Asst. Director of Income-tax (Exemptions)-I, Hyderabad V. Henery Martin Institute International Centre for Research Interfaith Relation & Reconciliation, Hyderabad

ITA 220/HYD/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66265 (ITAT-HYDERABAD)
• Duration Of Justice: 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 10-02-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Depreciation; Charitable institution
• Section: 12; 28; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER I.T.A. NO. 220/HYD/2012 ASSESSMENT YEAR 2004-05 THE ADIT (EXEMPTIONS)-I HYDERABAD V. M/S. HENRY MARTIN INSTITUTE INTERNATIONAL CENTRE FOR RESEARCH, INTERFAITH RELATION & RECONCILIATION, HYDERABAD PAN: AABCH0374C APPELLANT RESPONDENT APPELLANT BY: SRI M.H. NAIK RESPONDENT BY: SRI B.R. MAHESH DATE OF HEARING: 30.08.2012 DATE OF PRONOUNCEMENT: 07.09.2012 O R D E R PER CHANDRA POOJARI, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-IV, HYDERABAD DATED 30.11.2011 FOR AS SESSMENT YEAR 2004-05. 2. THE REVENUE RAISED THE FOLLOWING GROUNDS: (I) THE ORDER OF THE LEARNED CIT(APPEALS) IS NOT ACCEPTABLE AS IT IS ERRONEOUS BOTH IN LAW AND ON FA CTS. (II) THE LEARNED CIT (APPEALS) OUGHT TO HAVE SUSTAINED T HE DISALLOWANCE OF DEPRECIATION ON THE FACTS OF THE CA SE AND IN LIGHT OF DECISION OF THE SUPREME COURT IN TH E CASE OF ESCORTS LTD., &, ANOTHER VS. UNION OF INDIA (199 ITR 44). (III) THE LEARNED CIT(APPEALS) ERRED IN HOLDING THAT THE DECISION OF THE APEX COURT IN ESCORTS LIMITED, IS N OT ACCEPTABLE TO TRUSTS AS THE INCOME IS NOT REQUIRED TO BE COMPUTED IN TERMS OF SEC. 28 TO 44 OF THE I.T. A CT, 1961, BUT IS REQUIRED TO BE COMPUTED IN ACCORDANCE WITH SEC. 11 TO 13 OF THE I.T. ACT, 19 (IV) THE LEARNED CIT(APPEALS) ERRED IN HOLDING THAT THE RECEIPTS UNSPENT WERE PROPERLY TAKEN TO LIABILITIES WITHOUT GOING INTO THE CORRECTNESS OF SUCH CLAIM AN D I.T.A. NO. 220/HYD/2012 M/S. HENRY MARTIN INSTITUTE ... ======================= 2 ONLY BASED ON THE METHOD OF ACCOUNTING SYSTEM FOLLOWED BY THE ASSESSEE IN THE PAST. (V) THE LEARNED CIT(APPEALS) OUGHT TO HAVE UPHELD THE ASSESSMENT TO THE EFFECT THAT THE MONIES UN SPENT DURING THE YEAR SHOULD BE TAKEN TO RECEIPTS ON THE FACTS OF THE CASE AND THUS STANDS TAXABLE. (VI) THE ORDER OF THE HON'BLE ITAT ALLOWING DEPRECATION IN ITA NO. 807 TO 809/HYD/10 IN THE CASE OF KAMINENI EDUCATIONAL SOCIETY, HYDERABAD AND HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND WITH DUE RESPECT TO THE DECISION OF THE HON'BLE ITAT, HYDERABAD, THE DEPARTMENT HAS FILED AN APPEAL BEFORE THE HON'BLE HIGH COURT OF ANDHRA PRADESH, WHICH IS PENDING. 3. AFTER HEARING BOTH THE PARTIES, WE FIND GROUND NOS. 1 TO 4 ARE COVERED BY THE ORDER OF THE TRIBUNAL IN THE CAS E OF EXHIBITION SOCIETY OF HYDERABAD IN ITA NO. 1195/HYD/2009 DATED 22 ND MARCH, 2012 WHEREIN HELD AS FOLLOWS: '6. WE HEARD BOTH THE PARTIES ON THIS ISSUE. SIMI LAR ISSUE CAME UP FOR CONSIDERATION BEFORE THE JAIPUR BENCH OF THIS T RIBUNAL IN THE CASE OF JAIPUR STOCK EXCHANGE (108 TTJ 393)(JP), WHEREIN IT WAS HELD THAT DEPRECIATION ON FIXED ASSETS IS AN ALLOWABLE DEDUCT ION, WHICH IS NECESSARY TO ARRIVE AT THE INCOME AVAILABLE FOR APP LICATION TO CHARITABLE PURPOSE. FURTHER, IN THE CASE OF MAHILA SIDH NIRMAN YOJNA V/S. IAC (50 ITD 472), IT HAS BEEN HELD BY TH E DELHI BENCH OF THE TRIBUNAL THAT MERELY BECAUSE ENTIRE VALUE OF AS SET IS ALLOWABLE AS EXPENDITURE UNDER S.11, IT IS NOT SUFFICIENT TO DEN Y CLAIM FOR DEPRECIATION UNLESS THE VALUE OF ASSET HAS BEEN ACT UALLY ALLOWED AS EXPENDITURE. IF NOT SO ALLOWED IN THE YEAR OF ACQU ISITION, ASSESSEE WILL BE ENTITLED TO DEPRECIATION. FURTHER, IT WAS H ELD BY THE COCHIN BENCH OF THE TRIBUNAL IN THE CASE OF DY. CIT V/S. ADI SANKARA TRUST (46 SOT 230) THAT WHERE AN ASSESSEE TRUST IS CLAIMI NG DEPRECIATION ON ASSETS WHERE COST OF THE RELEVANT ASSETS STOOD C LAIMED AS AN APPLICATION OF INCOME FOR A PRECEDING AND/OR THE CU RRENT YEAR UNDER S. 11(1), ITS CLAIM UNDER S.32(1)IS ELIGIBLE ONLY I N RESPECT OF BUSINESS ASSETS AND WHERE ENTIRE COST OF THE ASSET STANDS AL LOWED BY WAY OF APPLICATION OF INCOME UNDER S. 11(1), THE DEPRECIAT ION CLAIMED BY THE ASSESSEE UNDER S. 32(1) IS NOT ALLOWABLE AS THE TRU ST IS NOT UNDERTAKING ANY BUSINESS ACTIVITY. IN VIEW OF THE ABOVE, THE ASSESSING OFFICER IS DIRECTED TO VERIFY IN RESPECT OF EACH ASSET ON WHICH DEPRECIATION CLAIMED, WHETHER THE VALUE OF SU CH ASSET WAS IN FACT ALLOWED UNDER S. 11, AND IF IT WAS SO ALLOWED, THE DEPRECIATION WOULD NOT BE ALLOWED IN RESPECT OF SUCH ASSET. ONL Y IF THE VALUE OF THE ASSET WAS NOT ALLOWED AS EXPENDITURE UNDER S. 1 1, THE ASSESSING OFFICER IS REQUIRED TO ALLOW DEPRECIATION THEREON, AS PER THE RATE APPLICABLE TO THOSE ASSETS, AS HELD IN THE CASE OF MAHILA SIDH NIRMAN YOJNA, CITED SUPRA. THIS ISSUE RAISED BY THE REVE NUE IS SET ASIDE TO THE FILE OF THE ASSESSING OFFICER FOR FRESH CONSIDE RATION, IN THE LIGHT OF I.T.A. NO. 220/HYD/2012 M/S. HENRY MARTIN INSTITUTE ... ======================= 3 THE ABOVE OBSERVATIONS. THE ASSESSING OFFICER SHAL L ACCORDINGLY REDECIDE THE ISSUE IN ACCORDANCE WITH LAW AND AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 4. RESPECTFULLY FOLLOWING THE ABOVE ORDER OF THE TRIBU NAL, WE ARE INCLINED TO REMIT THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER ON SIMILAR DIRECTION. 