The DCIT (Exemptions), Circle-1, Ahmedabad V. M/s. K.J. Mehta T.B. Hospital, Bhavnagar

ITA 2198/AHD/2016

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4130 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 5 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 17-02-2020
• Assessment Year: 2011-2012
• Appeal Filed On: 24-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SU RENDRA KUMAR
• Assessee Lawyers: SANJAY SHAH
• Keywords: Depreciation; Charitable institution; Set aside
• Section: 271(1)(c); 143(3); 6; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH (BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER) ITA. NO: 2198/AHD/2016 (ASSESSMENT YEAR: 2011-12) DEPUTY COMMISSIONER OF INCOME-TAX(EXEMPTIONS), CIRCLE-1, AHMEDABAD V/S K.J. MEHTA T.B. HOSPITAL AMARGADH, BHAVNAGAR- 364210 (APPELLANT) (RESPONDENT) PAN: AAATK3503E APPELLANT BY : SHRI SURENDRA KUMAR, CIT/ DR RESPONDENT BY : SHRI SANJAY SHAH, A.R. ( )/ ORDER DATE OF HEARING : 17 -02-202 0 DATE OF PRONOUNCEMENT : 19 -02-2020 PER MAHAVIR PRASAD, JUDICIAL MEMBER 1. THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF THE LD. CIT(A)-9, AHMEDABAD DATED 07.06.2016 PERTAINING TO A.Y. 2011-12 AND FOLLOWING GROUND HAS BEEN TAKEN: ITA NO. 2198 /AHD/2016 . A.Y. 2011-1 2 2 1 ) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE IS THE LD. CIT(A) JUSTIFIED IN DELETING THE PENALTY OF RS. 2,58,60,50 07- LEVIED U/S. 271(1)(C) OF THE IT ACT BY THE A.O. 2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME- TAX (APPEALS) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 3) IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) MAY BE SET ASIDE AND THAT OF THE ASSESSIN G OFFICER BE RESTORED. 2. FACTS OF THE CASE ARE THAT ASSESSEE IS A TRUST. DUR ING THE COURSE OF RE- ASSESSMENT PROCEEDING, CERTAIN DETAILS WERE NOT FUR NISHED IN SUPPORT OF THE CLAIM AND ORDER GIVING EFFECT TO THE LD. CIT(A), AH MEDABAD WAS PASSED TAXING VARIOUS RECEIPTS/ACCOUNTS/FUNDS RECEIVED BY THE ASS ESSEE TRUST. 3. AMPLE OPPORTUNITIES WERE GRANTED TO THE TRUST TO FU RNISH DETAIL IN SUPPORT OF THE EXEMPTION CLAIMED IN VIEW OF THE ORDER PASSED B Y THE LD.CIT(A), AHMEDABAD BUT ASSESSEE HAS NOT FURNISHED THE DETAIL S. THEN ASSESSING OFFICER FINALIZE THE ORDER RE-COMPUTING THE INCOME OF THE A SSESSEE TRUST AS UNDER: INCOME AS PER U/S 143(3) DT, 30.12,2011 RS. 1 6,38,060/- ADD:-L) AS PER INCOME & EXPENDITURE - CENTRAL ACCO UNTS RS. 41,99,297/-. ADD:-2) AS PER INCOME & EXPEDITURE - TB RISK FUND . RS. 4,47,024/- ADD;-3) AS PER INCOME & EXPENDITURE- ENDOWMENT 35 C. RS. 1,201/- ADD:-4) AS PER INCOME & EXPENDITURE HOSPITAL A CCOUNT. RS. 4,55,17,403/- ADD;-5) CLAIM OF DEPRECIATION IS DISALLOWED. RS. 8,05,084/- TOTAL IN COME RS. 5,26,08,069/- AND IMPOSED PENALTY OF RS. 17774000/-. ITA NO. 2198 /AHD/2016 . A.Y. 2011-1 2 3 4. AGAINST THE SAID PENALTY APPEAL, ASSESSEE PREFERRED FIRST STATUTORY APPEAL BEFORE THE LD. CIT(A) WHO GRANTED RELIEF TO THE ASSESSEE A ND DIRECTED ASSESSING OFFICER TO CANCEL THE PENALTY. 