DCIT (E) 1(1), MUMBAI V. ANJUMAN EDUCATION TRUST, MUMBAI

ITA 3332/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9931 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-09-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 05-05-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: JAYESH R CHUGH
• Assessee Lawyers: V JENARDHANAN
• Keywords: Depreciation; Charitable institution; Tax effect; Capital expenditure
• Section: 11

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI , BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ./ I.T.A. NO. 3332/MUM/2017 ( / ASSESSMENT YEAR: 2012 - 13 ) DY. CIT (EXEMPTION) - 1(1), ROOM NO. 506, 5 TH FLOOR, PIRAMAL CHAMBER, LALBAUG, MUMBAI - 400 012 / VS. ANJUMAN EDUCATION TRUST, 92, ANJUMAN - I ISLAM, DR. D. N. ROAD, FORT, MUMBAI - 400 001 ./ ./ PAN/GIR NO. AA ATA 4146 M ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI V. JENARDHANAN / RESPONDENT BY : SHRI JAYESH R. CHUGH / DATE OF HEARING : 27.06.2017 / DATE OF PRONOUNCEMENT : 01 .0 9 .2017 / O R D E R PER SHAMIM YAHYA , A. M.: THIS IS AN APPEAL BY THE REVENUE ARISING OUT OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - I , MUMBAI (CIT(A) FOR SHORT) DATED 21.02.2017 , PERTAINING TO THE ASSES SMENT YEAR (A.Y.) 2012 - 13 . 2. THE GROUNDS OF APPEAL READ AS UNDER : 2 ITA NO. 3332/MUM/2017 (A.Y. 2012 - 13) DY. CIT (EXEMPTION) VS. ANJUMAN EDUCATION TRUST 1. 'WHETHER ON THE FA CTS OF THE CASE AND IN LAW THE L D.CIT(A) ERRED IN ALLOWING THE APPEAL OF THE ASSESSEE ON ACCOUNT OF DISALLOWING DEPRECIATION ON FIXED ASSETS OF RS. 54,74,867/ - IN CON TRAVENTION 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 SP ECIFICALLY & EXPRESSLY PROVIDE FOR DOUBLE DEDUCTION ON ACCOUNT OF DEPRECIATION ON THE SAME VE RY 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 AMOUN TS TO CLAIMING A DOUBLE DEDUCTION.' 2. 'WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES 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 CA SE OF LISSIE MEDICAL INSTITUTIONS VS CIT 76 DTR (KER) 372 HAS DECIDED THE ISSUE 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 AND IN THE CIRCUMS TANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING THE DEPRECIATION CLAIM OF THE ASSESSEE BY RELYING UPON THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF INSTITUTE OF BANKING PERSONNEL SELECTION, IGNORING THE FACT THAT THE DEPARTMENT HAS NOT ACCEPTED THE SAID DECISION OF THE JURISDICTIONAL HIGH COURT ON MERIT OF THE CASE, BUT DUE TO SMALLNESS OF TAX EFFECT APPEAL WAS NOT FILED BEFORE HO N'BLE SUPREME COURT. ALSO, THE L D CIT(A) ERRED IN RELYING UPON THE JUDGMENT OF HON'BLE HIGH COURT IN THE CASE OF CIT VS. S H RI VILE - PARLE KELVANI MANDAL, WITHOUT APPRECIATING THE FACT THAT DEPARTMENT HAS NOT ACCEPTED THE DECISION ON MERIT AND FILED SLP, BUT SUBSEQUENTLY WITHDRAWN THE SAME AS THERE WAS NO CLAIM OF DEPRECIATION ON EXEMPTED ASSETS. MOREOVER, THE REVENUE HAS FILED SLPS ON THIS ISSUE IN OTHER CASES INCLUSIVE THE CASE OF G.D. BIRLA MEDICAL RESEARCH & EDUCATIONAL FOUNDATION (S.L.P.(C) NO. 24904 OF 2016(C.A.NO.8294 OF 2016) AND IN THIS CASE LEAVE H A S BEEN GRANTED BY THE HON'BLE APEX COURT AND IN A LL CASES ISSUE IS PENDING FOR ADJUDICATION B EFORE THE HON'BLE APEX COURT. 3. T HERE IS ONE ISSUE ARISING OUT OF THE ABOVE GROUNDS OF APPEAL , WHICH RELATES TO DISALLOWANCE OF THE DEPRECIATION. 3 ITA NO. 3332/MUM/2017 (A.Y. 2012 - 13) DY. CIT (EXEMPTION) VS. ANJUMAN EDUCATION TRUST 4. I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. IT TRANSPIRES THAT UPON ASSESSING OFFICER S DISALLOWANCE ON THE ABOVE ISSUE, THE LEARNED CIT - A HAS ALLOWED THE ASSESSEE'S APPEAL BY FOLLOWING HON'BLE JURISDICTIONAL HIGH COURT DIRECT DECISION ON THE ISSUE. BOTH THE COUNSEL FAIRLY AGREED THAT THE ISSUE IS COV ERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT RELIED UPON BY THE LEARNED CIT - A. THE R EVENUE HAS ALSO AGREED TO THIS . I N THE GROUNDS O F APPEAL RAISED HERE - IN - ABOVE AS IT IS MENTIONED THAT D EPARTMENT HAS NOT ACCEPTED THE HON'BLE JURISDICTIONAL HIGH COURTS DECISION ON THIS ISSUE . BE AS IT MAY TH E HON'BLE JURISDICTIONAL HIGH COURTS DECISION IS BINDING. IN THIS REGARD , I MAY GAINFULLY REFER TO THE ORDER OF LEARNED CIT ( A ) ON T HE ISSUE AS UNDER.: 5.2 I H AVE CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE, GONE THROUGH THE ASSESSMENT ORDER OF THE A.O AND THE SUBMISSIONS OF THE APPELLANT AND ALSO DISCUSSED THE CASE' WITH THE AR OF THE APPELLANT. THE CONTENTIONS AND SUBMISSIONS OF THE APPELLANT ARE BEING DISCUSSED AND DE CIDED HERE IN UNDER: I. THE ASSESSING OFFICER HAS NOT TREATED THE DEPRECIATION AS APPLICATION OF INCOME ON THE GROUND THAT IT AMOUNTS TO DOUBLE DEDUCTION. APPELLANT HAS SUBMITTED THAT IN A NUMBER OF JUDGMENTS, DEPRECIATION HAD BEEN ALLOWED AS APPLICATION OF INCOME U/S. 11. CASE LAWS RELIED UPON BY THE ASSESSING OFFICER HAVE ALSO BEEN DISTINGUISHED. IN THIS REGARD I FIND THAT THE ISSUE IS DIRECTLY COVERED IN APPELLANT'S FAVOUR BY THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. INSTITUTE OF BANKING PERSONNEL 264 ITR 110 WHEREIN THE HON'BLE COURT HAS OBSERVED AS UNDER: '4. QUESTION NO. 2 HEREIN IS IDENTICAL TO THE QUESTION WHICH WAS RAISED BEFORE THE BOMBAY HIGH COURT IN THE CASE OF DIRECTOR OF INCOME TAX (EXEMPTION) V. FRAMJEE CAWASJEE IN STITUTE (1993) 109 CTR 463 (BOM). IN THAT CASE, THE FACTS WERE AS FOLLOWS: THE ASSESSEE WAS THE TRUST. IT DERIVED ITS INCOME FROM DEPRECIABLE 4 ITA NO. 3332/MUM/2017 (A.Y. 2012 - 13) DY. CIT (EXEMPTION) VS. ANJUMAN EDUCATION TRUST ASSETS. THE ASSESSEE TOOK INTO ACCOUNT DEPRECIATION ON THOSE ASSETS IN COMPUTING THE INCOME OF THE TRUST. THE INCO ME TAX OFFICER HELD THAT DEPRECIATION COULD NOT BE TAKEN INTO ACCOUNT BECAUSE; FULL CAPITAL EXPENDITURE HAD BEEN ALLOWED IN THE YEAR OF ACQUISITION OF THE ASSETS. THE ASSESSEE WENT IN APPEAL BEFORE THE ASSISTANT APPELLATE COMMISSIONER. THE APPEAL WAS REJEC TED. THE TRIBUNAL, HOWEVER, TOOK THE VIEW THAT WHEN THE INCOME TAX OFFICER STATED THAT FULL EXPENDITURE HAD BEEN ALLOWED IN THE YEAR OF ACQUISITION OF THE ASSETS, WHAT HE REALLY MEANT WAS THAT THE AMOUNT SPENT ON ACQUIRING THOSE ASSETS HAD BEEN TREATED AS 'APPLICATION OF INCOME' OF THE TRUST IN THE YEAR IN WHICH THE INCOME WAS SPENT IN ACQUIRING THOSE ASSETS. THIS DID NOT MEAN THAT IN COMPUTING INCOME FROM THOSE ASSETS IN SUBSEQUENT YEARS, DEPRECIATION IN RESPECT OF THOSE ASSETS CANNOT BE TAKEN INTO ACCOUNT . THIS VIEW OF THE TRIBUNAL HAS BEEN CONFIRMED BY, THE BOMBAY HIGH COURT IN THE ABOVE JUDGMENT. HENCE, QUESTION NO. 2 IS COVERED BY THE DECISION OF THE BOMBAY HIGH COURT IN THE ABOVE JUDGMENT. CONSEQUENTLY, QUESTION NO. 2 IS ANSWERED IN THE AFFIRMATIVE I.E ., IN FAVOUR OF THE ASSESSEE AND AGAINST, THE DEPARTMENT.' II. IN A RECENT JUDGEMENT IN CASE OF DIRECTOR OF INCOME - TAX (EXEMPTIONS), MUMBAI V. SHRI VILE PARLE KELAVANI MANDAL [2015] 58 TAXMANN.COM 288 HON'BLE BOMBAY HIGH COURT HELD: 'AS FAR AS QUESTION NO.4 IS CONCERNED, THIS COURT HAS REPEATEDLY HELD THAT THERE IS NOTHING LIKE DOUBLE DEDUCTION. WHEN THE ASSESSEE HAS ACQUIRED AN ASSET FROM THE INCOME OF THE TRUST AND THEREAFTER THE AMOUNT THAT IS CLAIMED IS THE DEPRECIATION ON THE USE OF THE ASSETS, SUC H DEPRECIATION CLAIM DOES NOT MEAN DOUBLE DEDUCTION. THE DEDUCTION EARLIER CLAIMED IS TOWARDS APPLICATION OF FUNDS OF THE TRUST FOR ACQUIRING ASSETS. THE LATTER IS DEPRECIATION AND IT IS PERMISSIBLE DEDUCTION CONSIDERING THE USE OF THE ASSETS. THIS HAS BEE N CLARIFIED REPEATEDLY BY THIS COURT. IF ANY REFERENCE IS REQUIRED THEN THE CASE OF CIT V. INSTITUTION OF BANKING PERSONNEL SELECTION (IBPS) [2003 ] 264 ITR 110/131 TAXMAN 386 (BOM.) IS ENOUGH.' III. RESPECTFULLY FOLLOWING THE ABOVE OBSERVATIONS OF HON'BL E JURISDICTIONAL HIGH COURT, THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE 5 ITA NO. 3332/MUM/2017 (A.Y. 2012 - 13) DY. CIT (EXEMPTION) VS. ANJUMAN EDUCATION TRUST CLAIM OF DEPRECIATION AS APPLICATION OF INCOME U/S. 11 OF THE 1. T. ACT AFTER DUE VERIFICATION OF FACTS/, 5. SINCE THE LEARNED CIT - A HAS FOLLOWED THE HON'BLE JURISDICTIONAL HIGH COURTS DECISION MENTIONED HERE - IN - ABOVE , I DO NOT FIND ANY INFIRMITY IN THE SAME. HENCE , I U PHOLD THE ORDER OF LEARNED CIT ( A ) . 6. IN THE RESULT, THE REVENUES APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 01/09/2017 SD/ - (S HAMIM YAHYA ) / ACCOUNTANT MEMBER MUMBAI ; DATED : 01/09/2017 . . ./ ROSHANI , SR. PS / COPY OF THE ORDER FORWARDED T O : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI