Deputy Commissioner of Income-tax,(Exemption) Circle , Pune V. The Bishops Education Society, Pune

ITA 2551/PUN/2017

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 9119 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 29-01-2021
• Assessment Year: 2008-2009
• Appeal Filed On: 06-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Keywords: Capital asset; Depreciation; Charitable institution; CHAPTER IV
• Section: 143(3); 12A; 12AA; 264; 13; 32; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUNE (THROUGH VIRTUAL COURT) BEFORE SHRI INTURI RAMA RAO, AM AND SHRI PARTHA SARATHI CHAUDHURY, JM . / ITA NO.2548/PUN/2017 / ASSESSMENT YEAR : 2010-11 DCIT (EXEMPTION) CIRCLE, PUNE. ....... / APPELLANT / V/S. SHIVNAGAR VIDYA PRASARAK MANDAL, A/P MALEGAON BK, TAL. BARAMATI, PUNE-413115. PAN : AAATS5168B / RESPONDENT . / ITA NO.2551/PUN/2017 / ASSESSMENT YEAR : 2008-09 DCIT (EXEMPTION) CIRCLE, PUNE. ....... / APPELLANT / V/S. THE BISHOPS EDUCATION SOCIETY, 5/A, GENERAL BHAGAT MARG, PUNE-411001. PAN : AAATT1391F / RESPONDENT REVENUE BY : SHRI S. P. WALIMBE ASSESSEE BY : NONE / DATE OF HEARING : 22.03.2021 / DATE OF PRONOUNCEMENT : 23.03.2021 / ORDER PER INTURI RAMA RAO, AM: THESE ARE THE APPEALS FILED BY THE REVENUE DIRECTED AGAINST THE DIFFERENT ORDERS OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- 10, PUNE 2 ITA NO.2548/PUN/2017 ITA NO.2551/PUN/2017 (CIT(A) FOR SHORT) COMMONLY DATED 17.08.2017 FOR THE ASSESSMENT YEARS 2010-11 AND 2008-09 RESPECTIVELY. 2. SINCE THE IDENTICAL FACTS AND ISSUES ARE INVOLVED IN BOTH THE APPEALS, WE PROCEED TO DISPOSE OF THE SAME BY THIS COMMON ORDER. FOR THE SAKE OF CLARITY AND BREVITY, THE FACTS RELEVANT TO THE APPEAL IN ITA NO.2548/PUN/2017 FOR THE ASSESSMENT YEAR 2010-11 ARE STATED HEREIN. 3. THE REVENUE RAISED THE FOLLOWING GROUNDS OF APPEAL IN ITA NO.2548/PUN/2017 WHICH READ AS UNDER :- 1) WHETHER IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) WAS RIGHT IN ALLOWING THE APPEAL OF THE ASSESSEE BY IGNORING THE FACTS THAT ASSESSEE SOCIETY LIKE CHARITABLE OR RELIGIOUS INSTITUTIONS ARE GOVERNED BY ALMOST THE SEPARATE OR INDEPENDENT PROVISIONS OF SECTION 11,12, 12A, 12AA & 13 AND THESE PROVISIONS ARE INDEPENDENT CODE IN ITSELF IN CHAPTER III OF THE INCOME TAX ACT, 1961 AND CLAIM OF DEPRECIATION U/S 32 COMES UNDER CHAPTER IV OF THE ACT UNDER THE HEAD D - PROFIT AND GAINS OF BUSINESS OR PROFESSION AND DEPRECIATION IS ALLOWED WHEN CAPITAL ASSETS ARE USED FOR THE PURPOSE OF BUSINESS? 2) WHETHER IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) WAS RIGHT IN ALLOWING THE APPEAL OF THE ASSESSEE BY IGNORING THE FACTS THAT ASSESSEE IS NOT ELIGIBLE FOR ANY TYPE OF DEPRECIATION AS THE ENTIRE EXPENDITURE FOR THE PURCHASE OF CAPITAL ASSETS IS ALLOWED AS A DEDUCTION AND THE SAME IS TREATED AS APPLICATION OF INCOME U/S 11(1) AND CLAIMING DEPRECIATION ON THE SAME CAPITAL ASSETS IS A DOUBLE DEDUCTION AND IS NOT AS PER LAW AS THESE CAPITAL ASSETS ARE NOT USED FOR THE PURPOSE OF BUSINESS OR PROFESSION AS PROVIDED U/S 32(1) ? 4. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE RESPONDENT-ASSESSEE HEREIN IS A TRUST DULY REGISTERED UNDER THE BOMBAY PUBLIC TRUST ACT, 1950. IT WAS FORMED FOR THE PURPOSE OF PURSUING THE EDUCATIONAL OBJECTS. IT WAS ALSO DULY REGISTERED U/S 12A OF THE INCOME TAX ACT, 1961 (THE ACT). THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2010-11 WAS FILED DECLARING RS.NIL INCOME AFTER CLAIMING EXEMPTION U/S 11 OF THE ACT. AGAINST THE SAID RETURN OF INCOME, THE ASSESSMENT WAS COMPLETED BY THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-6, PUNE (THE ASSESSING OFFICER) VIDE ORDER DATED 3 ITA NO.2548/PUN/2017 ITA NO.2551/PUN/2017 30.11.2012 PASSED U/S 143(3) OF THE ACT AT A TOTAL INCOME OF RS.2,85,84,745/-. WHILE DOING SO, THE ASSESSING OFFICER HAD NOT ALLOWED THE DEPRECIATION AS APPLICATION OF INCOME OF THE TRUST. 5. BEING AGGRIEVED BY THE ABOVE ORDER, AN APPEAL WAS PREFERRED BEFORE THE LD. CIT(A), WHO VIDE HIS IMPUGNED ORDER FOLLOWING THE FOLLOWING JUDICIAL PRECEDENTS ALLOWED THE DEPRECIATION AS APPLICATION OF INCOME :- (A) CIT V INSTITUTE OF BANKING PERSONNEL SELECTION (IBPS)(2003) 264 ITR 110 (BOM) (B) G.K.R. CHARITIES V DEPUTY DIRECTOR OF IT (EXEMPTIONS)-I (2012) 051 SOT 0538 (CHEN TRIB) (C) CIT V SOCIETY OF THE SISTERS OF ST. ANNE (1984) 146 ITR 28 (KAR) (D) CIT V RAIPUR PALLOTTINE SOCIETY (1989) 180 ITR 579 (MP) (E) CIT V SHETH MANILAL RANCHHODDAS VISHRAM BHAVAN TRUST (1992) 198 ITR 598 (GUJ) (F) DIRECTOR OF INCOME TAX (EXEMPTION) V FRAMJEE CAWASJEE INSTITUTE (1993) 109 CTR 463 (BOM). (G) CIT V TINY TOTS EDUCATION SOCIETY (2011) 330 ITR 21 (P&H) (H) CIT V RAO BAHADUR CALAVALA CUNNAN CHETTY CHARITIES (1982) 135 ITR 485 (MAD.) (I) COMMISSIONER OF INCOME TAX V BHORUKHA PUBLIC WELFARE TRUST (1999) 240 ITR 513 (CAL). 6. HE FURTHER OBSERVED THAT THE AMENDMENT BROUGHT BY THE FINANCE ACT, 2014 W.E.F. 1.4.2015 PROVIDING THAT ONCE THE DEDUCTION HAS BEEN CLAIMED ON ACCOUNT OF APPLICATION OF INCOME AT THE TIME OF PURCHASE OR ACQUISITION OF SUCH ASSETS, NO FURTHER DEDUCTION WAS ALLOWED IN THE FORM OF DEPRECIATION SUBSEQUENTLY. 7. BEING AGGRIEVED BY THE ABOVE DECISION, THE REVENUE IS BEFORE US IN THE PRESENT APPEAL. 4 ITA NO.2548/PUN/2017 ITA NO.2551/PUN/2017 8. THE LD. SR. DR VEHEMENTLY CONTESTED THAT NO DOUBLE CLAIM DEDUCTION IS ALLOWED ONCE AT THE TIME OF ACQUISITION OF ASSETS AND AGAIN AS AN APPLICATION OF INCOME IN THE FORM OF DEPRECIATION CANNOT BE ALLOWED. HE PLACED HEAVILY RELIANCE ON THE ORDERS OF THE LOWER AUTHORITIES. 9. ON THE OTHER HAND, NONE APPEARED ON BEHALF OF THE ASSESSEE WHEN THE MATTER WAS CALLED DESPITE DUE SERVICE OF NOTICE. 10. HAVING HEARD THE LD. SR. DR AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT APPEAL IS NO MORE RES INTEGRA AS THE ISSUE IS ALREADY SETTLED IN FAVOUR OF THE ASSESSEE TRUST BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. RAJASTHAN AND GUJARAT CHARITABLE FOUNDATION, 402 ITR 441 (SC). THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. RAJASTHAN AND GUJARAT CHARITABLE FOUNDATION (SUPRA) HAD FOLLOWED THE JUDGEMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. INSTITUTE OF BANKING PERSONNEL SELECTION (IBPS) [2003] 131 TAXMAN 386 WHEREIN THE HONBLE JURISDICTIONAL HIGH COURT HAD HELD AS FOLLOWS :- 3. AS STATED ABOVE, THE FIRST QUESTION WHICH REQUIRES CONSIDERATION BY THIS COURT IS: WHETHER DEPRECIATION WAS ALLOWABLE ON THE ASSETS, THE COST OF WHICH HAS BEEN FULLY ALLOWED AS APPLICATION OF INCOME UNDER SECTION 11 IN THE PAST YEARS? IN THE CASE OF CIT V. MUNISUVRAT JAIN 1994 TAX LAW REPORTER, 1084 THE FACTS WERE AS FOLLOWS. THE ASSESSEE WAS A CHARITABLE TRUST. IT WAS REGISTERED AS A PUBLIC CHARITABLE TRUST. IT WAS ALSO REGISTERED WITH THE COMMISSIONER OF INCOME TAX, PUNE. THE ASSESSEE DERIVED INCOME FROM THE TEMPLE PROPERTY WHICH WAS A TRUST PROPERTY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEARS 1977-78, 1978-79 AND 1979-80, THE ASSESSEE CLAIMED DEPRECIATION ON THE VALUE OF THE BUILDING @ 2% AND THEY ALSO CLAIMED DEPRECIATION ON FURNITURE @ 5%. THE QUESTION WHICH AROSE BEFORE THE COURT FOR DETERMINATION WAS : WHETHER DEPRECIATION COULD BE DENIED TO THE ASSESSEE, AS EXPENDITURE ON ACQUISITION OF THE ASSETS HAD BEEN TREATED AS APPLICATION OF INCOME IN THE YEAR OF ACQUISITION? IT WAS HELD BY THE BOMBAY HIGH COURT THAT SECTION 11 OF THE INCOME-TAX ACT MAKES PROVISION IN RESPECT OF COMPUTATION OF INCOME OF THE TRUST FROM THE PROPERTY HELD FOR CHARITABLE OR RELIGIOUS PURPOSES AND IT ALSO PROVIDES FOR APPLICATION AND ACCUMULATION OF INCOME. ON THE OTHER HAND, SECTION 28 OF THE INCOME-TAX ACT DEALS WITH CHARGEABILITY OF INCOME FROM PROFITS AND GAINS OF BUSINESS AND SECTION 29 PROVIDES THAT INCOME FROM PROFITS AND GAINS OF BUSINESS SHALL BE COMPUTED IN ACCORDANCE WITH SECTION 30 TO 5 ITA NO.2548/PUN/2017 ITA NO.2551/PUN/2017 SECTION 43C. THAT, SECTION 32(1) OF THE ACT PROVIDES FOR DEPRECIATION IN RESPECT OF BUILDING, PLANT AND MACHINERY OWNED BY THE ASSESSEE AND USED FOR BUSINESS PURPOSES. IT FURTHER PROVIDES FOR DEDUCTION SUBJECT TO SECTION 34. IN THAT MATTER ALSO, A SIMILAR ARGUMENT, AS IN THE PRESENT CASE, WAS ADVANCED ON BEHALF OF THE REVENUE, NAMELY, THAT DEPRECIATION CAN BE ALLOWED AS DEDUCTION ONLY UNDER SECTION 32 OF THE INCOME-TAX ACT AND NOT UNDER GENERAL PRINCIPLES. THE COURT REJECTED THIS ARGUMENT. IT WAS 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. THE COURT REJECTED THE ARGUMENT ON BEHALF OF THE REVENUE THAT SECTION 32 OF THE INCOME-TAX ACT WAS THE ONLY SECTION GRANTING BENEFIT OF DEDUCTION ON ACCOUNT OF DEPRECIATION. IT WAS HELD THAT INCOME OF A CHARITABLE TRUST DERIVED FROM BUILDING, PLANT AND MACHINERY AND FURNITURE WAS LIABLE TO BE COMPUTED IN NORMAL COMMERCIAL MANNER ALTHOUGH THE TRUST MAY NOT BE CARRYING ON ANY BUSINESS AND THE ASSETS IN RESPECT WHEREOF DEPRECIATION IS CLAIMED MAY NOT BE BUSINESS ASSETS. IN ALL SUCH CASES, SECTION 32 OF THE INCOME-TAX ACT PROVIDING FOR DEPRECIATION FOR COMPUTATION OF INCOME DERIVED FROM BUSINESS OR PROFESSION IS NOT APPLICABLE. HOWEVER, THE INCOME OF THE TRUST IS REQUIRED TO BE COMPUTED UNDER SECTION 11 ON COMMERCIAL PRINCIPLES AFTER PROVIDING FOR ALLOWANCE FOR NORMAL DEPRECIATION AND DEDUCTION THEREOF FROM GROSS INCOME OF THE TRUST. IN VIEW OF THE AFORESATATED JUDGMENT OF THE BOMBAY HIGH COURT, WE ANSWER QUESTION NO. 1 IN THE AFFIRMATIVE I.E., IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT. 11. FURTHER, IT IS SETTLED POSITION OF LAW THAT THE AMENDMENT BROUGHT BY THE FINANCE ACT BY INSERTION OF SUB-SECTION (6) OF SECTION 11 OF THE I.T. ACT PROVIDING THAT NO DOUBLE DEDUCTION SHALL BE ALLOWED IN RESPECT OF THE FIXED ASSETS IS HELD TO BE PROSPECTIVE. FURTHER, THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF DIRECTOR OF INCOME-TAX, EXEMPTIONS VS. AL- AMEEN CHARITABLE FUND TRUST, 383 ITR 517 (KARNATAKA HC) AND IN THE CASE OF COMMISSIONER OF INCOME-TAX (EXEMPTIONS), BANGALORE VS. KARNATAKA REDDY JANASANGHA, 389 ITR 229 (KARNATAKA HC) TOOK THE SIMILAR VIEW. THE HONBLE APEX COURT IN THE CASE OF CIT VS. RAJASTHAN AND GUJARAT CHARITABLE FOUNDATION (SUPRA) ALSO HELD TO BE SAME EFFECT. 12. WE FIND THAT THE ORDER OF THE LD. CIT(A) IS INCONSONANCE WITH THE ABOVE SETTLED POSITION OF LAW. THEREFORE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A). ACCORDINGLY, THE GROUNDS OF APPEAL RAISED BY THE REVENUE STANDS DISMISSED. 6 ITA NO.2548/PUN/2017 ITA NO.2551/PUN/2017 13. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO.2548/PUN/2017 FOR THE ASSESSMENT YEAR 2010-11 IS DISMISSED. 14. SINCE THE FACTS AND ISSUES INVOLVED IN BOTH THE APPEALS OF THE REVENUE ARE IDENTICAL, THEREFORE, OUR DECISION IN APPEAL OF THE REVENUE IN ITA NO.2548/PUN/2017 FOR THE ASSESSMENT YEAR 2010-11 SHALL APPLY MUTATIS MUTANDIS TO THE APPEAL OF THE REVENUE IN ITA NO.2551/PUN/2017 FOR THE ASSESSMENT YEAR 2008-09. THUS, THE APPEAL OF THE REVENUE IN ITA NO.2551/PUN/2017 FOR THE ASSESSMENT YEAR 2008-09 IS DISMISSED. 15. RESULTANTLY, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED ON THIS 23 RD DAY OF MARCH, 2021. SD/- SD/- (PARTHA SARATHI CHAUDHURY) (INTURI RAMA RAO) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / PUNE; / DATED : 23 RD MARCH, 2021. SUJEET / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(A)-10, PUNE. 4. THE CIT (EXEMPTIONS), PUNE. 5. , , , / DR, ITAT, A BENCH, PUNE. 6. / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE.