Dy.Commissioner of Income Tax(Exemptions)-Circle-1, Ahmedabad V. AMC Medical Education Trust, Ahmedabad

ITA 2689/AHD/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 6751 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 4 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 01-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P PATHAK
• Keywords: Capital asset; Business income; Depreciation; Charitable institution; Capital expenditure; Set aside
• Section: 143(3); 12A; 28; 11

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, SMC BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV , JUDICIAL MEMBER AND SHRI WASEEM AHMED , ACCOUNTANT MEMBER ./ ITA NO .2689/AHD /2017 / ASSTT. YEAR : 2013 - 14 D.C.I.T , (EXEMPTIONS) CIRCLE - 1 , AHMEDABAD VS . AMC MEDICAL EDUCATION TRUST, AHMEDABAD MUNICIPAL CORPORATION, RAMANLAL PATEL BHAVAN , USMANPURA, AHMEDABAD . PAN: AACTA310 1 G (APPLICANT) ( RESPON D ENT ) REVENUE BY : SHRI O.P. PATHAK , SR. D . R ASSESSEE BY : SHRI ARTI N. SHAH , AR / DATE OF HEARING : 29 / 03 / 201 9 / DATE OF PRONOUNCEMENT: 10 / 04 /201 9 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE REVENUE AGAINST THE ORDER OF THE COMMIS SIONER OF INCOME TAX (APPEALS) - 9 , AHMEDABAD, [ LD. CIT (A) IN SHORT] DATE D 14/09/2017 ARISING IN THE MATTER OF ASSESSMENT ORDER PASSED UNDER S. 143(3) OF THE INCOME TAX ACT, 1961 ( HERE - IN - AFTER REFERRED TO AS 'THE ACT') DATED 09/12/2015 RELEVANT TO THE ASSESSMENT YEAR (AY) 2013 - 14 . ITA NO .2689/AHD /2017 ASSTT. YEAR 2013 - 14 PAGE 2 OF 6 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN ALLOWING THE DEPRECIATION OF RS.11,05,73,991/ - TO THE ASSESSEE WHICH AMOUNTS TO DOUBLE DEDUCTION AS 100% DEDUCTION WAS ALLOWED TO THE ASSESSEE AS APPLICATION OF INCOME. 2. THE LD.COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE AO TO GRANT EXEMPTION TO THE ASSESSEE U/S.11(1)(A) OF THE I.T. ACT, TREATING THE ACTIVITY OF THE TRUST TO BE IN THE INTEREST OF CHARITY. 3. THE REVENUE CRAVES OVER LEAVE TO ADD, ALTER, AMEND, MODIFY, SUBSTANTIATE, DELETE AND/OR RESCIND ALL OR ANY GROUNDS OF APPEAL ON OR BEFORE THE FINAL HEARING, IN NECESSITY SO ARISES. 4. IT IS THEREFORE , PRAYED THAT THE ORDER OF THE LD.CIT(A) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED . 3. THE 1 ST ISSUE RAISED BY THE REVENUE IS THAT THE LEARNED CIT (A) ERRED IN ALLOWING THE DEPRECIAT ION AMOUNTING TO 11,05,73,991.00 EVEN THOUGH THE ASSESSEE HAS CLAIMED 100% DEDUCTION O F SUCH CAPITAL EXPENDITURE AS THE APPLICATION OF INCOME. 4. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IN THE PRESENT CASE IS TRUST AND ENGAGED IN THE ACTIVITY OF EDUCATION. THE AO DURING THE ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE HAD CLAIMED A DEDUCTION OF THE CAPITAL EXPENDITURE AND DEPRECIATION ON IT AS THE APPLICATION OF ITS INCOME UNDER SECTION 11(1)(A) OF THE ACT WHICH IS AMOUNTING TO DOUBLE DEDUCTION OF THE SAME EXPENDITURE. ACCORDINGLY, THE AO DISALLOWED THE DEPRECIATION CLAIMED BY THE ASSESSEE ON THE CAPITAL EXPENDITURE AMOUNTING TO 11,05,73,99 1 AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. ITA NO .2689/AHD /2017 ASSTT. YEAR 2013 - 14 PAGE 3 OF 6 5. AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO LEARNED CIT (A). THE ASSESSEE BEFORE THE LEARNED CIT (A) SUBMITTED THAT THE INCOME OF THE CHARITABLE INSTITUTION NEEDS TO BE COMPUTED AS PER THE PROVISIONS OF SECTION 11 TO 13 OF THE ACT. ACCORDINGLY, THE PROVISION S AS APPLICABLE TO THE BUSINESS INCOME AS SPECIFIED UNDER THE PROVISIONS OF SECTION 28 TO 44DA OF THE ACT DO NOT APPLY TO IT. 5.1 THE ASSESSEE ALSO CLAIMED THAT IN THE EARLIER ASSESSMENT YEAR 2011 - 12, THE LEARNED CIT (A) ALLOWED THE DEPRECIATION CLAIMED BY IT ON THE CAPITAL EXPENDITURE. SIMILARLY, THERE WAS NO DISALLOWANCE OF THE DEPRECIATION ON THE CAPITAL EXPENDITURE INCURRED BY IT FOR THE ASSESSMENT YEAR 2012 - 13. 6. THE LEARNED CIT (A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE DELETED THE ADDIT ION MADE BY THE AO. ACCORDINGLY, THE LEARNED CIT - A ALLOWED THE APPEAL OF THE ASSESSEE. 7. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CIT - A, THE REVENUE IS IN APPEAL BEFORE US. 8. BEFORE US, BOTH LEARNED DR AND THE AR VEHEMENTLY SUPPORTED THE ORDER OF AUTHORITIES BELOW AS FAVORABLE TO THEM. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE ISSUE IN THE INSTANT CASE RELATES WHETHER THE ASSESSEE IS ENTITLED TO 100% DEDUCTION OF THE CAPITAL EXPENDITURE AS WELL AS D EPRECIATION THEREON UNDER THE PROVISIONS OF SECTION 11(1)(A) OF THE ACT. UNDER SECTION 11 OF THE ACT, THE INCOME OF AN INSTITUTION DERIVED FROM PROPERTY HELD UNDER TRUST ITA NO .2689/AHD /2017 ASSTT. YEAR 2013 - 14 PAGE 4 OF 6 WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES, IS NOT INCLUDED IN THE TOTAL INCOME OF T HE INSTITUTION, TO THE EXTENT THAT SUCH INCOME IS APPLIED FOR CHARITABLE OR RELIGIOUS PURPOSES, OR IS ACCUMULATED OR SET ASIDE FOR SUCH PURPOSES, SUBJECT TO CERTAIN CONDITIONS. 9.1 HOWEVER, THE AO IN THE INSTANT CASE HAS DISALLOWED THE CLAIM FOR DEPRECIATI ON ON THE ASSETS OF SUCH INSTITUTIONS, ON THE BASIS THAT ONCE THE CAPITAL EXPENDITURE TO ACQUIRE ASSETS IS TREATED AS THE APPLICATION OF INCOME FOR CHARITABLE PURPOSES; THE INSTITUTIONS HAD VIRTUALLY ENJOYED A 100% WRITE - OFF OF THE COST OF ASSETS. THEREFOR E, THE GRANT OF DEPRECIATION WOULD AMOUNT TO GIVING DOUBLE BENEFIT TO SUCH INSTITUTIONS. 9.2 REGARDING THE CLAIM FOR DEPRECIATION BY CHARITABLE/RELIGIOUS INSTITUTIONS ON ASSETS, WE NOTE THAT HON BLE SUPREME COURT (SC), HAS RECENTLY PUT TO REST TO THIS DEBA TED ISSUE IN THE CASE OF CIT VS. RAJASTHAN AND GUJARATI CHARITABLE FOUNDATION POONA REPORTED IN 402 ITR 441 WHERE IN THE HEADNOTE READS AS UNDER: IT : IN CASE OF ASSESSEE - CHARITABLE INSTITUTION REGISTERED UNDER SECTION 12A, EVEN THOUGH EXPENDITURE INCURRED FOR ACQUISITION OF CAPITAL ASSETS WAS TREATED AS APPLICATION OF INCOME FOR CHARITABLE PURPOSES UNDER SECTION 11(1)(A), YET DEPRECIATION WOULD BE ALLOWED ON ASSETS SO PURCHASED (POSITION PRIOR TO 1 - 4 - 2015) IN VIEW OF THE ABOVE, THERE REMAINS NO DO UBT THAT THE ASSESSEE BESIDES THE COST OF CAPITAL EXPENDITURE IS ALSO ENTITLED TO THE DEPRECIATION WHILE WORKING OUT THE INCOME OF THE CHARITABLE INSTITUTION HAVING VALID REGISTRATION UNDER SECTION 12A OF THE ACT. ITA NO .2689/AHD /2017 ASSTT. YEAR 2013 - 14 PAGE 5 OF 6 9.3 THERE IS AN AMENDMENT UNDER SECTION 1 1(6) OF THE ACT WHICH RESTRICTS THE CLAIM OF THE ASSESSEE FOR BOTH THE BENEFIT/DEDUCTION, I.E. CAPITAL EXPENDITURE AS WELL AS DEPRECIATION THEREON. AS SUCH AS PER THE AMENDMENT THE ASSESSEE IS ENTITLED TO THE DEDUCTION ON ACCOUNT OF DEPRECIATION IN RESPECT OF SUCH CAPITAL EXPENDITURES WHICH WERE NOT CLAIMED AS 100% DEDUCTION UNDER SECTION 11(1)(A) OF THE ACT. HOWEVER, THIS AMENDMENT IS APPLICABLE WITH EFFECT FROM 1.4.2015 AND THE YEAR UNDER CONSIDERATION BEFORE US IS THE ASSESSMENT YEAR 2013 - 14. THUS THIS A MENDMENT IS NOT APPLICABLE FOR THE YEAR UNDER CONSIDERATION. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT - A. ACCORDINGLY, WE DECLINE TO INTERFERE IN THE ORDER OF THE LEARNED CIT (A). HENCE THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 10. THE 2 ND ISSUE RAISED BY THE REVENUE IS THAT LEARNED CIT (A) ERRED IN DIRECTING THE AO TO GRANT THE EXEMPTIONS TO THE ASSESSEE UNDER SECTION 11(1)(A) OF THE ACT TREATING THE ACTIVITY OF THE TRUST AS IN THE INTEREST OF CHARITY. 11. AT THE OUTSET, WE NOTE THAT THE ISSUE REGARDING THE ACTIVITY OF THE TRUST IS NOT ARISING FROM THE ORDER OF THE AUTHORITIES BELOW. AS SUCH WE ARE OF THE VIEW THE ACTIVITIES CARRIED OUT BY THE ASSESSEE HAD NOT BEEN DOUBTED. THUS IT CAN BE INFERRED THAT THE ASSESSEE IS ENGAGED IN THE CHARITABLE ACTIVITY AS ENVISAGED U NDER SECTION 2(15) OF THE ACT. ONCE THE ACTIVITIES ARE CHARITABLE IN NATURE THEN, THE ASSESSEE IS ENTITLED TO A DEDUCTION UNDER SECTION 11(1)(A) OF THE ACT. ACCORDINGLY, WE ARE OF THE VIEW THERE IS NO INFIRMITY IN THE DIRECTION PROVIDED BY THE LEARNED CIT (A). THE LEARNED DR HAS ALSO NOT BROUGHT ANYTHING ON RECORD CONTRARY TO THE FINDING OF THE LEARNED CIT (A). THEREFORE WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF THE LEARNED CIT (A). HENCE THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. ITA NO .2689/AHD /2017 ASSTT. YEAR 2013 - 14 PAGE 6 OF 6 12. T HE LAST ISSUE IS GENERAL, AND NO SEPARATE ADJUDICATION IS REQUIRED. THEREFORE WE DISMISS THE SAME AS INFRUCTUOUS. 13. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 10 /04 / 2019 AT AHMEDABAD. - SD - - SD - (RAJPAL YADAV ) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (TRUE COPY) A HMEDABAD; DATED 10 / 04 /2019 MANISH