ITO Exemption Ward 3, CHENNAI V. Shri Shirdi Saibaba Spiritual and Charitable Trust, CHENNAI

ITA 2859/CHNY/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5302 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 08-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N MADHAVAN
• Keywords: Capital asset; Depreciation; Charitable institution; Cost of acquisition; Capital expenditure
• Section: 12AA; 12; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . , , BEFORE SHRI DUVVURU RL REDDY , JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER /. I.T.A. NO. 2859/CHNY/2017 / ASSESSMENT YEAR : 2012-13 INCOME TAX OFFICER, EXEMPTION WARD 3, 121, MAHATMA GANDHI ROAD, NUNGAMBAKKAM, CHENNAI 600 034. VS. M/S. SHRI SHIRIDI SAIBABA SPIRITUAL AND CHARITABLE TRUST, SAI BUSINESS POINT, NO. 17, 2 ND FLOOR, MOUNT ROAD, LITTLE MOUNT, CHENNAI 600 015. [PAN: AATS 3448J] ( / APPELLANT) ( &') /RESPONDENT ) REVENUE BY : SHRI. N. MADHAVAN, ADDL. CIT ASSESSEE BY : SHRI SAROJ KUMAR PARIDA, ADVOCATE / /DATE OF HEARING : 03.04.2018 / /DATE OF PRONOUNCEMENT : 10.04.2018 / O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER: THE REVENUE FILED THIS APPEAL AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-17, CHENNAI IN ITA NO 68/14 -15/CIT(A)-17 DATED 29.08.2017 FOR ASSESSMENT YEAR 2012-13. :-2-: ITA NO. 2859/CHNY/2017 2. SHRI SHIRIDI SAIBABA SPIRITUAL AND CHARITABLE TR UST, IS GRANTED REGISTRATION AS A PUBLIC CHARITABLE TRUST U/S. 12AA AND IT HAD APPROVAL U/S. 80G(5)(VI) UP TO 31.03.2012. WHILE MAKING THE ASSE SSMENT FOR ASSESSMENT YEAR 2012-13, THE AO FOUND THAT THE ASSESSEE IS SEL LING BOOKS AND ARTICLES AT A PROFIT AND HENCE IT IS CARRYING ON A TRADE WITH A M ARK UP. SINCE, THE ASSESSEE ACTIVITIES COVERED UNDER PURVIEW OF PROVISO TO SEC TION 2(15), THE AO ASSESSED SURPLUS ARISING OUT OF SALE OF DEVOTIONAL ARTICLES, BOOKS ETC AT RS. 76,79,169/- AS INCOME UNDER THE HEAD BUSINESS AFTER ALLOWING NO RMAL DEPRECIATION, TREATING THE ASSESSEE AS AN AOP. HE HAS HELD THAT SINCE PROVISO OF SECTION 2(15) IS INVOKED, THE PROVISIONS OF SECTION 11 & 12 BECAME INOPERATIVE AND HENCE CHARGED THE RECEIPT OF VOLUNTARY CONTRIBUTION AS INCOME AND DID NOT ALLOW EXPENSES OF CAPITAL NATURE WHICH WAS CLAIMED TO BE AN APPLICATION OF INCOME. WITH REGARD TO THE DEPRECIATION CLAIMED AS AN APPLICATION OF INCOME, HE HELD THAT SINCE, THE ENTIRE CAPITAL EXPENDITURE INCURRED HAD BEEN ALLOWED AS AN APPLICATION OF INCOME IN THE PAST, HE HAS ADD ED BACK SUCH DEPRECIATION. FURTHER, HE HELD THAT THE EXPENDITURE NOT CONNECTED TO THE INCOME EARNING ACTIVITY LIKE ACCUMULATION FOR FUTURE USE ARE NOT A LLOWABLE AS SECTION 11 HAS BECOME REDUNDANT. 3. AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE T HE CIT(A). THE CIT(A) FOLLOWING THIS TRIBUNAL DECISION IN THE ASSESSEES CASE FOR ASSESSMENT YEAR 2011-12 IN ITA NO. 1879/MDS/2015 DATED 07.11.2006 H ELD THAT THE ASSESSEE :-3-: ITA NO. 2859/CHNY/2017 IS ELIGIBLE FOR EXEMPTION U/S. 11 & 12. IN RESPECT OF OTHER ISSUES, FOLLOWING THIS TRIBUNAL DECISION, SUPRA, AND THE JURISDICTION AL HIGH COURT DECISION IN THE CASE OF MEDICAL TRUST OF THE SEVENTH DAY ADVENTISTS VS DIT, EXEMPTION-III, CHENNAI, IN TCA NO 949 OF 2015 & 771 OF 2016 DATED 08.08.2017 ALLOWED THE ASSESSEES APPEAL. AGGRIEVED, THE REVENUE FILED TH IS APPEAL WITH THE FOLLOWING GROUNDS : 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO THE LAW AND FACTS OF THE CASE. 2.1 THE LD. CIT(A) ERRED IN ALLOWING THE ASSESSEE'S CLAIM OF DEPRECIATION WHEN THE ENTIRE COST OF ACQUISITION OF ASSETS WERE TREAT ED AS 'APPLICATION OF INCOME' FOR THE PURPOSE OF CLAIMING EXEMPTION U/S. 11 OF TH E ACT. 2.2 THE LD. CIT(A) FAILED TO APPRECIATE THAT AS PER THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF M/S. NECTAR BEVERAGES LIM ITED VS CIT 314 ITR 314, DEPRECIATION IS NEITHER A LOSS NOR EXPENDITURE. DEP RECIATION IS ONLY AN 'ALLOWANCE' AND THE VIEW THAT DEPRECIATION IS AN 'E XPENDITURE' TO BE TREATED AS 'APPLICATION OF INCOME' FOR CHARITABLE PURPOSES IS INCORRECT. 2.3 THE LD. CIT(A) FAILED TO APPRECIATE THE DECISIO N OF THE HON'BLE KERALA HIGH COURT IN THE CASE OF LISSIE MEDICAL INSTITUTIONS VS CIT 348 ITR 344 (KER.), WHICH DECISION WAS RENDERED AFTER SEEKING THE VIEW OF THE CBDT. IN THAT CASE, THE IGH COURT HELD THAT 'IF THE ASSESSEE TREATS EXPENDITURE ON ACQUISITION OF ASSETS AS APPLICATION OF INCOME FOR CHARITABLE PURPOSES UNDER SECTION 11(1)(A), THEN ASSESSEE CANNOT CLAIM DEPRECIATION ON VALUE OF SUCH ASSETS.' 2.4 THE LD. CIT(A) OUGHT TO HAVE CONSIDERED THE DEC ISION OF THE HON'BLE DELHI COURT IN THE CASE OF DIT VS. M/S. CHARANJIV CHARITA BLE TRUST (2014) 43 TAXMANN.COM 300 (DEL) WHEREIN IT HAS BEEN HELD THAT DEPRECIATION WOULD NOT BE ALLOWED IN CASES WHERE THE TRUSTS ARE CLAIMING T HE COST OF ACQUISITION OF ASSETS AS APPLICATION OF INCOME. 2.5 THE LD. CIT(A) ERRED IN NOT CONSIDERING THE APE X COURT DECISION IN THE CASE OF J.K. SYNTHETICS LIMITED (65 TAXMAN 420) WHEREIN IT WAS HELD THAT A DOUBLE DEDUCTION CANNOT BE A MATTER OF INFERENCE. IT MUST BE PROVIDED FOR IN CLEAR AND EXPRESS LANGUAGE, HAVING REGARD TO ITS UNUSUAL NATU RE AND ITS SERIOUS IMPACT ON THE REVENUES OF THE STATE. :-4-: ITA NO. 2859/CHNY/2017 2.6 THE LD. CIT(A) FAILED TO APPRECIATE THE DECISIO N OF THE ITAT, COCHIN IN THE CASE OF DLT, ERNAKULAM VS ADI SANKARA TRUST (2012) 143 TT J 234 WHEREIN IT WAS HELD THAT WHEN A CHARITABLE BODY HAS ALREADY CL AIMED DEDUCTION FOR ACQUISITION OF CAPITAL ASSETS AS APPLICATION OF MON EY, FURTHER CLAIM OF DEPRECIATION ON THE SAME ASSETS WOULD AMOUNT TO DOU BLE BENEFITS AND CANNOT BE ALLOWED. 2.7 THE ID. CIT(A) OUGHT TO HAVE FOLLOWED THE JURIS DICTIONAL HIGH COURT'S DECISION IN THE CASE OF CIT VS. RAO BAHADUR CUNNAN CHETTY CHAIRITES 135 ITR 485 (MAD), WHEREIN IT WAS HELD THAT THE WORD 'INCOM E' APPEARING IN SECTION 11 TO SECTION 12 HAS TO BE UNDERSTOOD IN NORMAL PARLAN CE WITHOUT LOOKING INTO OR INVOKING THE PROVISIONS OF SECTION 14 OF THE INCOME TAX ACT. ONCE THAT IS DONE, 'DEPRECIATION' WHICH IS NOT AN 'ACTUAL EXPENDITURE' , CANNOT BE ALLOWED. 3. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT(APPEALS ) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED. THE DR PRESENTED THE CASE NARRATING THE FACTS AND T HE GROUNDS OF APPEAL AND PLEADED THAT THE ORDER OF ASSESSMENT MAY BE UPHELD. PER CONTRA, THE AR SUBMITTED THAT THIS TRIBUNAL IN ITA NO 879/MDS/2015 AND CO NO. 130/MDS/2015 IN ASSESSMENT YEAR 2011-12 HAS ALLOWED THE ASSESSEES APPEAL. BASED ON WHICH AND ALSO ON THE JURISDICTIONAL HIGH COURTS DECISION, THE CIT(A) ALLOWED THE ASSESSEES APPEAL. THE REVENUE HAS FILED AN APPEAL ONLY AGAINST THE ISSUE ON DEPRECIATION. SUPREME COURT I N THE CASE OF CIT-III, PUNE VS RAJASTHAN AND GUJARATI CHARITABLE FOUNDATION, PO ONA REPORTED IN 2017 TIOL-463-SC-IT DATED 13.12.2017 HELD THAT WHEN THE CHARITABLE BODY APPLIES ITS INCOME ON ACQUISITION OF CAPITAL ASSETS, DEPREC IATION ON SUCH ASSETS SHOULD BE ALLOWED AND HENCE THE AR PLEADED THAT THE REVENU ES CONTENTIONS ARE UNTENABLE AND HENCE ITS APPEAL MAY BE DISMISSED. :-5-: ITA NO. 2859/CHNY/2017 4. WE HEARD THE RIVAL SUBMISSIONS. IT IS CLEAR FRO M THE GROUND EXTRACTED, SUPRA, THAT THE REVENUE IS AGGRIEVED ONLY ON DEPREC IATION ISSUE. AS PER THE SUPREME COURT DECISION, SUPRA, IT IS IN FAVOUR OF A SSESSEE AND HENCE THE REVENUES APPEAL IS DISMISSED. 5. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . ORDER PRONOUNCED ON TUESDAY, THE 10 TH DAY OF APRIL, 2018 AT CHENNAI. SD/- ( . ) (DUVVURU RL REDDY) '# /JUDICIAL MEMBER SD/- ( ) (S. JAYARAMAN) # /ACCOUNTANT MEMBER /CHENNAI, 4 /DATED: 10 TH APRIL, 2018 JPV /&6787 /COPY TO: 1. ) / APPELLANT 2. &') /RESPONDENT 3. : ) ( /CIT(A) 4. : /CIT 5. 7& /DR 6. = /GF