Parul Arogya Seva Mandal Trust, Ahmedabad V. The Dy.DIT(Exemp), Ahmedabad

ITA 1190/AHD/2010

• Counselvise Citation: 119020514 RSA 2010
• Duration Of Justice: 2 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 30-05-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 16-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B K
• Assessee Lawyers: N B SHAH
• Keywords: Capital asset; Depreciation; Charitable institution; Opportunity of being heard
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMEDABAD BEFORE SHRI G.C.GUPTA , VICE PRESIDENT AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ITA NO. 1190/AHD/2010 ASSESSMENT YEAR :2007-08 PARUL AROGYA SEVA MANDAL TRUST, C/O AHMEDABAD HOMOEO MEDICAL COLLEGE, GHOOMA- BOPAL ROAD, BOPAL, AHMEDABAD V/S . DEPUTY DIRECTOR OF INCOME TAX (EXEMPTION), AHMEDABAD. PAN NO. AAA TP4313K (APPELLANT) .. (RESPONDENT) BY APPELLANT SHRI N.B. SHAH, A.R. /BY RESPONDENT SHRI B.K.S. PANDYA, SR. D.R /DATE OF HEARING 30.05.2012 /DATE OF PRONOUNCEMENT 15.06.2012 O R D E R PER : T.R.MEENA, ACCOUNTANT MEMBER THIS IS ASSESSEES APPEAL ARISES OUT OF ORDER OF C IT(A)-XXI, AHMEDABAD, ORDER DATED 16.02.2010 FOR ASSESSMENT YE AR 2007-08. THE ASSESSEE RAISED FOLLOWING EFFECTIVE GROUNDS OF APPE AL:- 1. THE ORDER PASSED BY CIT (APPEALS) IS BAD IN LAW AND ON FACTS AND HENCE, IT IS SUBMITTED THAT THE SAME BE CANCELL ED AND BE SUITABLY MODIFIED. THE APPELLATE ORDER PASSED BY THE LEARNE D CIT (APPEALS) IN DEFIANCE OF THE RATIO OF THE JUDGMENTS OF THE HONB LE HIGH COURT OF GUJARAT AND THE ITAT, AHMEDABAD BENCH WHICH ARE BIN DING ON ALL THE INCOME TAX AUTHORITIES IS PERVERSE. ITA NO. 1190/AHD/2010 A.Y.2007-08 PAGE 2 2. THE LEARNED CIT (APPEALS) HAS GROSSLY ERRED IN L AW AND ON FACTS OF THE CASE IN CONFIRMING THE ORDER U/S. 143(3) OF THE I.T. ACT PASSED BY THE AO FOR A.Y. 2007-08. 3. THE LEARNED CIT(APPEALS) HAS GROSSLY ERRED IN LA W AND ON FACTS OF THE CASE IN CONFIRMING THE DISALLOWANCE MADE BY THE AO OF THE APPELLANTS LEGITIMATE CLAIM FOR DEPRECIATION OF RS . 2,44,99,739/-, IN UTTER DISREGARD TO THE JUDGMENT OF THE HONBLE HIGH COURT OF GUJARAT IN THE CASE OF CIT V/S. SETH MANILAL RANCHHODDAS VISHRAM B HAVAN TRUST (198 ITR 598) WHICH IS BINDING ON ALL INCOME TAX AUTHORI TIES IN THE STATE OF GUJARAT. 4. THE LEARNED CIT (APPEALS) HAS GROSSLY ERRED IN L AW AND ON FACTS OF THE CASE IN CONFIRMING THE DISALLOWANCE MADE BY THE AO OF THE APPELLANTS LEGITIMATE CLAIM FOR DEPRECIATION OF RS . 2,44,99,739/-, IN UTTER DISREGARD TO THE JUDGMENT OF THE ITAT, AHMEDABAD BE NCH A DATED 24.7.2009 IN ITA NOS. 2331/AHD/2004, 84/AHD/2006, 2 782/AHD/2007 AND 3208/AHD/2007 IN THE CASE OF AHMEDABAD SOUTH IN DIAN ASSOCIATION, WHICH JUDGMENT IS BINDING ON ALL THE I NCOME TAX AUTHORITIES IN THE STATE OF GUJARAT. 2. GROUND NOS. 1 & 2 ARE GENERAL IN NATURE WHICH WI LL BE CONSIDERED IN DISPOSING OF GROUND NOS. 3 & 4 OF THE APPEAL. THER EFORE, NO SEPARATE FINDINGS ARE BEING GIVEN. 3. GROUND NOS. 3 & 4 ARE AGAINST NOT ALLOWING DEPRE CIATION BY CIT (A) AT RS. 2,44,99,739/-. THE FACT IS THAT THE ASSESSEE IS A CHARITABLE TRUST ENGAGED IN EDUCATION. IT HAS CLAIMED DEPRECIATION OF RS. 2 ,44,99,739/- EVEN EXPENDITURE OF SAID ASSETS HAD ALREADY BEEN ALLOWED AS EXPENDITURE/APPLICATION OF FUND. THE ASSESSEE WAS GIVEN REASONABLE OPPORTUNITY OF BEING HEARD DURING THE COURSE OF ASS ESSMENT PROCEEDING BUT ITA NO. 1190/AHD/2010 A.Y.2007-08 PAGE 3 ASSESSEES REPLY WAS NOT FOUND CONVINCING TO THE A. O. AFTER CONSIDERING THE VARIOUS DECISIONS, THE A.O. DISALLOWED THE DEPRECIA TION AS DOUBLE DEDUCTION. THE ASSESSEE RELIED UPON BEFORE THE A.O. AND CIT (A ) IN CASE OF CIT V/S. SHETH MANILAL RANCHHODDAS VISHRAM BHAVAN TRUST 198 ITR 598 (GUJ). THE CIT (A) CONSIDERED THIS CASE LAW AND ALSO FOLLOWED THE DECISION OF ITAT A BENCH IN CASE OF AHMEDABAD SOUTH INDIAN ASSOCIATION IN ITA NOS. 2331/AHD/2004, 84/AHD/2006, 2782/AHD/2007 AND 3208/ AHD/2007 , DATED 24.07.2009 WHERE HONBLE A BENCH HAD OBSERVED AS UNDER: IN OUR CONSIDERED VIEW THE HONBLE GUJARAT HIGH CO URT IN THE ABOVE REFERRED CASE WERE CONCERNED WITH THE COMPUTATION O F INCOME OF THE TRUST IN THE NORMAL COMMERCIAL SENSE AND HAD NOT CO NSIDERED WHETHER THE AMOUNT OF DEPRECIATION WOULD BE CONSIDERED AS A PPLICATION TO ARRIVE AT 85% OF THE RECEIPTS IN ADDITION TO INVESTMENT IN THE ASSETS ALREADY ALLOWED AS APPLICATION IN THE EARLIER YEAR. THE AL LOWANCE OF DEPRECIATION AS FURTHER APPLICATION OF RECEIPTS IN SUBSEQUENT YE AR WOULD APPARENTLY BE A DOUBLE APPLICATION WHICH, IN OUR HUMBLE VIEW W OULD BE APPARENTLY INCONSISTENT AS NOT SO PROVIDED IN LAW AND HENCE UN TENABLE, APPARENTLY ILLOGICAL. LEARNED CIT (A) ALSO HELD THAT DEPRECIATION WILL AM OUNT TO DOUBLE DEDUCTION I.E. AT THE TIME OF APPLICATION OF FUND AND AGAIN W HILE ALLOWING THE DEPRECIATION ON THE ASSETS PURCHASED BY SUCH APPLICATION OF FUND . HE DISALLOWED THE DEPRECIATION. 4. NOW THE ASSESSEE IS IN APPEAL BEFORE US. THE A. R. FOR THE ASSESSEE HAS FILED THE GIST IN CASE OF FOLLOWING JUDGMENTS:- 1. CIT V/S. SHETH MANILAL RANCHHODDAS VISHRAM BHAV AN TRUST 198 ITR 598 (GUJ) ITA NO. 1190/AHD/2010 A.Y.2007-08 PAGE 4 2. CIT V/S. RAO BAHADUR CALAVALA CUNNAN CHETTY CHAR ITIES 135 ITR 485 (MADRAS HIGH COURT) 3. SHRIMAD VALLABH VISHWA DHARMA SANSTHA V/S. ACIT 102 TTJ (AHD) 653 4. DEPUTY CIT & ORS. V/S. MARKET COMMITTEE 13 DTR 157 (DEL)(TRIB) 5. CIT V/S. MARKET COMMITTEE 330 ITR 16 6. CIT V/S. TINY TOTS EDUCATION SOCIETY IN ITA NO. 93 OF 2010 (PUNJAB & HARYANA COURTS) 7.. CIT V/S. INSTITUTE OF BANKING PERSONNEL SELECTI ON 264 ITR 110 (BOM) HE ALSO FILED A COPY OF ITAT C BENCH, AHMEDABAD D ECISIOJN IN CASE OF ADHARSHILA EDUCATION & CHARITABLE TRUST IN ITA NO. 1443/AHD/2008, A.Y. 2005-06 & 810/AHD/2009, A.Y. 2006-07, ORDER DATED 0 6.05.2011 IN WHICH SIMILAR ISSUE HAS BEEN ALLOWED BY FOLLOWING DECISIO N IN ITA NO. 2221/AHD/2008, A.Y. 2005-06, ORDER DATED 30.11.2010 OBSERVING AS UNDER: 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW THERE I S NO CASE FOR INTERFERENCE IN THE ORDER OF LD. CIT (A). 10. THE ISSUE OF DEPRECIATION ON THE ASSETS OWNED B Y THE ASSESSEE TRUST AND USED IN THEIR ACTIVITIES IS ALLOWABLE IN VIEW OF THE TWO JUDGMENTS REFERRED TO BY THE ASSESSEE IN THE WRITTE N SUBMISSIONS. IN ADDITION TO THIS, ABOVE VIEW IS SUPPORTED BY THE DE CISION OF HON. MADHYA PRADESH HIGH COURT IN CIT VS. RAIPUR PALLOTT INE SOCIETY (1989) 180 ITR 579 (M.P.) WHEREIN HON. HIGH COURT H ELD AS UNDER: DEPRECIATIOJN IS THE EXHAUSTION OF THE EFFECTIVE L IFE OF A FIXED ASSET OWING TO USE OR OBSOLESCENCE. IT MAY BE COMPUTED AS THAT PART OF THE COST OF THE ASSET WHICH WILL NOT BE RECOVERED WHEN THE ASSET IS FINALLY PUT OUT OF USE. THE OBJECT OF PROVIDING FOR DEPREC IATION IS TO SPREAD THE ITA NO. 1190/AHD/2010 A.Y.2007-08 PAGE 5 EXPENDITURE INCURRED IN ACQUIRING THE ASSET OVER IT S EFFECTIVE LIFETIME AND THE AMOUNT OF PROVISION MADE IN RESPECT OF AN ACCOU NTING PERIOD IS INTENDED TO REPRESENT THE PROPORTION OF SUCH EXPEND ITURE WHICH HAS EXPIRED DURING THAT PERIOD. IF DEPRECIATION IS NOT ALLOWED AS A NECESSARY DEDUCTION IN COMPUTING THE INCOME OF A CHARITABLE T RUST, THEN THERE WOULD BE NO WAY TO PRESERVE THE CORPUS OF THE TRUST . A CHARITABLE TRUST IS, THEREFORE, ENTITLED TO DEPRECIATION IN RESPECT OF THE ASSETS OWNED BY IT. IN CIT VS. INSTITUTE OF BANKING PERSONNEL SELECTION (SUPRA) HON. BOMBAY HIGH COURT HAS HELD AS UNDER:- INCOME DERIVED FROM THE TRUST PROPERTY HAS ALSO GO T TO BE COMPUTED ON COMMERCIAL PRINCIPLES AND IF COMMERCIAL PRINCIPLES ARE APPLIED THEN ADJUSTMENT OF EXPENSES INCURRED BY THE TRUST FOR CH ARITABLE AND RELIGIOUS PURPOSES IN THE EARLIER YEARS AGAINST THE INCOME EA RNED BY THE TRUST IN THE SUBSEQUENT YEAR WILL HAVE TO BE REGARDED AS APP LICATION OF INCOME OF THE TRUST FOR CHARITABLE AND RELIGIOUS PURPOSES IN THE SUBSEQUENT YEAR IN WHICH ADJUSTMENT HAS BEEN MADE HAVING REGARD TO THE BENEVOLENT PROVISIONS CONTAINED IN S.11 AND THAT SUCH ADJUSTME NT WILL HAVE TO BE EXCLUDED FROM THE INCOME OF THE TRUST UNDER S.11(1) (A) VS. SHRI PLOT SWETAMBER MURTI PUJAK JAIN MANDAL (1994) 119 CTR (G UJ.) 144 (1995) 211 ITR 293 (GUJ) CONCURRED WITH: ACCORDINGLY, GROUND NOS. 1 & 2 OF REVENUE ARE REJEC TED. RESPECTFULLY FOLLOWING ABOVE DECISION, WE REJECT TH E GROUND RAISED BY THE REVENUE, AS A RESULT, APPEAL FILED BY THE REVEN UE IS DISMISSED. 5. LD. D.R. VEHEMENTLY ARGUED TO CONFIRM THE ORDER OF LD. CIT(A). 6. WE HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW AND GONE THROUGH THE CASE LAW CITED BY BOTH THE SIDE. THE ASSESSEE HAD ALREADY BEEN ALLOWED ASSETS AS EXPENDITURE/APPLICATION OF FUND. WHEN FU LL VALUE OF ASSETS HAD BEEN ADJUSTED AS AN EXPENDITURE OR APPLICATION OF FUND, NO ASSETS REMAINED TO BE ITA NO. 1190/AHD/2010 A.Y.2007-08 PAGE 6 DEPRECIATED. WE ARE RESPECTFULLY FOLLOWING THE DEC ISION OF GUJARAT HIGH COURT AS WELL AS C BENCH DECISION IN ABOVE CASE, IN WHI CH DEPRECIATION HAS BEEN ALLOWED EVEN CAPITAL ASSETS ALLOWED FULLY AS AN EXP ENDITURE. BEING JUDICIAL PRECEDENT, WE ALSO ALLOW THIS APPEAL IN FAVOUR OF T HE ASSESSEE. 7. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE. SD/- SD/- (SHRI G.C.GUPTA) (T.R. MEENA) VICE PRESIDENT ACCOUNTANT MEMBER TRUE COPY S.K.SINHA ! ! ! ! '! '! '! '! / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. '(' ) * / CONCERNED CIT 4. *- / CIT (A) 5. !./ ), ) , 12( / DR, ITAT, AHMEDABAD 6. /45 67 / GUARD FILE. BY ORDER/ , 8/ 1 ': ) , 12( ; STRENGTHEN PREPARATION & DELIVERY OF ORDERS IN THE ITAT 1) DATE OF TAKING DICTATION 07.06.2012 2) DIRECT DICTATION BY MEMBER STRAIGHT ON COMPUTER/LAPTOP/DRAGON DICTATE XXXX 3) DATE OF TYPING & DRAFT ORDER PLACE BEFORE MEMBER 08.06.2012 4) DATE OF CORRECTION X 5) DATE OF FURTHER CORRECTION X 6) DATE OF INITIAL SIGN BY MEMBERS 15.06.2012 7) ORDER UPLOADED ON ,, ,, 8) ORIGINAL DICTATION PAD HAS BEEN ENCLOSED IN THIS FILE YES 9) FINAL ORDER AND 2 ND COPY SEND TO BENCH CLERK ON 15.06.2012 ITA NO. 1190/AHD/2010 A.Y.2007-08 PAGE 7