ACIT, Jaipur V. M/S JAWAHAR KALA KENDRA, Jaipur

ITA 1191/JPR/2010

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 7217 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 20-10-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 04-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VINOD JOHARI
• Keywords: Depreciation
• Section: 12A; 11

Judgement Text

1 ITA 1191-10 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH B JAIPUR BEFORE SHRI R.K. GUPTA AND SHRI N.L. KALRA ITA NO. 1191/JP/2010 ASSTT. YEAR : 2007-08. THE ACIT, CIRCLE-5, VS. M/S. JAWAHAR KALA KENDRA , JAIPUR. JAWAHAR LAL NEHRU MARG, JAIPUR. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VINOD JOHARI RESPONDENT BY : SHRI P.C. PARWAL DATE OF HEARING : 20.10.2011. DATE OF PRONOUNCEMENT : 04.11.2011. ORDER DATE OF ORDER : 04/11/2011. PER R.K. GUPTA, J.M. THIS IS AN APPEAL BY DEPARTMENT AGAINST THE ORDER OF LD. CIT (A) RELATING TO ASSESSMENT YEAR 2007-08. 2. THE DEPARTMENT IS OBJECTING IN DELETING THE DISA LLOWANCE OF DEPRECIATION WITHOUT APPRECIATING THAT THE ASSETS ON WHICH DEPRECIATION HAS BEEN CLAIMED BY THE ASSESSEE ARE NOT OWNED BY THE ASSESSEE SOCIETY. 3. THE BRIEF FACTS OF THE CASE NOTED BY LD. CIT (A) AT PAGES 1 & 2 ARE AS UNDER :- IN CONNECTION WITH DEPRECIATION CLAIM OF THE APP ELLANT SOCIETY AND BY REFERRING DETAILS FILED DURING THE COURSE OF ASSESS MENT PROCEEDINGS FOR A.Y. 2005-06 THE AO HAS NOTICED THAT THE APPELLANT SOCIETY HAD SHOWN OPENING FIXED ASSETS AT RS. 52,94,23,001/- AS ON 1. 8.2004 ON THE BASIS OF 2 REPORT OF AN AEN SHOWING THE MARKET VALUE OF THESE ASSETS AS ON 1.8.2004 AND THE SOCIETY WERE REQUIRED TO PROVE THE OWNERSHI P OF THE FIXED ASSETS AS ON 1.8.2004. IN THIS RESPECT, A SHOW CAUSE NOTICE WAS ISSUED JUSTIFYING THE PROOF OF OWNERSHIP OF THE BUILDING VIDE ORDER SHEET ENTRY DATED 25.11.2009 AND AFTER DISCUSSING THE EXPLANATION FURNISHED THE AO HAS HELD THAT IN ABSENCE OF GOVERNMENT NOTIFICATION AND THE PURPOSE FOR WHICH VALUATION HAS BEEN CARRIED OUT BY AEN, THE PROPERTY DID NOT B ELONG TO THE ASSESSEE AND THE DEPRECIATION CLAIM PERTAINING TO BUILDING A MOUNTING TO RS. 69,23,250/- WAS DISALLOWED. FURTHER, THE 100% DEPRE CIATION CLAIM ON THE WDV OF LIBRARY BOOKS WAS NOT HELD AS ALLOWABLE SINC E THE PRESCRIBED DEPRECIATION RATE IN THIS CASE IS ONLY 60% AND, THE REFORE, EXCESSIVE CLAIM OF RS. 12,92,334/- IN RESPECT OF LIBRARY BOOKS WAS DISALLOWED. SIMILARLY, CONSIDERING THE PERIOD OF USE FOR GENERAL STORES TH E EXCESSIVE DEPRECIATION CLAIM OF RS. 49,621/- WAS FURTHER DISALLOWED. IN TO TAL THE DISALLOWANCE OF DEPRECIATION CLAIM HAS BEEN WORKED OUT AT RS. 82,65 ,205/-. 4. IT WAS CONTENDED BEFORE LD. CIT (A) THAT THE GOV ERNMENT OF RAJASTHAN WAS OWNER OF THE BUILDING PRIOR TO 1.8.2004 AND FROM THIS DAT E AND ONWARDS IT WAS CONTINUED TO BE UTILIZED BY THE SOCIETY AS ITS INHERITOR FOR THE AI MS AND ACTIVITIES OF THE ASSESSEE SOCIETY UNDER THE ORDER OF GOVERNMENT OF RAJASTHAN. HE HAD ALSO REFERRED CIT (A)-II, JAIPUR APPELLATE ORDER IN THEIR CASE FOR A.Y. 2005-506 IN WHICH THE DEPRECIATION ON THE BUILDING WAS ALLOWED ON THE COST OF THE BUILDING OF RS. 5,51 ,78,000/- AND THEREFORE, A REQUEST WAS MADE TO ALLOW THE DEPRECIATION ACCORDINGLY. FURTHE R, IN RESPECT OF DEPRECIATION CLAIM ON BOOKS BY SUBMITTING A COPY OF INCOME AND EXPENDITUR E ACCOUNT AND DEPRECIATION CHART IT WAS CLAIMED THAT THE ASSESSEE SOCIETY HAS NOT CLAIM ED ANY DEPRECIATION ON THE LIBRARY AND, THEREFORE, THERE WAS NO QUESTION OF ANY DISALLOWANC E OF DEPRECIATION ON LIBRARY BOOKS AT 3 RS. 12,92,334/- AND HE HAS NOT PRESSED THE GROUND O F APPEAL REGARDING DISALLOWANCE OF DEPRECIATION ON GENERAL STORES OF RS. 49,621/-. 5. AFTER CONSIDERING THE SUBMISSIONS AND MATERIAL O N RECORD, THE LD. CIT (A) GAVE THE FOLLOWING FINDING :- I HAVE CONSIDERED FACTS OF THE CASE AND ARGUMENT S TAKEN BY SH. AGARWAL QUITE CAREFULLY. THE ISSUE OF DEPRECIATION CLAIM ON BUILDING HAS COME UP IN THE APPEAL FILED BY THE SOCIETY BEFORE THIS OFFICE FOR A.Y. 2005-06 AND FOR THE PURPOSE OF DISALLOWANCE OF DEPRECIATION CLAIM O N BUILDING THE AO HAS ALSO REFERRED THE DISCUSSION MADE IN THE ASSESSMENT ORDER OF A.Y. 2005-06. WHILE DECIDING THE APPEAL NO. 879/07-08 DT. 14.10.2 008 IN THE CASE OF APPELLANT SOCIETY FOR A.Y. 2005-06 IN PARA 1.3 OF T HE APPELLATE ORDER IT HAS BEEN HELD THAT THE APPELLANT SOCIETY IS ENTITLED FO R DEPRECIATION ON ALL THE ASSETS AS ON 1.8.2004 AS RECEIVED FROM GOVERNMENT O F RAJASTHAN AND NOT ON THE PRESENT VALUE AS ON 1.8.2004 BUT ONLY ON ACT UAL COST TO THE ERSTWHILE OWNER SUBJECT TO ALLOWABLE DEPRECIATION FROM THE DA TE OF ACQUISITION TILL IT IS PASSED OVER TO THE APPELLANT SOCIETY IN A.Y. 200 5-06 AS PER CLAUSE (B) OF EXPLANATION 2 TO S. 43(1) OF I.T. ACT. BASED UPON THE SAID FINDING THE AO SHOULD CONSIDER CLOSING WDV OF THE BUILDING AS ON 3 1.3.2005 AND AFTER CONSIDERING ALLOWABLE DEPRECIATION FOR THE F.Y. 200 5-06 HE SHOULD ASCERTAIN THE OPENING WDV AS ON 1.4.2006 AND ON THI S WDV THE DEPRECIATION AT THE PRESCRIBED RATE IS TO BE ALLOWE D ON THE BUILDING TO THE APPELLANT SOCIETY. AO IS, THEREFORE, DIRECTED TO AL LOW THE SAME AND TO THAT EXTENT THE APPELLANT GET RELIEF ON THIS ISSUE. HOWE VER, I AGREE THAT WHEN APPELLANT SOCIETY HAS NOT CLAIMED ANY DEPRECIATION ON THE BOOKS OF LIBRARY THEN THERE IS NO QUESTION OF ANY DISALLOWANCE OF SU CH DEPRECIATION PARTIALLY AND ACCORDINGLY SUCH DISALLOWANCE OF DEPRECIATION O N BOOKS TO THE EXTENT OF RS. 12,92,334/- MADE BY AO IS HEREBY DELETED. H OWEVER, SINCE SH. AGARWAL HAS NOT PRESSED THE GROUND OF APPEAL REGARD ING DISALLOWANCE OF DEPRECIATION ON GENERAL STORES TO THE EXTENT OF RS. 49,621/- AND THEREFORE, THE SAID DISALLOWANCE IS HEREBY CONFIRMED. 4 6. NOW THE DEPARTMENT IS IN APPEAL HERE BEFORE THE TRIBUNAL. 7. THE LD. D/R SUPPORTED THE ORDER OF THE AO. 8. ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSESS EE PLACED RELIANCE ON THE ORDER OF THE LD. CIT (A). IT WAS FURTHER ARGUED BY HIM THAT LD. CIT (A) HAS REDUCED THE DEPRECIATION AS HE HAS ALLOWED THE DEPRECIATION ON THE WDV ONLY. THE ASSESSEE HAD FILED RETURN OF LOSS AND AFTER REDUCING THE DEPRECIATION BY LD. CIT (A), THE RETURN OF INCOME CAME TO A POSITIVE FIGURE, THEREFORE, AO SHOULD BE DIRECTED TO COMPUTE THE INCOME OF THE ASSESSEE AS PER PROVISIONS OF LAW. RELIANCE WAS PL ACED ON VARIOUS CASE LAWS IN THIS RESPECT MENTIONED IN THE WRITTEN SUBMISSION. 9. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING T HE MATERIAL ON RECORD, WE FIND THAT ASSESSEE SOCIETY IS CONSTITUTED AS AN AUTONOMO US BODY BY THE GOVERNMENT OF RAJASTHAN VIDE ORDER DATED 11.8.2003 TO PRESERVE AN D PROMOTE ART & CULTURE OF RAJASTHAN AND TO CONTRIBUTE TO THE SOCIAL AND CULTURAL DEVELO PMENT OF THE PEOPLE OF THE STATE. IT IS REGISTERED UNDER THE SOCIETIES REGISTRATION ACT, 19 58 ON 19.09.2003. THE REGISTRATION CERTIFICATE AND THE MEMORANDUM OF ASSOCIATION OF TH E SOCIETY IS AT PB 3-20. IT IS ALSO GRANTED REGISTRATION UNDER SECTION 12A W.E.F. 31.01 .2006 (I.E. W.E.F. 01.04.2005)(PB 1). THE CHAIRPERSON OF THE SOCIETY IS CHIEF MINISTER OF RAJASTHAN AND ALL OTHER MEMBERS OF GOVERNING BODY ARE PERSON OF EMINENCE AS EVIDENT FR OM PAPER BOOK PAGES 6 TO 7. 9.1. PRIOR TO THE CONSTITUTION OF THE SOCIETY, JAWA HAR KALA KENDRA WAS BEING MANAGED BY GOVERNMENT OF RAJASTHAN. ON ITS CONSTITUTION, A LL THE ASSETS AND LIABILITIES WERE TRANSFERRED & INCORPORATED IN THE BOOKS OF THE SOCI ETY. ACCORDINGLY, THE ASSESSEE SOCIETY RECORDED THE VALUE OF THE LAND OF JAWAHAR KALA KEND RA AT RS. 42.62 CRORES AND BUILDING AT 5 RS. 9.05 CRORES IN ITS BOOKS OF ACCOUNTS. THE DEPRE CIATION WAS CLAIMED ON BUILDING ON THE VALUE OF RS. 9.05 CRORES. 9.2. IN ASSESSMENT YEAR 2005-06 THE AO DISALLOWED T HE CLAIM OF DEPRECIATION ON BUILDING ON THE GROUND THAT BUILDING IS NOW OWNED B Y THE ASSESSEE SOCIETY. THE LD. CIT (A) VIDE ORDER DATED 14.10.2008 HELD THAT ASSESSEE HAD ACQUIRED THE POSSESSION OF ASSET IN ITS OWN RIGHTS AND USING THE SAME FOR THE PURPOSE O F ITS ACTIVITY AND SINCE THE DOMINION AND CONTROL OVER ALL THE ASSETS OF JAWAHAR KALA KEN DRA HAS BEEN GIVEN BY THE GOVERNMENT OF RAJASTHAN, THEREFORE, REGISTRATION UNDER THE IND IAN REGISTRATION ACT IS NOT REQUIRED. ACCORDINGLY, IT ALLOWED DEPRECIATION ON ALL THE ASS ETS WHICH IS RECEIVED FROM GOVERNMENT OF RAJASTHAN AT IS ACTUAL COST LESS ALLOWABLE DEPRE CIATION IN IT PASSED ON TO THE SOCIETY AS PER CLAUSE (B) OF EXPLANATION 2 TO SECTION 43(1)(PB PAGES31 & 32). ON THIS BASIS, THE ALLOWABLE DEPRECIATION FOR A.Y. 2004-05 WORKED OUT AT RS. 21,37,709/- (PB 34-35) WHICH IS ALLOWED BY THE AO IN GIVING EFFECT TO THE ORDER OF LD. CIT (A). AGAINST THIS ORDER OF LD. CIT (A)(PB 38), DEPARTMENT HAS NOT FILED FURTHER AP PEAL BEFORE THE TRIBUNAL. 9.3. IN THE YEAR UNDER CONSIDERATION, ASSESSEE CLAI MED DEPRECIATION OF RS. 81,96,190/- COMPRISING OF DEPRECIATION ON BUILDING RS. 69,23,25 0/-, TECHNICAL STORE RS. 7,12,157/- AND GENERAL STORE RS. 5,60,783/-. AO DISALLOWED THE CLA IM OF DEPRECIATION ON BUILDING FOR THE REASON THAT ASSESSEE HAD NOT FURNISHED GOVERNMENT N OTIFICATION OR ANY DOCUMENT OR EVIDENCE TO PROVE THE CHANGE OF OWNERSHIP OF BUILDI NG FROM STATE GOVERNMENT TO THE ASSESSEE. HE FURTHER DISALLOWED DEPRECIATION ON LIB RARY BOOKS AT RS. 12,92,334/- AND ON GENERAL STORE AT RS. 49,621/-. THUS, HE DISALLOWED DEPRECIATION OF RS. 82,65,205/-. 9.4. THE LD. CIT (A) FOLLOWING HIS ORDER FOR A.Y. 2 005-06, DIRECTED TO ALLOW DEPRECIATION ON THE WDV OF BUILDING AFTER CONSIDERI NG THE ALLOWABLE DEPRECIATION FOR 6 F.Y. 05-06 FROM THE CLOSING WDV OF BUILDING AS ON 3 1.03.2005. HE DELETED THE DISALLOWANCE OF DEPRECIATION ON LIBRARY BOOKS ON TH E GROUND THAT NO DEPRECIATION IS CLAIMED BY THE ASSESSEE. HE CONFIRMED THE DISALLOWA NCE OF DEPRECIATION ON GENERAL STORE TO THE EXTENT OF RS. 49,621/-. 10. THE SUBMISSIONS OF THE LD. A/R ARE SIMILAR AS W AS MADE BEFORE LD. CIT (A). AFTER CONSIDERING THE SUBMISSIONS AND PERUSING THE MATERI AL ON RECORD, WE FIND NO INFIRMITY IN THE FINDING OF LD. CIT (A) WHICH ARE REPRODUCED SOM EWHERE ABOVE IN THIS ORDER. THE LD. CIT (A) HAS RIGHTLY ALLOWED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING THAT ASSESSEE IS OWNER NOW AS THE RAJASTHAN GOVERNMENT HAS TRANSFERR ED THE ASSETS AND LIABILITIES IN THE NAME OF SOCIETY CONSTITUTED AS AN AUTONOMOUS BODY B Y THE GOVERNMENT OF RAJASTHAN ITSELF. THEREFORE, IF THE ASSETS ARE NOT REGISTERE D IN THE NAME OF ASSESSEE SOCIETY, EVEN IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN TH E CASE OF MYSORE MINERAL LTD., 239 ITR 775, THE DEPRECIATION IS ALLOWABLE. THE DEPREC IATION WAS CLAIMED BY THE SOCIETY FOR THE FIRST TIME IN 2005-06 ON THE BASIS OF REVALUATI ON OF ASSETS. THE AO DISALLOWED THE CLAIM OF THE ASSESSEE. THE LD. CIT (A) ALLOWED THE APPEAL OF THE ASSESSEE IN PART BY OBSERVING THAT THE DEPRECIATION IS ALLOWABLE ONLY O N THE WDV AND NOT ON THE REVALUATED VALUE. NO APPEAL HAS BEEN PREFERRED BY THE DEPARTME NT FOR ASSESSMENT YEAR 2005-06. THE ASSESSMENT YEAR UNDER CONSIDERATION IS 2007-08. THE REFORE, IN OUR VIEW THE LD. CIT (A) WAS CORRECT IN ALLOWING THE DEPRECIATION IN PART ON THE VALUE OF WDV. ACCORDINGLY, WE CONFIRM THE ORDER OF LD. CIT (A) IN THIS RESPECT. 11. REGARDING THE CONTENTION OF THE ASSESSEE THAT A SSESSEE SOCIETY IS REGISTERED UNDER SECTION12A AND, THEREFORE, COMPUTATION OF INCOME SH OULD NOT BE ON THE BASIS OF INCOME AND EXPENDITURE ACCOUNT BUT FROM SURPLUS/DEFICIT AP PLICATION OF INCOME IS TO BE ALLOWED 7 AND ACCORDINGLY AS PER PROVISIONS OF SECTION 11 AND 12, THE INCOME HAS TO BE COMPUTED. SINCE ASSESSEE HAS FILED INCOME SHOWING LOSS AND AF TER ALLOWING DEPRECIATION IN PART, THE INCOME OF THE ASSESSEE WILL BE IN SURPLUS. THEREFOR E, THIS ASPECT HAS TO BE CONSIDERED BY THE AO WHILE RE-COMPUTING THE INCOME OF THE ASSESSE E AND ACCORDINGLY THE AO IS DIRECTED TO COMPUTE THE INCOME OF THE ASSESSEE AS P ER PROVISIONS OF LAW. WE ORDER ACCORDINGLY. 12. IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISM ISSED FOR THE ABOVE REASON. 13. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 04 .11.2011. SD/- SD/- ( N.L. KALRA ) ( R.K. GUPTA ) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR, D/- COPY FORWARDED TO :- THE ACIT, CIRCLE-5, JAIPUR. M/S. JAWAHAR KALA KENDRA, JAIPUR. THE CIT (A) THE CIT THE D/R GUARD FILE (ITA NO. 1191/JP/2010) BY ORDER, AR ITAT JAIPUR.