The ACIT 2(1), V. Central For Research & Industrias Staff Performance,

ITA 120/IND/2009

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 6047 (ITAT-INDORE)
• Duration Of Justice: 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 20-01-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 06-03-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Gift; Depreciation; Revocable transfer
• Section: 10

Judgement Text

PAGE 1 OF 6 I.T.A.NO. 120/IND/2009 CRISP (CENTRE FOR RESEARCH AND INDUSTRIAL STAFF PERFORMANCE, BHOPAL. IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI V.K. GUPTA, ACCOUNTANT MEMBER PAN NO. : AAATC1353N I.T.A.NO.120/IND/2009 A.Y. : 2005-06 ASSISTANT COMMISSIONER OF INCOME-TAX, CRISP (CENTRE FOR RESEARCH AND INDUSTRIAL STAFF PERFORMANCE, 2(1), VS BHOPAL. BHOPAL. APPELLANT RESPONDENT APPELLANT BY : SHRI K.K.SINGH, CIT DR RESPONDENT BY : SHRI ARUN MEHROTRA, C. A. DATE OF HEARING : 20.01.2010 O R D E R PER BENCH THIS APPEAL FILED BY THE REVENUE ARISES OUT OF ORDE R OF THE LD. CIT(A)-I, BHOPAL, DATED 16,12,2008, FOR THE ASSESSM ENT YEAR 2005-06. 2. WE HAVE HEARD BOTH THE PARTIES AND HAVE ALSO PERUSE D THE MATERIAL AVAILABLE ON RECORD. 3. GROUND RAISED BY THE REVENUE, IN THIS APPEAL, READ S AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 1,69,79,844/- MADE BY THE ASSESSING OFFICER ON ACCO UNT OF PAGE 2 OF 6 I.T.A.NO. 120/IND/2009 CRISP (CENTRE FOR RESEARCH AND INDUSTRIAL STAFF PERFORMANCE, BHOPAL. DISALLOWANCE OF DEPRECIATION ON FIXED ASSETS CLAIME D BY THE ASSESSEE. 4. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS A SOC IETY REGISTERED WITH REGISTRAR OF SOCIETIES, GOVERNMENT OF MADHYA P RADESH. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. NOTED TH AT IT WAS FORMED IN PURSUANCE TO AN AGREEMENT BETWEEN GOVERNMENT OF IN DIA AND GOVERNMENT OF GERMANY, WHEREBY EXISTING ASSETS OF P ROJECT DEVELOPMENT UNIT, A GOVERNMENT OF MADHYA PRADESH OW NED INSTITUTION, WAS TRANSFERRED TO THIS SOCIETY. THE VALUE OF SUCH ASSETS WAS RS. 698.95 LAKHS. THE GOVERNMENT OF GERMANY ALSO TRANSFERRED A SSETS WORTH RS.2 15.45 LAKHS. BOTH THESE GOVERNMENTS TRANSFERRED THE SE ASSETS WITHOUT ANY MONETARY CONSIDERATION. THE ASSESSEE SOCIETY WAS AL SO GRANTED REGISTRATION U/S 12AA, WHICH IS EFFECTIVE FROM FINA NCIAL YEAR 2005-06. HENCE, FOR THE YEAR UNDER CONSIDERATION , THE A.O. HELD THAT INCOME OF THE ASSESSEE SOCIETY WAS TO BE COMPUTED WITHOUT GIVING ANY EXEMPTION U/S 11. THE A.O. FURTHER FOUND THAT THE ASSESSEE HAD RE CEIVED CAPITAL GRANT WORTH RS. 12,97,20,578/-. THE ASSESSEE, ON AN INQUI RY FROM THE A.O., EXPLAINED THAT CAPITAL GRANT REPRESENTED ASSETS SO RECEIVED BY THE ASSESSEE. THE A.O. HELD THAT AS PER EXPLANATION 10 TO SECTION 43(1) OF THE ACT, THE COST OF SUCH ASSETS, WHERE ON THE ASSESSEE HAD CLAI MED THE DEPRECIATION HAD BEEN MET BY GOVERNMENT, HENCE, THE ASSESSEE WAS NOT ELIGIBLE FOR ANY PAGE 3 OF 6 I.T.A.NO. 120/IND/2009 CRISP (CENTRE FOR RESEARCH AND INDUSTRIAL STAFF PERFORMANCE, BHOPAL. DEPRECIATION TO THIS EXTENT. ACCORDINGLY, HE REWORK ED OUT THE DEPRECIATION AT RS. 21,93,724/- AS AGAINST RS. 1,91,73,568/- CLA IMED BY THE ASSESSEE 5. AGGRIEVED BY THIS, THE ASSESSEE CARRIED THE MATTER INTO APPEAL BEFORE THE LD. CIT(A), WHEREIN THE ASSESSEE CONTEND ED THAT ONLY CASH GRANT WERE COVERED UNDER THE PROVISIONS OF EXPLANAT ION 10 TO SECTION 43(1), HENCE, THE ACTION OF THE A.O. FOR DISALLOWAN CE OF DEPRECIATION WAS NOT CORRECT IN LAW. THE ASSESSEE FURTHER SUBMITTED THAT PROVISIONS OF EXPLANATION 2 TO SECTION 43(1) WERE APPLICABLE AS I T WAS A CASE OF GIFT OF AN ASSET. THE ASSESSEE, IN THIS REGARD, ALSO SUBMIT TED THAT COST OF GIFT SHALL BE THE COST TO THE PREVIOUS OWNER AND SINCE IN THE CASE OF GOVERNMENT NO DEPRECIATION HAD EVER BEEN CLAIMED, HENCE, THE COST AT WHICH SUCH ASSETS WERE TRANSFERRED WOULD BE THE ACTUAL COST OF ASSETS TO THE ASSESSEE AND, THEREFORE, DEPRECIATION THEREON HAD RIGHTLY BEEN CL AIMED BY THE ASSESSEE. IT WAS ALSO CONTENDED THAT CAPITAL GRANTS WERE SHOW N SO AS TO ACCOUNT FOR THE VALUE OF SUCH ASSETS IN THE BOOKS OF ACCOUNT, H OWEVER, SUCH PRESENTATION WOULD NOT CHANGE THE REAL CHARACTER OF THE TRANSACTION. THE ASSESSEE FURTHER CONTENDED THAT THE TRANSFER OF ASS ETS BY THE GOVERNMENT HAD TO BE TREATED AS CAPITAL CONTRIBUTION BY THE G OVERNMENT, HENCE, WHEN THE ASSETS WERE BROUGHT IN THE FORM OF CAPITAL CONT RIBUTION, THE DEPRECIATION THEREON WAS TO BE ALLOWED. FOR THIS PR OPOSITION, THE ASSESSEE PLACED RELIANCE ON THE DECISION OF RAJASTHAN HIGH C OURT IN THE CASE OF PAGE 4 OF 6 I.T.A.NO. 120/IND/2009 CRISP (CENTRE FOR RESEARCH AND INDUSTRIAL STAFF PERFORMANCE, BHOPAL. CIT VS. AMBER CORPORATION AS REPORTED IN 207 ITR 43 5. THE LD. CIT(A) HELD THAT IN THE PRESENT CASE, PROVISIONS OF EXPLAN ATION 2 OF SECTION 43(1) WERE APPLICABLE, BECAUSE THERE WAS CLEAR DISTINCTIO N BETWEEN THE GIFT IN THAT FORM OF MONEY AND GIFT IN THE FORM OF ASSETS. ACCORDINGLY, HE DELETED THE DISALLOWANCE OF DEPRECIATION MADE BY THE ASSESS ING OFFICER. AGGRIEVED BY THIS, THE REVENUE IS IN APPEAL BEFORE US. 6. THE LD. DEPARTMENTAL REPRESENTATIVE NARRATED THE FA CTS AND PLACED STRONG RELIANCE ON THE ORDER OF A.O. 7. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, REITERATED THE SUBMISSIONS MADE BEFORE THE REVENUE AUTHORITIES AND PLACED STRONG RELIANCE ON THE ORDER OF THE LD. CIT( A). HOWEVER, ON A QUERY FROM THE BENCH REGARDING THE APPLICABILITY OF PROVISIONS OF CLAUSE (B) OF EXPLANATION 2 TO SECTION 43(1), THE LEARNED COUNSEL CONTENDED THAT THE PROVISIONS OF SUCH CLAUSE HAD TO BE APPLIED ONL Y WITH EFFECT FROM FINANCIAL YEAR 1998-99 AS THESE ASSETS HAD BEEN TRA NSFERRED TO THE SOCIETY IN THE FINANCIAL YEAR 1998-99 AND ON THIS BASIS, TH E QUANTUM OF DEPRECIATION ALLOWABLE WAS RS. 1,08,22,838/-. 8. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 9. IT IS NOTED THAT THE ASSESSEE SOCIETY HAS COME INTO EXISTENCE AS A CONSEQUENCE OF MOU BETWEEN THE STATE GOVERNMENT, C ENTRAL PAGE 5 OF 6 I.T.A.NO. 120/IND/2009 CRISP (CENTRE FOR RESEARCH AND INDUSTRIAL STAFF PERFORMANCE, BHOPAL. GOVERNMENT AND GOVERNMENT OF GERMANY. CERTAIN ASSET S BELONGING TO ONE DEPARTMENT OF MADHYA PRADESH GOVERNMENT HAS BEE N TRANSFERRED TO THE ASSESSEE SOCIETY, WHERE ON THE ASSESSEE HAS CLA IMED THE DEPRECIATION. THE A.O. APPLIED PROVISIONS OF EXPLANATION 10 TO SE CTION 43(1) OF THE ACT, WHEREAS THE LD. CIT(A) HAS HELD THAT PROVISION S OF SUCH EXPLANATION TO SECTION 43 WERE APPLICABLE. HOWEVER, THE LD. CIT (A) HAS NOT WORKED OUT THE W. D. V. ACCORDING TO THE PROVISIONS OF EXP LANATION 2 TO SECTION 43(1). FURTHER, THE LD. CIT(A) HAS PROCEEDED ON THE BASIS OF THE FACT THAT IT WAS A CASE OF GIFT. HOWEVER, FROM THE PERUSAL OF THE ORDERS, IT IS NOT CLEAR THAT WHAT WOULD HAPPEN IN CASE THE ASSESSEE S OCIETY WAS BOUND UP I.E. THE ASSETS NOW TRANSFERRED TO ASSESSEE SOCIETY WHETHER WOULD GO BACK TO THE RESPECTIVE CONSTITUENTS OR NOT. UNLESS THIS FACT IS ANALYZED, THE ASSUMPTION OF GIFT IS NOT JUSTIFIED, BECAUSE IN CAS E OF GIFT, IT SHOULD BE AN IRREVOCABLE TRANSFER OF ASSETS. WE ARE FURTHER OF T HE OPINION THAT IN EXPLANATION 10 THE WORDS DIRECTLY OR INDIRECTLY HAVE BEEN USED WHICH ALSO REQUIRES FURTHER DELIBERATION. THUS, IN THE BA CKGROUND OF THESE FACTS, IN OUR OPINION, THE MATTER SHOULD BACK TO THE FILE OF LD. CIT(A) FOR EXAMINATION OF THESE FACTS AND DECISION THEREON AFR ESH AS PER LAW. ACCORDINGLY, WE RESTORE ALL THESE ISSUES RAISED IN THIS APPEAL BY THE REVENUE TO THE FILE OF LD. CIT(A). PAGE 6 OF 6 I.T.A.NO. 120/IND/2009 CRISP (CENTRE FOR RESEARCH AND INDUSTRIAL STAFF PERFORMANCE, BHOPAL. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS A LLOWED FOR STATISTICAL PURPOSES. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 25 TH FEBRUARY, 2010. SD/- SD/- (JOGINDER SINGH) (V. K. GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 25 TH FEBRUARY, 2010. CPU* 22.2