Rashtrotthana Mudranalaya Trust, Bengaluru V. Commissioner of Income tax (Appeals)-14, Bengaluru

ITA 2858/BANG/2017

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 5216 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 1 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 20-07-2020
• Assessment Year: 2008-2009
• Appeal Filed On: 26-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRIYADARSHI MISHTRA
• Assessee Lawyers: K SOWMYA
• Keywords: Capital asset; Depreciation; Charitable institution; Capital expenditure
• Section: 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B : BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI , JUDICIAL MEMBER ITA NO. 2858 /BANG/201 7 (ASSESSMENT YEAR: 20 0 8 - 0 9) M/S. RASHTROTTHANA SAHITYA AND MUDRANA TRUST, ( PREVIOUSLY RASHTROTTHANA MUDRANALAYA TRUST), KESHAVA SHILPA, KEMPEGOWDA NAGAR, BANGALORE - 560019 .APPELLANT . PAN AAATR1734Q VS. ASSISTANT COMMISSIONER OF INCOME TAX (EXEMPTI ONS) , CIRCLE 17(2), BANGALORE. RESPONDENT. ASSESSEE BY: SMT. K. SOWMYA, ADVOCATE. REVENUE BY: SHRI PRIYADARSHI MISHTRA, ADDL. CIT(D.R) DATE OF HEARING : 04.02 .20 2 1 . DATE OF PRONOUNCE MENT : 04 .02 .20 2 1 . O R D E R PER SHRI CHANDRA POOJARI, A.M. : TH IS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF C OMMISSIONER OF INCOME TAX (APPEALS) - 14 , BANGALORE DT.12.10.2017 FOR THE ASSESSMENT YEAR 2008 - 09 . 2. THE ASSESS EE HAS RAIS ED THE FOLLOWING GROUNDS : 2 ITA NO. 2858/BANG/2017 1. THE HON'BLE COMMISSIONER (APPEALS) HAS ERRED IN COMPUTING THE PERMISSIBLE ACCUMULATION OF 15% OF THE TOTAL INCOME OF THE APPELLANT CONTEMPLATED IN SECTION 11(1)(B) OF THE ACT. THE METHOD OF COMPUTATION ADOPTED B Y THE HON'BLE COMMISSIONER (APPEALS) IS MISCONCEIVED. 2. THE HON'BLE COMMISSIONER (APPEALS) IS NOT CORRECT IN HOLDING THAT THE CAPITAL EXPENDITURE INCURRED BY THE APPELLANT IN THE PURCHASE OF THE PRINTING MACHINERY AT THE COST OF RS.3,36,46,797 FINANCED OUT OF BANK LOAN DOES NOT QUALIFY FOR THE CLAIM OF APPLICATION IN COMPUTING THE INCOME OF THE APPELLANT TRUST. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE - TRUST WAS ESTABLISHED AS A PUBLIC CHARITABLE TRUST UNDER DEED OF TRUST DT.16.03.1987. T HE TRUST HAS ALSO BEEN REGISTERED AS A CHARITABLE INSTITUTION U/S. 12AA OF THE INCOME TAX ACT, 1961 ('THE ACT') . THE INCOME OF THE TRUST IS DERIVED FROM ITS PRINTING ACTIVITIES. THE PRINTING ACTIVITY IS A BUSINESS UNDERTAKING AND A PROPERTY HELD UNDER TR UST WITHIN THE MEANING OF THE EXPRESSION U/S. 11(4) OF THE ACT. THE ASSESSING OFFICER IS OF THE OPINION THAT WHILE AVAILABLE INCOME WAS ONLY RS.79,00,108 THE ACTUAL AMOUNT SPENT WAS RS.3,40,69,541 RESULTING IN A DEFICIT OF RS.2,61,69,433. ADDING THE PRE VIOUS YEARS DEFICIENCY CARRIED FORWARD AMOUNTING TO RS.17,43,510 THE DEFICIENCY IS RS.2,79,12,943 WHICH WAS SOUGHT TO BE CARRIED FORWARD. THE ASSESSING OFFICER REJECTED THIS CLAIM OF THE ASSESSEE. THE ASSESSEE FILED A NOTICE FOR ACCUMULATION IN FORM 10 BY WAY OF ABUNDANT CAUTION. THE ASSESSING OFFICER REJECTED THIS NOTICE ON THE GROUND THAT PERMISSION IS SOUGHT FOR ACCUMULATION FOR PURPOSES NOT DETERMINABLE AND OBJECTS ENSHRINED IN THE TRUST DEED IN A BLANKET 3 ITA NO. 2858/BANG/2017 MANNER HAVE BEEN INCORPORATE4D IN THE NOTICE AND ACCUMULATION IN SUCH A GLOBAL MANNER WAS DEFINITELY NOT CONTEMPLATED IN SECTION 11(2) AND WAS NOT PERMISSIBLE. THE ASSESSING OFFICER FURTHER HELD THAT THE AMOUNT SOUGHT TO BE ACCUMULATED HAS NOT BEEN SPECIFIED IN THE NOTICE. THE ASSESSEE HAD CLAIMED RS.7,35,018 AS DEPRECIATION ADMISSIBLE, BUT THE ASSESSING OFFICER HELD THAT DEDUCTION ON ACCOUNT OF DEPRECIATION CANNOT BE ALLOWED IN COMPUTING THE INCOME OF A CHARITABLE TRUST AS THE TRUST IS ALLOWED A DEDUCTION TOWARDS CAPITAL EXPENDITURE AND A CLAIM FO R DOUBLE DEDUCTION CANNOT BE ENTERTAINED. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE APPEALED BEFORE THE CIT (APPEALS). THE CIT (APPEALS) ALLOWED THE ASSESSEE'S CLAIM FOR DEPRECIATION AND UPHELD THE VALIDITY OF THE NOTICE FOR ACCUMULATION U/S. 11(2) OF THE ACT AND REJECTED THE CLAIM OF ASSESSEE WITH REGARD TO NOTICE FOR ACCUMULATION. THE CIT (APPEALS) RECOMPUTED THE INCOME OF THE ASSESSEE AND HELD THAT THERE IS NO DEFICIENCY. THE BASIS OF THE RECOMPUTATION OF INCOME OF THE ASSESSEE BY THE CIT (APPE ALS) GIVEN BELOW : A) THE COMPUTATION OF THE STANDARD ALLOWANCE OF 15% ENVISAGED IN SECTION 11(1)(B) WAS WITH REFERENCE TO THE NET INCOME ARRIVED AT AFTER APPLICATION FOR CHARITABLE PURPOSE. B) THE COST OF PRINTING MACHINERY PROCURED BY OBTAINING A LOAN F ROM THE BANK CANNOT BE CONSIDERED AS APPLICATION OF INCOME. 4 ITA NO. 2858/BANG/2017 AGGRIEVED BY THE ORDER OF CIT (APPEALS), THE ASSESSEE IS IN APPEAL BEFORE US. 4 . AT THE TIME OF HEARING, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE COMPUTATION MADE BY THE LEAR NED CIT (APPEALS) IN PARA 5.5 IS TOTALLY WRONG AND HE HAS NOT GIVEN REASON FOR ADOPTING THE VALUE OF THE ASSETS PURCHASED DURING THE YEAR UNDER CONSIDERATION AT RS.7,15,540 . ACCORDING TO THE LEARNED AUTHORISED REPRESENTATIVE THE ISSUE MAY BE REMITTED TO T HE FILE OF CIT (APPEALS) TO PASS A SPEAKING ORDER ON THE APPLICATION OF INCOME. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF LEARNED CIT (APPEALS). 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. ADMITTEDL Y, THE LEARNED CIT (APPEALS) COMPUTED THE APPLICATION AMOUNT IN PARAS 5 & 6 WHEREIN HE HAS MENTIONED THE VALUE OF THE ASSET PURCHASED AT RS.7,15,540. HOWEVER HE HAS NOT MENTIONED HOW HE HAS ARRIVED THE FIGURE. FURTHER WE MAKE IT CLEAR THAT PURCHASE OF CA PITAL ASSET BY AVAILING LOAN CANNOT BE CONSTRUED AS APPLICATION OF INCOME. THERE IS A DIFFERENCE BETWEEN APPLICATION OF INCOME AND UTILIZATION OF LOAN AS A SOURCE FOR ACQUISITION OF CAPITAL ASSET. ONLY THE REPAYMENT OF LOAN OUT OF INCOME W ILL BE CONSTRUED AS APPLICATION OF INCOME. 5 ITA NO. 2858/BANG/2017 6. GROUND NO.7 IS OF ACADEMIC NATURE AND DOES NOT REQUIRE ANY ADJUDICATION. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/ - SD/ - ( SMT. BEENA PILLAI ) ( CHANDRA POOJARI ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 04.02. 20 2 1 . *REDDY GP COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. CIT (A) 4. PR. CIT 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME - TAX APPELLATE TRIBUNAL BANGALORE