ITO (E) 2(1), MUMBAI V. M.P MANSINGHKA CHARIIES, MUMBAI

ITA 2417/MUM/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0362 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 08-06-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 05-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA
• Keywords: Depreciation; Charitable institution; Capital expenditure
• Section: 143(3); 12A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER ITA NO.2417/MUM/2017 ( ASSESSMENT YEAR 2010-11) THE ITO(E)-2(1), 512, 5 TH FLOOR, PIRAMAL CHAMBERS, LALBAUG, MUMBAI -400 012 ...... APPELLANT VS. M.P MANSINGHKA CHARITIES, 1111A,RAHEJA CHAMBERS, NARIMAN POINT, MUMBAI 400 021. PAN:AAATM5239M .... RESPONDENT APPELLANT BY : MS. N. HEMALATHA RESPONDENT BY : NONE DATE OF HEARING : 10/08/2017 DATE OF PRONOUNCEMENT : 10/08/2017 ORDER THE CAPTIONED APPEAL FILED BY THE REVENUE PER TAINING TO ASSESSMENT YEAR 2010-11 IS DIRECTED AGAINST AN ORDER PASSED BY CIT(A)-1, MUMBAI DATED 13/01/2017, WHICH IN TURN, ARISES OUT OF ORDER P ASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) OF THE INCOME TA X ACT, 1961 (IN SHORT THE ACT) DATED 02/01/2013. 2. AT THE TIME OF HEARING, IT WAS NOTED THAT NONE APPEARED ON BEHALF OF THE ASSESSEE INSPITE OF NOTICE OF HEARING BEING S ERVED UPON THE ASSESSEE. THEREFORE, I PROCEED TO DISPOSE-OFF THE APPEAL EX- PARTE QUA THE RESPONDENT 2 ITA NO.2417/MUM/2017 ( ASSESSMENT YEAR 2010-11) ASSESSEE AFTER HEARING THE LD. DEPARTMENTAL REPRES ENTATIVE ON MERITS IN TERMS OF RULE -25 OF INCOME TAX (APPELLATE TRIBUNAL ) RULES, 1963. 3. IN BRIEF, THE RELEVANT FACTS ARE THAT THE RESPON DENT ASSESSEE IS A TRUST, WHICH IS REGISTERED UNDER SECTION 12A OF THE ACT A S WELL AS WITH CHARITY COMMISSIONER, MUMBAI. THE ASSESSEE TRUST IS STATED TO BE ENGAGED IN CHARITABLE ACTIVITIES IN THE FIELD OF EDUCATIONAL A ND MEDICAL FILED. IN THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSING OFFICER NOTED THAT ASSESSEE HAD CLAIMED DEPRECIATION OF RS.99,97,741/-. IT WAS ALS O NOTED THAT THE CORRESPONDING COST OF ASSETS ON WHICH THE DEPRECIAT ION HAS BEEN CLAIMED HAS ALREADY BEEN ALLOWED AS APPLICATION OF INCOME. THE REFORE, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF DEPRECIATION ON THE GROUND THAT IT WOULD AMOUNT TO DOUBLE DEDUCTION. ON THIS ASPECT, THE CI T(A) HAS DISAGREED WITH THE ASSESSING OFFICER AND FOLLOWING THE JUDGMENTS O F THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. INSTITUTE OF BANK ING PERSONNEL SELECTION,264 ITR 110 (BOM) AS WELL AS IN THE CASE OF SHRI VILE -PARLE KELVANI MANDAL,58 TAXMANN.COM, 288(BOM), HE HAS ALLOWED THE CLAIM O F THE ASSESSEE FOR DEPRECIATION. THE FOLLOWING DISCUSSION IN THE ORDE R OF CIT(A) IS RELEVANT:- 1.THE ASSESSING OFFICER HAS NOT TREATED THE DEPREC IATION AS APPLICATION OF INCOME ON THE GROUND THAT IT AMOUNTS TO DOUBLE DEDUCTION. APPELLANT HAS SUBMITTED THAT IN A NUMBER OF JUDGMENTS, DEPRECIATION HAD BEEN ALLOWE D AS APPLICATION OF INCOME U/S. 11. IN THIS REGARD I FIND THAT THE ISSUE IS DI RECTLY COVERED IN APPELLANT'S FAVOUR BY THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT IN THE CA SE OF CIT VS. INSTITUTE OF BANKING PERSONNEL 264 ITR 110 WHEREIN THE HON'BLE COURT HAS OBSERVED AS UNDER : '4. QUESTION NO. 2 HEREIN IS IDENTICAL TO THE QUESTION WHICH WAS RAISED BEFORE THE BOMBAY HIGH COURT IN THE CASE OF DIRECTOR OF INCOME TAX (EXEMPTION) V. FRAMJEE CAWASJEE INSTITUTE (1993) 10 9 CTR 463 (BOM). IN THAT CASE, THE FACTS WERE AS FOLLOWS: THE ASSESSEE WAS THE TRUST. IT DERIVED ITS INCOME FROM DEPRECIABLE ASSETS, THE ASSESSEE TOOK INTO ACCOUNT DEPRECIATION ON THOSE ASSETS IN COMPUTING THE INCOME OF THE TRUST. THE INCOME TAX OFFICER HELD THAT DEPRECIATION COULD NOT BE TAKEN INTO ACCOUNT BECAUSE; FULL CAPITAL EXPENDITURE HAD BEEN ALLOWED IN THE YEAR OF ACQUISITION 3 ITA NO.2417/MUM/2017 ( ASSESSMENT YEAR 2010-11) OF THE ASSETS. THE ASSESSEE WENT IN APPEAL BEFORE THE ASSISTANT APPELLATE COMMISSIONER. THE APPEAL WAS REJECTED. THE TRIBUNAL , HOWEVER, TOOK THE VIEW THAT WHEN THE INCOME TAX OFFICER STATED THAT F ULL EXPENDITURE HAD BEEN ALLOWED IN THE YEAR OF ACQUISITION OF THE ASSE TS, WHAT HE REALLY MEANT WAS THAT THE AMOUNT SPENT ON ACQUIRING THOSE ASSETS HAD BEEN TREATED AS 'APPLICATION OF INCOME' OF THE TRUST IN THE YEAR IN WHICH THE INCOME WAS SPENT IN ACQUIRING THOSE ASSETS. THIS DID NOT MEAN THAT IN COMPUTING INCOME FROM THOSE ASSETS IN SUBSEQUENT YEARS, DEPRECIATION IN RESPECT OF THOSE ASSETS CANNOT BE TAKEN INTO ACCOUNT. THIS VIEW OF T HE TRIBUNAL HAS BEEN CONFIRMED BY, BOMBAY HIGH COURT IN THE ABOVE JUDG MENT. HENCE, QUESTION NO. 2 IS COVERED BY THE DECISION OF THE BOMB AY HIGH COURT IN THE ABOVE JUDGMENT. CONSEQUENTLY, QUESTION NO. 2 IS ANSWERED IN THE AFFIRMATIVE I.E., IN FAVOUR OF THE ASSESSES AND AGA INST, THE DEPARTMENT.' II. IN A RECENT JUDGEMENT IN CASE OF DIRECTOR OF I NCOME-TAX (EXEMPTIONS), MUMBAI V. SHRI VILE PARLE KELAVANI MANDAL [2015] 58 TAXMANN.COM 28 8 HON'BLE BOMBAY HIGH COURT HELD : 'AS FAR AS QUESTION NO.4 IS CONCERNED, THIS COURT H AS REPEATEDLY HELD THAT THERE IS NOTHING LIKE DOUBLE DEDUCTION. WHEN THE AS SESSEE HAS ACQUIRED AN ASSET FROM THE INCOME OF THE TRUST AND THEREAFTER T HE AMOUNT THAT IS CLAIMED IS THE DEPRECIATION ON THE USE OF THE ASSET S, SUCH DEPRECIATION CLAIM DOES NOT MEAN DOUBLE DEDUCTION, THE DEDUCTION EARLI ER CLAIMED IS TOWARDS APPLICATION OF FUNDS OF THE TRUST FOR ACQUIRING ASS ETS. THE LATTER IS DEPRECIATION AND IT IS PERMISSIBLE DEDUCTION CONSID ERING THE USE OF THE ASSETS. THIS HAS BEEN CLARIFIED REPEATEDLY BY THIS COURT. IF ANY REFERENCE IS REQUIRED THEN THE CASE OF CIT V. INSTITUTION OF BANKING PERSONNEL SELECTIO N (IBPS) [2003] 264 ITR 110/131 TAXMAN 386 (BOM.) IS ENOUGH.' 4. BEFORE ME, THE LD. DEPARTMENTAL REPRESENTATIVE R EITERATED THE STAND OF THE ASSESSING OFFICER BUT DID NOT CONTROVERT THE FACT THAT THE ISSUE HAS BEEN DECIDED BY THE CIT(A) IN THE LIGHT OF THE APPL ICABLE BINDING JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT. THEREFORE, THERE IS NO JUSTIFICATION TO INTERFERE WITH THE DECISION OF THE CIT(A), WHICH IS BASED ON THE JUDGMENTS OF THE HON'BLE BOMBAY HIGH COURT. MERELY BECAUSE REV ENUE HAS FILED SLP ON SIMILAR ISSUE IN SOME OTHER CASE WOULD NOT RENDER T HE ORDER OF THE CIT(A) ERRONEOUS, WHICH IS BASED ON THE SUBSISTING JUDGME NTS OF THE HON'BLE BOMBAY HIGH COURT IN THE CASES OF INSTITUTE OF BANK ING PERSONNEL SELECTION 4 ITA NO.2417/MUM/2017 ( ASSESSMENT YEAR 2010-11) (SUPRA) AND SHRI VILE-PARLE KELVANI MANDAL (SUPRA ). THUS, ON THIS ASPECT REVENUE FAILS. 5. ANOTHER ASPECT NOTED DURING THE ASSESSMENT PROCE EDINGS WAS THAT ASSESSEE CLAIMED TO HAVE APPLIED AMOUNT IN EXCESS O F 85% OF INCOME DURING THE YEAR. THE CURRENT YEAR DEFICIT WAS CALCULATED AT RS.1,14,05,387/- AND ASSESSEES CLAIM TO CARRY FORWARD THE SAME WAS REJE CTED ON THE PLEA THAT PROVISIONS OF SECTION 72 ARE INAPPLICABLE TO CHAR ITABLE TRUST. THE SAID DENIAL WAS CARRIED IN APPEAL BEFORE CIT(A) CONTENDING THAT THE INCOME OF A CHARITABLE INSTITUTION WAS REQUIRED TO BE COMPUTED ON COMMERCIAL PRINCIPLES AND IN VIEW THEREOF IT WAS ENTITLED TO ADJUST THE D EFIT THIS IN SUBSEQUENT YEAR S INCOME AGAINST THE DEFICIT ARISING IN AN EARLIER YEAR. THE CIT(A) UPHELD THE PLEA OF THE ASSESSEE FOLLOWING THE JUDGMENT OF HON' BLE BOMBAY HIGH COURT IN THE CASE OF INSTITUTE OF BANKING PERSONNEL SELECTIO N (SUPRA). 6. BEFORE ME, THE LD. DEPARTMENTAL REPRESENTATIVE H AS NOT CONTROVERTED THE FACT THAT THE ISSUE IS FULLY COVERED BY THE DEC ISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF INSTITUTE OF BANKING PE RSONNEL SELECTION (SUPRA) AND, THEREFORE, IN MY VIEW, THERE IS NO ERROR IN TH E ORDER OF THE CIT(A). THUS, THE DECISION OF THE CIT(A) IS HEREBY AFFIRMED ON TH IS ASPECT ALSO. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED, AS ABOVE. THE ABOVE DECISION WAS PRONOUNCED IN THE OPEN COUR T IN THE PRESENCE OF BOTH THE PARTIES AT THE CONCLUSION OF THE HEARIN G ON 10/08/2017 SD/- (G.S. PANNU) ACCOCUNTANT MEMBER MUMBAI, DATED 10/08/2017 VM , SR. PS 5 ITA NO.2417/MUM/2017 ( ASSESSMENT YEAR 2010-11) COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI