The ADIT(Exmep.), Ahmedabad V. U.N. Mehta Institute of Cardiology & Research Centre, Ahmedabad

ITA 2649/AHD/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0429 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 14-03-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 27-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D S KALYAN
• Keywords: Depreciation; Charitable institution
• Section: 143(3); 32; 27; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH AHMEDABAD (BEFORE SHRI A. MOHAN ALANKAMONY, AM AND SHRI KUL B HARAT, JM) ITA NO. 2649/AHD/2012 A. Y.: 2009-10 THE ASSISTANT DIRECTOR OF INCOME- TAX (EXEMPTION), 2 ND FLOOR, NATURE VIEW BUILDING, OPP. H. K. HOUSE, ASHRAM ROAD, AHMEDABAD 09 VS U. N. MEHTA INSTITUTE OF CARDIOLOGY & RESEARCH CENTRE, CIVIL HOSPITAL CAMPUS, AHMEDABAD P. A. NO. AAATU 0329 E (APPELLANT) (RESPONDENT) APPELLANT BY SHRI D. S. KALYAN, SR. DR RESPONDENT BY SHRI TUSHAR P. HEMANI, AR DATE OF HEARING: 14-03-2013 DATE OF PRONOUNCEMENT: 22-03-2013 O R D E R PER A. MOHAN ALANKAMONY: THIS APPEAL IS PREFERRED BY THE REVENUE AGGRIEVED BY THE ORDER OF THE LEARNED C IT(A)- XXI, AHMEDABAD DATED 13-09-2012, IN APPEAL NO. CIT(A)-XX I/406/11-12, PASSED U/S 250 READ WITH SECTION 143(3) OF THE IT A CT, FOR THE ASSESSMENT YEAR 2009-10. 2. THE REVENUE HAS RAISED FIVE GROUNDS IN ITS APPE AL WHEREAS THE CRUX OF THE ISSUE IS DELETING THE DISALLOWANCE OF D EPRECIATION BY THE LEARNED CIT(A) AMOUNTING TO RS.1,28,86,250/- BEING THE DEPRECIATION CLAIMED ON THE ASSETS PURCHASED THE VALUE OF WHICH WAS CLAIMED AS APPLICATION OF FUNDS U/S 11(1) (A) OF THE ACT. ITA NO.2649/AHD/2012 (AY: 2009-10 ADIT (EXEMPTION) VS U. N. MEHTA INSTITUTE OF CARDIO LOGY & RESEARCH CENTRE 2 3. AT THE OUTSET, THE LEARNED AR POINTED OUT THAT T HE ISSUE IS COVERED AGAINST THE REVENUE BY THE DECISION OF THE ITAT AHMEDABAD BENCH IN THE FOLLOWING CASES: (I) ITA NO. 2657/AHD/2012(AY 2009-10) ORDER DATED 24-0 1 2013 ADIT (EXEMPTION) VS BLIND PEOPLE ASSOCIATION . (II ITA NO. 2658/AHD/2012(AY:2009-12) ORDER DATED 3 1-01- 2013 ADIT (EXEMPTION) VS FRIENDS WWB, INDIA. 4. THE LEARNED DR COULD NOT CONTROVERT TO THE SUBMI SSIONS OF THE LEARNED AR. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. AT THE TIME OF HEARING BOTH THE PARTIES AGREED THAT THE ISSUE IS COVERED AGAINST THE REVENUE BY THE ORDERS OF THE TRIBUNAL CITED SUPRA. FURTHER, IN THE AFORESAID ORDER OF THE ITAT AHMEDABAD A BENCH ITA NO. 2658/AHD/2012 DATED 31-01-2013 CI TED SUPRA THE TRIBUNAL HELD AS UNDER: 6. REGARDING GROUND NO.3 OF THE REVENUES APPEAL, AS PER WHICH, THE CLAIM OF THE REVENUE THAT DEDUCTION U/S 32 IS ALLOWABLE WHILE COMPUTING PROFIT AND GAINS FROM BUS INESS AND SINCE THE CHARITABLE TRUST IS NOT ENGAGED IN ANY BU SINESS, THE INCOME IS NOT ASSESSABLE UNDER THIS HEAD AND HENCE, DEPRECIATION IS NOT ALLOWABLE FOR THIS REASON ALSO. IN THIS REGARD, WE WOULD LIKE TO OBSERVE THAT IT WAS HELD BY HONBL E GUJARAT HIGH COURT AND HONBLE BOMBAY HIGH COURT THAT ALTHO UGH, THE INCOME OF THE ASSESSEE TRUST DOES NOT FALL UNDER TH E HEAD INCOME FROM BUSINESS BUT STILL SUCH INCOME HAS TO B E COMPUTED ON THE BASIS OF COMMERCIAL PRINCIPLES AND THEREFORE , DEPRECIATION HAS TO BE ALLOWED. IN THE CASE OF CIT VS SETH MANIKLAL RANCHODDAS VISHRAM BHAVAN TRUST (SUPRA), H ONBLE GUJARAT HIGH COURT HAS AGREED WITH THE VIEW TAKEN B Y HONBLE MADRAS HIGH COURT ON THIS ISSUE. HONBLE MADRAS HIG H COURT HAS TAKEN THIS VIEW IN THE CASE OF CIT VS RAO BAHAD UR ITA NO.2649/AHD/2012 (AY: 2009-10 ADIT (EXEMPTION) VS U. N. MEHTA INSTITUTE OF CARDIO LOGY & RESEARCH CENTRE 3 CALAVALA CUNNAN CHETTY CHARITIES AS REPORTED IN 135 ITR 485 THAT THE INCOME FROM THE PROPERTY HELD UNDER TRUST WOULD HAVE TO BE ARRIVED AT IN THE COMMERCIAL MANNER AND NOT U NDER THE VARIOUS HEADS SET OUT IN SECTION 14. IN OUR CONSIDE RED OPINION, THIS JUDGEMENT OF HONBLE GUJARAT HIGH COURT ALONG WITH THIS JUDGMENT OF HONBLE MADRAS HIGH COURT AGREED TO BY HONBLE GUJARAT HIGH COURT COVERS THIS ASPECT ALSO AGAINST THE REVENUE AND HENCE, THIS GROUND OF THE REVENUE IS ALSO LIABL E TO BE REJECTED. WE ORDER ACCORDINGLY. 7. BEFORE PARTING, WE WOULD LIKE TO OBSERVE THAT TH E WRITTEN SUBMISSIONS FILED BY THE LEARNED DR AS REPRODUCED A BOVE DOES NOT RENDER ANY HELP TO THE REVENUE BECAUSE SITTING IN GUJARAT, WE ARE DUTY BOUND TO FOLLOW THE JUDGMENT OF HONBLE GUJARAT HIGH COURT IN PREFERENCE TO THE JUDGMENT OF HONBLE KERALA HIGH COURT CITED BY LEARNED DR. MOREOVER, WE ALSO F IND THAT IN THE PRESENT CASE, IT IS NOT AN ALLEGATION OF THE A. O. IN THE ASSESSMENT ORDER THAT ANY CASH OF THE ASSESSEE HAS GONE OUTSIDE THE BOOKS OF THE ASSESSEE. FACTS ARE NOT BR OUGHT TO OUR NOTICE ON THE BASIS OF WHICH IT IS OBSERVED BY HON BLE KERALA HIGH COURT THAT CASH SURPLUS HAS GONE OUTSIDE THE B OOKS. GENERALLY, CLAIMING OF DEPRECIATION IN BOOKS OR IN COMPUTATION OF INCOME DOES NOT AFFECT CASH POSITION BECAUSE IT ONLY REDUCES THE PROFIT AND REDUCES THE WDV OF THE CONCERNED ASS ET. REGARDING THE EXAMPLE GIVEN BY LEARNED DR IN THE W RITTEN SUBMISSIONS, WE WOULD LIKE TO OBSERVE THAT CLAIMING OF DEPRECIATION IS MAINLY TO BUILD FUND TO FACILITATE REPLACEMENT OF ASSET WHEN IT IS WORN OUT BECAUSE OF WEAR & TEAR OR OBSOLESCE AND HENCE, IT CANNOT BE ALLEGED THAT THERE WILL BE LEAKAGE IF DEPRECIATION IS ALLOWED. REGARDING VARIOUS SUBMISSIONS TO SAY THAT THE JUDG MENT OF HONBLE GUJARAT HIGH COURT IS NOT APPLICABLE IN THE PRESENT CASE, WE DO NOT FIND ANY IN THE SAME BECAUSE WE HAV E ALREADY SEEN THAT GRANTING OF EXEMPTION U/S 11 AND THEN DEP RECIATION U/S 32 DOES NOT AMOUNT TO GRANTING DOUBLE DEDUCTION BECAUSE EXEMPTION U/S 11 IS NOT A DEDUCTION BUT EXEMPTION O F AN INCOME FROM THE LIABILITY OF TAX ON FULFILLMENT OF CERTAIN CONDITIONS. FOR THE SAME REASONS, RELIANCE PLACED O N 211 ITR ITA NO.2649/AHD/2012 (AY: 2009-10 ADIT (EXEMPTION) VS U. N. MEHTA INSTITUTE OF CARDIO LOGY & RESEARCH CENTRE 4 293, 211 ITR 635 AND 155 ITR 120 IS MISPLACED BECAU SE THERE IS NO DOUBLE DEDUCTION IN THE PRESENT CASE. 5.1 FURTHER, ITAT AHMEDABAD A BENCH VIDE ORDER DA TED 24-07-2009 IN THE CASE OF ACIT CC 1 (3) VS AHMEDABA D SOUTH INDIAN ASSOCIATION CHARITABLE TRUST IN ITA NO.2331/ AHD/2004, FOR THE ASSESSMENT YEAR 2001-02 ALONG WITH OTHER APPEALS HA D DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REV ENUE, WHEREIN AT PARA 11 TO 14, IT WAS HELD AS UNDER: 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF TH E PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN TH E CASE OF CIT V. SHETH MANILAL RANCHHODDAS VISHRAM BHAVAN TRUST ( 198 ITR 598) (GUJ), THE FACTS ARE THAT THE ASSESSEE WAS A T RUST REGISTERED UNDER THE PUBLIC TRUSTS ACT. THE INCOME OF THE ASSESSEE IS MAINLY FROM IMMOVABLE PROPERTY. IN THE RETURNS OF INCOME FILED FOR THE ASSESSMENT YEARS 1971-72 AND 1 972-73, THE ASSESSEE CLAIMED DEPRECIATION AND CALCULATES IT S INCOME ACCORDINGLY. THE INCOME-TAX OFFICER HAS REJECTED TH E CLAIM OF THE ASSESSEE AS HE WAS OF THE VIEW THAT THE INCOME FROM HOUSE PROPERTY WAS TO BE CALCULATED ACCORDING TO SECTIONS 22 TO 27 OF THE ACT. IN APPEAL, THE APPELLATE ASSISTANT COMMISS IONER HELD OTHERWISE. THE REVENUE THEN WENT TO THE TRIBUNAL. T HE TRIBUNAL DISMISSED THE APPEAL. SAME THING HAPPENED FOR THE ASSESSMENT YEAR 1972-73 ALSO. AT T HE INSTANCE OF R EVENUE THE FOLLOWING QUESTIONS WERE REFERRED TO THE HONBLE CO URT FOR THEIR DECISION. 1. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS RIGHT IN LAW IN HOLDING THAT, WHILE COMPUTING INCOME UNDER SECTION 11(1) (A) OF T HE INCOME TAX ACT, 1961, DEPRECIATION HAS TO BE ALLOWE D? 2. WHETHER THE TRIBUNAL WAS RIGHT IN LAW IN HOLDING THAT, HAVING REGARD TO THE SCHEME OF THE ACT, INCO ME REFERRED TO IN SECTION 11(1) (A) OF THE ACT IS TO B E COMPUTED NOT IN ACCORDANCE WITH THE PROVISIONS OF T HE ACT ITA NO.2649/AHD/2012 (AY: 2009-10 ADIT (EXEMPTION) VS U. N. MEHTA INSTITUTE OF CARDIO LOGY & RESEARCH CENTRE 5 BUT IN ACCORDANCE WITH THE NORMAL RULES OF ACCOUNTA NCY UNDER WHICH THE DEPRECIATION HAS TO BE ALLOWED WHIL E COMPUTING SUCH INCOME UNDER SECTION 11 (1) (A) OF T HE ACT? HONBLE HIGH COURT ANSWERED THE QUESTIONS IN THE AF FIRMATIVE HOLDING THAT INCOME FROM THE PROPERTY HELD UNDER TH E TRUST SHOULD BE COMPUTED IN ACCORDANCE WITH THE NORMAL RU LES OF ACCOUNTANCY IN WHICH DEPRECIATION ON HOUSE PROPERTY IS TO BE ALLOWED. IT HAS FURTHER BEEN HELD THEREIN THAT THAT THE EXPRESSION INCOME HAS TO BE UNDERSTOOD IN THE POPULAR OR GEN ERAL SENSE AND NOT IN THE SENSE IN WHICH THE INCOME IS ARRIVED AT FOR THE PURPOSE OF ASSESSMENT TO TAX BY APPLICATION OF SOME ARTIFICIAL PROVISIONS EITHER GIVING OR DENYING DEDUCTION. THE PROVISIONS OF INCOME-TAX ACT ARE TO COMPUTE INCOME UNDER DIFFEREN T HEADS CANNOT BE INTRODUCED TO FIND OUT THE INCOME DERIVED FROM THE PROPERTY HELD UNDER THE TRUST. SIMILAR VIEW WAS TAK EN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V. INS TITUTE OF BANKING PERSONNEL SELECTION. 12. HOWEVER, IT IS NOT VERY CLEARLY LAID DOWN IN TH ESE DECISIONS REFERRED TO IN THE FOREGOING PARAGRAPH AS TO WHETHER DEPRECIATION, IN RESPECT OF ASSTS IN WHICH INVESTME NT WAS ALLOWED AS APPLICATION EARLIER, WOULD BE FURTHER CO NSIDERED AS APPLICATION IN SUBSEQUENT YEAR FOR THE PURPOSE OF T REATING 85% OF RECEIPTS AS APPLICATION AND 15% OF THE RECEIPTS FOR BEING CARRIED FORWARD I.E., WHETHER DEPRECIATION WOULD BE FURTHER TREATED AS APPLICATION FOR CHARITABLE PURPOSES. NOT WITHSTANDING, THAT THE INCOME IN THE PROPERTY HELD BY THE TRUST S HOULD BE COMPUTED IN THE NORMAL COMMERCIAL SENSE AND THEREFO RE, DEPRECIATION IS REQUIRED TO BE DEDUCTED TO COMPUTE INCOME ACCORDINGLY, BUT WHAT IS COMPUTED FOR THE PURPOSES OF TAXING U/S. 11 IS THE DEFICIENCY BETWEEN 85% AND ACTUAL AM OUNT APPLIED FOR CHARITABLE PURPOSES. FOR EXAMPLE WHER E A TRUST APPLIES ONLY, SAY 60% OF ITS RECEIPTS AS APPLICATIO N TO CHARITABLE PURPOSES THEN 25% OF THE RECEIPTS WOULD BE TREATED AS DEFICIENCY WHICH SHOULD BE SUBJECTED TO TAX AND 15% IS ALLOWED TO BE CARRIED FORWARD. IN OUR CONSIDERED VIEW, HON BLE BOMBAY AND GUJARAT HIGH COURT IN THE ABOVE REFERRED CASES WERE CONCERNED WITH THE COMPUTATION OF INCOME OF THE TRU ST IN THE ITA NO.2649/AHD/2012 (AY: 2009-10 ADIT (EXEMPTION) VS U. N. MEHTA INSTITUTE OF CARDIO LOGY & RESEARCH CENTRE 6 NORMAL COMMERCIAL SENSE AND HAD NOT CONSIDERED WHET HER THE AMOUNT OF DEPRECIATION WOULD BE CONSIDERED AS APPLI CATION TO ARRIVE AT 85% OF THE RECEIPTS IN ADDITION TO INVEST MENT IN THE ASSET ALREADY ALLOWED AS APPLICATION IN AN EARLIER YEAR. THE ALLOWANCE OF DEPRECIATION AS FURTHER APPLICATION OF RECEIPTS IN SUBSEQUENT YEAR WOULD APPARENTLY BE A DOUBLE APPLI CATION WHICH, IN OUR HUMBLE VIEW, WOULD BE APPARENTLY8 INC ONSISTENT AS NOT SO PROVIDED IN THE LAW AND HENCE UNTENABLE A PPARENTLY ILLOGICAL. NOTWITHSTANDING OUR VIEW, WE RESPECTFULL Y FOLLOW THE DECISION OF HONBLE HIGH COURT IN THE CASE OF CIT V . SHETH MANILAL RANCHHODDAS VISHRAM BHAVAN TRUST (198 ITR 5 98), AND HOLD THAT DEPRECIATION WOULD BE FURTHER ALLOWED TO THE TRUST IN A SUBSEQUENT YEAR IN RESPECT OF THE PROPERTY WHE N WE CALCULATE ITS INCOME IN A COMMERCIAL SENSE. WE, THE REFORE, UPHOLD THE IMPUGNED ORDER OF THE LEARNED CIT(A) AND DISMISS THE GROUND RAISED BY THE REVENUE IN THIS REGARD. 13. GROUNDS NO.3 AND 4 IN EACH OF THE APPEALS FILED BY THE REVENUE ARE GENERAL IN NATURE AND NEED NO SPECIFIC ADJUDICATION. 14. IN THE RESULT, ALL THE APPEALS OF THE REVENUE A RE DISMISSED. 5.2 RESPECTFULLY FOLLOWING THE DECISIONS OF OUR HIG HER JUDICIARY AUTHORITIES AND PREDECESSORS, WE HOLD THE ISSUE IN FAVOUR OF THE ASSESSEE. FURTHER, IT IS EXPLICITLY CLEAR THAT SECT ION 11 (1) (A) OF THE ACT PROVIDES A CONDITION FOR CLAIMING EXEMPTION OF INCOME IN THE CASE OF CERTAIN ASSESSEES FROM THEIR TOTAL INCOME FOR A PARTICULAR ASSESSMENT YEAR UNDER CHAPTER III OF THE ACT VIZ. INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME, WHILE AS DEPRECIATI ON IS A DEDUCTION ALLOWABLE U/S 32 OF THE ACT WHILE COMPUTING INCOME UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION AS PROVIDED UN DER CHAPTER V OF THE ACT VIZ., COMPUTATION OF TOTAL INCOME UNDER VAR IOUS HEADS. THUS, BOTH THE SECTIONS 11(1) (A) OF THE ACT AND SECTION 32 OF THE ACT ARE ITA NO.2649/AHD/2012 (AY: 2009-10 ADIT (EXEMPTION) VS U. N. MEHTA INSTITUTE OF CARDIO LOGY & RESEARCH CENTRE 7 APPLICABLE ON DIFFERENT ISSUES AND UNDER DIFFERENT CIRCUMSTANCES. ACCORDINGLY, BOTH THESE SECTIONS WILL BE APPLICABLE INDEPENDENTLY WHEN CONDITIONS STIPULATED THEREIN ARE FULFILLED. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22-03-2013 SD/- SD/- (KUL BHARAT) JUDICIAL MEMBER (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER LAKSHMIKANTA DEKA/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER A SST. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION- DIRECT ON COMPUTER 13-03-13/1 5-03-13 2 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER 18-03-13 3 DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./ P.S.: 4 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 5 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR . P.S./P.S.: 6 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 7 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 8 THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER 9 DATE OF DESPATCH OF THE ORDER: