ADIT (Exemptions)-I, Hyderabad V. Royal Education Soceity, Hyderabad

ITA 1378/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61946 (ITAT-HYDERABAD)
• Duration Of Justice: 11 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-06-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 26-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K VISWANATHAN
• Assessee Lawyers: K A SAI PRASAD
• Keywords: Capital asset; Business income; Depreciation
• Section: 143(3); 260A; 147; 148; 28; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DAY, JUDICIAL MEMBER ITA NO. 1378/HYD/2011 ASSESSMENT YEAR : 2004-05 ASSTT. DIRECTOR OF INCOME-TAX (EXEMPTIONS)-I, APPELLANT HYDERABAD (PAN AAATR 4382C) VS. ROYAL EDUCATION SOCIETY, RESPONDENT HYDERABAD. APPELLANT BY : SHRI K. VISWANATHAN RESPONDENT BY : SHRI K.A. SAI PRASAD DATE OF HEARING : 19/06/2012 DATE OF PRONOUNCEMENT : 28/06/2012 ORDER PER D. KARUNAKARA RAO, A.M: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-IV, HYDERABAD, DATED 31/05/2011 FOR THE ASSESSMENT YEAR 2004-05, WHEREIN THE REVENUE HA S RAISED THE FOLLOWING GROUNDS OF APPEAL:- I) THE ORDER OF THE CIT(A) IS NOT ACCEPTABLE AS IT IS ERRONEOUS BOTH IN LAW AND ON FACTS. II) THE CIT(A) OUGHT TO HAVE SUSTAINED THE DISALLOWANCE OF DEPRECIATION IN THE LIGHT OF DECISI ON OF THE SUPREME COURT IN THE CASE OF ESCORTS LTD. & ANOTHER VS. UNION OF INDIA, 199 ITR 44. III) THE CIT(A) ERRED IN HOLDING THAT THE DECISION OF THE APEX COURT IN ESCORTS LTD., IS NOT APPLICABLE T O TRUSTS AS THE INCOME IS NOT REQUIRED TO BE COMPUTED IN TERMS OF SEC. 28 TO 44 OF THE IT ACT, BUT IS REQ UIRED TO BE COMPUTED IN ACCORDANCE WITH SECTION 11 TO 13 OF THE ACT. IV) THE ORDER OF THE ITAT IN ITA NO. 807 TO 809/HYD/10 IN THE CASE OF KAMINENI EDUCATIONAL 2 ITA NO. 1378/HYD/11 M/S ROYAL EDUCATION SOCIETY SOCIETY, HYDERABAD HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND U/S. 260A HAS BEEN PREFERRED BEFORE THE HONBLE AP HIGH COURT. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE SOCIETY FILED ITS RETURN OF INCOME FOR THE YEAR UND ER CONSIDERATION ON 01/11/2011 DECLARING NIL INCOME CLAIMING EXEMPTION U/S 10(23C) OF THE ACT. THE CASE WAS CONVERTED INTO SCRUTINY AND ASSESSMENT WAS COMPLETE D U/S 143(3) ON 12/09/2006 DETERMINING NIL INCOME. SUBSEQUENTLY, NOTICE U/S 147 WAS INITIATED BY ISSUI NG NOTICE U/S 148 OF THE ACT ON 12/11/2009 WITH THE PR IOR APPROVAL OF DIT(E), HYD. THE ASSESSMENT WAS REOPENE D ON THE GROUND THAT THE ASSESSEE SOCIETY IS NOT ELIGIBL E FOR CLAIM OF DEPRECIATION OF RS. 52,08,811/-. ACCORDING LY, HE DISALLOWED THE SAID DEPRECIATION FOLLOWING THE DECI SION OF HONBLE SUPREME COURT IN THE CASE OF ESCORTS LTD. & ANOTHER VS. UOI, 199 ITR 44. AGGRIEVED, THE ASSESSE E CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). 3. BEFORE THE CIT(A), THE AR OF THE ASSESSEE SUBMIT TED THAT THE ASSESSEE HAD FURNISHED A DETAILED EXPLANAT ION REGARDING ALLOWABILITY OF DEPRECIATION CITING VARIO US CASE LAWS. HE FURTHER RELIED ON THE DECISION IN THE CASE OF CIT VS. INSTITUTE OF BANKING, 264 ITR 110 (BOM.), AS AL SO THE DECISION OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. MARKET COMMITTEE, PIPLI, 330 IT R 16 TO SUPPORT HIS CONTENTION. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE CIT(A) ANALYSED TH E ISSUE WITH VARIOUS CASE LAWS AND DELETED THE DISALL OWANCE MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DEPRECI ATION 3 ITA NO. 1378/HYD/11 M/S ROYAL EDUCATION SOCIETY CLAIM OF RS. 52,08,881/-. THE RELEVANT FINDINGS OF THE CIT(A) ARE AS UNDER:- 6.1 IN THE LIGHT OF THE ABOVE DISCUSSION AND THE VIEW TAKEN BY THE HONBLE AHMEDABAD BENCH OF THE ITAT IN THE CASE OF SHRIMAD VALLABH VISHWA DHARMA SANSTHA [2006] [102 TTJ 653], IT IS CLEAR THAT THE DECISION OF HONBLE APEX COURT IN THE CASE OF CIT V S. ESCORTS INDIA LTD., 199 ITR 44, APPLIES TO THE DEDUCTION CLAIMED U/S 35(2)(IV) WHILE COMPUTING THE BUSINESS INCOME. OBIVOUSLY, THEREFORE, THE SAME IS NOT APPLICABLE TO TRUSTS/SOCIETIES, AS THEIR INCOME IS NOT REQUIRED TO BE COMPUTED IN TERMS OF SECTION 28 TO 44 OF THE ACT, BUT IS REQUIRED TO BE COMPUTED IN ACCORDANCE WITH SECTION 11 TO 13 OF THE ACT. THOUGH IT IS TRUE THAT CLAIMING DEPRECIATION, BESIDES CLAI MING THE FULL COST OF ASSETS AS APPLICATION OF INCOME DO ES PRIMA FACIE LOOK LIKE A DOUBLE CLAIM OF DEDUCTION A ND IS UNTHINKABLE WHILE COMPUTING THE BUSINESS INCOME OF ANY OTHER PERSON, THE CASE LAWS DISCUSSED ABOVE DO ESTABLISH THAT SUCH CLAIM IS ALLOWABLE IN THE CA SE OF TRUSTS/SOCIETIES IN ORDER TO MAKE THEIR WORKING VIABLE. 6.3 IN THE RESULT, RESPECTFULLY FOLLOWING THE RATIO LAID DOWN IN THE ABOVE DECISIONS AS ALSO IN VIEW OF THE DISTINCTION CLEARLY MADE OUT BY THE HONBLE AHMEDABAD BENCH OF ITAT IN THE CASE OF SHRIMAD VALLABH VISHWA DHARMA SANSTHA [2006] 102 TTJ 653 AND FURTHER Y THE HONBLE P&H HIGH COURT IN THE CAS E OF CIT VS. DESH BHAGAT MEMORIAL EDUCATION TRUST, CIT VS. MARKET COOMMITTE, PIPLI, 330 ITR 16, IT IS CLEAR THAT THE CLAIM OF DEPRECIATION OF RS. 52,08,881/- COULD NOT HAVE BEEN DENIED TO THE APPELLANT. GROUND NO. 3 IS, THEREFORE, DECIDED IN FAVOUR OF THE APPELLANT. 4. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENU E IS IN APPEAL BEFORE US. 5. BEFORE US, THE LEARNED DR RELIED UPON THE ORDER OF THE ASSESSING OFFICER WHILE THE LEARNED COUNSEL FOR THE ASSESSEE CANVASSED THAT THE ISSUE IS COVERED BY THE 4 ITA NO. 1378/HYD/11 M/S ROYAL EDUCATION SOCIETY DECISION OF THE CO-ORDINATE BENCH OF TRIBUNAL IN TH E CASE OF ADIT VS. M/S KAMINENI EDUCATIONAL SOCIETY, HYDERABAD IN ITA NOS. 1303, 1304 & 1305/H/2010 FOR ASSESSMENT YEARS 2002-03 TO 2005-06 VIDE ORDER DATE D 28 TH DECEMBER, 2010. A COPY OF THE SAID ORDER HAS BEEN PLACED ON RECORD. 6. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE RECO RD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELO W. WE FIND THAT THE ISSUE IS COVERED BY THE DECISION OF T HE COORDINATE BENCH IN THE CASE M/S KAMINENI EDUCATION AL SOCIETY (SUPRA) WHEREIN THE TRIBUNAL HELD AS UNDER: - 3. AFTER HEARING BOTH THE PARTIES, WE ARE OF THE OPINION THAT SIMILAR ISSUES WERE CONSIDERED BY THIS TRIBUNAL VIDE ORDER DATED 03/09/2010 IN ITA NOS. 807 TO 809/H/2010 FOR THE ASSESSMENT YEARS 2001- 02, 2003-04 AND 2006-07 IN ASSESSEES OWN CASE WHEREIN THE TRIBUNAL DECIDED THE ISSUE OF ALLOWABILITY OF DEPRECIATION ON THE CAPITAL ASSET I N FAVOUR OF THE ASSESSEE AND OBSERVED THAT THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE O F ESCORTS INDIA LTD. REPORTED IN 1999 ITR 43 IS NTO APPLICABLE TO THE FACTS OF THE PRESENT CASE. FURTHE R, THE TRIBUNAL VIDE ITS ORDER DATED 03/12/2010 IN ITA NO. 1769/HYD/2008 FOR THE ASSESSMENT YEAR 2005- 06 IN THE CASE OF M/S PRATIMA EDUCATIONAL SOCIETY, HYDERABAD HAS TAKEN SIMILAR VIEW. 4. IN VIEW OF THE ABOVE ORDER OF THE TRIBUNAL, WE ARE INCLINED TO DISMISS THE REVENUE APPEALS ON SIMILAR TERMS. 7. SINCE THE ISSUE UNDER CONSIDERATION IS MATERIALL Y IDENTICAL TO THAT OF THE CASE DECIDED BY THE TRIBUN AL IN THE CASE OF M/S KAMINENI EDUCATIONAL SOCIETY(SUPRA) , RESPECTFULLY FOLLOWING THE SAME, WE UPHOLD THE ORDE R OF THE CIT(A) IN ALLOWING THE ASSESSEES DEPRECIATION CLAIM OF 5 ITA NO. 1378/HYD/11 M/S ROYAL EDUCATION SOCIETY RS. 52,08,881/- AND DISMISS THE GROUNDS OF APPEAL OF T HE REVENUE RAISED IN THIS REGARD. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 28/06/2012. SD/- SD/- (SAKTIJIT DEY) JUDICIAL MEMBER (D. KARUNAKARA RAO) ACCOUNTANT MEMBER HYDERABAD, DATED 28 TH JUNE, 2012 KV COPY TO:- 1)ADIT(E)-I, 3 RD FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD 04. 2) ROYAL EDUCATION SOCIETY, 1-1-191/A, ABOVE VYSYA BANK, CHIKKADPALLY, HYDERABAD. 3) THE CIT (A)-IV, HYDERABAD 4) THE DIT (EXEMPTIONS), HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABAD. S.NO. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON 20/06/12 SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR 27/06/12 SR.P.S/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 6 ITA NO. 1378/HYD/11 M/S ROYAL EDUCATION SOCIETY 9 DATE OF DISPATCH OF ORDER