ITO, Coimbatore V. M/s. Ranganathan Rajeswari Charitable Trust, Coimbatore

ITA 1995/CHNY/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8320 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 10 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-10-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 30-08-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 13-11-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A B MAURYA
• Assessee Lawyers: K R RAMASAMY
• Keywords: Capital asset; Business income; Depreciation; Charitable institution
• Section: 12A; 32; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . . . , . !'# ! , % !& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.1995/MDS/2013 & C.O. NO.194/MDS/2013 (IN I.T.A. NO.1995/MDS/2013) ( )( / ASSESSMENT YEAR : 2009-10 THE INCOME TAX OFFICER, COMPANY WARD I, 1 ST FLOOR, 63, RACE COURSE, COIMBATORE 641 018. PAN : V. M/S RANGANATHAN RAJESWARI CHARITABLE TRUST, NO.54-A, LAKSHMANAN NAGAR, GANDHIPURAM, COIMBATORE 641 012. PAN : AABTR 2441 P (+,/ APPELLANT) ( RESPONDENT & CROSS-OBJECTOR) +, - . / APPELLANT BY : SHRI A.B. MAURYA, CIT /0+, - . / RESPONDENT BY : SHRI K.R. RAMASAMY, FCA 1 - 2% / DATE OF HEARING : 30.08.2016 3') - 2% / DATE OF PRONOUNCEMENT : 07.10.2016 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) I, COIMBA TORE, DATED 04.09.2013 AND PERTAINING TO ASSESSMENT YEAR 2009-1 0. THE 2 I.T.A. NO.1995/MDS/13 C.O. NO.194/MDS/13 ASSESSEE HAS FILED CROSS-OBJECTION AGAINST THE SAME ORDER OF THE CIT(APPEALS). HENCE, WE HEARD BOTH THE APPEAL AND THE CROSS- OBJECTION TOGETHER AND DISPOSING OF THE SAME BY THI S COMMON ORDER. 2. SHRI A.B. MAURYA, THE LD. DEPARTMENTAL REPRESENT ATIVE, SUBMITTED THAT THE ASSESSEE - CHARITABLE INSTITUTIO N WAS REGISTERED UNDER SECTION 12A OF THE INCOME-TAX ACT, 1961 (IN S HORT 'THE ACT'). DURING THE YEAR UNDER CONSIDERATION, ACCORDING TO T HE LD. D.R., THE ASSESSEE DISCLOSED A GROSS RECEIPT OF ` 3,79,46,888/-. THE ASSESSEE CLAIMED BEFORE THE ASSESSING OFFICER THAT A SUM OF ` 8,25,99,229/- WAS APPLIED FOR CHARITABLE PURPOSE. OUT OF THIS AMOUNT OF ` 8,25,99,229/-, THE ASSESSEE CLAIMED ` 72,12,041/- TOWARDS DEPRECIATION ON THE VALUE OF ASSET ON WHICH THE ASSESSEE CLAIMED EXEMPTION UNDER SECTION 11 OF THE ACT. THE ASSESSING OFFICER FOUND THAT THE DEPRECIATION WAS CLAIMED BY THE ASSESSEE ON THE ASSET, WHICH WAS ALLOWED EARLIER AS APPLICATION OF INCOME FOR CHARITABLE PURPOSE. THEREFORE, THE ASSESSING OFFIC ER FOUND THAT THE CLAIM OF DEPRECIATION IN RESPECT OF THE ASSET ON WH ICH THE EXPENDITURE WAS ALREADY ALLOWED AS APPLICATION OF I NCOME AMOUNTS TO DOUBLE DEDUCTION. ACCORDINGLY, BY PLACING RELIA NCE ON THE JUDGMENT OF APEX COURT IN ESCORTS LTD. V UNION OF I NDIA (199 ITR 3 I.T.A. NO.1995/MDS/13 C.O. NO.194/MDS/13 43), THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE. ON APPEAL BY THE ASSESSEE THE CIT(APPEALS), HOWEVER, A LLOWED THE CLAIM OF THE ASSESSEE. ACCORDING TO THE LD. D.R., THE ASSESSEE IS NOT CARRYING ON ANY BUSINESS ACTIVITY. SECTION 32 OF THE ACT IS APPLICABLE ONLY IN RESPECT OF COMPUTING THE INCOME FROM BUSINESS AND PROFESSION. THE ACTIVITY OF THE ASSESSEE IS CH ARITABLE NATURE. THEREFORE, ACCORDING TO THE LD. D.R., THE EXEMPTION CLAIMED BY THE ASSESSEE HAS TO BE CONSIDERED UNDER SECTION 11 OF T HE ACT. HENCE, THE PROVISIONS APPLICABLE FOR COMPUTING THE INCOME FROM BUSINESS AND PROFESSION CANNOT BE APPLIED FOR COMPUTING THE INCOME OF THE CHARITABLE INSTITUTION. ACCORDING TO THE LD. D.R., THE MATTER MAY BE DIFFERENT IF THE ASSESSEE WAS NOT CLAIMING EXEMPTIO N UNDER SECTION 11 OF THE ACT. THE LD. D.R. PLACED HIS RELIANCE ON THE ORDER OF THIS TRIBUNAL IN ANJUMAN-E-HIMAYATH-E-ISLAM V. ADIT IN I .T.A. NO.2271/MDS/2014 DATED 02.06.2015. 3. ON THE CONTRARY, SHRI K.R. RAMASAMY, THE LD. REP RESENTATIVE FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSEE IS AD MITTEDLY A CHARITABLE INSTITUTION, WHICH CLAIMED DEPRECIATION ON THE CAPITAL ASSET. THE LD. REPRESENTATIVE CLARIFIED THAT THE A MOUNT INVESTED IN THE CAPITAL ASSET WAS CLAIMED AS APPLICATION OF INC OME UNDER 4 I.T.A. NO.1995/MDS/13 C.O. NO.194/MDS/13 SECTION 11 OF THE ACT. HOWEVER, THE CAPITAL ASSET ACQUIRED BY THE ASSESSEE ON APPLICATION OF ITS INCOME WAS USED FOR CARRYING ON THE CHARITABLE OBJECT OF THE TRUST, THEREFORE, THE SAME IS ELIGIBLE FOR DEPRECIATION. ON ENQUIRY FROM THE BENCH, THE LD. R EPRESENTATIVE CLARIFIED THAT THE ASSESSEE IS NOT CARRYING ON ANY BUSINESS ACTIVITY. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSEE IS ADMITTEDLY A CHARITABLE INSTITUTION REGISTERED AS S UCH UNDER SECTION 12A OF THE ACT. THE ASSESSEE ACQUIRED THE CAPITAL ASSET BY UTILIZING THE INCOME OF THE TRUST. IN RESPECT OF THE INVESTM ENTS MADE BY THE ASSESSEE ON THE CAPITAL ASSET, THE ASSESSEE CLAIMS THE SAME AS APPLICATION OF INCOME UNDER SECTION 11 OF THE ACT. IT IS ALSO AN ADMITTED FACT THAT THE CLAIM MADE BY THE ASSESSEE O N THE INVESTMENTS MADE ON THE CAPITAL ASSET WAS ALLOWED A S APPLICATION OF INCOME. NOW THE ASSESSEE CLAIMS DEPRECIATION ON THE CAPITAL ASSET, WHICH WAS ACQUIRED BY THE ASSESSEE BY THE IN COME WHICH WAS ALLOWED AS APPLICATION OF INCOME UNDER SECTION 11 OF THE ACT. THE QUESTION ARISES FOR CONSIDERATION IS WHEN THE C OST OF THE ASSET WAS ALLOWED AS APPLICATION OF INCOME UNDER SECTION 11 OF THE ACT, WHETHER THE ASSESSEE IS ENTITLED FOR DEPRECIATION O N THE VERY SAME 5 I.T.A. NO.1995/MDS/13 C.O. NO.194/MDS/13 ASSET? THIS TRIBUNAL EXAMINED THIS ISSUE IN THE AN JUMAN-E- HIMAYATH-E-ISLAM (SUPRA) AND FOUND THAT THE ASSESSE E IS NOT ELIGIBLE FOR DEPRECIATION UNDER SECTION 32 OF THE A CT. IN FACT, THIS TRIBUNAL PLACED ITS RELIANCE ON THE JUDGMENT OF KER ALA HIGH COURT IN LISSIE MEDICAL INSTITUTION V. CIT (2012) 348 ITR 34 4. 5. WE HAVE CAREFULLY GONE THROUGH THE SCHEME OF INC OME-TAX ACT, 1961. CHAPTER III OF THE ACT PROVIDES FOR MET HOD OF COMPUTATION OF INCOME WHICH DO NOT FORM PART OF TOTAL INCOME. SECTION 11 OF THE ACT, WHICH FALLS IN CHAPTER III OF THE ACT, CLEARLY SAYS THAT THE INCOME DERIVED FROM THE PROPERTY HELD UNDER TRUST, FOR CHA RITABLE OR RELIGIOUS PURPOSE, SHALL NOT BE INCLUDED IN THE TOTAL INCOME TO THE EXTENT TO WHICH THE INCOME IS APPLIED TO SUCH PURPOSES IN IND IA. THE ASSESSEE, IN FACT, APPLIED THE INCOME OF THE ASSESS EE, WHICH WAS DERIVED FROM THE PROPERTY HELD UNDER TRUST, FOR ACQ UIRING THE CAPITAL ASSET. THEREFORE, THE INCOME TO THE EXTENT TO WHIC H IT WAS APPLIED FOR ACQUIRING THE CAPITAL ASSET, WAS EXCLUDED ALREA DY FROM THE TOTAL INCOME OF THE ASSESSEE. SECTION 32 OF THE ACT, WHI CH PROVIDES FOR DEPRECIATION, FALLS UNDER CHAPTER IV OF THE ACT WHI CH PROVIDES FOR COMPUTATION OF BUSINESS INCOME. ADMITTEDLY, THE AS SESSEE IS NOT CARRYING ON ANY BUSINESS ACTIVITY. IF THE ASSESSEE CLAIMS THAT IT WAS 6 I.T.A. NO.1995/MDS/13 C.O. NO.194/MDS/13 CARRYING ON BUSINESS ACTIVITY, THEN IN VIEW OF THE PROVISO TO SECTION 2(15) OF THE ACT, IT HAS TO LOOSE ITS CHARACTER AS CHARITABLE INSTITUTION. SO LONG AS THE ASSESSEE CLAIMS THAT IT IS A CHARITA BLE INSTITUTION, THE PROVISIONS OF CHAPTER IV OF THE ACT WHICH PROVIDES FOR COMPUTATION OF BUSINESS INCOME, CANNOT BE APPLIED TO THE ASSESS EE. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT SINCE TH E ASSESSEE IS CARRYING ON CHARITABLE ACTIVITY AND NOT BUSINESS, T HE PROVISIONS OF SECTION 32 OF THE ACT WHICH PROVIDES FOR DEPRECIATI ON, IS NOT APPLICABLE TO THE ASSESSEE-TRUST. 6. MOREOVER, THE PROVISIONS OF SECTION 32 OF THE AC T, WHICH FALLS UNDER CHAPTER IV OF THE ACT, CANNOT OVERRIDE SECTIO N 11 OF THE ACT WHICH FALLS UNDER CHAPTER III OF THE ACT. WHEN THE PARLIAMENT IN THEIR WISDOM PROVIDES METHOD OF COMPUTATION IN RESP ECT OF DIFFERENT KIND OF ASSESSEES WITH REFERENCE TO THEIR ACTIVITY, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE CHARITABLE INSTITUT ION CANNOT CLAIM DEPRECIATION UNDER SECTION 32 OF THE ACT. WHEN AN INDIVIDUAL ASSESSEE IS COMPUTING ITS TAXABLE INCOME, HE CANNOT CLAIM DEPRECIATION UNDER SECTION 32 OF THE ACT IN RESPECT OF THE ASSET, WHICH WAS NOT USED IN THE BUSINESS. IN THE CASE BE FORE US, ADMITTEDLY, THE ASSET ON WHICH THE DEPRECIATION WAS CLAIMED UNDER 7 I.T.A. NO.1995/MDS/13 C.O. NO.194/MDS/13 SECTION 32 OF THE ACT, IS NOT USED FOR ANY BUSINESS ACTIVITY AT ALL. THEREFORE, THERE IS NO QUESTION OF ALLOWING ANY DEP RECIATION TO THE ASSESSEE UNDER SECTION 32 OF THE ACT. A SIMILAR VI EW WAS TAKEN BY THIS TRIBUNAL IN THE ANJUMAN-E-HIMAYATH-E-ISLAM (SU PRA). IN VIEW OF THE ABOVE, THIS TRIBUNAL IS UNABLE TO UPHOLD THE ORDER OF THE LOWER AUTHORITY. ACCORDINGLY, THE ORDER OF THE LOWER AUT HORITY IS SET ASIDE AND THAT OF THE ASSESSING OFFICER IS RESTORED. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S ALLOWED AND THE CROSS-OBJECTION FILED BY THE ASSESSEE IS DISMIS SED. ORDER PRONOUNCED ON 7 TH OCTOBER, 2016 AT CHENNAI. SD/- SD/- (. !'# ! ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 5 /DATED, THE 7 TH OCTOBER, 2016. KRI. - /267 87)2 /COPY TO: 1. +, /APPELLANT 2. /0+, /RESPONDENT 3. 1 92 () /CIT(A)-I, COIMBATORE 4. 1 92 /CIT-I, COIMBATORE 5. 7: /2 /DR 6. ( ; /GF.