M/s. Kongunadu Arts & Science College Council, Coimbatore V. ACIT, Coimbatore

ITA 2682/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7637 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 16-09-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Assessee Lawyers: K SENTHIL
• Keywords: Depreciation; Charitable institution; Capital expenditure
• Section: 143(3); 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , A B ENCH, CHENNAI . , ! . , % !& BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER, AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ./ ITA NO.2682/MDS/2016 / ASSESSMENT YEAR : 2012-13 M/S. KONGUNADU ARTS & SCIENCE COLLEGE COUNCIL, G.N. MILLS POST, COIMBATORE-29 V. THE ASST. COMMISSIONER OF INCOME TAX (EXEMPTIONS), COIMBATORE PAN: AAAAK1198E ( /APPELLANT) ( /RESPONDENT) /APPELLANT BY : SHRI K. SENTHIL, ADVOCATE /RESPONDENT BY : SHRI SHIVA SRINIVAS, JCIT /DATE OF HEARING : 06.03.2017 /DATE OF PRONOUNCEMENT : 09.03.2017 / O R D E R PER A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER: THIS APPEAL IS FILED BY THE ASSESSEE AGGRIEVED BY T HE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IN ITA NO. 20/15-16 DATED 30.06.2016 PASSED U/S. 250(6) R.W. S. 143(3) OF THE ACT. 2. THE ASSESSEE HAS RAISED FOUR GROUNDS IN ITS APPE AL; HOWEVER THE CRUX OF THE ISSUE IS THAT THE LD. CIT (A) HAS E RRED IN UPHOLDING 2 I.T.A. NO.2682/MDS/2016 THE ORDER OF THE LD. AO WHO HAD DISALLOWED THE DEPR ECIATION WHILE COMPUTING THE INCOME OF THE ASSESSEE FOR THE PURPOS E OF SECTION 11 OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A CHARITABLE TRUST RUNNING VARIOUS EDUCATIONAL INSTIT UTIONS AND IT IS REGISTERED U/S.12A(A) OF THE ACT VIDE ORDER DATED 2 9.11.1976. THE ASSESSEE HAD FILED ITS RETURN OF INCOME ON 27.09.20 12 DECLARING NIL INCOME. SUBSEQUENTLY, THE CASE WAS TAKEN UP FOR SC RUTINY AND THE ASSESSMENT WAS COMPLETED U/S.143(3) OF THE ACT ON 2 0.03.2015, WHEREIN THE LD. AO DISALLOWED THE CLAIM OF DEPRECIA TION OF RS.1,16,03,457/- FOR COMPUTING THE INCOME OF THE PR OPERTY HELD UNDER THE TRUST. 4. ON APPEAL, THE LD. CIT(A) FOLLOWING THE DECISION OF THE CHENNAI BENCH OF THE TRIBUNAL IN THE CASE OF ANJUMA N-E- HIMAYATH-E-ISLAM V ASSISTANT DIRECTOR OF INCOME-TAX (EXEMPTIONS)-IV, CHENNAI REPORTED IN [2015] 59 TAX MANN.COM 379 AND VARIOUS OTHER DECISION OF THE HONBLE HIGH COUR TS DISMISSED THE APPEAL OF THE ASSESSEE BY OBSERVING AS UNDER:- 3 I.T.A. NO.2682/MDS/2016 I HAVE CONSIDERED THE GROUNDS, FACTS AND CIRCUMSTA NCES AND ARGUMENTS OF THE AR. THE ISSUE OF ALLOWANCE OF DEPR ECIATION IN THE CASES OF TRUSTS HAS BEEN ELABORATELY DISCUSSED IN A NUMBER OF DECISIONS RENDERED BY VARIOUS COURTS AND CONFLICTING DECISION S WERE GIVEN. THE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF CIT . VS MARKET COMMITTEE, PIPLI (2011) 330 ITR 15 ( P & H) AND IN THE CASE OF CIT VS TINTY TOTS EDUCATION SOCIETY (2011) 330 ITR 21 (P&H ) HELD THAT THE ESCORTS CASE CITED BY THE DEPARTMENT IS DISTINGUISH ABLE AND NOT APPLICABLE IN RELATION TO THE TRUST AND THERE IS NO DOUBLE DEDUCTION OF DEPRECIATION AND CAPITAL EXPENDITURE ON FIXED ASSET S IN RESPECT OF TRUST. SIMILAR VIEW WAS EXPRESSED BY OTHER COURTS IN THE C ASES OF CIT V. SOCIETY OF THE SISTERS OF ST. ANNE [1984] 146 ITR 2 8 (KAR), CIT V. RAIPUR POLLOTTINE SOCIETY [1989] 180 ITR 579 (M.P), AND COMMISSIONER OF INCOME TAX V. SETH MANILAL RANCHHOD DAS VISHRAM BHAVAN TRUST [1992] 198 ITR 598 (GUJ). ON THE OTHER HAND, THE DELHI HIGH COURT, IN THE CASE OF DIT (EXEMPTIONS) V. CHAR ANJIV CHARITABLE TRUST [2014] 267 CTR (DELHI) 306 HELD THAT