Income TAx Officer Exemptions Ward-1 , Mangalore V. M/s Karnataka Education and Charitable Trust , Mangalore

ITA 2167/BANG/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7608 (ITAT-BANGALORE)
• Duration Of Justice: 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 13-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR P V PRADEEP KUMAR
• Keywords: Depreciation; Charitable institution; Tax effect

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A. K. GARODIA , ACCOUNTANT MEMBER ITA NO. 21 67 /BANG/201 7 ASSESSMENT YEAR : 20 1 1 - 1 2 THE INCOME-TAX OFFICER (EXEMPTIONS), WARD-1, MANGALORE. VS. M/S. KARNATAKA EDUCATION AND CHARITABLE TRUST, NO.1, KECT TOWER, URWA, MANGALORE. PAN : A A ATK 5073 H APPELLANT RESPONDENT REVENUE BY : DR. P. V. PRADEEP KUMAR, ADDL. CIT ASSESSEE BY : NONE DATE OF HEARING : 2 5 . 0 6 .201 8 DATE OF PRONOUNCEMENT : 20 . 0 7 .201 8 O R D E R PER SUNIL KUMAR YADAV, JUDICIAL MEMBER THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A), INTER ALIA , ON FOLLOWING GROUNDS: 1. THE ORDER OF THE LD. CIT (A) IS OPPOSED TO LAW AND FACTS OF THE CASE. 2. DEPRECIATION :- 2.1 THE LEARNED CIT(A) ERRED IN ALLOWING ASSESSEE'S CLAIM FOR DEPRECIATION ON ASSETS PUT INTO USE DURING THE ACCOUNTING YEAR RELEVANT TO THE ASSESSMENT YEAR, EVEN THOUGH THE ENTIRE COST OF THESE ASSETS HAS BEEN CLAIMED BY THE ASSESSEE AS APPLICATION OF INCOME FOR CHARITABLE ACTIVITIES. 2.2 THE LEARNED CIT(A) ERRED IN NOT FOLLOWING THE RATIO LAID DOWN BY THE HON'BLE APEX COURT IN THE CASE OF ESCORTS LTD AND ANR VS UNION OF INDIA 199 ITR 43 ITA NO. 2167/BANG/2017 PAGE 2 OF 4 WHEREIN IT IS HELD THAT DOUBLE DEDUCTION CANNOT BE PRESUMED UNLESS SPECIFICALLY PROVIDED FOR BY LAW. 2.3 THE LEARNED CIT(A) FAILED TO TAKE COGNIZANCE OF THE FACT THAT ALLOWING THE TOTAL COST OF THE ASSET AS AN APPLICATION OF INCOME AND ALLOWING DEPRECIATION ON THE VALUE OF SUCH ASSETS IN THE SAME YEAR RESULTS IN DOUBLE DEDUCTION AND IT IS NOT AS PER THE PROVISIONS OF THE INCOME TAX ACT. 2.4 THE LEARNED CIT(A) ERRED IN NOT FOLLOWING THE RATIO LAID DOWN BY THE HON'BLE KERALA HIGH COURT IN THE CASE OF LISSIE MEDICAL INSTITUTION ITA NO. 42 OF 2011 DATED 17.02.2012 WHEREIN IT IS HELD THAT IN ORDER TO REFLECT THE TRUE INCOME AVAILABLE FOR APPLICATION FOR CHARITABLE PURPOSES, THE ASSESSEE SHOULD WRITE BACK IN THE ACCOUNTS THE DEPRECIATION AMOUNT TO FORM PART OF THE INCOME TO BE ACCOUNTED FOR APPLICATION FOR CHARITABLE PURPOSES. 2.5 THE ORDER OF LEARNED CIT(A) MAY BE SET ASIDE AND THAT OF AO BE RESTORED BY PLACING RELIANCE OF THE RECENT JUDGMENT OF HON'BLE HIGH COURT OF DELHI IN THE CASE OF DIT(EXEMPTION) VS. CHARANJIV CHARITABLE TRUST DT. 18.03.2014 IN ITA NO. 321 TO 323/ 2013 WHEREIN IT IS HELD THAT TRIBUNAL WAS NOT JUSTIFIED IN DIRECTING THE ALLOWANCE OF DEPRECIATION IN RESPECT OF ASSETS, THE COST OF WHICH HAS BEEN ALLOWED AS DEDUCTION AS APPLICATION OF INCOME OF THE TRUST. 3. CARRY FORWARD AND SET OFF OF UNABSORBED DEFICIT:- 3.1 THE LEARNED CIT(A) ERRED IN DIRECTING THE AO TO ALLOW CARRY FORWARD OF UNABSORBED DEFICIT, WHEN THERE IS NO PROVISION IN THE INCOME TAX ACT TO ALLOW CARRY FORWARD OF SUCH DEFICIT. 3.2 THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT SECTIONS 70 TO 80 OF THE INCOME TAX ACT DEAL WITH CARRY FORWARD & SET OFF OF 'LOSS' & NOT EXCESS EXPENDITURE. THE LEARNED CIT (A) ERRED IN NOT SPECIFYING THE PROVISIONS OF THE INCOME TAX ACT WHILE DIRECTING THE AO TO ALLOW CARRY FORWARD OF DEFICIT. 4. 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 RESTORED. 5. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND ALL OR ANY OF THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF THE HEARING OF THE APPEAL. 