ITO, Coimbatore V. Kongunadu Arts & Science College Council, Coimbatore

ITA 2097/CHNY/2014

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9880 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2015
• Appeal Filed By: Department
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 11-08-2014
• Court: TRIBUNAL
• Department Lawyers: N MADHAVAN
• Assessee Lawyers: N RAJAN
• Keywords: Capital asset; Depreciation; Charitable institution; Cost of acquisition
• Section: 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 ] ./ I.T.A.NO.2097/MDS/2014 / ASSESSMENT YEAR : 2010-11 THE INCOME TAX OFFICER COMPANY WARD I COIMBATORE VS. M/S KONGUNADU ARTS & SCIENCE COLLEGE COUNCIL GNANAMBIGAI MILLS POST COIMBATORE 641 029 [PAN AAAAK 1198 E ] ( &' / APPELLANT) ( ()&' /RESPONDENT) / APPELLANT BY : SHRI N. MADHAVAN, JCIT /RESPONDENT BY : SHRI N. RAJAN, ADVOCATE / DATE OF HEARING : 20 - 05 - 2015 ! / DATE OF PRONOUNCEMENT : 26 - 0 6 - 2015 /ORDER PER N.R.S.GANESAN, JUDICIAL MEMBER THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, COIMBAT ORE, DATED 27.5.2014 AND PERTAINS TO ASSESSMENT YEAR 2010-11. 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IS WITH REG ARD TO CLAIM OF DEPRECIATION. ITA NO.2097/14 :- 2 -: 3. SHRI N. MADHAVAN, LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE, A CHARITABLE INSTITUTI ON, CLAIMED DEPRECIATION ON CAPITAL ASSET. THE ASSESSING OFFIC ER FOUND THAT THE COST OF ACQUISITION OF THE ASSET WAS FULLY ALLOWED EARLIER AS APPLICATION OF INCOME, THEREFORE, THERE IS NO QUESTION OF ALLOW ING DEPRECIATION ON THE ASSET. THE LD. DR PLACED HIS RELIANCE ON THE JUDGMENT OF THE HON'BLE KERALA HIGH COURT IN THE CASE OF M/S LISSIE MEDICAL INSTITUTIONS IN T.C.A.NO. 42 OF 2011 DATED 17.2.2012. 4. ON THE CONTRARY, SHRI N. RAJAN, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE INCOME OF THE ASSESSEE HAS TO B E COMPUTED ON COMMERCIAL BASIS AND DEPRECIATION HAS TO BE ALLOWED . IF ANY INCOME REMAINS AFTER ALLOWING THE DEPRECIATION, IT HAS TO BE ALLOWED AS APPLICATION OF INCOME. THE LD. COUNSEL FURTHER SUB MITTED THAT THERE ARE DIVERGENT OPINIONS ON THIS ISSUE, THEREFORE, TH E OPINION WHICH FAVOURS THE ASSESSEE HAS TO BE FOLLOWED. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO GONE THROUGH THE PROVISIONS OF SECTION 32 OF THE ACT WHI CH PROVIDES FOR DEPRECIATION. DEPRECIATION HAS TO BE ALLOWED ON TH E COST OF THE ASSET. IN THIS CASE, THE COST OF THE ASSET WAS ALLOWED U/ S 11 OF THE ACT AS APPLICATION INCOME SINCE THE ASSESSEE IS A CHARITA BLE INSTITUTION ITA NO.2097/14 :- 3 -: ENTITLED FOR EXEMPTION U/S 11. THEREFORE, THE COS T OF THE ASSET BECOMES NIL. WHEN THE COST OF THE ASSET BECOMES NI L, THERE IS NO QUESTION OF ALLOWING ANY DEPRECIATION. IF THE DEPR ECIATION IS ALLOWED THEN IT WOULD AMOUNT TO DOUBLE DEDUCTION. THE INCO ME OF THE CHARITABLE INSTITUTION HAS TO BE COMPUTED ON COMMER CIAL PRINCIPLE IN CASE THE ASSESSEE IS NOT CLAIMING EXEMPTION U/S 1 1 OF THE ACT. THE ASSESSEE CAN ALSO CLAIM DEPRECIATION IN CASE THE EX EMPTION U/S 11 WAS DENIED BY THE ASSESSING OFFICER. WHATEVER MAY BE THE REASONS, SINCE THE COST OF THE ASSET IS NIL AS THE COST WAS ALREADY ALLOWED AS APPLICATION OF INCOME, THIS TRIBUNAL IS OF THE CONS IDERED OPINION THAT THE ASSESSEE IS NOT ENTITLED FOR DEPRECIATION. SE CTION 32 OF THE ACT FALLS IN CHAPTER IV UNDER COMPUTATION OF BUSINESS I NCOME, HOWEVER, SECTION 11 FALLS IN CHAPTER III WHICH PROVIDES FOR INCOMES WHICH DO NOT FORM PART OF THE TOTAL INCOME. THEREFORE, THIS TRIB UNAL IS OF THE CONSIDERED PINION THAT PROVISIONS OF SECTION 11 OF THE ACT WILL OVERRIDE SECTION 32. IN OTHER WORDS, IF THE ASSESSEE CLAIM S EXEMPTION U/S 11 UNDER CHAPTER III OF THE ACT, IT CANNOT CLAIM DEPRE CIATION U/S 32 OF THE ACT. THEREFORE, WE ARE UNABLE TO UPHOLD THE ORDER OF THE CIT(A). ACCORDINGLY, THE ORDER OF THE CIT(A) IS SET ASIDE A ND THAT OF THE ASSESSING OFFICER IS RESTORED. ITA NO.2097/14 :- 4 -: 6. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH OF JUNE, 2015, AT CHENNAI. SD/- SD/- ( . !' ) (A. MOHAN ALANKAMONY) # / ACCOUNTANT MEMBER ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER #$ / CHENNAI %& / DATED: 26 TH JUNE, 2015 RD &' ()*) / COPY TO: 1 . / APPELLANT 4. + / CIT 2. / RESPONDENT 5. ),- . / DR 3. +/' / CIT(A) 6. -01 / GF