Income-Tax officer, Mangalore V. M/s.City Hospital Charitable Trust, Mangalore

ITA 2206/BANG/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7566 (ITAT-BANGALORE)
• Duration Of Justice: 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 15-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H L SOWMYA ACHAR ADDITIONAL
• Assessee Lawyers: SHEETHAL
• Keywords: Depreciation; Charitable institution; Capital receipt; Revenue expenditure
• Section: 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A. K. GARODIA, ACCOUNTANT MEMBER ITA NO.2206/BANG/2016 ASSESSMENT YEAR : 2014-15 I.T.O. (EXEMPTIONS), WARD 1, MANGALURU. VS. M/S. CITY HOSPITAL CHARITABLE TRUST, POUND GARDEN, NANDAVAN VYASA RAO LANE, KADRI, MANGALORE. PAN : AAATC4496J APPELLANT RESPONDENT REVENUE BY : SMT. H. L. SOWMYA ACHAR, ADDITIONAL CIT ASSESSEE BY : SMT. SHEETHAL, ADVOCATE DATE OF HEARING : 18.09.2017 DATE OF PRONOUNCEMENT : 22.09.2017 O R D E R PER SUNIL KUMAR YADAV, JUDICIAL MEMBER THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST TH E ORDER OF CIT(A), INTER ALIA , ON THE FOLLOWING GROUNDS: 1. THE ORDER OF THE LD. CIT (A) IS OPPOSED TO LAW AND FACTS OF THE CASE. 2. DISALLOWANCE OF REVENUE EXPENDITURE TO THE EXTENT CLAIMED AS APPLICATION U/S 11 3. THE LEARNED CIT(A) ERRED IN ALLOWING ASSESSEE'S CLA IM FOR REVENUE EXPENDITURE INCURRED ON THE LOAN AMOUNT AVA ILED WHICH WAS NOT CONSIDERED AS INCOME. THEAMOUNT OF LO AN TAKEN WAS NEITHER TREATED AS RECEIPTS OF THE TRUST NOR TH E AMOUNT SPENT ON APPLICATION WAS REDUCED TO THAT EXTENT IN THE COMPU TATION OF INCOME. ITA NO. 2206/BANG/2016 PAGE 2 OF 5 3.1 THE LEARNED CIT(A) ERRED IN NOT FOLLOWING THE R ATIO LAID DOWN BY THE HON'BLE APEX COURT IN THE CASE OF ESCORTS LTD AND ANR VS UNION OF INDIA 199 ITR 43 WHEREIN IT IS HELD THAT DOUBLE DEDUCTION CANNOT BE PRESUMED UNLESS SPECIFICALLY PR OVIDED FOR BY LAW. 4. THE AMOUNT OF LOAN TAKEN WAS NEITHER TREATED AS REC EIPTS OF THE TRUST NOR THE AMOUNT SPENT ON APPLICATION WAS REDUCED TO THAT EXTENT IN THE COMPUTATION OF INCOME. 5. THE LEARNED CIT(A) ERRED IN ALLOWING ASSESSEE'S CLA IM OF AS CAPITAL RECEIPT ON FIXED DEPOSITS EVEN THOUGH IT IS THE REV ENUE RECEIPT WHICH IS NOT CONSIDERED AS INCOME AVAILABLE FOR APPLICATION. 6. DEPRECIATION :- 6.1 THE LEARNED CIT(A) ERRED IN ALLOWING ASSESSEE'S CLAIM FOR DEPRECIATION ON ASSETS PUT INTO USE DURING THE ACCO UNTING YEAR RELEVANT TO THE ASSESSMENT YEAR, EVEN THOUGH THE EN TIRE COST OF THESE ASSETS HAS BEEN CLAIMED BY THE ASSESSEE AS AP PLICATION OF INCOME FOR CHARITABLE ACTIVITIES. 6.2 THE LEARNED CIT(A) ERRED IN NOT FOLLOWING THE R ATIO LAID DOWN BY THE HON'BLE APEX COURT IN THE CASE OF ESCORTS LTD AND ANR VS UNION OF INDIA 199 FIR 43 WHEREIN IT IS HELD THAT DOUBLE DEDUCTION CANNOT BE PRESUMED UNLESS SPECIFICALLY PROVIDED FOR BY LAW . 6.3 THE LEARNED CIT(A) FAILED TO TAKE COGNIZANCE OF THE FACT THAT ALLOWING THE TOTAL COST OF THE ASSET AS AN APPLICAT ION OF INCOME AND ALLOWING DEPRECTION ON THE VALUE OF SUCH ASSETS IN THE SAME YEAR RESULTS IN DOUBLE DEDUCTION AND IT IS NOT AS P ER THE PROVISIONS OF THE INCOME TAX ACT. 6.4 THE LEARNED CIT(A) ERRED IN NOT FOLLOWING THE R ATIO 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 WHE REIN 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 TH E INCOME TO BE ACCOUNTED FOR APPLICATION FOR CHARITABLE PURPOSES. 6.5 THE ORDER OF CIT(A) MAY BE SET ASIDE AND THAT O F AO BE RESTORED BY PLACING RELIANCE OF THE RECENT JUDGMENT OF HON'B LE HIGH COURT OF DELHI IN THE CASE OF DIT(EXEMPTION) VS. CHARANJI V CHARITABLE TRUST DT. 18.03.2014 IN ITA NO. 321 TO 323/2013 WHE REIN IT IS HELD THAT TRIBUNAL WAS NOT JUSTIFIED IN DIRECTING THE AL LOWANCE OF DEPRECIATION IN RESPECT OF ASSETS, THE COST OF WHIC H HAS BEEN ALLOWED AS DEDUCTION AS APPLICATION OF INCOME OF TH E TRUST. ITA NO. 2206/BANG/2016 PAGE 3 OF 5 7. FOR THESE AND SUCH OTHER GROUNDS IT IS URGED THAT T HE ORDER OF THE LD. CIT(A), ON THE ABOVE POINTS MAY BE SET ASIDE AND TH E ORDER OF THE ASSESSING OFFICER BE RESTORED. 8. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND A LL OR ANY OF THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF THE HEAR ING OF THE APPEAL. 2. WITH RESPECT TO DISALLOWANCE OF REVENUE EXPENDIT URE OF RS.1,33,82,498/- AS APPLICATION UNDER SECTION 11, WE FIND THAT DURING T HE YEAR ASSESSEES FIXED DEPOSIT OF RS.96,14,484/- WAS MATURED AND ASSESSEE HAS RECE IVED SECURITY DEPOSITS OF RS.37,68,014/- FROM B.S. & CO. AGGREGATING TO RS.1, 33,82,498/-. AO REDUCED THE SAME FROM THE REVENUES EXPENDITURE CLAIMED AS APPL ICATION UNDER SECTION 11 ON THE GROUND THAT ABOVE AMOUNT WAS NOT CONSIDERED FOR INCOME AVAILABLE FOR APPLICATION. ASSESSEE PREFERRED AN APPEAL BEFORE T HE CIT(A) WITH THE SUBMISSION THAT AO HIMSELF MISCONSTRUED THE FACT BY REDUCING T HE REVENUE EXPENDITURE INCURRED TO THE EXTENT OF PROCEEDS OF FIXED DEPOSIT MATURED AND SECURITY DEPOSIT RECEIVED BY ALLEGING THAT ASSESSEE HAS MET REVENUE EXPENDITURE OUT OF THIS INCOME ALSO. IN FACT, THE ASSESSEE MADE THE INVESTMENT OU T OF CORPUS FUNDS AND NOT OUT OF REVENUE RECEIPTS. HENCE, THE PROCEED OF SUCH INVES TMENT IS NOT FORMING PART OF REVENUE RECEIPTS / REVENUE EXPENDITURES. THE CIT(A ) RE-EXAMINED THE ISSUE IN THE LIGHT OF RELEVANT PROVISIONS OF THE ACT AND FIND FO RCE IN THE ARGUMENTS OF THE ASSESSEE THAT AMOUNT DISALLOWED BY THE AO OUT OF RE VENUE EXPENDITURE CLAIMED AS APPLICATION UNDER SECTION 11 IS IN FACT NOT REVENUE IN NATURE AND IN THE CAPITAL TRANSACTIONS. THE CIT(A) ACCORDINGLY DIRECTED THE AO TO ALLOW THE REVENUE EXPENDITURE AMOUNTING TO RS.1,33,82,498/- UNDER SEC TION 11. 3. AGGRIEVED, THE REVENUE IS BEFORE THE TRIBUNAL AN D PLACED THE HEAVY RELIANCE UPON THE ORDER OF THE AO WHEREAS THE LEARN ED COUNSEL FOR THE ASSESSEE BESIDES PLACING THE RELIANCE UPON THE ORDER OF THE CIT(A) HAS CONTENDED THAT DURING THE ASSESSMENT PROCEEDINGS, ASSESSEE HAS SHO WN THE RECEIPTS OF RS.2,29,92,985/-. THE EXPENDITURE INCLUDES FIXED D EPOSITS MATURED OF RS.96,14,484/- AND RS.37,68,014/- AS SECURITY DEPOS ITS. THEREFORE, THE ENTIRE ITA NO. 2206/BANG/2016 PAGE 4 OF 5 AMOUNT WAS AVAILABLE FOR ITS APPLICATION UNDER SECT ION 11 OF THE ACT. HENCE THE DISALLOWANCE OF REVENUE EXPENDITURE OF RS.1,33,82,4 98/- IS NOT PROPER. 4. HAVING CAREFULLY EXAMINED THE ORDER OF THE LOWER AUTHORITIES IN THE LIGHT OF RIVAL SUBMISSIONS, WE FIND THAT ASSESSEE HAS RECEIV ED RS.2,29,92,985/- WHICH WAS SHOWN AS INCOME. ASSESSEE HAS ALSO RECEIVED A FIXE D DEPOSIT MATURED AT RS.96,14,484/- AND SECURITY DEPOSIT OF RS.37,68,014 /-. THE ENTIRE AMOUNT WAS APPLIED AND ASSESSEE CLAIMED THE REVENUE EXPENDITUR E OF RS.3,41,10,002/-. THE TREATMENT GIVEN BY THE ASSESSEE DOES NOT APPEAR TO US TO BE ILLOGICAL AND ILLEGAL. THEREFORE, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) WHO HAS RIGHTLY DIRECTED THE AO TO ALLOW THE REVENUE EXPENDITURE AM OUNTING TO RS.1,33,82,498/- UNDER SECTION 11 OF THE ACT. 5. NEXT GROUND RELATE TO DISALLOWANCE OF DEPRECIATI ON ON FIXED DEPOSIT. THE DEPRECIATION WAS DISALLOWED BY THE AO ON THE GROUN D THAT ASSESSEE HAS CLAIMED EXEMPTION UNDER SECTION 11 OF THE ACT. THIS ISSUE WAS COVERED BY JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT(A) VS. BANGALORE BAPTIST HOSPITAL SOCIETY (71 TAXMANN.COM 192) AND DIRECTOR OF INCOME -TAX, EXEMPTIONS VS. AL- AMEEN CHARITABLE FUND TRUST (67 TAXMANN.COM 160) IN WHICH IT HAS BEEN HELD THAT AMENDMENT TO SECTION 11 OF THE ACT BY THE FINA NCE BILL 2014 IS PROSPECTIVE IN NATURE AND OPERATES WITH EFFECT FROM 01.04.2015 AND HENCE ASSESSEES CLAIM FOR DEPRECIATION ON ASSETS FOR THE ASSESSMENT YEAR UNDE R QUESTION WAS TO BE ALLOWED EVEN THOUGH ENTIRE COST OF THOSE ASSETS HAD BEEN CL AIMED AS AN APPLICATION OF INCOME FOR CHARITABLE ACTIVITIES. THE CIT(A) HAS ALLOWED THE RELIEF TO THE ASSESSEE FOLLOWING THE JUDGMENT OF JURISDICTIONAL H IGH COURT. THEREFORE, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) AND WE ACCO RDINGLY UPHOLD THE ORDER OF THE CIT(A). 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ITA NO. 2206/BANG/2016 PAGE 5 OF 5 PRONOUNCED IN THE OPEN COURT ON 22 ND SEPTEMBER, 2017. SD/- SD/- BANGALORE. DATED: 22 ND SEPTEMBER, 2017. /NSHYLU/* COPY TO: 1. APPELLANTS 2. RESPONDENT 3. CIT 4. DR BY ORDER SR. PRIVATE SECRETARY, ITAT, BANGALORE. (A. K. GARODIA) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER