International Goudiya Vedanta Trust, New Delhi V. ADIT (E), New Delhi

ITA 1136/DEL/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96991 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 1
• Next Hearing Date: 20-08-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 26-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K K JAISWAL
• Assessee Lawyers: S K KHURANA; KANISHKA MEHTA
• Keywords: Capital asset; Depreciation; Charitable institution
• Section: 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : SMC-I : NEW DELHI BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER ITA NO.1136/DEL/2015 ASSESSMENT YEAR : 2010-11 INTERNATIONAL GOUDIYA VEDANTA TRUST, B-3, BLOCK OCF POCKET, JANAKPURI, NEW DELHI. PAN : AAATI2455H VS. ADIT (E), TRUST CIRCLE-II, NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.K. KHURANA, ADVOCATE & SHRI KANISHKA MEHTA, CA RESPONDENT BY: SHRI K.K. JAISWAL, SR.DR DATE OF HEARING : 24.08.2015 DATE OF PRONOUNCEMENT: 25.08.2015 ORDER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) ON 26.12.2014 DENYING DEPRECIATION U/S 32(1) ON THE PREMISE THAT THE ASSESSEE BEING A CHARITABLE INSTITUTION HAS CLA IMED EXEMPTION FOR THE COST OF ASSET BY MEANS OF APPLICATION OF ITS INCOME . ITA NO.1136/DEL/2015 2 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE, A REGISTERED SOCIETY U/S 12A(A), ENGAGED IN PROVIDING EDUCATION, MEDICAL ASSISTANCE, KNOWLEDGE AND RESEARCH TO POOR, CLAIMED DEPRECIATIO N IN THE COMPUTATION OF ITS INCOME. THE AO DID NOT ALLOW SUCH DEPRECIATION ON THE GROUND THAT THE PURCHASE OF ASSET HAS ALREADY BEEN CLAIMED AS APPLI CATION OF INCOME AND AS SUCH DEDUCTION ON ACCOUNT OF DEPRECIATION WOULD AMO UNT TO DOUBLE DEDUCTION, WHICH IS IMPERMISSIBLE. WHEN THE MATTER CAME UP BEFORE THE LD. CIT(A), HE UPHELD THE ACTION OF THE AO IN THE LIGHT OF THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF DIT(EXEMPTION) VS. CHARANJIV CHARITABLE TRUST (2014) 43 TAXMAN.COM 330 (DEL). THE ASSESSEE IS AGGRIEVED AND IS IN APPEAL AGAINST THE DENIAL OF D EPRECIATION. 3. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE RELEVANT MATERIAL ON RECORD. IT IS NOTICED THAT THE ASSESSEE WAS ALL OWED DEPRECIATION BY THE HONBLE DELHI HIGH COURT VIDE ITS JUDGMENT DATED 27 .11.2013 IN A BUNCH OF APPEALS LED BY DIT(E) VS. INDIAN TRADE PROMOTION OR GANISATION. THE ASSESSEES NAME APPEARS AT SL. NO. 4 OF THIS JUDGME NT OF THE HONBLE DELHI HIGH COURT RELEVANT TO ASSESSMENT YEAR 2009-10. IN THIS JUDGMENT, THE ONLY QUESTION WAS ABOUT THE CLAIM OF DEPRECIATION. THE HONBLE HIGH COURT HELD ITA NO.1136/DEL/2015 3 IN THIS CASE THAT : `APPLICATION OF INCOME MAY INCL UDE PURCHASE OF A CAPITAL ASSET. THE SAID PURCHASE IS VALID AND TAKEN INTO C ONSIDERATION FOR THE PURPOSE FOR ENSURING COMPLIANCE, I.E. APPLICATION O F MONEY OR FUNDS AND IS NOT A FACTOR WHICH DETERMINES AND DECIDES THE QUANT UM OF INCOME DERIVED FROM PROPERTY HELD UNDER TRUST. COMPUTATION OF INCO ME IS SEPARATE AND DISTINCT AND HAS TO BE MADE ON COMMERCIAL BASIS BY APPLYING THE PROVISIONS OF THE ACT. THUS IT IS MANIFEST THAT THE HONBLE DELHI HIGH COURT IN THE ASSESSEES OWN CASE FOR THE IMMEDIATELY PRECEDING A SSESSMENT YEAR HAS HELD THAT DEPRECIATION IS ALLOWABLE AS SEPARATE DED UCTION APART FROM APPLICATION OF INCOME. THE LD. CIT(A) HAS RELIED O N THE JUDGMENT IN THE CASE OF CHARANJIV CHARITABLE TRUST (SUPRA) IN WHICH IT HAS BEEN HELD THAT WHERE IN CASE OF A TRUST, COTS OF ASSET HAS BEEN AL LOWED AS DEDUCTION BY WAY OF APPLICATION OF INCOME, THEN DEPRECIATION ON SAME ASSET CANNOT BE ALLOWED IN COMPUTATION OF INCOME OF TRUST. THIS JUD GMENT IS DATED 18.3.2014. ONCE AGAIN, SIMILAR ISSUE CAME UP FOR C ONSIDERATION BEFORE THE HONBLE DELHI HIGH COURT IN DIT (E) VS. INDRAPRASTHA CANCER SOCIETY (2015) 53 TAXMAN.COM 463 (DEL). VIDE ITS JUDGMENT DATED 18.3.2014, THE HONBLE HIGH COURT HAS HELD THAT A CHARITABLE INSTI TUTION, WHICH HAS PURCHASED CAPITAL ASSET AND TREATED THE AMOUNT SPEN T AS APPLICATION OF ITA NO.1136/DEL/2015 4 INCOME, IS FURTHER ENTITLED TO CLAIM DEPRECIATION O N THE SAME CAPITAL ASSET UTILIZED FOR BUSINESS. IN ITS LATER JUDGMENT, THE HONBLE HIGH COURT ALSO CONSIDERED THE EARLIER JUDGMENT IN THE CASE OF CHARANJIV CHARITABLE TRUST (SUPRA) DECIDING THE ISSUE AGAINST THE ASSESSEE AND THE EA RLIER JUDGMENT IN THE CASE OF INDIAN TRADE PROMOTION ORGANISATION (WHICH ALSO INCLUDES THE ASSESSEE) IN FAVOUR OF THE ASSESSEE. ON CONSIDERAT ION OF THESE TWO VIEWS, THE HONBLE HIGH COURT IN ITS LATEST JUDGMENT HAS D ECIDED TO ALLOW DEPRECIATION ON CAPITAL ASSET IN THE COMPUTATION OF INCOME APART FROM TREATMENT OF PURCHASE OF CAPITAL ASSET AS APPLICATI ON OF INCOME. 4. AT THIS STAGE, IT IS RELEVANT TO NOTE THAT TH E INSTANT CONTROVERSY HAS BEEN PUT TO REST BY THE LEGISLATURE BY INSERTING SUB-SEC TION (6) TO SECTION 11 BY THE FINANCE (NO. 2) ACT, 2014, W.E.F. 1-4-2015, WHICH R EADS AS UNDER : - `(6) IN THIS SECTION WHERE ANY INCOME IS REQUIRED T O 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. 5. THE EFFECT OF THIS INSERTION IS THAT FROM THE A.Y. 23015-16, NO DEPRECIATION CAN BE ALLOWED IN RESPECT OF ANY ASSET , WHOSE ACQUISITION HAS BEEN CLAIMED AS AN APPLICATION OF INCOME. IN VIEW OF THIS LATER LEGISLATIVE ITA NO.1136/DEL/2015 5 INSERTION WHICH IS NOT APPLICABLE TO THE YEAR UNDER CONSIDERATION AND RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE ASSESSEES OWN CASE FOR THE IMMEDIATEL Y PRECEDING ASSESSMENT YEAR, I HOLD THAT DEPRECIATION SHOULD BE ALLOWED SE PARATELY IN THE COMPUTATION OF INCOME. 6. IN THE RESULT, THE APPEAL IS ALLOWED. THE DECISION WAS PRONOUNCED IN THE OPEN COURT ON 25 TH AUGUST, 2015. SD/- (R.S. SYAL) ACCOUNTANT MEMBER DATED: 25 TH AUGUST, 2015. DK COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR DY. REGISTRAR, ITAT, NEW DELHI