ADIT (E)I(2), MUMBAI V. RATAN TATA TRUST, MUMBAI

ITA 172/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75817 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 04-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A C TEJPAL
• Assessee Lawyers: DI LIP J THAKKAR
• Keywords: Depreciation; Charitable institution; Capital expenditure
• Section: 12A; 32; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES D, MUMBAI .. , , . , !' ! # BEFORE SHRI I P BANSAL, JM, & SHRI D KARUNKARA RAO, AM ./ITA NO.172/MUM/2013 ( $ % / ASSESSMENT YEAR :2008-09) THE DDIT(E) 1(2), MUMBAI. VS. RATAN TATA TRUST, BOMBAY HOUSE, 24 HOMI MODY SREET, FORT, MUMBAI- 400 001 PAN AAATS1013P ( &' /APPELLANT) ( ()&' / RESPONDENT) APPELLANT BY : SHRI A C TEJPAL RESPONDENT BY : SHRI DILIP J THAKKAR DATE OF HEARING : 20.03.2014 DATE OF PRONOUNCEMENT : 20.03.2014 !* / O R D E R PER I P BANSAL, JUDICIAL MEMBER : THIS APPEAL HAS BEEN FILED BY THE REVENUE. IT IS D IRECTED AGAINST THE ORDER PASSED BY THE CIT(A) DATED 23.10.2012 FOR A.Y. 2008 -09. THE GROUNDS OF APPEAL RAISED READ AS UNDER:- '1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE AO TO ALLOW THE CLAIM OF DEPRECIATION AMOUNTING TO RS. 16,15,0021- RELYING ON THE DECISIO N OF THE HON 'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. INSTITUTE OF BANKING 2 ITA NO.172/MUM/2013 AY:2008-09 PERSONNEL SERVICES REPORTED IN 264 ITR 110 (BORN) I GNORING THE RATIO OF JUDGEMENT OF HON'BLE SUPREME COURT IN THE CASE O F ESCORTS LTD. VS. UNION OF INDIA (199 ITR 43) WHEREIN HON'BLE SUP REME COURT HAS HELD THAT DOUBLE DEDUCT/ON CANNOT BE PRESUMED I F THE SAME IS NOT SPECIFICALLY PROVIDED BY LAW, IN ADDITION TO NO RMAL DEDUCTION. 2. THAT WITHOUT PREJUDICE TO GROUND NO. I ABOVE, TH E LD. CIT(A) OUGHT TO HAVE HELD THAT, DEDUCTION OF DEPRECIATION U/S 32 WH ICH FALLS UNDER THE HEAD 'PROFIT AND GAINS FROM BUSINESS AND PROFESSION 'OF THE INCOME TAX ACT, 1961 WOULD NOT BE AVAILABLE TO A CHARITABLE TR UST WHOSE INCOME IS OTHERWISE NOT ASSESSABLE UNDER THE ABOVE HEAD. 3. THAT WITHOUT PREJUDICE TO GROUND NO. I AND 2 ABO VE, THE LD. CIT(A) OUGHT TO HAVE REJECTED THE CLAIM OF DEPRECIATION, S INCE THE VALUE OF THE ASSET, THE COST OF WHICH HAS ALREADY BEEN ALLOW ED AS A DEDUCTION ON ACCOUNT OF APPLICATION OF INCOME, WOUL D BE TREATED AS NIL FOR THE PURPOSE OF DEPRECIATION. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE AO TO ALLOW THE D EFICIT OF RS. 62,73,36,1681- (ON ACCOUNT OF EXCESS OF EXPENDITURE OVER INCOME) TO BE CARRIED FORWARD WITHOUT APPRECIATING THE FACT TH AT THIS WOULD HAVE THE EFFECT OF GRANTING DOUBLE BENEFIT TO THE ASSESS EE, FIRST AS 'ACCUMULATION' OF INCOME U/S I 1(I)(A) OR AS CORPUS DONATION U/S I 1(1)(D) IN THE EARLIER YEAR OR CURRENT YEAR AND THE N AS 'APPLICATION' OF INCOME U/S 11 (I)(A) IN THE CURRENT OR SUBSEQUEN T YEAR WHICH WAS LEGALLY NOT PERMISSIBLE. 5. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING THE CLAIM OF THE ASSES SEE FOR CARRY FORWARD OF THE SAID DEFICIT, IGNORING THE FACT THAT THERE W AS NO EXPRESS PROVISION IN THE I T ACT, 1961 PERMITTING ALLOWANCE OF SUCH CLAIM. 2. THE ASSESSEE IS A CHARITABLE TRUST, WHOSE INCOME IS EXEMPT U/S. 11 OF THE ACT. THE AO DID NOT GRANT THE BENEFIT OF DEPRECIATION TO THE ASSESSEE ON THE GROUND THAT THE SAME WILL TANTAMOUNT TO DOUBLE DEDUCTION. THE ORDE R OF THE AO HAS BEEN REVERSED BY THE LEARNED CIT(A). THE DEPARTMENT IS AGITATING TH E DECISION OF THE CIT(A) ON THE GROUND THAT THE LEARNED CIT(A) HAS WRONGLY FOLLOWED THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V. INSTITUTE O F BANKING PERSONNEL SERVICES (SUPRA) BY IGNORING THE RATIO OF THE JUDGMENT OF HONBLE SU PREME COURT IN THE CASE OF ESCORTS 3 ITA NO.172/MUM/2013 AY:2008-09 LTD. (SUPRA). ACCORDING TO THE REVENUE IF THE IMPU GNED BENEFIT IS GRANTED TO THE ASSESSEE IT WILL TANTAMOUNT TO DOUBLE DEDUCTION. 3. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE AND WE FIND THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE SUBSEQUENT DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF DIRECTOR OF INCOME TAX (EX EMPTION) VS. GEM & JEWELLERY EXPORTS PROMOTION COUNCIL ORDER DATED 15.02.2011 IN ITA NO. (LOD) NO. 113 OF 2010. THIS DECISION WAS FOLLOWED BY ITAT, MUMBAI BENCHES IN ITS RECENT ORDER DATED 27.02.2014 IN THE CASE OF DDIT(E) VS. ADITYA BIRLA F OUNDATION IN ITA NO.5922/MUM/2012. THE RELEVANT OBSERVATIONS ARE AS UNDER: 2. THE ASSESSEE IS A TRUST CREATED AND REGISTERED WITH CHARITY COMMISSIONER AS WELL AS UNDER SECTION 12A O F THE INCOME TAX ACT, 1961 (THE ACT). THE ACTIVITIES OF THE TRUST AR E TO PROVIDE FINANCIAL ASSISTANCE TO VARIOUS CHARITABLE INSTITUTIONS FOR M EDICAL RELIEF, SPORTS AND CULTURAL ACTIVITIES. WHILE COMPUTING THE INCOME THE AO DISALLOWED DEPRECIATION UNDER SECTION 11(1) OF THE ACT ON THE GROUND THAT CAPITAL EXPENDITURE ON THESE ASSETS HAD BEEN CLAIME D AS APPLICATION OF INCOME, THEREFORE, ALLOWING DEPRECIA TION WOULD AMOUNT TO CLAIM OF DOUBLE DEDUCTION. BEFORE LD. CIT (A) IT WAS PLEADED THAT SUCH DISALLOWANCE BY THE AU IS CONTRAR Y TO THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. INSTITUTE OF BANKING PERSONNEL, 264 ITR 110 (BORN). FINDING FORCE IN SUC H CLAIM OF THE ASSESSEE LD. CIT(A) HAS DELETED THE ADDITION OF RS.3,75,52,8 14/- ON ACCOUNT OF DEPRECIATION. THE DEPARTMENT IS AGGRIEVED, HENCE, H AS FILED GROUND NO.1 TO 3 TO AGITATE SUCH DECISION OF LD. CIT(A). 3. AS IT CAN BE SEEN FROM THE GROUNDS RAISED BY THE RE VENUE, THE DELETION IS MAINLY AGITATED ON THE BASIS OF DECISIO N OF HON'BLE SUPREME COURT IN THE CASE OF ESCORTS LTD. VS. UNION OF INDIA, 199 ITR 43(SC). DURING THE COURSE OF HEARING LD. AR DREW OU R ATTENTION TOWARDS LATEST DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF DIRECTOR OF INCOME TAX (EXEMPTION), MUMBAI VS. GICR CHARITIES, (2013) 32 TAXMANN.COM 208 (BOMBAY). COPY OF THIS DECISION IS PLACED AT PAGES 4 TO 5 OF THE PAPER BOOK. OUR ATTENTION WAS D RAWN TO THE FOLLOWING QUESTION ADDRESSED BY THE REVENUE TO BE A DJUDICATED BY THE HON'BLE HIGH COURT: (B) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE TRIBUNAL WAS CORRECT IN LAW IN IGNORING THE STAND OF THE 4 ITA NO.172/MUM/2013 AY:2008-09 REVENUE THAT ALLOWANCE OF DEPRECIATION ON THE ASSET S, THE COST OF WHICH HAS ALREADY BEEN ALLOWED AS A DEDUCTION ON AC COUNT OF APPLICATION OF INCOME, WOULD AMOUNT TO DOUBLE DEDUC TION WHICH IS LEGALLY NOT PERMISSIBLE IN VIEW OF THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF ESCORTS LTD. V. UNION OF INDIA 199 ITR 443? THE AFOREMENTIONED QUESTION WAS ADJUDICATED WITH TH E FOLLOWING OBSERVATION: 4. SO FAR QUESTIONS (B) & (C) ARE CONCERNED, COUNSEL F OR THE PARTIES AGREE THAT THE ISSUE ARISING HEREIN ARE COVERED BY THE DECISION OF THIS COURT IN THE MATTER OF CIT V. INSTITUTE OF BAN KING PERSONNEL SELECTION (JBP$ [20031 264 ITR 110 / 131 TAXMAN 386 IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. IN THESE C IRCUMSTANCES, WE DO NOT SEE ANY REASON TO ENTERTAIN QUESTIONS (B) & (C). 4. IN THIS VIEW OF THE SITUATION, AS THE ISSUE IS D IRECTLY COVERED BY THE AFOREMENTIONED OBSERVATIONS OF JURISDICTIONAL HIGH COURT, WE DECLINE TO INTERFERE IN THE RELIEF GRANTED BY LD. CIT(A) AND G ROUND NO.1 TO 3 RAISED BY THE REVENUE ARE DISMISSED. 5. APROPOS GROUND NO. 4 & 5, THE GRIEVANCE OF THE REVE NUE IS REGARDING THE DIRECTION OF LD. CIT(A) VIDE WHICH IT HAS BEEN HELD THAT ALLOWANCE OF CARRY FORWARD DEFICIT OF RS.3,92,18,81 3/- SHOULD BE CONSIDERED IN THE LIGHT OF DECISION OF HON'BLE BOMB AY HIGH COURT IN THE CASE OF CIT VS. INSTITUTE OF BANKING PERSONNEL (SUPRA) A ND ALLOWED THE CAPITAL EXPENDITURE TO THE EXTENT OF SURPLUS AND BALANCE BE ALLOWED TO CARRY FORWARD. HOWEVER, LD. CIT(A) HAS ALSO HELD THAT THE DEFICIT IN EACH YEAR SHOULD BE WORKED OUT WITHOUT CONSIDERING THE ACCUMU LATION OF 25%/15%. AGAINST SUCH DIRECTION OF LD. CIT(A) THE REVENUE IS AGGRIEVED AND, HENCE, HAS FILED AFOREMENTIONED GROUNDS. 6. THIS ISSUE WAS STATED TO BE COVERED NOT ONLY BY THE AFOREMENTIONED DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE O F CIT VS. INSTITUTE OF BANKING PERSONNEL (SUPRA) BUT ALSO BY THE LATER DEC ISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF DIRECTOR O F INCOME TAX (EXEMPTION) VS. GEM & JEWELLERY EXPORTS PROMOTION COUNCIL ORDER DATED 13/2/2011 IN INCOME TAX APPEAL NO.(LOD) NO.113 OF 2010. COPY OF THIS ORDER IS FILED AT PAGES 14 TO 16 OF THE PAPER BOOK. FOLLOWING QUESTIO N WAS RAISED BY THE REVENUE BEFORE HON'BLE BOMBAY HIGH COURT FOR ADJUDI CATION: 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE TRIBUNAL WAS TIGHT IN DIRECTING THE AO TO SET O FF THE DEFICIT OF 5 ITA NO.172/MUM/2013 AY:2008-09 EARLIER YEARS TO THE SURPLUS OF THIS YEAR AND CONSI DER SUCH ADJUSTMENT AS APPLICATION OF INCOME FOR CHARITABLE PURPOSE? HON'BLE COURT HAS ADJUDICATED THE QUESTION WITH THE FOLLOWING OBSERVATION: '4. AS REGARDS SECOND QUESTION IS CONCERNED, COUNSE L ON BOTH SIDES AGREED THAT THE SAID QUESTION IS COVERED AGAI NST THE REVENUE BY THE DECISION OF THIS COURT IN THE CASE O F COMMISSIONER OF INCOME TAX VS. INSTITUTE OF BANKING REPORTED IN (2003) 264 ITR 110. IN THIS VIEW OF THE MATTER, WE SEE NO MERIT IN THE APPEAL AND THE SAME IS DISMISSED WITH NO ORDER AS TO COSTS. 7. IN THIS VIEW OF THE SITUATION, AFTER HEARING BOTH T HE PARTIES WE FIND NO SUBSTANCE IN GROUNDS NO.4 & 5 RAISED BY THE REVE NUE. THESE GROUNDS ARE DISMISSED. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS D ISMISSED. IN THIS VIEW OF THE SITUATION, AFTER HEARING BOTH T HE PARTIES, WE DECLINE TO INTERFERE WITH THE RELIEF GRANTED BY THE CIT(A). THE DEPARTMENTAL APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 20 TH DAY OF MARCH, 2014. SD/- SD/- (D KARUNAKARA RAO) (I P BANSAL) ACCOUNTANT MEMBER JUDICIAL ME MBER MUMBAI, DT : 20 TH MARCH, 2014 SA COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE C.I.T, CONCERNED 4. THE CIT (A)-CONCERNED 5. THE DR, D BENCH, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI