL, 21 1 ITR 293: THE HEAD NOTES IN THIS CASE IS REPRODUCED TO PROVE THAT CASE LAW IS RENDERED IN A DIFFERENT CONTEXT ALTOGETHER: I.T.A.NO.2798 /AHD/2011 7 'SECTION 11 OF THE INCOME-TAX ACT, 1961 -CHARITABLE OR RELIGIOUS TRUST - EXEMPTION OF INCOME FROM PROPERTY HELD UNDE R - ASSESSMENT YEAR 1973-74 - WHETHER WHERE EXPENSES FOR CHARITABL E AND RELIGIOUS PURPOSES HAVE BEEN INCURRED IN EARLIER YEAR AND SAI D EXPENSES ARE ADJUSTED AGAINST INCOME OF A SUBSEQUENT YEAR, INCOM E OF THAT YEAR BE SAID TO HAVE BEEN APPLIED FOR CHARITABLE AND RELIGI OUS PURPOSES IN YEAR IN WHICH EXPENSES HAS BEEN ADJUSTED - I HELD YES'* THIS IS A CASE WHERE EXPENDITURE WAS INCURRED PRIOR TO RECEIPT AND WHETHER IT AMOUNTED TO APPLICATION OF INCOME OR NOT * D. MISCELLANEOUS IN THE CASE OF CIT VS. KALPETTA ESTATES LTD, 211 IT R 635, 78 TAXMAN 265, THE HON'BLE KERALA HC HELD AS UNDER: 4. ... WHAT THE BENCH DID WAS TO AFFIRM THAT THE PR INCIPLES OF RES JUDICATA WILL NOT APPLY TO INCOME-TAX PROCEEDINGS N EVERTHELESS, THE TRIBUNAL MAY PLACE RELIANCE ON AN EARLIER DECISION TO SUPPORT ITS CONCLUSION . IT COULD NOT, THEREFORE, BE SAID THAT THE DECISION IN THE ASSESSEE'S CASE BEFORE US. RELATING TO THE PRIOR YE ARS WOULD OPERATE AS RES JUDICATA. THE TRIBUNAL IS ENTITLED TO TAKE A DIFFERENT VIEW O F THE MATTER. IF NEW MATERIALS WERE PLACED OR ON A CLOSER AND MORE INTELLIGENT ANALYSIS. IT IS EVIDENT FROM THE VARIOUS DECISIONS PLACED BE FORE US THAT A DIFFERENT ASPECT OF THE MATTER HAS BEEN PRESENTED F OR CONSIDERATION, AS LAID DOWN IN THE DECISIONS MENTIONED EARLIER THE TR IBUNAL WAS I.T.A.NO.2798 /AHD/2011 8 THEREFORE ENTITLED TO HAVE A FRESH LOOK AT THE MATT ER BASED ON THE LINE OF THINKING DISCLOSED BY THESE DECISIONS THAT WAS WHAT WAS DONE BY THE TRIBUNAL IN THE INSTANT CASE. WE ARE NOT THEREFORE, INCLINED TO ACCEPT THE CONTENTION THAT THE ASSESSMENT IN THE EARLIER YEARS OPERATES AS RES JUDICATA OR THAT IT PRECLUDES THE ASSESSEE FROM RAI SING THE PERA 35 DONE IN THE INSTANT CASE WE OVERRULE THE CONTENTION . IN THE CASE OF BARODA DISTRIBUTORS P LTD, 155 ITR 1 20, THE HON'BLE SC HELD AS UNDER: 'TO PERPETUATE AN ERROR IS NO HEROISM. TO RECTIFY IT IS OF JUDICIAL CONSCIENCE . IN THIS WE DERIVE COMFORT AND STRENGTH FROM THE WI SE AND INSPIRING WORDS OF JUSTICE BRONSON IN PIERCE M.A.M. Y. DELAMETER AT PAGE 18 : 'A JUDGE OUGHT TO BE WISE ENOUGH TO KNOW-THAT HE IS FALLIBLE AND THEREFORE EVER READY TO LEARN : GREAT, AND HONEST ENOUGH TO DISCARD ALL MERE PRIDE OF OPINION AND FOLLOW TRUTH WHEREVER IT MAY LEAD: AND COURAGEOUS ENOUGH TO ACKNOWLEDGE HIS ERRORS.'' PRAYER 4. IT IS HUMBLY PRAYED THAT THIS SUBMISSION MA Y BE TAKEN INTO CONSIDERATION. I.T.A.NO.2798 /AHD/2011 9 5. A COPY OF THE JUDGMENT OF HIGH COURT OF K ERALA IS SUBMITTED HEREWITH. 