M/s. Raja Muthiah Chettiar Charitable and Educational Trust, CHENNAI V. DDIT, CHENNAI

ITA 2129/CHNY/2016

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3961 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 15-07-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Keywords: Depreciation; Charitable institution; Scheme of amalgamation; Capital expenditure
• Section: 12A; 12AA; 32; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . . . , . . ! ' , # $% BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./ ITA NO.2129/MDS/2016 & '& /ASSESSMENT YEAR : 2010-11 M/S.RAJA MUTHIAH CHETTIAR CHARITABLE AND EDUCATIONAL TRUST, RANI SEETHAI HALL, V FLOOR, 603, ANNA SALAI, CHENNAI 600 006. PAN: AAATR 3208 F V. THE DEPUTY DIRECTOR OF INCOME TAX (EXEMPTIONS), CHENNAI CIRCLE, CHENNAI 600 034. ( () /APPELLANT) ( *+() /RESPONDENT) () , - /APPELLANT BY : SHRI SAROJ KUMAR PARIDA, ADVOCAT E *+(),- /RESPONDENT BY : SHRI A.V.SREEKANTH, JCIT ,.# /DATE OF HEARING : 19.10.2016 /0' ,.# /DATE OF PRONOUNCEMENT : 23.11.2016 /O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A) - 17, CHENNAI DATED 20.05.2016 AND PERTAINS TO THE AS SESSMENT YEAR 2010-11. 2 I.T.A. NO.2129/MDS/2016 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IS DISAL LOWANCE OF DEPRECIATION CLAIMED BY THE ASSESSEE. SHRI SAROJ KUMAR PARIDA, T HE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS A CHARITABL E INSTITUTION REGISTERED UNDER SECTION 12A OF THE ACT. THE ASSESSEE HAS ALSO CLAIMED EXEMPTION UNDER SECTION 11 IN RESPECT OF THE INCOME APPLIED FOR CHA RITABLE ACTIVITY AND THE ASSESSING OFFICER HAS ALLOWED THE CLAIM OF THE ASSE SSEE. THE ASSESSEE HAS CLAIMED DEPRECIATION. HOWEVER, THE ASSESSING OFFICE R DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE INCOME OF THE A SSESSEE WAS ALREADY ALLOWED AS EXEMPTION UNDER SECTION 11 ON APPLICATIO N. REFERRING TO THE ORDER OF THIS TRIBUNAL IN THE MUSIC ACADEMY MADRAS VS. TH E DEPUTY DIRECTOR OF INCOME TAX IN ITA NO.1098/MDS/2015 DATED 22.04.2016 , THE LEARNED COUNSEL SUBMITTED THAT ON IDENTICAL CIRCUMSTANCES, THIS TRI BUNAL CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 3. WE HEARD SHRI A.V.SREEKANTH, THE LEARNED DEPARTM ENT REPRESENTATIVE ALSO. THE LEARNED DEPARTMENT REPRESENTATIVE SUBMITT ED THAT IN VIEW OF THE ORDER OF THIS TRIBUNAL IN THE MUSIC ACADEMY MADRAS (SUPRA), THE ISSUE IS COVERED AGAINST THE ASSESSEE. 3 I.T.A. NO.2129/MDS/2016 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ONL Y ISSUE ARISES FOR CONSIDERATION IS DISALLOWANCE OF DEPRECIATION CLAIM ED BY THE ASSESSEE WHEN THE CLAIM OF THE ASSESSEE UNDER SECTION 11 WAS ALLO WED AS APPLICATION OF INCOME ON THE VERY SAME ASSET. THIS ISSUE WAS EXAMI NED BY THIS TRIBUNAL IN THE MUSIC ACADEMY MADRAS (SUPRA) AND FOUND THAT THE ASSESSEE IS NOT ELIGIBLE FOR DEPRECIATION UNDER SECTION 32 OF THE ACT. IN FA CT, THIS TRIBUNAL HAS OBSERVED AS FOLLOWS: 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ISSUE ARISES FOR CONSIDERATION IS WHETHER A CHARITABLE INSTITUTI ON IS ELIGIBLE FOR DEPRECIATION IN RESPECT OF ITS ASSET, WHICH WAS USE D AS A TOOL FOR CARRYING OUT ITS OBJECT. DEPRECIATION IS PROVIDED UNDER SECTION 32 OF THE ACT, WHICH READS AS FOLLOWS:- DEPRECIATION 32 (1) IN RESPECT OF DEPRECIATION OF-- (I) BUILDINGS, MACHINERY, PLANT OR FURNITURE BEING TANGIBLE ASSETS ; (II) KNOW-HOW, PATENTS, COPYRIGHTS, TRADE MARKS, LI CENCES, FRANCHISES OR ANY OTHER BUSINESS OR COMMERCIAL RIGH TS OF SIMILAR NATURE, BEING INTANGIBLE ASSETS ACQUIRED ON OR AFTE R THE 1ST DAY OF APRIL, 1998, OWNED, WHOLLY OR PARTLY, BY THE ASSESSEE AND USED F OR THE PURPOSES OF THE BUSINESS OR PROFESSION THE FOLLOWING DEDUCTI ONS SHALL BE ALLOWED-- 4 I.T.A. NO.2129/MDS/2016 (I) IN THE CASE OF ASSETS OF AN UNDERTAKING ENGAGED IN GENERATION OR GENERATION AND DISTRIBUTION OF POWER, SUCH PERCENTA GE ON THE ACTUAL COST THEREOF TO THE ASSESSEE AS MAY BE PRESCRIBED. (II) IN THE CASE OF ANY BLOCK OF ASSETS, SUCH PERCE NTAGE ON THE WRITTEN DOWN VALUE THEREOF AS MAY BE PRESCRIBED: PROVIDED THAT NO DEDUCTION SHALL BE ALLOWED UNDER THIS CLAU SE IN RESPECT OF--(A) ANY MOTOR CAR MANUFACTURED OUTSIDE INDIA, WHERE SUCH MOTOR CAR IS ACQIRED BY THE ASSESSEE AFTER THE 28TH DAY OF FEBRUARY, 1975 5BUT BEFORE THE 1ST DAY OF APRIL, 2001, UNL ESS IT IS USED--(I) IN A BUSINESS OF RUNNING IT ON HIRE FOR T OURISTS; OR(II) OUTSIDE INDIA IN HIS BUSINESS OR PROFESSION IN ANOT HER COUNTRY ; AND(B) ANY MACHINERY OR PLANT IF THE ACTUAL COST TH EREOF IS ALLOWED AS A DEDUCTION IN ONE OR MORE YEARS UNDER AN AGREEM ENT ENTERED INTO BY THE CENTRAL GOVERNMENT UNDER SECTION 42: PROVIDED FURTHER THAT WHERE ANY ASSET REFERRED TO IN CLAUSE (I) OR CLAUSE (II) OR CLAUSE (IIA) OR THE FIRST PROVISO TO CLAUSE (IIA), AS THE CASE MAY BE, IS ACQUIRED BY THE ASSESSEE DURING THE PREVIOUS YEAR AND IS PUT TO USE FOR THE PURPOSES OF BUSINESS OR P ROFESSION FOR A PERIOD OF LESS THAN ONE HUNDRED AND EIGHTY DAYS IN THAT PREVIOUS YEAR, THE DEDUCTION UNDER THIS SUB-SECTION IN RESPE CT OF SUCH ASSET SHALL BE RESTRICTED TO FIFTY PER CENT. OF THE AMOUN T CALCULATED AT THE PERCENTAGE PRESCRIBED FOR AN ASSET UNDER CLAUSE (I) 6OR CLAUSE (II) OR CLAUSE (IIA), AS THE CASE MAY BE: PROVIDED ALSO THAT WHERE AN ASSET REFERRED TO IN CLAUSE (IIA) OR THE FIRST PROVISO TO CLAUSE (IIA), AS THE CASE MAY BE, IS ACQUIRED BY THE ASSESSEE DURING THE PREVIOUS YEAR AND IS PUT TO USE FOR THE PURPOSES OF BUSINESS FOR A PERIOD OF LESS THAN ONE HUNDRED AND EIGHTY DAYS IN THAT PREVIOUS YEAR, AND THE DEDUCTIO N UNDER THIS SUB- SECTION IN RESPECT OF SUCH ASSET IS RESTRICTED TO F IFTY PER CENT. OF THE AMOUNT CALCULATED AT THE PERCENTAGE PRESCRIBED FOR AN ASSET UNDER CLAUSE (IIA) FOR THAT PREVIOUS YEAR, THEN, TH E DEDUCTION FOR THE BALANCE FIFTY PER CENT. OF THE AMOUNT CALCULATE D AT THE PERCENTAGE PRESCRIBED FOR SUCH ASSET UNDER CLAUSE ( IIA) SHALL BE ALLOWED UNDER THIS SUB-SECTION IN THE IMMEDIATELY S UCCEEDING PREVIOUS YEAR IN RESPECT OF SUCH ASSET : 5 I.T.A. NO.2129/MDS/2016 PROVIDED ALSO THAT WHERE AN ASSET BEING COMMERCIAL VEHICLE IS ACQUIRED BY THE ASSESSEE ON OR AFTER THE 1ST DAY OF OCTOBER, 1998, BUT BEFORE THE 1ST DAY OF APRIL, 1999, AND IS PUT TO U SE BEFORE THE 1ST DAY OF APRIL, 1999, FOR THE PURPOSES OF BUSINESS OR PROFESSION, THE DEDUCTION IN RESPECT OF SUCH ASSET SHALL BE ALL OWED ON SUCH PERCENTAGE ON THE WRITTEN DOWN VALUE THEREOF AS MAY BE PRESCRIBED. EXPLANATION FOR THE PURPOSES OF THIS PROVISO,-- (A) THE EXPRESSION 'COMMERCIAL VEHICLE' MEANS 