Assistant Commissioner of Income-Tax, Bangalore V. M/s.Gokula Education foundation (Medical), Bangalore

ITA 1655/BANG/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7486 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 16-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Charitable institution; Cost of acquisition; Capital expenditure
• Section: 32; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B BEFORE S HRI N.V. VASUDEVAN , JUDICIAL MEMBER AND SHRI JASON P BOAZ , ACCOUNTANT MEMBER I.T . A. NO S . 1655 & 1656 /BANG/20 16 (ASSESSMENT YEAR : 20 08 - 09 ) ASST. COMMISSIONER OF INCOME TAX (EXEMPTION S), CIRCLE 1, BANGALORE. . APPELLANT. VS. 1. GOKULA EDUCATION FOUNDATION (MEDICAL), MS RAMAIHA NAGAR, MSRIT POST, MATHIKERE, BANGALORE. 2. GOKULA EDUCATION FOUNDATION, MS RAMAIHA NAGAR, MSRIT POST, MATHIKERE, BANGALORE. .. RESPONDENT S . APPELLANT BY : MS. NEERA MALHOTRA, CIT (D.R) R E SPONDENT BY : SHRI NAREN DRA SHARMA, ADVOCATE. DATE OF H EARING : 10.10.2017. DATE OF P RONOUNCEMENT : 13. 10. 201 7 . O R D E R PER SHRI N.V.VASUDEVAN, J .M . : THESE ARE APPEALS BY THE REVENUE AGAINST TWO ORDERS, IN THE CASE OF TWO DIFFERENT ASSESSEES, BOTH DATED 29.6.2016 OF C OMMISSIONER OF INCOME TAX (APPEALS) ,LTU, BANGALORE, RELATING TO ASSESSMENT YEAR 2008 - 09 . 2. BOTH THE ASSESSEES IN THESE APPEALS ARE CHARITABLE TR USTS WITH OBJECTS TO PROVIDE EDUCATION BY RUNNING SEVERAL EDUCATIONAL INSTITUTIONS. BOTH THE ASSESSEE S FILED THEIR RETURN OF INCOME FOR AY 2008 - 09. BOTH THE ASSESSEE S 2 IT A NO S . 1655 & 1656 /BANG/201 6 IN THEIR RETURN OF INCOME HAD CLAIMED DEPRECIATION ON CERTAIN ASSETS. THE COST OF TH OSE ASSETS ON WHICH DEPRECIATION WAS CLAIMED BY THE ASSESSEE HAD BEEN CLAIMED BY THE ASSESSEE AS APPLICATION OF INCOME FOR CHARITABLE PURPOSE AND ALLOWED AS APPLICATION OF INCOME FOR CHARTIABLE PURPOSE BY THE AO IN THE YEAR OF ACQUISITION. THE AO ALLOWE D DEPRECIATION AS CLAIMED BY THE ASSESSEE IN AN ORDER OF ASSESSMENT PASSED U/S.143(3) OF THE ACT DATED 28.12.2010. 3. THE CIT IN EXERCISE OF HIS POWERS U/S.263 OF THE ACT WAS OF THE VIEW THAT THE AFORESAID TWO ORDERS OF ASSESSMENT U/S.263 OF THE ACT WERE ERRO NEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE BECAUSE THE CLAIM FOR DEDUCTION ON ACCOUNT OF DEPRECIATION ON ASSETS, THE COST OF ACQUISITION OF WHICH IN THE YEAR OF THEIR ACQUISITION HAD BEEN CLAIMED BY THE ASSESSEE AS APPLICATION OF FUNDS TOWARDS TH E OBJECTS OF THE TRUST, OUGHT NOT TO HAVE BEEN ALLOWED BY THE AO. ACCORDING TO CIT, ONCE AT THE TIME OF ACQUISITION OF THE ASSETS, THE CAPITAL EXPENDITURE IS CONSIDERED AS APPLICATION OF INCOME FOR CHARITABLE PURPOSE U/S.11(1) OF THE ACT, ON THE VERY SAME ASSETS, ALLOWING DEPRECIATION WOULD AMOUNT TO ALLOWING DOUBLE DEDUCTION. THE CIT WAS OF THE VIEW THAT THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF ESCORTS LIMITED & ANOTHER VS. UNION OF INDIA 199 ITR 43 WAS SQUARELY APPLICABLE. IN THE AFORESA ID CASE, THE FACTS WERE THAT CAPITAL EXPENDITURE ON ACQUISITION OF ASSETS WAS ALLOWED AS DEDUCTION U/S 35(2)(IV) OF THE ACT. ON THE VERY SAME ASSETS DEPRECIATION WAS CLAIMED BY THE ASSESSEE IN THE SUBSEQUENT YEARS. THE CLAIM FOR DEDUCTION ON ACCOUNT OF D EPRECIATION WAS DISALLOWED BY THE REVENUE 3 IT A NO S . 1655 & 1656 /BANG/201 6 AUTHORITIES ON THE GROUND THAT SINCE THE COST OF THE ASSET WHICH WAS CAPITAL EXPENDITURE ON SCIENTIFIC RESEARCH WAS ALLOWED AS DEDUCTION ALLOWING DEPRECIATION ON THE VERY SAME ASSET WOULD AMOUNT TO CONFERRING DOUBL E DEDUCTION AND HENCE NO DEPRECIATION IS ALLOWABLE U/S 32 ON THE SAME ASSET. THIS VIEW WAS CONFIRMED BY THE HON BLE SUPREME COURT IN THE CASE OF ESCORTS LTD. (SUPRA). THE AO WAS OF THE VIEW THAT FOLLOWING THE RATIO LAID DOWN IN THE CASE OF ESCORTS LTD. (S UPRA), THE CLAIM FOR DEDUCTION ON ACCOUNT OF DEPRECIATION SHOULD BE DISALLOWED. 4. THE CIT THEREFORE PASSED TWO ORDERS U/S.263 OF THE ACT IN THE CASE OF THE TWO ASSESSEES BOTH DATED 29.2.2012 DIRECTING THE AO TO DISALLOW CLAIM FOR DEPRECIATION. THE CIT A LSO REFERRED TO THE DECISION OF THE HON'BLE HIGH COURT OF KERALA IN THE CASE OF DDIT(E) V. LISSIE MEDICAL INSTITUTIONS, 348 ITR 344 (KER) W HEREIN IT WAS HELD THAT ALLOWING DEPRECIATION OF A DEPRECIABLE ASSET WHEN THE COST OF ACQUISITION OF DEPRECIABLE AS SET WAS ALLOWED AS APPLICATION OF INCOME FOR CHARITABLE PURPOSE AMOUNTS TO DOUBLE DEPRECIATION AND THEREFORE DEPRECIATION CANNOT BE ALLOWED. 5. PURSUANT TO THE ORDER OF THE CIT U/S.263 OF THE ACT DATED 29.2.2012, THE AO S IN THE CASE OF BOTH THE ASSESSEES PASSED AN ORDER U/S.143(3) READ WITH SEC.263 OF THE ACT BOTH DATED 11.4.2012, DISALLOWING THE CLAIM FOR DEPRECIATION ON ASSETS THE COST OF ACQUISITION WAS ALLOWED AS APPLICATION OF INCOME FOR CHARITABLE PURPOSE IN THE YEAR OF ACQUISITION. 4 IT A NO S . 1655 & 1656 /BANG/201 6 6. IN THE MEANWHIL E, THE ASSESSEES CHALLENGED THE ORDERS DATED 29.2.2012 PASSED BY THE CIT U/S.263 OF THE ACT BEFORE THE ITAT. THE ITAT BY ORDER DATED 5.4.2013 IN ITA NO.600 & 601/BANG/2012 QUASHED THE ORDERS PASSED U/S.263 OF THE ACT. THE REVENUE FILED APPEALS AGAINST THE AFORESAID COMMON ORDER OF THE TRIBUNAL BEFORE THE HON BLE KARNATAKA HIGH COURT AND THOSE APPEALS WERE DISMISSED AS REPORTED IN THE CASE OF AL AMEEN CHARTIABLE TRUST AND OTHERS 67 TAXMAN 160. 7. THE ASSESSEE FILED APPEALS AGAINST THE ORDERS DATED 11.4.2012 PASSED U/S.143(3) READ WITH SEC.263 OF THE ACT BY THE AOS GIVING EFFECT TO THE ORDERS OF THE CIT DATED 29.2.2012. THE CIT(A) BY THE IMPUGNED ORDERS AFTER NOTICING THAT THE VERY FOUNDATION OF THE ORDERS DATED 11.4.2012 VIZ., THE ORDER DATED 29.2.2012 PA SSED BY CIT U/S.263 OF THE ACT HAD BEEN QUASHED BY THE TRIBUNAL AND UPHELD BY THE HIGH COURT, HELD THAT THE ADDITION ON ACCOUNT OF DEPRECIATION CANNOT SURVIVE. 8. AGGRIEVED BY THE AFORESAID ORDERS OF THE CIT(A), THE REVENUE HAS PREFERRED THE PRESENT APPEALS BEFORE THE TRIBUNAL. THE SUBMISSION OF THE LEARNED DR BEFORE US WAS A REITERATION OF THE ARE THAT THE CONCLUSIONS OF THE CIT IN THE ORDER U/S.263 OF THE ACT. IT WAS ALSO SUBMITTED BY THE LEARNED DR THAT THE ISSUE HAS NOT ATTAINED FINALITY AND THE REVENU E HAS FILED APPEALS AGAINST THE ORDER OF THE HON BLE KARNATAKA HIGH COURT. 5 IT A NO S . 1655 & 1656 /BANG/201 6 9. WE HAVE CONSIDERED THE SUBMISSION OF THE LEARNED DR AND ARE OF THE VIEW THAT AS ON TODAY THE DISALLOWANCE OF DEPRECIATION AS DONE BY THE REVENUE PURSUANT TO PROCEEDINGS U/S.263 OF THE ACT, CANNOT BE SUSTAINED IN VIEW OF THE QUASHING OF THE SAID ORDERS BY THE TRIBUNAL. THE HON BLE HIGH COURT OF KARNATAKA HAS ALSO UPHELD THE DECISION OF THE TRIBUNAL. IN SUCH CIRCUMSTANCES, WE ARE OF THE VIEW THAT THERE IS NO MERIT IN THESE APPEA LS BY THE REVENUE AND THEY ARE LIABLE TO BE DISMISSED. THE DISALLOWANCE OF DEPRECIATION CANNOT BE SUSTAINED. 10. IN THE RESULT, THE APPEALS BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 13TH DAY OF OCT., 201 7 . SD/ - ( JASON P BOAZ ) ACCOUNTANT MEMBER SD/ - ( N.V. VASUDEVAN ) JUDICIAL MEMBER BANGALORE, DT. 13 . 10.2017. *REDDY GP COPY TO : 1 APPELLANT 4 CIT(A) 2 RESPONDENT 5 DR. ITAT, BANGALORE 3 CIT 6 GUARD FILE SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL BANGALORE.