DCIT (Exemptions), CHENNAI V. Sundaram Medical Foundation, CHENNAI

ITA 2878/CHNY/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5035 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 28-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: T BANUSEKAR
• Keywords: Business income; Depreciation; Charitable institution; Cost of acquisition; Set aside
• Section: 12

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI , , BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ./I.T.A. NO.2878/CHNY/2017. ! ' / ASSESSMENT YEAR : 2009-10. THE DEPUTY COMMISSIONER OF INCOME TAX, (EXEMPTIONS) CHENNAI CIRCLE, CHENNAI. VS. M/S. SUNDARAM MEDICAL FOUNDATION, 21, PATTULAS ROAD, CHENNAI 600 002. [PAN AACTS 1335A] ( / APPELLANT) ( /RESPONDENT) # $ % / APPELLANT BY : SHRI. AR.V. SREENIVASAN, IRS, JCIT. &' # $ % /RESPONDENT BY : SHRI. T. BANUSEKAR, C.A. ( ) $ * /DATE OF HEARING : 14-05-2019 +,'! $ * /DATE OF PRONOUNCEMENT : 22-05-2019 / O R D E R PER INTURI RAMA RAO , ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE REVENUE DIRECTED AG AINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-1 7, CHENNAI (CIT(A) FOR SHORT) DATED 22.09.2017 FOR THE ASSES SMENT YEAR (AY) 2009-10. ITA NO. 2878/2017 :- 2 -: 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APP EAL:- 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO THE LAW AND FACTS OF THE CASE. 2.1 THE ID. CIT (A) ERRED IN HOLDING THAT THE ASS ESSEE IS ELIGIBLE TO SET OFF OF BROUGHT FORWARD EXCESS APPLICATION OF FUNDS TO SUBSEQUENT YEARS. 2.2 THE ID. CIT (A) FAILED TO OBSERVE THAT THERE IS NO PROVISION IN THE INCOME TAX ACT WHICH ALLOWS FOR DETERMINATION OF LOSS ULS 11 AND CARRY FORWARD OF THE SAME TO SUBSEQUENT YEAR TO BE SET OFF AGAINST INCOME OF THE SUBSEQUENT YEAR. 2.3. THE CIT(A) FAILED TO OBSERVE THAT THE INCOME OF THE TRUST IS NOT COMPUTED ON THE PRINCIPLES OF BUSINESS INCOME WHICH CONTAINS THE PROVISIONS OF CARRY FORWARD OF LOSSES OF EARLIER YE AR AND SET OFF SUCH LOSSES AGAINST THE INCOME OF THE CURRENT YEAR. 2.4 THE ID. CIT(A) FAILED TO CONSIDER THE DECISIO N OF IT AT, DELHI IN THE CASE OF PUSHPAWATI SINGHANI RESEARCH INSTITUTE FOR LIVER, RENAL & DIGESTIVE DISEASES VS DY.DIT ( 009)29 SOT 316, IT AT, CHENNAI DECISIONS IN THE CASE OF ANJUMAN-E-HIMAY TH-ISLAM VS.ADIT(EXEMPTION) - IV, CHENNAI FOR THE A.Y. 2009- 10 REPORTED IN [2015] 59 TAXMANN.COM 379 AND MLS INTER CHURCH SERV ICE ASSOCIATION I ITA NO.1253/MDS/2014 DATED 05/02/2016. 2.5 THE ID.CIT(A) FAILED TO OBSERVE THAT CARRY FO RWARD OF EXCESS APPLICATION OF FUNDS WOULD RESULT IN NOTIONAL APPLI CATION OF INCOME IN SUBSEQUENT YEAR WHICH IS NOT PERMISSIBLE IN LAW. 3.1 THE LD. CIT(A) ERRED IN ALLOWING THE ASSESSEE' S CLAIM OF DEPRECIATION WHEN THE ENTIRE COST OF ACQUISITION OF ASSETS WERE TREATED AS 'APPLICATION OF INCOME' FOR THE PURPOSE OF CLAIM ING EXEMPTION U/S. 11 OF THE ACT. 3.2 THE LD. CIT(A) FAILED TO APPRECIATE THAT AS PER THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF IS. NECTAR BEVERAGES LIMITED VS CIT 314 ITR 314, DEPRECIATION IS NEITHER A LOSS NOR EXPENDITURE. DEPRECIATION IS ONLY AN 'ALLOWANCE' AN D THE VIEW HAT DEPRECIATION IS AN'EXPENDITURE' TO BE TREATED AS 'A PPLICATION OF INCOME' FOR CHARITABLE PURPOSES IS INCORRECT. 3.3 THE LD. CIT(A) FAILED TO APPRECIATE THE DECISIO N OF THE HON'BLE KERALA HIGH COURT IN THE CASE OF LISSIB MEDICAL INS TITUTIONS VS CIT 348 ITR 344 (KER.), WHICH DECISION WAS REND. RED AF TER SEEKING THE VIEW OF THE CBDT. IN THAT CASE, THE HIGH COURT HELD THAT 'IF THE ASSESSEE TREATS EXPENDITURE ON ACQUISITION OF ASSET S AS APPLICATION ITA NO. 2878/2017 :- 3 -: OF INCOME FOR CHARITABLE PURPOSES UNDER SECTION 11(1) ( A), THEN ASSESSEE CANNOT CLAIM DEPRECIATION ON VALUE OF SUCH ASSETS. ' 3.4 THE ID. CIT(A) OUGHT TO HAVE CONSIDERED THE DEC ISION OF THE HON'BLE DELHI COURT IN THE CASE OF DIT VS. M/S. CHA RANJIV CHARITABLE TRUST (2014) 43 TAXMANN.COM 300 (DEL) WHEREIN IT HA S BEEN HELD THAT DEPRECIATION WOULD NOT BE ALLOWED IN CASES WHERE TH E TRUSTS ARE CLAIMING THE COST OF ACQUISITION OF ASSETS AS APPLI CATION OF INCOME. 3.5 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 NATURE AND ITS SERIOUS IMPACT ON THE RE VENUES OF THE STATE. 3.6 THE ID. CIT(A) FAILED T APPRECIATE THE DECISIO N OF THE ITAT, COCHIN IN THE CASE OF DDLT, ERNA ULAM VS ADI SANKAR A TRUST (2012) 143 TTJ 234 WHEREIN IT WAS HELD THAT WHEN A CHARITA BLE BODY HAS ALREADY CLAIMED DEDUCTION FOR ACQUISITION OF CAPITA L ASSETS AS APPLICATION OF MONEY, FURTHER CLAIM OF DEPRECIATION ON THE SAME ASSETS WOULD AMOUNT TO DOUBLE BENEFITS AND CANNOT BE ALLOW ED. 3.7 THE ID. CIT(A) OUGHT T HAVE FOLLOWED THE JUR ISDICTIONAL HIGH COURT'S DECISION IN THE CASE OF CIT VS. RAO BAHADUR CUNNAN CHETTY CHARITIES 135 ITR 485 (MAD), WHEREIN IT WAS HELD TH AT THE WORD 'INCOME' APPEARING IN SECTION 11 TO SECTION 12 HAS TO BE UNDERSTOOD IN NORMAL PARLANCE 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 ALL OWED. 3.8 THE ID.CIT(A) FAILED T APPRECIATE THAT ON TH E VERY SAME ISSUE WHETHER THE IMPUGNED PROVISION AS TO BE APPLIED PRO SPECTIVELY OR RETROSPECTIVELY, THE HON'BLE SUPREME COURT OF INDIA HAS ADMITTED THE SPECIAL LEAVE PETITION ON 08.11.2016 FILED BY THE R EVENUE IN CIT VS BANGALORE BAPTIST HOSPITAL SOCIETY [2017] 77 TAXMAN N. OM 14 (SC) AGAINST THE JUDGMENT OF THE HON'BLE KARNATAKA HIGH COURT AND IN ANOTHER CASE OF DIT(EXEM) VS AI-AMEEN CHARITABLE FU ND RUST (2016) TAXMANN.COM 160 BEARING NO. CIVIL APPEAL NO. 008019 I 2016, ALSO SLP HAS BEEN ADMITTED. ITA NO. 2878/2017 :- 4 -: 4. FOR THESE AND OTHER ROUNDS THAT MAY BE ADDUCED A T 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. 3. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE RESPONDENT ASSESSEE IS A PUBLIC CHARITABLE TRU ST RUNNING A COMMUNITY GENERAL HOSPITAL AND IT WAS DULY REGISTER ED U/S.12AA OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) ON 30 .11.1990. THE RETURN OF INCOME FOR THE AY 2009-10 WAS FILED ON 30.09.20 11 CLAIMING EXEMPTION U/S.11 OF THE ACT. THE ASSESSMENT WAS COM PLETED BY THE DEPUTY DIRECTOR OF INCOME TAX (EXEMPTIONS)-I, CHENN AI, VIDE ORDER DATED 30.12.2011 PASSED U/S.143(3) OF THE ACT AT N IL INCOME. HOWEVER, THE ASSESSING OFFICER HAD NOT DISALLOWED D EPRECIATION CLAIM OF RS.2,24,88,139/- AS APPLICATION OF INCOME AND N OT ALLOWED CARRY FORWARD OF EXCESS APPLICATION OF INCOME TO THE SUB SEQUENT ASSESSMENT YEARS. 4. BEING AGGRIEVED, AN APPEAL WAS PREFERRED BEFORE LD. CIT(A), WHO VIDE IMPUGNED ORDER HAD ALLOWED THE APPEAL. 5. BEING AGGRIEVED BY ORDER OF THE COMMISSIONER OF IN COME TAX (APPEALS), REVENUE IS IN APPEAL BEFORE US CHA LLENGING THE CORRECTNESS OF THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS). ITA NO. 2878/2017 :- 5 -: 6. THE GROUNDS OF APPEAL NO.1 & 4 ARE GENERAL IN NATUR E THEREFORE, DOES NOT REQUIRE ANY ADJUDICATION. GROU NDS 2.1 TO 2.4 CHALLENGES THE DECISION OF LD. COMMISSIONER OF INCO ME TAX (APPEALS) ALLOWING THE SET OFF BROUGHT FORWARD EXCESS APPLICA TION OF INCOME AND CARRY FORWARD THE EXCESS APPLICATION OF INCOME TO T HE SUBSEQUENT YEARS. THIS ISSUE IS NO LONGER RES-INTEGRA AS PER THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. SUBROS EDUCATIONAL SOCIETY, (2018) 4 TMI 1622 , WHEREIN IT IS HELD THAT ELIGIBLE TRUST WHICH ARE ENJOYING THE REGISTRATION U/S.12AA OF THE ACT A RE ENTITLED TO CARRY FORWARD AND SET OFF OF THE EXCESS APPLICATION OF I NCOME. THUS, WE DO NOT FIND ANY MERITS IN THE GROUNDS OF APPEAL. THER EFORE GROUNDS OF APPEAL NO.2.1 TO 2.4 FILED BY THE REVENUE ARE DISMI SSED. 7. GROUNDS 3.1 TO 3.8 CHALLENGES THE DECISION OF LD. COMMISSIONER OF INCOME TAX (APPEALS) IN ALLOWING D EPRECIATION AS APPLICATION OF INCOME BEFORE THE AMENDMENT. THIS I SSUE IS ALSO COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. RAJASTHAN & GUJARTI C HARITABLE FOUNDATION, 300 CTR 1, WHEREIN IT WAS HELD THAT THE INCOME OF THE TRUST IS REQUIRED TO BE COMPUTED U/S.11 OF THE ACT ON COMMERCIAL PRINCIPLES AFTER PROVIDING FOR ALLOWANCE FOR NORMAL DEPRECIATION, AFFIRMED THE VIEW OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF DIT ITA NO. 2878/2017 :- 6 -: (EXEMPTION) VS. FRAMJEE CASASJEE INSTITUTE, 109 CTR 463 AND DIFFERING WITH THE VIEW EXPRESSED BY HONBLE KERALA HIGH COUR T IN THE CASE OF LISSIE MEDICAL INSTITUTIONS VS. CIT, 348 ITR 344 . THEREFORE IN VIEW OF THE SETTLED LEGAL PROPOSITION IN FAVOUR OF THE ASS ESSEE TRUST, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS). GROUNDS OF APPEAL NO. 3.1 TO 3.8 OF THE REVENUE ARE DISMISSED. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON 22ND DAY OF MAY, 2019, AT CH ENNAI. SD/- SD/- ( ) (GEORGE MATHAN) /JUDICIAL MEMBER ( ) (INTURI RAMA RAO) /ACCOUNTANT MEMBER -) / CHENNAI . / DATED: 22ND MAY, 2019. KV /0 $0& *12032'* / COPY TO: 0 1 . # / APPELLANT 3. 0 ( 4*056 / CIT(A) 5. 278 0& * 9 / DR 2. &' # / RESPONDENT 4. 0 ( 4* / CIT 6. 8:0;) / GF