ACIT, CHENNAI V. M/s. Mamallan Educational Trust, CHENNAI

ITA 1808/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64636 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 12-12-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 04-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR S MOHARANA IRS
• Assessee Lawyers: T BANUSEKAR
• Keywords: Capital asset; Depreciation; Charitable institution
• Section: 153A; 260A; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENT AND SHRI V. DURGA RAO, JUDICIAL MEMBER I.T.A. NOS. 1807 & 1808/MDS/2012 ASSESSMENT YEARS : 2006-07 & 2008-09 THE ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-I(3), CHENNAI 34. VS. M/S. MAMALLAN EDUCATIONAL TRUST, NO.29-A, GANAPATHI STREET, ROYAPETTAH, CHENNAI 600 014. PAN AABTM1887E (APPELLANT) (RESPONDENT) APPELLANT BY : DR. S. MOHARANA, IRS, CIT RESPONDENT BY : SHRI T. BAN USEKAR, FCA DATE OF HEARING : 12 TH DECEMBER, 2012 DATE OF PRONOUNCEMENT : 14 TH DECEMBER, 2012 O R D E R PER DR.O.K.NARAYANAN, VICE-PRESIDENT THESE TWO APPEALS ARE FILED BY THE REVENUE. THE RELEVANT ASSESSMENT YEARS ARE 2006-07 AND 2008-09. THE 2 ITA 1807 & 1808/12 APPEALS ARE DIRECTED AGAINST THE ORDERS OF THE COMM ISSIONER OF INCOME-TAX(APPEALS) I AT CHENNAI DATED 17.7.2012. THE APPEAL FOR THE ASSESSMENT YEAR 2006-07 ARISES OUT OF THE A SSESSMENT COMPLETED UNDER SEC.153C, READ WITH SECTIONS 153A A ND SEC.143(3) OF THE INCOME-TAX ACT, 1961. THE APPEAL FOR THE ASSESSMENT YEAR 2008-09 ARISES OUT OF THE ASSESSMEN T COMPLETED UNDER SEC.143(3) OF THE INCOME-TAX ACT, 1 961. 2. AS FAR AS THE APPEAL FOR THE ASSESSMENT YEAR 200 6-07 IS CONCERNED, THE REVENUE HAS RAISED THE FOLLOWING GRO UNDS : 1.A. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE A.O. TO ALLOW EXEMPTION U/S 11. 1.B THE LEARNED CIT(A) HAS FAILED TO NOTE THAT THE ASSESSEE HAS NOT PROVIDED ANY PARTICULARS EITHER BEFORE THE A.O. OR BEFORE THE CIT(A) RELATING TO TH E PROVISION OF FUNDS TO M/S JEPPIAR EDUCATIONAL TRUST . 1.C THE LEARNED CIT(A) HAS FAILED TO NOTE THAT, IN THE CASE OF M/S. JEPPIAR EDUCATIONAL TRUST, THE ORDERS OF THE HONBLE ITAT A IN ITA NO.3387/MDS/2004 DATED 3 ITA 1807 & 1808/12 22.09.2006 FOR ASSESSMENT YEAR 2001-02 AND ORDERS OF THE HONBLE ITAT IN IT(SS)A NOS.51, 65/MDS/05, 117 & 142/MDS/03 DATED 22.09.2006 FOR THE BLOCK PERIOD FROM 1.4.89 TO 12.8.99 HAVE NOT BEEN ACCEPTE D BY THE DEPARTMENT AND APPEALS U/S 260A ARE PENDING BEFORE THE HONBLE HIGH COURT OF MADRAS AND THAT EXEMPTION U/S 11 HAS BEEN DENIED TO M/S JEPPIAR EDUCATIONAL TRUST FROM SEVERAL ASSESSMENT YEARS AND HENCE CBDT INSTRUCTION NO.1132 IS NOT APPLICABLE IN THIS CASE. 1.D THE LEARNED CIT(A) HAS FAIED TO NOTE THAT OXFO RD DICTIONARY DEFINES A CONCERNAS A PROPERTY AND EST ATE AS WELL AND A CONCERN NEED NOT NECESSARILY RUN FOR PROFIT AND HENCE CONCERN CAN INCLUDE A TRUST TO WHO M EXEMPTION U/S 11 HAS BEEN DENIED. 1.E THE LEARNED CIT(A) HAS FAILED TO NOTE THAT THE ASSESSEE HAS NOT PROVIDED ANY PARTICULARS EITHER BEFORE THE A.O. OR BEFORE THE CIT(A) RELATING TO TH E PROVISION OF FUNDS TO M/S JEPPIAR EDUCATIONAL TRUST . 4 ITA 1807 & 1808/12 2.A THE LEARNED CIT(A) HAS FAILED TO NOTE THAT M/S SIVARAJA RAMALINGA TRUST HAS BEEN DENIED EXEMPTION U/S 11 IN THE ASSESSMENT YEAR 2006-07 AND 2007-08 VIDE ASSESSMENT ORDER DATED 30-12-2008. ACCORDINGL Y CBDT INSTRUCTION NO.1132 IS NOT APPLICABLE IN THIS CASE AND HENCE THE PAYMENTS MADE TO M/S SIVARAJA RAMALINGA TRUST ARE HIT BY SECTION 13(1)(C) READ WI TH SECTION 13(3) OF THE I.T.ACT 1961. 2.B THE LEARNED CIT(A) HAS FAILED TO NOTE THAT THE ASSESSEE HAS NOT PROVIDED ANY PARTICULARS EITHER BEFORE THE A.O. OR BEFORE THE CIT(A) RELATING TO T HE PROVISION OF FUNDS TO M/S SIVARAJA RAMALINGA TRUST. 3. THE LEARNED CIT(A) HAS FAILED TO NOTE THAT PERU SAL OF I.T. RETURN FILED BY M/S HOLY SATELLITE TOWN LTD . FOR THE ASSESSMENT YEAR 2006-07 REVEALS THAT THERE IS N O SUPPLY OF MATERIALS AND THAT WHEN THE ASSESSEE HAS BORROWED LOANS FROM I.O.B. AT ` 9,32,58,581 AND PAID INTEREST AT ` 36,24,066 AND PARKED AN AMOUNT OF ` 1,99,77,000 WITHOUT ANY COMPENSATION, PAYMENTS 5 ITA 1807 & 1808/12 MADE TO M/S HOLY SATELLITE TOWN LTD ARE HIT BY SECT ION 13(1)(C) READ WITH SECTION 13(3) OF THE I.T. ACT 19 61. 4. THE LEARNED CIT(A) HAS FAILED TO NOTE THAT WHEN THE ASSESSEE HAS BORROWED LOANS FROM I.O.B. AT ` 9,32,58,581AND PAID INTEREST AT ` 36,24,066 AND PARKED AN AMOUNT OF ` 24,40,000 WITHOUT ANY COMPENSATION, PAYMENTS MADE TO M/S JET ASSOCIATES ARE HIT BY SECTION 13(1)(C READ WITH SECTION 13(3) OF THE I.T.ACT 1961. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS FOLL OWED THE ORDER OF THE INCOME-TAX APPELLATE TRIBUNAL, CHE NNAI A BENCH PASSED FOR THE EARLIER ASSESSMENT YEARS IN DE CIDING THE ISSUES RAISED BEFORE HIM. THE TRIBUNAL HAS HELD TH AT THE ASSESSEE IS ELIGIBLE FOR EXEMPTION UNDER SEC.11 AND THE ASSESSEE CANNOT BE ASSESSED AS AN AOP. THE CIRCUMS TANCES REMAIN THE SAME. THE ORDER OF THE TRIBUNAL HAS NOT BEEN DISTURBED BY ANY COURTS OF LAW SO FAR. IN THESE CI RCUMSTANCES, WE FIND THAT THE ORDER OF THE COMMISSIONER OF INCOM E- TAX(APPEALS) IS JUSTIFIED IN LAW. 6 ITA 1807 & 1808/12 4. AS FAR AS THE APPEAL FILED FOR THE ASSESSMENT YE AR 2008- 09 IS CONCERNED, THE GROUNDS RAISED BY THE REVENUE IS THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED IN DI RECTING THE ASSESSING OFFICER TO ALLOW EXEMPTION UNDER SEC.11 A FTER TREATING THE DEPRECIATION CLAIMED AS APPLICATION OF INCOME. 5. AS FAR AS THE ABOVE GROUND IS CONCERNED, THE LEA RNED COMMISSIONER HAS PLACED RELIANCE ON : 1. LISSY MEDICAL INSTITUTIONS V. CIT (24 TAXMANN.CO M 9(KER.) IN THE SAID CASE, THE HONBLE HIGH COURT OF KERALA HAS HELD THAT WHEN THE ASSESSEE HAS CLAIMED EXPENDITURE FOR ACQUISITION OF ASSETS AS APPLICATION OF INCOME FOR CHARITABLE PURPOSES, THE ASSESSEE WAS NOT ENTITLED TO CLAIM DE PRECIATION ON SUCH ASSETS. 2. DY. DIT(EXEMPTION) V. ADI SANKARA TRUST (46 SOT 230). IN THE SAID CASE, THE TRIBUNAL HAS HELD THAT WHERE EXPENDITURE IS TREATED AS APPLICATION OF FUND FOR C HARITABLE PURPOSE, THE ASSESSEE IS NOT ENTITLED FOR THE BENEF IT OF DEPRECIATION. 7 ITA 1807 & 1808/12 6. THE LEARNED COUNSEL APPEARING FOR THE ASSESSEE, ON THE OTHER HAND, PLACED ON THE FOLLOWING RELIANCE: 1. DIT VS. VISHWA JAGRITI MISSION 2012 (4) TMI 289 (DEL.) IN THE ABOVE JUDGMENT, THE HONBLE HIGH COURT HAS H ELD THAT THE CLAIM OF DEPRECIATION ON FIXED ASSETS UTILIZED FOR THE CHARITABLE PURPOSE HAS TO ALLOWED WHILE ARRIVING AT THE INCOME AVAILABLE FOR APPLICATION TO CHARITABLE AND RELIGIOUS PURPOSES SINCE THE INCOME OF THE ASSESSEE SHOULD BE COMPUTED ON THE BASIS OF COMMERCIAL PRINCIPLES. 2. CIT V. MARKET COMMITTEE, PIPLI (2011) 330 ITR 1 6 (P & H) IN THIS CASE ALSO, THE HONBLE HIGH COURT HAS HELD THAT THE DEPRECIATION IS ALLOWABLE ON CAPITAL ASSETS FROM TH E INCOME OF CHARITABLE TRUST FOR DETERMINING THE QUANTUM OF FUNDS WHICH HAVE TO BE APPLIED FOR THE PURPOSES OF THE TR UST IN TERMS OF SEC.11. 3. CIT V. SOCIETY OF SISTERS OF ST. ANNI (146 ITR 2 8)(KAR.) IN THE ABOVE CASE ALSO, THE HONBLE HIGH COURT HAS HELD THAT INCOME DERIVED FROM THE PROPERTIES HELD UNDER THE T RUST SHOULD BE ARRIVED AT IN THE NORMAL COMMERCIAL MANNE R AND, 8 ITA 1807 & 1808/12 THEREFORE, THE DEPRECIATION HAS TO BE ALLOWED WHILE COMPUTING THE INCOME AND IF NO DEDUCTION IS ALLOWE D, THERE WILL BE NO WAY TO PRESERVE THE CORPUS OF THE TRUST. 7. AS SEEN FROM THE ABOVE, MAJORITY OF THE HIGH CO URTS HAVE HELD THAT THE INCOME OF A CHARITABLE TRUST HAS TO BE COMPUTED ON THE BASIS OF REGULAR AND COMMERCIAL PRI NCIPLES AND THEREFORE, THE TRUSTEES ARE ENTITLED FOR DEPREC IATION ALLOWANCE. 8. THE HONBLE SUPREME COURT IN THE CASE OF CI T V. VEGETABLE PRODUCTS LTD. (88 ITR 192) HAS HELD THAT WHEN SUCH DIFFERENT VIEWS ARE AVAILABLE, THE VIEWS FAVOU RABLE TO THE ASSESSEE SHOULD BE ADOPTED. 9. THEREFORE, WE HOLD THAT THE COMMISSIONER OF INCOME- TAX(APPEALS) IS JUSTIFIED IN HOLDING THAT THE DEPRE CIATION IS TO BE ALLOWED TO THE ASSESSEE IN COMPUTING THE INCOME . THIS APPEAL OF THE REVENUE IS ALSO LIABLE TO BE DISMISSE D. 10. IN RESULT, THESE APPEALS FILED BY THE REVENUE ARE DISMISSED. 9 ITA 1807 & 1808/12 ORDERS PRONOUNCED ON FRIDAY, THE 14 TH OF DECEMBER, 2012 AT CHENNAI. SD/- SD/- (V. DURGA RAO) ( DR.O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED, THE 14 TH DECEMBER, 2012. MPO* COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GF.