JCIT (OSD), Ghaziabad V. M/s. Shikshadeep Educational Trust, Ghaziabad

ITA 1989/DEL/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5658 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 11-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHIMA NEB
• Keywords: Capital asset; Depreciation; Charitable institution; Tax effect; Capital expenditure
• Section: 80G; 12A; 12AA; 32; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : A : NEW DELHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER ITA NO.1989/DEL/2016 ASSESSMENT YEAR: 2012-13 JCIT (OSD), EXEMPTION-CIRCLE, GHAZIABAD. VS. SHIKSHADEEP EDUCATIONAL TRUST, 119, BAGH BHATIYARI, GT ROAD, NEAR PALIKA BAZAR, GHAZIABAD. PAN: AAGTS8458L (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE REVENUE BY : MS ASHIMA NEB, SR. DR DATE OF HEARING : 30.01.2019 DATE OF PRONOUNCEMENT : 31.01.2019 ORDER PER R.K. PANDA, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 12 TH JANUARY, 2016 OF THE CIT(A), GHAZIABAD, RELATING TO ASSESSME NT YEAR 2012-13. 2. NONE APPEARED ON BEHALF OF THE ASSESSEE DESPITE SER VICE OF NOTICE. THEREFORE, THIS APPEAL IS BEING DECIDED ON THE BASIS OF MATERI AL AVAILABLE ON RECORD AND AFTER HEARING THE LD. DR. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS A TRUST WHICH WAS INCORPORATED VIDE TRUST DEED DATED 1 ST AUGUST, 2007 AND REGISTERED WITH SUB-REGISTRAR-2, ITA NO.1989/DEL/2016 2 GHAZIABAD ON 1 ST AUGUST, 2007. THE TRUST HAS BEEN GRANTED REGISTRA TION U/S 12AA OF THE IT ACT AND BY CIT, GHAZIABAD AS PER ORDER DATED 12 TH JANUARY, 2009. IT HAS ALSO BEEN GRANTED EXEMPTION U/S 80G OF THE IT ACT BY CIT , GHAZIABAD VIDE ORDER DATED 12 TH JANUARY, 2009. THE SOCIETY RUNS EDUCATIONAL INSTIT UTIONS UNDER THE NAME AND STYLE OF MAHARAJA AGARSAIN INSTITUTE OF TECHNOLOGY AT N H-24, PILKHUWA, GHAZIABAD. IT FIELD ITS RETURN OF INCOME ON 28 TH SEPTEMBER, 2012 DECLARING NIL INCOME. THE ASSESSING OFFICER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, OBSERVED THAT THE ASSESSEE HAS CLAIMED DEPRECIATION ON THE ASSETS REL ATING TO WHICH ENTIRE EXPENSES WAS ALREADY CLAIMED AGAINST THE RECEIPTS EITHER IN THE LAST YEAR OR THIS YEAR TO EXHAUST THE LIMIT OF 85%. HE, THEREFORE, ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE DEPRECIATION CLAIMED BY THE ASSESSEE SHOULD NOT BE TREATED AS DO UBLE DEDUCTION. REJECTING VARIOUS EXPLANATIONS GIVEN BY THE ASSESSEE AND FOLLOWING TH E DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF ESCORTS LTD. AND FOLLOWING THE AMENDMENT TO SECTION 11(6) OF THE IT ACT WHICH WAS INSERTED W.E.F. 01.04.2015, THE AS SESSING OFFICER DISALLOWED THE DEPRECIATION OF RS.63,14,679/- AND ADDED BACK THE S AME TO THE TOTAL INCOME OF THE ASSESSEE. 4. IN APPEAL, THE LD.CIT(A), FOLLOWING THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF DIT(E) VS. INDRAPRASTHA CANCER SOCIETY VIDE ORDER DATED 18.11.2014 ALLOWED THE CLAIM OF THE ASSESSEE AND DELETED THE D EPRECIATION OF RS.63,14,679/-. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE REVENU E IS IN APPEAL BEFORE THE TRIBUNAL BY RAISING THE FOLLOWING GROUNDS:- ITA NO.1989/DEL/2016 3 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF DEPRECIATION AMOUNTING TO RS.63,14,679/- IGNORING T HE FACT THAT THE ASSESSEE HAS CLAIMED PURCHASE OF FIXED ASSETS AS APPLICATION OF INCOME IN RESPECTIVE YEARS, THEREFORE ALLOWANCE OF DEPRECIATION WILL AMOUNT TO DOUBLE DEDUCTION. 2. THE ORDER OF THE LD.CIT(A) BE CANCELLED AND THE ORDER OF THE A.O. BE RESTORED. 5. WE HAVE HEARD THE LD. DR AND PERUSED THE RELEVANT M ATERIAL ON RECORD. FIRST OF ALL, THE TAX EFFECT INVOLVED IN THE GROUNDS RAISED BY THE REVENUE IS ADMITTEDLY BELOW RS.20 LAKHS, THEREFORE, IN VIEW OF THE CBDT CIRCULA R NO.03/2018 DATED 11 TH JULY, 2018 WHICH IS APPLICABLE EVEN TO PENDING APPEALS, T HE APPEAL FILED BY THE REVENUE IS NOT MAINTAINABLE. EVEN OTHERWISE ALSO, THE ISSUE S TANDS DECIDED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HON'BLE SUPREME COU RT IN THE CASE OF CIT VS. RAJASTHAN AND GUJARATI CHARITABLE FOUNDATION POONA VIDE CIVIL APPEAL NO.7186 OF 2014 AND BATCH OF OTHER APPEALS VIDE CONSOLIDATED O RDER DATED 13 TH DECEMBER, 2017. FOR THE SAKE OF REFERENCE, THE ORDER OF THE HON'BLE SUPREME COURT ON THIS VERY ISSUE IS REPRODUCED AS BELOW:- THESE ARE THE PETITIONS AND APPEALS FILED BY THE IN COME TAX DEPARTMENT AGAINST THE ORDERS PASSED BY VARIOUS HIGH COURTS GRANTING B ENEFIT OF DEPRECIATION ON THE ASSETS ACQUIRED BY THE RESPONDENTS-ASSESSEES. IT IS A MATTER OF RECORD THAT ALL THE ASSESSEES ARE CHARITABLE INSTITUTIONS REGISTERED UN DER SECTION 12A OF THE INCOME TAX ACT (HEREINAFTER REFERRED TO AS 'ACT'). FOR THI S REASON, IN THE PREVIOUS YEAR TO THE YEAR WITH WHICH WE ARE CONCERNED AND IN WHICH Y EAR THE DEPRECIATION WAS CLAIMED, THE ENTIRE EXPENDITURE INCURRED FOR ACQUIS ITION OF CAPITAL ASSETS WAS TREATED AS APPLICATION OF INCOME FOR CHARITABLE PUR POSES UNDER SECTION 11(1)(A) OF THE ACT. THE VIEW TAKEN BY THE ASSESSING OFFICER IN DISALLOWING THE DEPRECIATION WHICH WAS CLAIMED UNDER SECTION 32 OF THE ACT WAS T HAT ONCE THE CAPITAL EXPENDITURE IS TREATED AS APPLICATION OF INCOME FOR CHARITABLE PURPOSES, THE ASSESSEES HAD VIRTUALLY ENJOYED A 100 PER CENT WRIT E OFF OF THE COST OF ASSETS AND, THEREFORE, THE GRANT OF DEPRECIATION WOULD AMOUNT T O GIVING DOUBLE BENEFIT TO THE ITA NO.1989/DEL/2016 4 ASSESSEE. THOUGH IT APPEARS THAT IN MOST OF THESE C ASES, THE CIT (APPEALS) HAD AFFIRMED THE VIEW, BUT THE ITAT REVERSED THE SAME A ND THE HIGH COURTS HAVE ACCEPTED THE DECISION OF THE ITAT THEREBY DISMISSIN G THE APPEALS OF THE INCOME TAX DEPARTMENT. FROM THE JUDGMENTS OF THE HIGH COUR TS, IT CAN BE DISCERNED THAT THE HIGH COURTS HAVE PRIMARILY FOLLOWED THE JUDGMEN T OF THE BOMBAY HIGH COURT IN 'COMMISSIONER OF INCOME TAX V. INSTITUTE O F BANKING PERSONNEL SELECTION (IBPS)' [(2003) 131 TAXMAN 386 (BOMBAY)]. IN THE SAID JUDGMENT, THE CONTENTION OF THE DEPARTMENT PREDICATED ON DOUBLE B ENEFIT WAS TURNED DOWN IN THE FOLLOWING MANNER: 3. AS STATED ABOVE, THE FIRST QUESTION WHICH REQUIR ES CONSIDERATION BY THIS COURT IS: WHETHER DEPRECIATION WAS ALLOWABLE O N THE ASSETS, THE COST OF WHICH HAS BEEN FULLY ALLOWED AS APPLICATION OF INCOME UNDER SECTION 11 IN THE PAST YEARS? IN THE CASE OF CIT V. MUNISUVRAT JAIN 1994 TAX LAW REPORTER, 1084 THE FACTS WERE AS FOLLOWS. THE ASSESSEE WAS A CHARITABLE TRUST. IT WAS REGISTERED AS A PUBLIC CHARITABLE TRUST. IT WAS ALSO REGISTERED WITH THE C OMMISSIONER OF INCOME TAX, PUNE. THE ASSESSEE DERIVED INCOME FROM THE TEMPLE PROPERTY WHICH WAS A TRUST PROPERTY. DURING THE COU RSE OF ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEARS 1977-78, 1978-79 A ND 1979-80, THE ASSESSEE CLAIMED DEPRECIATION ON THE VALUE OF THE B UILDING @2% AND THEY ALSO CLAIMED DEPRECIATION ON FURNITURE @ 5%. T HE QUESTION WHICH AROSE BEFORE THE COURT FOR DETERMINATION WAS : WHET HER DEPRECIATION COULD BE DENIED TO THE ASSESSEE, AS EXPENDITURE ON ACQUISITION OF THE ASSETS HAD BEEN TREATED AS APPLICATION OF INCOME IN THE YEAR OF ACQUISITION? IT WAS HELD BY THE BOMBAY HIGH COURT T HAT SECTION 11 OF THE INCOME TAX ACT MAKES PROVISION IN RESPECT OF CO MPUTATION OF INCOME OF THE TRUST FROM THE PROPERTY HELD FOR CHAR ITABLE OR RELIGIOUS PURPOSES AND IT ALSO PROVIDES FOR APPLICATION AND A CCUMULATION OF INCOME. ON THE OTHER HAND, SECTION 28 OF THE INCOME TAX ACT DEALS WITH CHARGEABILITY OF INCOME FROM PROFITS AND GAINS OF BUSINESS AND SECTION 29 PROVIDES THAT INCOME FROM PROFITS AN D GAINS OF BUSINESS AHLL BE COMPUTED IN ACCORDANCE WITH SECTION 30 TO S ECTION 43C. THAT, SECTION 32(1) OF THE ACT PROVIDES FOR DEPRECI ATION IN RESPECT OF BUILDING, PLANT AND MACHINERY OWNED BY THE ASSESSEE AND USED FOR BUSINESS PURPOSES. IT FURTHER PROVIDES FOR DEDUCTIO N SUBJECT TO SECTION 34. IN THAT MATTER ALSO, A SIMILAR ARGUMENT, AS IN THE PRESENT CASE, WAS ADVANCED ON BEHALF OF THE REVENUE, NAMELY, THAT DEP RECIATION CAN BE ALLOWED AS DEDUCTION ONLY UNDER SECTION 32 OF THE I NCOME TAX ACT AND NOT UNDER GENERAL PRINCIPLES. THE COURT REJECTED TH IS ARGUMENT. IT WAS HELD THAT NORMAL DEPRECIATION CAN BE CONSIDERED AS A LEGITIMATE DEDUCTION IN COMPUTING THE REAL INCOME OF THE ASSES SEE ON GENERAL PRINCIPLES OR UNDER SECTION 11(1)(A) OF THE INCOME TAX ACT THE COURT REJECTED THE ARGUMENT ON BEHALF OF THE REVENUE THAT SECTION 32OF THE INCOME TAX ACT WAS THE ONLY SECTION GRANTING BENEFI T OF DEDUCTION ON ACCOUNT OF DEPRECIATION. IT WAS HELD THAT INCOME OF A CHARITABLE TRUST ITA NO.1989/DEL/2016 5 DERIVED FORM BUILDING, PLANT AND MACHINERY AND FURN ITURE WAS LIABLE TO BE COMPUTED IN NORMAL COMMERCIAL MANNER ALTHOUGH TH E TRUST MAY NOT BE CARRYING ON ANY BUSINESS AND THE ASSETS IN R ESPECT WHEREOF DEPRECIATION IS CLAIMED MAY NOT BE BUSINESS ASSETS. IN ALL SUCH CASES, SECTION 32 OF THE INCOME TAX ACT PROVIDING F OR DEPRECIATION FOR COMPUTATION OF INCOME DERIVED FROM BUSINESS OR PROF ESSION IS NOT APPLICABLE. HOWEVER, THE INCOME OF THE TRUST IS REQ UIRED TO BE COMPUTED UNDER SECTION 11 ON COMMERCIAL PRINCIPLES AFTER PROVIDING FOR ALLOWANCE FOR NORMAL DEPRECIATION AND DEDUCTION THEREOF FROM GROSS INCOME OF THE TRUST. IN VIEW OF THE AFORESATA TED JUDGMENT OF THE BOMBAY HIGH CURT, WE ANSWER QUESTION NO. 1 IN THE A FFIRMATIVE I.E., IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMEN T. 4. QUESTION NO. 2 HEREIN IS IDENTICAL TO THE QUESTI ON WHICH WAS RAISED BEFORE THE BOMBAY HIGH COURT IN THE CASE OF DIRECTO R OF INCOME-TAX (EXEMPTION) V. FRAMJEE CAWASJEE INSTITUTE [1993] 10 9 CTR 463. IN THAT CASE, THE FACTS WERE AS FOLLOWS: THE ASSESSEE WAS THE TRUST. IT DERIVED ITS INCOME FROM DEPRECIABLE ASSETS. THE ASS ESSEE TOOK INTO ACCOUNT DEPRECIATION ON THOSE ASSETS IN COMPUTING T HE INCOME OF THE TRUST. THE ITO HELD THAT DEPRECIATION COULD NOT BE TAKEN INTO ACCOUNT BECAUSE, FULL CAPITAL EXPENDITURE HAD ETC. BEEN ALL OWED IN THE YEAR OF ACQUISITION OF THE ASSETS. THE ASSESSEE WENT IN APP EAL BEFORE THE ASSISTANT APPELLATE COMMISSIONER. THE APPEAL WAS RE JECTED. THE TRIBUNAL, HOWEVER, TOOK THE VIEW THAT WHEN THE ITO STATED THAT FULL EXPENDITURE HAD BEEN ALLOWED IN THE YEAR OF ACQUISI TION OF THE ASSETS, WHAT HE REALLY MEANT WAS THAT THE AMOUNT SPENT ON A CQUIRING THOSE ASSETS HAD BEEN TREATED AS 'APPLICATION OF INCOME' OF THE TRUST IN THE YEAR IN WHICH THE INCOME WAS SPENT IN ACQUIRING THO SE ASSETS. THIS DID NOT MEAN THAT IN COMPUTING INCOME FROM THOSE ASSETS IN SUBSEQUENT YEARS, DEPRECIATION IN RESPECT OF THOSE ASSETS CANN OT BE TAKEN INTO ACCOUNT. THIS VIEW OF THE TRIBUNAL HAS BEEN CONFIRM ED BY THE BOMBAY HIGH COURT IN THE ABOVE JUDGMENT. HENCE, QUESTION N O. 2 IS COVERED BY THE DECISION OF THE BOMBAY HIGH COURT IN THE ABO VE JUDGMENT. CONSEQUENTLY, QUESTION NO. 2 IS ANSWERED IN THE AFF IRMATIVE I.E., IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT. AFTER HEARING LEARNED COUNSEL FOR THE PARTIES, WE A RE OF THE OPINION THAT THE AFORESAID VIEW TAKEN BY THE BOMBAY HIGH COURT CORRE CTLY STATES THE PRINCIPLES OF LAW AND THERE IS NO NEED TO INTERFERE WITH THE SAME . IT MAY BE MENTIONED THAT MOST OF THE HIGH COURTS HA VE TAKEN THE AFORESAID VIEW WITH ONLY EXCEPTION THERETO BY THE HIGH COURT OF KE RALA WHICH HAS TAKEN A CONTRARY VIEW IN 'LISSIE MEDICAL INSTITUTIONS V. CO MMISSIONER OF INCOME TAX'. IT MAY ALSO BE MENTIONED AT THIS STAGE THAT THE LEG ISLATURE, REALISING THAT THERE WAS NO SPECIFIC PROVISION IN THIS BEHALF IN THE INCOME TAX ACT, HAS MADE AMENDMENT ITA NO.1989/DEL/2016 6 IN SECTION 11(6) OF THE ACT VIDE FINANCE ACT NO. 2/ 2014 WHICH BECAME EFFECTIVE FROM THE ASSESSMENT YEAR 2015-2016. THE DELHI HIGH COURT HAS TAKEN THE VIEW AND RIGHTLY SO, THAT THE SAID AMENDMENT IS PROSPECT IVE IN NATURE. IT ALSO FOLLOWS THAT ONCE ASSESSEE IS ALLOWED DEPRE CIATION, HE SHALL BE ENTITLED TO CARRY FORWARD THE DEPRECIATION AS WELL. FOR THE AFORESAID REASONS, WE AFFIRM THE VIEW TAKEN BY THE HIGH COURTS IN THESE CASES AND DISMISS THESE MATTERS. 6. SINCE THE ASSESSMENT YEAR INVOLVED IN THE INSTANT A PPEAL IS ASSESSMENT YEAR 2012-13, THEREFORE, THE AMENDMENT IN SECTION 11(6) OF THE IT ACT, VIDE FINANCE ACT, 2014 WHICH BECAME EFFECTIVE FROM ASSESSMENT YEAR 20 15-16 WILL NOT BE APPLICABLE FOR THE IMPUGNED ASSESSMENT YEAR. SINCE THE ISSUE HAS ALREADY BEEN DECIDED BY THE HON'BLE SUPREME COURT IN THE CASE CITED (SUPRA), TH EREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) ALLOWING THE C LAIM OF DEPRECIATION OF RS.63,14,679/- ON THE ASSETS WHICH WERE ALSO ALLOWE D AS APPLICATION OF INCOME IN RESPECTIVE YEARS. THE GROUNDS RAISED BY THE REVENUE ARE, THEREFORE, DISMISSED. 7. IN THE RESULT, THE APPEAL FILED BY THE REV ENUE IS DISMISSED. THE DECISION WAS PRONOUNCED IN THE OPEN COURT ON 3 1.01.2019. SD/- SD/- (K. NARASIMHA CHARY) (R .K. PANDA) JUDICIAL MEMBER ACCOUN TANT MEMFBER DATED: 31 ST JANUARY, 2019 DK ITA NO.1989/DEL/2016 7 COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASSTT. REGISTRAR, ITAT, NEW DELHI