DCIT, Yamunanagar V. The Ved Parkash Mukand Lal Educational Society, Yamunanagar

ITA 240/CHANDI/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5476 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 13-04-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 08-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K SAINI
• Keywords: Capital asset; Depreciation; Charitable institution; Cost of acquisition; Capital expenditure
• Section: 143(3); 32; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI D.K.SRIVASTAVA, ACCOUNTANT MEMBER AND MS SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 240/CHD/2011 ASSESSMENT YEAR: 2007-08 THE DCIT, VS. THE VED PARKASH MUKAND LAL EDUCATIO NAL YAMUNANAGAR CIRCLE, SOCIETY, RADAUR, YAMUNANAGAR DISTRICT. YAMUNANAGAR PAN NO. AAATV4812B (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI N.K.SAINI RESPONDENT BY: NONE ORDER PER SUSHMA CHOWLA, JM THE APPEAL BY THE REVENUE IS AGAINST THE ORDER OF C IT(A), PANCHKULA DATED 16.12.2010 RELATING TO ASSESSMENT Y EAR 2007-08 AGAINST THE ORDER PASSED UNDER SECTION 143(3) OF THE I.T. A CT, 1961. 2. THE ISSUES RAISED BY THE REVENUE IN GROUND NOS 1 & 2 ARE AS UNDER:- 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS RIGHT IN ALLOWING DEPRECIATION ON FIX ED ASSETS, THE COST OF ACQUISITION OF WHICH HAS ALREAD Y BEEN CLAIMED AS APPLICATION OF INCOME LEAVING THEREBY NO WRITTEN DOWN VALUE. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS RIGHT IN ALLOWING DEPRECIATION ON FIX ED ASSETS RELYING UPON THE HON'BLE PUNJAB & HARYANA HI GH COURT DECISION IN THE CASE OF CIT V M/S TINY TOTS EDUCATION SOCIETY FOLLOWING ITS OWN JUDGMENT IN THE CASE OF M/S MARKET COMMITTEE, PIPLI V CIT KARNAL, WHICH HAS 2 NOT BEEN ACCEPTED BY THE REVENUE AND HAS FILED SLP BEFORE THE APEX COURT CONTESTING THE SAID ORDER OF HON'BLE PUNJAB & HARYANA HIGH COURT. 3. DESPITE SERVICE OF NOTICE, NONE APPEARED ON BEHA LF OF THE ASSESSEE AND WE PROCEED TO DISPOSE OF THE PRESENT APPEAL AS THE ISSUE STANDS COVERED BY THE EARLIER ORDER OF THE TRIBUNAL IN ITA NOS. 93 TO 98/CHD/2010 VIDE ORDER DATED 11.3.2011 AND RATIO LA ID DOWN BY HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT KARN AL VS. MARKET COMMITTEE, PIPLI (ITA NO. 535 OF 2009). 4. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD CLAIMED ITS ENTIRE I NCOME TO BE EXEMPT UNDER THE PROVISIONS OF SECTION 11 OF THE ACT. TH E ASSESSEE HAD CLAIMED EXPENDITURE OF RS. 2.77 CRORES ON ACCOUNT OF DEPREC IATION. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD SHOWN GROSS RECEIPTS OF RS. 12.91 CRORES AGAINST WHICH THE APPLICATION OF INCOME INCL UDING DEPRECIATION ALLOWANCE ON FIXED ASSETS WAS SHOWN AT RS. 18.60 CR ORES. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE CLAIM OF DEPRECIAT ION AMOUNTING TO RS. 2.77 CRORES WAS NOT APPLICATION OF INCOME AND HENCE THE SAME WAS HELD TO BE NOT IN CONFORMITY WITH THE LAW. THE ASSESSING OFFICER HELD THE SAME AS NOT APPLIED FOR CHARITABLE PURPOSE. THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE FOLLOWING THE RATIO LAID DOWN BY HE JU RISDICTIONAL HIGH COURT CIT KARNAL VS MARKET COMMITTEE, PIPLI (SUPRA). 5. THE REVENUE IS IN APPEAL AGAINST THE SAME. ON THE PERUSAL OF RECORD, WE FIND THAT THE ASSESSEE HAD COMPUTED ITS INCOME AFTER CLAIMING A DEDUCTION ON ACCOUNT OF DEPRECIATION ALLOWABLE ON F IXED ASSETS. UNDER 3 THE PROVISIONS OF SECTION 11 OF THE I.T. ACT, THE I NCOME IS NOT TO BE INCLUDED IN THE HANDS OF THE PERSON IN RECEIPT OF S UCH INCOME PROVIDED THE INCOME DERIVED FROM THE PROPERTY HELD UNDER TRUST I S APPLIED FOR SUCH PURPOSES AS STIPULATED U/S 18 OF THE ACT. FOR THE PURPOSE OF AFORESAID SECTION, THE FIRST STEP IS TO DETERMINED THE INCOM E FROM PROPERTY HELD FOR CHARITABLE OR RELIGIOUS PURPOSE AND THEREAFTER SUCH INCOME OF THE PREVIOUS YEAR IS TO BE APPLIED FOR SUCH CHARITABLE OR RELIGI OUS PURPOSES, IN ORDER TO BE OUTSIDE THE PURVIEW OF SECTION 11 OF THE ACT. IN THE FACTS OF THE PRESENT CASE, THE GROSS RECEIPTS WERE RS. 12.91 CRO RES AND ASSESSEE HAD CLAIMED DEPRECIATION OF RS. 2.77 CRORES AND THE NET INCOME WAS CLAIMED TO BE APPLIED FOR THE PURPOSE STIPULATED IN SECTION 11 OF THE ACT. ACCORDINGLY, WE FIND NO MERIT IN THE OBSERVATION OF THE ASSESSEE THAT THE CLAIM OF DEPRECIATION BY THE ASSESSEE IS ON ACCOUNT OF APPLICATION OF INCOME. THE SAID CLAIM OF DEPRECIATION ON FIXED A SSETS IS TO BE CONSIDERED WHILE COMPUTING THE INCOME OF THE PREVIO US YEAR. 6. THE SECOND ASPECT OF THE ISSUE IS WHETHER DEPREC IATION ON SUCH ASSETS, COST OF WHICH HAS BEEN ALLOWED AS APPLICATI ON OF INCOME, IS TO BE ALLOWED IN THE HANDS OF THE ASSESSEE. WE FIND THE SAID ISSUE STANDS COVERED BY VARIOUS ORDERS OF THE MARKET COMMITTEES I..E MARKET COMMITTEE, KALANVALI & OTHER MARKET COMMITTEES VS. ITO (ITA NOS. 326 TO 328/CHD/2010) ORDER DATED 26.5.2010 AND THE TRIB UNAL IN TURN RELIED ON THE RATIO LAID DOWN BY THE TRIBUNAL IN MARKET COMMI TTEES, MUSTAFABAD & SAUDHASRA VS. DCIT, YAMUNANAGAR IN ITA NOS. 1037/CH D/2009 & 1067/CHD/2009 (ORDER DATED 18.3.2010). 4 7. THE ISSUE HAS ALSO BEEN DEALT WITH BY THE HON 'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT KARNAL V MARKET COMMI TTEE, PIPLI (SUPRA). THE HON'BLE HIGH COURT IN ITS ORDER DATED 5.7.2010 HELD AS UNDER:- IN ALL FAIRNESS TO THE LD. COUNSEL FOR THE REVENUE , REFERENCE IS MADE TO THE JUDGMENT OF THE HON'BLE APEX COURT I N ESCORT LIMITEDS CASE [199 ITR 43] ON WHICH RELIANCE HAS B EEN PLACED BY THE LD. COUNSEL FOR THE REVENUE. THE HON 'BLE SUPREME COURT IN THAT CASE WAS DEALING WITH A CASE RELATING TO TWO DEDUCTIONS BOTH UNDER SECTIONS 10(2)(VI) AND 10(2)(XIV) OF THE 1922 ACT OR BOTH