Income Tax Officer (Exemption), Lucknow V. M/s SuryaBux Pal Charitable Trust, Lucknow

ITA 193/LKW/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1124 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 22-02-2018
• Assessment Year: 2011-2012
• Appeal Filed On: 13-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: IN FORMATION; FILED INCOMPLETE DETAILS
• Keywords: Capital asset; Depreciation; Charitable institution; Earning of tax free income; Additional evidence; Reasonable cause; Benefit of exemption; Capital expenditure
• Section: 12A; 12AA; 10B; 12; 11

Judgement Text

I.T.A. NO.193/LKW/2016 ASSESSMENT YEAR:2011-12 1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI T. S. KAPOOR, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER ITA NO.193/LKW/2016 ASSESSMENT YEAR:2011-12 INCOME TAX OFFICER (EXEMPTION) LUCKNOW. VS. SURYA BUX PAL CHARITABLE TRUST 3/249, VINAY KHAND, GOMTI NAGAR, LUCKNOW. PAN:AAETS 2948 D (APPELLANT) (RESPONDENT) O R D E R PER T. S. KAPOOR, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LEARNED CIT(A) DATED 08/02/2016 RELATING TO ASSESSMENT YEAR 2011-12. 2. BRIEF FACTS, AS STATED IN THE ASSESSMENT ORDER, ARE THAT THE ASSESSEE IS RUNNING EDUCATIONAL INSTITUTION AND IS A SOCIETY RE GISTERED UNDER THE SOCIETIES ACT AND ALSO ENJOYED THE BENEFIT OF EXEMP TION U/S 12AA OF THE ACT. DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE DID NOT COMPLY WITH THE VARIOUS NOTICES AND FILED INCOMPLETE DETAILS AND IN FORMATION AND THEREFORE, THE ASSESSING OFFICER DENIED AN AMOUNT OF RS.2,71,2 0,688/- OUT OF ADMINISTRATIVE EXPENSES AS INADMISSIBLE BEING 30% O F THE EXPENSES CLAIMED UNDER THIS HEAD. THE ASSESSING OFFICER ALSO DISALL OWED THE CLAIM FOR APPLICATION OF INCOME TOWARDS CAPITAL ASSETS AT RS. 8,14,18,262/- IN THE APPELLANT BY SHRI YASHVENDRA SINGH, D.R. RESPONDENT BY MS. SWETA MITTAL, A.C.A. DATE OF HEARING 22/02/2018 DATE OF PRONOUNCEMENT 23 / 02 /201 8 I.T.A. NO.193/LKW/2016 ASSESSMENT YEAR:2011-12 2 ABSENCE OF DOCUMENTARY EVIDENCE IN SUPPORT OF APPLI CATION OF INCOME TOWARDS THE PURCHASE OF CAPITAL ASSETS. SIMILARLY, THE ASSESSING OFFICER DISALLOWED AN AMOUNT OF RS.63,45,086/- BEING THE AM OUNT ALLOWED AS CONCESSION AGAINST FEE OF STUDENTS AS THE ASSESSING OFFICER HELD THAT NO DETAILS OF SUCH STUDENTS, TO WHOM THE CONCESSION WA S PROVIDED, HAD BEEN FILED. THE ASSESSING OFFICER FURTHER DISALLOWED A CLAIM OF DEPRECIATION OF RS.2,65,36,922/- WHICH THE ASSESSEE HAD CLAIMED AS DEPRECIATION BY HOLDING THAT THE CLAIM OF APPLICATION OF INCOME TOWARDS CAP ITAL ASSETS HAS ALREADY BEEN ALLOWED IN EARLIER YEARS THEREFORE, HE HELD TH AT THE FURTHER CLAIM OF DEPRECIATION WILL AMOUNT TO DOUBLE DEDUCTION OF CLA IM. 2.1 AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER , THE ASSESSEE FILED APPEAL BEFORE LEARNED CIT(A) AND MADE VARIOUS SUBMI SSIONS. THE ASSESSEE ALSO FILED ADDITIONAL EVIDENCE WHICH THE CIT(A) SEN T TO ASSESSING OFFICER FOR HIS REMAND REPORT. THE LEARNED CIT(A), AFTER GOING THROUGH THE REMAND REPORT AND FURTHER COMMENTS OF THE ASSESSEE, ALLOWE D RELIEF TO THE ASSESSEE BY HOLDING AS UNDER: ADDITION OF AD HOC DISALLOWANCE OUT OF ADMINISTRATI VE EXPENSES 6.4 THE SUBMISSIONS OF THE APPELLANT WERE FORWARDED TO THE ASSESSING OFFICER FOR NECESSARY INQUIRY AND REPORT. THE AO HAS SINCE SUBMITTED A REMAND REPORT VIDE LETTER F.NO. ITO(E)/LKO/REMAND REPORT/2015-16 DATED 20.01.2016 W HICH IS ON RECORD. THE OBSERVATIONS OF THE ASSESSING OFFICE R IN THE REMAND REPORT ARE AS UNDER:- DURING THE ASSESSMENT PROCEEDINGS, THE AO HAD MADE ADDITION OF RS.2,71,20,688/- TOWARDS ADMINISTRATIVE EXPENSES @ 30% OF TOTAL EXPENSES CLAIMED AT RS.9,04,02,294/- AS THE A SSESSEE TRUST FAILED TO PRODUCE BOOKS OF ACCOUNTS, BILLS/VO UCHERS ETC. IN RESPECT OF CLAIM OF APPLICATION OF INCOME TOWARDS C HARITABLE PURPOSE. DURING THE REMAND PROCEEDINGS, THE ASSESSE E TRUST HAS SUBMITTED COPIES OF LEDGER ACCOUNT OF EXPENSES EXCEEDING I.T.A. NO.193/LKW/2016 ASSESSMENT YEAR:2011-12 3 RS. 2 LAKHS AND SUBMITTED PHOTOCOPY OF SOME BILLS A ND VOUCHERS. 6.5 A COPY OF REMAND REPORT WAS PROVIDED TO THE APP ELLANT FOR COMMENTS. THE APPELLANT HAS FILED THE WRITTEN S UBMISSIONS CLAIMING THAT WITH RESPECT TO AFORESAID EXPENSE WE WOULD LIKE TO STATE THAT DURING THE REMAND PROCEEDING WE HAD SUBMITTED COPIE S OF LEDGER ACCOUNTS OF EXPENSES OF 2,00,000/- AND ABOVE CLAIMED UNDER THE HEAD ADMINISTRATIVE EXPENSES IN INCOME & EXPENDITURE ACCOUNT OF RELEVANT ASSESSMENT YEAR ALO NGWITH COPIES OF .SOME BILLS AND VOUCHERS. WE WOULD FURTHE R LIKE TO STATE THAT ALL BILLS AND VOUCHERS OF ADMINISTRATIVE EXPENSES AMOUNTING TO RS.9,04,02,294.92 INCURRED BY THE APPE LLANT APPELLANT TRUST DURING THE RELEVANT ASSESSMENT YEAR WERE ALSO PRODUCED BEFORE THE LD. ASSESSING OFFICER FOR VERIF ICATION WITH OUR REPLY DATED 04/01/2016 DURING THE REMAND PROCEE DINGS. 6.6 ON EXAMINATION OF THE ABOVE FACTS AND CIRCUMSTA NCES IT IS EVIDENT THAT THE BOOKS OF ACCOUNTS AND BILL/VOUCHER S ARE DULY MAINTAINED BY THE APPELLANT AND AUDIT REPORT IN FOR M 10B WAS FILED WITH BALANCE SHEET. THE COPIES OF LEDGER ACCO UNTS AND BILL/VOUCHERS WERE PRODUCED BEFORE THE AO IN REMAND PROCEEDINGS AND NO ADVERSE INFERENCE ON THE SAME HA S BEEN DRAWN IN REMAND REPORT. LEDGER ACCOUNTS AND BILL/VO UCHERS WERE PRODUCED IN APPELLATE PROCEEDINGS ALSO. THE AC TIVITIES OF THE APPELLANT ARE EXACTLY SIMILAR TO ACTIVITIES OF THE EARLIER AY'S. IN THE EARLIER AY'S THE APPELLANT HAS ALWAYS BEEN G RANTED EXEMPTION U/S 11 AS REGISTRATION U/S 12A WAS ALREAD Y GRANTED SIMILAR IS THE POSITION IN THE YEAR UNDER CONSIDERA TION. THE BOOKS OF ACCOUNTS AND BILLS/VOUCHERS HAVE BEEN EXAM INED BY THE AO AND NO ADVERSE INFERENCE HAS BEEN DRAWN IN T HE REMAND REPORT. IN VIEW OF THESE FACTS, THE BASIS OF DISALLOWANCE OF ADMINISTRATIVE EXPENSES CANNOT BE SUSTAINED AND THE SAME IS HEREBY DELETED. THE ADDITION OF RS.2,71,20,688/- OU T OF ADMINISTRATIVE EXPENSES IS DELETED. ADDITION ON ACCOUNT OF CONCESSION GIVEN TO STUDENTS 7.4 THE SUBMISSIONS OF THE APPELLANT WERE FORWARDED TO THE ASSESSING OFFICER FOR NECESSARY INQUIRY AND REPORT. THE AO HAS I.T.A. NO.193/LKW/2016 ASSESSMENT YEAR:2011-12 4 SINCE SUBMITTED A REMAND REPORT VIDE LETTER F.NO. ITO(E)/LKO/REMAND REPORT/2015-16 DATED 20.01.2016 W HICH IS ON RECORD. THE OBSERVATIONS OF THE ASSESSING OFFICE R IN THE REMAND REPORT ARE AS UNDER:- THE AO HAD MADE THE ADDITION AT RS. 63,45,086/- ON ACCOUNT OF FEE CONCESSION AS THE ASSESSEE TRUST HAD NOT PRODUC ED DETAILS AND DOCUMENTS DURING THE ASSESSMENT PROCEEDINGS. IN THIS REGARD, DURING THE REMAND PROCEEDINGS, THE ASSESSEE HAS PRODUCED LEDGER ACCOUNTS OF THE FEE CONCESSION UNDE R FOLLOWING HEADS. S.NO. ACCOUNT NAME AMOUNT 1 FEE REBATE 4565600 2 FEE EXEMPTION 976386 3 DISCOUNT ON FEE FIX 773100 4 DISCOUNT A/C 30000 TOTAL 6345086 A COPY OF REMAND REPORT WAS PROVIDED TO THE APPELLA NT FOR COMMENTS. THE APPELLANT HAS FILED THE WRITTEN SUBMI SSION CLAIMING THAT- WITH RESPECT TO AFORESAID EXPENSE WE WOULD LIKE TO STATE THAT WE HAD SUBMITTED COPIES OF ALL LEDGER ACCOUNTS PERT AINING TO FEE CONCESSION ALONG WITH COPIES OF SOME LETTER/NOTICES ISSUE BY THE MANAGEMENT OF THE APPELLANT TRUST FOR FEE CONCESSIO N ALONG WITH INCENTIVE POLICY FOR ADMISSION OF MERITORIOUS STUDENTS AND COPIES OF SOME APPLICATIONS FOR FEE CONCESSION OF F INANCIALLY DEPRIVED STUDENTS ALONG WITH THE HAND WRITTEN LEDGE R DURING THE REMAND PROCEEDING. FURTHER, THE APPELLANT TRUST HAD PRODUCED ALL ITS BOOKS OF ACCOUNTS ALONG WITH BILLS AND VOUC HERS BEFORE THE LD. ASSESSING OFFICER FOR VERIFICATION WITH REP LY DATED 06.01.2016 DURING REMAND PROCEEDING. THE ACTIVITY OF GIVING FEE CONCESSIONS TO DESERVING STUDENTS IS NOT NEW FOR THIS YEAR AND IS A REGULAR PRACTICE OF THE APPELLANT I.T.A. NO.193/LKW/2016 ASSESSMENT YEAR:2011-12 5 TRUST. THE ACTIVITIES OF APPELLANT ARE EXACTLY SIMI LAR TO THE ACTIVITIES UNDERTAKEN BY APPELLANT IN THE EARLIER A .Y.'S IN THE EARLIER A.Y.'S THE APPELLANT HAS BEEN GRANTE D EXEMPTION U/S 11 AS IT IS REGISTERED U/S 12A OF THE ACT. THE AUDIT REPORT WAS FILED ALONGWITH BALANCE SHEET. THESE FEE CONCES SIONS HAVE BEEN ALLOWED TO THE APPELLANT-TRUST IN THE EARLIER A.Y'S ALSO. THE RELEVANT LEDGER ACCOUNTS OF FEE CONCESSION AND SUPP ORTING DOCUMENTARY EVIDENCE WAS PRODUCED BEFORE THE AO IN REMAND PROCEEDINGS AND SAME WERE CHECKED BY AO. NO ADVERSE INFERENCE HAS BEEN DRAWN BY AO IN THE REMAND REPORT IN RESPECT OF THE SAME. DOCUMENTARY EVIDENCE IN SUPPOR T OF FEE CONCESSIONS IN TUITION FEE AND OTHER FEE GIVEN TO T HE STUDENTS WAS PRODUCED IN APPELLANT PROCEEDINGS AND WAS EXAMI NED. THE SAME DOCUMENTS WITH LEDGER ACCOUNTS WERE EXAMINED B Y THE AO IN REMAND PROCEEDINGS AND NO ADVERSE INFERENCE W AS DRAWN. IN VIEW OF THE ABOVE FACTS THE ADDITION MADE TO THE TUNE OF RS. 63,45,086/- IS HEREBY DELETED. THE ADDITION MADE TO GROSS RECEIPTS IS NOT CALLED FOR AND THE SAME IS HE REBY DELETED. ADDITION ON ACCOUNT OF DEPRECIATION ON CAPITAL ASSE TS 8.4 THE SUBMISSIONS OF THE APPELLANT WERE FORWARDE D TO THE ASSESSING OFFICER FOR NECESSARY INQUIRY AND REPORT. THE AO HAS SINCE SUBMITTED A REMAND REPORT VIDE LETTER F.NO. ITO(E)/LKO/REMAND REPORT/2015-16/DATED 20.01.2016 W HICH IS ON RECORD. THE OBSERVATIONS OF THE ASSESSING OFFICE R IN THE REMAND REPORT ARE AS UNDER:- IN THIS REGARD, THE ASSESSING OFFICER HAD OBSERVED THAT SINCE, THE CLAIM OF APPLICATION OF INCOME TOWARDS CAPITAL ASSETS HAS ALREADY BEEN ALLOWED IN EARLIER YEARS, THEREFORE, D OUBLE DEDUCTION OF CLAIM OF DEPRECIATION IS NOT ALLOWABLE IN VIEW OF THE SETTLED PRINCIPLES OF LAW AND INSTRUCTIONS OF C BDT. ON THIS ISSUE, I AM OF THE OPINION THAT THE ASSESSI NG OFFICER HAD RIGHTLY CONSTRUED THAT THE ASSESSEE TRUST WAS NOT E LIGIBLE FOR ITS CLAIM OF DEPRECIATION AS THE SAME WOULD AMOUNT TO D OUBLE DEDUCTION. HENCE, THE CLAIM OF APPLICATION OF INCOM E TO THE TUNE OF RS.2,65,36,922/- TOWARDS DEPRECIATION IS NOT ALL OWABLE AND MAY BE SUSTAINED. I.T.A. NO.193/LKW/2016 ASSESSMENT YEAR:2011-12 6 8.5 A COPY OF REMAND REPORT WAS PROVIDED TO THE APP ELLANT FOR COMMENTS. THE APPELLANT HAS FILED THE WRITTEN S UBMISSIONS CLAIMING THAT- WE WOULD LIKE TO SUBMIT THAT INCOME OF TRUST/SOCIET Y REGISTERED U/S 12A SHALL BE DETERMINED WITHOUT ANY DEDUCTION O R ALLOWANCE BY WAY OF DEPRECIATION OR OTHERWISE IN RE SPECT OF ANY ASSET, ACQUISITION OF WHICH HAS BEEN CLAIMED AS AN APPLICATION OF INCOME UNDER SECTION 11 IN THE SAME OR ANY OTHER PREVIOUS YEAR W.E.F. 01.04.2015 AS SECTION 11(6) OF INCOME-T AX ACT HAS BEEN INSERTED BY THE FINANCE (NO. 2) ACT, 2014. THU S, DEPRECIATION CLAIM WAS NOT DISALLOWABLE AS PER INCO ME-TAX ACT, 1961, IN THE RELEVANT ASSESSMENT YEAR. FURTHER, BY CATENA OF JUDGMENTS OF HON'BLE ITAT AND HON'BLE HIGH COURT IT IS WELL SETTLED THAT CHARITABLE INSTITUTIONS CAN CLAIM DEPR ECIATION ON ASSETS ACQUIRED OUT OF APPLICATION OF TRUST INCOME, IRRESPECTIVE OF THE FACTS THAT COST OF PURCHASE IS OUT OF APPLIC ATION OF INCOME EXEMPT U/S 11 AND 12 OF THE ACT. IN THIS REGARD, OU R RELIANCE IS PLACED ON JUDGMENT OF HON'BLE ITAT, JAIPUR IN THE C ASE OF M/S SANTOKBHA DURLABHJI CUKE TRUST, JAIPUR V. INCOME TA X OFFICER IN ITA NO. 241 & 242/JP/2014 FOR A.YS. 2004-05 AND 200 9-10 DATED 13.03.2015. RELEVANT PORTION IS REPRODUCED BE LOW: '2.5 BESIDES BY A CATENA OF JUDGMENTS OF ITAT AND HON'BLE HIGH COURT IT IS BY NOW WELL SETTLED THAT CHARITABLE INSTITUTIONS CAN CLAIM DEPRECIATION ON A SSETS ACQUIRED OUT OF APPLICATION OF TRUST INCOME, IRRESP ECTIVE OF THE FACTS THAT COST OF PURCHASE IS OUT OF APPLICATI ON OF INCOME EXEMPT U/S 11 AND 12 OF THE ACT FOLLOWING AR E THE CASE LAWS RELIED:- A. IN ITO V. SS JAIN SUBODH SHIKSHA SAMITI IN [ITA NO. 250/JP/2007] IT WAS HELD: WHERE THE SOCIETY HAD CLAIMED DEPRECIATION EVEN WHE N THE COST OF THE ASSETS HAVE BEEN TREATED AS APPLIED , IT SHALL BE TREATED AS APPLIED TOWARDS THE INCOME OF T HE SOCIETY. THE WORD 'APPLIED' USED IN SECTION 11 SHOU LD BE CONSTRUED WIDELY AND NOT IN A NARROW SENSE AS HELD IN: B. IN ACIT VS. BHOPAL CAMPION SCHOOL SOCIETY [2011] 14 TAXMANN.COM 59 (INDORE) IT WAS HELD: I.T.A. NO.193/LKW/2016 ASSESSMENT YEAR:2011-12 7 EVEN OTHERWISE, DEPRECIATION ALLOWANCE IS A CONCESS ION GRANTED BY THE STATE IN THE COMPUTATION OF INCOME B ASE ON MANY FACTORS RELEVANT TO THE WHOLESOME FISCAL ADMINISTRATION. DEPRECIATION REPRESENTS THE DIMINUT ION IN THE VALUE OF AN ASSET WHEN APPLIED TO M/S SANTOKBHA DURLABHJI TRUST VS. ITO WARD-L(L), JAIPUR. THE PURPOSE OF MAKING PROFIT OR GAIN. DEPRECIATION IS THUS RELATED TO AN ASSET AND IS A NOTIONAL LOSS AGAINST ACTUAL LOSS IN THE SENSE OF OUTGOING OF A BUSINESS, MEANING THEREB Y, DEPRECIATION IS A STATUTORY ALLOWANCE NOT CONFINED EXPRESSLY TO DIMINUTION IN VALUE OF ASSET BY REASON OF WEAR AND TEAR ONLY. A CHARITABLE TRUST IS ENTITLED TO DEPRECIATION IN RES PECT OF ASSET HELD BY IT. OUR VIEW IS FORTIFIED BY THE DECISION F ROM HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. RAI PUR PALLOTTINE SOCIETY [1990] 50 TAXMAN 233(MP) C. IN CIT V. INSTITUTE OF BANKING PERSONNEL SELECTION (IMPS) [2003] 131 TAXMAN 386 (BOM). IT WAS HELD: SECTION 11 OF THE INCOME-TAX ACT, 1961, CHARITABLE OR RELIGIOUS TRUST EXEMPTION OF INCOME FROM PROPERTY H ELD UNDER-ASSESSMENT YEAR 1984-85- WHETHER ASSESSEE TRU ST COULD CLAIM DEPRECIATION ON ASSETS, COST OF WHICH H AD BEEN FULLY ALLOWED AS APPLICATION OF INCOME UNDER SECTIO N 11 IN PAST YEARS-HELD, YES -WHETHER ASSESSEE COULD CLAIM DEPRECIATION ON ASSER TS WHICH IT RECEIVED ON ACCOUNT OF TRANSFER AND COST OF ACQU IRING OF WHICH WAS NOT INCURRED BY ASSESSEE -HELD, YES -WHET HER ASSESSEE COULD CARRY FORWARD DEFICIT OF EARLIER YEA RS AND SET IT OFF AGAINST SURPLUS OF SUBSEQUENT YEARS-HELD, YE S, D. IN CIT VS. SETH MANILAL RANCHOD DAS VISHRAM BHAW AN TRUST [198 ITR 598 (GUJ)] IT WAS HELD: THE AMOUNT OF DEPRECIATION DEBITED TO THE ACCOUNTS OF THE CHARITABLE INSTITUTIONS HAS TO BE DEDUCTED TO ARRIV E AT THE INCOME AVAILABLE FOR APPLICATION TO CHARITABLE AND RELIGIOUS PURPOSES. I.T.A. NO.193/LKW/2016 ASSESSMENT YEAR:2011-12 8 E. IN CIT VS. SOCIETY OF SISTER ST. ANNE 146 ITR 28 DEPRECIATION WAS ALLOWED IN ADDITION TO CAPITAL EXP ENDITURE. F. IN POORAN MAL PHOOLA DEVI MEMORIAL TRUST VS. ITO (JP ITAT) IT WAS HELD THAT DEPRECIATION IS ALLOWABLE AS APPLICATION OF INCOME. G. LATEST JUDGMENT IN GKR CHARITIES VS. DY. DIT (EXEMPTIONS) [2011] 46 SOT 23 IS ALSO OF THE VIEW T HAT BENEFIT OF DEPRECIATION IS DIFFERENT FROM CLAIM OF CAPITAL EXPENDITURE AND BOTH ARE ALLOWABLE DISTINCTIVELY. H. P&H HIGH COURT AGAIN HAS REITERATED THE SIMILAR STAND IN ITS LATEST JUDGMENT IN CIT VS. MARKET COMMITTEE [20 11] 330 ITR 16. M/S SANTOKBHA DURLABHJI TRUST VS. ITO WARD-KL). JAI PUR. IT IS FURTHER PLEADED THAT THE LEGAL POSITION IN BEHALF O F SUCH DEPRECIATION HAS BEEN AMENDED W.E.F. 01.04.2015 BY INSERTION OF SECTION 11(6) OF I.T. ACT, 1961 BY FINANCE (NO.2 ) ACT, 2014 AS UNDER- '(6) IN THIS SECTION WHERE ANY INCOME IS REQUIRED T O BE APPLIED OR ACCUMULATED OR SET APART FOR APPLICATION, THEN, FOR SUCH PURPOSES THE INCOME SHALL BE DETERMINED WITHOUT ANY DEDUCTION OR ALLOWANCE BY WAY OF DEPRECIATION OR OTHERWISE IN RESPECT OF ANY ASSET, ACQUISITION OF WHICH HAS BEEN CLAIMED AS AN APPLICATION OF INCOME UNDER THIS SECTION IN THE SAM E OR ANY\OTHER PREVIOUS YEAR. THE MEMORANDUM EXPLAINING THE AMENDMENT OF ABOVE PROVISION APPENDED WITH FINANCE (NO.2) ACT, 2014 EXPLAINS THE SAME AS UNDER:- THE SECTION ISSUE WHICH HAS ARISEN IS THAT THE EXIS TING SCHEME OF SECTION 11 AS WELL AS SECTION 10(23C) PROVIDES E XEMPTION IN RESPECT OF INCOME WHEN IT IS APPLIED TO ACQUIRE A C APITAL ASSET. SUBSEQUENTLY, WHILE COMPUTING THE INCOME FOR PURPOS ES OF THESE SECTION, NOTIONAL DEDUCTION BY WAY OF DEPRECI ATION ETC, IS CLAIMED AND SUCH AMOUNT OF NOTIONAL DEDUCTION REMAI NS TO BE APPLIED FOR CHARITABLE PURPOSE. THEREFORE, DOUBLE B ENEFIT IS CLAIMED BY THE TRUSTS AND INSTITUTIONS UNDER THE EX ISTING LAW. THE PROVISIONS NEED TO BE RATIONALIZED TO ENSURE TH AT DOUBLE BENEFIT IS NOT CLAIMED AND SUCH NOTIONAL AMOUNT DOE S NOT GET I.T.A. NO.193/LKW/2016 ASSESSMENT YEAR:2011-12 9 EXCLUDED FROM THE CONDITION OF APPLICATION OF INCOM E FOR CHARITABLE PURPOSE. IN VIEW OF THE ABOVE, IT IS ALSO PROPOSED TO AMEND THE ACT TO PROVIDE THAT UNDER SECTION 11 AND 10(23C), INCOME F OR THE PURPOSES OF APPLICATION SHALL BE DETERMINED WITHOUT ANY DEDUCTION OR ALLOWANCE BY WAY OF DEPRECIATION OR OT HERWISE IN RESPECT OF ANY ASSET, ACQUISITION OF WHICH HAS BEEN CLAIMED AS AN APPLICATION OF INCOME UNDER THESE SECTIONS IN TH E SAME OR ANY OTHER PREVIOUS YEAR. THESE AMENDMENTS WILL TAKE EFFECT FROM 1 ST APRIL, 2015 AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASSESSMENT YE AR 2015-16 AND SUBSEQUENT ASSESSMENT YEARS. M/S SANTOKBHA DURL ABHJI TRUST VS. ITO WARDOL(L), JAIPUR. THUS, THE CHANGE IN LEGAL POSITION ABOUT ELIGIBILIT Y OF DEPRECIATION QUA ASSETS ACQUIRED BY MEETING THE COS T FROM APPLICATION OF EXEMPT INCOME OF THE CHARITABLE INST ITUTION IS EFFECTIVE WITH PROSPECTIVE EFFECTIVE, SPECIFICALLY FROM 01.04.2015. THU THE LEGISLATIVE AMENDMENT ALSO SUPP ORTS THE RATION OF JUDICIAL PRECEDENTS CITED ABOVE, ALLOWING SUCH DEPRECIATION. ................................................... ...........................IN VIEW THEREOF, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) ON THIS ISSUE ALLOWING DEPRECIATION. HENCE, THE APP EALS OF THE REVENUE ARE DISMISSED.' 8.6 THE UNDERSIGNED HAS GONE THROUGH THE JUDGMENT O F HON'BLE ITAT, JAIPUR JUDGMENT RELIED UPON BY THE APPELLANT IN THE CASE OF M/S SANTOKBHA DURIABHJI TRUST VS. ITO W ARD-1(1), JAIPUR IN ITA NO. 241 & 242/JP/2014 FOR A.Y. 2004-0 5 AND 2009-10 DATED 13.03.2015. THE UNDERSIGNED HAS ALSO GONE THROUGH SECTION 11(6) OF THE IT. ACT, 1961 INSERTED BY THE FINANCE (NO.2) ACT, 2014. THIS PROVISION IS APPLICA BLE W.E.F. 01.04.2015. BRIEFLY STATED AS PER THE EXISTING SCHE ME OF SECTION 11 AND SECTION 10(23C) PROVIDES EXEMPTION IN RESPEC T OF INCOME WHEN IT IS APPLIED TO ACQUIRE A CAPITAL ASSE T. SUBSEQUENTLY WHEN COMPUTING THE INCOME, NOTIONAL DE DUCTION BY WAY OF DEPRECIATION ETC. IS CLAIMED AND SUCH AMO UNT OF NOTIONAL DEDUCTION REMAINS TO BE APPLIED FOR CHARIT ABLE PURPOSE. THIS MEANS THAT DOUBLE BENEFIT IS CLAIMED BY TRUST AND INSTITUTIONS. TO ENSURE THAT DOUBLE BENEFIT IS NOT CLAIMED THERE I.T.A. NO.193/LKW/2016 ASSESSMENT YEAR:2011-12 10 WAS AMENDMENT IN THE ACT AND INCOME FOR PURPOSE OF APPLICATION SHALL BE DETERMINED WITHOUT ANY ALLOWAN CE OF DEPRECIATION. THIS AMENDMENT TOOK EFFECT FROM 01.04 .2015 I.E. A.Y. 2015-16 AND SUBSEQUENT YEARS. THE ISSUE IN APP EAL IS FOR A.Y. 2011-12 AND THE PRE AMENDED SECTION WILL APPLY IN THE CASE OF APPELLANT. IN VIEW OF THESE FACTS THE PROVI SIONS OF SECTION 11(6) OF THE ACT SHALL BE APPLICABLE ONLY A FTER 01.04.2015. IN VIEW OF EXISTING SCHEME OF SECTION 1 1 & SECTION 10(23C) FOR A.Y. 2011-12 AND THE JUDGMENTS IN CASE OF M/S SANTOKBHA DURLABHJI TRUST OF HON'BLE ITAT JAIPUR TH E CLAIM OF DEPRECIATION IS ALLOWED TO THE APPELLANT. THE ADDIT ION MADE BY AO IS DELETED. ADDITION ON ACCOUNT OF CAPITAL EXPENDITURE 9.3 THE SUBMISSIONS OF APPELLANT WERE FORWARDED TO THE ASSESSING OFFICER FOR NECESSARY INQUIRY AND REPORT. THE AO HAS SINCE SUBMITTED A REMAND REPORT VIDE LETTER F.NO. ITO(E)/LKO/REMAND REPORT/2015-16 DATED 20.01.2016 W HICH IS ON RECORD. THE OBSERVATIONS OF THE ASSESSING OFFICE R IN THE REMAND REPORT ARE AS UNDER:- THE AO HAD MADE THE ADDITION TOWARDS CAPITAL EXPEND ITURE AT RS. 8,14, / 18 / 262/- THE ASSESSEE TRUST HAD NOT PRODUCED THE DETAILS AND DOCUMENTARY EVIDENCES IN SUPPORT OF ITS CLAIM OF APPLICATION OF INCOME TOWARDS PURCHASE OF CAPITAL A SSET. DURING THE REMAND PROCEEDINGS, THE ASSESSEE TRUST HAS SUBM ITTED DETAILS OF ADDITION IN FIXED ASSETS AND ALSO SUBMIT TED COPIES OF SOME LEDGER ACCOUNT OF ADDITIONS IN FIXED ASSETS AS UNDER:- S. NO. ASSETS CEST ADDITION 1. FURNITURE & FIXTURES 2609268 2. ELECTRICAL EQUIPMENT 544300 3. LIBRARY BOOK 492010 4. TATA SAFATI UP32DR 0077 767384 5. TATA SAFARI UP 32 DS 0077 767384 6. WINGER CAR UP 51T4177 663000 7. WINGER CAR UP 51T 4277 663000 8. BIO METRIC MACHINE 84000 9. CARD PRINTER DUEL SIDE ENCODER 118650 10. ENDEAVOUR 1686358 I.T.A. NO.193/LKW/2016 ASSESSMENT YEAR:2011-12 11 A COPY OF REMAND REPORT WAS PROVIDED TO THE APPELLA NT FOR COMMENTS. THE APPELLANT HAS FILED THE WRITTEN SUBMI SSION CLAIMING THAT- CAPITAL EXPENDITURE OF RS.8,14,18,262/- WAS INCURRE D FOR PURCHASE OF CAPITAL ASSETS BY THE APPELLANT TRUST D URING THE RELEVANT ASSESSMENT YEAR. THE ASSESSEE TRUST HAS SU BMITTED DETAILS OF AFORESAID ADDITION IN FIXED ASSETS ALONG WITH COPIES OF ITS LEDGER ACCOUNTS WITH LD. ASSESSING OFFICER DURI NG THE REMAND PROCEEDING. FURTHER, THE APPELLANT TRUST HAD PRODUCED ALL ITS BOOKS OF ACCOUNTS ALONG WITH BILLS AND VOUC HERS BEFORE THE LD. ASSESSING OFFICER FOR VERIFICATION WITH REP LY DATED 06.01.2016 DURING REMAND PROCEEDING. THE ACTIVITIES OF THE APPELLANT ARE SIMILAR TO THE ACTIVITIES UNDERTAKEN IN THE EARLIER AY'S . APPELLANT HAS ALWA YS BEEN GRANTED EXEMPTION U/S 11 IN EARLIER AY'S AS IT WAS REGISTERED U/S 12A. DURING THE REMAND PROCEEDINGS THE LEDGER ACCOU NTS AND DETAILS OF ADDITION TO FIXED ASSETS WERE PRODUCED B EFORE AO ALONG WITH SUPPORTING DOCUMENTARY EVIDENCE. THE SAM E WERE EXAMINED BY AO AND NO ADVERSE INFERENCE HAS BEEN DR AWN IN THE REMAND REPORT AFTER VERIFICATION OF THE BOOKS O F ACCOUNTS AND BILL/VOUCHERS. THE LEDGER ACCOUNTS OF ADDITION OF FIXED ASSETS ALONG WITH COPIES OF BILLS/VOUCHERS WERE PRO DUCED BEFORE THE UNDERSIGNED ALSO AND WERE EXAMINED HEAD WISE. T HE ACTIVITIES OF THE CHARITABLE TRUST FOR THE YEAR UND ER CONSIDERATION ARE SIMILAR TO ACTIVITIES OF EARLIER A.Y.'S WHEREIN EXEMPTION U/S 11 WAS GRANTED AS IT WAS HELD THAT THESE CAPITAL AS SETS WERE USED FOR CHARITABLE PURPOSE. NO FACT HAS BEEN BROUG HT OUT TO HOLD THAT THESE ASSETS WERE NOT UTILIZED FOR CHARIT ABLE PURPOSE DURING THE YEAR UNDER CONSIDERATION. IN VIEW OF THE SE FACTS THE AMOUNT SPENT ON CAPITAL ASSETS IS ALLOWED TO BE TRE ATED AS APPLICATION OF INCOME WHILE COMPUTING INCOME U/S 11 AND 12 OF THE ACT. THE ACTION OF AO IS DELETED. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 3. LEARNED D. R., AT THE OUTSET, HEAVILY PLACED HIS RELIANCE ON THE ORDER OF THE ASSESSING OFFICER. IT WAS SUBMITTED THAT DU RING THE REMAND PROCEEDINGS THE ASSESSING OFFICER HAD SPECIFICALLY HELD THAT THE ALLOWANCE OF I.T.A. NO.193/LKW/2016 ASSESSMENT YEAR:2011-12 12 DEPRECIATION WILL AMOUNT TO DOUBLE BENEFIT TO THE A SSESSEE AS THE CAPITAL EXPENDITURE WAS ALREADY ALLOWED TO THE ASSESSEE IN EARLIER YEARS. 4. LEARNED A. R., ON THE OTHER HAND, HEAVILY PLACED HER RELIANCE ON THE ORDER OF LEARNED CIT(A) AND SUBMITTED THAT LEARNED CIT(A) AFTER GOING THROUGH THE SUBMISSIONS OF THE ASSESSEE AND AFTER O BTAINING REMAND REPORT FROM THE ASSESSING OFFICER HAS ELABORATELY DEALT WI TH THE ISSUES AND HAS RIGHTLY DELETED THE ADDITIONS. IT WAS SUBMITTED TH AT THE REGISTRATION U/S 12A OF THE ACT WAS NEVER CANCELLED AND ASSESSEE WAS BEI NG ALLOWED EXEMPTION U/S 11 AS THE ASSESSEE WAS ENGAGED IN CHARITABLE AC TIVITIES. AS REGARDS THE ARGUMENTS OF LEARNED D. R. REGARDING DOUBLE CLAIM O N ACCOUNT OF DEPRECIATION, LEARNED A. R. SUBMITTED THAT VARIOUS COURTS HAVE ALREADY HELD THAT DEPRECIATION CLAIM HAS TO BE ALLOWED IRRESPECT IVE OF THE FACT THAT THE CAPITAL ASSETS WERE ALREADY ALLOWED AS A DEDUCTION AS UTILIZATION OF INCOME. SPECIFIC RELIANCE WAS PLACED ON AN ORDER OF HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. KRISHI UTPADAN MANDI SAMITI IN INCOME TAX APPEAL NO. 21 OF 2012 WHEREIN HON'BLE HIGH COURT HAS DECIDED T HE QUESTION OF ALLOWANCE OF DEPRECIATION IN FAVOUR OF THE ASSESSEE . 5. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE T HROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT IT IS UNDISPUTED FA CT THAT THE ASSESSEE IS A REGISTERED TRUST AND IS ALSO ENJOYING EXEMPTION U/S 12A OF THE ACT. IT IS ALSO UNDISPUTED FACT THAT THE BENEFIT OF EXEMPTION U/S 1 2A WAS NOT WITHDRAWN. LEARNED CIT(A) AFTER GOING THROUGH THE DETAILED SUB MISSIONS OF THE ASSESSEE AND AFTER OBTAINING REMAND REPORT OF THE ASSESSING OFFICER HAS RIGHTLY DELETED THE ADDITION BY HOLDING THAT THE REGISTRATI ON U/S 12A WAS NOT CANCELLED. WE FURTHER FIND THAT CIT(A) HAS CATEGOR ICALLY HELD THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE AUDITED AND NECESSA RY AUDIT REPORT IN THE PRESCRIBED FORM WAS FILED WITH THE RETURN OF INCOME . HE HAS ALSO HELD THAT I.T.A. NO.193/LKW/2016 ASSESSMENT YEAR:2011-12 13 THE ASSESSING OFFICER DURING THE REMAND PROCEEDINGS HAD NOT COMMENDED ADVERSELY ON THE WRITTEN SUBMISSIONS FILED BY THE A SSESSEE. AS REGARDS THE ADVERSE COMMENTS BY THE ASSESSING OFFICER REGARDING DEPRECIATION CLAIMED BY THE ASSESSEE, WE FIND THAT HON'BLE ALLAHABAD HIG H COURT IN THE CASE OF CIT VS. KRISHI UTPADAN MANDI SAMITI, UNDER SIMILAR FACTS AND CIRCUMSTANCES, HAS HELD THAT DEPRECIATION WAS ALLOWABLE EVEN IF TH E ENTIRE CAPITAL EXPENDITURE WAS ALLOWED AS DEDUCTION. THE RELEVANT FINDINGS OF HON'BLE COURT AS REPRODUCED BELOW: ON PERUSAL OF THE IMPUGNED JUDGMENT AND ORDER PASS ED BY THE TRIBUNAL, IT REFLECTS THAT AFTER TAKING INTO CONSIDERATION THE UNDISPUTED FACTS THAT THE ISSUE OF DEPRECIATION ON THE ASSETS OF THE ASSESSES WAS EXAMINED BY THE TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR THE EARLIER ASSESSMENT YEAR 2007-2008 RENDERED IN THE CASE OF INCOME TAX OFFICER VS. KRISHI UTPADA N MANDI SAMITI JALAUN AND OTHERS IN I.T.R. NOS. 305 TO 309/ LKW/LL OF THIS BENCH, DIRECTING THE ASSESSING OFFICER TO ALLOW THE CLAIM OF THE ASSESSEE, THE APPELLATE TRIBUNAL, VIDE IMPUGNED JUD GMENT AND ORDER DATED 20.6.2012, DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT. THE FINDINGS O F FACTS SO RECORDED BY THE APPELLATE TRIBUNAL ARE ON THE BASIS OF COGENT MATERIAL ON RECORDS. THEREFORE, IT CANNOT BE SAID THAT THE FINDINGS RECORDED BY THE TRIBUNAL ARE PERVERSE OR C ONTRARY TO THE MATERIAL ON RECORD. IT IS SETTLED LAW THAT THE FINDINGS OF FACT CANNOT BE UPSET UNLESS PERVERSITY IS SHOWN. WE ALSO TAKE NOTE OF THE FACT THAT INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DECLARED BY THE ASSESSEE IS NIL. THEREFORE, THE APPELLATE TRIBUNAL HAS RIGHT LY PASSED THE IMPUGNED ORDER. DURING THE COURSE OF ARGUMENTS, SRI ALOK MATHUR, LE ARNED COUNSEL FOR THE DEPARTMENT HAS ALSO FAILED TO POINT OUT ANY REASONABLE CAUSE WHICH SHOWS THAT DEPRECIATION WAS ALLOWABLE. MOREOVER, AS PER CLAUSE 3 OF CIRCULAR NO. 3/2011[F. NO. 279/MISC. 142/2007-ITJ] DATED 9.2.2011, APPEAL IS N OT MAINTAINABLE. I.T.A. NO.193/LKW/2016 ASSESSMENT YEAR:2011-12 14 FOR THE REASONS AFORESAID, THE QUESTION SO FRAMED I S ANSWERED IN THE NEGATIVE I.E. AGAINST THE DEPARTMEN T. THE IMPUGNED JUDGMENT AND ORDER PASSED BY THE APPELLATE TRIBUNAL IS HEREBY CONFIRMED. 5.1 WE FURTHER FIND THAT WITH EFFECT FROM 01/04/201 5 SECTION 11(6) HAS BEEN INSERTED BY WHICH IT HAS BEEN LAID DOWN THAT I NCOME OF TRUST/SOCIETY REGISTERED U/S 12A SHALL BE DETERMINED WITHOUT ANY DEDUCTION OR ALLOWANCE BY WAY OF DEPRECIATION OR OTHERWISE IN RESPECT OF A NY ASSET, ACQUISITION OF WHICH HAS BEEN CLAIMED AS AN APPLICATION OF INCOME U/S 11 IN THE SAME OR ANY OTHER PREVIOUS YEAR. THIS AMENDMENT IS PROSPEC TIVE AND IS APPLICABLE FROM 01/04/2015 AND BEFORE THIS MANY COURTS, AS NOT ED BY LEARNED CIT(A) IN HIS ORDER, HAVE HELD THAT DEPRECIATION CLAIM IS ALL OWABLE. THE CASE OF ASSESSEE RELATES TO ASSESSMENT YEAR 2011-12 AND THE REFORE, THIS AMENDMENT WILL NOT BE APPLICABLE IN THE CASE OF THE ASSESSEE. 5.2 IN VIEW OF THESE FACTS AND CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS OF CIT(A). 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 23/02 /2018) SD/. SD/. (PARTHA SARATHI CHAUDHURY) ( T. S. KAPOOR ) JUDICIAL MEMBER A CCOUNTANT MEMBER DATED:23/02/2018 *SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW