DCIT Exemptions, Coimbatore V. Saveetha Institute of Medical and Technical Sciences, Erode

ITA 2989/CHNY/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7445 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 06-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S SRIDHAR
• Keywords: Depreciation; Charitable institution; Cost of acquisition
• Section: 143(3); 32; 28; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , C BENCH, CHENNAI . . . , . , BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NO.2989/ CHNY/2017 ( / ASSESSMENT YEAR: 2013-14) THE DEPUTY COMMISSIONER OF INCOME TAX, EXEMPTIONS, COIMBATORE. VS M/S. SAVEETHA INSTITUTE OF MEDICAL AND TECHNICAL SCIENCES, NO.333, SAVEETHA HOSPITAL BUILDING, BROUGH ROAD, ERODE 638 001. PAN: AAFTS0845L ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : SHRI AR.V. SREENIVASAN, JCIT / RESPONDENT BY : SHRI S. SRIDHAR, ADVOCATE /DATE OF HEARING : 17.05.2018 /DATE OF PRONOUNCEMENT : 03.07.2018 / O R D E R PER A. MOHAN ALANKAMONY, AM:- THE APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-2, COIMBATORE DATED 30.08.2017 IN ITA NO.16/16-17 FOR THE ASSESSMENT YEAR 2013-14 PASSED U/S.250(6) R.W.S. 143(3) OF THE ACT. 2 ITA NO.2989/CHNY/201 7 2. THERE IS A DELAY OF 2 DAYS IN FILING THE APPEAL BY THE REVENUE. THE LD.ACIT HAS FURNISHED AN AFFIDAVIT BEFORE US STATING THAT THE DELAY HAD OCCURRED DUE TO THE TIME BARRING WORKLOAD, SHORTAGE OF STAFF AND INTERVENING HOLIDAYS. IT WAS THEREFORE PLEADED THAT THE SHORT DELAY IN FILING THE APPEAL MAY BE CONDONED. THE LD.AR OBJECTED TO THE SUBMISSION OF THE LD.DR. HOWEVER, AFTER HEARING BOTH SIDES, THOUGH WE DO NOT APPRECIATE THE LETHARGIC ATTITUDE OF THE REVENUE, IN THE INTEREST OF JUSTICE WE ARE OF THE CONSIDERED VIEW THAT THE SHORT DELAY IN FILING THE APPEAL IS REQUIRES TO BE CONDONED. ACCORDINGLY, WE HEREBY CONDONE THE DELAY OF 2 DAYS IN FILING THE APPEAL BY THE REVENUE AND PROCEED TO HEAR THE CASE ON MERITS. 3. THE REVENUE HAS RAISED THREE GROUNDS IN ITS APPEAL HOWEVER THE CRUX OF THE ISSUE IS THAT THE LD.CIT(A) HAS ERRED IN ALLOWING THE ASSESSEES CLAIM OF DEPRECIATION OF RS.13,74,55,854/- WHEN THE ENTIRE COST OF ACQUISITION OF ASSETS WAS TREATED AS APPLICATION OF INCOME FOR THE PURPOSE OF CLAIMING EXEMPTION U/S.11 OF THE ACT. 3 ITA NO.2989/CHNY/201 7 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A CHARITABLE TRUST REGISTERED U/S.12A(A) OF THE ACT, FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2013-14 IN FORM ITR-7 ON 10.12.2013 ADMITTING NIL INCOME. THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S.143(2) OF THE ACT WAS ISSUED ON 22.09.2014. FINALLY, ASSESSMENT ORDER WAS PASSED U/S.143(3) OF THE ACT ON 14.03.2016, WHEREIN, THE LD.AO DISALLOWED DEPRECIATION AMOUNTING TO RS.13,74,55,584/- BECAUSE THE COST OF THE ASSET PURCHASED WAS ALLOWED AS APPLICATION OF INCOME WHILE DETERMINING THE INCOME OF THE ASSESSEE FOR THE PURPOSE OF SEC.11 OF THE ACT. WHILE DOING SO, THE LD.AR PLACED RELIANCE ON THE DECISION OF THE HONBLE KERALA HIGH COURT IN THE CASE OF LISSIE MEDICAL INSTITUTIONS VS. CIT REPORTED 348 ITR 344. 5. AT THE OUTSET, THE LD.AR SUBMITTED THAT THE ISSUE IS SETTLED BY THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF CIT VS. RAJASTHAN & GUJARATI CHARITABLE FOUNDATION POONA, WHEREIN IT WAS HELD THAT NORMAL DEPRECIATION HAS TO BE CONSIDERED AS LEGITIMATE DEDUCTION IN COMPUTING REAL INCOME OF THE ASSESSEE ON GENERAL PRINCIPLES OR U/S.11(1)(A) OF THE ACT. THE LD.DR COULD NOT CONTROVERT TO THE SUBMISSION OF THE LD.AR. 4 ITA NO.2989/CHNY/201 7 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE MATERIAL PLACED ON RECORD. WE FIND MERIT IN THE SUBMISSIONS OF THE LD.AR. THE HONBLE APEX COURT CITED SUPRA HAS HELD THE ISSUE IN FAVOUR OF THE ASSESSEE AND THE GIST OF THE DECISION IS REPRODUCED HEREIN BELOW FOR REFERENCE: IN THE CASE OF COMMISSIONER OF INCOME TAX V. INSTITUTE OF BANKING PERSONNEL SELECTION (IBPS), IT WAS HELD THAT SECTION 11 MAKES PROVISION IN RESPECT OF COMPUTATION OF INCOME OF THE TRUST FROM THE PROPERTY HELD FOR CHARITABLE OR RELIGIOUS PURPOSES AND IT ALSO PROVIDES FOR APPLICATION AND ACCUMULATION OF INCOME. ON THE OTHER HAND, SECTION 28 DEALS WITH CHARGEABILITY OF INCOME FROM PROFITS AND GAINS OF BUSINESS AND SECTION 29 PROVIDES THAT INCOME FROM PROFITS AND GAINS OF BUSINESS SHALL BE COMPUTED IN ACCORDANCE WITH SECTION 30 TO SECTION 43C. THAT, SECTION 32(1) PROVIDES FOR DEPRECIATION IN RESPECT OF BUILDING, PLANT AND MACHINERY OWNED BY THE ASSESSEE AND USED FOR BUSINESS PURPOSES. IT FURTHER PROVIDES FOR DEDUCTION SUBJECT TO SECTION 34. IN THAT MATTER ALSO, A SIMILAR ARGUMENT, AS IN THE PRESENT CASE, WAS ADVANCED ON BEHALF OF THE REVENUE, NAMELY, THAT DEPRECIATION CAN BE ALLOWED AS DEDUCTION ONLY U/S.32 AND NOT UNDER GENERAL PRINCIPLES. COURT REJECTED THIS ARGUMENT. IT WAS HELD THAT NORMAL DEPRECIATION CAN BE CONSIDERED AS A LEGITIMATE DEDUCTION IN COMPUTING THE REAL INCOME OF THE ASSESSEE ON GENERAL PRINCIPLES OR UNDER SECTION 11(1)(A). COURT REJECTED THE ARGUMENT ON BEHALF OF THE REVENUE THAT SECTION 32 WAS THE ONLY SECTION GRANTING BENEFIT OF DEDUCTION ON ACCOUNT OF DEPRECIATION. IT WAS HELD THAT INCOME OF A CHARITABLE TRUST DERIVED FROM BUILDING, PLANT AND MACHINERY AND FURNITURE WAS LIABLE TO BE COMPUTED IN NORMAL COMMERCIAL MANNER ALTHOUGH THE TRUST MAY NOT BE CARRYING ON ANY BUSINESS AND THE ASSETS IN RESPECT WHEREOF DEPRECIATION IS CLAIMED MAY NOT BE BUSINESS ASSETS. IN ALL SUCH CASES, SECTION 32 PROVIDING FOR DEPRECIATION FOR COMPUTATION OF INCOME DERIVED FROM BUSINESS OR PROFESSION IS NOT APPLICABLE. HOWEVER, THE INCOME OF THE TRUST IS REQUIRED TO BE COMPUTED U/S.11 ON COMMERCIAL PRINCIPLES AFTER PROVIDING FOR ALLOWANCE FOR NORMAL DEPRECIATION AND DEDUCTION THEREOF FROM GROSS INCOME OF THE TRUST. IN VIEW OF THE AFORESATATED JUDGMENT OF THE BOMBAY HIGH CURT, SUPREME COURT ANSWERED QUESTION NO. 1 IN THE AFFIRMATIVE I.E., IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT. 5 ITA NO.2989/CHNY/201 7 7. RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE APEX COURT, CITED SUPRA, WE UPHOLD THE DECISION OF THE LD.CIT(A) AS HE HAS ONLY FOLLOWED THE RATIO LAID DOWN BY THE HONBLE APEX COURT WHILE DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE. HOWEVER, WE HEREBY DIRECT THE LD.AO TO VERIFY WHETHER THE ASSESSEE HAS CLAIMED THE DEPRECIATION IN ACCORDANCE WITH THE PROVISIONS OF THE ACT AND THEREAFTER ALLOW THE SAME WHILE DETERMINING THE INCOME OF THE ASSESSEE U/S.11 OF THE ACT. 8. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THE 03 RD JULY, 2018 AT CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( . ) (A. MOHAN ALANKAMONY) / ACCOUNTANT MEMBER /CHENNAI, /DATED 03 RD JULY, 2018 RSR /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. ( )/CIT(A) 4. /CIT 5. /DR 6. /GF