M/s Sanjoe Hospital, Perumbavoor V. Th DDIT, Cochin

ITA 214/COCH/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5339 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 17-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A DHANARAJ
• Assessee Lawyers: T K MATHEWCA
• Keywords: Depreciation; Charitable institution
• Section: 143(3); 12A; 32; 12; 28; 11

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI CHANDRA POOJARI , AM & GEORGE GEORGE K., JM I.T.A. NOS.214&215/COCH/2017 ASSESSMENT YEAR S : 2011 - 12 & 2012 - 13 M/S. SANJOE HOSPITAL, A.M. ROAD, PERUMBAVOOR, KOCHI-683 542. [PAN : AAHFS 9533M] VS. THE DY. DIRECTOR OF INCOME - TAX (EXEMPTION), RANGE-4, KOCHI. (ASSESSEE - APPELLANT) (REVENUE - RESPONDENT) A SSESSEE BY SHRI T.K. MATHEW,CA REVENUE BY SHRI A. DHANARAJ, SR. DR D ATE OF HEARING 12 / 0 6 /2018 DATE OF PRONOUNCEMENT 12 / 0 6 /2018 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THESE TWO APPEALS FILED BY THE ASSESSEE ARE DIR ECTED AGAINST DIFFERENT ORDERS OF THE CIT(A)-III, KOCHI DATED 29/03/2017 AND PERTA IN TO THE ASSESSMENT YEARS 2011-12 AND 2012-13. 2. SINCE THE ISSUE INVOLVED IN THESE TWO APPEALS IS IDENTICAL, THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON O RDER. THE ONLY ISSUE FOR OUR CONSIDERATION IS WITH REGARD TO THE ALLOWABILIT Y OF DEPRECIATION AS APPLICATION OF INCOME WHILE COMPUTING THE EXEMPTION U/S. 11 OF THE I.T. ACT. I.T.A. NOS.214&215/C/2017 2 3. THE ASSESSEE IS A CHARITABLE TRUST REGISTERED U/S. 12A OF THE IT ACT RUNNING A HOSPITAL AS WELL AS NURSING SCHOOL, NURSING COLLEGE ETC. THE TRUST HAD FILED ITS RETURN OF INCOME FOR THE AYS 2011-12 AND 2012-13 O N 11/03/2013. THE RETURNS WERE SELECTED FOR SCRUTINY AND ASSESSMENT ORDER U/S . 143(3) WAS PASSED ON 21/03/2014 WHEREIN THE ASSESSING OFFICER INVOKED TH E PROVISIONS OF SECTION 11(4A) OF THE I.T. ACT AND ARRIVED AT TAXABLE INCOM E OF RS.31,43,515/- AND RS.31,56,715/- FOR THE AYS 2011-12 AND 2012-13 RE SPECTIVELY. 4. ON APPEAL, THE CIT(A), BY RELYING ON THE DECI SION OF THE HIGH COURT OF KERALA IN THE CASE OF LISSIE MEDICAL INSTITUTION (348 ITR 344), DIRECTED THE ASSESSING OFFICER TO RE-COMPUTE THE INCOME OF THE ASSESSEE FO R BOTH THE ASSESSMENT YEARS. 5. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. THE LD. AR REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. THE LD. DR RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. WE ARE OF THE OPINION THAT THIS ISSUE IS COVERED BY THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF CIT VS. RAJASTHAN AND GUJARATI CHARITABLE F OUNDATION POONA (402 ITR 441) WHEREIN IT WAS HELD AS UNDER: I.T.A. NOS.214&215/C/2017 3 IN THE CASE OF COMMISSIONER OF INCOME TAX VS. INST ITUTE OF BANKING PERSONNEL SELECTION, IT WAS HELD THAT SECTION 11 MA KES PROVISION IN RESPECT OF COMPUTATION OF INCOME OF THE TRUST FROM THE PROPERT Y HELD FOR CHARITABLE OR RELIGIOUS PURPOSES AND IT ALSO PROVIDES FOR APPLICA TION AND ACCUMULATION OF INCOME. ON THE OTHER HAND, SECTION 28 DEALS WITH C HARGEABILITY OF INCOME FROM PROFITS AND GAINS OF BUSINESS AND SECTION 29 P ROVIDES THAT INCOME FROM PROFITS AND GAINS OF BUSINESS SHALL BE COMPUTED IN ACCORDANCE WITH SECTION 30 TO SECTION 43C. THAT, SECTION 32(1) PROVIDES FOR DE PRECIATION IN RESPECT OF BUILDING, PLANT AND MACHINERY OWNED BY THE ASSESSEE AND USED FOR BUSINESS PURPOSES. IT FURTHER PROVIDES FOR DEDUCTION, SUBJE CT TO SECTION 34. IN THAT MATTER ALSO, A SIMILAR ARGUMENT, AS IN THE PRESENT CASE, WAS ADVANCED ON BEHALF OF THE REVENUE, NAMELY, THAT DEPRECIATION CA N BE ALLOWED AS DEDUCTION ONLY U/S. 32 AND NOT UNDER GENERAL PRINCIPLES. COU RT REJECTED THIS ARGUMENT. IT WAS HELD THAT NORMAL DEPRECIATION CAN BE CONSIDE RED AS A LEGITIMATE DEDUCTION IN COMPUTING THE REAL INCOME OF THE ASSES SEE ON GENERAL PRINCIPLES OR UNDER SECTION 11(1)(A). COURT REJECTED THE ARGUM ENT ON BEHALF OF THE REVENUE THAT SECTION 32 WAS THE ONLY SECTION GRANTI NG BENEFIT OF DEDUCTION ON ACCOUNT OF DEPRECIATION. IT WAS HELD THAT INCOME O F A CHARITABLE TRUST DERIVED FROM BUILDING, PLANT AND MACHINERY AND FURN ITURE WAS LIABLE TO BE COMPUTED IN NORMAL COMMERCIAL MANNER ALTHOUGH THE T RUST MAY NOT BE CARRYING ON ANY BUSINESS AND THE ASSETS IN RESPECT WHEREOF DEPRECIATION IS CLAIMED MAY NOT BE BUSINESS ASSETS. IN ALL SUCH CA SES, SECTION 32 PROVIDING FOR DEPRECIATION FOR COMPUTATION OF INCOME DERIVED FROM BUSINESS OR PROFESSION IS NOT APPLICABLE. HOWEVER, THE INCOME OF THE TRUST IS REQUIRED TO BE COMPUTED U/S. 11 ON COMMERCIAL PRINCIPLES AFTER PROVIDING FOR ALLOWANCE FOR NORMAL DEPRECIATION AND DEDUCTION THEREOF FROM GROSS INCOME OF THE TRUST. IN VIEW OF THE AFORESTATED JUDGMENT OF THE BOMBAY HIGH COURT, SUPREME COURT ANSWERED QUESTION NO. 1 IN THE AFFIRM ATIVE I.E., IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT. NORMAL DEP RECIATION COULD BE CONSIDERED AS LEGITIMATE DEDUCTION IN COMPUTING REA L INCOME OF ASSESSEE ON GENERAL PRINCIPLES OR U/S. 11(1)(A).S 7. ACCORDINGLY, NORMAL DEPRECIATION IS TO BE CONSIDERE D AS DEDUCTION IN COMPUTING THE INCOME OF THE ASSESSEE WHILE GRANTING EXEMPTION U/S. 11 OF THE I.T. ACT. I.T.A. NOS.214&215/C/2017 4 8. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THI S 12 TH JUNE, 2018. SD/- SD/- ( GEORGE GEORGE K.) (CHAN DRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: DATED: 12 TH JUNE, 2018 GJ COPY TO: 1. M/S. SANJOE HOSPITAL, A.M. ROAD, PERUMBAVOOR, KO CHI-683 542. 2. THE DEPUTY DIRECTOR OF INCOME-TAX (EXEMPTION), KO CHI. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS)-III, KO CHI 4. THE PR. COMMISSIONER OF INCOME-TAX, KOCHI 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRA R) I.T.A.T. , COCHIN