Bala Brindavan, CHENNAI V. DCIT (Exemption-IV), , CHENNAI

ITA 2827/CHNY/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5600 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 23-11-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANAT KUMAR RAHA
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Depreciation; Question of law
• Section: 195

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: CHENNAI . . . , , ' BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ./ ITA NO.2827/CHNY/2017 ( ( /ASSESSMENT YEAR: 2011-12 M/S. BALA BRINDAVAN, 58, FOURTH MAIN ROAD, GANDHI NAGAR, ADYAR, CHENNAI-600 020. VS. THE DY. COMMISSIONER OF- INCOME TAX (EXEMPTIONS-IV), 121, NUNGAMBAKKAM HIGH ROAD, CHENNAI-34. [PAN: AAATB 4905 H ] ( + /APPELLANT) ( ,-+ /RESPONDENT) + . / APPELLANT BY : MR.R.VIJAYARAGHAVAN, ADV. ,-+ . /RESPONDENT BY : MR.SANAT KUMAR RAHA, JCIT . /DATE OF HEARING : 17.01.2019 . /DATE OF PRONOUNCEMENT : 30.01.2019 / O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED A GAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-17 , CHENNAI, DATED 31.08.2017, FOR THE AY 2011-12. 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APP EAL: 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPE ALS) IS CONTRARY TO LAW, FACTS AND CIRCUMSTANCES OF THE CASE. 2.1 THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED I N UPHOLDING THAT PROVISION MADE IN THE BOOKS TOWARDS GRATUITY IS NOT AN APPLICATION. ITA NO.2827/CHNY/2017 :- 2 -: 2.2 THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED I N RELYING THE DECISION OF THE SUPREME COURT IN THE CASE OF NACHIMUTHU INDUSTRIAL ASSOCIATION VS CIT (235 ITR 190) (SC), WHERE IN THE ISSUE WAS WHETHER PROVISION MADE IN THE ACCOUNTS FOR DONATION IS AN APPLICATION. 2.3 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) OUGHT TO HAVE APPRECIATED THAT, THE APPELLANT IS REQUIRED TO PAY THE GRATUITY STATU TORILY AND MAINTAINING A SEPARATE FUND WITH LIC AS WELL. 2.4 WITHOUT PREJUDICE TO THE ABOVE, THE APPELLANT S UBMITS THAT, IF THE PROVISION FOR GRATUITY IS NOT ALLOWABLE, THEN THE LEARNED CIT(A) OUGHT TO H AVE ALLOWED THE ACTUAL PAYMENT OF GRATUITY OF RS 8,09,313/-, TO THE RESIGNED / RETIRED EMPLOYEES. 3.1 THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED I N NOT ENTERTAINING THE ADDITIONAL GROUND, WHERE IN THE APPELLANT PLEADED THAT REPAYME NT OF VEHICLE LOAN (COMPRISING OF SCHOLL BUS & VAN) TO HDFC AMOUNTING TO RS.11,05,500 /- OUGHT TO BE ALLOWED IN TERMS OF CBDT CIRCULAR 100 , DATED 24TH JANUARY 1973 , F.NO: 195 / 1/72-IT (AL) 4. THE APPELLANT CRAVES LEAVE TO ADDUCE ADDITIONAL GROUNDS AT THE TIME OF HEARING. 3. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSE SSEE IS A SOCIETY REGISTERED U/S.12AA OF THE INCOME TAX ACT, 1961 AND THE RETURN OF INCOME FOR THE AY 2011-12 WAS FILED ON 29.09.2011 DISCLOSI NG NIL INCOME. AGAINST THE SAID RETURN OF INCOME, THE ASSESSMENT W AS COMPLETED BY THE DY. DIRECTOR OF INCOME TAX (EXEMPTIONS-IV), CHENNAI , VIDE ORDER DATED 26.03.2014, PASSED U/S.143(3) OF THE INCOME TAX ACT , 1961, AT A TOTAL INCOME OF RS.58,29,479/-. WHILE DOING SO, THE AO T REATED THE ADMISSION FEE OF RS.17,52,000/- AS AN INCOME OF THE TRUST, AS AGAINST THE CLAIM THAT THE SAME SHOULD BE FORM PART OF THE CORPUS FUND. F URTHER, THE AO HAS NOT ALLOWED THE DEPRECIATION AND THE PROVISION FOR GRAT UITY AS APPLICATION OF INCOME. 4. BEING AGGRIEVED, AN APPEAL WAS PREFERRED BEFORE THE LD.CIT(A), WHO VIDE IMPUGNED ORDER DISMISSED THE APPEAL. ITA NO.2827/CHNY/2017 :- 3 -: 5. THE ADDITIONAL GROUNDS RAISED BEFORE THE LD.CIT( A) THAT THE REPAYMENT OF LOAN SHOULD BE CONSIDERED AS APPLICATI ON INCOME ALSO CAME TO BE REJECTED. 6. BEING AGGRIEVED, THE ASSESSEE IS BEFORE US IN TH E PRESENT APPEAL. THE ASSESSEE ALSO RAISED THE FOLLOWING ADDITIONAL G ROUNDS OF APPEAL: 1. DEPRECIATION SHOULD BE TAKEN INTO ACCOUNT WHILE COMPUTING THE INCOME OF THE APPELLANT. 2. THE JURISDICTIONAL HIGH COURT IN THE CASE OF DIT VS M/S.MEDICAL TRUST OF SEVENTH DAY REPORTED IN 398 ITR 0721 (MADRAS) HELD SUCH CLAIM IN FAVOR OF THE ASSESSEE. 3. THE APPELLANT CRAVES LEAVE TO FILE ADDITIONAL GR OUNDS AT THE TIME OF HEARING. 7. THE ADDITIONAL GROUNDS OF APPEAL FILED BY THE AS SESSEE ARE ALLOWED AS IT REQUIRES NO VERIFICATION INTO FACTS AND IT IS A PURE QUESTION OF LAW, IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT I N THE CASE OF NATIONAL THERMAL POWER CO. LTD., REPORTED IN 229 ITR 383, NO W THE ISSUE WHETHER DEPRECIATION CAN BE ALLOWED AS APPLICATION OF INCOM E IS SETTLED BY THE HONBLE SUPREME COURT IN THE CASE OF RAJASTHAN & GU JARAT CHARITABLE FOUNDATION REPORTED IN 402 ITR 441, WHEREIN THE H ONBLE SUPREME COURT HELD THAT THE INCOME OF THE TRUST WAS REQUIRED TO B E COMPUTED U/S.11 ON COMMERCIAL PRINCIPLES AFTER PROVIDING THE ALLOWANCE FOR NORMAL DEPRECIATION. THE AMENDMENT MADE U/S.11 IS ONLY PR OSPECTIVE IN NATURE AND APPLICABLE FROM THE AY 2015-16 AND ACCORDINGLY, THE ADDITIONAL GROUNDS OF APPEAL ARE ALLOWED. 9. IN REGARD TO GROUND NO.2, PROVISION FOR GRATUITY THAT THE INCOME OF TRUST U/S.11 SHOULD BE COMPUTED ON NORMAL COMMERCIA L PRINCIPLES. THE ITA NO.2827/CHNY/2017 :- 4 -: PROVISION FOR GRATUITY SHOULD BE ALLOWED AS APPLICA TION OF INCOME, PROVIDED THE INCOME THE TRUST COMPUTED FOLLOWING THE MERCANT ILE SYSTEM OF ACCOUNTING. THEREFORE, THIS ISSUE REMITTED BACK TO THE FILE OF AO FOR VERIFICATION. 10. IN REGARD TO GROUND NO.3, TREATMENT OF RE-PAYME NT OF LOANS CAN BE ALLOWED AS APPLICATION OF INCOME IN CASE WHERE LOAN PROCEEDS HAVE SHOWN AS A SOURCE OF INCOME FOR THE TRUST IN THE YEAR OF RECEIPT OF THE LOAN. SINCE THIS ISSUE REQUIRES FURTHER VERIFICATION, WE REMIT THE ISSUE BACK TO THE FILE OF THE AO FOR FRESH ADJUDICATION IN THIS A SPECT. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSE E IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THE 30 TH JANUARY, 2019, IN CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( ) ( INTURI RAMA RAO ) /ACCOUNTANT MEMBER /CHENNAI, 4 /DATED: 30 TH JANUARY, 2019. TLN . ,56 76 /COPY TO: 1. + /APPELLANT 4. 8 /CIT 2. ,-+ /RESPONDENT 5. 6 , /DR 3. 8 ( ) /CIT(A) 6. ( /GF