4. AS AGAINST THIS, LD. A.R. OF THE ASSESSEE SUPPOR TED THE ORDER OF LD. CIT(A) AND RELIANCE WAS PLACED BY HIM ON THE JUDGEM ENT OF HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF CIT VS SETH MANI KLAL RANCHODDAS VISHRAM BHAVAN TRUST AS REPORTED IN 198 ITR 594(GUJ.). REL IANCE WAS ALSO PLACED ON THE JUDGEMENT OF HONBLE BOMBAY HIGH COURT RENDERED IN THE CASE OF CIT VS INSTITUTE OF BANKING PERSONNEL SELECTION AS REPORTE D IN 264 ITR 110. REGARDING THE JUDGEMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF ESCORTS LTD. (SUPRA), IT WAS SUBMITTED THAT THIS JUDGEMENT IS NO T APPLICABLE IN THE PRESENT CASE BECAUSE THIS JUDGMENT IS IN RESPECT OF SECTION 35(2 ) WHERE THERE IS SPECIFIC PROVISION THAT IF ANY DEDUCTION IS ALLOWED U/S 35(2 ), THEN NO DEDUCTION SHALL BE ALLOWED U/S 32(1) (II) IN RESPECT OF THIS ASSET. I T WAS SUBMITTED THAT THERE IS NO SUCH SPECIFIC RESTRICTION FOR ALLOWING DEPRECIATION UNDER THE PROVISIONS OF SECTION 11 AS PER WHICH EXEMPTION IS ALLOWABLE TO T HE ASSESSEE FOR USAGE OF INCOME FOR THE PURPOSE OF THE OBJECTS OF THE TRUST. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BEL OW AND THE JUDGEMENTS CITED BY BOTH THE SIDES. WE FIND THAT THE ASSESSMENT ORD ER IS ALSO BASED ON THIS JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF ESCORTS LTD. (SUPRA) AND BEFORE US ALSO, RELIANCE HAS BEEN PLACED BY THE LD. D.R. ON THIS JUDGEMENT AND HENCE, WE FIRST EXAMINE THE APPLICABILITY OF TH IS JUDGEMENT IN THE PRESENT CASE. - WE FIND THAT ON PAGE 5 OF HIS ORDER, LD. CIT (A) HAS OBSERVED THAT THIS JUDGEMENT OF HONBLE APEX COURT RENDERED IN THE CAS E OF ESCORTS LTD. (SUPRA) HAS ALREADY BEEN DISTINGUISHED BY HONBLE PUNJAB & HARYANA HIGH COURT IN THE JUDGEMENT RENDERED IN THE CASE OF CIT VS. TINY TOTS EDUCATION SOCIETY AS I.T.A.NO.2798 /AHD/2011 10 REPORTED IN 330 ITR 21 (P&H). WE ALSO FIND THAT SI NCE THERE IS SPECIFIC PROVISION IN SECTION 35(2) FOR NOT ALLOWING DEPRECI ATION ON THOSE ASSETS FOR WHICH DEDUCTION IS ALLOWED U/S 35(2), THIS JUDGEMEN T CANNOT BE APPLIED IN THE PRESENT CASE BECAUSE IN THE PRESENT CASE, THE CLAIM OF THE ASSESSEE IS NOT FOR DOUBLE DEDUCTION. AT THE TIME OF PURCHASE OF THE A SSET IN QUESTION, CLAIM IS ALLOWED TO THE ASSESSEE U/S 11, IF SUCH PURCHASE OF ASSET IS CONSIDERED TO BE FOR THE PURPOSE OR FOR THE OBJECTS OF THE TRUST I.E. AN EXEMPTION ALLOWABLE TO THE ASSESSEE FOR THE INCOME EARNED BY THE ASSESSEE. FO R ALLOWABILITY OF DEPRECIATION, WHILE COMPUTING THE INCOME OF THE ASS ESSEE TRUST, IT HAS BEEN HELD BY VARIOUS HIGH COURTS IN THE JUDGEMENTS CITED BY T HE LD. A.R. INCLUDING HONBLE GUJARAT HIGH COURT THAT THE INCOME OF THE A SSESSEE TRUST HAS TO BE COMPUTED ON THE BASIS OF COMMERCIAL PRINCIPLES. MO REOVER, DEDUCTION IS ALLOWED ONLY ONCE FOR COMPUTATION OF INCOME BY WAY OF ALLOWING DEPRECIATION AND ALLOWING EXEMPTION U/S 11 IS NOT EQUIVALENT TO ALLOWING THE DEDUCTION FOR COMPUTATION OF INCOME BECAUSE EXEMPTION IS ALLOWED ON THE INCOME FROM TAX AND IT IS NOT AKIN TO REDUCING THE INCOME ITSELF. HENCE, THIS ARGUMENT OF THE REVENUE IS DEVOID OF ANY MERIT THAT ALLOWING DEPREC IATION IN THE PRESENT CASE WILL RESULT INTO ALLOWING DOUBLE DEDUCTION TO THE A SSESSEE. MOREOVER, THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY TH E JUDGEMENT OF HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF CIT VS S ETH MANIKLAL RANCHODDAS VISHRAM BHAVAN TRUST (SUPRA) AND HENCE, BY RESPECTF ULLY FOLLOWING THIS JUDGEMENT, WE DECLINE TO INTERFERE IN THE ORDER OF LD. CIT (A). 6. REGARDING GROUND NO.3 OF THE REVENUES APPEAL, A S PER WHICH, THE CLAIM OF THE REVENUE THAT DEDUCTION U/S 32 IS ALLOWABLE W HILE COMPUTING PROFIT AND GAINS FROM BUSINESS AND SINCE THE CHARITABLE TRUST IS NOT ENGAGED IN ANY BUSINESS, THE INCOME IS NOT ASSESSABLE UNDER THIS H EAD AND HENCE, DEPRECIATION IS NOT ALLOWABLE FOR THIS REASON ALSO. IN HIS REGARD, WE WOULD LIKE TO OBSERVE THAT IT WAS HELD BY HONBLE GUJARAT HIGH COURT AND HONBLE BOMBAY HIGH COURT THAT ALTHOUGH, THE INCOME OF THE ASSESSEE TRUST DOES NOT FALL UNDER THE HEAD INCOME I.T.A.NO.2798 /AHD/2011 11 FROM BUSINESS BUT STILL SUCH INCOME HAS TO BE COMPU TED ON THE BASIS OF COMMERCIAL PRINCIPLES AND THEREFORE, DEPRECIATION H AS TO BE ALLOWED. IN THE CASE OF CIT VS SETH MANIKLAL RANCHODDAS VISHRAM BHAVAN T RUST (SUPRA), HONBLE GUJARAT HIGH COURT HAS AGREED WITH THE VIEW TAKEN B Y HONBLE MADRAS HIGH COURT ON THIS ISSUE. HONBLE MADRAS HIGH COURT HAS TAKEN THIS VIEW IN THE CASE OF CIT VS RAO BAHADUR CALAVALA CUNNAN CHETTY CHARIT IES AS REPORTED IN 135 ITR 485 THAT THE INCOME FROM THE PROPERTY HELD UNDE R TRUST WOULD HAVE TO BE ARRIVED AT IN THE COMMERCIAL MANNER AND NOT UNDER T HE VARIOUS HEADS SET OUT IN SECTION 14. IN OUR CONSIDERED OPINION, THIS JUDGEM ENT OF HONBLE GUJARAT HIGH COURT ALONG WITH THIS JUDGEMENT OF HONBLE MADRAS H IGH COURT AGREED TO BY HONBLE GUJARAT HIGH COURT COVERS THIS ASPECT ALSO AGAINST THE REVENUE AND HENCE, THIS GROUND OF THE REVENUE IS ALSO LIABLE TO BE REJECTED. WE ORDER ACCORDINGLY. 7. BEFORE PARTING, WE WOULD LIKE TO OBSERVE THAT TH E WRITTEN SUBMISSIONS FILED BY THE LEARNED DR AS REPRODUCED ABOVE DOES NO T RENDER ANY HELP TO THE REVENUE BECAUSE SITTING IN GUJARAT, WE ARE DUTY BOU ND TO FOLLOW THE JUDGMENT OF HONBLE GUJARAT HIGH COURT IN PREFERENCE TO THE JUD GMENT OF HONBLE KERALA HIGH COURT CITED BY LEARNED DR. MOREOVER, WE ALSO F IND THAT IN THE PRESENT CASE, IT IS NOT AN ALLEGATION OF THE A. O. IN THE ASSESSM ENT ORDER THAT ANY CASH OF THE ASSESSEE HAS GONE OUTSIDE THE BOOKS OF THE ASSESSEE . FACTS ARE NOT BROUGHT TO OUR NOTICE ON THE BASIS OF WHICH IT IS OBSERVED BY HON BLE KERALA HIGH COURT THAT CASH SURPLUS HAS GONE OUTSIDE THE BOOKS. GENERALLY, CLAIMING OF DEPRECIATION IN BOOKS OR IN COMPUTATION OF INCOME DOES NOT AFFECT C ASH POSITION BECAUSE IT ONLY REDUCES THE PROFIT AND REDUCES THE WDV OF THE CONCE RNED ASSET. REGARDING THE EXAMPLE GIVEN BY LEARNED DR IN THE W RITTEN SUBMISSIONS, WE WOULD LIKE TO OBSERVE THAT CLAIMING OF DEPRECIAT ION IS MAINLY TO BUILD FUND TO FACILITATE REPLACEMENT OF THE ASSET WHEN IT IS WORN OUT BECAUSE OF WEAR & TEAR OR OBSOLESCE AND HENCE, IT CANNOT BE ALLEGED THAT THER E WILL BE LEAKAGE IF DEPRECIATION IS ALLOWED. I.T.A.NO.2798 /AHD/2011 12 REGARDING VARIOUS SUBMISSIONS TO SAY THAT THE JUDG MENT OF HONBLE GUJARAT HIGH COURT IS NOT APPLICABLE IN THE PRESENT CASE, WE DO NOT FIND ANY MERIT IN THE SAME BECAUSE WE HAVE ALREADY SEEN THAT GRANTING OF EXEMPTION U/S 11 AND THEN DEPRECIATION U/S 32 DOES NOT AMOUNT TO GRANTING DOUBLE DEDUCTION BECAUSE EXEMPTION U/S 11 IS NOT A DEDUCTION BUT EXE MPTION OF AN INCOME FROM THE LIABILITY OF TAX ON FULFILLMENT OF CERTAIN COND ITIONS. FOR THE SAME REASONS, RELIANCE PLACED ON 211 ITR 293, 211 ITR 635 AND 155 ITR 120 IS MISPLACED BECAUSE THERE IS NO DOUBLE DEDUCTION IN THE PRESENT CASE. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. 9. NOW, WE TAKE UP THE CROSS OBJECTION FILED BY THE ASSESSEE. 10. THE GROUNDS RAISED BY THE ASSESSEE IN THE CROSS OBJECTIONS ARE AS UNDER: L(I) DEPARTMENT HAS ERRED IN FILING THE APPEA L AGAINST THE PRINCIPLE LAID DOWN BY HONBLE SC THAT - IF THE DEPARTMENT HAS ACCEPTED THE DECISION OF HIGH COURT IN CASE OF ONE ASSESSEE AND NO APPEAL WAS FILED AGAINS T THE SAID DECISION, IT COULD NOT CHALLENGE ITS CORRECTNESS IN CASE OF OTHER ASSE ESSEE WITHOUT JUST CAUSE. (II) IT IS SUBMITTED THAT THE DECISION OF GUJAR AT HC IN CASE OF SHETH MANILAL RANCHHODDAS VISHRAM BHAVAN TRUST [1993 (70 TAXMAN 228)] INVOLVES THE SIMILAR ISSUE AS OF RESPONDENT'S CASE. THE SAME IS NOT CHALLENGED, AS NO APPEAL IS FILED TILL DATE AGAINST THE SAID DECISION BEFORE HONBLE SC BY THE DEPARTMENT. THEREFORE, NO APPEAL SHOULD BE ADMITTED BEFORE THE HONBLE ITAT AGAINST THE RESPONDENT WITH OUT THE JUST CAUSE. 2. IT IS SUBMITTED BY THE RESPONDENT THAT NO APPEAL WAS FILED BEFORE HONBLE ITAT AGAINST THE ORDER OF HONBLE CIT (A) F OR IDENTICAL ISSUE FOR PREVIOUS ASSESSMENT YEAR (AY 2008-09) IN THE RE SPONDENT'S OWN CASE. THE DEPARTMENT HAS ERRED IN FILING AN APPEAL BEFORE HONBLE ITAT AGAINST THE ORDER OF HONBLE CIT (A) IN RESPECT OF THE SIMILAR ISSUE FOR THE YEAR UNDER CONSIDERATION. 3. WITHOUT PREJUDICE TO ABOVE, THE RESPONDEN T SUBMITS THAT EVEN IF THE DEPRECIATION OF RS.11,55,974 IS NOT ALLOWED TO BE TREATED AS APPLICATION OF INCOME, THE SAID AMOUNT SHALL BE ALL OWED TO THE RESPONDENT TO BE ACCUMULATED U/S 11 (2) OF THE ACT. 11. FROM THE ABOVE GROUNDS FILED BY THE ASSESSEE, W E FIND THAT THE C.O. FILED BY THE ASSESSEE IS MERELY IN SUPPORT OF THE ORDER O F LD. CIT (A) AND HENCE, THE I.T.A.NO.2798 /AHD/2011 13 SAME IS NOT MAINTAINABLE. MOREOVER, AS PER OUR DEC ISION IN THE REVENUES APPEAL, THE C.O. FILED BY THE ASSESSEE HAS BECOME I NFRUCTUOUS ALSO. 12. IN THE RESULT, C.O. OF THE ASSESSEE IS ALSO DIS MISSED. 13. IN THE COMBINED RESULT, APPEAL OF THE REVENUE A S WELL AS C.O. OF THE ASSESSEE ARE DISMISSED. 14. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED HEREINABOVE. SD./- SD./- (KUL BHARAT) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE AR,ITAT,AHMEDABAD 1. DATE OF DICTATION 22/01/2013 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 23/01/2013.OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 31/01/2013 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.31/1 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 31/01/2013 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. .