2. AT THE OUTSET, IT IS OBSERVED THAT THE TAX EFFECT INVOLVED IN THIS APPEAL IS BELOW RS.20 LAKHS. THE CBDT, WITH A VIEW TO REDUCE UNNECESSARY LITIGATION ON THEIR PART, HAS ISSUED A CIRCULAR NO. 3/2018 DATED 11 TH JULY, 2018, WHEREIN THEY HAVE REVISED THE MONETARY LIMITS FOR FILING OF APPEALS BY THE DEPARTMENT BEFORE THE INCOME TAX APPELLATE TRIBUNAL, HIGH COURTS AND SUPREME COURT. INSOFAR AS THE TRIBUNAL IS CONCERNED, THE MONETARY LIMIT SPECIFIED THEREIN IS RS.20 LAKHS AND THE CONCERNED AUTHORITY HAS TO WITHDRAW ITS APPEAL OR IT NEED NOT PRESS THE SAME IF TAX EFFECT IN THAT APPEAL IS LESS THAN RS.20 LAKHS. IT IS FURTHER SPECIFIED THAT THE TAX EFFECT INDICATED THEREIN IS APPLICABLE TO ALL PENDING APPEALS, THOUGH THEY ARE FILED BY THE REVENUE ITA NO. 2167/BANG/2017 PAGE 3 OF 4 PRIOR TO THE ISSUANCE OF THE SAID CIRCULAR. IT WAS ALSO CLARIFIED THAT THE ASSESSING OFFICER HAS TO CALCULATE THE TAX EFFECT SEPARATELY FOR EVERY ASSESSMENT YEAR IN RESPECT OF THE DISPUTED ISSUE/S IN THE CASE OF EVERY ASSESSEE. IF, IN THE CASE OF AN ASSESSEE, THE DISPUTED ISSUE ARISES IN MORE THAN ONE YEAR(S), APPEAL(S) CAN BE FILED IN RESPECT OF SUCH ASSESSMENT YEAR(S) IN WHICH TAX EFFECT IN RESPECT OF THE DISPUTED ISSUE EXCEEDS THE MONETARY LIMIT SPECIFIED. IN OTHER WORDS, IF THERE ARE A NUMBER OF YEARS, IF THE TAX EFFECT IS LESS THAN THE SPECIFIED LIMIT IN ONE YEAR, APPEAL CANNOT BE FILED OR THE SAME HAS TO BE WITHDRAWN FOR THAT YEAR, FOR WANT OF TAX EFFECT. HOWEVER, AN EXCEPTION IS MADE TO THIS DIRECTION WITH REGARD TO A COMBINED ORDER PASSED BY THE FIRST APPELLATE AUTHORITY. IF IN ONE OF THE YEARS THE TAX EFFECT IS MORE THAN RS.20 LAKHS AND THE REVENUE DECIDES TO FILE AN APPEAL, IN RESPECT OF OTHER YEARS COVERED BY THE SAID ORDER ALSO, REVENUE IS ELIGIBLE TO FILE APPEAL, EVEN THOUGH THE TAX EFFECT IN EACH OF THOSE YEARS IS LESS THAN RS.20 LAKHS. IT WAS ALSO CLARIFIED THAT MERELY BECAUSE THE APPEAL IS DISMISSED FOR WANT OF TAX EFFECT, IT DOES NOT COME IN THE WAY OF THE DEPARTMENT IN FILING APPEAL FOR OTHER YEARS(S), AND IT DOES NOT MEAN THAT THE DEPARTMENT HAS ACQUIESCED THE ISSUE. 3. THE ABOVE CIRCULAR WAS SPECIFICALLY MADE APPLICABLE TO ALL PENDING APPEALS. IN THE PRESENT CASE, THE TAX EFFECT ON THE ADDITION IN DISPUTE, WHICH WAS DELETED BY THE CIT(A) BY THE IMPUGNED ORDER IS INDISPUTABLY BELOW 20LAKHS. 4. THE LEGISLATURE IN ITS WISDOM HAS INTRODUCED SECTION 268A OF THE INCOME TAX ACT, 1961, WHEREBY THE BOARD IS EMPOWERED TO ISSUE ORDERS/INSTRUCTIONS/DIRECTIONS TO THE INCOME-TAX AUTHORITIES, FIXING THE MONETARY LIMITS FOR THE PURPOSE OF REGULATING THE FILING OF APPEALS. IN THE LIGHT OF THE CIRCULAR DATED 11.07.2018, ISSUED BY THE CBDT IN EXERCISE OF THE POWERS CONFERRED IN IT BY SUBSECTION (1) OF SECTION 268A, WE ARE OF THE VIEW THAT THE APPEAL FILED HEREIN SHOULD NOT HAVE BEEN PRESSED BY THE REVENUE. THE LEARNED DEPARTMENTAL REPRESENTATIVE FAIRLY ADMITTED THAT THE REVENUE EFFECT IN THIS APPEAL IS LESS THAN THE PRESCRIBED LIMIT IN PARA-3 OF THE ABOVE CIRCULAR ISSUED BY THE CBDT. HAVING REGARD TO THE CIRCUMSTANCES OF THE CASE, WE DISMISS THE APPEALS OF THE REVENUE. ITA NO. 2167/BANG/2017 PAGE 4 OF 4 5. HOWEVER, THE REVENUE IS AT LIBERTY TO MOVE APPROPRIATE APPLICATION/PETITION IN CASE IT IS FOUND THAT THE CASE IS COVERED BY ONE OF THE EXCEPTION(S) CARVED OUT IN THE SAID CIRCULAR. 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 20 TH DAY OF JULY, 2018. SD/- SD/- BANGALORE. DATED: 20 TH JULY, 2018. /NS/* COPY TO: 1. APPELLANTS 2. RESPONDENT 3. 5. CIT GUARD FILE 4. DR BY ORDER SR. PRIVATE SECRETARY, ITAT, BANGALORE. ( A. K. GARODIA ) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER