ACIT, New Delhi V. India Trade Promotion Organization, New Delhi

ITA 2110/DEL/2017

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 7541 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 07-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VED PRAKASH MISHRA
• Keywords: Capital asset; Depreciation; Charitable institution
• Section: 264; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER & SHRI B.R.R. KUMAR, ACCOUNTANT MEMBER I.T.A. NO. 2110/DEL/2017 ASSESSMENT YEAR 2012-13 ACIT, CIRCLE-1(1), NEW DELHI. V. INDIA TRADE PROMOTION ORGANIZATION PRAGATI BHAWAN, PRAGATI MAIDAN, NEW DELHI. TAN/PAN: AAAT12955C (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI VED PRAKASH MISHRA, SR.D.R. RESPONDENT BY: NONE DATE OF HEARING: 12 01 2021 DATE OF PRONOUNCEMENT: 22 01 2021 O R D E R PER AMIT SHUKLA, J.M.: THE AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE IMPUGNED ORDER DATED 25.01.2017, PASSED BY LD. COMMISSIONER OF INCOME TAX (APPEALS)-XL, DELHI FOR THE QUANTUM OF ASSESSMENT PASSED U/S.143(3) FOR THE ASSESSMENT YEAR 2012-13. FOLLOWING GROUNDS HAVE BEE N TAKEN BY THE REVENUE IN MEMO OF APPEAL: (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, LD. CIT(A) HAS ERRED IN ALLOWING THE APPEAL OF THE ASSESSEE IGNORING THE FACT THAT IN THE CASE OF CHARITABLE OR RELIGIOUS INSTITUTIONS, THE ASSESSEE IS NOT ELIGIBLE FOR ANY TYPE OF DEPRECIATION AS THE ENTIRE EXPENDITURE FOR THE PURC HASE OF CAPITAL I.T.A. NO. 2110/DEL/2017 2 ASSETS IS ALLOWED AS A DEDUCTION AND THE SAME IS TR EATED AS APPLICATION OF INCOME U/S. 11(1) AND CLAIMING DEPRE CIATION ON THE SAME CAPITAL ASSETS IS A DOUBLE DEDUCTION AND IS NO T AS PER LAW AS THESE CAPITAL ASSETS ARE NOT USED FOR THE PURPOS E OF BUSINESS OF PROFESSION AS PROVIDED U/S. 32(1). (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) HAS ERRED IN ALLOWING THE APPEAL OF THE ASSESSEE BY IGNORING THE FACT THAT ASSESSEE IS FOLLOWING MERCAN TILE SYSTEM OF ACCOUNTING AND RENTAL INCOME HAS NOT ACCOUNTED IN T HE BOOKS. THE INCOME AS PER MERCANTILE METHOD OF ACCOUNTING H AS TO BE OFFERED TO TAX ON ACCRUAL BASIS. SUCH INCOME WHICH HAS ACCRUED BUT NOT RECEIVED IS SHOWN AS RECEIVABLE OR UNDER TH E HEAD SUNDRY DEBTOR AS THE CASE MAY BE IN THE BALANCE SHE ET. SUCH INCOME IS ENTITLED AS AND TO BE WRITTEN OFF SUBSEQU ENTLY WHEN IT ACTUALLY BECOMES BAD, AS PER PROVISIONS OF THE ACT. 2. IN SO FAR AS THE ISSUE RAISED IN GROUND NO.1, TH E SAME STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDG MENT OF HONBLE DELHI HIGH COURT IN THE APPEAL FOR THE ASSE SSMENT YEAR 2008-09, WHEREIN THE HONBLE HIGH COURT IN THE APPEAL PREFERRED BY THE ASSESSEE IN ITA NO.167 & 168/2012 HAS ALLOWED BOTH THE EXPENDITURE, I.E., CAPITAL EXPENDI TURE AND DEPRECIATION AS APPLICATION OF INCOME. THIS ORDER O F THE HONBLE HIGH COURT HAS BEEN FOLLOWED BY THE ITAT IN ASSESSEES OWN CASE IN THE ASSESSMENT YEARS 2009-10 , 2010- 11 AND 2011-12. 3. SIMILARLY, IN SO FAR AS THE ISSUE RAISED IN GROU ND NO.2 IS CONCERNED, ALSO STANDS COVERED IN FAVOUR OF THE ASS ESSEE BY I.T.A. NO. 2110/DEL/2017 3 THE ORDER OF THE TRIBUNAL IN THE APPEALS FOR THE AS SESSMENT YEARS 2009-10, 2010-11 AND 2011-12. 4. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS AN ORGANIZATION, WHOLLY OWNED APEX TRADE PROMOTION BOD Y OF GOVERNMENT OF INDIA WITH SENIOR GOVERNMENT OFFICIAL S AS DIRECTOR AND MEMBERS. IT WAS INCORPORATED U/S.25 OF THE COMPANIES ACT, 1956 AS NON-PROFIT ORGANIZATION. IT WAS ALSO REGISTERED U/S.12A TO CARRY ON THE OBJECTS OF PROMO TING THE INDIAN TRADE THROUGH MEDIUM OF ORGANIZING TRADE FAI RS, EXHIBITIONS, ETC. IN INDIA AND ABROAD. IT HAS ALSO GOT EXEMPTION U/S. 10(23)(IV) FROM ASSESSMENT YEAR 1989 -90 ONWARDS. THE TRIBUNAL IN SO FAR AS THE ISSUE OF ALL OWANCE OF DEPRECIATION IS CONCERNED HAD DECIDED THIS ISSUE IN THE FOLLOWING MANNER: 9. AO MADE DISALLOWANCE OF RS.2,11,52,612/-, RS.1,69,34,321/- & RS.1,37,55,543 IN AYS 2009-1 0, 2010-11 & 2011-12 RESPECTIVELY ON THE GROUND THAT WHEN DEDUCTION IS ALLOWED IN RESPECT OF CAPITAL EXPENDIT URE, NO DEPRECIATION IS ALLOWED ON THE SAME ASSETS AS IT WO ULD LEAD TO DOUBLE DEDUCTION. HOWEVER, THE LD. CIT (A) ALLOWED THE DEPRECIATION BY RELYING UPON THE DECISI ON RENDERED BY HONBLE DELHI HIGH COURT IN ITA NO.7 / 2013 ORDER DATED 27.11.2013 RENDERED IN ASSESSEES OWN C ASE. 10. HONBLE DELHI HIGH COURT IN THE AFORESAID DECIS ION IN ASSESSEES OWN CASE (SUPRA) VIDE ORDER DATED 06.09. 2013 DISMISSED THE APPEAL PREFERRED BY THE REVENUE I.T.A. NO. 2110/DEL/2017 4 CHALLENGING THE ORDER OF THE TRIBUNAL; THE OPERATIV E PART OF THE ORDER IS EXTRACTED FOR READY PERUSAL AS UNDER : - 14. FROM THE YEAR 1984 ONWARDS, THERE HAVE BEEN A NUMBER OF DECISIONS OF VARIOUS HIGH COURTS TAKING A SIMILAR AND IDENTICAL VIEW, AS THAT OF SOCIETY OF THE SISTERS OF ST. ANNE (SUPRA). THESE ARE AS UNDER:- INCOME TAX VS. MARKET COMMITTEE, PIPLI (2011) 330 I TR 16 (P&H), INCOME TAX VS. TINY TOTS EDUCATION SOCI ETY, (2011) 330 ITR 21 (P&H), COMMISSIONER OF INCOME T AX VS. MANAV MANGAL SOCIETY, (2010) 328 ITR 421 (P&H) , COMMISSIONER OF INCOME TAX VS. SHETH MANILAL RANCHHODDAS VISHRAM BHAVAN TRUST, (1992) 198 ITR 598 (GUJ.), COMMISSIONER OF INCOME TAX VS. RAIPUR PALLOTTINE SOCIETY, (1989) 180 ITR 579 (M.P.), COMMISSIONER OF INCOME TAX VS. INSTITUTE OF BANKING , (2003) 264 ITR 110 (BOM), AND CIT VS. SHAKUNTALA THARAL CHARITABLE FOUNDATION, (2013) 358 ITR 452 (M P). 15. KERALA HIGH COURT WAS ALSO CONSCIOUS OF THE SAID DECISIONS AND THE FACT THAT SECTION 11(1)(A) HAD BEEN INTERPRETED IN A DIFFERENT MANNER. IT WAS IN THES E CIRCUMSTANCES THAT THE KERALA HIGH COURT IN THE LAST PORTION OF PARAGRAPH 6, AS QUOTED ABOVE, HAS STATED THAT THE ASSESSEE WOULD BE ENTITLED TO WRITE BACK DEPRECIATION AND IF DONE, THE ASSESSING OFFICER WO ULD MODIFY THE ASSESSMENT DETERMINING THE HIGHER INCOME AND ALLOW RECOMPUTATION OF DEPRECIATION WRITTEN B ACK FOR I.T.A. NO. 2110/DEL/2017 5 THE PURPOSE OF APPLICATION OF INCOME FOR CHARITABLE PURPOSES IN FUTURE OR SUBSEQUENT YEARS. THIS MAY L EAD TO ITS OWN DIFFICULTIES AND PROBLEMS AS SUDDENLY THE ENTIRE DEPRECIATION WRITTEN OFF WOULD HAVE TO BE ADDED FIR ST AND THEN IN ONE YEAR SUBSTANTIAL APPLICATION OF INCOME WOULD BE REQUIRED. THIS MAY BE IMPRACTICAL AND WOULD DIS TURB THE WORKING OF MANY A CHARITABLE INSTITUTIONS. THE LEGAL INTERPRETATION WHICH HAS CONTINUED SINCE 1984, IF DISTURBED AND IMPLEMENTED, WOULD NOT APPROPRIATELY RESOLVED. CONSISTENCY AND CERTAINTY IS MORE APPROP RIATE. 16. THE EQUALLY PLAUSIBLE AND CONSISTENT INTERPRET ATION OF CLAUSE (A) OF SECTION 11(1) OF THE ACT IS THAT I NCOME DERIVED FROM PROPERTY MUST BE CALCULATED AS PER THE PRINCIPLES OF THE ACT. THE SAID CLAUSE IS NOT A COM PUTATION PROVISION AND DOES NOT DISTURB THE INCOME EARNED OR AVAILABLE BUT POSTULATES THAT THE INCOME AS CO MPUTED IN ACCORDANCE WITH THE PROVISIONS OF THE ACT TO TH E EXTENT OF 86% MUST BE APPLIED. APPLICATION OF INCOME MAY INCLUDE PURCHASE OF A CAPITAL ASSET. THE SAID PURCH ASE IS VALID AND TAKEN INTO CONSIDERATION FOR THE PURPOSE OF ENSURING COMPLIANCE, I.E., APPLICATION OF MONEY OR FUNDS AND IS NOT A FACTOR WHICH DETERMINES AND DECIDES T HE QUANTUM OF INCOME DERIVED FROM PROPERTY HELD UNDER TRUST. COMPUTATION OF INCOME IS SEPARATE AND DISTIN CT AND HAS TO BE MADE ON COMMERCIAL BASIS BY APPLYING PROVISIONS OF THE ACT. I.T.A. NO. 2110/DEL/2017 6 11. SO, FOLLOWING THE DECISION RENDERED BY HONBLE DELHI HIGH COURT IN ASSESSEES OWN CASE (SUPRA), THE LD. CIT (A) HAS RIGHTLY ALLOWED THE DEPRECIATION IN FAV OUR OF THE ASSESSEE AND THEREBY DELETED THE DISALLOWANCE M ADE BY THE AO. SO, WE FIND NO ILLEGALITY OR PERVERSITY IN THE IMPUGNED ORDER ON THIS ISSUE. CONSEQUENTLY, GROUND NO.2 IN AYS 2009-10, 2010-11 & 2011-12 IS DETERMINED AGAINST THE REVENUE. 5. THUS RESPECTFULLY FOLLOWING THE SAME, GROUND NO. 1 RAISED BY THE REVENUE IS DISMISSED. 6. THE BRIEF FACTS QUA THE SECOND ISSUE ARE THAT TH ERE WAS A LONG STANDING DISPUTE BETWEEN THE GOVERNMENT DEPART MENTS WHO ARE IN POSSESSION OF THE SPACE IN PRAGATI MAIDA N AND ASSESSEE MADE ENDEAVOURS FOR RECOVERY OF SPACE RENT . IN THIS REGARD, THE ASSESSEE WAS ENGAGED IN LONG CORRESPOND ENCE WITH THE DEPARTMENTS AND PURSUING THE MATTER FOR RECOVER Y OF THE SPACE RENT AT VARIOUS LEVELS IN THE ADMINISTRATIVE MINISTRIES OF THE GOVERNMENT OF INDIA. ONE OF THE ORGANIZATION VI Z. NATIONAL SCIENCE CENTRE (NSC) HAD PAID SPACE RENT TO THE ' A SSESSEE COMPANY @ RS. 200/- PER SQ. MTR. P.A. IN AN EARLIER YEAR. SUBSEQUENTLY, THE RATE OF SPACE RENT WAS ENHANCED B Y THE ASSESSEE COMPANY ON YEAR TO YEAR BASIS WHICH WAS CO NTESTED BY THE NSC. ACCORDINGLY, THE ASSESSEE COMPANY HAS ACCOUNTED FOR INCOME @ RS. 200/- PER SQ. MTR. PER Y EAR IN THE INCOME & EXPENDITURE ACCOUNT AS NSC HAD PAID @ RS 2 00/- PER SQ. MTR. P.A., BUT CONTESTED THE INCREASE IN RA TES. THE I.T.A. NO. 2110/DEL/2017 7 ELEMENT OF ENHANCED SPACE RENT OVER RS.200/- PER SQ . MTR. P.A. (DISPUTED AMOUNT) WAS KEPT OUT OF BOOKS AS 'CO NTESTED DUES NOT ACCOUNTED FOR' AND DISCLOSED IN THE NOTES TO THE ACCOUNTS. THE ASSESSEE IS ESSENTIALLY RELYING ON TH E ACCOUNTING STANDARD 9 ISSUED BY THE INSTITUTE OF CH ARTERED ACCOUNTANTS OF INDIA RELATING TO RECOGNITION OF INC OME IN ACCORDANCE WITH PARA 10 WHICH STATES THAT IF AT THE TIME OF RAISING ANY CLAIM, IT IS UNREASONABLE TO EXPECT ULT IMATE COLLECTION, REVENUE RECOGNITION SHOULD BE POSTPONED . AS REGARDS THE OTHER DEPARTMENT VIZ. CRAFTS MUSEUM, TH EY HAVE NOT PAID ANY SPACE RENT TO THE ASSESSEE COMPANY AND ARE MAINTAINING THAT THEY WERE IN POSSESSION OF THE SPA CE EVEN PRIOR TO THE FORMATION OF THE ASSESSEE COMPANY. ON THE SAME ANALOGY OF NSC AND FOLLOWING AS 9, THE ASSESSEE COM PANY HAS NOT RAISED ANY INVOICE FOR THE SPACE RENT ON CRAFT MUSEUM ANY DISCLOSED THE DISPUTED AMOUNT OF SPACE RENT REL ATING TO THE ASSESSMENT YEAR UNDER REFERENCE, IN THE NOTES T O ACCOUNTS. ASSESSEE HAS NOT RECOGNISED THE LICENCE F EE PERTAINING TO THESE DEPARTMENTS AS INCOME IN THE BO OKS IN ACCORDANCE WITH PARA 10 OF THE ACCOUNTING STANDARD 9 WHICH STATES THAT 'REVENUE FROM SALE OR SERVICE TRANSACTI ONS SHOULD BE RECOGNISED WHEN THE REQUIREMENTS AS TO PERFORMAN CE SET OUT IN PARAGRAPHS 11 & 12 ARE SATISFIED, PROVIDED T HAT AT THE TIME OF PERFORMANCE IT IS NOT UNREASONABLE TO EXPEC T ULTIMATE COLLECTION. IF AT THE TIME OF RAISING ANY CLAIM IT IS UNREASONABLE TO EXPECT ULTIMATE COLLECTION, REVENUE RECOGNITION SHOULD BE POSTPONED. I.T.A. NO. 2110/DEL/2017 8 7. THIS PRECISE ISSUE HAS ALSO BEEN CONSIDERED BY T HE TRIBUNAL IN THE EARLIER YEARS WHEREIN IT HAS BEEN D ISCUSSED IN THE FOLLOWING MANNER: 12. AO MADE ADDITION OF RS.1,68,73,663, RS.2,01,86,003 & RS.1,83,00,000 IN AYS 2009-10, 20 10-11 & 2011-12 RESPECTIVELY ON A/C OF SPACE RENT INCOME ON THE BASIS OF DISCLOSURE IN NOTES TO ACCOUNTS OF THE ASS ESSEE. HOWEVER, LD. CIT(A) DELETED THE ADDITION ON THE GRO UND THAT SINCE SPACE RENT ACCOUNT IS DISPUTED BY TWO GOVERNM ENT DEPARTMENTS VIZ. NATIONAL SCIENCE CENTRE AND CRAFTS MUSEUM BY CONTESTING THE OWNERSHIP OF LAND ATTRAC TING RENT BY THE ASSESSEE AND CLAIMED THAT THEY ARE IN POSSESSION OF THE LAND AND AS SUCH IT IS UNCERTAIN, NO ADDITION CAN BE MADE. 13. LD. CIT (A) HAS THRASHED THE FACTS IN DETAIL AN D BY APPLYING THE DECISION RENDERED BY VARIOUS HONBLE H IGH COURTS AND HONBLE SUPREME COURT, DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE ON THE GROUND THAT SINCE THE DISPUTE HAS NOT BEEN RESOLVED TILL DATE, THE ADDITION IS NO T SUSTAINABLE. 14. ASSESSEE HAS BROUGHT ON RECORD DOCUMENTS AND LETTER OF DISCUSSION TO RESOLVE THE DISPUTES BETWEE N NATIONAL SCIENCE CENTRE & CRAFTS MUSEUM AND INDIA TRADE PROM OTION ORGANISATION (ITPO) FOR NON-PAYMENT OF RENT, AVAILA BLE AT PAGES 93 TO 130 OF THE PAPER BOOK, WHICH HAVE BEEN DULY EXAMINED BY THE LD. CIT(A). WE ARE OF THE CONSIDER ED VIEW I.T.A. NO. 2110/DEL/2017 9 THAT WHEN INCOME ON ACCOUNT OF SPACE RENT HAS NOT B EEN ACCRUED, AS IN THE INSTANT CASE DUE TO DISPUTE, THE RE CANNOT BE ANY RENT EVEN THOUGH ENTRY IN THE BOOKS OF ACCOU NT HAVE BEEN MADE ON ACCOUNT OF NOTIONAL INCOME. SO, WHEN THE INCOME WOULD BE RECEIVED ITS TAXABILITY CAN BE EXAM INED BY THE REVENUE. LD. DR FOR THE REVENUE HAS NOT BROUGH T ON RECORD ANY DOCUMENT IF THE DISPUTE BETWEEN THE PART IES QUA THE SPACE RENT HAS BEEN RESOLVED. SO, IN THESE CIRCUMSTANCES, WE ARE OF THE CONSIDERED VIEW THAT T HERE IS NO ILLEGALITY OR PERVERSITY IN THE FINDINGS RETURNE D BY THE LD. CIT (A), CONSEQUENTLY GROUND NO.3 IN AYS 2009-10, 2 010-11 & 2011-12 IS DETERMINED AGAINST THE REVENUE. 8. THUS, RESPECTFULLY FOLLOWING THE SAME, THE GROUN D NO.2 IS DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND JANUARY, 2021. SD/- SD/- [B.R.R. KUMAR] [AMIT SHUKLA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 22 ND JANUARY, 2021 PKK: