INDIAN INSTITUTE OF INFORMATION TECHNOLOGY SOCIETY VADODARA,GANDHINAGAR V. THE DY.CIT, CIRCLE-1, EXEMPTION, AHMEDABAD

ITA 1613/AHD/2024

AI Insights

The case involves the Indian Institute of Information Technology Society Vadodara appealing against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, which confirmed the addition of Rs. 26,84,786 made by the Assessing Officer under Section 11(6) of the Income Tax Act. The addition was related to the disallowance of depreciation on fixed assets, which the assessee argued was incorrectly applied as they had not claimed the purchase value of these assets as 'application of income'. The Tribunal found merit in the assessee's argument and restored the matter to the Assessing Officer for further verification.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 25865 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K AGAL
• Assessee Lawyers: M. K. PATEL
• Keywords: Depreciation; Cost of acquisition; Charitable institution
• Section: 143(3); 11

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, AHMEDABAD BEFORE SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER & SHRI NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER I.T.A. No.1613/Ahd/2024 (Assessment Year: 2017-18) Indian Institute of Information Technology Society Vadodara, Block-9, Government Engineering College, Sector-28, Gandhinagar-382028 Vs. Deputy Commissioner of Income Tax, Circle-1, Exemption, Ahmedabad [PAN No.AABTI1838B] (Appellant) .. (Respondent) Appellant by : Shri M. K. Patel, Advocate Respondent by: Shri S K Agal, SR.-D.R. Date of Hearing 20.01.2025 Date of Pronouncement 22.01.2025 O R D E R PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER: This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax(Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi vide order dated 01.08.2024 passed for A.Y. 2017-18. 2. The assessee has raised the following grounds of appeal: “(1) That on facts, and in law, the learned NFAC and the AO has grievously erred in not at all considering the replies/submissions filed by appellant and in dismissing the appeal. (2) That on facts, and in law, the learned NFAC has grievously erred in not granting the opportunity of Video Hearing, in spite of specific request made by appellant. (3) That on facts and in law, the learned NFAC has grievously erred in confirming the addition of Rs. 26,84,786/- made by AO u/s 11(6) of the Act, by ITA No. 1613/Ahd/2024 Indian Institute of Information Technology Society V vs. DCIT Asst.Year –2017-18 - 2 – completely ignoring the fact that the appellant has not claimed the purchase value of assets as application of income and hence, the claim of depreciation did not amount to claim of any double benefit. (4) The appellant craves leave to add, alter, amend any ground of appeal.” 3. The brief facts of the case are that the assessee is an institution established by the Ministry of Human Resource Development (in short “MHRD”), Government of India under the Public-Private-Partnership (in short “PPP”) in the year 2013. During the course of assessment, the Assessing Officer made an addition of Rs. 26,84,786/- by disallowing depreciation on fixed assets under Section 11(6) of the Act. In appeal before Ld. CIT(A), the assessee submitted that Section 11(6) of the Act was not applicable to the instant facts since this section provides that in respect of any asset, the acquisition of which has been claimed as application of income under Section 11 of the Act, then depreciation on such asset would not be allowable to the assessee. The assessee submitted that the Assessing Officer erred in not appreciating the fact that it has not claimed the amount incurred for purchase / acquisition of fixed asset, as application of income. Therefore, since the amount spent for purchase of assets was not claimed as “application of income” under Section 11 of the Act, depreciation on such assets could not be the subject matter of disallowance under Section 11(6) of the Act. In support of the contention that the assessee had not claimed the cost of acquisition of fixed assets as application of income, the assessee also furnished certificate of Chartered Accountant to demonstrate that amounts spent for acquisition of such asset was not claimed as “application of income”. However, Ld. CIT(A) dismissed the appeal of the assessee with the following observations: ITA No. 1613/Ahd/2024 Indian Institute of Information Technology Society V vs. DCIT Asst.Year –2017-18 - 3 – “5.3.1 I have gone through the assessment order and grounds of the appeal and submissions. In order to do away with the complication of double benefits, section 11 was amended and sub section (6) was inserted via the Finance Act No. 2/2014. This sub section specifically deals with this issue and stipulates that where the use of funds for acquisition of an asset has been accepted as application of income of the charitable trust, no deduction of depreciation or otherwise in respect of such asset would be allowed for determining the income of such charitable organisation. This subsection came into effect from A.Y. 2015-16. This amendment was held to be prospective. Therefore, for the A.Ys. prior to 2015-16 depreciation can be claimed on the assets, expenditure on which has already been accounted as application of income. Due to amendment in law, this benefit would not be available. In view of the above, I do not find any reason to interfere in the order passed by the assessing Officer under sec 143(3) of the I T Act dated 29.12.2019 for the assessment year 2017-18. Therefore, the grounds of appeal are dismissed.” 4. The assessee is in appeal before us against the aforesaid order passed by Ld. CIT(A). 5. Before us, the Counsel for the assessee submitted that the assessee had specifically argued before Ld. CIT(A) that the amounts spent for acquiring the fixed asset was not claimed as “application of income”, however, Ld. CIT(A) erred in facts and in law in not even bothering to discuss this argument of the assessee and looking into the crucial aspect, while dismissing the appeal of the assessee. The Counsel for the assessee submitted that on perusal of the records, it would be clear that the assessee has not claimed the amounts spent for acquisition of asset as “application of income” for the impugned assessment year and copy of Chartered Accountant Certificate was also produced before us, for our records. The Counsel for the assessee submitted that this is the second year of incorporation and neither in this year or in the previous assessment year, this amount was claimed by the assessee as “application of income”. Accordingly, it was submitted that Ld. CIT(A) erred in facts and in law in ITA No. 1613/Ahd/2024 Indian Institute of Information Technology Society V vs. DCIT Asst.Year –2017-18 - 4 – holding that depreciation on the fixed assets called for disallowance under Section 11(6) of the Act. 6. In response, Ld. D.R. placed on the disallowance made by Ld. CIT(A) in the appellate order. 7. It would be useful to reproduce Section 11(6) of the Act for ready reference: “The appellant invites reference to the provisions of Section 11(6) of the Income Tax Act, 1961 which read as under:- Sec.11(6) In this section where any income is required to be applied or accumulated or set apart for application, then, for such purposes the income shall be determined without any deduction or allowance by way of depreciation or otherwise in respect of any asset, acquisition of which has been claimed as an application of income under this section in the same or any other previous year.” 8. From the plain reading of the above provision, it is seen that deduction by way of depreciation shall be disallowed only if depreciation is claimed in respect of any assets, acquisition of which has already been claimed as an application of income under this Section 11 of the Act. In the present case, the Counsel for the assessee submitted before us that on verification of the records of the assessee, it would become clear that assessee has never claimed “application of income” towards acquisition of the above assets, either in this year or any of the earlier previous years. Therefore, there is no question of making any disallowance under Section 11(6) of the Act. Further, we observe that the assessee had also furnished Chartered Accountant Certificate in support of the above claim that the assessee has never claimed “application of income” towards acquisition of assets. On going through the facts of the instant case, looking into the ITA No. 1613/Ahd/2024 Indian Institute of Information Technology Society V vs. DCIT Asst.Year –2017-18 - 5 – instant facts, in the interest of justice, the matter is restored to the file of Assessing Officer to verify from the case records whether the assessee has claimed cost of acquisition of such assets on which depreciation was claimed towards “application of income” either in this year or any of the previous assessment years. If, on verification of records it is found that the assessee has not claimed the cost of acquiring the assets as “application of income”, then relief may be given to the assessee, in accordance with law. 9. In the result, the appeal of the assessee is allowed for statistical purposes. This Order pronounced in Open Court on 22/01/2025 Sd/- Sd/- (NARENDRA P. SINHA) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 22/01/2025 TANMAY, Sr. PS TRUE COPY आदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to : 1. अपीलाथŎ / The Appellant 2. ŮȑथŎ / The Respondent. 3. संबंिधत आयकर आयुƅ / Concerned CIT 4. आयकर आयुƅ(अपील) / The CIT(A)- 5. िवभागीय Ůितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाडŊ फाईल / Guard file. आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation 21.01.2025 2. Date on which the typed draft is placed before the Dictating Member 22.01.2025 3. Other Member………………… 4. Date on which the approved draft comes to the Sr.P.S./P.S 22.01.2025 5. Date on which the fair order is placed before the Dictating Member for pronouncement 22.01.2025 6. Date on which the fair order comes back to the Sr.P.S./P.S 22.01.2025 7. Date on which the file goes to the Bench Clerk 22.01.2025 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Despatch of the Order…………………………………… "