The DCIT, (Exemptions), Circle-2, Ahmedabad V. The New English School Trust, Anand

ITA 2636/AHD/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7955 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 15-09-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Depreciation; Charitable institution
• Section: 143(3); 12A; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMEDABAD BEFORE, SHRI S. S. GODARA, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ITA NO. 2636/AHD/2015 WITH CO NO. 190/AHD/2015 (ASSESSMENT YEAR: 2012-13) DEPUTY COMMISSIONER OF INCOME-TAX (EXEMPTIONS), CIRCLE-2, AHMEDABAD APPEL LANT VS. THE NEW ENGLISH SCHOOL TRUST, AT-POST-VASAD, TALUKA - ANAND 388 306 RESP ONDENT/CROSS OBJECTOR PAN: AAATT2113M /BY REVENUE : SHRI SUMIT KUMAR VERMA, SR. D. R. /BY ASSESSEE : NONE /DATE OF HEARING : 22.12.2017 /DATE OF PRONOUNCEMENT : 22.12.2017 ORDER PER S. S. GODARA, JUDICIAL MEMBER THIS REVENUES APPEAL AND ASSESSEES CROSS OBJECTIO N FOR ASSESSMENT YEAR 2012-13 ARISE AGAINST THE CIT(A)-9, AHMEDABADS ORD ER DATED 07.07.2015 IN CASE NO. CIT(A)-9/554/DCIT(EXEM)CIR.2/14-15, IN PROCEEDI NGS U/S. 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. 2. THE REVENUES SOLE SUBSTANTIVE GROUND IN THE INS TANT APPEAL CHALLENGES THE CIT(A)S ORDER REVERSING ASSESSING OFFICERS ACTION DISALLOWING DEPRECIATION OF RS.1,20,19,633/-. THE ASSESSEES CROSS OBJECTION O N THE OTHER HAND SUPPORTS THE CIT(A)S ORDER. ITA NO. 2636/AHD/15 WITH 190/AHD/15 [DCIT VS. THE N EW ENGLISH SCHOOL TRUST] A.Y. 2012-13 - 2 - 3. RELEVANT FACTS ARE IN A VERY NARROW COMPASS. TH IS ASSESSEE IS A PUBLIC CHARITABLE TRUST REGISTERED UNDER THE BOMBAY PUBLIC CHARITABLE TRUST ACT, 1950. IT GOT SECTION 12A REGISTRATION ON 21.07.1975. THE AS SESSEE IS ENGAGED IN EDUCATIONAL ACTIVITIES. IT RUNS SCHOOL AS WELL AS AN ENGINEERI NG COLLEGE IN VALSAD. THE ASSESSEE FILED ITS RETURN OF INCOME ON 28.09.2012 DECLARING LOSS OF RS.2,61,34,328/-. THE ASSESSING OFFICER FRAMED SCRUTINY ASSESSMENT IN ITS CASE ON 30.01.2015 DISALLOWING ITS IMPUGNED DEPRECIATION CLAIM ON THE GROUND THAT THE SAME AMOUNTED TO DOUBLE DEDUCTION SINCE COST OF THE RELEVANT ASSETS HAD ALR EADY BEEN CLAIMED FOR THE PURPOSE OF APPLICATION OF INCOME U/S.11 OF THE ACT. HE QUO TED HONBLE APEX COURTS DECISION IN ESCORTS LTD. 129 ITR 43 IN SUPPORT OF T HE ABOVE DISALLOWANCE. 4. THE CIT(A) REVERSES ASSESSING OFFICERS ACTION D ISALLOWING IMPUGNED DEPRECIATION CLAIM AS UNDER: 3. THE ISSUE OF ALLOWABILITY OF DEPRECIATION IN TH E CASE OF CHARITABLE TRUST HAS BEEN DECIDED BY THE HON'BLE 1TAT, AHMEDABAD 'B' BEN CH VIDE ITA NO. 1190/AHD/2010 DATED 15-06-2012 IN THE CASE OF PARU L AROGYA SEVA MANDAL TRUST AS UNDER:- '4. NOW THE ASSESSEE IS IN APPEAL BEFORE US. THE A.R. FOR THE ASSESSEE HAS FILED THE GIST IN THE CASE OF FOLLOWING JUDGMEN TS: 1. CIT VS. SHETH MANILAL RANCHHODDAS VISHRAM BHAVAN TRUST 198 ITR 598 (GUJ) 2. CIT VS. RAO BAHADUR CALAVALA CUNNAN CHETT Y CHARITIES 135 ITR 485 (MADRAS HIGH COURT) 3. SHRIMAD VALLABH VISHWA DHARMA SANSTHA V S. ACIT 102 TTJ (AHD) 653 4. DEPUTY CIT & ORS. VS. MARKET COMMITT EE 13 DTR 157 (DEL) (TRIB.) 5. CIT VS. MARKET COMMITTEE 330 ITR 16 6. CIT VS. TINY TOTS EDUCATION SOCIETY IN ITA NO. 93 OF 2010 (PUNJAB & HARYANA COURTS) 7. CIT VS. INSTITUTE OF BANKING PERSONNEL SE LECTION 264 ITR 110 (BOM). HE ALSO FILED A COPY OF IT AT 'C' BENCH, AHMEDABAD DECISION IN THE CASE OF ADHARSHILA EDUCATION & CHARITABLE TRUST IN ITA NO . 1443/AHD/2008, A.Y. 2005-06 & 810/AHD/2009, A.Y.2006-07, ORDER DAT ED 06.05.2011 IN WHICH SIMILAR ISSUE HAS BEEN ALLOWED BY FO LLOWING DECISION IN ITA NO. 2221/AHD/2008, A. Y. 2005-06, ORDER DATED 30.11 .2010 OBSERVING AS UNDER: ITA NO. 2636/AHD/15 WITH 190/AHD/15 [DCIT VS. THE N EW ENGLISH SCHOOL TRUST] A.Y. 2012-13 - 3 - '9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW, THERE I S NO CASE FOR INTERFERENCE IN THE ORDER OF ID. CIT(A). 10. THE ISSUE OF DEPRECIATION ON THE ASSETS OWNED B Y THE ASSESSES TRUST AND USED IN THEIR ACTIVITIES IS ALLOWABLE IN VIEW OF THE TWO JUDGMENTS REFERRED TO BY THE ASSESSEE IN THE WRITTE N SUBMISSIONS. IN ADDITION TO THIS, ABOVE VIEW IS SUPPORTED BY THE DE CISION OF HON'BLE MADHYA PRADESH HIGH COURT IN CIT VS. RAIPUR PALLOTT INE SOCIETY (1989) 180 ITR 579 (M.P.) WHEREIN HON'BLE HIGH COURT HELD AS UNDER: 'DEPRECIATION IS THE EXHAUSTION OF THE EFFECTIVE LI FE OF A FIXED ASSET OWING TO 'USE' OR OBSOLESCENCE. IT MAY BE COM PUTED AS THAT PART OF THE COST OF THE ASSET WHICH WILL NOT B E RECOVERED WHEN THE ASSET IS FINALLY PUT OUT OF USE. THE OBJEC T OF PROVIDING FOR DEPRECIATION IS TO SPREAD THE EXPENDI TURE INCURRED IN ACQUIRING THE ASSET OVER ITS EFFECTIVE LIFETIME AND THE AMOUNT OF PROVISION MADE IN RESPECT OF ACCOUNTI NG PERIOD IS INTENDED TO REPRESENT THE PROPORTION OF S UCH EXPENDITURE WHICH HAS EXPIRED DURING THAT PERIOD. I F DEPRECIATION IS NOT ALLOWED AS A NECESSARY DEDUCTIO N IN COMPUTING THE INCOME OF A CHARITABLE TRUST, THEN TH ERE WOULD BE NO WAY PRESERVE THE CORPUS OF THE TRUST. A CHARI TABLE TRUST IS, THEREFORE, ENTITLED TO DEPRECIATION IN RESPECT OF THE ASSETS OWNED BY IT. IN CIT VS. INSTITUTE OF BANKING PERSONNEL SELECTION (SUPRA), HON 'BLE BOMBAY HIGH COURT HAS HELD AS UNDER: 'INCOME DERIVED FROM THE TRUST PROPERTY HAS ALSO GO T TO BE COMPUTED ON COMMERCIAL PRINCIPLES AND IF COMMERCIAL PRINCIPLES ARE APPLIED THEN ADJUSTMENT OF EXPENSES INCURRED BY THE TRUST FOR CHARITABLE AND RELIGIOUS PURPOSES IN THE EARLIER YEARS AGAINST THE INCOME EARNED BY THE TRUS T IN THE SUBSEQUENT YEAR WILL HAVE TO BE REGARDED AS APPLICA TION OF INCOME OF THE TRUST FOR CHARITABLE AND RELIGIOUS PU RPOSES IN THE SUBSEQUENT YEAR IN WHICH ADJUSTMENT HAS BEEN MA DE HAVING REGARD TO THE BENEVOLENT PROVISIONS CONTAINE D IN S. 11 AND THAT SUCH ADJUSTMENT WILL HAVE TO BE EXCLUDE D FROM THE INCOME OF THE TRUST UNDER S. 11(1)(A) VS. SHRI PLOT SWETAMBER MURTI PUJAK JAIN MANDAL (1994) 119 CTR (G UJ.) 144 (1995) 211 ITR 293 (GUJ.) CONCURRED WITH'. 5. LD. D.R. VEHEMENTLY ARGUED TO CONFIRM THE ORD ER OF ID. CIT(A). 6. WE HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW AND GONE THROUGH THE CASE LAW CITED BY BOTH THE SIDE. THE AS SESSEE HAD ALREADY BEEN ALLOWED ASSETS AS EXPENDITURE/APPLICAT ION OF FUND. WHEN FULL VALUE OF ASSETS HAD BEEN ADJUSTED AS A EX PENDITURE OR ITA NO. 2636/AHD/15 WITH 190/AHD/15 [DCIT VS. THE N EW ENGLISH SCHOOL TRUST] A.Y. 2012-13 - 4 - APPLICATION OF FUND, NO ASSETS REMAINED TO BE DEPRE CIATED. WE ARE RESPECTFULLY FOLLOWING THE DECISION OF GUJARAT HIGH COURT AS WELL AS 'C' BENCH DECISION IN ABOVE CASE, IN WHICH DEPRECIA TION HAS BEEN ALLOWED EVEN CAPITAL ASSETS ALLOWED FULLY AS AN EXP ENDITURE. BEING JUDICIAL PRECEDENT, WE ALSO ALLOW THIS APPEAL IN FA VOUR OF THE ASSESSEE. 3.2 FURTHER, THE A.O HAS RELIED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF ESCORTS LTD. VS. UNION OF INDIA (1993) 199 ITR 43 ( SC) WHILE DISALLOWING THE DEPRECIATION OF CAPITAL ASSETS HELD BY CHARITABLE TRUST. THIS ASPECT WAS ALSO ELABORATED BY HON'BLE ITAT 'C' BENCH, AHME DABAD IN APPEAL NO. 1322/AHD/2011 IN THE CASE OF SARDAR PATEL INSTITUTE OF PUBLIC ADMINISTRATION FOR ASST. YEAR 2008-09. THE HON'BLE ITAT VIDE PARA-4 HA S OBSERVED AS UNDER: 'BEFORE US LD. CIT-DR HAS SUPPORTED THE ASSESSMENT ORDER AND MADE SUBMISSION THAT THE VIEW OF THE ASSESSING OFFICER W AS CORRECT. ON THE CONTRARY, THAT THE VIEW OF THE ASSESSEE ARGUED THAT THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF ESCORTS LTD. (SUPRA) I S NOT APPLICABLE IN THE PRESENT CASE. THE AR FURTHER ARGUED THAT IN THE IDE NTICAL FACTS AND CIRCUMSTANCES OF HON'BLE PUNJAB AND HARYANA HIGH CO URT HAS DISTINGUISHED THE JUDGMENT OF THE HON'BLE SUPREME C OURT IN FAVOUR OF THE ASSESSEE. THE LD. AR HAS RELIED UPON THE FOLLOWING CASE LAWS:- I) CIT V. SHETH MANILAL RANCHHODDAS VISHRAM BHAV AN TRUST 198 ITR 590 (GUJ.) II) CIT V. INSTITUTE OF BANKING PERSONNEL SELEC TION 264 ITR 110 (BOM) III) CIT V. SOCIETY OF THE SISTERS OF ANNE 14 6 ITR 28 (KER) IV) CIT V. RAIPUR PALLOTTINE SOCIETY 180 ITR 579 (MP) V) CIT V. MARKET COMMITTEE, PIPLI 330 ITR 16 ( P&H) VI) CIT V. TINY TOTS EDUCATION SOCIETY 330 IT R 21 (P&H) WE HAVE CONSIDERED FACTS AND CIRCUMSTANCES OF THE CASE AND SUBMISSIONS MADE BY THE RESPECTIVE REPRESENTATIVES OF THE PARTIES. THE ASSESSING OFFICER HAS DISALLOWED THE CLAIM FOLL OWING THE JUDGMENT PASSED BY THE HON'BLE SUPREME COURT IN THE CASE OF ESCORTS LTD. (SUPRA). WE FIND THE HON'BLE HIGH COU RT PUNJAB AND HARYANA HAS DISTINGUISHED THE JUDGMENT OF THE HON'B LE SUPREME COURT IN THE CASE OF CIT VS. TINY TOTS EDUCATION SO CIETY 330 ITR 21 (P&H). IN VIEW OF THE FACT THAT THE ISSUE HAS AL READY BEEN SETTLED BY THE HON'BLE HIGH COURT OF PUNJAB & HARYANA RESPE CTFULLY FOLLOWING THE RATIO LAID THEREIN WE HAD NO INFIR MITY INTO THE IMPUGNED ORDER OF THE LD. CIT(A). THEREFORE, THE PR ESENT APPEAL STANDS DISMISSED. WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT (A). IN VIEW OF THE ABOVE, THE APPEAL OF THE REVENU E IS DISMISSED.' 3.3 IN VIEW ABOVE AND RESPECTFULLY FOLLOWING THE JU DGMENTS BY HON'BLE ITAT, AHMEDABAD AS ABOVE, I DIRECT THAT ADDITION OF RS. 1 ,20,19,633/- ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION BE DELETED. GROUND NO. 1, IS ACCORDINGLY ALLOWED. ITA NO. 2636/AHD/15 WITH 190/AHD/15 [DCIT VS. THE N EW ENGLISH SCHOOL TRUST] A.Y. 2012-13 - 5 - 5. LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY SUP PORTS ASSESSING OFFICERS ACTION DENYING THE IMPUGNED DEDUCTION CLAIM BY TERM ING IT AS AN INSTANCE OF DOUBLE DEDUCTION. WE FIND NO MERIT IN THE INSTANT ARGUMEN T IN VIEW OF A CATENA OF CASE LAW QUOTED HEREINABOVE IN CIT(A)S FINDINGS. IT HAS FU RTHER COME TO OUR NOTICE THAT HONBLE APEX COURT VERY RECENT JUDGMENT IN CIVIL AP PEAL NO. 7186 OF 2014 AND OTHER CASES CIT VS. RAJASTHAN & GUJARATI CHARITABLE FOUNDATION, POONA HAS SETTLED THE LAW THAT SUCH A CLAIM IS NOT A CASE OF DOUBLE D EDUCTION. THE REVENUE FAILS TO DISPUTE THESE RECENT LEGAL DEVELOPMENTS. WE THEREF ORE AFFIRM CIT(A)S FINDINGS UNDER CHALLENGE. REVENUES APPEAL FAILS ACCORDING LY. THE ASSESSEES CROSS OBJECTION SUPPORTIVE OF THE CIT(A)S ORDER ON THIS ISSUE IS RENDERED INFRUCTUOUS. 6. THIS REVENUES APPEAL ITA NO.2636/AHD/2015 IS DI SMISSED WHEREAS ASSESSEES CROSS OBJECTION I.E. C.O. NO.190/AHD/201 5 IS DISMISSED AS RENDERED INFRUCTUOUS. [PRONOUNCED IN THE OPEN COURT ON THIS THE 22 ND DAY OF DECEMBER , 2017.] SD/- SD/- ( AMARJIT SINGH ) (S. S. GODARA ) ACCOUNTANT MEMBER JUDIC IAL MEMBER AHMEDABAD: DATED 22/12/2017 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )*+ ,--. . /0 / DR, ITAT, AHMEDABAD 1 +23 / GUARD FILE. BY ORDER / . // . /0