ADIT(E), New Delhi V. Fashion Design Council Of India, Gurgaon

ITA 1999/DEL/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 97746 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 15-10-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 21-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NANDITA KANCHAN
• Assessee Lawyers: LALITHA KRISHNAMARTHYCA
• Keywords: Depreciation; Charitable institution; Question of law; Capital expenditure
• Section: 12

Judgement Text

ITA NO. 1999/DEL/2011 FASHION DESIGN COUNCIL OF INDIA A Y 2007-08 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B, NEW DELHI BEFORE SH. A.T.VARKEY, JM AND SH. PRASHANT MAHARISHI, AM ITA NO. 1999/DEL/2011 ASSTT. YEAR: 2007-08 ADIT(E) V S. FASHION DESIGN COUNCIL OF INDIA TC-II C/O. RAHUL KAPOOR & ASSOCIATES, CA E - 186, GREATER KAILASH I, NEW DELHI NEW DELHI PAN : AAAAF0181A APPELLANT RESPONDENT ASSESSEE BY : MS. LALITHA KRISHNAMARTHY,CA. REVENUE BY : MS. NANDITA KANCHAN, CIT. DR. DATE OF HEARING: 15.10.2015 DATE OF PRONOUNC EMENT: 06 . 11.2015 PER PRASHANT MAHARISHI, AM: 01. THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST TH E ORDER OF CIT (A) XII, NEW DELHI DATED 10.01.2011 RAISING ONLY ONE GROUND : ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE, T HE LD. CIT(A) HAS ERRED IN ALLOWING CAPITAL EXPENDITURE AT APPELLATE STAGE AS IT HAS NOT BEEN CLAIMED EARLIER IN RETURN OF INCOME. 02. THE REVENUES APPEAL IS AGAINST THE DISALLOWANCE OF ADDITION OF FIXED ASSETS OF RS. 11,01,919/- AS AN APPLICATION OF INCOME. THE AO HA S HELD THAT THE PURCHASE OF FIXED ASSETS AS WELL AS DEPRECIATION THEREON BOTH C ANNOT BE APPLICATION OF INCOME AND THEREFORE HE ALSO DID NOT GRANT DEDUCTION FROM INCOME PURCHASE OF FIXED ASSETS OF RS. 11,01,919/- AS APPLICATION OF INCOME. IN OUR ORDER WHILE DECIDING GROUND NO. 2 OF THE APPEAL OF THE ASSESSEE IN ITA N O. 979/DEL/2011 DATED 30.10.2015 IN PARA NO. 10 WE HAVE DISCUSSED THAT I N A CASE OF TRUST THE PURCHASE OF ITA NO. 1999/DEL/2011 FASHION DESIGN COUNCIL OF INDIA A Y 2007-08 PAGE 2 OF 4 THE FIXED ASSETS AS WELL AS DEPRECIATION THEREON IS ALLOWABLE AS APPLICATION OF INCOME FOLLOWING DECISION OF HONORABLE DELHI HIGH COURT AS UNDER :- 10.WE HAVE CAREFULLY PERUSED THE ORDERS OF LOWER A UTHORITIES AND ARGUMENTS ADVANCED. WE ARE OF THE VIEW THAT THIS ISSUE IS SQUARELY COVE RED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONOURABLE JURISDICTIONAL HIGH COURT IN CASE OF DIRECTOR OF INCOME TAX V VISHWA JAGRITI MISSION 262 CTR 558 WHERE IN IT IS H ELD THAT 12. A SIMILAR VIEW WAS EARLIER EXPRESSED BY THE ANDHRA PRADESH HIGH COURT IN CIT V. TRUSTEES OF H.E.H. NIZAM'S SUPPL. RELIGIOUS ENDOWME NT TRUST [1981] 127 ITR 378 AND BY THE MADRAS HIGH COURT IN CIT V. RAO BAHADUR CALA VALA CUNNAN CHETTY CHARITIES [1982] 135 ITR 485 . THE MADHYA PRADESH HIGH COURT IN RAIPUR PALLOTTIN E SOCIETY (SUPRA) HAS HELD, FOLLOWING THE JUDGMENT OF THE KAR NATAKA HIGH COURT CITED ABOVE, THAT IN COMPUTING THE INCOME OF A CHARITABLE INSTITUTION /TRUST, DEPRECIATION OF ASSETS OWNED BY THE TRUST/INSTITUTION IS A NECESSARY DEDUCTION O N COMMERCIAL PRINCIPLES. THE GUJARAT HIGH COURT, AFTER REFERRING TO THE JUDGMENTS OF THE KARNATAKA, MAHARASHTRA AND MADHYA PRADESH HIGH COURTS CITED ABOVE, ALSO CAME T O THE SAME CONCLUSION AND HELD THAT THE AMOUNT OF DEPRECIATION DEBITED TO THE ACCO UNTS OF THE CHARITABLE INSTITUTION HAS TO BE DEDUCTED TO ARRIVE AT THE INCOME AVAILABLE FO R APPLICATION TO CHARITABLE AND RELIGIOUS PURPOSES. 13. THE JUDGMENT OF THE SUPREME COURT IN ESCORTS LIMIT ED (SUPRA) HAS BEEN RIGHTLY HELD TO BE INAPPLICABLE TO THE PRESENT CASE. THERE ARE T WO REASONS AS TO WHY THE JUDGMENT CANNOT BE APPLIED TO THE PRESENT CASE. FIRSTLY, THE SUPREME COURT WAS NOT CONCERNED WITH THE CASE OF A CHARITABLE TRUST/INSTITUTION INV OLVING THE QUESTION AS TO WHETHER ITS INCOME SHOULD BE COMPUTED ON COMMERCIAL PRINCIPLES IN ORDER TO DETERMINE THE AMOUNT OF INCOME AVAILABLE FOR APPLICATION TO CHARITABLE P URPOSES. IT WAS A CASE WHERE THE ASSESSEE WAS CARRYING ON BUSINESS AND THE STATUTORY COMPUTATION PROVISIONS OF CHAPTER IV-D OF THE ACT WERE APPLICABLE. IN THE PRESENT CAS E, WE ARE NOT CONCERNED WITH THE APPLICABILITY OF THESE PROVISIONS. WE ARE CONCERNED ONLY WITH THE CONCEPT OF COMMERCIAL INCOME AS UNDERSTOOD FROM THE ACCOUNTING POINT OF V IEW. EVEN UNDER NORMAL COMMERCIAL ACCOUNTING PRINCIPLES, THERE IS AUTHORIT Y FOR THE PROPOSITION THAT DEPRECIATION IS A NECESSARY CHARGE IN COMPUTING THE NET INCOME. SECONDLY, THE SUPREME COURT WAS CONCERNED WITH THE CASE WHERE THE ASSESSE E HAD CLAIMED DEDUCTION OF THE COST OF THE ASSET UNDER SECTION 35(1) OF THE ACT, WHICH ALLOWED DEDUCTION FOR CAPITAL EXPENDITURE INCURRED ON SCIENTIFIC RESEARCH. THE QU ESTION WAS WHETHER AFTER CLAIMING DEDUCTION IN RESPECT OF THE COST OF THE ASSET UNDER SECTION 35(1), CAN THE ASSESSEE AGAIN CLAIM DEDUCTION ON ACCOUNT OF DEPRECIATION IN RESPE CT OF THE SAME ASSET. THE SUPREME COURT RULED THAT, UNDER GENERAL PRINCIPLES OF TAXAT ION, DOUBLE DEDUCTION IN REGARD TO THE SAME BUSINESS OUTGOING IS NOT INTENDED UNLESS CLEAR LY EXPRESSED. THE PRESENT CASE IS NOT ONE OF THIS TYPE, AS RIGHTLY DISTINGUISHED BY THE C IT(APPEALS). 14. HAVING REGARD TO THE CONSENSUS OF JUDICIAL OPINION ON THE PRECISE QUESTION THAT HAS ARISEN IN THE PRESENT APPEAL, WE ARE NOT INCLINED T O ADMIT THE APPEAL AND FRAME ANY SUBSTANTIAL QUESTION OF LAW. THERE DOES NOT APPEAR TO BE ANY CONTRARY VIEW PLAUSIBLE ON THE QUESTION RAISED BEFORE US AND AT ANY RATE NO JU DGMENT TAKING A CONTRARY VIEW HAS ITA NO. 1999/DEL/2011 FASHION DESIGN COUNCIL OF INDIA A Y 2007-08 PAGE 3 OF 4 BEEN BROUGHT TO OUR NOTICE. IN THE CIRCUMSTANCES, W E DECLINE TO ADMIT THE PRESENT APPEAL AND DISMISS THE SAME WITH NO ORDER AS TO COSTS. THEREFORE RESPECTFULLY FOLLOWING THE DECISION OF HO NOURABLE DELHI HIGH COURT WE ALLOW THE GROUND NO 2 OF THE APPEAL DIRECTING AO TO GRANT THE ASSESSEE ALLOWANCE OF DEPRECIATION OF RS 638652. GROUND NO 2 OF THE APPE AL OF THE ASSESSEE IS ALLOWED. 03. THEREFORE CT (A) HAS RIGHTLY ALLOWED THE DEDUCTION OF RS 11,01,919/- AS ALL THE FACTS WERE AVAILABLE ON RECORD AND ALSO THE ISSUE I S COVERED NOW IN FAVOUR OF THE ASSESSEE BY JURISDICTIONAL HIGH COURT ALLOWING ACQ UISITION AS WELL AS DEPRECIATION THEREON AS APPLICATION OF INCOME WHILE COMPUTING TH E INCOME OF ASSESSEE UNDER THE PROVISIONS OF SECTION 11, 12 AND 13 OF THE ACT. 04. IN VIEW OF THE ABOVE THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 06.11.2015 SD/- SD/- (A.T.VARKEY) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 06 /11/2015 *B. RUKHAIYAR* COPY FORWARDED TO: 1. APPELLANT A 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSI STANT REGISTRAR ITA NO. 1999/DEL/2011 FASHION DESIGN COUNCIL OF INDIA A Y 2007-08 PAGE 4 OF 4 DATE INITIAL 1. DRAFT DICTATED ON 03/11/2015 2. DRAFT PLACED BEFORE AUTHOR 03 /1 1 / 2015 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 5. APPROVED DRAFT COMES TO THE SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON /11/2015 7. FILE SENT TO THE BENCH CLERK /11/2015 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.