5. NOW REVENUE HAS COME BEFORE US BY WAY OF SECOND STA TUTORY APPEAL. 6. AT THE OUTSET, LD. A.R. SHRI SANJAY KUMAR STATED TH AT IN QUANTUM PROCEEDING, RELIEF HAS BEEN GRANTED BY THE ITAT, AHMEDABAD IN I TA NO. 221/AHD/2017 WHEREIN APPEAL OF THE REVENUE WAS DISMISSED BY THE TRIBUNAL. 7. ON THE OTHER HAND, LD. D.R. HAS NOTHING TO CONTROVE RT SUBMISSION OF THE LD. A.R. 8. ITAT, AHMEDABAD DISMISSED THE APPEAL OF THE REVENUE IN QUANTUM PROCEEDING ON 31.01.2020 WITH FOLLOWING OBSERVATION S: 13. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD INCLUDI NG THE JUDICIAL PRONOUNCEMENTS CITED AND PLACED RELIANCE UPON. INST ANT ISSUE BEFORE US RELATES TO THE AMOUNT OF DEPRECIATION WHETHER IT SHOULD BE TREATED AS APPLICATION OF INCOME FOR CHARITABLE PURPOSE UNDER SECTION 11(1)(A ) OF THE ACT. INDEED, THERE IS AN AMENDMENT UNDER THE PROVISION OF SECTION 11(6) O F THE ACT WHEREBY IT WAS PROVIDED THAT THE DEPRECIATION IN RESPECT OF FIXED ASSETS IS NOT TO BE TREATED AS APPLICATION OF INCOME. IT IS IMPORTANT TO REFER THE SAID SECTION WHICH IS EXTRACTED AS UNDER: INCOME FROM PROPERTY HELD FOR CHARITABLE OR RELIG IOUS PURPOSES. 11.(1) SUBJECT TO THE PROVISIONS OF SECTION 60 TO 6 3, THE FOLLOWING INCOME SHALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE PR EVIOUS YEAR OF THE PERSON IN RECEIPT OF THE INCOME- (2) (3) ITA NO. 2198 /AHD/2016 . A.Y. 2011-1 2 4 (4) .. (5) [(6) IN THIS SECTION WHERE ANY INCOME IS REQUIRED T O BE APPLIED OR ACCUMULATED OR SET APART FROM APPLICATION, THEN, FO R SUCH PURPOSES THE INCOME SHALL BE DETERMINED WITHOUT ANY DEDUCTION OR ALLOWANCE BY WAY OF DEPRECIATION OR OTHERWISE IN RESPECT OF ANY ASSE T, ACQUISITION OF WHICH HAS BEEN CLAIMED AS AN APPLICATION OF INCOME UNDER THIS SECTION IN THE SAME OR ANY OTHER PREVIOUS YEAR. 13.1 FROM THE ABOVE AMENDED PROVISION THERE REMAINS NO AMBIGUITY THAT THE DEPRECIATION SHOULD NOT BE TREATED AS APPLICATION O F INCOME WITH RESPECT TO THE ASSETS, THE COST OF WHICH HAS BEEN CLAIMED AS AN AP PLICATION OF INCOME UNDER THE PROVISION OF SECTION 11(1)(A) OF THE ACT. IT IS ALS O UNDISPUTED FACT THAT SUCH AMENDMENT IN SECTION 11(6) OF THE ACT IS PROSPECTIV E IN NATURE AND THEREFORE IT CANNOT BE APPLIED TO THE EARLIER YEARS I.E. THE YEA R UNDER CONSIDERATION. 13.2 THUS THE VIEW TAKEN BY THE HON'BLE JURISDICTIO NAL HIGH COURT IN THE CASE OF CIT VS. SHETH MANILAL RANCHHODDAS VISHARAM BHAVAN T RUST REPORTED IN 198 ITR 598 FOR THE TREATING THE DEPRECIATION AS APPLICATIO N OF INCOME IS SQUARELY APPLICABLE TO THE PRESENT FACTS OF THE CASE. THE RE LEVANT EXTRACT OF THE JUDGMENT IS REPRODUCED AS UNDER: IN THE CASE OF CIT V. RAO BAHADUR CALAVALA CUNNAN C HETTY CHARITIES [1982] 135 ITR 485, THE MADRAS HIGH COURT HELD THAT THE I NCOME FROM THE PROPERTIES HELD UNDER TRUST WOULD HAVE TO BE ARRIVE D AT IN THE NORMAL COMMERCIAL MANNER WITHOUT CLASSIFICATION UNDER THE VARIOUS HEADS SET OUT IN SECTION 14. IT HELD THAT THE EXPRESSION 'INCOME' HAS TO BE UNDERSTOOD IN THE POPULAR OR GENERAL SENSE AND NOT IN THE SENSE I N WHICH THE INCOME IS ARRIVED AT FOR THE PURPOSE OF ASSESSMENT TO TAX BY APPLICATION OF SOME ARTIFICIAL PROVISIONS EITHER GIVING OR DENYING DEDU CTION. IT OBSERVED THAT THE COMPUTATION UNDER THE DIFFERENT CATEGORIES OR H EADS ARISES ONLY FOR THE PURPOSE OF ASCERTAINING THE TOTAL INCOME FOR TH E PURPOSES OF CHARGE. THOSE PROVISIONS CANNOT BE INTRODUCED TO FIND OUT W HAT THE INCOME DERIVED FROM THE PROPERTY HELD UNDER TRUST TO BE EX CLUDED FROM THE TOTAL INCOME IS, FOR THE PURPOSE OF THE EXEMPTIONS UNDER CHAPTER III. FOLLOWING THE AFORESAID DECISION IN THE INSTANT CASE THE TRIB UNAL WAS JUSTIFIED IN HOLDING THAT HAVING REGARD TO THE SCHEME OF THE ACT , 'INCOME' REFERRED TO IN SECTION 11 (1)(A) WAS NOT TO BE COMPUTED NOT IN ACCORDANCE WITH THE PROVISIONS OF THE ACT BUT IN ACCORDANCE WITH THE NO RMAL RULES OF THE ITA NO. 2198 /AHD/2016 . A.Y. 2011-1 2 5 ACCOUNTANCY UNDER WHICH THE DEPRECIATION HAS TO BE ALLOWED WHILE COMPUTING SUCH INCOME UNDER SECTION 11(1)(A). 13.3 RELYING ON THE SAME IN THIS REGARD, WE DO NOT FIND ANY REASON TO INTERFERE IN THE FINDING OF THE LEARNED CIT (A). ACCORDINGLY WE UPHOLD THE SAME. HENCE THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 14. THE ISSUE RAISED BY THE REVENUE IN GROUND NO. 3 AND 4 ARE GENERAL AND THEREFORE NO SEPARATE ADJUDICATION IS REQUIRED FOR THE SAME. HENCE, WE DISMISS THE SAME. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS DI SMISSED. 9. SINCE APPEAL OF THE REVENUE HAS BEEN DISMISSED BY T HE ITAT AND PENALTY APPEAL IS CONSEQUENTIAL TO THE QUANTUM APPEAL NOW N OTHING REMAINS IN SUPPORT OF THE REVENUE. THEREFORE, WE DISMISS THE APPEAL OF THE REVENUE. 10. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMI SSED. ORDER PRONOUNCED IN OPEN COURT ON 19 - 02- 2020 SD/- SD/- (PRADIP KUMAR KEDIA) (MAHAVIR PRASAD) ACCOUNTANT MEMBER TRUE COPY JUDICIAL MEMBER AHMEDABAD: DATED 19/02/2020 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD