Income Tax Officer, Exemptions-(4), Hyderabad V. Sreethaja Educational Society, Hyderabad

ITA 1371/Hyd/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4048 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB-A
• Next Hearing Date: 05-03-2019
• Assessment Year: 2012-2013
• Appeal Filed On: 03-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KOMALI KRISHNA
• Assessee Lawyers: A V RAGHURAM
• Keywords: Depreciation; Capital expenditure
• Section: 192; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ITA NO.1371/HYD/2017 ASSESSMENT YEAR: 2012-13 THE INCOME TAX OFFICER (EXEMPTIONS)-4, HYDERABAD. VS. M/S. SREETHAJA EDUCATIONAL SOCIETY, 17-1-388, 1 ST FLOOR, LAKSHMI NAGAR, SAIDABAD, HYDERABAD. PAN- AACAS8178A (APPELLANT) (RESPONDENT) REVENUE BY : SMT., KOMALI KRISHNA, ASSESSEE BY : SHRI A.V. RAGHURAM DATE OF HEARING : 05-03-2019 DATE OF PRONOUNCEMENT : 08-03-2019 ORDER PER D.S. SUNDER SINGH, A.M: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A)-9, HYDERABAD DATED 21.03.2017 FOR THE A.Y 2012-13. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER OF THE CIT(A) IS ERRONEOUS BOTH ON FACTS AND IN LAW. 2. THE CIT(A) ERRED IN LAW AND ON FACTS IN ALLOWING THE ASSESSEES APPEAL ON THE ISSUE OF DEPRECIATION CLAIMED ON ASSETS, SINCE THE EXPENDITURE FOR ACQUISITION OF ASSETS WAS ALREADY TREATED AS APPLICATION OF FUND AND TANTAMOUNT TO DOUBLE DEDUCTION. 3. THE CIT(A) ERRED IN LAW AND ON FACTS IN ALLOWING THE ASSESSEES CLAIM FOR SE OFF OF PREVIOUS YEAR DEFICIT WITHOUT APPRECIATING THE FACTS THAT THERE IS NO PROVISION U/S 11, 12 AND 13 OF THE ACT FOR CARRYING FORWARD OF DEFICIT LOSS TO SUBSEQUENT YEARS TO BE SET OFF AGAINST INCOME OF SUBSEQUENT YEARS. 4. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF HEARING. 2 ITA NO. 1371/HYD/2017 M/S SREETHAJA EDUCATIONAL SOCIETY, HYD. 2. GROUND OF APPEAL NO. 1 & 4 ARE GENERAL IN NATURE WHICH DOES NOT REQUIRED SPECIAL ADJUDICATION. 3. GROUNDS OF APPEAL NO. 2 IS RELATED TO THE ISSUE OF DEPRECIATION CLAIMED ON ASSETS, WHICH WAS ALREADY ALLOWED AS EXPENDITURE TREATING THE SAME AS APPLICATION OF INCOME. DURING THE ASSESSMENT PROCEEDINGS THE A.O FOUND THAT THE ASSESSEE HAD CLAIMED THE DEPRECIATION OF RS. 45,40,362/- IN THE INCOME AND EXPENDITURE STATEMENT AND ALSO CLAIMED THE CAPITAL EXPENDITURE OF RS. 30,59,485/- AS APPLICATION OF INCOME. SINCE, THE CLAIM OF APPLICATION OF INCOME AND THE ALLOWANCE OF DEPRECIATION WOULD AMOUNT TO DOUBLE DEDUCTION THE A.O DISALLOWED THE DEPRECIATION AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. ON APPEAL, THE CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE FOLLOWING THE THE DECISION OF ITAT IN THE CASE OF KAMINENI EDUCATIONAL SOCIETY VIDE ORDER DATED 14.10.2015 IN ITA NO. 939/HYD/2015. AGAINST THE ORDER OF THE CIT(A) THE REVENUE HAS FILED THE APPEAL BEFORE THE TRIBUNAL. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD AND FIND THAT THE LD. CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE BY FOLLOWING THE ORDER OF THIS TRIBUNAL IN THE CASE OF KAMINENI EDUCATIONAL SOCIETY (SUPRA), THE DEPARTMENT RELIED ON THE DECISIONS OF THE HONBLE KERALA HIGH COURT IN THE CASE OF LISSIE MEDICAL INSTITUTIONS VS. CIT [2012] 348 ITR 344 (KERALA). THE HONBLE SUPREME COURT IN THE CASE OF CIT-III, PUNE VS. RAJASTHAN AND GUJARATI CHARITABLE FOUNDATION POONA AND OTHERS IN CIVIL APPEAL NO. 7186 OF 2014 DATED 30.12.2017 HAS CONSIDERED THE DECISION OF HONBLE KERALA HIGH COURT (SUPRA) ALSO DECIDED THE ISSUE IN FAVOURE OF THE ASSESSEE AND AGAINST THE REVENUE. SINCE THE CASE IS SQUARELY COVERED BY THE DECISION OF THE HONBLE SUPREME COURT IN FAVOURE OF THE ASSESSEE, WE UPHOLD THE ORDER OF THE LD. CIT(A) AND DISMISS THE APPEAL OF THE REVENUE ON THIS GROUND. 5. GROUNDS OF APPEAL NO. 3 IS RELATED TO THE SET OFF OF PREVIOUS YEAR DEFICIT U/S 11,12 AND 13 OF THE ACT AGAINST 3 ITA NO. 1371/HYD/2017 M/S SREETHAJA EDUCATIONAL SOCIETY, HYD. THE INCOME OF THE SUBSEQUENT YEARS. DURING THE ASSESSMENT PROCEEDINGS THE A.O FOUND THAT THE ASSESSEE WAS HAVING THE SURPLUS OF RS. 14,80,878/- IN THE IMPUGNED ASSESSMENT YEAR WHICH WAS CLAIMED FOR SET OFF OF THE PREVIOUS YEARS DEFICIT AND COMPUTED THE TOTAL INCOME AT NIL. THE A.O DISALLOWED THE CLAIM OF SET OFF OF LOSS OF EARLIER YEARS DEFICIT HOLDING THAT AS PER THE LANGUAGE USED IN SEC. 11(1)(A) OF THE ACT, ALLOWS THE APPLICATION OF INCOME ONLY OUT OF ITS CURRENT YEARS INCOME. THE ASSESSEE WENT ON APPEAL BEFORE THE CIT(A) AND THE LD. CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE FOLLOWING THE DECISIONS OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. MAHARANA OF MEWAR CHARITABLE FOUNDATION, HONBLE HIGH COURT OF GUJARAT DECISION IN THE CASE OF CIT VS. SHRI PLOT SWETAMBER MURTI PUJAK JAIN MANDAL AND HONBLE HIGH COURT OF MADRAS DECISION IN THE CASE OF GONVINDU NAICKER ESTATE VS. ASST. DIRECTOR OF INCOME TAX. FOR THE SAKE OF CLARITY AND CONVENIENCE WE EXTRACT THE RELEVANT PART OF THE ORDER OF THE CIT(A) WHICH READS AS UNDER: 5. SETOFF OF CARRIED FORWARD EXCESS EXPENDITURE OVER INCOME: ASSESSEE CLAIMED SETOFF OF CARRIED FORWARD PREVIOUS YEAR DEFICIT AMOUNTING TO RS. 14,80,878/-. THE A.O RELYING ON THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF RAMJILAL RAIS (58 ITR 181) HELD THAT EXCESS EXPENDITURE OF EARLIER YEARS IS NOT ELIGIBLE FOR SETOFF AGAINST INCOME OF SUCCEEDING ASSESSMENT YEARS. DURING THE APPELLATE PROCEEDINGS, ASSESSEE, RELYING ON HONBLE RAJASTHAN HIGH COURT DECISION IN CASE OF MAHARANA OF MEWAR CHARITABLE FOUNDATION (164 ITR 439), GUJARAT HIGH COURT DECISION IN CASE OF SWETAMBAR MURTY (211 ITR 368), MADRAS HIGH COURT IN CASE OF GOVINDU NAICKER ESTATE (248 ITR 293), ARGUED THAT SETOFF OF BROUGHT FORWARD EXPENDITURE OF EARLIER YEARS IS ALLOWABLE. I HAVE CONSIDERED THE ARGUMENTS OF THE ASSESSE AND IN VIEW OF VARIOUS DECISIONS IN FAVOUR OF THE ASSESSEE DIRECT THE A.O TO ALLOW THE SETOFF OF CARRIED FORWARD EXCESS EXPENDITURE OF OVER INCOME PERTAINING TO EARLIER YEARS AFTER DUE VERIFICATION. THE GROUNDS OF RELATING THIS ISSUE ARE THUS TREATED AS ALLOWED. 6. DURING THE APPEAL HEARING THE LD. DR DID NOT BRING ANY OTHER DECISION OF JURISDICTIONAL HIGH COURT OR THE APEX COURT. THE DECISION OF HONBLE HIGH COURT IS IN FAVOUR OF THE REVENUE AND THE REMAINING DECISIONS (CITED SUPRA) ARE 4 ITA NO. 1371/HYD/2017 M/S SREETHAJA EDUCATIONAL SOCIETY, HYD. IN FAVOUR OF THE ASSESSEE. IN THE CIRCUMSTANCES HONBLE HIGH COURT OF ANDHRA PRADESH IN THE CASE OF STATE OF ANDHRA PRADESH VS. CIT REPORTED IN [1987] 169 ITR 0564 (AP) HELD THAT THE DECISION WHICH IS MOST FAVOURABLE TO THE ASSESSEE REQUIRED TO BE CONSIDERED. SIMILARLY THE HONBLE APEX COURT IN THE CASE OF CIT VS. M/S VEGETABLE PRODUCTS LTD., REPORTED IN [1973] 88 ITR 192 (SC) ALSO EXPRESSED THE SIMILAR VIEW, THEREFORE, FOLLOWING THE DECISION OF HONBLE APEX COURT AND THE JURISDICTIONAL HIGH COURT WE UPHOLD THE ORDER OF THE LD. CIT(A) AND DISMISS THE APPEAL OF THE REVENUE ON THIS GROUND. 7. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 08 TH MARCH, 2019 SD/- SD/- (P. MADHAVI DEVI) (D.S. SUNDER SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED: 08 TH MARCH , 2019. KRK 1 M/S SREETHAJA EDUCATIONAL SOCIETY, 17-1-388/788, 1 ST FLOOR, LAKSHMI NAGAR, SAIDABAD, HYDERABAD. 2 INCOME TAX OFFICER (EXEMPTIONS)-4, HYDERABAD. 3 CIT(A)-9, HYDERABAD. 4 THE ADDL. CIT (EXEMPTIONS), HYDERABAD. 5 THE DR, ITAT HYDERABAD 6 GUARD FILE