5. THE NEXT ISSUE FOR OUR CONSIDERATION IN GROUND NOS. 5 AND 6 IS THAT THE CIT(A) OUGHT TO HAVE UPHELD THE ASSES SMENT TO THE EFFECT THAT THE MONIES UNSPENT DURING THE YEAR SHOU LD BE TAKEN TO RECEIPTS ON THE FACTS OF THE CASE AND THUS STAND S TAXABLE. 6. AFTER HEARING BOTH THE PARTIES, WE ARE OF THE OPINI ON THAT THE UNSPENT GRANT OF RS. 90,73,067 IS A TIED UP GRA NT GIVEN BY DONORS FOR SPECIFIC PURPOSE. THERE IS NO DISPUTE R EGARDING THIS ISSUE. BEING SO, THIS CANNOT BE CONSIDERED AS INCO ME OF THE ASSESSEE IN VIEW OF THE ORDER OF THE TRIBUNAL IN TH E CASE OF NIRMAL AGRICULTURAL SOCIETY V. ITO (71 ITD 152) (HY D) WHEREIN THE TRIBUNAL HELD AS UNDER: 'THE GRANTS RECEIVED FROM FOREIGN DONOR WERE FOR SPECIFIC PURPOSES. THE GRANTS WHICH WERE FOR SPECI FIC PURPOSES DID NOT BELONG TO THE ASSESSEE SOCIETY; SU CH GRANTS DID NOT FORM CORPUS OF THE ASSESSEE OR ITS INCOME. THOSE GRANTS WERE NOT DONATIONS TO THE ASSESSEE SO AS TO BRING THEM UNDER THE PURVIEW OF SECTION 12. VOLUNTARY CONTRIBUTIONS COVERED BY SECTION 12 ARE THOSE CONTRIBUTIONS FREELY AVAILABLE TO THE ASSESSEE WITHOUT ANY STIPULATION, WHICH THE ASSESSEE CAN UTILISE TOWARDS ITS OBJECTIVES ACCORDI NG TO ITS OWN DISCRETION AND JUDGEMENT. TIED-UP GRANT S FOR A SPECIFIED PURPOSE WOULD ONLY MEAN THAT THE ASSESSEE WHICH WAS A VOLUNTARY ORGANISATION HAD AGREED TO ACT AS A TRUSTEE OF A SPECIAL FUND GRANTE D BY DONOR WITH THE RESULT THAT IT NEED NOT BE POOLED OR INTEGRATED WITH THE ASSESSEE'S NORMAL INCOME OR CORPUS. IN THE INSTANT CASE, THE ASSESSEE WAS ACTI NG AS AN INDEPENDENT TRUSTEE FOR THAT GRANT, JUST AS SAME TRUSTEE COULD ACT AS A TRUSTEE OF MORE THAN ON E TRUST. TIED-UP AMOUNTS NEED NOT, THEREFORE, BE TREATED AS AMOUNTS WHICH WERE REQUIRED TO BE I.T.A. NO. 220/HYD/2012 M/S. HENRY MARTIN INSTITUTE ... ======================= 4 CONSIDERED FOR ASSESSMENT FOR ASCERTAINING THE AMOUNT EXPENDED OR THE AMOUNT TO BE ACCUMULATED.' 7. BEING SO, WE ARE INCLINED TO DISMISS THIS GROUND BY HOLDING THAT TIED-UP GRANT CANNOT BE CONSIDERED AS INCOME OF THE ASSESSEE THOUGH IT WAS NOT SPENT BY THE ASSESSE E. 8. IN THE RESULT, THE REVENUE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 07.09.2012. SD/- (SAKTIJIT DEY) JUDICIAL MEMBER SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED 7 TH SEPTEMBER, 2012 TPRAO COPY FORWARDED TO: 1. THE ASST. DIRECTOR OF INCOME-TAX (E)-I, 3 RD FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD-500 004. 2. M/S. HENRY MARTIN INSTITUTE INTERNATIONAL CENTRE FOR RESEARCH INTERFAITH RELATION & RECONCILIATION, NAMP ALLY STATION ROAD, HYDERABAD. 3. THE CIT(A)-IV, HYDERABAD. 4. THE DIT (EXEMPTIONS), HYDERABAD. 5. THE DR A BENCH, ITAT, HYDERABAD