'HEAVY GOODS VEHICLE', 'HEAVY PASSENGER MOTOR VEHICLE', 'LIGHT M OTOR VEHICLE', 'MEDIUM GOODS VEHICLE' AND 'MEDIUM PASSENGER MOTOR VEHICLE' BUT DOES NOT INCLUDE 'MAXI CAB', 'MOTOR-CAB', 'TRACTOR' AND 'ROAD- ROLLER' ; (B) THE EXPRESSIONS 'HEAVY GOODS VEHICLE', 'HEAVY PA SSENGER MOTOR VEHICLE', 'LIGHT MOTOR VEHICLE', 'MEDIUM GOODS VEHI CLE', 'MEDIUM PASSENGER MOTOR VEHICLE', 'MAXI-CAB', 'MOTOR-CAB', ' TRACTOR' AND 'ROAD-ROLLER' SHALL HAVE THE MEANINGS RESPECTIVELY AS ASSIGNED TO THEM IN SECTION 2 OF THE MOTOR VEHICLES ACT, 1988 (59 OF 1988). PROVIDED ALSO THAT, IN RESPECT OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING ON THE 1ST DAY OF APRIL, 1991, THE DEDUCTION IN RELATION TO ANY BLOCK OF ASSETS UNDER THIS CLAUSE SHALL, IN THE CASE OF A COMPANY, BE RESTRICTED TO SEVENTY- FIVE PER CENT.OF THE AMOUNT CALCULATED AT THE PERCENTAGE, ON THE WRI TTEN DOWN VALUE OF SUCH ASSETS, PRESCRIBED UNDER THIS ACT IMMEDIATE LY BEFORE THE COMMENCEMENT OF THE TAXATION LAWS (AMENDMENT) ACT, 1 991. PROVIDED ALSO THAT THE AGGREGATE DEDUCTION, IN RESPECT OF DEPRECIATION OF BUILDINGS, MACHINERY, PLANT OR FURN ITURE, BEING TANGIBLE ASSETS OR KNOW-HOW, PATENTS, COPYRIGHTS, T RADEMARKS, LICENCES, FRANCHISES OR ANY OTHER BUSINESS OR COMME RCIAL RIGHTS OF SIMILAR NATURE, BEING INTANGIBLE ASSETS ALLOWABLE T O THE PREDECESSOR AND THE SUCCESSOR IN THE CASE OF SUCCESSION REFERRE D TO IN CLAUSE (XIII), CLAUSE (XIIIB) AND CLAUSE (XIV) OF SECTION 47 OR SECTION 170 OR TO THE AMALGAMATING COMPANY AND THE AMALGAMATED COM PANY IN THE CASE OF AMALGAMATION, OR TO THE DEMERGED COMPANY AN D THE RESULTING COMPANY IN THE CASE OF DEMERGER, AS THE C ASE MAY BE, SHALL NOT EXCEED IN ANY PREVIOUS YEAR THE DEDUCTION CALCULATED AT THE PRESCRIBED RATES AS IF THE SUCCESSION OR THE AM ALGAMATION OR THE DEMERGER, AS THE CASE MAY BE, HAD NOT TAKEN PLA CE, AND SUCH 6 I.T.A. NO.2129/MDS/2016 DEDUCTION SHALL BE APPORTIONED BETWEEN THE PREDECES SOR AND THE SUCCESSOR, OR THE AMALGAMATING COMPANY AND THE AMAL GAMATED COMPANY, OR THE DEMERGED COMPANY AND THE RESULTING COMPANY, AS THE CASE MAY BE, IN THE RATIO OF THE NUMBER OF DAYS FOR WHICH THE ASSETS WERE USED BY THEM. EXPLANATION 1. WHERE THE BUSINESS OR PROFESSION OF THE ASSESSEE IS CARRIED ON IN A BUILDING NOT OWNED BY HIM BUT IN RESPECT OF WHICH THE ASSESSEE HOLDS A LEASE OR OTHER RIGHT OF OCCUPA NCY AND ANY CAPITAL EXPENDITURE IS INCURRED BY THE ASSESSEE FOR THE PURPOSES OF THE BUSINESS OR PROFESSION ON THE CONSTRUCTION OF A NY STRUCTURE OR DOING OF ANY WORK, IN OR IN RELATION TO, AND BY WAY OF RENOVATION OR EXTENSION OF, OR IMPROVEMENT TO, THE BUILDING, THEN, THE PROVISIONS OF THIS CLAUSE SHALL APPLY AS IF THE SAID STRUCTURE OR WORK IS A BUILDING OWNED BY THE ASSESSEE. EXPLANATION 2. FOR THE PURPOSES OF THIS SUB-SECTION 'WRITTEN DOWN VALUE OF THE BLOCK OF ASSETS' SHALL HAVE THE SAME M EANING AS IN CLAUSE (C) OF SUB-SECTION (6) OF SECTION 43; EXPLANATION 3. FOR THE PURPOSES OF THIS SUB-SECTION, 10THE EXPRESSIONS 'ASSETS' SHALL MEAN-- (A) TANGIBLE ASSETS, BEING BUILDINGS, MACHINERY, PL ANT OR FURNITURE ; (B) INTANGIBLE ASSETS, BEING KNOW-HOW, PATENTS, COP YRIGHTS, TRADE MARKS, LICENCES, FRANCHISES OR ANY OTHER BUSINESS O R COMMERCIAL RIGHTS OF SIMILAR NATURE. EXPLANATION 4. FOR THE PURPOSES OF THIS SUB-SECTION, THE EXPRESSION 'KNOW-HOW' MEANS ANY INDUSTRIAL INFORMATI ON OR TECHNIQUE LIKELY TO ASSIST IN THE MANUFACTURE OR PR OCESSING OF GOODS OR IN THE WORKING OF A MINE, OIL-WELL OR OTHER SOUR CES OF MINERAL DEPOSITS (INCLUDING SEARCHING FOR DISCOVERY OR TEST ING OF DEPOSITS FOR THE WINNING OF ACCESS THERETO) ; EXPLANATION 5. FOR THE REMOVAL OF DOUBTS, IT IS HERE BY DECLARED THAT THE PROVISIONS OF THIS SUB-SECTION SHALL APPLY WHETHER OR NOT THE ASSESSEE HAS CLAIMED THE DEDUCTION IN RESPECT O F DEPRECIATION IN COMPUTING HIS TOTAL INCOME ; (IIA) IN THE CASE OF ANY NEW MACHINERY OR PLANT (OT HER THAN SHIPS AND AIRCRAFT), WHICH HAS BEEN ACQUIRED AND INSTALLED AF TER THE 31ST DAY OF MARCH, 2005, BY AN ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING, A FURTHER SUM EQUAL TO TWENTY PER CENT. OF THE ACTUAL COST OF SUC H MACHINERY OR PLANT SHALL BE ALLOWED AS DEDUCTION UNDER CLAUSE (I I) : 7 I.T.A. NO.2129/MDS/2016 PROVIDED THATWHERE AN ASSESSEE, SETS UP AN UNDERTAKING OR ENTERPRISE FOR MANUFACTURE OR PRODUCTION OF ANY ART ICLE OR THING, ON OR AFTER THE 1ST DAY OF APRIL, 2015 IN ANY BACKWARD AR EA NOTIFIED BY THE CENTRAL GOVERNMENT IN THIS BEHALF, IN THE STATE OF ANDHRA PRADESH OR IN THE STATE OF BIHAR OR IN THE STATE OF TELANGANA OR IN THE STATE OF WEST BENGAL, AND ACQUIRES AND INSTALLS ANY NEW MACHINERY OR PLANT (OTHER THAN SHIPS AND AIRCRAFT) FOR THE PURPOSES OF THE SAID UNDERTAKING OR ENTERPRISE DURING THE PE RIOD BEGINNING ON THE 1ST DAY OF APRIL, 2015 AND ENDING BEFORE THE 1S T DAY OF APRIL, 2020 IN THE SAID BACKWARD AREA, THEN, THE PROVIS IONS OF CLAUSE (IIA) SHALL HAVE EFFECT, AS IF FOR THE WORDS TWENTY PER CENT., THE WORDS THIRTY-FIVE PER CENT. HAD BEEN SUBSTITU TED : PROVIDED FURTHER NO DEDUCTION SHALL BE ALLOWED IN RESPECT O F- (A) ANY MACHINERY OR PLANT WHICH, BEFORE ITS INSTAL LATION BY THE ASSESSEE, WAS USED EITHER WITHIN OR OUTSIDE INDIA B Y ANY OTHER PERSON ; OR (B) ANY MACHINERY OR PLANT INSTALLED IN ANY OFFICE P REMISES OR ANY RESIDENTIAL ACCOMMODATION, INCLUDING ACCOMMODATION IN THE NATURE OF A GUEST-HOUSE ; OR (C) ANY OFFICE APPLIANCES OR ROAD TRANSPORT VEHICLE S ; OR (D) ANY MACHINERY OR PLANT, THE WHOLE OF THE ACTUAL COST OF WHICH IS ALLOWED AS A DEDUCTION (WHETHER BY WAY OF DEPRECIAT ION OR OTHERWISE) IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' OF AN Y ONE PREVIOUS YEAR ; (III) IN THE CASE OF ANY BUILDING, MACHINERY, PLANT OR FURNITURE IN RESPECT OF WHICH DEPRECIATION IS CLAIMED AND ALLOWE D UNDER CLAUSE (I) AND WHICH IS SOLD, DISCARDED, DEMOLISHED OR DES TROYED IN THE PREVIOUS YEAR (OTHER THAN THE PREVIOUS YEAR IN WHIC H IT IS FIRST BROUGHT INTO USE), THE AMOUNT BY WHICH THE MONEYS P AYABLE IN RESPECT OF SUCH BUILDING, MACHINERY, PLANT OR FURNI TURE, TOGETHER WITH THE AMOUNT OF SCRAP VALUE, IF ANY, FALL SHORT OF THE WRITTEN DOWN VALUE THEREOF : PROVIDED THAT SUCH DEFICIENCY IS ACTUALLY WRITTEN OFF IN TH E BOOKS OF THE ASSESSEE. EXPLANATION FOR THE PURPOSES OF THIS CLAUSE,-- (1) 'MONEYS PAYABLE' IN RESPECT OF ANY BUILDING, MA CHINERY, PLANT OR FURNITURE INCLUDES-- 8 I.T.A. NO.2129/MDS/2016 (A) ANY INSURANCE, SALVAGE OR COMPENSATION MONEYS P AYABLE IN RESPECT THEREOF ; (B) WHERE THE BUILDING, MACHINERY, PLANT OR FURNITU RE IS SOLD, THE PRICE FOR WHICH IT IS SOLD, SO, HOWEVER, THAT WHERE THE ACTUAL COST OF A MOTOR CAR IS, IN ACCORDANCE WITH THE PROVISO TO CLAUSE (1) OF SECTIO N 43, TAKEN TO BE TWENTY-FIVE THOUSAND RUPEES, THE MONEYS PAYABLE IN RESPECT OF SUCH MOTOR CAR SHALL BE TAKEN TO BE A SUM WHICH BEA RS TO THE AMOUNT FOR WHICH THE MOTOR CAR IS SOLD OR, AS THE C ASE MAY BE, THE AMOUNT OF ANY INSURANCE, SALVAGE OR COMPENSATION MO NEYS PAYABLE IN RESPECT THEREOF (INCLUDING THE AMOUNT OF SCRAP VALU E, IF ANY) THE SAME PROPORTION AS THE AMOUNT OF TWENTY-FIVE THOUSA ND RUPEES BEARS TO THE ACTUAL COST OF THE MOTOR CAR TO THE AS SESSEE AS IT WOULD HAVE BEEN COMPUTED BEFORE APPLYING THE SAID P ROVISO (2) 'SOLD' INCLUDES A TRANSFER BY WAY OF EXCHANGE OR A COMPULSORY ACQUISITION UNDER ANY LAW FOR THE TIME BEING IN FOR CE BUT DOES NOT INCLUDE A TRANSFER, IN A SCHEME OF AMALGAMATION, OF ANY ASSET BY THE AMALGAMATING COMPANY TO THE AMALGAMATED COMPANY WHERE THE AMALGAMATED COMPANY IS 8AN INDIAN COMPANY OR IN A SC HEME OF AMALGAMATION OF A BANKING COMPANY, AS REFERRED TO I N CLAUSE (C) OF SECTION 5 OF THE BANKING REGULATION ACT, 1949 (10 OF 1949), WITH A BANKING INSTITUTION AS REFERRED TO IN SUB-SECTION ( 15) OF SECTION 45 OF THE SAID ACT, SANCTIONED AND BROUGHT INTO FORCE BY THE CENTRAL GOVERNMENT UNDER SUB-SECTION (7) OF SECTION 45 OF THAT ACT, OF ANY ASSET BY THE BANKING COMPANY TO THE BANKING INSTITU TION. (2) WHERE, IN THE ASSESSMENT OF THE ASSESSEE, FULL E FFECT CANNOT BE GIVEN TO ANY ALLOWANCE UNDER SUB-SECTION (1) IN ANY PREVIOUS YEAR, OWING TO THERE BEING NO PROFITS OR GAINS CHARGEABLE FOR THAT PREVIOUS YEAR, OR OWING TO THE PROFITS OR GAINS CHA RGEABLE BEING LESS THAN THE ALLOWANCE, THEN, SUBJECT TO THE PROVISIONS OF SUB-SECTION (2) OF SECTION 72 AND SUB-SECTION (3) OF SECTION 73, THE ALLOWANCE OR THE PART OF THE ALLOWANCE TO WHICH EFFECT HAS NO T BEEN GIVEN, AS THE CASE MAY BE, SHALL BE ADDED TO THE AMOUNT OF TH E ALLOWANCE FOR DEPRECIATION FOR THE FOLLOWING PREVIOUS YEAR AND DE EMED TO BE PART OF THAT ALLOWANCE, OR IF THERE IS NO SUCH ALLOWANCE FOR THAT PREVIOUS YEAR, BE DEEMED TO BE THE ALLOWANCE FOR THAT PREVIO US YEAR, AND SO ON FOR THE SUCCEEDING PREVIOUS YEARS. 9 I.T.A. NO.2129/MDS/2016 A BARE READING OF SECTION 32 OF THE ACT CLEARLY SAY S THAT DEPRECIATION HAS TO BE ALLOWED WHILE COMPUTING THE TAXABLE INCOME ON BUILDING, MACHINERY, PLANT, ETC. WHICH IS OWNED WHOLLY OR PARTLY BY THE ASSESSEE AND USED FOR THE PURPOSE OF BUSINES S. DEPRECIATION IS NOTHING BUT AN INHERENT DECLINE IN THE VALUE OF THE ASSET FROM WEAR AND TEAR. IN RESPECT OF THE BUSIN ESS ASSETS, THE PARLIAMENT THOUGHT IT FIT IN THEIR WISDOM TO ALLOW DEPRECIATION FOR WEAR AND TEAR OF THE BUILDING, MACHINERY, PLANT, ET C. DEPRECIATION IN CERTAIN CASES IS TREATED AS EXPENDITURE LAID OUT OV ER THE YEARS DURING THE LIFE TIME OF THE MACHINERY. IN OTHER WO RDS, THE VALUE OF THE ASSET, MACHINERY, ETC. REDUCED PRO TANTO . THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE DEPRECIATION IS SPREAD OVER DURING THE EFFECTIVE LIFE TIME OF THE MACHINERY OR ASSET, ETC. USED FOR BUSINESS BY ALLOWING THE SAME AS DEDUCTION ON NOTIONAL BASIS . THE AMOUNT OF DEPRECIATION ALLOWED IN A PARTICULAR YEAR IS INT ENDED TO REPRESENT THE LIFE OF THE MACHINERY SUCH AS EXPENDITURE DURIN G THE ABOVE SAID PERIOD. IN OTHER WORDS, THE VALUE OF THE MACHINERY WAS SPREAD OVER FOR THE EFFECTIVE LIFE TIME OF THE ASSET AND A PROV ISION WAS MADE BY WAY OF NOTIONAL DEDUCTION TO REPLACE THE MACHINERY AFTER EXPIRY OF ITS ENTIRE LIFE TIME. THEREFORE, THE LEGISLATURE PROVI DED DEPRECIATION UNDER SECTION 32 OF THE ACT AS AN INCENTIVE/ALLOWAN CE TO THE ASSET 10 I.T.A. NO.2129/MDS/2016 WHICH WAS USED FOR THE BUSINESS OR PROFESSION. THI S CAN BE CONSTRUED AS REDUCTION IN VALUE IN THE BALANCE SHEE T WHILE COMPUTING THE INCOME FROM BUSINESS OR PROFESSION. 7. SECTION 32(1) OF THE ACT CLEARLY SAYS THAT THE A SSET OWNED WHOLLY OR PARTLY BY THE ASSESSEE AND USED FOR THE PURPOSE OF BUSINESS OR PROFESSION. IN VIEW OF THE LANGUAGE E MPLOYED BY THE PARLIAMENT, THE ASSET USED FOR THE PURPOSE OF BUSIN ESS OR PROFESSION ALONE ELIGIBLE FOR DEPRECIATION.THE INCO ME-TAX ACT DOES NOT PROVIDE FOR DEPRECIATION IN RESPECT OF THE ASSE T OTHER THAN THE ONE WHICH IS USED FOR BUSINESS OR PROFESSION. THERE FORE, IT IS FOR THE ASSESSEE TO ESTABLISH THAT THE ASSESSEE IS CARRYING ON ANY BUSINESS OR PROFESSION. IN THE CASE BEFORE US, THE ADMITTED CASE OF THE ASSESSEE IS THAT THE ASSESSEE IS NOT CARRYING ON AN Y BUSINESS OR PROFESSION. THEREFORE, WHATEVER BE THE NATURE OF T HE ASSET, WHICH WAS USED AS A TOOL FOR CARRYING OUT THE OBJECT OF T HE CHARITABLE INSTITUTION, CANNOT BE CONSTRUED AS AN ASSET WHICH IS USED FOR THE BUSINESS OR PROFESSION OF THE ASSESSEE. THEREFORE, THE ASSESSEE IS NOT ELIGIBLE FOR DEPRECIATION UNDER SECTION 32 OF T HE INCOME-TAX ACT. 8. THE LD.COUNSEL FOR THE ASSESSEE HAS ALSO CLARIFI ED THAT THE ASSESSEE IS NOT CLAIMING DEPRECIATION UNDER SECTION 32 OF THE ACT. 11 I.T.A. NO.2129/MDS/2016 ACCORDING TO THE LD. COUNSEL, THE ASSESSEE IS CLAIM ING DEPRECIATION ON THE COMMERCIAL PRINCIPLE. ON A QUERY FROM THE B ENCH WHAT IS MEANT BY COMMERCIAL PRINCIPLE?, HE CLARIFIED THAT COMPUTATION OF INCOME OF THE TRUST IN A CUSTOMARY METHOD OF ACCOUN TANCY. ON A QUERY FROM THE BENCH, THE LD.COUNSEL HAS ALSO CLARI FIED THAT THERE IS NO CONFLICT BETWEEN THE CUSTOMARY WAY OF COMPUTATIO N OF INCOME AND PROVISIONS OF SECTION 32 OF THE ACT. THIS TRIB UNAL IS OF THE CONSIDERED OPINION THAT SECTION 32 PROVIDES FOR DEP RECIATION ONLY IN RESPECT OF THE ASSET WHICH IS USED FOR THE PURPOSE OF BUSINESS OR PROFESSION. THE COMMERCIAL PRINCIPLE OF COMPUTING INCOME OR THE CUSTOMARY PRACTICE OF COMPUTING INCOME MAY ALSO PRO VIDE FOR DEPRECIATION ONLY IN RESPECT OF COMPUTING BUSINESS OR PROFESSIONAL INCOME. 9. INCOME-TAX ACT PROVIDES FOR PROCEDURE AND METHOD FOR COMPUTING INCOME UNDER DIFFERENT HEADS. DEPRECIATI ON IS PROVIDED UNDER SECTION 32 OF THE ACT WHEN COMPUTING INCOME U NDER THE HEAD INCOME FROM BUSINESS OR PROFESSION. IN RESPECT O F OTHER HEADS, NO DEPRECIATION IS PROVIDED UNDER THE SCHEME OF THE AC T. THE INCOME OF THE TRUST IS EXEMPTED ON APPLICATION AND ACCUMUL ATION AS PROVIDED UNDER THE ACT. IF ANY VIOLATION, THE INCO ME OF THE TRUST IS 12 I.T.A. NO.2129/MDS/2016 LIABLE FOR TAXATION, IN SUCH A CASE, IF THE INCOME IS ASSESSED AS INCOME FROM BUSINESS OR PROFESSION, THE ASSESSEE MA Y BE ELIGIBLE FOR DEPRECIATION. THE ASSESSEE IS CERTAINLY NOT EN TITLED FOR DEPRECIATION, WHEN THE INCOME WAS EXEMPTED ON APPLI CATION OR ACCUMULATION AS PROVIDED UNDER THE SCHEME OF THE AC T. THE CHARITABLE INSTITUTION UNDER THE SCHEME OF INCOME-T AX ACT IS ON A DIFFERENT FOOTING. THE ENTIRE INCOME OF THE ASSESS EE-TRUST FROM THE PROPERTY HELD UNDER TRUST DO NOT FORM PART OF TOTAL INCOME UNDER SECTION 11 OF THE ACT PROVIDED THE SAME IS APPLIED FOR CHARITABLE OBJECT. SECTION 11 OF THE ACT ALSO PROVIDES FOR AC CUMULATION OF 15% OF INCOME FOR FUTURE APPLICATION FOR THE OBJECT OF THE TRUST. THEREFORE, THE BUSINESS AND CHARITABLE INSTITUTION ARE TWO DIF FERENT CATEGORIES IN THE SCHEME OF INCOME-TAX ACT. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE CUSTOMARY WAY OF COMPUTING INCOME OR THE COMMERCIAL PRINCIPLE OF COMPUTING INCOME CANNOT OVE RRIDE THE SPECIFIC PROVISION OF INCOME-TAX ACT. THE INCOME-T AX ACT DOES NOT PROVIDE FOR ALLOWING DEPRECIATION OTHER THAN THE AS SET WHICH WAS USED FOR BUSINESS OR PROFESSION. THERE IS NO OTHER PROVISION IN THE INCOME-TAX ACT OTHER THAN SECTION 32 OF THE ACT FOR ALLOWING DEPRECIATION. THEREFORE, THE CLAIM OF THE ASSESSEE THAT THE DEPRECIATION HAS TO BE ALLOWED ON COMMERCIAL PRINCI PLE OR 13 I.T.A. NO.2129/MDS/2016 CUSTOMARY PRINCIPLE OF COMPUTATION OF INCOME IS CON TRARY TO THE SPECIFIC PROVISION, NAMELY, SECTION 32 OF THE ACT. 10. THE NEXT QUESTION ARISES FOR CONSIDERATION IS W HEN THERE IS A CONFLICT BETWEEN CUSTOMARY PRACTICE, COMMERCIAL PRI NCIPLE AND PROVISIONS OF SECTION 32, WHICH ONE WILL PREVAIL? THE OBVIOUS ANSWER TO THIS QUESTION IS THE STATUTORY PROVISION, NAMELY, SECTION 32 OF THE ACT WILL PREVAIL OVER THE CUSTOMARY PRACT ICE AND COMMERCIAL PRINCIPLE. THEREFORE, EVEN ON CUSTOMARY PRACTICE OR COMMERCIAL PRINCIPLE WHEREBY THE ASSESSEE CLAIMS DE PRECIATION WHILE COMPUTING THE INCOME, SECTION 32 OF THE ACT I S A SPECIFIC PROVISION UNDER INCOME-TAX ACT, WHICH IS CONTRARY T O COMMERCIAL PRINCIPLE OR CUSTOMARY PRACTICE. THEREFORE, THIS T RIBUNAL IS OF THE CONSIDERED OPINION THAT SECTION 32 WILL PREVAIL OVE R THE CUSTOMARY PRACTICE OR COMMERCIAL PRINCIPLE. HENCE, THE ASSES SEE IS NOT ELIGIBLE FOR DEPRECIATION IN RESPECT OF BUILDING, P LANT, MACHINERY, ETC. WHICH ARE NOT USED FOR THE PURPOSE OF BUSINESS OR P ROFESSION. 11. EVEN ASSUMING FOR ARGUMENT SAKE THAT THE ASSESS EE WAS DOING BUSINESS, THEN THE ASSESSEE IS NOT ELIGIBLE F OR EXEMPTION UNDER SECTION 11 OF THE ACT AND AS RIGHTLY SUBMITTE D BY THE LD. DEPARTMENTAL REPRESENTATIVE, THE REGISTRATION UNDER SECTION 12AA 14 I.T.A. NO.2129/MDS/2016 OF THE ACT HAS TO BE CANCELLED UNDER SECTION 12AA(3 ) OF THE ACT. MOREOVER, THE ASSESSEE WILL NOT BE ELIGIBLE FOR EXE MPTION UNDER SECTION 11 OF THE ACT IF IT IS CARRYING ON ANY BUSI NESS ACTIVITY. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINI ON THAT THE ASSESSEE IS NOT ELIGIBLE FOR DEPRECIATION. 12. AS RIGHTLY SUBMITTED BY THE LD. DEPARTMENTAL RE PRESENTATIVE, IN VIEW OF SECTION 11(4) & (4A) OF THE ACT, IF THE PROPERTY HELD UNDER TRUST IS A BUSINESS UNDERTAKING, THEN THE INCOME OF THE BUSINESS UNDERTAKING, WHICH WAS SO HELD AS PROPERTY HELD UND ER TRUST, HAS TO BE COMPUTED BY APPLYING THE PROVISIONS OF INCOME-TA X ACT UNDER CHAPTER IV. WHILE COMPUTING INCOME OF THE BUSINESS UNDERTAKING, ALL EXPENDITURE, INCLUDING DEPRECIATION, HAS TO BE ALLOWED AND THE INCOME OF SUCH BUSINESS UNDERTAKING WHICH WAS HELD UNDER TRUST HAS TO BE ALLOWED AS EXEMPTION UNDER SECTION 11 ON APPLICATION AND ACCUMULATION. IN THIS CASE, AS RIGHTLY SUBMITT ED BY THE LD. D.R., NO BUSINESS UNDERTAKING WAS HELD UNDER TRUST AS PRO VIDED UNDER SECTION 11(4) & (4A) OF THE ACT. THE ASSESSEE IS C LAIMING DEPRECIATION IN RESPECT OF ASSET WHICH WAS USED AS TOOL FOR CARRYING OUT CHARITABLE OBJECT OF THE INSTITUTION. WHEN THE ASSET WAS USED AS TOOL FOR CARRYING OUT THE OBJECT OF THE CHARITABLE INSTITUTION, SUCH 15 I.T.A. NO.2129/MDS/2016 ACTIVITY CANNOT BE CONSTRUED AS A BUSINESS OR PROFE SSION OF THE ASSESSEE. THEREFORE, SECTION 32 OF THE ACT IS NOT APPLICABLE IN THIS CASE. 13. WE HAVE CAREFULLY GONE THROUGH ALL THE JUDGMENT S AND DECISIONS CITED BY THE LD.COUNSEL FOR THE ASSESSEE, WHICH ARE AS UNDER:- 1. DIT V. VISHWAJAGRITI MISSION (2012) 73 DTR (DEL) 195 2. CIT V. MARKET COMMITTEE, PIPLI (2011) 330 ITR 16 (P&H) 3. CIT V. SOCIETY OF SISTERS OF ST.ANNE (1984) 146 ITR 28 (KAR) 4. CIT V. BHORUKA PUBLIC WELFARE TRUST (1999) 240 ITR 513 (CAL) 5. CIT V. TINY TOTS EDUCATION SOCIETY (2011) 330 ITR 21 (P&H) 6. CIT V. SHETHMANILALRANCHHODDASVISHRAMBHAVAN TRUST (1992) 198 ITR 598 (GUJ) 7. CIT V. RAIPUR PALLOTTINE SOCIETY (1989) 180 ITR 579 (MP) 8. CIT V. INSTITUTE OF BANKING PERSONNEL SELECTION (2003) 264 ITR 110 (BOM) 9. DIT(E) V. FRAMJEECAWASJEE INSTITUTE (1993) 109 CTR (BOM) 463 10. DDIT V. LAKSHMI SARASWATHI EDUCATIONAL TRUST ITA NO.452/MDS/2014 CHENNAI ITAT 1 1. APOLLO HOSPITALS EDUCATIONAL TRUST V. DCIT ITA NO.2090/MDS/2012 CHENNAI ITAT 12. SERVICES ASSOCIATION OF SEVENTH DAY ADVENTISTS PVT. LTD. V. ITO ITA NO.1853/MDS/2011 16 I.T.A. NO.2129/MDS/2016 CHENNAI ITAT 13. SERVICES ASSOCIATION OF SEVENTH DAY ADVENTISTS PVT. LTD. V. ITO ITA NO.427/MDS/2012 CHENNAI ITAT 14. ACIT V. MAMALLAN EDUCATIONAL TRUST ITA NO.1808/MDS/2012 CHENNAI ITAT 15. DCIT V. MAMALLAN EDUCATIONAL TRUST ITA NO.91/MDS/2013 CHENNAI ITAT 16. ITO V. SRI RANGANATHAR TRUST ITA NO.1954/MDS/2012 CHENNAI ITAT 17. ITO V. KGISL TRUST ITA NO.1813/MDS/2012 CHENNAI ITAT 18. CIT V. RAO BAHADUR CALAVALACUNNANCHETTY CHARITIES (1982) 135 ITR 485 (MAD) 19. DEVI KARUMARIAMMAN EDUCATIONAL TRUST V. DCIT (EXEMPTIONS) (2015) 60 TAXMANN.COM 439 (MADRAS) 20. ITO V. THE GRD TRUST ITA NO.2537/MDS/2014 CHENNAI ITAT AFTER GOING THROUGH ALL THE JUDGMENTS / DECISIONS, WE FIND THAT THE CONFLICT BETWEEN THE COMMERCIAL PRINCIPLE OR CUSTOM ARY PRACTICE IN COMPUTING INCOME AND THE PROVISIONS OF SECTION 32 W ERE NOT BROUGHT TO THE NOTICE OF THE COURTS / TRIBUNAL. TH EREFORE, THOSE JUDGMENTS / DECISIONS ARE NOT APPLICABLE TO THE FAC TS OF THE CASE. 5. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY, THE S AME IS CONFIRMED. 17 I.T.A. NO.2129/MDS/2016 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED ON 23 RD NOVEMBER, 2016 AT CHENNAI. SD/- SD/- ( . . ! ' ) ( . . . ) (D.S. SUNDER SINGH) (N.R.S. GANESAN) # /ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 1 /DATED, THE 23 RD NOVEMBER, 2016. SP. , *.!2 32'. /COPY TO: 1. () /APPELLANT 2. *+() /RESPONDENT 3. 4. ( )/CIT(A) 4. 4. /CIT, 5. 25 *. /DR 6. & 6 /GF.