Institute of Management and Advance Global Excellence (IMAGE), Bhubaneswar V. ACIT(Exemptions), Bhubaneswar

ITA 225/CTK/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7251 (ITAT-CUTTACK)
• Duration Of Justice: 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 10-01-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 07-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Charitable institution; Capital expenditure
• Section: 11

Judgement Text

2 ITA NO.225/CTK/2016 ASSESSMENT YEAR :2011 - 2012 3. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE DOES NOT HAVE A BUILDING OF ITS OWN, THAT IT HAD STATED TO HAVE INCURRED CAPITAL EXPENDITURE TOWARDS IMPROVEMENT OF THE BUILDING TAKEN ON LEASE FROM ONE SHRI SOMNATH NAYAK AND SHJRI R.S.MEHER . THEREFORE, INVOKING THE EXPLANATION 1 TO SECTION 32, HE HELD THAT THE ASSESSEE IS NOT ENTITLED TO CLAIM DEPRECIATION ON LEASED ASSETS AND ADDED RS.7,68,058/ - TO THE INCOME OF THE A SSESSEE. 4. ON APPEAL, LD CIT(A) OBSERVED THAT THE CLAIM OF DEPRECIATION OVER AND ABOVE CLAIM OF ENTIRE CAPITAL EXPENDITURE AS APPLICATION OF INCOME IS NOT AVAILABLE IN THE STATUTE. NO FURTHER DEPRECIATION IS ADMISSIBLE ON ASSETS CLAIMED AS APPLICATION OF INCOME, BECAUSE IF THE CHARITABLE TRUST TREATS EXPENDITURE ON ACQUISITION OF ASSETS AS APPLICATION OF INCOME FOR CHARITABLE PURPOSES U/S.11(1)(A) AND IF THE TRUST CLAIMS DEPRECIATION ON THE VALUE OF SUCH ASSETS, THEN IN ORDER TO REFLECT THE TRUE INCOME TO BE AVAILABLE FOR APPLICATION FOR CHARITABLE PURPOSES, THE TRUST SHOULD WRITE BACK IN THE ACCOUNTS THE DEPRECATION AMOUNT TO FORM PART OF INCOME TO BE ACCOUNTED FOR APPLICATION FOR CHARITABLE PURPOSES. 5. BEFORE ME, LD A.R. OF THE ASSESSEE FILED ASSESSMENT ORDERS FOR THE ASSESSMENT YEARS 2006 - 07, 2007 - 08, 2008 - 09 & 2009 - 2010 PASSED U/S.143(3)OF THE ACT AND SUBMITTED THAT THE DEPRECIATION ON BUILDING IN 4 ITA NO.225/CTK/2016 ASSESSMENT YEAR :2011 - 2012 DIFFERENT ASSESSMENT YEARS HAS BEEN FOUND AS A FACT ONE WAY OR THE OTHER AND PARTIES HAVE AL LOWED THAT POSITION TO BE SUSTAINED BY NOT CHALLENGING THE ORDER, IT WOULD NOT BE AT ALL APPROPRIATE TO ALLOW THE POSITION TO BE CHANGED IN A SUBSEQUENT YE A R. 7 . FURTHER, LD CIT(A) HAS HELD THAT BY ALLOWING DEPRECIATION TO THE ASSESSEE, THE ASSESSEE IS ALLOWED DOUBLE DEDUCTION ONCE ON ACCOUNT OF APPLICATION OF FUNDS AND ANOTHER ON ACCOUNT OF DEPRECIATION. THE HONBLE P&H HIGH COURT IN THE CASE OF MARKET COMMITTEE PIPILI (2011) 330 ITR 16 (P&H) HAS HELD AS UNDER: IN THE PRESENT CASE, THE ASSESSEE IS NOT CLAIMING DOUBLE DEDUCTION ON ACCOUNT OF DEPRECIATION AS HAS BEEN SUGGESTED BY LEARNED COUNSEL FOR THE REVENUE. THE INCOME OF THE ASSESSEE BEING EXEMPT, THE ASSESSEE IS ONLY CLAIMING THAT DEPRECIATION SHOULD BE REDUCED FROM THE INCOME FOR DETERMINING THE PERCENTAGE OF FUNDS WHICH HAVE TO BE APPLIED FOR THE PURPOSES OF THE TRUST. THERE IS NO DOUBLE DEDUCTION CLAIMED BY THE ASSESSEE AS CANVASSED BY THE REVEN UE. THE JUDGMENT OF THE HON'BLE SUPREME COURT IN ESCORTS LTD. CASE [1993] 199 ITR 43 IS DISTINGUISHABLE FOR THE ABOVE REASONS. IT CANNOT BE HELD THAT DOUBLE BENEFIT IS GIVEN IN ALLOWING CLAIM FOR DEPRECIATION FOR COMPUTING INCOME FOR PURPOSES OF SECTION 11 . THE QUESTIONS PROPOSED HAVE, THUS, TO BE ANSWERED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE'. 9. THEREFORE, I SET ASIDE THE ORDERS OF LOWER AUTHORITIES AND DELETE THE DISALLOWANCE OF DEPRECIATIO N OF RS.7,68,058/ - ON BUILDING AND ALLOW THE GROUND OF APPEAL OF THE ASSESSEE.