Karnataka Jesuit Education Society, V. Dy.DIR, Bangalore

ITA 307/BANG/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9467 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 08-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: A R V SREENIVASAN JT
• Keywords: Capital asset; Depreciation; Charitable institution; Deemed to accrue or arise in india
• Section: 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NOS.485 & 486/BANG/2013 ASSESSMENT YEARS : 2008-09 & 2009-10 THE DEPUTY DIRECTOR OF INCOME TAX (EXEMPTIONS), CIRLCE 17(1), BANGALORE. VS. KARNATAKA JESUIT EDUCATIONAL SOCIETY, LOYOLA MANDIR, NO.96, LAVELLE ROAD, BANGALORE 560 001. PAN: AAATK 2245D APPELLANT RESPONDENT ITA NOS.307 & 308/BANG/2013 ASSESSMENT YEARS : 2008-09 & 2009- 10 KARNATAKA JESUIT EDUCATIONAL SOCIETY, BANGALORE 560 001. PAN: AAATK 2245D VS. THE DEPUTY DIRECTOR OF INCOME TAX (EXEMPTIONS), CIRLCE 17(1), BANGALORE. REVENUE BY : SHRI A.R.V. SREENIVASAN, JT. CIT(DR) RESPONDENT BY : SMT. SHEETAL BORKAR, ADVOCATE DATE OF HEARING : 28.07.2016 DATE OF PRONOUNCEMENT : 12.08.2016 ITA NOS.485, 486, 307 & 308/BANG/2013 PAGE 2 OF 9 O R D E R PER SUNIL KUMAR YADAV, JUDICIAL MEMBER THESE CROSS APPEALS ARE PREFERRED BY THE REVENUE AND THE ASSESSEE AGAINST THE RESPECTIVE ORDERS OF THE CIT(A PPEALS). SINCE THE APPEALS WERE HEARD TOGETHER, THESE ARE BEING DISPOS ED OF THROUGH THIS CONSOLIDATED ORDER. WE, HOWEVER, PREFER TO ADJUDIC ATE THEM ONE AFTER THE OTHER. ITA NOS.485 & 486/B/13 2. IN THESE APPEALS, THE REVENUE HAS ASSAILED THE ORDER OF THE CIT(APPEALS) THAT THE CIT(A) HAS NOT FOLLOWED THE O RDER OF THE TRIBUNAL IN THE CASE OF M/S. C M R JANARDHANA TRUST IN ITA NOS. 642 & 643/BANG/2008 DATED 24.12.2008 IN WHICH IT WAS HELD THAT IF THE ENTIRE AMOUNT OF CAPITAL ASSET PURCHASED DURING THE YEAR I S TREATED AS APPLICATION OF INCOME, THEN NO FURTHER DEDUCTION CAN BE ALLOWED FOR DEPRECIATION AS THE VALUE OF ENTIRE CAPITAL ASSET IS TREATED AS APPLICA TION OF INCOME AND THE CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESSEE AFTER HOLDING THAT THE ASSESSEE IS ENTITLED FOR DEPRECIATION. 3. DURING THE COURSE OF HEARING, THE LD .COUNSEL FO R THE ASSESSEE HAS INVITED OUR ATTENTION WITH THE SUBMISSION THAT THE IMPUGNED ISSUE IS SQUARELY COVERED BY THE JUDGMENT OF THE HON'BLE JUR ISDICTIONAL HIGH COURT IN ITA NOS.485, 486, 307 & 308/BANG/2013 PAGE 3 OF 9 THE CASE OF AL-AMEEN CHARITABLE FUND TRUST IN ITA NO.62/2010 AND VARIOUS ORDERS OF THE TRIBUNAL IN THE CASE OF KARNATAKA REDDY JANASANGHA V. DIT, IN ITA NO.220/BANG/2011 AND DDIT V. INTERNATIONAL INSTITUTE OF INFORMATION TECHNOLOGY IN ITA NO.396/BANG/2013 IN WHICH IT HAS BEEN HELD THAT ASSESSEE IS ENTITLED FOR DEPRECIATION, DESPITE APPL ICATION OF ENTIRE AMOUNT. WHILE HOLDING SO, THEY HAVE TAKEN INTO ACCOUNT THE DECISION OF THE TRIBUNAL IN THE CASE OF M/S. C M R JANARDHANA TRUST (SUPRA) . 4. THE LD. DR PLACED RELIANCE UPON THE ORDER OF THE ASSESSING OFFICER. 5. HAVING CAREFULLY EXAMINED THE ORDERS OF THE AUTH ORITIES BELOW IN THE LIGHT OF THE JUDGMENTS REFERRED TO BY THE PARTIES, WE FIND THAT THE TRIBUNAL HAS TAKEN A CONSISTENT VIEW, FOLLOWING THE JUDGMENT OF HON'BLE HIGH COURT OF KARNATAKA THAT ASSESSEE IS ENTITLED FOR DEPRECIA TION IN SUCH CIRCUMSTANCES. THE RELEVANT OBSERVATIONS OF THE TR IBUNAL IN THE CASE OF INTERNATIONAL INSTITUTE OF INFORMATION TECHNOLOGY ( SUPRA) ARE EXTRACTED HEREUNDER FOR THE SAKE OF REFERENCE:- 5.3 WE HAVE HEARD BOTH PARTIES AND PERUSED AND CAR EFULLY CONSIDERED THE MATERIAL ON RECORD. WE FIND THAT TH E ISSUE OF THE ASSESSEE BEING ENTITLED TO DEPRECIATION, IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE CO-ORDINATE BENCH O F THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2006 -07 IN ITA NO.983/BANG/2011 OF 17.9.2012 IT HAS BEEN AS UNDER AT PARA 5 THEREOF: 05. AT THE TIME OF HEARING, THE LEARNED DR RELIED ON THE GROUNDS OF APPEAL AND REITERATED THE SAME AS IT S SUBMISSIONS, BUT NOTHING WAS BROUGHT ON RECORD TO S HOW THAT THE EARLIER DECISION OF THIS TRIBUNAL IN ASSES SEE'S OWN CASE HAS BEEN REVERSED BY THE HON'BLE HIGH COURT OF ITA NOS.485, 486, 307 & 308/BANG/2013 PAGE 4 OF 9 KARNATAKA. IN SUCH FACTS AND CIRCUMSTANCES, WE ARE BOUND TO FOLLOW THE EARLIER ORDER OF THE TRIBUNAL, THAT T OO IN ASSESSEE'S OWN CASE, THERE BEING NO CHANGE IN THE F ACTS AND CIRCUMSTANCES OF THE CASE IN THIS APPEAL ALSO. IN T HE SAID ORDER, WHILE ALLOWING THE ASSESSEE'S APPEAL, THE TR IBUNAL OBSERVED AS UNDER : '7.5 THE HON'BLE JURISDICTIONAL HIGH COURT IN THE C ASE OF CIT V SOCIETY OF THE SISTERS OF ST. ANNE (146 ITR 26 HAD CATEGORICALLY HELD THAT THE AMOUNT OF DEPRECIATION DEBITED TO THE ACCOUNTS OF A CHARITABLE INSTITUTION IS TO BE DEDUCTED TO ARRIVE AT THE AVAILABLE INCOME FOR THE PURPOSE OF APPLICATION TO CHARITABLE AND RELIGIOUS PURPOSES. THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT HAS BEEN FOLLOWED BY THE HON'BLE MADHYA PRADESH HIGH COURT IN THE CASE OF CIT V. RAIPUR PALLOTTINE SOCIETY 180 ITR 579 AND BY THE HON'BLE MADRAS HIGH COURT IN THE CASE OF GOVINDU NAICKER ESTATE V. ASST. DIRECTOR OF INCOME TAX AND ANOTHER 248 ITR 368. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED. IN THIS YEAR ALSO, THE LEARNED DEPARTMENTAL REP RESENTATIVE COULD NOT BRING ON RECORD ANY ORDER TO SHOW THAT TH E EARLIER DECISIONS BY THIS TRIBUNAL FOR EARLIER YEARS I.E. I TA NO.889/BANG/2009 DT. 30.6.2010 OR ITA NO.893/BANG/2 011 DT. 17.9.2012 FOR ASSESSMENT YEAR 2006-07 WERE REVERSED BY THE HONBLE HIGH COURT OF KARNATAKA. IN THESE SIMILAR FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE BOUND TO FOLLOW T HE EARLIER ORDERS OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL (S UPRA). FOLLOWING THE SAME, WE HOLD THAT THE ASSESSEE IS EN TITLED TO DEPRECIATION AND CONSEQUENTLY DISMISS GROUNDS 2 TO 4 RAISED BY REVENUE. 6. SINCE NO CONTRARY JUDGMENT HAS BEEN PLACED BY TH E REVENUE, WE HAVING PERUSED THE ORDERS OF THE TRIBUNAL, HOLD THA T THE CIT(APPEALS) HAS RIGHTLY ADJUDICATED THE ISSUE IN HOLDING THAT THE A SSESSEE IS ENTITLED FOR DEPRECIATION. ACCORDINGLY, THE ORDER OF THE CIT(AP PEALS) STANDS CONFIRMED. ITA NOS.485, 486, 307 & 308/BANG/2013 PAGE 5 OF 9 ITA NOS.307 & 308/B/2013 7. IN THESE APPEALS, THE ASSESSEE HAS ASSAILED THE ORDER OF THE CIT(APPEALS) INTER ALIA ON THE FOLLOWING COMMON GROUNDS. FOR THE SAKE OF REFERENCE, THE GROUNDS RAISED IN ITA NO.307/B/2013 ARE EXTRACTED HEREUNDER:- 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCO ME TAX (APPEALS)-V, BANGALORE IS OPPOSED TO LAW AND ON FAC TS OF THE CASE. 2. ACCUMULATION OR SET APART OF INCOME UNDER SECTION L1(1)(A): (A) THE LEARNED CIT (APPEALS)-V, BANGALORE HAS ERR ED IN LAW IN DISMISSING THE APPELLANT'S CLAIM FOR ACCUMUL ATION OR SET APART OF AN INCOME OF RS.1,95,43,427/- UNDER SECTIO N 11(1)(A), BEING 15% OF THE GROSS RECEIPTS AMOUNTING TO RS.13 ,02,89,512/- WITHOUT NOTICE TO THE ASSESSING OFFICER, BY STATING THAT, ACCUMULATION HAS ALREADY BEEN A LLOWED BY THE ASSESSING OFFICER UNDER SECTION 11(2) OF THE INCOME TAX ACT, 1961. (B) THE LEARNED CIT (APPEALS)- V, BANGALORE HAS FA ILED TO APPRECIATE THE FACT THAT, ACCUMULATION UNDER SECTIO N 11(1)(A) IS A SEPARATE ISSUE FROM ACCUMULATION WITH NOTICE UNDER SECTION 11(2). (C) THE LEARNED CIT (APPEALS)-V, BANGALORE OUGHT T O HAVE GIVEN SPECIFIC DIRECTION TO THE ASSESSING OFFICER T O FIRST ALLOW ACCUMULATION UNDER SECTION 11(1)(A) AND AFTER ALLOW ACCUMULATION UNDER SECTION 11(2) FOR THE REMAINING UNSPENT SURPLUS, IF ANY. (D) THE LEARNED CIT (APPEALS)- V, BANGALORE HAS GR OSSLY IGNORED THE DECISIONS RELIED ON BY THE APPELLANT IN THE FOLLOWING CASES. (I) ADDITIONAL COMMISSIONER OF INCOME TAX & ANOTHER VS. ALN RAO CHARITABLE TRUST [216 ITR 697] (SC) ITA NOS.485, 486, 307 & 308/BANG/2013 PAGE 6 OF 9 (II) CIT VS. PROGRAMME FOR COMMUNITY ORGANISATION [ 248 ITR 1] (SC) (III) CIT VS. PROGRAMME FOR COMMUNITY ORGANISATION [228 ITR 620] (KERALA) (IV) CIT VS. G.R.GOVINARAJULU & SONS CHARITIES [27 1 ITR 145] (MAD) 3. INVESTMENT MADE IN FIXED DEPOSITS AMOUNTING TO RS.4,59,21,115/-: (A) THE LEARNED CIT (APPEALS)-V, BANGALORE IS NOT JUSTIFIED IN LAW IN STATING THAT, INVESTING IN CAPI TAL ASSETS WHICH IS NOT PART OF THE OBJECT OF THE TRUST WOULD NOT AMOUN T TO AN APPLICATION AS ENVISAGED UNDER SECTION 11 (1)( A) O F THE INCOME TAX ACT, 1961 AND THEREBY NOT CONSIDER THE INVESTME NT MADE ON FIXED DEPOSITS AMOUNTING TO RS.4,59,21,115/- AS APPLICATION OF INCOME. (B) THE LEARNED CIT (APPEALS)-V, BANGALORE HAS GRO SSLY IGNORED THE BOARD'S INSTRUCTION NO.883-CBDT F.NO.18 0/54/72- IT(AL), DATED 24.9.1975 (CBDT BULLETIN XXI/L/74, PA GE 157), RELIED ON BY THE APPELLANT. 4. ACCUMULATED INCOME TREATED AS DEEMED INCOME UNDER SECTION L1(3)(C): (A) THE LEARNED CIT (APPEALS)-V, BANGALORE HAS ERR ED IN LAW IN STATING THAT, THE INCOME ACCUMULATED FOR THE ASSESSMENT YEAR 2003-2004 AMOUNTING TO RS.1,95,43,427/- WILL BE TAXABLE IN THE SUBSEQUENT ASSESSMENT YEAR 2009-2010 BY OVERLOO KING THE FACT THAT, THE SAID INCOME WAS SPENT WITHIN FIVE YE ARS FROM THE ASSESSMENT YEAR 2003-2004. 5. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALT ER ANY OF THE FORGOING GROUNDS. 6. FOR THESE AND ANY OTHER GROUNDS THAT MAY BE URG ED BEFORE THE HON'BLE ITAT, IT IS PRAYED THAT THE HON'BLE ITA T MAY ALLOW THE APPEAL WITH COST. ITA NOS.485, 486, 307 & 308/BANG/2013 PAGE 7 OF 9 8. GROUND NO.1 IN BOTH THE APPEALS RELATE TO INDEP ENDENT ACCUMULATION OF INCOME U/S. 11(2), BESIDES ACCUMULA TION OF PROFIT U/S. 11(1)(A) OF THE ACT. 9. DURING THE COURSE OF HEARING OF THE APPEALS, IT HAS BEEN BROUGHT TO OUR NOTICE FROM THE DETAILS OF APPLICATION OF FUNDS IN BOTH THE ASSESSMENT YEARS WITH THE SUBMISSION THAT APPLICATION OF FUND IS ALREADY MORE THAN 85%, THEREFORE THE ISSUE OF ACCUMULATION OF FUND U/ S. 11(2) BECOMES ACADEMIC AND DOES NOT REQUIRE ANY ADJUDICATION, AS THE CIT(APPEALS) HAS ALREADY ALLOWED THE ACCUMULATION OF FUND AS PER THE PROVISIONS OF SECTION 11(1)(A) OF THE ACT. THEREFORE, WE DO NOT FIND IT NECESSARY TO GIVE A SPECIFIC FINDING ON A ISSUE, WHETHER ACCUMULATION O F FUND IS FURTHER PERMISSIBLE AFTER ALLOWING ACCUMULATION OF FUND U/S . 11(1)(A) OF THE ACT. ACCORDINGLY, THIS ISSUE IS DISPOSED OF FOR BOTH THE ASSESSMENT YEARS. 10. SO FAR AS GROUND NO.2 IN BOTH THE APPEALS IS CO NCERNED, WE FIND THAT THE CIT(APPEALS) HAS APPROVED THE ACTION OF THE AO BY HOLDING THAT INVESTMENT IN FIXED DEPOSITS CANNOT BE THE OBJECT O F THE ASSESSEE TRUST OR FOR THE PURPOSE OF THE TRUST FOR WHICH THE TRUST WA S CREATED. IN THIS REGARD, THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT FOR MAKING FIXED DEPOSITS MAY NOT BE THE OBJECT OF THE ASSESSEE TRUS T, BUT FOR ACCUMULATING THE FUND FOR A PARTICULAR PURPOSE, CERTAIN INVESTME NTS IN FDRS ARE REQUIRED. 11. THE LD. DR, ON THE OTHER HAND, HAS PLACED RELIA NCE UPON THE ORDERS OF CIT(APPEALS). ITA NOS.485, 486, 307 & 308/BANG/2013 PAGE 8 OF 9 12. HAVING HEARD THE RIVAL SUBMISSIONS AND FROM A C AREFUL PERUSAL OF THE ORDERS OF AUTHORITIES BELOW, WE FIND THAT THE MODE OF INVESTMENT IS GIVEN IN SUB-SECTION (5) OF SECTION 11 FOR ACCUMULATING THE FUND. INVESTMENT OR DEPOSITS OF MONEY CAN BE MADE AS PER SUB-SECTION (5 ) OF SECTION 11 OF THE ACT AND CLAUSE (III) SAYS THAT FOR THE PURPOSE OF S UB-SECTION (2), DEPOSITS CAN BE MADE IN ANY ACCOUNT OF THE SCHEDULED BANK OR CO-OPERATIVE SOCIETY ENGAGED IN CARRYING ON THE BUSINESS OF BANKING (INC LUDING A CO-OPERATIVE LAND MORTGAGE BANK OR A CO-OPERATIVE LAND DEVELOPME NT BANK); MEANING THEREBY, IF THE ASSESSEE MAKES INVESTMENTS OR DEPO SITS IN THE SCHEDULED BANK AND CLAIMS THE DEPOSITS AS ACCUMULATED FOR THE PURPOSE OF SECTION 11(1)(A) OR 11(2), THE INVESTMENT OR DEPOSIT CANNOT BE DISALLOWED ONLY FOR THE REASON THAT APPLICATION OF MONEY WAS NOT FOR TH E OBJECT OF THE SOCIETY. WE ACCORDINGLY DO NOT FIND ANY MERIT IN THE DISALLO WANCE AND DIRECT THE AO TO TREAT THE DEPOSITS IN THE SCHEDULED BANK AS PART OF ACCUMULATION OF FUND AS NO DISALLOWANCE CAN BE MADE. 13. THE NEXT GROUND RELATES TO NON-APPLICATION OF A CCUMULATION OF FUND WITHIN A SPECIFIED PERIOD. IN THIS REGARD, THE CIT( APPEALS) HAS CATEGORICALLY OBSERVED THAT THE ACCUMULATED FUND WAS NOT APPLIED FOR THE OBJECTS OF THE SOCIETY AND IF NOT APPLIED, IT IS TO BE LIABLE TO B E TAXED IN THE PREVIOUS YEAR IMMEDIATELY FOLLOWING THE PREVIOUS YEAR IN WHICH IT WAS DERIVED WHERE IT COULD NOT BE APPLIED TO THE SPECIFIED PURPOSES AND THE CIT(APPEALS) HAS GIVEN DIRECTIONS THAT THE SAID AMOUNT WILL BE TAXAB LE IN A.Y. 2009-10 AND NOT IN THE CURRENT YEAR. THE CIT(APPEALS) HAS TAKE N INTO ACCOUNT THE ITA NOS.485, 486, 307 & 308/BANG/2013 PAGE 9 OF 9 PROVISIONS OF THE ACT AND HAVING NOTED THAT THE ACC UMULATED FUND WAS NOT APPLIED FOR THE SPECIFIED PURPOSES, HE DIRECTED THA T THIS AMOUNT BE TAXED IN THE A.Y. 2009-10. SINCE WE DO NOT FIND ANY INFIRMI TY IN THE ORDER OF CIT(APPEALS), WE CONFIRM THE SAME. 14. IN THE RESULT, THE APPEALS OF THE REVENUE ARE D ISMISSED, AND THAT OF THE ASSESSEE ARE PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 12 TH DAY OF AUGUST, 2016. SD/- SD/- ( A.K. GARODIA ) (SUNIL KUMAR YA DAV ) ACCOUNTANT MEMBER JUDIC IAL MEMBER BANGALORE, DATED, THE 12 TH AUGUST, 2016. /D S/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.