The Assistant Commissioner of Income Tax (Exemption) Circle-1, Mangalore V. M/s Catholic Diocesan Society , Bidar

ITA 214/BANG/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7509 (ITAT-BANGALORE)
• Duration Of Justice: 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 01-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PADMA MEENAKSHI
• Assessee Lawyers: EDMOND DSOUZA
• Keywords: Capital asset; Depreciation; Charitable institution; Cost of acquisition; Condonation of delay
• Section: 12A; 32; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH 'B' BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER ITA NO.214/BANG/2017 (ASST. YEAR 2011-12) THE ASST. COMMISSIONER OF INCOME-TAX (EXEMPTIONS), CIRCLE-1, MANGALORE. . APPELLANT VS. M/S CATHOLIC DIOCESAN SOCIETY, OPP: KSRTC BUS STAND VIJAYA NAGAR COLONY, BIDAR. . RESPONDENT PAN - AAAACO515D. APPELLANT BY : SMT. PADMA MEENAKSHI, JCIT RESPONDENT BY : SHRI EDMOND DSOUZA, C.A DATE OF HEARING : 28-09-2017 DATE OF PRONOUNCEMENT : 04-10-2017 O R D E R PER SHRI JASON P BOAZ, ACCOUNTANT MEMBER: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS), GULBAR GA DATED 28/11/2016 FOR ASST. YEAR 2011-12. ITA NO. 214/B/17 2 ORDER ON PETITION FOR CONDONATION OF DELAY IN FILING APPEAL 2.1 AT THE OUTSET, THE LD DR FOR REVENUE INFORMED U S THAT THERE WAS A DELAY OF 1 DAY IN FILING THIS APPEAL BEFORE THE T RIBUNAL. AFTER HEARING BOTH PARTIES, PERUSING AND CAREFULLY CONSID ERING THE REASONS CITED IN THE AFFIDAVIT FILED BY REVENUE AND RESPECT FULLY FOLLOWING THE RATIO OF THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF COLLECTOR, LAND ACQUISITION VS. MST KATIJI & OTHER S (167 ITR 471) (SC), WE ARE OF THE OPINION THAT THIS IS A FIT CASE FOR CONDONATION OF THE DELAY OF 1 DAY IN FILING THE APPEAL AND DO SO. CONSEQUENTLY, THE APPEAL IS ADMITTED FOR ADJUDICATION. O R D E R 3. BRIEFLY STATED, THE FACTS OF THE CASE RELEVANT F OR THIS APPEAL ARE AS UNDER:- 3.1 THE ASSESSEE, A TRUST, REGISTERED U/S 12A OF THE INCOME-TAX ACT 1961 (IN SHORT THE ACT) VIDE ORDER DATED 31/7/198 4, FILED ITS RETURN FOR ASST. YEAR 2011-12 ON 26/8/2011 DECLARING NIL I NCOME AFTER CLAIMING EXEMPTION U/S 11 OF THE ACT. THE CASE WAS TAKEN UP FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED U/S 143(3 ) OF THE ACT VIDE ORDER DATED 13/12/2013 WHEREIN THE ASSESSEES INCOM E WAS DETERMINED AT NIL; AFTER DISALLOWING THE ASSESSEES CLAIM FOR DEPRECIATION ON FIXED ASSETS AMOUNTING TO RS.51,61, 088/-. 3.2 AGGRIEVED BY THE ORDER OF ASSESSMENT DATED 13/1 2/2013 FOR ASST. YEAR 2011-12, THE ASSESSEE WENT IN APPEAL BEF ORE THE CIT(A), GULBARGA. THE LD CIT(A) DISPOSED THE APPEAL VIDE T HE IMPUGNED ITA NO. 214/B/17 3 ORDER DATED 28/11/2016, ALLOWING THE ASSESSEE APPEA L ON THE ISSUE OF ITS CLAIM FOR DEPRECIATION ON FIXED ASSETS BY FOLLO WING THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF DIT (EXEMPTION) VS. AL AMEEN CHARITABLE FUND TRUST (2016) 67 TAXMAN N.COM 160 (KARNATAKA). 4.1 REVENUE, BEING AGGRIEVED BY THE ORDER OF THE CI T(A), MANGALORE DATED 28/11/2016 FOR ASST. YEAR 2011-12, HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL, RAISING THE FOLLOWING G ROUNDS:- 1. THE ORDER OF THE LD. CIT (A) IS OPPOSED TO LAW AND FACTS OF THE CASE. 2.THE LD. CIT(A) HAS ERRED IN ALLOWING THE ASSESSEE 'S CLAIM OF DEPRECIATION AND NOT CONSIDERING THE JUDGM ENT OF THE HON'BLE KERALA HIGH COURT IN THE CASE OF LIS SIE MEDICAL INSTITUTION DT. 17.02.2012. 3.THE LD. CIT(A) HAS ALSO FAILED TO APPRECIATE THE FACT THAT DEPRECIATION IS ADMISSIBLE ONLY IN RESPECT OF ASSETS USED BY THE ASSESSEE FOR THE PURPOSE OF BUSINESS OR PROFESSION. SINCE THE ASSESSEE IS NOT ENGAGED IN BU SINESS BUT UNDERTAKING CHARITABLE/ RELIGIOUS ACTIVITIES, T HE BENEFIT OF DEPRECIATION SHOULD NOT BE AVAILABLE TO IT. 4.CARRY FORWARD OF DEPRECIATION AS RECOMMENDED BY CIT (A) IS NOT ALLOWABLE UNDER LAW. 5.FOR THESE AND SUCH OTHER GROUNDS IT IS URGED THAT THE ORDER OF THE LD. CIT(A), ON THE ABOVE POINTS MAY BE SET ASIDE AND THE ORDER OF THE ASSESSING OFFICER BE RES TORED. ITA NO. 214/B/17 4 6. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEN D ALL OR ANY OF THE GROUNDS OF APPEAL BEFORE OR AT THE TI ME OF THE HEARING OF THE APPEAL. 4.2 THE LD DR FOR REVENUE WAS HEARD IN SUPPORT OF T HE GROUNDS RAISED (SUPRA) AND PLACED STRONG RELIANCE ON THE OR DER OF THE AO IN DISALLOWING THE ASSESSEES CLAIM FOR DEPRECIATION O N FIXED ASSETS IN VIEW OF THE DECISION OF THE HONBLE KERALA HIGH COU RT IN THE CASE OF LISSIE MEDICAL INSTITUTIONS (384 ITR 344) (KAR). 4.3.1 ACCORDING TO THE LD AR FOR THE ASSESSEE, THE ISSUE IN RESPECT OF THE CLAIM OF DEPRECIATION IS COVERED BY THE DECI SION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF DIT(E) VS. AL- AMEEN CHARITABLE TRUST AND OTHERS (383 ITR 517) (KA R) VIDE ORDER DATED 22/2/2016. THE LD AR ALSO, INTER ALIA, PLACED RELIANCE ON THE FOLLOWING DECISIONS OF THE CO-ORDINATE BENCH ES OF THIS TRIBUNAL:- (I) MOOGAMBIGAI CHARITABLE TRUST VS. ADDL. CIT (EXEMPTION) IN ITA NO.1224/BANG/2015 DATED 13/7/201 6; (II) ITO EXEMPTION VS. SHARADDHA TRUST IN ITA NO.899/BANG/2016 DATED 7/4/2017, (III) JYOTHI CHARITABLE TRUST VS. DCIT (EXEMPTION) IN ITA NO.622/BANG/2015 DATED 14/8/2015. 4.3.2 IT WAS SUBMITTED THAT THE ISSUE IN DISPUTE I. E CLAIM OF DEPRECIATION IS ALSO COVERED BY THE ABOVE ORDERS OF THE VARIOUS CO- ORDINATE BENCHES OF THIS TRIBUNAL. ITA NO. 214/B/17 5 4.4.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD, INCLUD ING THE JUDICIAL PRONOUNCEMENTS CITED. WE FIND THAT THE ISSUE OF CL AIM OF DEPRECIATION BY A CHARITABLE TRUST U/S 11 OF THE AC T HAS BEEN CONSIDERED AND HELD IN FAVOUR OF THE ASSESSEE BY VA RIOUS CO- ORDINATE BENCHES OF THIS TRIBUNAL AS CITED (SUPRA) AND ALSO BY THE HONBLE KARNATAKA HIGH COURT, IN THE CASE OF DIT(EX EMPTION) VS. AL-AMEEN CHARITABLE FUND TRUST & OTHERS (383 ITR 51 7) (KAR). IN THE CASE OF MOOGAMBIGAI CHARITABLE AND EDUCATION TRUST VS. ADIT (EXEMPTION), THE CO-ORDINATE BENCH IN ITS ORDE R IN ITA NO.1224/BANG/2015 DATED 13/7/2016 AT PARA 11 THEREO F HAS HELD AS UNDER:- 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WE LL AS THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET, WE NOTE THAT THIS ISSUE HAS BEEN CONSIDERED BY THIS TRIBUNAL IN A SERIES OF DECISIONS. IN THE CASE OF M /S CMR JANARDHANA TRUST (SUPRA), THE TRIBUNAL HAS AGAI N CONSIDERED AND DECIDED THIS ISSUE IN PARAS 15 TO 17 ASUNDER: 15. WE HAVE HEARD THE SUBMISSIONS OF THE ID. OR, W HO RELIED ON THE ORDER OF CIT)A) AND THE DECISION OF T HE HONBLE DELHI HIGH COURT IN THE CASE OF DIT(E) VS. CHARANJIV CHARITABLE TRUST (2014) 83 TAXMANN.COM 300 (DELHI). WE HAVE CONSIDERED THE ORDER OF THE CIT(A). IDENTICAL ISSUE CAME UP FOR CONSIDERATION BEFORE ITAT BANGALORE BENCH IN THE CASE OF DDIT(E) V. ITA NO. 214/B/17 6 CUTCHI MEMON UNION (2013) 60 SOT 260 BANGALORE ITAT, WHEREIN SIMILAR ISSUE HAS BEEN DEALT WITH BY THIS TRIBUNAL, IN THE AFORESAID CASE, THE ASSESSEE CLAIM ED DEPREDATION AND THE AO DENIED DEPRECIATION ON THE GROUND THAT AT THE TIME OF ACQUIRING THE RELEVANT C APITAL ASSET, COST OF ACQUISITION WAS CONSIDERED AS APPLIC ATION OF INCOME IN THE YEAR OF ITS ACQUISITION. THE AO TO OK THE VIEW THAT ALLOWING DEPREDATION WOULD AMOUNT TO ALLOWING DOUBLE DEDUCTION AND PLACED RELIANCE ON TH E DECISION OF HONBLE SUPREME COURT IN ESCORTS LTD. (SUPRA), THE CIT(A) HOWEVER, ALLOWED THE CLAIM OF ASSESSES. ON FURTHER APPEAL BY THE REVENUE, THE TRIBUNAL HELD AS FOLLOWS:- '20. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IF DEPRECIATION IS NOT ALLOWED AS A NECESSARY DEDUCTIO N FOR COMPUTING INCOME OF CHARITABLE INSTITUTIONS, TH EN THERE IS NO WAY TO PRESERVE THE CORPUS OF THE TRUST FOR DERIVING THE INCOME AS IT IS NOTHING BUT A DECREASE IN THE VALUE OF PROPERTY THROUGH WEAR, DETERIORATION, OR OBSOLESCENCE, SINCE INCOME FOR THE PURPOSES OF SECT ION 11)1) HAS TO BE COMPUTED IN NORMAL COMMERCIAL MANNER, THE AMOUNT OF DEPRECIATION DEBITED IN THE BOOKS IS DEDUCTIBLE WHILE COMPUTING SUCH INCOME, IT WAS SO HELD BY THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. SOCIETY OF SISTERS OF ST. ANNE 146 ITR 28 (KAR). IT WAS HELD IN CIT VS. TINY TOTS ITA NO. 214/B/17 7 EDUCATION SOCIETY (2011) 330 ITR 21 (P&H), FOLLOWIN G CIT VS. MARKET COMMITTEE, PIPLI (2011) 330 ITR 16 (P&H) (2011) 238 CTR (P&H) 103 THAT DEPRECIATION CAN BE CLAIMED BY A CHARITABLE INSTITUTION IN DETERMINING PERCENTAGE OF FUNDS APPLIED FOR THE PURPOSE OF CHARITABLE OBJECTS. CLAIM FOR DEPRECIATI ON WILL NOT AMOUNT TO DOUBLE BENEFIT, THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF ESCORTS LTD. 1 99 ITR 43 (SC) HAVE BEEN REFERRED TO AND DISTINGUISHED BY THE HON'BLE COURT IN THE AFORESAID DECISIONS. 21. THE ISSUE RAISED BY THE REVENUE IN THE GROUND O F APPEAL IS THUS NO LONGER RES INTEGRA AND HAS BEEN DECIDED BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. MARKET COMMITTEE, PIPLI, 330 ITR 16 (P&H). THE HON'BLE PUNJAB & HARYANA HIGH COURT AFTER CONSIDERING SEVERAL DECISIONS ON THAT I SSUE AND ALSO THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF ESCORTS LTD. (SUPRA), CAME TO THE CONCL USION THAT DEPRECIATION IS ALLOWABLE ON CAPITAL ASSETS ON THE INCOME OF THE CHARITABLE TRUST FOR DETERMINING THE QUANTUM OF FUNDS WHICH HAVE TO BE APPLIED FOR THE PURPOSE OF TRUSTS IN TERMS OF SECTION 11 OF THE ACT . THE HON'BLE PUNJAB & HARYANA HIGH COURT MADE A REFERENCE TO THE DECISION OF ME HON'BLE SUPREME COU RT IN THE CASE OF ESCORTS LTD. (SUPRA) AND OBSERVED TH AT THE HON'BLE SUPREME COURT WAS DEALING WITH A CASE OF TW O ITA NO. 214/B/17 8 DEDUCTIONS UNDER DIFFERENT PROVISIONS OF THE ACT, O NE U/S. 32 FOR DEPRECIATION AND THE OTHER ON ACCOUNT O F EXPENDITURE OF A CAPITAL NATURE INCURRED ON SCIENTI FIC RESEARCH U/S. 35(1)(IV) OF THE ACT. THE HON'BLE COU RT THEREAFTER HELD THAT A TRUST CLAIMING DEPRECIATION CANNOT BE EQUATED WITH A CLAIM FOR DOUBLE DEDUCTION THE HON'BLE PUNJAB & HARYANA HIGH COURT HAS ALSO MADE A REFERENCE TO THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. SOCIETY OF SISTERS OF ANNE, 146 ITR 28 (KAR), WHEREIN IT WAS H ELD THAT U/S. 11(1) OF THE ACT, INCOME HAS TO BE COMPUT ED IN NORMAL COMMERCIAL MANNER AND THE AMOUNT OF DEPRECIATION DEBITED IN THE BOOKS IS DEDUCTIBLE WHI LE COMPUTING SUCH INCOME. IN VIEW OF THE AFORESAID DECISION ON THE ISSUE, WE ARE OF THE VIEW THAT THE ORDER OF THE CIT(A) ON THE ABOVE ISSUE DOES NOT CALL FOR ANY INTERFERENCE. 22. CONSEQUENTLY, GROUND NO.5 RAISED BY THE REVENUE IS DISMISSED.' 16. IT IS NO DOUBT TRUE THAT THE HON'BLE DELHI HIGH COURT IN THE CASE OF CHARANJIV CHARITABLE TRUST (SU PRA) HAS TAKEN A CONTRARY VIEW BUT THEN WHEN TWO VIEWS A RE POSSIBLE ON AN ISSUE, THE VIEW FAVOURABLE TO THE ASSESSEE HAS TO BE FOLLOWED, THE DECISION OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IS IN FAVOUR OF THE ASSESSEE AND HAS FOLLOWED THE DECISION OF THE ITA NO. 214/B/17 9 HONBLE KARNATAKA HIGH COURT IN THE CASE OF SOCIETY OF SISTERS OF ANNE (SUPRA). THE INTERPRETATION TO THE CONTRARY GIVEN BY THE CIT(A) ON THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF SOCIETY OF SISTERS OF ANNE (SUPRA) CANNOT THEREFORE BE ACCEPTE D. WE MAY ALSO ADD THAT THE LEGAL POSITION HAS SINCE B EEN AMENDED BY A PROSPECTIVE AMENDMENT BY THE FINANCE (NO.2) ACT, 2014 W.E.F 1.4.2015 BY INSERTION OF SUBSECTION (6) TO SECTION 11 OF THE ACT, WHICH READ S AS UNDER:- '(6) IN THIS SECTION WHERE ANY INCOME IS REQUIRED TO BE APPLIED OR ACCUMULATED OR SET APART FOR APPLICATION, THEN, FOR SUCH PURPOSES THE INCOME SHA LL BE DETERMINED WITHOUT ANY DEDUCTION OR ALLOWANCE BY WA Y OF DEPRECIATION OR OTHERWISE IN RESPECT OF ANY ASSE T, ACQUISITION OF WHICH HAS BEEN CLAIMED AS AN APPLICA TION OF INCOME UNDER THIS SECTION IN THE SAME OR ANY OTH ER PREVIOUS YEAR. 17. AS ALREADY STATED, THE AFORESAID AMENDMENT IS PROSPECTIVE AND WILL APPLY ONLY FROM AX. 201546. IN VIEW OF THE ABOVE LEGAL POSITION, WE ARE OF THE VIEW THA T THE ORDER OF THE CIT(A) HAS TO BE REVERSED. CONSEQUENTL Y GROUNDS NO,4 & 5 RAISED BY THE ASSESSEE ARE ALLOWED . THERE IS NO DISPUTE THAT THE AMENDMENT OF SECTION 1 1(6) OF THE ACT BY THE FINANCE ACT, 2014 IS PROSPECTIVE W.EF. 1.42015 AND THEREFORE THE SAID AMENDED PROVISION IS NOT ITA NO. 214/B/17 10 APPLICABLE FOR THE ASSESSMENT YEAR UNDER CONSIDERAT ION. FOLLOWING THE EARLIER DECISIONS OF THIS TRIBUNAL, W E DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AND AGA INST THE REVENUE. 4.4.2 RESPECTFULLY FOLLOWING THE DECISION OF THE HO NBLE KARNATAKA HIGH COURT IN THE CASE OF AL-AMEEN CHARIT ABLE FUND TRUST & OTHERS (383 ITR 517), WHEREIN THE HONBLE H IGH COURT HAS DISTINGUISHED THE DECISION OF THE HONBLE KERAL A HIGH COURT IN LISSIE MEDICAL INSTITUTIONS (SUPRA) AND ALSO FOLLOW ING THE DECISION OF THE CO-ORDINATE BENCH IN THE CASE OF M/S MOOGAM BIGAI CHARITABLE & EDUCATIONAL TRUST, IN ITA NO.1224/BANG /2015 DATED 13/7/2016, WE UPHOLD THE DECISION OF THE LD CIT(A) IN ALLOWING THE ASSESSEES CLAIM FOR DEPRECIATION ON FIXED ASSETS F OR ASST. YEAR 2011-12. CONSEQUENTLY, THE GROUNDS RAISED BY REVEN UE (SUPRA) ON THIS ISSUE ARE DISMISSED. 5. IN THE RESULT, REVENUES APPEAL FOR ASST. YEAR 2 011-12 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH OCTOBER, 2017 . SD/- SD/- (SUNIL KUMAR YADAV) (JASON P BOA Z) JUDICIAL MEMBER ACCOUNTANT MEMB ER BANGALORE DATED : 4/10/2017 VMS ITA NO. 214/B/17 11 COPY TO :1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER SR. PRIVATE SECRETAR Y, ITAT, BANGALORE