WHERE IN A CASE OF A TRUST, COST OF ASSETS HAS BEEN ALLOWED AS DEDUCTION BY WAY OF APPLICATION OF INCOME, THEN DEPRECATION ON THE SAME ASSET CANNOT B E ALLOWED IN THE COMPUTATION OF THE TRUST'S INCOME. THE DECISION OF HIGH COURT OF KERALA IN THE CASE OF LISSIE MEDICAL INSTITUTIONS, ON WHIC H THE AO PLACED RELIANCE, IS AGAIN A DECISION IN WHICH IT WAS HELD THAT DEPRECIATION ALLOWANCE IS A NOTIONAL COST AFTER WRITING OFF THE FULL VALUE OF EXPENDITURE ON ACQUISITION OF ASSETS AS APPLICATION OF INCOME, THEREFORE THE DEPRECIATION HAS TO BE WRITTEN BACK AS INCOME A VAILABLE FOR APPLICATION FOR CHARITABLE PURPOSES. IN OTHER WORDS , DEPRECIATION SHOULD NOT BE CONSIDERED AS INCOME APPLIED FOR CHAR ITABLE PURPOSE WHILE CONSIDERING WHETHER 85% OF GROSS INCOME OF TH E TRUST HAS BEEN APPLIED FOR CHARITABLE PURPOSE AND TAXING THE SHORT FALL AS INCOME OF THE TRUST. IT IS TRUE THAT THE CHENNAI ITAT HELD IN A P LETHORA OF DECISIONS IN TRUST CASES THAT DEPRECIATION HAS TO BE ALLOWED. HO WEVER, IN RECENT DECISIONS DELIVERED BY ITAT CHENNAI, A CONTRARY VIE W WAS TAKEN TO THE 4 I.T.A. NO.2682/MDS/2016 EFFECT THAT DEPRECIATION ON ASSETS IS NOT ALLOWABLE AS IT AMOUNTS TO DOUBLE DEDUCTION. IN THE CASE OF ANJUMAN- E- HIMAYA TH-E-ISLAM V. ASSISTANT DIRECTOR OF INCOME-TAX (EXEMPTION)- IV CH ENNAI [2015] 59 TAXMANN.COM 379, THE CHENNAI TRIBUNAL RECONSIDERED THE DECISION OF KERALA HIGH COURT IN THE CASE OF LISSIE MEDICAL INS TITUTIONS AND HELD THAT IT IS ONLY IN THIS DECISION, THE COURT CONSIDE RED CIRCULAR NO. 5P(LLX-6) DATED 19.06.1968 OF THE BOARD WHEREAS IT HAS NOT BEEN CONSIDERED IN OTHER DECISIONS AND CONCLUDED THAT TH EY ARE FOLLOWING THIS DECISION OF THE KERALA HIGH COURT AND HELD THE ISSU E IN FAVOUR OF REVENUE. THE ITAT, WHILE TAKING THIS DECISION, ALSO TOOK CUE FROM THE DECISION OF KOLKATA HIGH COURT ORDER IN THE CASE OF GIRDHARILAL SHEWNARAIN TANTIA TRUST [1993] 199 ITR 215 WHEREIN THE COURT HELD THAT 'INCOME' CONTEMPLATED BY THE PROVISIONS OF SEC TION 11 IS THE REAL INCOME AND NOT THE INCOME ASSESSED OR ASSESSABLE. I N THE LATER DECISIONS IN THE CASES OF TAMIL NADU CRICKET ASSOCI ATION V. DEPUTY DIRECTOR OF INCOME-TAX (EXEMPTIONS), CHENNAI [2015] 60 TAXMANN. COM 287 (CHENNAI - TRIB.) AND DEPUTY DIRECTOR OF IN COME-TAX (EXEMPTIONS), CHENNAI V. VELS INSTITUTE OF SCIENCE, TECHNOLOGY & ADVANCED STUDIES [2015] 64 TAXMANN. COM 46 (CHENNAI -TRIB.) AND FEW OTHER CASES, THE ITAT HELD A SIMILAR VIEW. IN FACT, THE ITAT, CHENNAI HAD, VIDE ORDER IN 1.T.A.NO.2097/MDS/2014 DATED 26. 06.2015, DECIDED THE IDENTICAL ISSUE IN THE APPELLANT'S OWN CASE FOR A.Y.2010-11 AGAINST THE APPELLANT. RESPECTFULLY FOLLOWING THE ABOVE DEC ISIONS OF THE JURISDICTIONAL ITAT, CHENNAI, I HOLD THAT DEPRECIAT ION IS NOT ALLOWABLE SINCE THE COST OF ASSET WAS ALREADY ALLOWED AS DEDU CTION TOWARDS APPLICATION OF INCOME. THE GROUNDS ARE DISMISSED. 5. AT THE OUTSET, WE FIND THE ISSUE WITH RESPECT TO THE CLAIM OF DEPRECIATION, WHILE COMPUTING THE INCOME U/S. 11 OF THE ACT, IS SQUARELY COVERED BY THE DECISION OF THE CHENNAI BEN CH OF THE 5 I.T.A. NO.2682/MDS/2016 TRIBUNAL CITED SUPRA, WHICH THE LD. CIT (A) HAS FOL LOWED. THEREFORE, WE DO NOT FIND IT NECESSARY TO INTERFERE WITH THE ORDERS OF THE LD. CIT(A). 6. IN THE RESULT THE APPEAL OF THE ASSESSEE IS DISM ISSED. ORDER PRONOUNCED ON 09 TH MARCH, 2017 AT CHENNAI. SD/- SD/- ( . ) )) ) (G. PAVAN KUMAR) /JUDICIAL MEMBER ( . ) (A. MOHAN ALANKAMONY) / ACCOUNTANT MEMBER /CHENNAI, /DATED, THE 09 TH MARCH, 2017. JR. /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. ( )/CIT(A) 4. /CIT, 5. /DR 6. /GF.