Malviya Public School, New Delhi V. DDIT(E), New Delhi

ITA 1667/DEL/2015

• Counselvise Citation: 166720114 RSA 2015
• Duration Of Justice: 5 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 1
• Next Hearing Date: 08-09-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 24-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR B R R KUMAR
• Assessee Lawyers: RAJIV MEHTA
• Keywords: Depreciation; Charitable institution; Opportunity of being heard; Capital expenditure
• Section: 12A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: SMC - I NEW DELHI BEFORE SMT DIVA SINGH, JUDICIAL MEMBER I.T.A .NO. - 1667 /DEL/201 5 (ASSESSMENT YEAR - 20 11 - 12 ) MALVIYA PUBLIC SCHOOL, T - 55, MALVIYA SCHOOL, MALVIYA NAGAR, NEW DELHI - 110017. PAN - AAATM8113C ( APPELLANT) VS DDIT(E), INV. CIR - 1, NEW DELHI - 110002. (RESPONDENT ) APPELLANT BY SH.RAJIV MEHTA, FCA RESPONDENT BY DR.B.R.R.KUMAR, SR.DR ORDER THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE ASSAILING THE CORRECTNESS OF THE ORDER DATED 03.02.2015 OF CIT(A) - 40, NEW DELHI PERTAINING TO 2010 - 11 ASSESSMENT YEAR ON THE FOLLOWING GROUNDS: - 1. THE ORDER OF THE LEARNED CIT(APPEAL) IS BAD IN LAW AND ON THE FACTS OF THE CASE. 2. THAT THE ASSESSEE HAS NOT BEEN CLAIMING CAPITAL EXPENDITURE AS APPLICATION OF INCOME UPTO THE ASSESSMENT YEAR 2011 - 2012. 3. THAT THE CLAIM OF DEPRECIATION OF RS 2,66,390/ - FOR THE ASSES SMENT YEAR 2011 - 2012 DID NOT AMOUNT TO DOUBLE DEDUCTION. 4. THAT THE DEPRECIATION IS ALLOWABLE EXPENDITURE FOR APPLICATION OF INCOME FOR CHARITABLE OR EDUCATIONAL INSTITUTION. THE FINDINGS OF THE LEARNED CIT (APPEAL) THAT IT IS ALLOWABLE TO ONLY BUSINESS E NTITY IS BASED ON SURMISES AND WRONG ASSUMPTION. 5. THAT AS PER AMENDMENT OF SECTION 11 BY SUB CLAUSE (6) WHICH IS EFFECTIVE FROM 01/04/2015, IT IS APPARENT THAT DEPRECIATION WAS ALLOWABLE EXPENDITURE FOR APPLICATION OF INCOME UPTO ASSESSMENT YEAR 2014 - 201 5. 6. THE CASE OF DIT(EXEMPTION) V/S CHARANJIV CHARITABLE T RUST RELIED ON BY THE LEARNED CI T(APPEAL) IS NOT APPLICABLE TO THE ASSESSEE AS THE SAME WAS PASSED ON 18/03/2014 I.E. BEFORE INSERTION OF CLAUSE 11(6) BY FINANCE (NO.2) ACT, 2014 WHICH WAS EFFECTIV E FROM ASSESSMENT YEAR 2015 - 16. 7. THAT THE CLAIM OF DEPRECIATION CAN NOT BE DISALLOWED UPTO THE ASSESSMENT YEAR 2014 - 2015 AS THE AMENDMENT OF SECTION 11 FOR DATE OF HEARING 08 .0 9 .2015 DATE OF PRONOUNCEMENT 23 . 0 9 .2015 I.T.A .NO. - 1667/ DEL/201 5 PAGE 2 OF 4 DISALLOWANCE WAS MADE W.E.F 01/04/2015 RELATING TO ASSESSMENT YEAR 2015 - 2016 AND SUBSEQUENT ASSESS MENT YEAR. 8. THE ASSESSEE MADE AN ALTERNATIVE CLAIM FOR CARRY OVER THE DEFICIT OF RS.7,77,605/ - AFTER TREATING THE CAPITAL EXPENDITURE OF RS.12,02,353/ - MADE DURING THE ASSESSMENT YEAR 2011 - 12 AS APPLICATION OF INCOME. 9. THE ASSESSEE CRAVES LEAVE TO ADD , AMEND OR WITHDRAW ANY GROUND OF APPEAL AT THE TIME OR BEFORE THE HEARING OF APPEAL. 2. THE RELEVANT FACTS OF THE CASE ARE THAT CONSIDERING THE NIL RETURN DECLARED BY THE ASSESSEE THE AO IN THE SCRUTINY ASSESSMENT TOOK NOTE THAT THE ASSESSEE S SOCIETY WAS REGISTERED UNDER THE REGISTRATION ACT, 1860 VIDE NO.4405, 1969 IN 1970. THE ASSESSEE WA S ALSO FOUND TO BE REGISTERED U/.S 12A VIDE REGISTRATION NO.DIT(E)/2007 - 08/M - 1582/1551 DATED 31.01.2008. 3. CONSIDERING THE RETURN THE AO REQUIRED THE ASSESSEE TO P RODUCE THE BOOKS OF ACCOUNTS WHICH WERE PRODUCED AND ALSO CALLED FORTH FOR THE EXPLANATION OF THE ASSESSEE ON ITS CLAIM OF DEPRECIATION AND FINALLY RE JECTED THE CLAIM OF DEPRECIATION HOLDING AS UNDER: - FROM THE DETAILS SUBMITTED BY THE ASSESSEE, IT IS SEE N THAT THE ASSESSEE IS RUNNING A SCHOOL NAMELY MALVIYA PUBLIC SCHOOL AT MALVIYA NAGAR, NEW DELHI. THE ASSESSEE HAS CLAIMED DEPRECIATION OF RS.2,66,390/ - WHICH IS TENTAMOUNT TO DOUBLE DEDUCTION SINCE THE ASSESSEE IS ALLOWED BENEFIT OF EXPENDITURE IN FULL. ACCORDINGLY, THE DEPRECIATION IS DISALLOWED AND ADDED BACK TO THE SURPLUS WHICH STILL IS BELOW 15% ALLOWABLE FOR SET OFF. AFTER EXAMINING THE DETAILS AND EXPLANATION AND BOOKS OF ACCOUNTS ON TEST CHECK BASIS, THE ASSESSEE S TOTAL INCOME RETURNED AT NIL I S ACCEPTED. 4 . I N APPEAL BEFORE THE FIRST APPELLATE AUTHORITY, RELIANCE WAS PLACED BY THE ASSESSEE UPON THE FOLLOWING DECISIONS: - 1) CIT VS. MARKET COMMITTEE, PIPLI, 330 ITR 16 {2011} (P&H). 2) CIT VS. RAIPUR PALLOTTINE SOCIETY, 180 ITR 579 (1989) (MP) 3) CIT VS. RAO BAHADUR CALAVALA CNNAN CHETTY CHARITIES, 135 ITR 198 (1982) (MAD) 4) CIT VS. SHETH MANILA L RANCHHODDAS VISHRAM BHAVAN TRUST, 1198 ITR 598 (1992)(GUJ) 5) CIT VS. SOCIETY OF THE SISTERS OF ST. ANNE, 146 ITR 28 (1984)(KARN) 6). CIT VS. INSTITUTE OF BANKING, 264 ITR 110 (2003)(BOM) 7). CIT VS!. TINY TOTS EDUCATION SOCIETY, 330 ITR 21 (2011)(P&H) 4.1 . NOT CONVINCED WITH THE EXPLANATION OFFERED AND RELYING UPON THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF DIT(EXEMPTION) VS CHARANJIV CHARITABLE TRUST IN IT APPEAL NO.321 TO 323/2013, THE CIT(A) A L S O DISMISS ED THE APPEAL OF THE ASSESSEE. 5 . AGGRIEVED BY WHICH THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. I.T.A .NO. - 1667/ DEL/201 5 PAGE 3 OF 4 6. HAVING HEARD THE LD. AR AND LD. SR.DR AND CONSIDERING THE MATERIAL AVAILABLE ON RECORD, IT IS SEEN THAT RELEVANT FACTS HAVE NOT BEEN BROUGHT OUT BY THE AO IN HIS ORDER A S I S EVIDENT FROM THE REPRODUCTION FROM THE SAME IN THE EARLIER PART OF THIS ORDER. ON A READING OF THE FINDING ARRIVED AT BY THE CIT(A) IN PARA 4.4 TO PARA 4.7, IT IS ALSO SEEN THAT THE DECISIONS RELIED UPON BY THE ASSESSEE REPRODUCED IN PARA 4.3 HA V E NOT BEEN CONSIDERED . EVEN OTHERWISE HOW THE FACTS IN THE PRESENT CASE ARE PARI - MATERIA WITH THE FACTS TAK EN INTO CONSIDERATION BY THE HON BLE DELHI HIGH COURT IN THE CASE OF DIT(EXEMPTION) VS CHARANJIV CHARITABLE TRUST (CITED SUPRA) HAVE ALSO NOT BEEN BROUGHT OUT IN THE ORDER. A REPRODUCTION OF THE FOLLOWING PARA FROM THE SAID JUDGEMENT WOULD HIGHLIGHT THE F ACT TH AT THE POSITION CONSIDERED BY THE HON BLE HIGH COURT IN THE CASE OF DIT VS VISHWAJAGRATI MISSION HAS NOT BEEN UPSET BY THE DECISION DATED 18.03.2014 IN THE CASE OF DIT(EXEMPTION) VS CHARANJIV CHARITABLE TRUST (CITED SUPRA). FOR READY - REFERENCE, THE SAME IS REPRODUCED HEREUNDER: - 30. SO FAR AS THE CLAIM OF DEPRECIATION IS CONCERNED THE DECISION OF THE TRIBUNAL CANNOT BE COUNTENANCED. THE TRIBUNAL HAS OVERLOOKED THAT THE COST OF THE ASSETS HAS ALREADY BEEN ALLOWED AS A DEDUCTION AS APPLICATION OF INCO ME, AS HELD BY THE CIT (APPEALS) AS WELL AS THE ASSESSING OFFICER. IT WAS THEIR VIEW THAT ALLOWING DEPRECIATION IN RESPECT OF ASSETS, THE COST OF WHICH WAS EARLIER ALLOWED AS DEDUCTION AS APPLICATION OF INCOME OF THE TRUST, WOULD ACTUALLY AMOUNT TO DOUBLE DEDUCTION ON THE BASIS OF THE RULING OF THE SUPREME COURT IN ESCORTS LTD. VS. UOI (SUPRA). IN RESPECT OF THE ADDITIONS TO THE FIXED ASSETS MADE DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2006 - 07, THE CIT (APPEALS) HELD THAT SINCE THE COST OF THE ASSETS WAS NOT A LLOWED AS A DEDUCTION BY WAY OF APPLICATION OF INCOME, DEPRECIATION SHOULD BE ALLOW. THE CIT (APPEALS) HAS THUS MADE A DISTINCTION BETWEEN ASSETS THE COST OF WHICH WAS ALLOWED AS DEDUCTION AS APPLICATION OF INCOME AN D ASSETS, THE COST O F WHICH WAS NOT SO ALLOWED. THE TRIBUNAL HAS NOT KEPT THIS DISTINCTION IN VIEW, BUT HAS PROCEEDED TO RELY UPON A JUDGMENT OF THIS COURT IN DIT VS. VISHWA JAGRATI MISSION (SUPRA). IN THE JUDGMENT OF THIS COURT THE QUESTION WAS WHETHER THE INCOME OF THE ASSE SSEE, WHICH WAS A CHARITABLE TRUST, SHOULD BE COMPUTED ON COMMERCIAL PRINCIPLES AND IF SO, WHETHER DEPRECIATION ON FIXED ASSETS USED FOR CHARITABLE PURPOSES SHOULD BE ALLOWED AS A DEDUCTION. THIS COURT NOTICED THAT THERE WAS A CONSENSUS OF JUDICIAL OPINION ON THIS ASPECT AND HELD, AFTER REFERRING TO THOSE AUTHORITIES AS WELL AS A CIRCULAR OF THE CBDT ISSUED ON 19.07.1968, THAT WHILE COMPUTING THE INCOME OF THE TRUST AVAILABLE FOR APPLICATION FOR CHARITABLE PURPOSES, DEPRECIATION ON ASSETS USED FOR CHARITABL E PURPOSES SHOULD BE ALLOWED. THE POINT TO BE NOTICED IS THAT IN THIS JUDGMENT, THIS COURT REFERRED TO AND DISTINGUISHED THE JUDGMENT OF THE SUPREME COURT IN ESCORTS LTD. (SUPRA) ON THE GROUND THAT IN ESCORTS (SUPRA), THE SUPREME COURT WAS CONCERNED WITH A CASE WHERE THE DEDUCTION OF THE COST OF THE ASSET WAS ALLOWED UNDER SECTION 35(1) AS CAPITAL EXPENDITURE INCURRED ON SCIENTIFIC RESEARCH AND, THEREFORE, NO I.T.A .NO. - 1667/ DEL/201 5 PAGE 4 OF 4 DEDUCTION FOR DEPRECIATION ON THE VERY SAME ASSETS WAS HELD ALLOWABLE UNDER GENERAL PRINCIPLES OF T AXATION, AS IT WOULD AMOUNT TO DOUBLE DEDUCTION. THE JUDGMENT OF THIS COURT IN DIT VS. VISHWAJAGRATI MISSION REINFORCES THE PRINCIPLE THAT IF THE COST OF THE ASSET HAS BEEN ALLOWED AS DEDUCTION BY WAY OF APPLICATION OF INCOME THEN DEPRECIATION ON THE SAME ASSET CANNOT BE ALLOWED IN THE COMPUTATION OF THE INCOME OF THE TRUST. THE DISTINCTION HAS NOT BEEN KEPT IN VIEW BY THE TRIBUNAL WHICH SEEMS TO HAVE ERRONEOUSLY RELIED ON THE JUDGMENT OF THIS COURT TO DIRECT ALLOWANCE OF DEPRECIATION EVEN IN RESPECT OF ASS ETS, THE COST OF WHICH HAS ALREADY BEEN ALLOWED AS APPLICATION OF INCOME. WE ACCORDINGLY HOLD THAT THE TRIBUNAL WAS NOT JUSTIFIED IN DIRECTING THE ALLOWANCE OF DEPRECIATION IN RESPECT OF SUCH ASSETS. (EMPHASIS PROVIDED IN THE PRESENT PROCEEDINGS) 7 . IN THE FACTS OF THE PRESENT CASE, THE LD.AR ALSO FILED A PAPER BOOK WHEREIN A DECISION HAS BEEN RENDERED IN THE CASE OF CIT VS GUJRATI SAMAJ (REGD.) DATED 08.07.2011 IN ITA NO. - 22 & 23/2011 . HOWEVER FACTS AS STATED HAVE NOT BEEN ELABORATED ACCORDINGLY F OR WANT OF DISCUSSION ON THE FACTS OF THE PRESENT CASE, THE IMPUGNED ORDER IS SET ASIDE AND THE ISSUE IS RESTORED BACK TO THE CIT(A) WITH THE DIRECTION TO FIRST THRASH OUT THE FACTS AND THEREAFTER APPLY LAW. ACCORDINGLY IN TERMS OF THE ABOVE DIRECTION, TH E ISSUE IS RESTORED BACK TO THE CIT(A) TO DECIDE THE SAME IN ACCORDANCE WITH LAW BY WAY OF A SPEAKING ORDER . NEEDLESS TO SAY THAT THE ASSESSEE SHALL BE AFFORDED A REASONABLE OPPORTUNITY OF BEING HEARD. THE SAID ORDER WAS PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ITSELF. 8 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 2 3 R D OF SEPTEMBER, 2015. S D / - (DIVA SINGH) JUDICIAL MEMBER DATED: 2 3 /09 /2015 * AMIT KUMAR * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI