Belle Vue Clinic, Kolkata V. DCIT (Exemption) - 1, Kolkata , Kolkata

ITA 2511/KOL/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4273 (ITAT-KOLKATA)
• Duration Of Justice: 10 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 22-12-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: G MALLIKARJUNA
• Assessee Lawyers: J P KHATAIN LD
• Keywords: Capital asset; Business income; Depreciation; Charitable institution; Cost of acquisition
• Section: 143(3); 12AA; 32; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH D, KOLKATA BEFORE SH. S.S.GODARA, JUDICIAL MEMBER AND DR.A.L.SAINI, ACCOUNTANT MEMBER ITA NO.2511/KOL/2017 [ASSESSMENT YEAR: 2009-10] BELLE VUE CLINIC, BIRLA BUILDING, 4 TH FLOOR, 9/1, R.N.MUKHERJEE ROAD, KOLKATA-700001. PAN-AAATB4004B V S DCIT ( EXEMPTION ) - 1, 10B, MIDDLETON ROW, 5 TH FLOOR, KOLKATA-700071. (APPELLANT) (RESPONDENT) APPELLANT BY SH. J .P.KHATAIN, LD.AR RESPONDENT BY S H. G. MALLIKARJUNA, CIT DR DATE OF HEARING 2 7 . 0 9 .20 18 DATE OF PRONOUNCEMENT 26 .10.2018 ORDER PER S.S.GODARA, JUDICIAL MEMBER THIS ASSESSEES APPEAL FOR AY 2008-09 ARISES AGAINST THE ORDER DATED 10.08.2017 PASSED BY THE CIT(A)-25, KOLKATA IN ITA NO.103/CIT(A)-25/KOL/2014- 15, INVOLVING PROCEEDINGS U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT ACT). HEARD BOTH THE PARTIES. CASE FILE PERUSED. 2. THE ASSESSEES SOLE SUBSTANTIVE GROUNDS RAISED IN THE INSTANT APPEAL CHALLENGED THE CIT(A)S ACTION REVERSING ASSESSMENT FINDINGS TREATING ASSESSEES DEPRECIATION CLAIM OF RS.2,52,14,568/- AS AN INSTANCE OF DOUBLE DEDUCTION IN BOTH APPLICATION OF INCOME INVOLVING COST OF ACQUISITION AS WELL AS FOR THE PURPOSE OF COMPUTING DEPRECIATION ON THE RELEVANT FIXED ASSETS. LEARNED CIT(A)S FINDINGS UNDER CHALLENGE READ AS UNDER:- 5. GROUNDS OF DECISION: THE ONLY GROUND OF APPEAL RELATES TO NOT TREATING THE DEPRECIATION OF RS. 2,52,14,568/- AS APPLICATION OF INCOME FOR THE YEAR UNDER CONSIDERATION IN THE COMPUTATION OF INCOME AS APPLICATION. IN THE INCOME TAX RETURN FOR THE YEAR, THE APPELLANT HAS TREATED DEPRECIATION OF RS. 2,52,14,568 AS APPLICATION OF INCOME. BUT THE JDLT (EXEMPTION), KOLKATA, WHILE COMPUTING THE TOTAL INCOME ITA NO.2511/KOL/2017 [ASSESSMENT YEAR: 2009-10] PAGE | 2 OF THE APPELLANT, DID NOT CONSIDER THE DEPRECIATION AS APPLICATION OF INCOME FOR MEDICAL PURPOSES AS REFERRED TO U/S.10(23C)(VIA) OF THE ACT, 1961 THE APPELLANT HAS ENTIRELY RELIED UPON THE DECISION(S) TAKEN BY THE ERSTWHILE LD. C.I.T.(A)-25, KOLKATA, VIDE HIS APPELLATE ORDER PASSED ON 18-07-2016 IN THE CASE OF M P BIRLA FOUNDATION EDUCATIONAL SOCIETY FOR THE AY. 2009-10. THE APPELLANT CLAIMED THAT THE ASSESSING OFFICER ERRED IN THE ASSESSMENT SO MADE. THE INCOME OF A CHARITABLE/RELIGIOUS TRUST HAS TO BE UNDERSTOOD IN ITS COMMERCIAL SENSE AND THE CONCEPT OF 'COMMERCIAL INCOME' NECESSARILY ENVISAGES DEDUCTION OF DEPRECIATION ON THE ASSETS OF THE TRUST. THE APPELLANT HAS RELIED HIS PREVIOUS YEARS ARGUMENT THAT THE ISSUE IS SQUARELY COVERED BY THE JUDGEMENT OF THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX V. SILIGURI REGULATED MARKET COMMITTEE [2014] 51 TAXMANN.COM 455 (CALCUTTA). IN THIS CASE THE APPELLANT HAS ACQUIRED ASSET THROUGH APPLICATION OF INCOME AND HAS ALSO CLAIMED THIS AMOUNT AS AN EXPENDITURE IN IT'S INCOME AND EXPENDITURE ACCOUNT, DEPRECIATION ON SUCH ASSET WOULD NOT ALLOWABLE TO THE ASSESSEE. SUCH NOTIONAL STATUTORY DEDUCTION LIKE DEPRECIATION, IF CLAIMED AS DEDUCTION WHILE COMPUTING THE INCOME OF THE PROPERTY HELD UNDER TRUST UNDER RELEVANT HEAD OF INCOME, IS REQUIRED TO BE ADDED BACK WHILE COMPUTING THE INCOME FOR THE PURPOSE OF APPLICATION IN THE INCOME AND EXPENDITURE ACCOUNT. THIS WOULD IMPLY THAT A CORRECT FIGURE OF SURPLUS FROM THE TRUST PROPERTY IS REFLECTED IN THE INCOME & EXPENDITURE ACCOUNT OF THE TRUST TO DETERMINE THE INCOME FOR THE PURPOSE OF APPLICATION UNDER SECTION 11 OF THE INCOME TAX ACT, 1961. IT IS PERTINENT TO MENTION HERE THAT IN NORMAL TAXABLE BUSINESS ENTITY, THE DEPRECIATION IS COMPENSATORY IN NATURE TO THE CAPITAL DEPLOYED BY THE BUSINESS ENTITY. THERE IS NO OTHER WAY TO TAKE OUT THE CAPITAL CONTRIBUTION FROM THE BUSINESS RECEIPT AS THE ASSETS BLOCKS THE FUND OF THE ENTITY WHICH IS EITHER BORROWED OR DEPLOYED BY ITS OWN SOURCES. IF ITA NO.2511/KOL/2017 [ASSESSMENT YEAR: 2009-10] PAGE | 3 DEPRECIATION IS NOT ALLOWED, THEN THE COST OF ASSETS WILL NEVER BE RECOVERED. ONCE THE DEPRECIATION IS ALLOWED FROM THE PROFIT, THE BUSINESS ENTITY IS FREE TO TAKE OUT ITS CAPITAL PART WHICH WAS CONTRIBUTED TO GENERATE THE PROFIT OR TO SUPPORT THE BUSINESS ENTITY, BEING ASSETS, IN FORM OF DEPRECIATION. THE ENTRY IS PASSED ON IN THE BALANCE SHEET ACCORDINGLY AND LIABILITY WDV BOTH ARE REDUCED. IN CASE OF CHARITABLE ORGANIZATION, THE COST OF ASSETS (IN THE PRESENT CASE) IS DEPLOYED FROM SURPLUS FUND OF THE TRUST WHICH IS GENERATED FROM CHARITABLE ACTIVITY; THE ASSETS VALUE SHOULD BE EITHER 'NIL' OR NO DEPRECIATION SHOULD BE CHARGED. THE CHARGING OF DEPRECIATION ON ASSETS LEAVES NO TRAIL OF FUND WHICH IS DEBITED IN THE SHAPE OF DEPRECIATION. IN THE BUSINESS ENTITY, THE DEPRECIATION FUND IS UTILIZED TO REPAYMENT OF CAPITAL LOAN OR CAPITAL OF THE MANAGERS AND THERE IS NO SIPHONING OF FUND AS SUCH. IN CASE OF CHARITABLE ORGANIZATION RATHER THAN INCREASING THE CORPUS FUND (AS THE DEPRECIATION REDUCES SURPLUS AND BALANCE SHEET IS ALSO REDUCED ON BOTH SIDES TO THE EXTENT OF DEPRECIATION) THE TRAIL OF DEPRECIATION IS OUT OF BOOKS OF ACCOUNT. THE HON'BLE KOLKATA HIGH COURT, IN THE CASE OF [2014] 51 TAXMANN.COM 455 (CALCUTTA) HIGH COURT OF CALCUTTA COMMISSIONER OF INCOME-TAX VS.SILIGURI REGULATED MARKET COMMITTEE HAS HELD AS UNDER:- 'WE HAVE CONSIDERED THE SUBMISSIONS AND PERUSED THE JUDGMENTS OF THE PUNJAB AND HARYANA HIGH COURT AND THE BOMBAY HIGH COURT AS ALSO THE JUDGMENT OF THIS COURT IN THE CASE OF JAYASHREE CHARITY TRUST (SUPRA) AND IN THE CASE OF BHERUKA PUBLIC WELFARE TRUST (SUPRA). WE ARE OF THE OPINION THAT THE VIEWS EXPRESSED IN THE CASE OF JAYASHREE CHARITY TRUST (SUPRA) ARE LOGICAL AND IN CONSONANCE WITH COMMON SENSE. THE OBJECT OF SECTION 11 OF THE INCOME-TAX ACT,1961 IS TO FEED THE PUBLIC CHARITY. BY PERMITTING COMPUTATION OF INCOME IN A COMMERCIAL MANNER, THE OBJECT OF FEEDING THE PUBLIC CHARITY IS ACHIEVED. THE AMOUNT DEDUCTED BY WAY OF DEPRECIATION IS IN THAT CASE IS ITA NO.2511/KOL/2017 [ASSESSMENT YEAR: 2009-10] PAGE | 4 PLOUGHED BACK FOR USER ON ACCOUNT OF CHARITY. IT CANNOT BE DISPUTED THAT A BUILDING USED FOR THE PURPOSE OF CHARITY DIMINISHES IN VALUE OVER THE TIME LIKE ANY OTHER BUILDING. THEREFORE, PROVIDING FOR SUCH DIMINUTION OF VALUE WOULD KEEP THE CORPUS OF THE TRUST INTACT OTHERWISE THE CORPUS OF THE TRUST ITSELF IN COURSE OF TIME MAY GET DISSIPATED.' IN THE AFORESAID DECISION, THE HON'BLE HIGH COURT HAS CLEARLY INTENDED TO PUMP UP THE FUND OF THE CHARITABLE ORGANIZATION FOR THE CHARITABLE PURPOSE AND ALLOWED THE DEPRECIATION IN THIS SPIRIT TOO. BUT IN THE INSTANT CASE, NO SUCH ENTRY OF INCREASING FUND OF THE TRUST IN THE BALANCE SHEET REFLECTS. THE APPELLANT NEVER PRONOUNCED THAT THE DEPRECIATION CLAIMED HAS BEEN SEPARATELY REFLECTED AS RESERVE FUND RATHER IT HAS NO TRAIL AS SUCH IN THE INCOME AND EXPENDITURE ACCOUNT OR BALANCE SHEET. IN THIS REGARD, THE RELEVANT OBSERVATION OF THE HON'BLE KERALA HIGH COURT IN LISSIE MEDICAL INSTITUTION VS. CIT(SUPRA), THE BOARD ISSUED CLARIFICATION DATED 02-02-2012 'WHICH HAS BEEN MADE PART OF DECISION AS UNDER :- THE VIEW OF THE CBOT TO BE CONVEYED TO THE COURT IN THIS REGARD IS AS UNDER :- 'THE CENTRAL BOARD OF DIRECT TAXES IS OF THE CONSIDERED VIEW THAT WHERE AN ASSESSEE HAS ACQUIRED AN ASSET THROUGH APPLICATION OF INCOME AND HAS ALSO CLAIMED THIS AMOUNT AS EXPENDITURE IN ITS INCOME EXPENDITURE ACCOUNT, DEPRECIATION ON SUCH ASSET WOULD NOT BE ALLOWABLE TO THE ASSESSEE. SUCH NOTIONAL STATUTORY DEDUCTIONS LIKE DEPRECIATION, IF CLAIMED AS DEDUCTION WHILE COMPUTING THE INCOME OF 'THE PROPERTY HELD UNDER TRUST' UNDER THE RELEVANT HEAD OF INCOME, IS REQUIRED TO BE ADDED BACK WHILE COMPUTING THE INCOME FOR THE PURPOSE OF APPLICATION IN THE INCOME EXPENDITURE ACCOUNT. THIS WOULD IMPLY THAT A CORRECT FIGURE OF SURPLUS FROM THE TRUST PROPERTY IS REFLECTED IN THE INCOME AND EXPENDITURE ACCOUNT OF THE TRUST TO DETERMINE THE INCOME FOR THE PURPOSE OF APPLICATION UNDER SECTION 11 OF THE INCOME TAX ACT. THIS WOULD REDUCE THE POSSIBILITY OF REVENUE LEAKAGE WHICH MAY BE A CAUSE FOR ITA NO.2511/KOL/2017 [ASSESSMENT YEAR: 2009-10] PAGE | 5 GENERATION OF BLACK MONEY AND THE HON'BLE COURT HAS DISMISSED THE CLAIM OF THE APPELLANT FOR CLAIMING DOUBLE DEDUCTION OF DEPRECIATION. IN THIS CASE, THE APPELLANT HAS TAKEN TWO TIME BENEFIT; ONCE ON A COMMERCIAL LINE CLAIM OF SEC. 32 HAS BEEN MADE AND SECONDLY, ON APPLICATION OF SURPLUS BY VIRTUE OF SEC. 11 AND OTHER ONE IN FORM OF DEPRECIATION CLAIMED U/S. 32 OF THE I. T. ACT. THUS IF DEPRECIATION IS ALLOWED THEN THERE REMAINS NO TRAIL OF THE FUND FROM THE BALANCE SHEET, THE APPELLANT TOOK BENEFIT OF SECTION 32 AND SECTION 11 OF THE I. T. ACT. BUT IT DID NOT MAINTAIN ITS NET WORTH AS PER THE BENEFIT BY IT WHICH CAN SHOW THE AVAILABILITY OF FUND WITH TRUST. DEFINITELY ONCE THE ENTIRE ASSET HAS BEEN PURCHASED FROM SURPLUS FUND AND AGAIN DEPRECIATION IS CHARGED THEN EVERY YEAR APPELLANT SHOULD SHOW ITS ACCUMULATED FUND ON ACCOUNT OF DEPRECIATION BUT NEITHER ANY SUCH ACCUMULATION IS MADE NOR ITS UTILIZATION IS SHOWN AND SURPLUS GENERATED BY DEBITING DEPRECIATION, GOES OUT OF BOOKS. THE FUNDS TRAIL SHOULD ALWAYS BE THERE FOR THE PUBLIC BUT THE SAME IS WITHOUT ANY RECORD AND IN THE PRESENT KNOWLEDGE OF THE TRUSTEES WHICH GIVES LOOSE END TO THE TRUSTEES FOR UTILIZING MONEY FOR THEIR BENEFITS AT THEIR OWN DISCRETION. THE APPELLANT HAS NOT COMPLIED BY ANY DOCUMENTATION, BY MAKING AS A PART OF RETURN, TO DEMONSTRATE THE ACCUMULATION OF FUND ON ACCOUNT OF DEPRECIATION WHICH IS THE INTENT OF OBSERVATION OF HON'BLE KOLKATA HIGH COURT TO MAKE THE TRUST CASH RICH. INCOME TAX APPELLATE TRIBUNAL - CHENNAI IN THE THE MUSIC ACADEMY MADRAS, CHENNAI VS ASSESSEE ON 22 APRIL, 2016 ITA NO.1098/MDS/2015 I ASSESSMENT YEAR: 2010- 11WITH REGARD TO DISALLOWANCE OF DEPRECIATION HAS HELD AS UNDER:- '3. SH. R. VIJAYARAGHAVAN, THE LD.COUNSEL FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSEE WAS REGISTERED AS CHARITABLE INSTITUTION UNDER SECTION 12AA OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). DURING THE YEAR UNDER ITA NO.2511/KOL/2017 [ASSESSMENT YEAR: 2009-10] PAGE | 6 CONSIDERATION, THE ASSESSEE CLAIMED DEPRECIATION OF '63,14,533/- ON THE CAPITAL ASSET. HOWEVER, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT ALLOWING THE CLAIM OF DEPRECIATION WOULD AMOUNT TO DOUBLE DEDUCTION WHICH IS NOT PERMISSIBLE UNDER THE PROVISIONS OF INCOME- TAX ACT. ACCORDING TO THE LD. COUNSEL, DEPRECIATION IS ALLOWABLE WHILE COMPUTING INCOME UNDER THE HEAD 'BUSINESS OR PROFESSION'. REFERRING TO SECTION 11 OF THE ACT, THE LD.COUNSEL SUBMITTED THAT SECTION 11 PROVIDES FOR EXEMPTION OF INCOME OF THE TRUST ON APPLICATION. HOWEVER, THE INCOME OF THE TRUST HAS TO BE COMPUTED ON COMMERCIAL PRINCIPLES. THE LD.COUNSEL PLACED HIS RELIANCE ON VARIOUS CASE LAWS TO SUPPORT THE CLAIM OF DEPRECIATION, INCLUDING SOME OF THE ORDERS OF THIS TRIBUNAL. PLACING RELIANCE ON THE DECISION CO- ORDINATE BENCH OF THIS TRIBUNAL IN ITO V. SAKTHI FOUNDATION IN ITA. NO.2219/MDS/2014 DATED 12.12.2014, THE LD.COUNSEL SUBMITTED THAT ON IDENTICAL SET OF FACTS, THIS TRIBUNAL BY FOLLOWING ITS OWN EARLIER ORDER IN CMS EDUCATIONAL & CHARITABLE TRUST IN ITA. NO.2261/MDS/2012 DATED 17.04.2013, DIRECTED THE ASSESSING OFFICER TO ALLOW DEPRECIATION. THE LD.COUNSEL HAS ALSO FILED A LIST OF VARIOUS JUDGMENTS AND SUBMITTED THAT IN ALL THESE CASES, THE CLAIM OF DEPRECIATION WAS ALLOWED EVEN THOUGH THE INCOME OF THE TRUST WAS ALLOWED AS EXEMPTED ON ITS APPLICATION. THEREFORE, AT NO STRETCH OF IMAGINATION, THE CLAIM OF DEPRECIATION CAN BE SAID THAT IT WOULD AMOUNT TO DOUBLE DEDUCTION. 4. ON A QUERY FROM THE BENCH WHETHER SECTION 32 OF THE ACT PROVIDES FOR ALLOWING DEPRECIATION FOR BUSINESS ASSET OR OTHER ASSET, THE LD.COUNSEL FOR THE ASSESSEE VERY FAIRLY SUBMITTED THAT SECTION 32 OF THE ACT PROVIDES FOR ALLOWING DEPRECIATION ONLY ON BUSINESS ASSET. THE LD.COUNSEL FURTHER CLARIFIED THAT THE ASSESSEE IS NOT DOING BUSINESS, THE ASSESSEE IS CLAIMING AS CHARITABLE INSTITUTION. ACCORDING TO THE LD. COUNSEL, WHILE COMPUTING INCOME ON COMMERCIAL PRINCIPLE, IRRESPECTIVE OF THE PROVISIONS OF SECTION 32 OF THE ACT, ITA NO.2511/KOL/2017 [ASSESSMENT YEAR: 2009-10] PAGE | 7 THE ASSESSEE IS ELIGIBLE FOR DEPRECIATION. THE LD.COUNSEL FURTHER SUBMITTED THAT THERE IS NO CONFLICT BETWEEN COMPUTATION OF INCOME ON COMMERCIAL PRINCIPLE AND THE PROVISIONS OF SECTION 32 WHICH ALLOWS DEPRECIATION ONLY ON THE COMMERCIAL ASSET, WHICH IS USED FOR BUSINESS. 5. ON THE CONTRARY, SH. P. RADHAKRISHNAN, THE LD. DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT SECTION 32 OF THE ACT PROVIDES FOR ALLOWING DEPRECIATION IN RESPECT OF THE ASSET WHICH USED FOR BUSINESS OR PROFESSION. IN THIS CASE, THE ASSESSEE ADMITTEDLY REGISTERED AS A CHARITABLE INSTITUTION UNDER SECTION 12AA OF THE ACT. THE ASSESSEE IS NOT DOING ANY BUSINESS OR PROFESSION. IF THE ASSESSEE CLAIMS THAT IT IS DOING BUSINESS OR PROFESSION, THEN THE REGISTRATION HAS TO BE CANCELLED UNDER SECTION 12AA(3) OF THE ACT AND THE ASSESSEE WILL NOT BE ELIGIBLE FOR EXEMPTION UNDER SECTION 11 OF THE ACT. THE LD. D.R. HAS ALSO CLARIFIED THAT THE ASSESSEE IS NOT DOING ANY BUSINESS OR PROFESSION. THEREFORE, THE PROVISIONS OF SECTION 32 IS NOT AT ALL APPLICABLE TO THE CHARITABLE INSTITUTION. THE LD. D.R. FURTHER POINTED OUT THAT SECTION 32 FALLS IN CHAPTER IV OF THE ACT WHICH PROVIDES FOR COMPUTATION OF BUSINESS INCOME. THE CLAIM OF THE ASSESSEE UNDER SECTION 11 FALLS IN CHAPTER III OF THE ACT WHICH SAYS THAT CERTAIN KIND OF INCOME DO NOT FORM PART OF TOTAL INCOME. THE LD. D.R. FURTHER POINTED OUT THAT IT IS NOT THE CASE OF THE ASSESSEE THAT ANY BUSINESS WAS HELD AS PROPERTY UNDER THE TRUST. THE MATTER WOULD STAND IN A DIFFERENT FOOTING IF THE ASSESSEE CLAIMS DEPRECIATION ON THE BUSINESS WHICH WAS HELD AS PROPERTY UNDER TRUST UNDER SECTION 11 (4) OF THE ACT. IN THE CASE BEFORE US, ACCORDING TO THE LD. D.R., THE ASSESSEE IS CLAIMING DEPRECIATION ON THE ASSET WHICH IS USED FOR CHARITABLE PURPOSE. IN FACT, THE ASSET WAS USED AS A TOOL FOR CARRYING OUT OBJECT OF THE TRUST. THEREFORE, SECTION 320F THE ACT IS NOT APPLICABLE AT ALL. HENCE, THE ASSESSEE IS NOT ELIGIBLE FOR DEPRECIATION UNDER SECTION 32 OF THE ACT. THE LD. D.R. PLACED HIS RELIANCE ON THE DECISION OF THIS BENCH OF THE TRIBUNAL IN THE ANJUMAN-E-HIMAYATH-E-ISLAM V. ITA NO.2511/KOL/2017 [ASSESSMENT YEAR: 2009-10] PAGE | 8 ADIT(EXEMPTION) IN !.T.A. NO. 2271/MDS/2014 DATED 02.06.2015 AND ALSO THE JUDGMENT OF KERALA HIGH COURT IN LISSIE MEDICAL INSTITUTION V. CIT (2012) 348 ITR 344. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ISSUE ARISES FOR CONSIDERATION IS WHETHER A CHARITABLE INSTITUTION IS ELIGIBLE FOR DEPRECIATION IN RESPECT OF ITS ASSET, WHICH WAS USED AS A TOOL FOR CARRYING OUT ITS OBJECT. DEPRECIATION IS PROVIDED UNDER SECTION 32 OF THE ACT. ' A BARE READING OF SECTION 32 OF THE ACT CLEARLY SAYS THAT DEPRECIATION HAS TO BE ALLOWED WHILE COMPUTING THE TAXABLE INCOME ON BUILDING, MACHINERY, PLANT, ETC. WHICH IS OWNED WHOLLY OR PARTLY BY THE ASSESSEE AND USED FOR THE PURPOSE OF BUSINESS. DEPRECIATION IS NOTHING BUT AN INHERENT DECLINE IN THE VALUE OF THE ASSET FROM WEAR AND TEAR. IN RESPECT OF THE BUSINESS ASSETS, THE PARLIAMENT THOUGHT IT FIT IN THEIR WISDOM TO ALLOW DEPRECIATION FOR WEAR AND TEAR OF THE BUILDING, MACHINERY, PLANT, ETC. DEPRECIATION IN CERTAIN CASES IS TREATED AS EXPENDITURE LAID OUT OVER THE YEARS DURING THE LIFE TIME OF THE MACHINERY. IN OTHER WORDS, THE VALUE OF THE ASSET, MACHINERY, ETC. REDUCED PRO TANTO. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE DEPRECIATION IS SPREAD OVER DURING THE EFFECTIVE LIFE TIME OF THE MACHINERY OR ASSET, ETC. USED FOR BUSINESS BY ALLOWING THE SAME AS DEDUCTION ON NOTIONAL BASIS. THE AMOUNT OF DEPRECIATION ALLOWED IN A PARTICULAR YEAR IS INTENDED TO REPRESENT THE LIFE OF THE MACHINERY SUCH AS EXPENDITURE DURING THE ABOVE SAID PERIOD. IN OTHER WORDS, THE VALUE OF THE MACHINERY WAS SPREAD OVER FOR THE EFFECTIVE LIFE TIME OF THE ASSET AND A PROVISION WAS MADE BY WAY OF NOTIONAL DEDUCTION TO REPLACE THE MACHINERY AFTER EXPIRY OF ITS ENTIRE LIFE TIME. THEREFORE, THE LEGISLATURE PROVIDED DEPRECIATION UNDER SECTION 32 OF THE ACT AS AN INCENTIVE/ALLOWANCE TO THE ASSET WHICH WAS USED FOR THE BUSINESS OR ITA NO.2511/KOL/2017 [ASSESSMENT YEAR: 2009-10] PAGE | 9 PROFESSION. THIS CAN BE CONSTRUED AS REDUCTION IN VALUE IN THE BALANCE SHEET WHILE COMPUTING THE INCOME FROM BUSINESS OR PROFESSION. 7. SECTION 32(1) OF THE ACT CLEARLY SAYS THAT THE ASSET OWNED WHOLLY OR PARTLY BY THE ASSESSEE AND 'USED FOR THE PURPOSE OF BUSINESS OR PROFESSION'. IN VIEW OF THE LANGUAGE EMPLOYED BY THE PARLIAMENT, THE ASSET USED FOR THE PURPOSE OF BUSINESS OR PROFESSION ALONE ELIGIBLE FOR DEPRECIATION. THE INCOME-TAX ACT DOES NOT PROVIDE FOR DEPRECIATION IN RESPECT OF THE ASSET OTHER THAN THE ONE WHICH IS USED FOR BUSINESS OR PROFESSION. THEREFORE, IT IS FOR THE ASSESSEE TO ESTABLISH THAT THE ASSESSEE IS CARRYING ON ANY BUSINESS OR PROFESSION. IN THE CASE BEFORE US, THE ADMITTED CASE OF THE ASSESSEE IS THAT THE ASSESSEE IS NOT CARRYING ON ANY BUSINESS OR PROFESSION. THEREFORE, WHATEVER BE THE NATURE OF THE ASSET, WHICH WAS USED AS A TOOL FOR CARRYING OUT THE OBJECT OF THE CHARITABLE INSTITUTION, CANNOT BE CONSTRUED AS AN ASSET WHICH IS USED FOR THE BUSINESS OR PROFESSION OF THE ASSESSEE. THEREFORE, THE ASSESSEE IS NOT ELIGIBLE FOR DEPRECIATION UNDER SECTION 32 OF THE INCOME-TAX ACT. 8. THE LD.COUNSEL FOR THE ASSESSEE HAS ALSO CLARIFIED THAT THE ASSESSEE IS NOT CLAIMING DEPRECIATION UNDER SECTION 32 OF THE ACT. ACCORDING TO THE LD. COUNSEL, THE ASSESSEE IS CLAIMING DEPRECIATION ON THE COMMERCIAL PRINCIPLE. ON A QUERY FROM THE BENCH WHAT IS MEANT BY 'COMMERCIAL PRINCIPLE'?, HE CLARIFIED THAT COMPUTATION OF INCOME OF THE TRUST IN A CUSTOMARY METHOD OF ACCOUNTANCY. ON A QUERY FROM THE BENCH, THE LD.COUNSEL HAS ALSO CLARIFIED THAT THERE IS NO CONFLICT BETWEEN THE CUSTOMARY WAY OF COMPUTATION OF INCOME AND PROVISIONS OF SECTION 32 OF THE ACT. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT SECTION 32 PROVIDES FOR DEPRECIATION ONLY IN RESPECT OF THE ASSET WHICH IS USED FOR THE PURPOSE OF BUSINESS OR PROFESSION. THE COMMERCIAL PRINCIPLE OF COMPUTING INCOME OR THE CUSTOMARY PRACTICE OF COMPUTING INCOME MAY ALSO PROVIDE FOR DEPRECIATION ONLY IN RESPECT OF COMPUTING BUSINESS OR PROFESSIONAL INCOME. ITA NO.2511/KOL/2017 [ASSESSMENT YEAR: 2009-10] PAGE | 10 9. INCOME-TAX ACT PROVIDES FOR PROCEDURE AND METHOD FOR COMPUTING INCOME UNDER DIFFERENT HEADS. DEPRECIATION IS PROVIDED UNDER SECTION 32 OF THE ACT WHEN COMPUTING INCOME UNDER THE HEAD 'INCOME FROM BUSINESS OR PROFESSION'. IN RESPECT OF OTHER HEADS, NO DEPRECIATION IS PROVIDED UNDER THE SCHEME OF THE ACT. THE INCOME OF THE TRUST IS EXEMPTED ON APPLICATION AND ACCUMULATION AS PROVIDED UNDER THE ACT. IF ANY VIOLATION, THE INCOME OF THE TRUST IS LIABLE FOR TAXATION, IN SUCH A CASE, IF THE INCOME IS ASSESSED AS INCOME FROM BUSINESS OR PROFESSION, THE ASSESSEE MAY BE ELIGIBLE FOR DEPRECIATION. THE ASSESSEE IS CERTAINLY NOT ENTITLED FOR DEPRECIATION, WHEN THE INCOME WAS EXEMPTED ON APPLICATION OR ACCUMULATION AS PROVIDED UNDER THE SCHEME OF THE ACT. THE CHARITABLE INSTITUTION UNDER THE SCHEME OF INCOME-TAX ACT IS ON A DIFFERENT FOOTING. THE ENTIRE INCOME OF THE ASSESSEE-TRUST FROM THE PROPERTY HELD UNDER TRUST DO NOT FORM PART OF TOTAL INCOME UNDER SECTION 11 OF THE ACT PROVIDED THE SAME IS APPLIED FOR CHARITABLE OBJECT. SECTION 11 OF THE ACT ALSO PROVIDES FOR ACCUMULATION OF 15% OF INCOME FOR FUTURE APPLICATION FOR THE OBJECT OF THE TRUST. THEREFORE, THE BUSINESS AND CHARITABLE INSTITUTION ARE TWO DIFFERENT CATEGORIES IN THE SCHEME OF INCOME-TAX ACT. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE CUSTOMARY WAY OF COMPUTING INCOME OR THE COMMERCIAL PRINCIPLE OF COMPUTING INCOME CANNOT OVERRIDE THE SPECIFIC PROVISION OF INCOME-TAX ACT. THE INCOME-TAX ACT DOES NOT PROVIDE FOR ALLOWING DEPRECIATION OTHER THAN THE ASSET WHICH WAS USED FOR BUSINESS OR PROFESSION. THERE IS NO OTHER PROVISION IN THE INCOME-TAX ACT OTHER THAN SECTION 32 OF THE ACT FOR ALLOWING DEPRECIATION. THEREFORE, THE CLAIM OF THE ASSESSEE THAT THE DEPRECIATION HAS TO BE ALLOWED ON COMMERCIAL PRINCIPLE OR CUSTOMARY PRINCIPLE OF COMPUTATION OF INCOME IS CONTRARY TO THE SPECIFIC PROVISION, NAMELY, SECTION 32 OF THE ACT. 10. THE NEXT QUESTION ARISES FOR CONSIDERATION IS WHEN THERE IS A CONFLICT BETWEEN CUSTOMARY PRACTICE, COMMERCIAL PRINCIPLE AND PROVISIONS OF SECTION ITA NO.2511/KOL/2017 [ASSESSMENT YEAR: 2009-10] PAGE | 11 32, WHICH ONE WILL PREVAIL? THE OBVIOUS ANSWER TO THIS QUESTION IS THE STATUTORY PROVISION, NAMELY, SECTION 32 OF THE ACT WILL PREVAIL OVER THE CUSTOMARY PRACTICE AND COMMERCIAL PRINCIPLE. THEREFORE, EVEN ON CUSTOMARY PRACTICE OR COMMERCIAL PRINCIPLE WHEREBY THE ASSESSEE CLAIMS DEPRECIATION WHILE COMPUTING THE INCOME, SECTION 32 OF THE ACT IS A SPECIFIC PROVISION UNDER INCOME-TAX ACT, WHICH IS CONTRARY TO COMMERCIAL PRINCIPLE OR CUSTOMARY PRACTICE. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT SECTION 32 WILL PREVAIL OVER THE CUSTOMARY PRACTICE OR COMMERCIAL PRINCIPLE. HENCE, THE ASSESSEE IS NOT ELIGIBLE FOR DEPRECIATION IN RESPECT OF BUILDING, PLANT, MACHINERY, ETC. WHICH ARE NOT USED FOR THE PURPOSE OF BUSINESS OR PROFESSION. 11. EVEN ASSUMING FOR ARGUMENT SAKE THAT THE ASSESSEE WAS DOING BUSINESS, THEN THE ASSESSEE IS NOT ELIGIBLE FOR EXEMPTION UNDER SECTION 11 OF THE ACT AND AS RIGHTLY SUBMITTED BY THE LD. DEPARTMENTAL REPRESENTATIVE, THE REGISTRATION UNDER SECTION 12AA OF THE ACT HAS TO BE CANCELLED UNDER SECTION 12AA(3) OF THE ACT. MOREOVER, THE ASSESSEE WILL NOT BE ELIGIBLE FOR EXEMPTION UNDER SECTION 11 OF THE ACT IF IT IS CARRYING ON ANY BUSINESS ACTIVITY. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSEE IS NOT ELIGIBLE FOR DEPRECIATION. 12. AS RIGHTLY SUBMITTED BY THE LD. DEPARTMENTAL REPRESENTATIVE, IN VIEW OF SECTION 11(4) & (4A) OF THE ACT, IF THE PROPERTY HELD UNDER TRUST IS A BUSINESS UNDERTAKING, THEN THE INCOME OF THE BUSINESS UNDERTAKING, WHICH WAS SO HELD AS PROPERTY HELD UNDER TRUST, HAS TO BE COMPUTED BY APPLYING THE PROVISIONS OF INCOME-TAX ACT UNDER CHAPTER IV. WHILE COMPUTING INCOME OF THE BUSINESS UNDERTAKING, ALL EXPENDITURE, INCLUDING DEPRECIATION, HAS TO BE ALLOWED AND THE INCOME OF SUCH BUSINESS UNDERTAKING WHICH WAS HELD UNDER TRUST HAS TO BE ALLOWED AS EXEMPTION UNDER SECTION 11 ON APPLICATION AND ACCUMULATION. IN THIS CASE, AS RIGHTLY SUBMITTED BY THE LD. D.R., NO BUSINESS UNDERTAKING WAS HELD UNDER TRUST AS PROVIDED UNDER SECTION 11(4) & (4A) OF THE ACT. THE ITA NO.2511/KOL/2017 [ASSESSMENT YEAR: 2009-10] PAGE | 12 ASSESSEE IS CLAIMING DEPRECIATION IN RESPECT OF ASSET WHICH WAS USED AS TOOL FOR CARRYING OUT CHARITABLE OBJECT OF THE INSTITUTION. WHEN THE ASSET WAS USED AS TOOL FOR CARRYING OUT THE OBJECT OF THE CHARITABLE INSTITUTION, SUCH ACTIVITY CANNOT BE CONSTRUED AS A BUSINESS OR PROFESSION OF THE ASSESSEE. THEREFORE, SECTION 32 OF THE ACT IS NOT APPLICABLE IN THIS CASE. 13. WE HAVE CAREFULLY GONE THROUGH ALL THE JUDGMENTS AND DECISIONS CITED BY THE LD.COUNSEL FOR THE ASSESSEE, WHICH ARE AS UNDER:- 1. DIT V. VISHWA JAGRITI MISSION (2012) 73 DTR (DEL) 195 2. CIT V. MARKET COMMITTEE, PIPLI (2011) 330 ITR 16 (P&H) 3. CIT V. SOCIETY OF SISTERS OF ST.ANNE (1984) 146 ITR 28 (KAR) 4. CIT V. BHORUKA PUBLIC WELFARE TRUST (1999) 240 ITR 513 (CAL) 5. CIT V. TINY TOTS EDUCATION SOCIETY (2011) 330 ITR 21 (P&H) 6. CIT V. SHETH MANILAL RANCHHODDAS (1992) 1981TR 598 (GUJ) VISHRAM BHAVAN TRUST 7. CIT V. RAIPUR PALLOTTINE SOCIETY (1989) 180 ITR 579 (MP) 8. CIT V. INSTITUTE OF BANKING PERSONNEL (2003) 264 ITR 110 (BOM) SELECTION 9. DIT(E) V. FRAMJEE CAWASJEE (1993) 109 CTR (BOM) 463 INSTITUTE 10. DOLT V. LAKSHMI SARASWATHILTA NO.452/MDS/2014 EDUCATIONAL TRUST CHENNAI ITAT 11. APOLLO HOSPITALS EDUCATIONAL TRUST V.ITA NO.2090/MDS/2012 DCIT CHENNAI ITAT 12. SERVICES ASSOCIATION OF SEVENTH DAY ITA NO.1853/MDS/2011- ADVENTISTS PVT. LTD. V. ITO CHENNAI ITAT 13. SERVICES ASSOCIATION OF SEVENTH DAY ITA NO.427/MDS/2012 ADVENTISTS PVT. LTD. V. ITO CHENNAI ITAT 14. ACIT V. MAMALLAN EDUCATIONAL TRUST ITA NO.1808/MDS/2012 CHENNAI ITAT 15. DCIT V. MAMALLAN EDUCATIONAL TRUST ITA NO.91/MDS/2013 CHENNAI ITAT ITA NO.2511/KOL/2017 [ASSESSMENT YEAR: 2009-10] PAGE | 13 16. ITO V. SRI RANGANATHAR TRUST ITA NO.1954/MDS/2012 CHENNAI ITAT 17. ITO V. KGISL TRUST ITA NO.1813/MDS/2012 CHENNAI ITAT 18. CIT V. RAO BAHADUR CALAVALA CUNNAN (1982) 135 ITR 485 (MAD) CHETTY CHARITIES 19. DEVI KARUMARIAMMAN EDUCATIONAL (2015) 60 TAXMANN.COM TRUST V. DCIT (EXEMPTIONS) 439 (MADRAS) 20. ITO V. THE GRD TRUST ITA NO.2537/MDS/2014 CHENNAI ITAT AFTER GOING THROUGH ALL THE JUDGMENTS / DECISIONS, WE FIND THAT THE CONFLICT BETWEEN THE COMMERCIAL PRINCIPLE OR CUSTOMARY PRACTICE IN COMPUTING INCOME AND THE PROVISIONS OF SECTION 32 WERE NOT BROUGHT TO THE NOTICE OF THE COURTS / TRIBUNAL. THEREFORE, THOSE JUDGMENTS / DECISIONS ARE NOT APPLICABLE TO THE FACTS OF THE CASE. IN VIEW OF THE ABOVE DISCUSSION, WE FIND NO MERIT IN THE APPEAL OF THE ASSESSEE. ACCORDINGLY, THE SAME IS DISMISSED.' KEEPING IN VIEW THE AFORESAID FACTS AND RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE ITAT, THE DEPRECIATION DISALLOWED BY THE A.O IS HEREBY UPHELD AND ALL THE GROUNDS OF THE APPEAL ARE DISMISSED. IN THE RESULT, THE APPEAL IS DISMISSED. 3. LEARNED DR VEHEMENTLY CONTENDED THAT THE ASSESSING OFFICER HAD RIGHTLY DISALLOWED ASSESSEES DEPRECIATION SINCE IT HAD ALREADY CLAIMED CORRESPONDING COST OF ACQUISITION FOR THE PURPOSE OF SECTION 11 EXEMPTION PROVIDED IN THE ACT. HE TERMS THE CASE TO BE ON APPARENT INSTANCE OF DOUBLE DEDUCTION. WE FIND NO MERIT IN REVENUES AS HONBLE APEX COURT IN THE CASE OF CIT VS RAJASTHAN AND GUJARATI CHARITABLE FOUNDATION [2018] 402 ITR 441 (SC) DATED 13.12.2017 HAS SETTLED THE VERY SAME ISSUE IN ASSESSEES FAVOUR. THEIR LORDSHIPS HAVE ALREADY MADE IT CLEAR THAT SECTION 11(6) BROUGHT IN ACT VIDE FINANCE ACT, 2014 WHICH APPLIES W.E.F AY 2015-16 ONLY THAN HAVING ANY RETROSPECTIVE OPERATION. WE MAKE IT CLEAR THAT WE ARE IN AY 2008-09. WE THUS CONFIRM THE CIT(A) FINDINGS ACCEPTING ASSESSEES DEPRECIATION CLAIM. ITA NO.2511/KOL/2017 [ASSESSMENT YEAR: 2009-10] PAGE | 14 4. IN THE RESULT, THE ASSESSEES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26.10.2018. SD/- SD/- (A.L.SAINI) (S.S.GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE:- 26.10.2018 *AMIT KUMAR* COPY FORWARDED TO: 1. APPELLANT- BELLE VUE CLINIC, BIRLA BUILDING, 4 TH FLOOR, 9/1, R.N.MUKHERJEE ROAD, KOLKATA-700001. 2. RESPONDENT- DCIT (EXEMPTION),-1, 10B, MIDDLETON ROW, 5 TH FLOOR, KOLKATA-700071. 1. CIT-KOLKATA 2. CIT(APPEALS)-KOLKATA 3. DR: ITAT-KOLKATA BENCHES SR.P.S./H.O.O ITAT, KOLKATA