M/s. Indian Institute Of Management & Engineering Society, Ghaziabad V. ACIT, Ghaziabad

ITA 3199/DEL/2015

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 7054 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 19-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: VED JAIN SHRI AKSHIT GOEL
• Keywords: Depreciation; Charitable institution; Rule of consistency; Question of law; Capital expenditure; Set aside
• Section: 12A; 12AA; 195; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B : NEW DELHI) BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.3199/DEL./2015 (ASSESSMENT YEAR : 2010-11) INDIAN INSTITUTE OF MANAGEMENT & VS. ACIT, RANGE 1, ENGINEERING SOCIETY, GHAZIABAD. 27, KM STONE (AKGEC COMPLEX), NH 24, DELHI HAPUR BYE PASS ROAD, GHAZIABAD. (PAN : AAATI3688N) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VED JAIN, ADVOCATE SHRI AKSHIT GOEL, CA REVENUE BY : MS. ASHIMA NEB, SENIOR DR DATE OF HEARING : 16.04.2019 DATE OF ORDER : 30.04.2019 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : THE APPELLANT, INDIAN INSTITUTE OF MANAGEMENT & ENGINEERING SOCIETY (HEREINAFTER REFERRED TO AS THE ASSESSEE) BY FILING THE PRESENT APPEAL SOUGHT TO SET ASIDE THE I MPUGNED ORDER DATED 27.02.2015 PASSED BY THE COMMISSIONER OF INCO ME-TAX (APPEALS), MUZAFFARNAGAR, QUA THE ASSESSMENT YEAR 2 010-11 ON THE GROUNDS INTER ALIA THAT :- ITA NO.3199/DEL./2015 2 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)[(CIT(A)] IS BAD BOTH IN THE EYE OF LAW AN D ON FACTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN UPHOLD ING THE ACTION OF THE AO IN ASSESSING THE INCOME OF THE APP ELLANT SOCIETY AT RS.3,71,99,570/- AS AGAINST NIL INCOME DECLARED AND ASSESSABLE UNDER THE PROVISIONS OF THE ACT. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN REJECT ING THE CONTENTION OF THE APPELLANT THAT HOSTEL AND TRANSPO RT FACILITIES BEING INCIDENTAL TO THE EDUCATION ACTIVITIES BY WAY OF RUNNING SCHOOL, THE AO WAS NOT JUSTIFIED IN HOLDING THAT TH ESE ACTIVITIES TANTAMOUNT TO BUSINESS AND AS SUCH NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 11 OF THE INCOME TAX ACT. 4(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIR MING THE ACTION OF THE AO IN DISALLOWING EXEMPTION UNDER SEC TION 11 TO THE ASSESSEE IN RESPECT OF ACTIVITIES RELATED TO RU NNING OF HOSTEL AND PROVIDING TRANSPORT TO THE STUDENTS. (II) THAT THE LEARNED CIT(A) HAS ERRED BOTH ON FAC TS AND IN LAW IN CONFIRMING THE ABOVESAID ACTION OF THE AO RE JECTING THE CONTENTION OF THE ASSESSEE THAT HOSTEL AND TRANSPOR T FACILITIES BEING PART OF ACTIVITIES OF PROVIDING EDUCATION ONL Y, THE SAME ARE ELIGIBLE FOR EXEMPTION UNDER SECTION 11 OF THE ACT. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN HOLDIN G THE ACTION OF THE AO THAT THE HOSTEL AND TRANSPORT ACTIVITIES CONSTITUTE INDEPENDENT BUSINESS AND AS SUCH ASSESSEE IS RESPON SIBLE TO MAINTAIN SEPARATE BOOKS OF ACCOUNTS UNDER SECTION 1 1 (4A) OF THE ACT. 6(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN IGNORI NG THE CONTENTION OF THE APPELLANT THAT THE AO WAS NOT JUS TIFIED IN DEDUCTING A SUM OF RS.4,35,23,067/- BEING DEPRECIAT ION, WHILE COMPUTING TOTAL AMOUNT UTILIZED AND APPLIED TOWARDS CHARITABLE PURPOSE. (II) THAT THE ABOVE ACTION OF THE AO IS AGAINST TH E EXPRESS PROVISION OF SECTION 11 OF THE INCOME TAX ACT. 7(I) WITHOUT PREJUDICE TO THE ABOVE AND IN THE ALT ERNATIVE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW I N CONFIRMING ITA NO.3199/DEL./2015 3 THE INCOME FROM HOSTEL AND TRANSPORT COMPUTED BY AO AT RS.3,71,99,567/-. (II) THAT THE AO HAS ERRED IN NOT DEDUCTING ALL TH E EXPENSES ATTRIBUTABLE TO HOSTEL AND TRANSPORT ACTIVITIES WHI LE COMPUTING INCOME FROM HOSTEL AND TRANSPORT ACTIVITIES. (III) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN REJECT ING THE ALTERNATIVE CONTENTION OF THE APPELLANT THAT INCOME COMPUTED BY THE AO FOR HOSTEL AND TRANSPORT ACTIVITIES AT RS.3, 71,99,567/- IS NOT CORRECT. (IV) THAT THE EXPLANATION AND DETAILS SUBMITTED BY THE APPELLANT IN THIS REGARD HAVE BEEN REJECTED ARBITRA RILY. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : ASSESSEE SOCIETY IS RUNNI NG A SCHOOL BEING A CHARITABLE EDUCATION SOCIETY REGISTERED UND ER SECTION 12AA OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT) A ND AS SUCH CLAIMED ITS INCOME AS EXEMPT U/S 11 OF THE ACT . A SSESSING OFFICER MADE ADDITION OF RS.3,71,99,570/- ON ACCOUNT OF SUR PLUS GENERATED ON ACCOUNT OF PROVIDING TRANSPORT AND HOSTEL FACILI TIES TO THE STUDENTS BY TREATING THE SAME AS INDEPENDENT BUSINE SS. AO HAS ALSO DISALLOWED AN AMOUNT OF RS.4,35,23,067/- ON AC COUNT OF DEPRECIATION CLAIMED BY THE ASSESSEE ON THE GROUND THAT CLAIMING FULL EXPENDITURE AS AN APPLICATION OF INCOME AND SI MULTANEOUSLY CLAIMING DEPRECIATION ON THE SAME EXPENDITURE WILL RESULT INTO DOUBLE TAXATION. AO HAS ALSO DISALLOWED AN AMOUNT OF RS.1,27,127/- ON ACCOUNT OF REPAIR AND MAINTENANCE OF BUSES AND FUEL CHARGES OF RS.2,55,135/- INCURRED FOR RUNNING THE SCHOOL BUSES. ITA NO.3199/DEL./2015 4 3. ASSESSEE CARRIED THE MATTER BY WAY OF AN APPEAL BEFORE THE LD. CIT (A) WHO HAS CONFIRMED THE ADDITIONS BY DISM ISSING THE APPEAL. FEELING AGGRIEVED, THE ASSESSEE HAS COME U P BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEAL. 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. GROUND NO.1 5. GROUND NO.1 IS GENERAL IN NATURE, HENCE NEEDS NO ADJUDICATION. GROUNDS NO.2, 3, 4(I), 4(II) & 5 6. UNDISPUTEDLY, THE ASSESSEE SOCIETY IS DULY REGIS TERED U/S 12A OF THE ACT TO AVAIL OF THE EXEMPTION OF INCOME U/S 11 OF THE ACT. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE HAS BEEN P ROVIDING HOSTEL AS WELL AS TRANSPORT FACILITIES TO ITS OWN STUDENTS. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE HAS NOT MAINTAINED SEPARA TE BOOKS OF ACCOUNT FOR RUNNING TRANSPORTATION AND HOSTEL SERVI CES. IT IS ALSO NOT IN DISPUTE THAT ALL THE VEHICLES ENGAGED IN PRO VIDING TRANSPORTATION FACILITIES TO THE STUDENTS BY THE AS SESSEE ARE HIRED ONE EXCEPT TWO VEHICLES OWNED BY THE ASSESSEE SOCIETY. ITA NO.3199/DEL./2015 5 7. AO AS WELL AS CIT (A) HAVE MADE DISALLOWANCE OF EXEMPTION U/S 11 OF THE ACT PERTAINING TO RUNNING O F HOSTELS AND PROVIDING TRANSPORTATION FACILITIES TO THE STUDENTS OF THE INSTITUTE BY INVOKING THE PROVISIONS CONTAINED U/S 11(4A) OF THE ACT ON THE GROUND THAT THE ASSESSEE HAS FAILED TO COMPLY WITH BOTH THE LIMBS U/S 11(4) OF THE ACT. LD. AR FOR THE ASSESSEE CONT ENDED THAT BOTH THE FACILITIES OF TRANSPORTATION AS WELL AS HOSTEL ARE BEING PROVIDED TO THE STUDENTS OF THE INSTITUTE ARE INCIDENTAL TO THE EDUCATION AND RECEIPT THEREFROM CANNOT BE TREATED AS INCOME FROM INDEPENDENT BUSINESS. 8. WE ARE OF THE CONSIDERED VIEW THAT HOSTEL AND TR ANSPORTATION FACILITIES BEING PROVIDED BY THE ASSESSEE SOCIETY T O THE STUDENTS ARE INCIDENTAL ACTIVITIES HENCE PART AND PARCEL OF THE MAIN OBJECTS OF THE SOCIETY QUA PROVIDING EDUCATION. EVEN OTHERWISE, I T IS A MATTER OF COMMON KNOWLEDGE THAT WHEN STUDENTS ARE LIVING IN T HE HOSTEL PROVIDED BY THE EDUCATIONAL INSTITUTION, THEIR PARE NTS FEEL COMFORTABLE AND AT THE SAME TIME WHEN SCHOOL BUSES ARE FERRYING THE STUDENTS FROM INSTITUTE TO HOME AND VICE-VERSA, IT IS AGAIN PART AND PARCEL OF THE MAIN OBJECTS OF THE ASSESSEE SOCI ETY BECAUSE IT SAVES THE TIME AND MONEY OF THE STUDENTS. MOREOVER , WHEN THERE IS NOT AN IOTA OF MATERIAL ON RECORD THAT HOSTEL AND T RANSPORTATION FACILITIES ARE SIMULTANEOUSLY BEING PROVIDED BY THE ASSESSEE SOCIETY ITA NO.3199/DEL./2015 6 TO THE OUTSIDER OTHER THAN STUDENTS AND ITS STAFF, IT CANNOT BE DISALLOWED. AT THE SAME TIME, IT IS NOT THE CASE O F THE REVENUE THAT THE ASSESSEE SOCIETY IS INTO THE BUSINESS OF RUNNIN G OF HOSTEL AND VEHICLES. MORE PARTICULARLY, ALL THE VEHICLES EXCE PT TWO VEHICLES OWNED BY THE ASSESSEE SOCIETY ARE HIRED ONE FOR FER RYING THE STUDENTS AT THE COMPETITIVE RATES. 9. AO HAS MADE AN OPINION THAT FOR PROVIDING TRANSP ORTATION FACILITIES, STUDENTS ARE CHARGED ON COMMERCIAL BASI S AND HE HAS MADE SOME COMPARATIVE STUDY IN THIS REGARD. BUT WE ARE OF THE CONSIDERED VIEW THAT WHEN HOSTEL AS WELL AS TRANSPO RTATION FACILITIES ARE NOT BEING ON COMPETITIVE BASIS, NO STUDENT WOUL D AVAIL OF THE TRANSPORTATION AND HOSTEL FACILITIES IF THEY ARE CH ARGED COMMERCIALLY AT EXORBITANT RATES. SO, THE AO HAS JUST MADE AN O BSERVATION TO FORTIFY HIS CASE THAT SURPLUS GENERATED ON ACCOUNT OF RUNNING OF TRANSPORTATION AND HOSTEL FACILITIES IS AN INDEPEND ENT BUSINESS. 10. AT THE SAME TIME, WE ARE OF THE CONSIDERED VIEW THAT IN CASE, SURPLUS HAS BEEN GENERATED ON ACCOUNT OF RUNNING OF TRANSPORTATION AND HOSTEL FACILITIES THE SAME WOULD BE SET OFF, IN CASE IN THE SUBSEQUENT PERIOD, ASSESSEE SUFFERED SOME LOSS ON A CCOUNT OF PROVIDING THESE FACILITIES. SO, MERELY ON THE BASI S OF THE FACT THAT THE ASSESSEE SOCIETY HAS GENERATED SURPLUS ON ACCOU NT OF RUNNING OF ITA NO.3199/DEL./2015 7 TRANSPORTATION AND HOSTEL SERVICES, THE SAME CANNOT BE TREATED AS AN INDEPENDENT BUSINESS. 11. THIS ISSUE HAS BEEN DECIDED BY THE COORDINATE B ENCH OF THE TRIBUNAL IN CASE CITED AS DELHI PUBLIC SCHOOL GHAZIABAD VS. ACIT 2018 (5) TMI 1482 ITAT DELHI BY RELYING UPON THE DECISION RENDERED BY HONBLE KARNATAKA HIGH COURT IN KARNATAKA LINGAYAT EDUCATION SOCIETY IN ITA NO.5004/2012 DATED 15.10.2 014 WHEREIN IT IS HELD THAT PROVIDING OF THE HOSTEL TO THE STUDENTS AND STAFF WORKING FOR THE SOCIETY IS INCIDENTAL TO ACHI EVE THE OBJECT OF PROVIDING EDUCATION. IN KANHA CHARITABLE TRUST VS. ACIT IN ITA NOS.3297 & 5987/DEL/2015 , THE COORDINATE BENCH OF THE TRIBUNAL ALSO HELD THAT WHEN HOSTEL AND TRANSPORT FACILITIES ARE BEING PROVIDED TO THE STUDENTS AND STAFF OF THE SOCIETY O NLY IT SHALL BE CONSTRUED TO BE INTRINSIC PART OF THE EDUCATIONAL A CTIVITIES. 12. SO, IN THE CASE AT HAND, IT IS UNDISPUTED CASE OF THE ASSESSEE THAT HOSTEL AND TRANSPORTATION FACILITIES ARE ONLY BEING PROVIDED TO THE STUDENTS OF THE INSTITUTE AND AS SUCH IS INCIDE NTAL TO ACHIEVE THE OBJECT OF PROVIDING EDUCATION IN COMPLIANCE TO THE AIMS AND OBJECTS OF THE ASSESSEE TRUST. SO, IN THESE CIRCUM STANCES, PROVISIONS CONTAINED U/S 11 (4A) INVOKED BY THE AO ARE NOT APP LICABLE TO THE FACTS AND CIRCUMSTANCES OF THE CASE. ITA NO.3199/DEL./2015 8 13. WE ARE OF THE CONSIDERED VIEW THAT ACTIVITY OF ASSESSEE SOCIETY IN PROVIDING TRANSPORT AND HOSTEL FACILITIE S TO THE STUDENTS AND STAFF IS INCIDENTAL TO ACHIEVE THE CHARITABLE O BJECT OF PROVIDING EDUCATION. 14. AO MADE DISALLOWANCE OF RS.1,27,127/- AND RS.2, 55,135/- ON ACCOUNT OF REPAIR AND MAINTENANCE OF BUSES AND O N ACCOUNT OF FUEL CHARGES FOR RUNNING THE BUSES RESPECTIVELY ON AD HOC BASIS ON THE GROUND THAT THE SAME ARE ON HIGHER SIDE AS THE ASSESSEE SOCIETY IS OWNING ONLY TWO BUSES. 15. IT IS CONTENDED BY THE LD. AR FOR THE ASSESSEE THAT THE ASSESSEE HAS DULY EXPLAINED TO THE AO THAT ALL THE EXPENSES HAVE BEEN DULY RECORDED IN THE BOOKS OF ACCOUNT WHICH HA VE NEVER BEEN DISPUTED AND ACTUAL EXPENSES HAVE BEEN CLAIMED. SI NCE BOTH AO/CIT (A) HAVE DISALLOWED/CONFIRMED THE EXPENSES O N AD HOC BASIS ONLY ON THE GROUND THAT THE SAME ARE ON HIGHE R SIDE WITHOUT DISPUTING THE INCURRENCE OF THE EXPENSES IT IS NOT PERMISSIBLE UNDER LAW. MOREOVER, MAINTENANCE CHARGES AS WELL AS FUEL CHARGES OF THE BUSES DEPENDS UPON THE AGE AND CONDITION OF THE VEH ICLE WHICH HAS NOT BEEN EXAMINED BY THE AO. SO, WE ARE OF THE CON SIDERED VIEW THAT THESE EXPENSES ARE LIABLE TO BE ALLOWED, HENCE DISALLOWANCES OF RS.1,27,127/- AND RS.2,55,135/- ARE ORDERED TO BE D ELETED. ITA NO.3199/DEL./2015 9 16. MOREOVER, IT IS A MATTER OF RECORD THAT WHEN TH E ASSESSEE SOCIETY HAS BEEN CLAIMED EXEMPTION U/S 11 OF THE AC T, NO SUCH QUESTION HAS BEEN RAISED BY THE AO REGARDING DISALL OWANCE OF EXEMPTION CLAIMED ON ACCOUNT OF HOSTEL AND TRANSPOR TATION FACILITIES AS IS EVIDENT FROM ASSESSMENT ORDER FOR AYS 2009-10, 2012-13 AND 2013-14 PASSED U/S 143 (3) OF THE ACT, COPIES AVAILABLE AT PAGES 65 TO 67, 102 TO 105 AND 106 TO 108 OF THE PAPER BOOK. WHEN THERE IS NO CHANGE IN THE FACTS AND CIR CUMSTANCES OF THE CASE, THE REVENUE IS ALSO BOUND TO FOLLOW RULE OF CONSISTENCY. 17. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, WE AR E OF THE CONSIDERED VIEW THAT DISALLOWANCE OF EXEMPTION OF R ECEIPT OF RS.3,71,99,570/- FROM THE ACTIVITIES OF PROVIDING H OSTEL AND TRANSPORT FACILITIES TO THE STUDENTS OF THE INSTITU TION IS NOT SUSTAINABLE IN THE EYES OF LAW BEING INTRINSIC PART OF THE EDUCATIONAL ACTIVITIES OF THE ASSESSEE SOCIETY. CONSEQUENTLY, GROUNDS NO.2, 3, 4(I), 4(II) & 5 ARE DETERMINED IN FAVOUR OF THE ASS ESSEE. GROUND NO.6(I) & 6(II) 18. AO/CIT (A) MADE DISALLOWANCE OF RS.4,35,23,067/ - ON ACCOUNT OF DEPRECIATION ON FIXED ASSETS WHILE COMPU TING TOTAL AMOUNT UTILIZED AND APPLIED TOWARDS CHARITABLE PURP OSES BY RELYING ITA NO.3199/DEL./2015 10 UPON THE DECISION RENDERED BY HONBLE SUPREME COURT IN THE CASE OF ESCORTS LIMITED VS. UOI 199 ITR 43 . 19. LD. AR FOR THE ASSESSEE CHALLENGING THE IMPUGNE D ORDER CONTENDED THAT THE DECISION RENDERED BY HONBLE SUP REME COURT IN CASE OF ESCORTS LIMITED (SUPRA) IS NOT APPLICABLE HAVING BEEN DISTINGUISHED BY THE HONBLE DELHI HIGH COURT IN CA SE CITED AS DIRECTOR OF INCOME-TAX VS. VISHWA JAGRITI MISSION 7 3 DTR (DEL.) 195 . 20. UNDISPUTEDLY, ASSESSEE BEING A SOCIETY REGISTER ED U/S 12AA OF THE ACT IS ENTITLED FOR EXEMPTION OF ITS INCOME U/S 11 OF THE ACT. NOW, THE ISSUE IN CONTROVERSY IS :- AS TO WHETHER THE ASSESSEE IS ENTITLED FOR DEPRECI ATION ON THE FIXED ASSETS UTILIZED FOR CHARITABLE PURPOSE S AND AS TO WHETHER INCOME OF ASSESSEE SHOULD BE COMPUTED ON COMMERCIAL PRINCIPLE. 21. HONBLE DELHI HIGH COURT DECIDED THE IDENTICAL ISSUE IN CASE OF VISHWA JAGRITI MISSION (SUPRA) IN FAVOUR OF THE ASSESSEE AFTER EXAMINING THE DECISION RENDERED BY HONBLE SUPREME COURT IN CASE OF ESCORTS LTD. (SUPRA) BY RETURNING FOLLOWING FINDINGS :- 13. THE JUDGMENT OF THE SUPREME COURT IN ESCORTS L IMITED VS. UNION OF INDIA(SUPRA)HAS BEEN RIGHTLY HELD TO B E INAPPLICABLE TO THE PRESENT CASE. THERE ARE TWO REASONS AS TO WH Y THE JUDGMENT CANNOT BE APPLIED TO THE PRESENT CASE. FIRSTLY, THE SUPREME COURT WAS NOT CONCERNED WITH THE CASE OF A CHARITABLE TRU ST/INSTITUTION INVOLVING THE QUESTION AS TO WHETHER ITS INCOME SHO ULD BE COMPUTED ON COMMERCIAL PRINCIPLES IN ORDER TO DETER MINE THE AMOUNT OF INCOME AVAILABLE FOR APPLICATION TO CHARI TABLE ITA NO.3199/DEL./2015 11 PURPOSES. IT WAS A CASE WHERE THE ASSESSEE WAS CARR YING ON BUSINESS AND THE STATUTORY COMPUTATION PROVISIONS O F CHAPTER IV- D OF THE ACT WERE APPLICABLE. IN THE PRESENT CASE, WE ARE NOT CONCERNED WITH THE APPLICABILITY OF THESE PROVISION S. WE ARE CONCERNED ONLY WITH THE CONCEPT OF COMMERCIAL INCOM E AS UNDERSTOOD FROM THE ACCOUNTING POINT OF VIEW. EVEN UNDER NORMAL COMMERCIAL ACCOUNTING PRINCIPLES, THERE IS A UTHORITY FOR THE PROPOSITION THAT DEPRECIATION IS A NECESSARY CH ARGE IN COMPUTING THE NET INCOME. SECONDLY, THE SUPREME COU RT WAS CONCERNED WITH THE CASE WHERE THE ASSESSEE HAD CLAI MED DEDUCTION OF THE COST OF THE ASSET UNDER SECTION 35 (1) OF THE ACT, WHICH ALLOWED DEDUCTION FOR CAPITAL EXPENDITURE INC URRED ON SCIENTIFIC RESEARCH. THE QUESTION WAS WHETHER AFTER CLAIMING DEDUCTION IN RESPECT OF THE COST OF THE ASSET UNDER SECTION 35(1), CAN THE ASSESSEE AGAIN CLAIM DEDUCTION ON ACCOUNT O F DEPRECIATION IN RESPECT OF THE SAME ASSET. THE SUPR EME COURT RULED THAT, UNDER GENERAL PRINCIPLES OF TAXATION, D OUBLE DEDUCTION IN REGARD TO THE SAME BUSINESS OUTGOING IS NOT INTE NDED UNLESS CLEARLY EXPRESSED. THE PRESENT CASE IS NOT ONE OF T HIS TYPE, AS RIGHTLY DISTINGUISHED BY THE CIT(APPEALS). 14. HAVING REGARD TO THE CONSENSUS OF JUDICIAL OPIN ION ON THE PRECISE QUESTION THAT HAS ARISEN IN THE PRESENT APP EAL, WE ARE NOT INCLINED TO ADMIT THE APPEAL AND FRAME ANY SUBSTANT IAL QUESTION OF LAW. THERE DOES NOT APPEAR TO BE ANY CONTRARY VI EW PLAUSIBLE ON THE QUESTION RAISED BEFORE US AND AT ANY RATE NO JUDGMENT TAKING A CONTRARY VIEW HAS BEEN BROUGHT TO OUR NOTI CE. IN THE CIRCUMSTANCES, WE DECLINE TO ADMIT THE PRESENT APPE AL AND DISMISS THE SAME WITH NO ORDER AS TO COSTS. 22. IDENTICAL ISSUE HAS ALSO BEEN DECIDED BY HONBL E SUPREME COURT IN CASE OF CIT VS. RAJASTHAN AND GUJARATI CHARITABLE FOUNDATION POONA IN CIVIL APPEAL NO.7186 OF 2014 DA TED 13.12.2017 IN FAVOUR OF THE ASSESSEE WHEREIN VIEW TAKEN BY HONBLE BOMBAY HIGH COURT IN CASE OF DIRECTOR OF INCOME-TAX (EXEMPTION) VS. FRAMJEE CAWASJEE INSTITUTE (1993) 1 09 CTR 463 HAS BEEN AFFIRMED BY RETURNING FOLLOWING FINDINGS : - 4. QUESTION NO.2 HEREIN IS IDENTICAL TO THE QUESTI ON / WHICH WAS RAISED BEFORE THE BOMBAY HIGH COURT IN THE CASE OF DIRECTOR OF INCOME-TAX (EXEMPTION) V. FRAMJEE CAWASJEE INSTI TUTE [1993] 109 CTR 463. IN THAT CASE, THE FACTS WERE AS FOLLOW S: THE ITA NO.3199/DEL./2015 12 ASSESSEE WAS THE TRUST. IT DERIVED ITS INCOME FROM DEPRECIABLE ASSETS. THE ASSESSEE TOOK INTO ACCOUNT DEPRECIATIO N ON THOSE ASSETS IN COMPUTING THE INCOME OF THE TRUST. THE IT O HELD THAT DEPRECIATION COULD NOT BE TAKEN INTO ACCOUNT BECAUS E FULL CAPITAL EXPENDITURE HAD BEEN ALLOWED IN THE YEAR OF ACQUISI TION OF THE ASSETS. THE ASSESSEE WENT IN APPEAL BEFORE THE ASSI STANT APPELLATE COMMISSIONER. . THE APPEAL WAS REJECTED. THE TRIBUN AL, HOWEVER, TOOK THE VIEW THAT WHEN THE ITO STATED THA T FULL EXPENDITURE HAD BEEN ALLOWED IN THE YEAR OF ACQUISI TION OF THE ASSETS, WHAT HE REALLY MEANT WAS THAT THE AMOUNT SP ENT ON ACQUIRING THOSE ASSETS HAD BEEN TREATED AS 'APPLICA TION OF INCOME' OF THE TRUST IN THE YEAR IN WHICH THE INCOM E WAS SPENT IN ACQUIRING THOSE ASSETS. THIS DID NOT MEAN THAT IN C OMPUTING INCOME FROM THOSE ASSETS IN SUBSEQUENT YEARS, DEPRE CIATION IN RESPECT OF THOSE ASSETS CANNOT BE TAKEN INTO ACCOUN T. THIS VIEW OF THE TRIBUNAL HAS BEEN CONFIRMED BY THE BOMBAY HIGH COURT IN THE ABOVE JUDGMENT. HENCE, QUESTION NO. 2 IS COVERE D BY THE DECISION OF THE BOMBAY HIGH COURT IN THE ABOVE JUDG MENT. CONSEQUENTLY, QUESTION NO.2 IS ANSWERED IN THE AFFI RMATIVE I.E., IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMEN T. 23. HONBLE SUPREME COURT IN CASE OF RAJASTHAN AND GUJARATI CHARITABLE FOUNDATION POONA (SUPRA) ALSO HELD THAT AMENDMENT IN SECTION 11 (6) OF THE ACT VIDE FINANCE ACT (NO.2), 2014 EFFECTED FROM AY 2015-16 IS PROSPECTIVE IN NATURE. 24. SO, FOLLOWING THE DECISIONS RENDERED BY HONBLE DELHI HIGH COURT IN VISHWA JAGRITI MISSION (SUPRA) AND DECISION RENDERED BY HONBLE SUPREME COURT IN CASE OF RAJASTHAN AND GUJARATI CHARITABLE FOUNDATION POONA (SUPRA), WE ARE OF THE CONSIDERED VIEW THAT WHILE COMPUTING INCOME FROM THOSE ASSETS OF WHICH FULL EXPENDITURE HAS BEEN ALLOWED IN THE YEAR OF ACQUISI TION, IN THE SUBSEQUENT YEARS DEPRECIATION IN RESPECT OF THOSE A SSETS HAS ALSO TO BE TAKEN INTO ACCOUNT. SO, AO/CIT (A) HAVE ERRED I N MAKING DISALLOWANCE OF RS.4,35,23,067/- ON ACCOUNT OF DEPR ECIATION ON ITA NO.3199/DEL./2015 13 FIXED ASSETS CLAIMED DURING THE YEAR UNDER ASSESSME NT BECAUSE APPLICATION OF INCOME IS NOT COMPUTATION OF INCOME AND THE PROVISIONS OF APPLICATION OF INCOME WOULD COME INTO PLAY ONLY AFTER THE INCOME CHARGEABLE TO TAX IS DETERMINED AN D THE INCOME HAS TO BE IN THE GENERAL SENSE AND DEPRECIATION IS ONE OF THE DEDUCTIONS AVAILED UNDER LAW AND THERE IS NO REASON FOR DISALLOWING THE SAME. CONSEQUENTLY, GROUNDS NO.6(I) & 6(II) AR E DETERMINED IN FAVOUR OF THE ASSESSEE. GROUND NO.7(I), (II), (III) & (IV) 25. IN VIEW OF OUR FINDINGS ON GROUNDS NO.2, 3, 4, & 5, NO FINDINGS ARE REQUIRED TO BE RETURNED ON THIS GROUND BECAUSE THE EARLIER GROUNDS HAVE BEEN DECIDED IN FAVOUR OF THE ASSESSEE AND GROUND NO.7 HAS BEEN RAISED WITHOUT PREJUDICE AND I N THE ALTERNATIVE. CONSEQUENTLY, GROUNDS NO.7(I), (II), (III) & (IV) ARE DETERMINED AGAINST THE ASSESSEE. 26. RESULTANTLY, THE APPEAL FILED BY THE ASSESSEE I S PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 30 TH DAY OF APRIL, 2019. SD/- SD/- (R.K. PANDA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 30 TH DAY OF APRIL, 2019 TS ITA NO.3199/DEL./2015 14 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A), MUZAFFARNAGAR. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.