A.C.I.T.. Cir.-4, Nagpur V. M/S NAGPUR AGRICULTURE PRODUCE MARKETING COMMITTEE, Nagpur

ITA 1/NAG/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1278 (ITAT-NAGPUR)
• Duration Of Justice: 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 04-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A R NINAWE
• Keywords: Capital asset; Depreciation; Charitable institution; Tax effect; Capital expenditure
• Section: 32; 28

Judgement Text

1 ITA NO. 01/NAG/2016. IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER.. I.T.A. NO. 01/NAG/2016 ASSESSMENT YEAR : 20 07 - 08. ASSTT. COMMISSIONER OF INCOME - TAX, M/S NAGPUR AGRICULTURAL PRODUCTS CIRCLE - 4, NAGPUR. VS. MARKETING COMMITTEE, NAGPUR. PAN AA JN0267G. APPELLANT. RESPONDENT. APPELLANT BY : SHRI A.R. NINAWE. RESPONDENT BY : SHRI MAHAVIR ATAL . DATE OF HEARING : 2 2 - 11 - 2016 DATE OF PRONOUNCEMENT : 19 TH DEC ., 2016 O R D E R. PER SHAMIM YAHYA , A.M. : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(APPEALS) - 4, NAGPUR DATED 23 - 10 - 2015 AND PERTAINS TO ASSESSMENT YEAR 2007 - 08. THE GROUNDS OF APPEAL READ AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, WAS TH LEARNED CIT(A) RIGHT IN DELETING THE ADDITION OF RS.3,14,21,130/ - , BEING DEPRECIATION CLAIMED BY THE ASSESSEE, THOUGH THE HONBLE SUPREME COURT IN THE CASE OF ESCORTS LTD. V/S UNION OF INDIA: 199 ITR 43 HAS HELD THAT DOUBLE DEDUCTION CANNOT BE PRESUMED IF THE AME IS NOT SPECIFICALLY PROVIDED BY LAW IN ADDITION TO NORMAL DEDUCTION? 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, WAS TH LEARNED CIT(A) RIGHT IN DELETING THE ADDITION OF RS.3,14,21,130/ - , BEING DEPRECIATION CLAIMED BY THE ASSESSEE, DESPITE AN EXEMPTION U/S 11(1)(A) OF THE I.T. ACT, 1961 ON ACCOUNT OF CAPITAL EXPENDITURE ON ASSET ALREADY HAVING BEEN AVAILED, THUS RES ULTING IN DOUBLE DEDUCTION? 2 ITA NO. 01/NAG/2016. 2. BRIEF FACTS OF THE CASE ARE AS UNDER : THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD CLAIMED DEPRECIATION OF RS.3,14,21,130/ - BY DEBITING THE SAME TO INCOME & EXPENDITURE ACCOUNT. THE ASSESSEE HAS ALSO CLAIMED EXEMPTI ON U/S 11(1)(A) OF THE INCOME - TAX ACT ON THE TUNE OF RS.83,32,059/ - . THE AO NOTED THAT THE ASSESSEE HAD CLAIMED EXEMPTION U/S 11(1)(A) AND WAS ENTITLED FOR DEDUCTION OF CAPITAL EXPENDITURE OF ASSETS FOR THE RELEVANT CURRENT YEAR AND PREVIOUS YEARS, THE DED UCTION IN RESPECT OF DEPRECIATION ON SUCH CAPITAL ASSETS IS IRREGULAR, AS IT AMOUNTS TO DOUBLE DEDUCTION TO THE ASSESSEE. THE AO CONCLUDED THAT THIS RESULTED IN IRREGULAR CLAIM OF DEPRECIATION OF RS.3,14,21,130/ - . THE ASSESSEE RELIED ON THE DECISION OF HON BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. INSTITUTE OF BANKING AND PERSONNEL SERVICES REPORTED IN 264 ITR 110 (BOMBAY). THE AO STATED THAT THE REVENUE DEPARTMENT HAD NOT FILED ANY SLP AGAINST THE SAID CASE ONLY DUE TO LOW TAX EFFECT, AND DID NOT ACCEPT ASSESSEES ARGUMENTS. 3. UPON ASSESSEES APPEAL, LEARNED CIT(APPEALS) DELETED THE ADDITION HOLDING AS UNDER : THE A.O . IN HIS ORDER HAS PRIMARILY RELIED ON THE CASE OF LIS S IE MEDICAL INSTITUTIONS V / S.CIT 76 DTR (KER) 372. HOWEVER, HON'BLE HIGH COUR T 0 DELHI IN THE CASE OF DIT V / S. INDRAPRASTHA CANCER SOCIETY 53 TAXMAN 463 (DEL ) HAS CONSIDERED THE CASE OF LISSIE MEDICAL INSTITUTE AND AFTER CONSIDERING T H E SAME HAS DECIDED THE ISSUE IN FAVOUR OF THE APPELLANT. THE HON'BLE COURT HA D HELD THAT IN CASE OF THE TRUST WHERE A CHARITABLE INSTITUTE HAS PURCHASED CAP I T A L ASSET AND TREATED THE AMOUNT SPENT ON PURCHASE OF CAPITAL ASSET AS APPLICA TI O N OF INCOME, THAN SUCH CHARITABLE INSTITUTE IS ENTITLED TO CLAIM D E P REC IATIO N 0 N SAME CAPITAL ASSETS UTILIZED FOR BUSINESS. HON'BLE HIGH COURT OF DELHI HAS G IV E N THIS RULING IN FAVOUR OF INDRAPRASTH CANCER SOCIETY AFTER TAKING INTO A CCOUNT SEC.32 R.W.S.11 OF THE INCOME TAX ACT, 1961 . HON'BLE DELHI HIGH COURT H AS NOTED THAT BY FINANCE ACT , 2014, SUB - SEC.6 TO SEC.11 STANDS I NSERTED W . E.F. 1 . 4.2015 TO THE EFFECT THAT WHERE ANY INCOME IS REQUIR E D TO BE APP L IE D ACCUMULATED OR SET APART FOR APPLICATION , THEN FOR SUCH PURPOSES THE I NC O ME SHALL BE DETERMINED WITHOUT AN Y DEDUCTION OR ALLO W ANCE BY W A Y DEPREC IATION. THE COURT HAS HELD THAT 3 ITA NO. 01/NAG/2016. THE LEGAL POSITION WOULD UNDERGO A CHANG E O NL Y W . E. F . 1.4.2015 AN D NOT TO T H E ASSESSMENT Y EARS BEFORE T H AT . SIM I LARLY , HO N ' BLE BOMBAY HIGH COURT IN THE CASE OF C I T VS. IN ST I T U TE OF B ANKING PERSONNEL SELECTION HAS GIVEN THE FOLLOWING FINDING : ' AS STATED ABOVE , THE FIRST QUESTION WHICH REQUIRED CONSIDERA T ION B Y THIS COURT IS : WHETHER DEPRECIATION WAS ALLOWABLE ON T HE A SSETS , THE COST OF WHICH HAS BEEN FULLY ALLOWED AS APPLICATION OF INCOME U N DER SECTION 11 IN THE PAST YEARS? IN HE CASE OF CIT VS . M UNI S UURAT J A IN 1994 TAX LAW REPORTER , 1 - 84 THE FACTS WERE AS FOLLOWS . THE ASSESSEE WAS A CHARITABLE TRUST. IT WAS REGISTERED AS A PUBLIC CH ARIT ABLE TR U ST . IT WAS ALSO REGISTERED WITH THE COMMISSIONER OF I NCOME T A X, P UNE. T H E ASSESSEE DERIVED INCOME FROM THE TEMPLE PROPERTY WHIC H W AS A TRUST PROPE R TY . DURING THE COURSE OF ASSESSMENT PROCEED I NGS F O R A. Y S.1977 - 78 , 1978 - 79 AND 1979 - 80 , THE ASSESSEE CLAIMED DEP R EC IATI O N ON T HE VALUE OF THE BUIL D ING @ 2 %% AND THEY ALSO CLAIMED DE PREC I ATI O N ON FURNITURE @ 5 %. THE QUESTION WHICH AROSE BEFORE THE C O URT F O R DETERMINATION WAS: WHETHER DEPRECIATION COULD BE DENIED TO TH E ASSESSEE , AS EXPENDITURE ON ACQUIS I TION OF THE ASSETS HAD B EE N TR E AT ED AS APPLICATION OF INCOME IN THE YEAR OF ACQUISITION? IT WAS HEL D BY T HE BOMBAY HIGH COURT THAT SEC . 11 OF THE INCOMETAX ACT MAK E S PR O VI S I O N IN RESPEC T OF COMPUTATION OF INCOME O F THE TRUST F ROM THE P R OPE RTY HELD F O R CHARITABLE OR RELIGIOUS PURPOSES AND IT ALSO PROVIDES FOR APP LICATION AND ACCUMUL ATION OF INCOME . ON THE OTHER HAND , SEC . 28 OF T H E INCOMETAX A CT , DEALS WITH CHARGEABILITY OF INCOME COMPUTED IN ACCO R D ANCE WITH S EC.30 TO SEC.43G . THAT, SEC.32 (1) OF THE ACT PROVIDES FOR DEPREC IATI O N IN RESPECT OF B UILDING, PLANT AND MACHINERY OWNED BY THE ASSE S SEE AND USED FOR THE BUSINESS PURPOSES. IT FURTHER PROVIDES FO R D E D U CT IO N SUBJEC T T O SEC. 34 . IN THAT MATTER A L SO , A SIMILAR ARGUMEN T A S IN TH E PRESENT CASE , WAS ADVANCED ON BEHALF OF THE REVENUE , N A MEL Y , T HAT DEPRECIATION CAN BE ALLOWED AS DEDUCTION ONLY U/ S.32 OF THE I N CO MET A X ACT , AND NOT UNDER GENERAL PRINCI P LES . THE COURT REJEC T E D T HIS ARGUMENT . IT WAS HELD THAT NORMAL DEPRECIATION CAN BE CO N SI DERED A S A LEGITIMATE DEDUCTION IN COMPUT I NG THE REAL I NCOME OF T H E A SS E SSE E ON GENERAL PRINCIPLES OR U/ S . 11 ( 1 )(A ) O F THE INCOMETA X AC T . THE C OU RT REJECTED T HE ARGUMENT ON BEHA LF OF THE REVENUE THAT SEC . 32 O F THE INCOMETAX ACT WAS THE ONLY SECTION G RANT I N G BENEFI T O F DEDUCTI O N ON ACCOUNT OF DEPRECIATION . IT WAS HELD THAT INCOME OF THE CHAR I TABLE TR US T DERIVED FROM BUILDING , PLANT AND MACHINERY AND FURNITURE W AS LIABLE T O BE COMPUTED IN NORMAL COMMERCIAL MANNER ALTHOUGH THE TRUST MAY NOT BE CARRYING OUT ANY BUSINESS AND THE ASSETS IN RESPECT WHEREOF DEPRECIATION IS CLAIMED MAY NOT BE BUSINESS ASSETS. IN ALL SUCH CASES , SEC.32 OF THE INCOMETAX ACT PROVIDING FOR DEPRECIATION FOR COMPUTATION OF INCOME DERIVED FROM BUSINESS OR PROFESSION IS NOT APPLICABLE . HOWEVER, THE INCOME OF THE TRUST IS REQUIRED TO BE COMPUTED U /S 11 L ON COMMERCIAL PRINCIPLES AFTER PROVIDING FOR ALLOWANCE FOR NORMAL DEPRECIATION AND DEDUCTION THEREOF FROM 4 ITA NO. 01/NAG/2016. GROSS INCOME OF THE TRUST. IN VIEW OF THE AFORESTATED JUDGEMEN T OF THE BOMBAY HIGH COURT , WE ANSWER QUESTION NO. 1 IN THE AFFIRMATIVE I.E. IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT. ' 5.3 . CONSIDERING THE ORDER OF DELHI HIGH COURT IN THE CASE O F INDRAPRASTH CANCER SOCIETY (53 TAXMAN 463 DE1 . ) AND THE ORDER O F JURISDICTIONAL HIGH COURT IN THE CASE OF INSTITUTE OF BANKING PERSO N NEL ( 13 1 TAXMAN 386 (BORN . ) SELECTION IT IS HELD THAT WHERE A CHARITABLE INSTITUTE H AS PURCHASED A CAPITAL ASSETS AND TREATED THE AMOUNT SPENT ON SAID ASSETS A S APPLICATION OF INCOME, THAN THE CHARITABLE INSTITUTE IS ENTITLED TO CLAIM DEPRECIATION ON SAID ASSET UTI LIZED FOR BUSINESS. ACCORDINGLY, AFTER CONSIDERIN G THESE DECISIONS , THE GROUNDS RAISED BY THE APPELLANT ARE ALLOWED AND TH E ADDITION MADE BY THE LD.AO ON ACCOUNT OF D I SALLOWANCE OF D E PRECIATION CLAIM E D IS DELETED. 4. AGAINST THE ABOVE ORDER REVENUE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. INS TITUTE OF BANKING PERSONNEL SERVICES REPORTED IN 264 ITR 110 AS REFERRED BY THE LEARNED CIT(APPEALS). ACCORDINGLY RESPECTFULLY FOLLOWING THE PRECEDENT AS ABOVE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LEARNED CIT(APPEALS). HENCE WE UPHOLD THE SAME. 6. IN THE RESULT THIS APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 19 TH DAY OF DEC ., 2016. SD/ - SD/ - (RAM LAL NEGI) ( SHAMIM YAHYA) JUDICIAL MEMBER. ACOUNTANT MEMBER. NAGPUR, DATED: 19 TH DEC . , 2016. 5 ITA NO. 01/NAG/2016. COPY FORWARDED TO : 1. M/S NAGPUR AGRICULTURAL PRODUCE MARKETING COMMITTEE, KHAMLA MARKET YARD, KHAMLA, NAGPUR. 2. A.C.I.T., CIRCLE - 3 , NAGPUR. 3. C.I.T. - , NAGPUR. 4. CIT(APPEALS), - 4, NAGPUR. 5. D.R., ITAT, NAGPUR. 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR. WAKODE.