UNDER SECTIONS 3 2(I)(II) AND 35(1)(IV) OF THE ACT. THE ASSESSEE THEREIN HA D INCURRED EXPENDITURE OF A CAPITAL NATURE ON SCIENTIFIC RESEA RCH RELATING TO THE BUSINESS WHICH RESULTED INTO ACQUIS ITION OF AN ASSET. THE ASSESSEE HAD SOUGHT TO CLAIM A SPECIFIE D PERCENTAGE OF THE WRITTEN DOWN VALUE OF THE ASSET A S DEPRECIATION AND AT THE SAME TIME CLAIMED DEDUCTION , IN FIVE CONSECUTIVE YEARS OF THE EXPENDITURE INCURRED ON TH E ACQUISITION OF THE ASSET. THE APEX COURT OBSERVED:- WHERE A CAPITAL ASSET USED FOR SCIENTIFIC RESEARC H RELATED TO THE BUSINESS OF THE ASSESSEE IS ALSO IPS O FACTO AN ASSET USED FOR THE PURPOSE OF THE BUSINESS, IT IS I MPOSSIBLE TO CONCEIVE OF THE LEGISLATURE HAVING ENVISAGED A DOUB LE DEDUCTION IN RESPECT OF THE SAME EXPENDITURE, ONE B Y WAY OF DEPRECIATION UNDER SECTION 32 OF THE INCOME TAX ACT , 1961 AND OTHER BY WAY OF ALLOWANCE UNDER SECTION 35(1)(I V) OF A PART OF THE CAPITAL EXPENDITURE ON SCIENTIFIC RESEA RCH, EVEN THOUGH THE TWO HEADS OF DEDUCTION DO NOT COMPLETELY OVERLAP AND THERE IS SOME DIFFERENCE IN THE RATIONALE OF TH E TWO DEDUCTIONS. IT WAS FURTHER RECORDED THAT :- THERE IS A FUNDAMENTAL THOUGH UNWRITTEN, AXIOM THAT NO LEGISLATURE COULD HAVE AT ALL INTENDED A DOUBLE DED UCTION IN REGARD TO THE SAME BUSINESS OUTGOING; AND, IT IS IN TENDED, IT WILL BE CLEARLY EXPRESSED. IN OTHER WORDS, IN THE ABSENCE OF CLEAR STATUTORY INDICATION TO THE CONTRARY, THE STA TUTE SHOULD NOT BE READ AS TO PERMIT AN ASSESSEE TWO DEDUCTIONS .. IN THE PRESENT CASE, THE ASSESSEE IS NOT CLAIMING D OUBLE TAXATION ON ACCOUNT OF DEPRECIATION AS HAS BEEN SUG GESTED BY LD. COUNSEL FOR THE REVENUE. THE INCOME OF THE ASS ESSEE BEING EXEMPT, THE ASSESSEE IS ONLY CLAIMING THAT DE PRECIATION SHOULD BE REDUCED FROM THE INCOME FOR DETERMINING T HE PERCENTAGE OF FOUNDS WHICH HAVE TO BE APPLIED FOR T HE PURPOSES OF TRUST. THERE IS NO DOUBLE DEDUCTION CL AIMED BY THE ASSESSEE AS CANVASSED BY THE REVENUE. JUDGMENT OF THE HON'BLE SUPREME COURT IN ESCORTS LTD AND ANOTHER (S UPRA) IS DISTINGUISHABLE FOR THE ABOVE REASONS. IT CANNOT B E HELD THAT DOUBLE BENEFIT IS GIVEN IN ALLOWING CLAIM FOR DEPRE CIATION FOR 5 COMPUTING INCOME PURPOSES OF SECTION 11. THE QUEST IONS PROPOSED HAVE, THUS TO BE ANSWERED AGAINST THE REVE NUE AND IN FAVOUR OF THE ASSESSEE. 8. FOLLOWING THE RATIO LAID DOWN BY THE HON'BLE PUN JAB & HARYANA HIGH COURT IN CIT KARNAL VS MARKET COMMITTEE, PIPLI (SUPRA) AND THE TRIBUNAL IN THE CASE OF MARKET COMMITTEES (ORDERS D ATED 18.3.2010 AND 26.5.2010), WE ALLOW THE CLAIM OF THE ASSESSEE. H OWEVER, WE ARE IN CONFORMITY WITH THE ORDER OF CIT(A) IN RESTORING TH E ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER IS DIRECTED TO VERIFY THE ADDITIONS MADE TO THE FIXED ASSETS FROM YEAR TO YEA R AND THE RATE OF DEPRECIATION TO BE ALLOWED ON THE SAME AND CONSEQUE NTLY WORK OUT THE DEPRECIATION ALLOWABLE TO THE ASSESSEE DURING THE Y EAR UNDER CONSIDERATION. A REASONABLE OPPORTUNITY OF HEARING SHALL BE AFFORD ED TO THE ASSESSEE. THUS THE GROUNDS OF APPEAL RAISED BY THE REVENUE AR E ALLOWED FOR STATISTICAL PURPOSES 9. THE ISSUE RAISED BY THE REVENUE VIDE GROUND NO.3 IS AS UNDER:- 3. WHETHER THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) PANCHKULA HAS ERRED IN ALLOWING CREDIT OF EX CESS OF EXPENDITURE OVER INCOME IN THE EARLIER YEARS TO BE CARRIED FORWARD & SET OFF LOSSES AS U/S 72 OF THE I NCOME TAX ACT, 1961 AS THE INCOME OF INSTITUTION HAD BEEN ASSESSED IN PURSUANCE OF SECTION 11 TO 13 OF THE IN COME TAX ACT, 1961. 10. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE ASSESSING OFFICER WHILE COMPUTING THE INCOME OF THE ASSESSEE DID NOT ALLOW CREDIT OF EXCESS OF EXPENDITURE OVER INCOME IN THE EARLIER YEARS TO BE CARRIED FORWARD. THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE FOLLOWING THE RATIO LAID DOWN BY 6 BOMBAY HIGH COURT IN CIT VS. INSTITUTE OF BANKING P ERSONNEL SELECTION [131 TAXMAN 386 (BOM)]. THE REVENUE IS IN APPEAL A GAINST THE SAME. 11. WE FIND THAT THE CIT(A) ALLOWED THE CLAIM OF TH E ASSESSEE HOLDING AS UNDER:- 4. THE 3 RD GROUND OF APPEAL IS REGARDING ASSESSING OFFICERS ACTION OF NOT ALLOWING CREDIT OF EXCESS O F EXPENDITURE OVER INCOME IN THE EARLIER YEAR TO BE C ARRIED FORWARD. THE COUNSEL FOR THE APPELLANT HAS RELIED O N THE DECISION OF THE BOMBAY HIGH CURT IN THE CASE OF CIT VS. INSTITUTE OF BANKING PERSONNEL SELECTION 131 TAXMAN 386 AND THAT OF MY PREDECESSOR IN THE CASE OF GURU NANAK GI RLS COLLEGE, YAMUNANAGAR IN APPEAL NO. 30/YN/08-09 DATE D 27.7.2009 VIDE WHICH A SIMILAR CLAIM OF THE APPELLA NT HAS BEEN ALLOWED. I HAVE CAREFULLY GONE THROUGH THE OR DER OF MY PREDECESSOR AND FIND THAT THE ISSUE HAS BEEN DECIDE D IN FAVOUR OF THE APPELLANT RELYING UPON THE DECISION O F BOMBAY HIGH COURT IN THE CASE OF INSTITUTE OF BANKING PERS ONNEL SELECTION (SUPRA). THEREFORE, WITHOUT GOING INTO MUCH DETAILS, IT IS HELD THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN NOT ALLOWING THE CARRY FORWARD OF ACCUMULATED EX CESS OF EXPENDITURE OF OVER INCOME RELATING THE EARLIER YEA RS. THIS GROUND OF APPEAL IS ALLOWED. 12. WE UPHOLD THE ORDER OF CIT(A) IN THIS REGARD FO LLOWING THE RATIO LAID DOWN BY THE BOMBAY HIGH COURT IN IN CIT VS. IN STITUTE OF BANKING PERSONNEL SELECTION (SUPRA). THUS, THE GROUND NO. 2 OF APPEAL RAISED BY THE REVENUE IS DISMISSED. 13 IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 28 TH DAY OF APRIL, 2011. SD/- SD/- (D.K.SRIVASTAVA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 28 TH APRIL, 2011 RKK 7 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR TRUE COPY BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH