The ACIT, Indore V. M/s. Shri Gujrati Samaj (Regd.), Indore

ITA 171/IND/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 9615 (ITAT-INDORE)
• Duration Of Justice: 9 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 20-12-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 06-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H P VERMA
• Assessee Lawyers: PRADEEP KUMAR MITRA
• Keywords: Depreciation; Charitable institution

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C.SHARMA, ACCOUNTANT MEMBER PAN NO. : AABTS7736G I.T.A.NO.160/IND/2010 A.Y. : 2004-05 SHRI GUJRATI SAMAJ ( REGD.), ACIT, 1(2), 1, NASIA ROAD, VS INDORE. INDORE. (APPELLANT) (RESPONDENT) PAN NO. : AABTS7736G I.T.A.NO.171 TO 173/IND/2010 A.Y. : 2004-05 TO 2006-07 ACIT, 1(2), SHRI GUJRATI SAMAJ ( REGD.), INDORE. VS 1, NASIA ROAD, INDORE. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI H.P.VERMA, ADV. AND SHRI ASHISH GOYAL, C.A. RESPONDENT BY : SHRI PRADEEP KUMAR MITRA, SR. DR O R D E R -: 2: - 2 PER R. C. SHARMA, A.M. I.T.A.NOS. 171 TO 173/IND/2010 (REVENUES APPEAL) : THESE ARE THE APPEALS FILED BY THE ASSESSEE AND THE REVENUE AGAINST THE ORDER OF LD. CIT(A) DATED 4.1.2 010 FOR THE ASSESSMENT YEARS 2004-05, 2005-06 AND 2006-07. 2. THERE ARE COMMON ISSUES IN ALL THE APPEALS, THEREFO RE, ALL WERE HEARD TOGETHER AND ARE NOW BEING DECIDED B Y THE CONSOLIDATED ORDER. 3. GRIEVANCE OF REVENUE RELATES TO DELETING DISALLOWAN CE OF CLAIM FOR DEPRECIATION, WHILE COMPUTING THE INCOME OF CHARITABLE TRUST. 4. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS A CHA RITABLE TRUST. IN THE COURSE OF ASSESSMENT U/S 143(3), THE AO DISALLOWED ASSESSEES CLAIM FOR DEPRECIATION ON THE FIXED ASSTS. BY THE IMPUGNED ORDER, THE LD. CIT(A) DELETED THE D ISALLOWANCE BY FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CA SE OF M.P. MADHYAM & OTHERS, 13 ITJ 103. REVENUE IS IN APPEAL BEFORE US, AGAINST THE SAID DELETION OF DISALLOWANCE OF DE PRECIATION. 5. WE HAVE GONE THROUGH THE ORDER OF I.T.A.T. IN THE C ASE OF M.P. MADHYAM & OTHERS (SUPRA), WHEREIN AFTER CON SIDERING -: 3: - 3 THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CA SE OF CIT VS. RAIPUR PALLOTINE SOCIETY, 180 ITR 579 (MP), ISSUE W AS DECIDED IN ASSESSEES FAVOUR. PRECISE OBSERVATION OF HON'BL E HIGH COURT WAS AS UNDER :- DEPRECIATION IS THE EXHAUSTION OF THE EFFECTIVE LI FE OF A FIXED ASSET OWING TO USE OR OBSOLESCENCE. IT MA Y BE COMPUTED AS THAT PART OF THE COST OF THE ASSET WHICH WILL NOT BE RECOVERED WHEN THE ASSET IS FINAL LY PUT OUT OF USE. THE OBJECT OF PROVIDING FOR DEPRECIATION IS TO SPREAD THE EXPENDITURE INCURRED IN ACQUIRING THE ASSET OVER ITS EFFECTIVE LIFETIME AND THE AMOUNT OF PROVISION MADE IN RESPECT OF AN ACCOUNTING PERIOD IS INTENDED TO REPRESENT THE PROPORTION OF SUCH EXPENDITURE WHICH HAS EXPIRED DURING THAT PERIOD. IF DEPRECIATION IS NOT ALLOWED AS A NECESSARY DEDUCTION IN COMPUTING THE INCOME OF A CHARITABLE TRUST, THEN THERE WOULD BE NO WAY TO PRESERVE THE CORPUS OF THE TRUST. A CHARITABLE TRUS T IS, THEREFORE, ENTITLED TO DEPRECIATION IN RESPECT OF THE ASSETS OWNED BY ITS. -: 4: - 4 6. IN VIEW OF THE ABOVE DECISION OF THE JURISDICTIONA L HIGH COURT, WE RESPECTFULLY FOLLOW THE DECISION OF THE TRIBUNAL RELIED ON BY THE LD. CIT(A) AND DO NOT FIND ANY INF IRMITY IN HIS ORDER FOR DELETING THE DISALLOWANCE OF DEPRECIATION . 7. IN THE RESULT, THE APPEALS OF THE REVENUE FOR ASSESSMENT YEARS 2004-05 AND 2005-06 ARE DISMISSED. 8. GRIEVANCE OF THE ASSESSEE IN ALL THE YEARS RELATE T O AOS DENIAL TO CARRY FORWARD DEFICIT IN THE APPLICATION OF FUNDS. 9. AT THE OUT-SET, THE LD. AUTHORIZED REPRESENTATIVE SUBMITTED AND RELIED ON THE DECISION OF THE I.T.A.T . IN THE CASE OF SARVAJANIK JANKALYAN PARMARTHIK NYAS VS. ACIT, ( 2010) 15 ITJ 642 (TRIB), WHEREIN AFTER CONSIDERING VARIOUS D ECISIONS OF THE HIGH COURT, IT WAS HELD THAT EXCESS EXPENDITURE INCURRED FOR CHARITABLE PURPOSES IN THE YEAR UNDER CONSIDERA TION IS LIABLE TO BE ADJUSTED AGAINST THE INCOME OF THE SUC CEEDING YEAR WHILE COMPUTING TAXABLE INCOME OF SUCCEEDING YEAR. WE ALSO FOUND THAT SIMILAR ISSUE HAS BEEN DECIDED BY THE HO N'BLE RAJASTHAN HIGH COURT IN THE CASE OF MAHARAJA OF MEW AR CHARITABLE FOUNDATION, 164 ITR 439, WHEREIN IT WAS HELD THAT IT IS NOT NECESSARY THAT CHARITABLE TRUST SHOULD AP PLY ITS ENTIRE -: 5: - 5 INCOME IN THE YEAR IN WHICH IT HAS ARISEN. IF THE E XPENDITURE OF A CHARITABLE TRUST EXCEEDS INCOME IN A PARTICULAR Y EAR, ADJUSTMENT OF EXCESS EXPENDITURE AGAINST INCOME OF FOLLOWING YEAR WOULD AMOUNT TO APPLICATION OF INCOME FOR CHAR ITABLE PURPOSES. ACCORDINGLY, THE ASSESSEE WAS HELD TO BE ENTITLED FOR EXEMPTION U/S 11(1)(A) OF THE INCOME-TAX ACT, 1961. 10. RESPECTFULLY FOLLOWING THE DECISION OF COORDINATE BENCH DISCUSSED ABOVE AS WELL AS DECISION OF HON'BL E RAJASTHAN HIGH COURT (SUPRA), WE DO NOT FIND ANY ME RIT IN THE OBSERVATION OF THE LOWER AUTHORITIES TO THE EFFECT THAT THE ASSESSEE IS NOT ENTITLED FOR CARRY FORWARD AND SET OFF EXCESS OF THE EXPENDITURE INCURRED DURING THE YEAR, OVER ITS INCOME. 11. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED, WHEREAS THE APPEALS OF THE REVENUE ARE DISMISSED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 31 ST JANUARY, 2011. SD/- SD/- (JOGINDER SINGH) ( R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED :31 ST JANUARY, 2011. CPU* 311