ASST CIR (E)-1(1), MUMBAI V. K.J. SOMAIYA MEDICAL TRUST, MUMBAI

ITA 311/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8672 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-11-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 19-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV
• Keywords: Depreciation; Charitable institution; Earning of tax free income; Tax effect; Capital expenditure
• Section: 143(3); 12A; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI , JUDICIAL MEMBER ITA NO. 311/MUM/2016 : A.Y : 2011 - 12 ACIT (EXEMPTIONS) - 1(1), MUMBAI (APPELLANT) VS. K.J. SOMAIYA MEDICAL TRUST SOMAIYA BHAVAN, 45 - 47, MAHATMA GANDHI ROAD, MUMBAI 400 001 (RESPONDENT) PAN : AAATK4296Q APPELLANT BY : SHRI RAJESH KUMAR YADAV RESPONDENT BY : MS. ARATI VISSANJI DATE OF HEARING : 02/11/2017 DATE OF PRONOUNCEMENT : 02/11/2017 O R D E R PER G.S. PANNU , AM : THE CAPTIONED APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF CIT(A) - 1, MUMBAI DATED 12.11.2015 PERTAINING TO THE ASSESSMENT YEAR 2011 - 12 , WHICH IN TURN HAS ARISEN FROM THE ORDER PASSED BY THE ASSESSING OFFICER DATED 26.03.2014 UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. IN ITS APPEAL, REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 2 K.J. SOMAIYA MEDICAL TRUST ITA NO. 311/MUM/2016 1. WHETHER ON THE FACTS OF THE CASE AND IN LAW THE ID.CIT(A) ERRED IN ALLOWING THE APPEAL OF THE ASSESSEE ON ACCOUNT OF DISALLOWING DEPRECIATION ON FIXED ASSETS OF RS. 63,59,112/ - IN CONTRAVENTION OF THE DECISION OF ESCORTS LTD. VS. UOI 199 ITR 43 WHEREIN IT WAS HELD THAT SINCE SECTION 11 OF THE INCOME TAX ACT PROVIDES FOR DEDUCTION CAPITAL EXPENDITURE INCURRED ON ASSETS ACQUIRED FOR THE OBJECTS OF THE TRUST AS APPLICATION AND DOES NOT SPECIFICALLY & EXPRESSLY PROVIDE FOR DOUBLE DEDUCTION ON ACCOUNT OF DEPRECI ATION ON THE SAME VERY ASSETS ACQUIRED FROM SUCH CAPITAL EXPENDITURE, NO DEDUCTION SHALL BE ALLOWED U/S.32 FOR THE SAME OR ANY OTHER PREVIOUS YEAR IN RESPECT OF THAT ASSET AS IT AMOUNTS TO CLAIMING A DOUBLE DEDUCTION. 2. WHETHER, ON THE FACTS AND IN THE C IRCUMSTANCES OF THE CASE AND IN LAW THE ID CIT(A) ERRED IN ALLOWING THE APPEAL, WHEN THE DELHI HIGH COURT IN THE CASE OF CHARANJIV CHARITABLE TRUST AND KERALA HIGH COURT IN THE CASE OF LISSIE MEDICAL INSTITUTIONS VS CIT 76 DTR (KER) 372 HAS DECIDED THE ISS UE IN THE FAVOUR OF THE DEPARTMENT AFTER CONSIDERING THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF ESCORTS LTD (199 ITR 43). 3. WHETHER ON THE FACTS OF THE CASE AND IN LAW THE ID.CIT(A) ERRED IN ALLOWING THE CARRY FORWARD OF DEFICIT OF RS.1,59,44,0 41/ - AND ALLOWING SET OFF AGAINST THE INCOME OF THE SUBSEQUENT YEARS, ALLOWING THE DEFICIT WILL TANTAMOUNT TO DOUBLE DEDUCTION ON ACCOUNT OF EXPENDITURE OUT OF EXEMPT INCOME. 4. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LOW, THE LD CIT(A) ERRED IN ALLOWING TO CARRY FORWARD OF DEFICIT ON ACCOUNT OF EXCESS EXPENDITURE AND DIRECTING THE ASSESSING OFFICER TO ALLOW CARRY FORWARD OF DEFICIT ON ACCOUNT OF EXCESS EXPENDITURE WITHOUT APPRECIATING THE FACT THAT THIS WOULD HAVE THE EFFECT OF G RANTING DOUBLE BENEFIT TO THE ASSESSEE, FIRST AS 'ACCUMULATION' OF INCOME U/S. 11 ( 1 )(A) OR AS CORPUS DONATION U/S 11 ( 1 )(D) IN EARLIER YEARS/CURRENT YEAR AND THEN AS 'APPLICATION' OF INCOME U/S 11 ( 1 )(A) IN THE SUBSEQUENT YEARS WHICH WAS LEGALLY NOT PERMISSI BLE? 5. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN ALLOWING THE CLAIM OF THE ASSESSEE FOR CARRY FORWARD OF THE SAID DEFICIT, IGNORING THE FACT THAT THERE WAS NO EXPRESS PROVISION IN THE IT ACT, 1961 PERMITTING ALLOWANCE OF SUCH CLAIM. 6. THAT THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF INDIAN INSTITUTE OF BANKING AND PERSONNEL SELECTION (2003) 264 ITR 110 WAS NOT ACCEPTED BY REVENUE, BUT THE APPEAL WAS NOT FILED DUE TO THE SMALLNESS OF T AX EFFECT. ON THE ISSUES DECIDED IN SAID ORDER ARE CHALLENGED IN APEX COURT IN OTHER CASES HENCE THE ISSUE OF DOUBLE DEDUCTION ON ACCOUNT OF ALLOWING CLAIM 3 K.J. SOMAIYA MEDICAL TRUST ITA NO. 311/MUM/2016 OF DEPRECIATION AND CARRY FORWARD OF DEFICIT TO ADJUST AS APPLICATION OF INCOME IN SUBSEQUENT YEARS HAVE NOT REACHED FINALITY. 7. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A), MUMB AI ERRED IN ALLOWING THE PHARMACY SHOP'S INCOME U/S 11(4A) OF THE INCOME TAX ACT, DISALLOWED BY THE AO, HELD THAT ACTIVITY OF RUNNING A PHARMA CY SHOP IS INCIDENTAL TO THE ATTAINMENT OF THE OBJECTS OF THE TRUST AS WELL AS RUNNING SHOP IS NOT A PLANNED ACTIVITY, THOUGH ASSESSEE IS PAYING VAT ON SALES, WITH AN INTENTION OF EARNING INCOME SIDE BY SIDE. 8. THE APPELLANT PRAYS THAT THE ORDER OF THE C OMMISSIONER OF INCOME - TAX (APPEALS) I, MUMBAI BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. ALTHOUGH THE REVENUE HAS RAISED MULTIPLE GROUNDS OF APPEAL, BUT THE DISPUTE INVOLVED IN THIS APPEAL IS ON THREE ISSUES. FIRSTLY, THE REVENUE IS AGGRIEVED BY THE DECISION OF THE CIT(A) IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE BENEFIT OF DEPRECIATION. SECONDLY, THE GRIEVANCE OF THE REVENUE IS AGAINST THE ACTION OF THE CIT(A) IN ALLOWING THE ASSESSEE THE BENE FIT OF CARRY FORWARD OF THE DEFICIT FOR FUTURE SET - OFF. LASTLY, REVENUE IS AGGRIEVED BY THE DECISION OF CIT(A) IN DELETING THE ADDITION ON ACCOUNT OF INCOME FROM RUNNING THE PHARMACY SHOP. 4. IN THIS BACKGROUND, NOW WE MAY REFER TO THE RELEVANT FACTS. THE RESPONDENT - ASSESSEE IS A CHARITABLE ORGANISATION REGISTERED U/S 12A OF THE ACT AND IS ENGAGED IN ACTIVITIES OF CHARITABLE NATURE. THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAD CLAIMED DEPRECIATION ALLOWANCE OF RS. 63,59,112 / - ON THE COST OF FIXED ASS ETS, WHEREAS SUCH COST OF FIXED ASSETS HAS ALSO BEEN TAKEN AS AN APPLICATION OF INCOME WHILE COMPUTING THE TOTAL INCOME. ACCORDING TO THE ASSESSING OFFICER, THIS AMOUNTED TO A DOUBLE DEDUCTION AND HE, THEREFORE, DISALLOWED THE ASSESSEES CLAIM FOR DEPRECI ATION. THE CIT(A) HAS SINCE ALLOWED THE CLAIM OF THE ASSESSEE 4 K.J. SOMAIYA MEDICAL TRUST ITA NO. 311/MUM/2016 FOLLOWING THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF INSTITUTE OF BANKING PERSONNEL SELECTION, 264 ITR 110 (BOM) . 5. BEFORE US, THE ONLY PLEA OF THE DEPARTMENT IS THAT THE D ECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF INSTITUTE OF BANKING PERSONNEL SELECTION (SUPRA) HAS NOT BEEN ACCEPTED BY THE DEPARTMENT ON MERITS AND ON SIMILAR ISSUE, A SLP NO. 9891 OF 2014 HAS BEEN FILED BEFORE THE HON'BLE SUPREME COURT IN THE C ASE OF MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION (MIDC) . FURTHER, IT IS CONTESTED THAT ALLOWING OF DEPRECIATION WOULD AMOUNT TO A DOUBLE DEDUCTION, WHICH WAS IMPERMISSIBLE HAVING REGARD TO THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF ESCO RTS LTD., 199 ITR 43 (SC) . 6. WE FIND THAT THE DECISION IN THE CASE OF ESCORTS LTD. (SUPRA) BEING RELIED UPON BY THE REVENUE BEFORE US HAS BEEN CONSIDERED BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF INDRAPRASTHA CANCER SOCIETY, (2014) 112 DTR 345 DATED 18.11.2014, WHEREIN IT HAS BEEN OPINED THAT THE ALLOWANCE OF DEPRECIATION IN SIMILAR SITUATION WOULD NOT AMOUNT TO A DOUBLE DEDUCTION. FURTHER, IT IS NOTED THAT THE HON'BLE DELHI HIGH COURT IN THE CASE OF VISHWA JAGRITI MISSION, ITA NO. 140/2012 DATED 29 .3.2012 ALSO ALLOWED A SIMILAR CLAIM AFTER ANALYSING THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF ESCORTS LTD. (SUPRA) , WHICH IS BEING RELIED UPON BY THE REVENUE. T HE HON'BLE SUPREME COURT HAS ALSO DISMISSED THE SLP FILED BY THE DEPARTMENT AGA INST THE SAID DECISION OF THE HON'BLE DELHI HIGH COURT VIDE SLP NO. 19321 OF 2013. WE FIND THAT THE HON'BLE BOMBAY HIGH COURT SUBSEQUENT TO THE DECISION IN THE CASE 5 K.J. SOMAIYA MEDICAL TRUST ITA NO. 311/MUM/2016 OF INSTITUTE OF BANKING PERSONNEL SELECTION (SUPRA) CONSIDERED A SIMILAR ARGUMENT OF THE R EVENUE IN THE CASE OF M/S. MUMBAI EDUCATION TRUST, ITA NO. 11/2014 DATED 3.5.2016 AND ALLOWED THE CLAIM OF THE ASSESSEE. IN FACT, THE GROUNDS OF APPEAL URGED BY THE REVENUE BEFORE THE HON'BLE HIGH COURT, WHICH READ AS UNDER : - (A) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE AND IN LAW, THE TRIBUNAL WAS JUSTIFIED IN CONFIRMING THE ORDER OF THE CIT(A) TO ALLOW THE CLAIM OF DEPRECIATION RELYING ON THE DECISION OF THIS COURT IN THE CASE OF CIT V/S. INSTITUTE OF BANKING PERSONNEL SERVICES REPORT ED IN 264 ITR 110 (BOM) IGNORING THE RATIO OF HON'BLE SUPREME COURT JUDGMENT IN THE CASE OF ESCORTS LTD. V/S. UNION OF INDIA (199 ITR 43) WHEREIN HON'BLE SUPREME COURT HAS HELD THAT DOUBLE DEDUCTION CANNOT BE PRESUMED IF THE SAME IS NOT SPECIFICALLY PROVID ED BY LAW, IN ADDITION TO NORMAL DEDUCTION? (B) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE AND IN LAW, THE TRIBUNAL WAS JUSTIFIED IN CONFIRMING THE ORDER OF THE CIT(A) TO ALLOW TO CARRY FORWARD OF DEFICIT OF EARLIER YEARS RELYING ON THE DECI SION OF THIS COURT IN THE CASE OF CIT V/S. INSTITUTE OF BANKING PERSONNEL SERVICES REPORTED IN 264 ITR 110 (BOM) WHILE THE REVENUE DID NOT FILE SLP AGAINST THE CASE OF CIT V/S. INSTITUTE OF BANKING PERSONNEL SERVICES REPORTED IN 264 ITR110 (BOM) DUE TO LOW TAX EFFECT?. STAND ON SAME FOOTING AS ARE BEING CANVASSED BEFORE US IN THE INSTANT CASE. THUS, THERE IS NO ERROR ON THE PART OF THE CIT(A) IN FOLLOWING THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF INSTITUTE OF BANKING PERSONNEL SELECTIO N (SUPRA) AND ALLOWING THE STAND OF THE ASSESSEE. THE OTHER ARGUMENT TAKEN BY THE REVENUE THAT ITS SLP FILED BEFORE THE HON'BLE SUPREME COURT IS PENDING ON A SIMILAR ISSUE IS OF NO CONSEQUENCE INASMUCH AS THE BINDING JUDGMENTS OF THE HON'BLE 6 K.J. SOMAIYA MEDICAL TRUST ITA NO. 311/MUM/2016 BOMBAY HIGH C OURT IN THE CASE OF INSTITUTE OF BANKING PERSONNEL SELECTION (SUPRA) AS WELL AS IN THE CASE OF M/S. MUMBAI EDUCATION TRUST (SUPRA) CONTINUE TO SUBSIST. THEREFORE, IN THIS BACKGROUND, WE FIND NO MERIT IN THE GROUND RAISED BY THE REVENUE AND THE SAME IS ACC ORDINGLY DISMISSED. 7. SIMILARLY, THE SECOND ISSUE RAISED BY THE REVENUE IS WITH REGARD TO CARRY FORWARD OF THE DEFICIT OF RS. 1,59,44,041 / - TO BE SET - OFF AGAINST THE FUTURE INCOME. ON THIS ASPECT ALSO, CIT(A) HAS ALLOWED THE CLAIM FOLLOWING THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF INSTITUTE OF BANKING PERSONNEL SELECTION (SUPRA) ; IN FACT, SIMILAR SITUATION HAS BEEN FURT HER AFFIRMED BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF M/S. MUMBAI EDUCATION TRUST (SUPRA). THEREFORE, ON THIS ASPECT ALSO, WE FIND NO ERROR ON THE PART OF THE CIT(A) IN ALLOWING THE CLAIM OF THE ASSESSEE, WHICH WE HEREBY AFFIRM. 8. INSOFAR AS THE THIRD ISSUE RAISED BY THE REVENUE WITH REGARD TO DELETION OF ADDITION OF INCOME FROM RUNNING THE PHARMACY SHOP IS CONCERNED, WE FIND THAT THE ISSUE IS FULLY COVERED BY THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF BAUN FOUNDATION TRUST VS. C HIEF COMMISSIONER OF INCOME TAX, (2013) 33 TAXMANN.COM 677 (BOMBAY), WHICH HAS BEEN FOLLOWED BY THE CIT(A) IN DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. THEREFORE, ON THIS ASPECT ALSO, WE FIND NO ERROR ON THE PART OF THE CIT(A) IN ALLOWING T HE CLAIM OF THE ASSESSEE, WHICH WE HEREBY AFFIRM. 7 K.J. SOMAIYA MEDICAL TRUST ITA NO. 311/MUM/2016 9 . RESULTANTLY, APPEAL OF THE REVENUE IS DISMISSED. THE ABOVE DECISION WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF BOTH THE PARTIES AT THE CONCLUSION OF THE HEARING ON 2 ND NOVEMBER , 2017. SD/ - SD/ - ( RAM LAL NEGI ) JUDICIAL MEMBER (G.S. PANNU) ACCOUNTANT MEMBER MUMBAI, DATE : 2 ND NOVEMBER , 201 7 *SSL* COPY TO : 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT(A) CONCERNED 4) THE CIT CONCERNED 5) THE D.R, A BENCH, MUMBAI 6) GUARD FILE BY ORDER DY./ASSTT. REGISTRAR I.T.A.T, MUMBAI