The ACIT- 1(2), Indore V. Shri Gujarati Samaj (Regd.), Indore

ITA 310/IND/2013

• Counselvise Citation: 31022714 RSA 2013
• Duration Of Justice: 3 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 17-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Keywords: Depreciation; Charitable institution
• Section: 32

Judgement Text

1 INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO. 310/IND/2013 A.Y. 2009-10 ACIT-1(2), INDORE :: APPELLANT VS SHRI GUJRATI SAMAJ (REGD.), INDORE PAN AABTS 7736 G :: RESPONDENT ITA NO. 342/IND/2013 A.Y. 2009-10 SHRI GUJRATI SAMAJ (REGD.), INDORE PAN AABTS 7736 G :: APPELLANT VS ACIT-1(2), INDORE :: RESPONDENT REVENUE BY SHRI R.A. VERMA ASSESSEE BY SHRI ASHISH GOYAL 2 DATE OF HEARING 27 . 8 .2013 DATE OF PRONOUNCEMENT 27 . 8 .2013 O R D E R PER JOGINDER SINGH, JUDICIAL MEMBER THE ASSESSEE AS WELL AS THE REVENUE ARE IN CROSS A PPEALS CHALLENGING THE ORDER OF THE LEARNED CIT(A) DATED 1 4.2.2013 FOR THE A.Y.2009-10. FIRST WE SHALL TAKE UP THE APPEAL OF THE ASSESSEE (ITANO. 342/IND/2013) WHEREIN DISALLOWANCE OF CARRY FORWARD OF DEFICIT OF CURRENT YEAR TO THE SUCCEEDING YEAR HAS BEEN CHALLENGED. 2. DURING HEARING WE HAVE HEARD SHRI ASHISH GOYAL, LEARNED COUNSEL FOR THE ASSESSEE AND SHRI R.A. VERMA, LEARN ED SENIOR DR. AT THE OUTSET, THE LEARNED COUNSEL FOR THE ASSESSEE CLAIMED THAT THE IMPUGNED ISSUE IS COVERED BY THE DECISION OF THE HO NBLE JURISDICTIONAL HIGH COURT IN THE CASE OF THE ASSESS EE ITSELF REPORTED AS CIT VS. SHRI GUJRATI SAMAJ; 18 ITJ 255 (MP). ON THE OTHER HAND, THE LEARNED SR. DR CONTENDED THAT SLP HAS BEEN FILE D BY THE REVENUE AGAINST THE DECISION OF THE HONBLE HIGH CO URT, THEREFORE, THE SAID DECISION MAY NOT BE RELIED UPON. 3 2.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE SOCIETY WAS REGISTERED WITH THE REGISTRAR OF SOCIETIES. THE ASSESSING OFFICER DISALLOWED CARRY FORWARD OF LOSSE S WHICH WAS ALSO AFFIRMED BY THE LEARNED CIT(A). FOR EARLIER YEARS THE ASSESSEE AS WELL AS THE DEPARTMENT FILED APPEALS BEFORE THE TRI BUNAL WHEREIN THE ASSESSEE WAS AGGRIEVED REGARDING DISALLOWANCE O F CLAIM OF CARRY FORWARD OF LOSSES AND THE DEPARTMENT AGITATED THE D ECISION FOR ALLOWING THE CLAIM OF DEPRECIATION TO THE ASSESSEE. THE TRIBUNAL VIDE CONSOLIDATED ORDER DATED 31.1.2011 (ITA NO. 171/IND /2010; 2011 17 ITJ 684 (TRIBUNAL INDORE) FOR A.Y. 2004-05, ITA NO. 172/IND/2010 FOR A.Y. 2005-06 AND ITA NO. 173/IND/2 010 FOR THE A.Y. 2006-07) DISPOSED OF THE APPEALS OF BOTH THE S IDES AND DISMISSED THE APPEAL OF THE DEPARTMENT REGARDING CA RRY FORWARD OF LOSSES BY HOLDING THAT IT IS ALLOWABLE. THE REVENU E PREFERRED APPEAL BEFORE THE HONBLE JURISDICTIONAL HIGH COURT WHEREI N THE DECISION OF THE TRIBUNAL WAS AFFIRMED. THE RELEVANT PORTION FRO M THE ORDER OF HONBLE HIGH COURT IS REPRODUCED HEREUNDER FOR READ Y REFERENCE:- 4 8. COMING TO THE NEXT QUESTION AS TO WHETHER THE O RDER OF THE TRIBUNAL HOLDING THAT THE ASSESSEE IS ENTITL ED FOR CARRY FORWARD AND SET OFF EXCESS OF EXPENDITURE INC URRED DURING THE YEAR OVER ITS INCOME. WE FIND THAT IN V IEW OF SECTION 11(1)(A) OF THE ACT, IT CANNOT BE SAID THAT THE EXPENDITURE INCURRED IN THE EARLIER EYAR CANNOT BE MET OUT OF THE INCOME OF THE SUBSEQUENT YEAR AND UTILISATIO N OF SUCH INCOME FOR MEETING THE EXPENDITURE OF THE EARL IER YEAR WOULD NOT AMOUNT TO SUCH INCOME BEING APPLIED FOR CHARITABLE OR RELIGIOUS PURPOSES. HAVING REGARD TO SECTION 11(1)(A) OF THE ACT IN OUR VIEW WHEN THE INCOME OF THE TRUST IS USED OR PUT TO USE TO MEET THE CHARITABLE OR RELIGIOUS PURPOSES IT IS APPLIED FOR CHARITABLE PUR POSE AND THE SAID APPLICATION OF THE INCOME FOR CHARITABLE O R RELIGIOUS PURPOSES TAKES PLACE IN THE YEAR IN WHICH THE INCOME IS ADJUSTED TO MEET THE EXPENSES INCURRED FO R CHARITABLE OR RELIGIOUS PURPOSES. THUS EVEN IF THE EXPENSES FOR CHARITABLE AND RELIGIOUS PURPOSES HAVE BEEN INCURRED IN THE EARLIER YEAR AND THE SAID EXPENSES ARE ADJUSTED AGAINST THE INCOME OF A SUBSEQUENT YEAR, T HE 5 INCOME OF THAT YEAR CAN BE SAID TO HAVE BEEN APPLIE D FOR CHARITABLE AND RELIGIOUS PURPOSE IN THE YEAR IN WHI CH EXPENSES INCURRED FOR CHARITABLE AND RELIGIOUS PURP OSES HAD BEEN ADJUSTED. THERE ARE NO WORDS OF LIMITATIO N IN SECTION 11(1)(A) OF THE ACT EXPLAINING THAT THE INC OME SHOULD HAVE BEEN APPLIED FOR CHARITABLE OR RELIGIOU S PURPOSES ONLY IN THE YEAR IN WHICH THE INCOME HAD A RISEN (SEE CIT VS. MAHARANA OF MEWAR CHARITABLE FOUNDATIO N (1987) 164 ITR 439 (RAJ) : (1987) 60 CTR 40 : (1986 ) 29 TAXMAN 476). IN OUR CONSIDERED VIEW THE TRIBUNAL H AS RIGHTLY APPLIED THE RATIO OF THE JUDGMENT AND ORDER PASSED BY THE DIVISION BENCH OF RAJASTHAN HIGH COUR T IN CIT VS. MAHARANA OF MEWAR CHARITABLE FOUNDATION (SUPRA) AND HAS COMMITTED NO ERROR IN HOLDING THIS ISSUE IN FAVOUR OF THE ASSESSEE. IN VIEW OF THE ABOVE, WE FIND MERIT IN THE SUBMISSI ON OF THE ASSESSEE. SO FAR AS THE CONTENTION OF THE LEARNED SENIOR DR THAT SLP HAS BEEN FILED BY THE DEPARTMENT AGAINST THE AF ORESAID DECISION OF THE HONBLE HIGH COURT IS CONCERNED, NEITHER ANY CONTRARY 6 DECISION WAS BROUGHT TO OUR NOTICE NOR ANY ORDER WA S PRODUCED BEFORE US STAYING OR REVERSING THE AFORESAID DECISI ON OF THE HONBLE JURISDICTIONAL HIGH COURT, THEREFORE, RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF THE HONBLE JURISDICTIONAL HI GH COURT, THIS APPEAL OF THE ASSESSEE IS ALLOWED. 3. NOW WE SHALL TAKE THE APPEAL OF THE REVENUE (ITA NO. 310/IND/2013) CHALLENGING THE ORDER OF THE LEARNED CIT(A) IN ALLOWING THE DEPRECIATION ON FIXED ASSETS SO ACQUIR ED OUT OF INCOME CLAIMED EXEMPT U/S 11(1) OF THE ACT IN EARLIER YEAR . THE CRUX OF ARGUMENTS ADVANCED BY THE LEARNED SENIOR DR IS THAT THE LEARNED CIT(A) IGNORED THE FACT THAT ALLOWING DEPRECIATION IN EARLIER YEAR TANTAMOUNTS TO DOUBLE BENEFIT TO THE ASSESSEE IGNOR ING THE DECISION OF THE HONBLE APEX COURT IN ESCORTS LIMITED AND O THERS VS. CIT (1993) 199 ITR 43 (SC). ON THE OTHER HAND, THE LEA RNED COUNSEL FOR THE ASSESSEE CONTENDED THAT THE TRIBUNAL IN THE CAS E OF THE ASSESSEE ITSELF FOR THE A.Y. 2004-05 RELIED UPON TH E DECISION FROM HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF RA IPUR PALLOTTINE SOCIETY; 180 ITR 579 AND DECIDED IN FAVOUR OF THE A SSESSEE. 7 3.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL AVAILABLE ON RECORD. WITHOUT GOING INTO M UCH DELIBERATION WE FIND THAT THE HONBLE JURISDICTIONAL HIGH COURT FOR EARLIER ASSESSMENT YEARS ALSO DECIDED THE ISSUE OF DEPRECIA TION U/S 32 IN RESPECT OF ASSET OWNED BY IT IN THE CASE OF THE ASS ESSEE ITSELF FOLLOWING THE DECISION OF THE DIVISION BENCH IN THE CASE OF CIT VS. RAIPUR PALLOTTINE SOCIETY; (1989)180 ITR 579 (MP) A ND KARNATAKA HIGH COURT IN CIT VS. SOCIETY OF SISTERS OF ST. ANN E (1984) 146 ITR 28 (KARN.) HELD THAT DEPRECIATION IS NOTHING BUT DE CREASE IN VALUE OF PROPERTY THROUGH WEAR, DETERIORATION AND ALLOWANCE IS MADE FOR THIS PURPOSE IN BOOK KEEPING, ACCOUNTANCY, ETC. IT IS TH E EXHAUSTION OF THE EFFECTIVE LIFE OF A FIXED ASSET OWING TO USE OF OBSOLESCENCE. IT MAY BE COMPUTED AS THAT PART OF THE COST OF THE ASS ET WHICH WILL NOT BE RECOVERED WHEN THE ASSET IS FINALLY PUT OUT OF U SE. THE OBJECT OF PROVIDING DEPRECIATION IS TO SPREAD THE EXPENDITURE , INCURRED IN ACQUIRING THE ASSET, OVER ITS EFFECTIVE LIFE TIME, THE AMOUNT OF PROVISION MADE IN RESPECT OF AN ACCOUNTING PERIOD, IS INTENDED TO REPRESENT THE PROPORTION OF SUCH EXPENDITURE WHICH HAS EXPIRED DURING THAT PERIOD. IF DEPRECIATION IS NOT ALLOWED AS A NECESSARY DEDUCTION IN COMPUTING THE INCOME OF A CHARITABLE T RUST THEN THERE 8 WOULD BE NO WAY TO PRESERVE THE CORPUS OF THE TRUST . A CHARITABLE TRUST IS, THEREFORE, ENTITLED TO DEPRECIATION IN RE SPECT OF THE ASSET OWNED BY IT. THE HONBLE HIGH COURT AFFIRMED THE CO NCLUSION DRAWN BY THE TRIBUNAL. THE HONBLE PUNJAB & HARYANA HIGH COURT IN CIT VS. TINY TOTS EDUCATION SOCIETY (2011) 11 TAXMAN.CO M 242 CLEARLY HELD THAT CLAIM OF DEPRECIATION BY A CHARITABLE INS TITUTION, WHOSE INCOME IS FULLY EXEMPT, DOES NOT AMOUNT TO TAKING D OUBLE BENEFIT. IN THE ABSENCE OF ANY CONTRARY DECISION BROUGHT TO OUR NOTICE, WE FIND NO INFIRMITY IN THE CONCLUSION DRAWN BY THE LEARNED CIT(A) AND AFFIRM THE SAME. THIS APPEAL OF THE REVENUE IS, AC CORDINGLY, DISMISSED. FINALLY, THE APPEAL OF THE ASSESSEE IS ALLOWED AND THAT OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES OF BOTH SIDES AT THE CONCLUS ION OF THE HEARING ON 27.8.2013. SD SD (R.C.SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER 9 DATED: 27.8.2013 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, GU ARD FILE DN/2727