Kumareshwar Prasad Nilay., Belgaum V. Dy. Commissioner of Income Tax, Circle-2, Belgaum., Belgaum

ITA 242/PAN/2014

• Counselvise Citation: 24224114 RSA 2014
• Duration Of Justice: 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 21-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NISHANT K
• Assessee Lawyers: D E ROBINSON
• Keywords: Depreciation; Charitable institution
• Section: 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, PANAJI BENCH, PANAJI BEFORE S/SHRI P.K.BANSAL (AM) AND D.T.GARASIA (JM) I.T.A. NO.242 /PAN /2014: ASSESSMENT YEAR 2010 - 2011 KUMURESHWAR PRASAD NILAY, SHIVABASAVNAGAR, BELGAUM - 590010 KARNATAKA VS. DCIT, CIRCLE - 2, INCOME TAX DEPARTMENT, DR. B. R.AMBEDKAR ROAD, BELGAUM PA NO.AAATK 1071 B APPELLANT RESPONDENT FOR THE APPELLANTS: SHRI D.E.ROBINSON FOR THE RESPO NDENT: SHRI NISHANT K. DATE OF HEARING: 29.9 .2014 DATE OF PRONOUNCEMENT: 14 /11/2014 ORDER PER D.T.GARASIA, JM THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST ORDER 5.5. 2014 OF LD CIT(A), BELGAUM FOR THE ASSESSMENT YEAR 2010 - 2011. 2. GROUNDS RAISED BY THE ASESSEE ARE AS UNDER: 1. THE LD CIT(A) ERRED IN CONFIRMING THE DI SALLOWANCE OF DEPRECIATION CLAIMED BY THE ASSESSEE IN THE PROCESS OF COMPUTATION OF TOTAL INCOME OF THE APPELLANT. 2. THE LD CIT(A) ERRED IN HOLDING THAT PROVISION OF SECTION 32(I)(IV) WOULD NOT APPLY FOR COMPUTATION OF TAXABLE INCOME OF THE APPELLANT. 3. ALTHOUGH, THE ASSESSEE HAS TAKEN ABOVE GROUNDS, BUT THE ONLY EFFECTIVE GROUND IS WHETHER OR NOT LD CIT(A) IS JUSTIFIED IN HOLDING THAT PROVISIONS OF SECTION 32(I)IV) WOULD NOT APPLY FOR COMPUTATION OF TAXABLE INCOME OF THE ASSESSEE. 4. BRIEFLY STATED THE RELEVANT FACTS ARE LIKE THIS. THE ASSESSEE IS A TRUST. ITS MAIN OBJECTIVE IS TO PROVIDE BOARDING AND LODGING FACILITIES TO POOR AND DESERVING STUDENTS. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE FILED ITS RETURN OF INCO ME DECLARING NIL INCOME AFTER CLAIMING DEDUCTION U/S.11 AND 13. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD DEBITED DEPRECIATION OF 2 I.T.A. NO.242/PAN/2014: ASSESSMENT YEAR 2010 - 2011 RS.3,02,711/ - ON THE FIXED ASSET IN THE INCOME AND EXPENDITURE ACCOUN T. THE AO ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE TO DISALLOW THE DEPRECIATION CLAIMED BY THE ASSESSEE AND AFTER CAREFUL CONSIDERATION OF THE SUBMISSION OF THE ASSESSEE, THE AO HELD THAT THE ASSESSEE IS NOT ELIGIBLE FOR DEPRECIATION. ACCORDINGLY, HE COM PLETED THE ASSESSMENT U/S.143(3) OF THE ACT, INTER ALIA, DISALLOWING DEPRECIATION OF RS.3,02,711/ - . THE MATTER CARRIED TO LD CIT(A) BUT WITHOUT ANY SUCCESS. 5. DURING THE COURSE OF HEARING, LD A.R. SUBMITTED THAT ASSESSEE IS A TRUST AND AO DISALLOWED THE DEPRECIATION HOLDING THAT THE CHARITABLE TRUST IS NOT ELIGIBLE FOR DEPRECIATION BECAUSE ASSESSEES INCOME IS EXEMPT TO CHARGEABLE TO TAX. HE SUBMITTED THAT THE ISSUE IN CONTROVERSY IS COVERED BY THE FOLLOWING DECISIONS: I) HONBLE JURISDICTIONAL HIGH CO URT IN THE CASE OF CIT VS. INSTITUTE OF BANKING, 264 ITR 110 (BOM) II) HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. MARKET COMMITTEE, PIPLI, 330 ITR 016 (P&H) III) HONBLE SUPREME COURT IN THE CASE OF ESCORTS LTD VS. UNION OF INDIA, 1 99 ITR 043 (SC) 6. LD D.R. RELIED UPON THE ORDERS OF REVENUE AUTHORITIES. 7. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE RECORD OF THE CASE. IT IS AN UNDISPUTED FACT THAT ASSESSEE IS A CHARITABLE TRUST AND ITS INCOME IS EXEMPT U/S.11 OF THE INCOME TAX ACT. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF INSTITUTE OF BANKING (SUPRA) HAS HELD THAT NORMAL DEPRECIATION CAN BE CONSIDERED AS A LEGITIMATE DEDUCTION IN COMPUTING THE REAL INCOME OF THE ASSESSEE ON GENERAL PRINCIPLES OR UNDER SECTION 11(1)(A) OF THE INCOME TAX ACT, 1961. THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF MARKET COMMITTEE,(SUPRA) AFTER CONSIDERING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ESCORTS LTD (SUPRA) HAS HELD THAT WHEN THE ASSESSEE IS REGISTERED UNDER SE CTION 12AA OF THE ACT AS A CHARITABLE TRUST, AND THE ASSESSEE WAS ONLY CLAIMING THAT DEPRECIATION SHOULD BE REDUCED FROM THE INCOME FOR DETERMINING THE PERCENTAGE OF FUNDS WHICH HAD TO BE APPLIED FOR THE PURPOSE OF THE TRUST, THEREFORE, THE ASESSEE IS ELIG IBLE FOR DEPRECIATION ALTHOUGH THE INCOME OF THE ASSESSEE BEING EXEMPT. IN VIEW OF THIS, RESPECTFULLY FOLLOWING THE DECISIONS AS NOTED (SUPRA), WE HOLD THAT THE ASSESSEE IS ELIGIBLE FOR DEPRECIATION. WE, ACCORDINGLY, SET ASIDE THE ORDER OF LD CIT(A) AND DIRECT THE AO TO ALLOW DEPRECIATION AS CLAIMED BY THE ASSESSEE. 3 I.T.A. NO.242/PAN/2014: ASSESSMENT YEAR 2010 - 2011 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. PRONOUNC ED IN THE OPEN COURT ON 1 4 /11/2014 S D / - S D / - (P.K.BANSAL) (D.T.GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER DAT ED, PANAJI 1 4 /11/2014 B.K.PARIDA,SR. PS COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE : KUMURESHWAR PRASAD NILAY,SHIVABASAVNAGAR, BELGAUM - 590010 - KARNATAKA 2. THE REVENUE:DCIT, CIRCLE - 2, BELGAUM 3. THE CIT, BELGAUM 4. THE CIT(A),BELGAUM 5. DR, PANAJI BENCH 6. GUARD FILE. TRUE COPY// BY ORDER ASST. REGISTRAR, ITAT, PANAJI