ADIT("Exemptions)-I, Hyderabad V. Institute of Development and Research in, Hyderabad

ITA 259/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59093 (ITAT-HYDERABAD)
• Duration Of Justice: 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 22-08-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 18-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K MYTHILI RANI
• Assessee Lawyers: LAXMINIWAS SHAR MA
• Keywords: Capital asset; Business income; Depreciation; Charitable institution; Capital expenditure
• Section: 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SHRI CHANDRA POOJARI, A.M. & SMT. ASHA VIJAYARAGHAVAN, J.M. ITA NO.259/HYD/2011 ASSESSMENT YEAR 2007-08 THE ADIT (EXEMPTIONS) - I, HYDERABAD VS THE INSTITUTE OF DEVELOPMENT AND RESEARCH IN BANKING TECHNOLOGY, HYDERABAD. (PAN AAAA10204K) APPELLANT RESPONDENT APPELLANT BY : SMT. K. MYTHILI RANI RESPONDENT BY : SHRI LAXMINIWAS SHARMA DATE OF HEARING : 27.12.2011 DATE OF PRONOUNCEMENT : 6.1.2012 ORDER PER ASHA VIJAYARAGHAVAN, JM: THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED A GAINST THE ORDER PASSED BY THE CIT(A) IV, HYDERABAD DATED 30.11.201 0 AND IT PERTAINS TO THE ASSESSMENT YEAR 2007-08. 2. THE REVENUE RAISED THE FOLLOWING GROUNDS: 1. THE ORDER OF THE CIT(A) IS NOT ACCEPTABLE AS IT IS ERRONEOUS BOTH IN LAW AND ON FACTS. 3. WE HEARD BOTH THE PARTIES. THIS GROUND IS GEN ERAL IN NATURE AND HENCE DOES NOT REQUIRE ANY ADJUDICATION. 4. THE SECOND GROUND RAISED BY THE REVENUE IS AS FOLLOWS: ITA NO.259/H/2011 INSTITUTE OF DEVELOPMENT AND RESEARCH IN BANKING TECHNOLOGY, HYD 2 2. IT IS NOT CORRECT TO CLAIM THAT PROVIDING THE B ANKING TECHNOLOGY SERVICE TO THE BANKS WOULD BE INDIRECTLY BENEFIT TH E GENERAL PUBLIC FOR THE SIMPLE REASON THAT ALL THE BANKS THAT RECEIVE T HE TECHNOLOGICAL SERVICES ARE EVIDENTLY THE INCOME TAX ASSESSEES AND ARE INCORPORATED BODIES. ANY SERVICES FROM THE INCORPORATED BODIES TO THE GENERAL PUBLIC IS NOT FOR FREE OF COST, NOT SUBSIDISED AND NOT CON CESSIONAL. THEREFORE, THERE IS NO REAL BENEFIT TO THE GENERAL PUBLIC UTIL ITY BY THE APPLICATION OF THE ASSESSEE WHICH IS IN CONTRAVENTION TO THE PROVI SIONS CONTAINED IN SECTION 2(15) OF THE IT ACT. 5. AFTER HEARING BOTH THE PARTIES, WE ARE OF THE OPINION THAT THE ISSUES INVOLVED IN GROUND NO.2 IS SQUARELY COVERED IN FAVO UR OF THE ASSESSEE BY THE ORDER OF THIS TRIBUNAL DATED 20.5.2008 IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEAR 2004-05 IN ITA NO.520/H/2008 WHEREI N THE TRIBUNAL HELD THAT THE ASSESSEES INCOME IS EXEMPTED U/S 11 OF TH E INCOME TAX ACT, 1961. 6. RESPECTFULLY, FOLLOWING THE SAME RATIO LAID DO WN IN THE ABOVE ORDER OF THIS TRIBUNAL, WE DISMISS THE GROUND TAKEN BY THE R EVENUE. 7. THE THIRD GROUND RAISED BY THE REVENUE IS AS F OLLOWS: 3. THE CIT(A) OUGHT TO HAVE CONSIDERED THE DECISIO N OF HONBLE SUPREME COURT IN THE CASE OF ESCORTS LTD. & ANOTHER VS. UNI ON OF INDIA (199 ITR 44) BEFORE ALLOWING THE CLAIM OF DEPRECIATION. 8. WE FIND THAT IN ASSESSEES OWN CASE IN ITA NO.8 10/HYD/2010 FOR THE ASSESSMENT YEAR 2006-07, THE CO-ORDINATE BENCH HAS HELD AS FOLLOWS: 6.THE NEXT GROUND IS WITH REGARD TO DISALLOWANCE O F DEPRECIATION FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT ITA NO.259/H/2011 INSTITUTE OF DEVELOPMENT AND RESEARCH IN BANKING TECHNOLOGY, HYD 3 VS. ESCORTS (P) LTD. (199 ITR 4) (SC). THE ASSE SSING OFFICER HAS DENIED THE DEPRECIATION ON FIXED ASSETS BY APPLYING THE DE CISION OF THE HONBLE SUPREME COURT CITED (SUPRA). IN OUR OPINION, THE J UDGEMENT IN THE CASE OF ESCORTS (P) LTD. WHICH WAS RENDERED IN THE CON TEXT OF COMPUTATION OF BUSINESS INCOME HOLDING THAT DEDUCTION U/S 35(2) ON CE HAVING BEEN GIVEN IN THE COMPUTATION OF BUSINESS INCOME, DEPREC IATION CANNOT BE ALLOWED ONCE AGAIN IN RESPECT OF THE SAME ASSETS, O N THE SAME WOULD AMOUNT TO DOUBLE DEDUCTION, WHICH IS NOT PERMISSIBL E. HOWEVER, IN THE PRESENT CASE, THE ISSUE IS CONCERNED WITH THE COMPU TATION OF INCOME U/S 11 (1) (9) AND THERE IS JUDICIAL FAVOUR FOR THE VIE W THAT SUCH INCOME HAS TO BE COMPUTED ON COMMERCIAL LINE. THE ARGUMENT OF DOUBLE DEDUCTION WAS CONSIDERED BY HONBLE AHEMADABAD TRIBUNAL IN TH E CASE OF SHRIMAD VISHWA DHARMA SANSTHA (2006) 102 TTJ 653 AL SO. IN THE SAID CASE, THE DECISION OF HONBLE APEX COURT IN THE CAS E OF VIT VS. HICO PRODUCT P LTD. (247 ITR 797) HAD BEEN PRESSED INTO SERVICE TO CONTAINED THAT SUCH DOUBLE DEDUCTION IS NOT AVAILABLE. FURTH ER, THE TRIBUNAL VIDE ORDER DATED 3.9.2010 IN THE CASE OF KAMINENI EDUCAT IONAL SOCIETY, HYDERABAD IN ITA NO.807-809/HYD/2010 HAS CONSIDERED JUDGEMENT OF HONBLE SUPREME COURT IN THE CASE OF ESCORTS (P) LT D. CITED SUPRA WHEREIN HELD THAT THE CAPITAL EXPENDITURE IS ALLOWE D AS DEDUCTION, NO DEPRECIATION IS ALLOWED ON SUCH CAPITAL ASSET IN TE RMS OF CLAUSE (IV) OF S.35(2) OF THE ACT, BUT OBSERVED THAT IN THE CASE O F A CHARITABLE INSTITUTION, SUCH A SPECIFIC PROVISION WAS NOT AVAI LABLE UNDER SECTION 11 OF THE ACT. THE TRIBUNAL IN THE CASE OF KAMINENI E DUCATIONAL SOCIETY (SUPRA) HAS FURTHER OBSERVED THAT THE DECISION OF T HE HONBLE APEX COURT IN ESCORTS INDIA (SUPRA) WAS NOT APPLICABLE TO THE TRUSTS, AS THEIR INCOME WAS REQUIRED TO BE COMPUTED IN TERMS OF SECTION 11 TO 13 OF THE ACT. WE, BEING IN AGREEMENT WITH THE DECISION OF THE COO RDINATE BENCH OF THE TRIBUNAL IN KAMINENI EDUCATIONAL SOCIETY (SUPRA), D ECIDE THE ISSUE IN ITA NO.259/H/2011 INSTITUTE OF DEVELOPMENT AND RESEARCH IN BANKING TECHNOLOGY, HYD 4 FAVOUR OF THE ASSESSEE AND GROUNDS OF APPEAL OF THE REVENUE ARE REJECTED. 9. RESPECTFULLY FOLLOWING THE DECISION IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEAR 2006-07, WE DISMISS THE GROUND RAIS ED BY THE DEPARTMENT. 10. THE FOURTH GROUND RAISED BY THE REVENUE IS AS FOLLOWS: 4. THE CIT(A) FAILED TO APPRECIATE THE FACT THAT T HE ASSESSEE INSTITUTE HAS RECEIVED GRANTS DURING THE YEAR FROM VARIOUS OR GANISATIONS. THE INSTITUTE HAS NOT UTILISED THE ENTIRE AMOUNT TOWARD S THE PURPOSE FOR WHICH THE GRANTS WERE RECEIVED DURING THE YEAR. HE NCE, THE GRANTS UNUTILISED AMOUNTING TO RS.1,16,53,650/- HAS BEEN A DDED AS INCOME OF THE ASSESSEE FOR CONTRAVENING THE PROVISIONS OF SEC TION 11 OF THE IT ACT. 11. BEFORE THE CIT(A), THE LEARNED AUTHORIZED REPR ESENTATIVE FOR THE ASSESSEE CONTESTED THE ADDITION OF UNUTILISED GRAN TS OF RS.1,16,53,650/-. IT WAS CONTENDED THAT THE GRANT RECEIVED AND UNSPENT D URING THE YEAR AMOUNTED TO RS.27,90,915/- ONLY WHICH WAS TO BE SPE NT FOR SPECIFIC PURPOSES. 11.1. FROM THE ASSESSMENT ORDER, IT IS SEEN THAT THE ASSESSING OFFICER FELT THAT THE GRANTS RECEIVED DURING THE YEAR FROM VARIOUS ORGANISATIONS WERE NOT UTILISED ENTIRELY FOR THE PURPOSE FOR WHICH THE SAME WERE RECEIVED. SHE THEREFORE ADDED THE UN-UTILISED GRANTS OF RS.1,16,5 3,650/- TO THE ASSESSEES INCOME IN VIEW OF THE CONTRAVENTION OF THE PROVISIO NS OF SECTION 11. 11.2. DURING THE COURSE OF APPELLATE PROCEEDINGS, IT WAS SUBMITTED BY THE AR OF THE ASSESSEE THAT THE NET ADDITION OF GRA NT DURING THE YEAR WAS RS.27,90,915/-. IT WAS SUBMITTED THAT THE SAID SUM HAS BEEN OFFERED AS INCOME BY INSTITUTE IN ITS COMPUTATION OF INCOME. HOWEVER, THE ASSESSING ITA NO.259/H/2011 INSTITUTE OF DEVELOPMENT AND RESEARCH IN BANKING TECHNOLOGY, HYD 5 OFFICER TOOK THE CLOSING BALANCE AS PER BALANCE SHE ET FOR MAKING THE ADDITION ON THIS ACCOUNT. 11.3. IT WAS THE CONTENTED BEFORE THE CIT(A) THAT THE UNUTILISED GRANTS APPEARING THE BALANCE SHEET OF RS.1,16,53,560/- INC LUDE THE GRANT RECEIVED FOR SMART CARD PROJECT ALSO, OUT OF WHICH RS.26,774 /- WERE SPENT DURING THE YEAR, THOUGH NO FURTHER AMOUNTS WAS RECEIVED ON THI S ACCOUNT DURING THE YEAR. HE AVERRED THAT THE SAID AMOUNT HAS ALREADY BEEN ASSESSED TO TAX IN THE EARLIER YEARS. DURING THE YEAR UNDER CONSIDERA TION, THE ASSESSEE RECEIVED GRANT OF RS.21,95,498/- FROM AICET, OUT O F WHICH RS.7,54,274/- REMAINED TO BE SPENT. SIMILARLY, RS.18,96,626/- HA VE REMAINED TO BE SPENT OUT OF THE GRANT OF RS.22,30,000/- RECEIVED FROM TH E MINISTRY OF COMMUNICATION AND TECHNOLOGY. BESIDES, AN AMOUNT O F RS.1,66,789/- HAD ACCRUED AS INTEREST ON PROJECT FUNDS DURING THE YEA R AND THE SAME ALSO IS REQUIRED TO REFUNDED TO THE RESPECTIVE AUTHORITIES, IF IT IS NOT SPENT FOR THE PROJECT. IT WAS ALSO CONTENDED THAT SINCE THE ABO VE GRANTS WERE RECEIVED FOR SPECIFIC PURPOSES, THE SAME COULD NOT HAVE BEEN TRE ATED AS INCOME OF THE ASSESSEE. 12. THE CIT(A) WHEREIN HELD AS FOLLOWS: ON GOING THROUGH THE FACTS OF THE CASE, IT IS CLEA R THAT THE ASSESSING OFFICER CONSIDERED THE BALANCE OF UNUTILISED GRANTS SHOWN IN THE BALANCE SHEET AS THE GRANTS RECEIVED AND UNUTILISED DURING THE YEAR. HOWEVER, AS PER THE SUBMISSIONS OF THE ASSESSEE, TH E UNUTILISED GRANTS WERE OF RS.27,90,915/- ONLY AND THE ASSESSEE HAD EV EN OFFERED THE SAME AS RECEIPTS FOR THE YEAR. THE ASSESSING OFFIC ER IS THEREFORE DIRECTED TO VERIFY THE SAID CONTENTION OF THE ASSES SEE, WHILE GIVING EFFECT TO THIS ORDER AND NO FURTHER ADDITION IS REQUIRED T O BE MADE IF THE GRANTS RECEIVED AND UNSPENT DURING THE YEAR ARE OF RS.27,9 0,915/- ONLY. ITA NO.259/H/2011 INSTITUTE OF DEVELOPMENT AND RESEARCH IN BANKING TECHNOLOGY, HYD 6 GROUND NO.4 IS THEREFORE DECIDED IN FAVOUR OF THE A SSESSEE SUBJECT TO SUCH VERIFICATION. 13. WE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL AVAILABLE ON RECORD. WE FIND NO INFIRMITY IN THE ORDERS OF THE CIT(A). ON GOING THROUGH THE BALANCE SHEET, WE FIND THAT THE UNUTILISED GRAN TS WERE OF RS.27,90,995/- AND THE ASSESSEE HAS OFFERED THE SAME AS RECEIPTS F OR THE ASSESSMENT YEAR UNDER CONSIDERATION. FURTHER, THE CIT(A) HAS MEREL Y DIRECTED THE ASSESSING OFFICER TO VERIFY WHETHER THE GRANTS RECEIVED AND U NSPENT DURING THE YEAR ARE OF RS.27,90,915/- ONLY AND IF SO, NO FURTHER ADDITI ON IS TO BE MADE. THE DEPARTMENT CANNOT HAVE ANY GRIEVANCE IN ORDER TO CO ME UP APPEAL AGAINST THE CIT(A), SINCE THE CIT(A) HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE ONLY SUBJECT TO VERIFICATION TO BE MADE BY THE ASSE SSING OFFICER. 14. IN THE RESULT, THE APPEAL OF THE REVENUE IS D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 6.1.2012 SD/- SD/- (CHANDRA POOJARI) ( (ASHA VIJAYA RAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 6 TH JANUARY, 2012 COPY FORWARDED TO: 1. THE ASSISTANT DIRECTOR OF INCOME TAX (E)-I, 3 RD FLOOR, AYAKAR BHAVAN, HYDERABAD 2. THE INSTITUTE OF DEVELOPMENT AND RESEARCH BANKING T ECHNOLOGY, CASTLE HILLS, ROAD NO.1, BANJARA HILLS, HYDERABAD 3. THE CIT(A)- IV, HYDERABAD 4. THE CIT, HYDERABAD 5. THE DR, ITAT, HYDERABAD NP/