Appeal details
Counselvise Citation
342219914 RSA 2015
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 month(s) 26 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
30-07-2015
Appeal Filed By
Department
Bench Allotted
SMC
Assessment Year
2011-2012
Appeal Filed On
04-06-2015
Judgement Text
, . . , IN THE INCOME TAX APPELLATE TRIBUNAL SMC , BENCH MUMBAI . . , BEFORE SHRI R.C.SHARMA , ACCOUNTANT MEMBER ./ ITA NO S . 3421& 342 2 / MUM/20 1 5 ( / ASSESSMENT YEAR S : 2010 - 11 & 20 1 1 - 1 2 ) ACIT(EXEMPTIONS) - 1(1), MUMBAI - 12 VS. DAWAT E. HADIYAH, BADRI MAHAL, 3 RD FLOOR, DR. D ADABHOY NOWROJEE ROAD, FORT, MUMBAI - 400001 ./ ./ PAN/GIR NO. : A A ATD 1489 N ( / APPELLANT ) .. ( / RESPONDENT ) /REVENUE BY : SHRI JASBIR SINGH CHOUHAN /ASSESSEE BY : SHRI F.B.ANDHYARUJINA / DATE OF HEARING : 2 3 /0 7 / 2015 / DATE OF PRONOUNCEMENT 30 /0 7 /2015 / O R D E R TH ESE ARE THE APPEAL S FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) FOR THE A.Y. 2010 - 11 & 2011 - 2012 IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE I.T.ACT, 1961. 2. IN ITA NO. 3422/MUM/2015, THE REVENUE HAS COME FORWARD WITH THE FOL LOWING GROUNDS OF APPEAL : - 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN ALLOWING THE APPEAL OF THE ASSESSEE ON ACCOUNT OF DISALLOWING D E PR ECIATION ON F I XE D ASSETS OF R S . 23 , 25 , 84 , 521 / - IN CON T RAVENTI O N OF T H E DECI SION OF ES CORT S VS U O I 199 IT R 43 , W H EREIN IT WAS HE L D T H A T S IN CE SEC TI O N 11 OF T H E IN CO M E - TAX ACT PROVIDES FOR DEDUCTION CAP I TA L EXPE ND I T URE IN C U R R E D O N ASSETS AC QUI RE D FO R T H E O B JEC T S OF T H E TRUST AS APP L ICATION A N D D OES N O T SPEC I FICA LL Y & EX P RESS L Y PR O V ID E FOR D O UBL E D E DU CTION ON ACCO UN T OF DEPRECIA T ION ON T H E SAME VER Y ASSE T S AC QU IRED FROM SUC H CAPITAL EXPENDITURE , NO DEDUCTION S H ALL B E A LL OWE D U / S 32 FO R TH E SA M E OR A N Y O TH ER ITA NO S . 3421& 342 2 /1 5 2 P REVIOU S Y EAR IN RESPECT OF THAT ASSE T S AS I T AMO UNT S T O CLA IMIN G A DO UBL E D E DU CT I O N . ' 2 . ' W H E T HER O N TH E FACTS A ND C IR C UM S T A N CES OF TH E CASE A N D I N L AW , T H E LD . CIT(A) , ERRED IN ALLOWI N G THE DEPREC I A T IO N , W HEN T H E D E LH I H I G H CO UR T IN T H E CASE OF CHARANJI V CHARITABLE TRUST AND KERA L A H I GH CO U RT IN TH E CASE L I SS I E M EDICA L I N STITU T I ONS VS CIT 76 D T R ( KER ) 372 H A S D ECIDED T H E I SS U E IN TH E FAVO UR OF THE D E P A R T M E N T AFTE R CONSIDERING TH E DECISI O N O F HON ' BL E SUPREME COUR T I N T HE CASE OF ESCOR T S LTD. ( 1 99 I TR 43) . 3. ' W H ET H E R O N TH E FACTS OF TH E CASE A N D IN L AW TH E I D . CIT(A) ER R ED IN ALLOW ING THE CARR Y FO R WARD OF D EFIC I T OF R S. 2 7 8 , 24 , 26 , 64 1 / - A ND A L LOW IN G SET OFF AGAI N ST TH E INCOME OF THE S U BSEQUE N T Y EARS A LL OWING T H E DEF I C I T WI L L TA N TA M O U NT TO DO U BLE DEDUCTION ON A CCOUNT O F EXPENDITURE OUT OF EXE MPT I N CO M E. ' 4. ' WHETHER , ON TH E FA C TS A ND C I RC UM S T ANCES OF T H E CASE A N D IN LA W , THE ID . CIT(A ) ERRED IN A LL OW I NG TO CARRY FORWARD OF D EF I CIT O N ACCO UN T OF EXCESS EX P ENDITUR E A ND DIRECTING THE ASSESS I NG OFFICE R T O A LL OW CA RR Y FORWARD OF D EFIC I T ON ACCOUNT OF E X CESS EXPENDITURE W ITH O UT APP R ECIATI N G TH E FAC T TH AT THI S WO ULD H AVE T H E EFFECT OF GRAN T ING DOUBLE BE N E F IT TO T H E ASSESSEE , FIRST AS ' ACC UMUL A TI O N ' OF I N CO M E U / S II(L)(A ) OR A S CORPU S DONATIONS U / S 11 (1)(D ) IN EARLY Y EARS / C URR E NT YEA R A N D TH E N AS ' APP L ICAT I ON OF INCOM E U / S 11 ( L)(A) I N TH E S UB SEQ U ENT L Y Y EARS W H I C H WAS L EGA LL Y N OT P E R MI SS I B L E ? 5. ' WHETHER , O N TH E FACTS A ND C I RC UM S T ANCES OF T H E CASE AND IN L AW , THE ID.CI T (A) ERR E D I N A L LOW I NG T HE C L A I M OF TH E ASSESSEE FOR CARRY FORWARD OF T H E SAID DEFICIT , I GNORING THE FACT T H AT THERE WAS N O EXP R ESS P RO VISIO N S IN TH E ACT , 1961 PERMIT T I N G A L LOWANCE OF SUCH C L AIM. 6. T H E AP P E LL ANT P RAYS TH A T T H E OR D E R OF TH E CO MMI SS I O N ER OF IN COME - TAX (APPEALS ) - 1 M UMBAI , BE SET AS ID E A ND T H A T OF T H E ASSESS IN G OFFICER B E RESTORED . 3. AS COMMON GROUNDS HAVE BEEN TAKEN IN BOTH THE YEARS, THEREFORE, BOTH APPEALS ARE BEING HEARD TOGETHER AND ARE NOW DECIDED BY THIS CONSOLIDATED ORDER. 4 (I) THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A TRUST WHICH IS ENGAGED IN RELIGIOUS CHARITABLE ACTIVITIES FOR THE WELFARE OF DAWAOODI BOHRA CO MMUNITY AND OTHER COMMUNITIES. IT FILED RETURN OF INCOME ON 30 TH SEPTEMBER,2011 ALONG WITH THE INCOME AND EXPENDITURE ACCOUNT, ITA NO S . 3421& 342 2 /1 5 3 BALANCE SHEET AND AUDIT REPORT IN FORM NO. 10 B DECLARING TOTAL INCOME AT DEFICIT OF RS.2,782,426,641/ - . IT ALSO CLAIMED CARRIED FO RWARD OF EARLIER YEARS EXCESS OF EXPENDITURE OF RS.21,289,728,242/ - IN THE COMPUTATION OF INCOME FILED ALONG WITH THE RETURN OF INCOME. T HE TRUST IS REGISTERED AS A CHARITABLE ORGANIZATION WITH DIT (EXEMPTION), MUMBAI U/S. 12A OF THE INCOME TAX ACT, 1961. THE ASSESSEE HAS ACCORDINGLY CLAIMED EXEMPTION U/S. 11 OF THE INCOME TAX ACT,1961. 4 (II) FOR THE ASSESSMENT YEAR 2011 - 2012 THE APPELLANT HAD CLAIMED DEPRECIATION OF RS.23,25,84,521 / - , WHICH THE LEARNED AO HAS DISALLOWED CONSIDERING THE SAME AS DOUBLE DED UCTION. 4 (III) THE APPELLANT HAS CLA IMED DEFICIT OF RS.201,37,85,581/ - OF THE CURRENT YEAR AS THE SAME IS ARRIVED AT AFTER APPLICATION OF INCOME AS PER PRINCIPLES OF SECTION 11 - 13 WHICH THE LD. AO HAS TAKEN AS NIL. NOW WE TAKE THE APPEAL GRO UNDWISE : - 5 . GROUND NOS. 1 & 2 ARE RELATED WITH DOUBLE DEDUCTION OF DEPRECIATION AND IS DEALT WITH SIMUL TANEOUSLY. 5 .1 THE ASSESSEE IS A TRUST ENGAGED IN CHARITABLE ACTIVITIES AND REGISTERED U/S.12A OF THE INCOME TAX ACT. DURING THE YEAR THE ASSESSEE INVESTED IN FIXED ASSETS AND CLAIMED THE SAME AS APPLICATION OF INCOME WHILE FILING THE RETURN. FURTHERMORE, THE ASSESSEE ALSO CLAIMED DEPRECIATION OF RS. 23,21,54,114/ - ON SA ME FIXED ASSETS DURING THE YEAR WHICH THE LD. A O HAS DISALLOWED CITING AS DOUBLE DEDUCTION. THE LD. AO HAS MENTIONED AS UNDER : - I HAVE CONSIDERED THE REPLY OF THE ASSESSEE AND ALSO THE RATIO OF JURISDICTIONAL HIGH COURT IN THE MATTER OF CIT V/S INSTITUTE OF BANKING ITA NO S . 3421& 342 2 /1 5 4 PERSONAL SELECTION AS REPORTED IN 264 ITR 110 (BOM) . HOWEVER, THE HON'BLE APEX COURT IN 1 99 ITR 43 UNION BANK OF INDIA VS. ESCORTS LIMITED HAS HELD THAT DOUBLE DEDUCTION CANNOT BE ALLOWED UNDER ANY CIRCUMSTANCES. IT MAY ALSO BE PERTINENT TO MENTION THAT THE RATIO OF 264 ITR 110 (BOM) WAS PRONOUNCED BY THE HON'BLE JURISDICTIONAL HIGH COURT WITH OUT TAKING INTO CONSIDERATION THE RATIO OF HON'BLE APEX COURT IN 199 ITR 43. IT MAY ALSO BE FURTHER PERTINENT TO MENTION THAT THE JURISDICTION IN THE 264 ITR 110 (BOM) WAS ACCEPTED BY THE DEPARTMENT IN VIEW OF LOW TAX EFFECT INVOLVED AND NOT IN VIEW OF THE MERITS OF THE CASE. THEREFORE RELYING ON THE RATIO OF THE APEX COURT IN 199 ITR 43 ESCORTS LIMITED V / S UNION BANK OF INDIA, SINCE THE CLAIM OF DEPRECIATION OF RS.23,21,54,114/ - AMOUNTS TO DOUBLE DEDUCTION. THEREFORE, THE SAME IS DISALLOWED. 5 .2 AGGRIEVED WITH THE ORDER OF THE LD. A O , THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) ALLOWED THE APPEAL OF ASSESSEE. IN THIS APPELLATE ORDER, THE LD. CIT(A) MENTIONED AS UNDER : - 5.2 I HAVE CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ASSESSMENT ORDER OF THE A. O AND THE SUBMISSIONS OF THE APPELLANT. THE DECISION OF THE HON. JURISDICTIONAL HIGH COURT ON THE ISSUE OF ALLOWANCE OF DEPRECIATION IS IN FAVOUR OF THE APPELLANT. THE A O HAS NOT GIVEN ANY OTHER REASON FOR DISALLOWANCE OF DEPRECIA TION AND RELIED ON THE DECISION OF THE HON. APEX COURT IN ESCORTS LIMITED CASE (199 ITR). HOWEVER, THE APPELLANT HAS FURTHER RELIED ON DECISION IN THE CASE OF DIT(E) VS. NAJAM BAUG TRUST (BOM.). IN FACT THE DECISION OF THE HON. JURISDICTION COURT IN CIT VS . INSTITUTE OF BANKING PERSONNEL SELECTION (2003) 185 CTR 492 (BOM) IS APPLICABLE IN THIS CASE. AS PER DECISION OF THE HON. HIGHER JUDICIAL AUTHORITIES ON THIS ISSUE, DEPRECATION IS ALLOWABLE AS CLAIMED BY THE APPELLANT. THEREFORE, GROUND NO. 2 OF APPEAL I S ALLOWED FOR BOTH THE YEARS. 5 .3 AGGRIEVED WITH THE ORDER OF CIT(A) , THE REVENUE FILED SECOND APPEAL BEFORE US. 5 .4 LD. AR SUBMITTED THAT T HE DEPRECIATION CLAIMED IS AS PER ESTABLISHED ACCOUNTING PRINCIPLE AND BASED ON VARIOUS JUDGMENT OF HIGH COURT. T HE INCOME BEING EXEMPT, DEPRECIATION SHOULD BE REDUCED FOR DETERMINING THE CORRECT INCOME COMPUTATION. DEPRECIATION IS A CHARGE WHICH OUGHT TO BE ALLOWED IN ORDER TO REFLECT THE TRUSTS CORRECT PROFITS. LD. AR FURTHER CONTENDED THAT T HE SUPREME COURT IN CIT VS. WILLIAMSON FINANCIAL SERVICES (2008) 297 ITR 17 (SC) HAS HELD THAT IN ORDER TO ARRIVE ITA NO S . 3421& 342 2 /1 5 5 AT CORRECT INCOME FOR THE PURPOSES OF SECTION 11 DEDUCTIONS AND PROVISIONS OF SECTION 15 TO SECTION 59 HAD TO BE CONSIDERED. THUS DEPRECIATION HAS TO BE TAKEN INTO C ONSIDERATION TO ARRIVE AT THE CORRECT INCOME. AS PER LD. AR, I N ORDER TO ARRIVE AT CORRECT APPLICATION OF INCOME UNDER SECTION 11 ON COMMERCIAL PRINCIPLES NORMAL DEPRECIATION SHOULD BE CONSIDERED FROM GROSS INCOME OF THE TRUST. CIT . INSTITUTE OF BANKING (2003) 264 ITR 110 (BORN). CIT . INSTITUTE OF BANKING. PERSONNEL SECTION (2003) 185 CTR 492 (BORN). ITO V. TRUSTEES OF MAR AT HI MISSION (1982) 80 ITD 539 (BORN) FURTHER THE CONTENTION OF LD. AR WAS THAT THE ITO HAS WRON GLY CONSIDERED UNION OF INDIA V / S. ESCORTS LIMITED 199 ITR 43(SC) WHICH IS TOTALLY DISTINGUISHABLE AND DOES NOT REFER TO THE ISSUE OF DEPRECIATION AT ALL. HENCE THE SAID DECISION HAS NO APPLICABILITY TO THE ISSUE OF GRANT OF DEPRECIATION. THE LD. AR FURTHER SUBMITTED THAT I N ASSESSEES OW N CASE IN EARLIER YEARS , C.I.T.(A )/TRIBUNAL ALLOWED THE DEPRECIATION, AND THE MATTER STANDS, CONCLUDED. 5 . 5 WE HAVE HEARD BOTH THE PARTIES. JUDICIAL PRONOUNCEMENTS CITED AT BAR AND RELIED ON BY LOWER AUTHORITIES HAD ALSO BEEN DELIBERATED. THE LD. D R REL IED HEAVILY ON THE JUDGMENT OF HON BLE APEX COURT IN THE CASE OF UNION OF INDIA VS. ESCORTS LTD., 199 ITR 43, WHEREBY IT WAS HELD THAT DOUBLE DEDUCTION CANNOT BE ALLOWED. 5 . 6 ON THE OTHER HAND, LD. AR RELIED ON THE JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE MATTER OF CIT VS. INSTITUTE OF BANKING PERSONNEL SELECTION, 264 ITR 110 (BOM) . THE LD. AR ALSO REFERRED TO THE CASE OF DIT(E) VS. NAJAM BAUG TRUST, JUDGMENT DATED 14 - 2 - 2015, WHEREIN THE ITA NO S . 3421& 342 2 /1 5 6 HONBLE BOMBAY HIGH COURT HAS OPINED THAT NO FAULT CAN BE FOUND I N THE ORDER OF THE TRIBUNAL RELYING ON THE JUDGMENT OF THE HONBLE HIGH COURT IN THE CASE OF INSTITUTE OF BANKING PERSONAL SELECTION, 264 ITR 110. THUS, THE HONBLE HIGH COURT DID NOT EVEN ADMIT THE APPEAL. THE LD. AR FURTHER POINTED OUT THAT THE AMENDMENT IN CLAUSE 6 TO SECTION 11 OF THE INCOME TAX ACT, 1961 HAS BEEN BROUGHT INTO EFFECT FROM 1 - 4 - 201 5 AND PRIOR TO THAT DEPRECIATION IS TO BE ALLOWED. THE ASSESSEE ALSO PUT FORWARD FOLLOWING JUDGMENTS IN ITS FAVOUR : - I) CIT VS. MUNISUVARAT JAIN (1994) TAXLR 1084 (BOM) ; II) CIT VS. INSTITUTE OF BANKING (2003) 264 IT R 110 (BOM); III) CIT VS. PUBLIC WELFARE TRUST (1999) 240 ITR 513 (CAL); IV) CIT VS. BIRLA JANAHIT TRUST (1994) 208 ITR 372 (CAL); V) CIT VS. SETH MANILAL RANCHHODDAS VISHRAM BHAVAN TRUST (1992) 198 ITR 598 (GUJ); VI) CIT VS. SOCIETY OF SISTERS OF ST. ANNE (1984) 146 ITR 28 (KER); VII) CIT VS. ST. GEORGE FORANA CHURCH (1988) 170 62 (KER); AND VIII) CIT VS. RAO BAHADUR CALAVALA CHETTY CHARITIES (1982) 135 ITR 485 (MAD) 5 . 7 THE SOLE CONTENTION OF THE LD. DR IS THAT JURISDICTION IN THE CASE REPORTED IN 264 ITR 110 (BOM) WAS ACCEPTED BY THE DEPARTMENT IN VIEW OF THE LOW TAX INVOLVED. HE FURTHER RELIED ON DECISION OF KERALA HIGH COURT IN THE CASE OF LISSI MEDICAL INSTITUTION (SUPRA) AND DELHI HIGH COURT D ECISION IN THE CASE OF CHARANJIV CHARITABLE TRUST (SUPRA). THE LD. A R HAS FURTHER RELIED ON THE DECISION IN THE CASE OF DIT(E) VS. NAJAM B AUG TRUST (BOM) . 5 . 8 IT IS PERTINENT TO NOTE HERE THAT BY WAY OF AMENDMENT IN FINANCE ACT 2014 IN SECTION 11(6) OF TH E ACT, DEPRECIATION WILL NOT BE ALLOWED WHILE COMPUTING APPLICATION OF INCOME W.E.F.1 - 4 - 201 5 . THUS, THE AMENDED PROVISIONS ARE APPLICABLE W.E.F.A.Y.2015 - 2016. HOWEVER, THE SECTION DOES NOT MENTION ANYTHING FOR APPLICABILITY PRIOR TO A.Y.2015 - 16 CASES. SO ITA NO S . 3421& 342 2 /1 5 7 C ASES PRIOR TO A.Y.2015 - 2016 HAVE TO BE DECIDED AS PER THE LAW APPLICABLE DURING THAT PERIOD. RECENTLY HONBLE DELHI HIGH COURT IN THE CASE OF INDRAPRASTHA CANCER SOCIETY IN ITA NO. 240 OF 2014, ORDER DATED 18 - 11 - 2014 HELD AS UNDER WITH RESPECT TO APPLICATI ON OF AMENDED PROVISIONS OF LAW : - 1. BY FINANCE (NO. 2) ACT OF 2014, SUB - SECTION (6) TO SECTION 11 STANDS INSERTED WITH EFFECT FROM 1ST APRIL, 2015 TO THE EFFECT THAT WHERE ANY INCOME IS REQUIRED TO BE APPLIED, ACCUMULATED OR SET APART FOR APPLICATION, THEN FOR SUCH PURPOSES THE INCOME SHALL BE DETERMINED WITHOUT ANY DEDUCTION OR ALLOWANCE BY WAY OF DEPRECIATION OR OTHERWISE IN RESPECT OF AN ASSET, THE ACQUISITION OF WHICH HAS BEEN CLAIMED AS APPLICATION OF INCOME UNDER THIS SECTION IN THE SAME OR ANY OTHER PREVIOUS YEAR. THE LEGAL POSITION, THEREFORE, WOULD UNDERGO A CHANGE IN TERMS OF SECTION 11(6) , WHICH HAS BEEN INSERTED AND APPLICABLE WITH EFFECT F ROM 1ST APRIL, 2015 AND NOT TO THE ASSESSMENT YEARS IN QUESTION. THE NEWLY ENACTED SUB - SECTION RELATES TO APPLICATION OF INCOME. IN VIEW OF THE ABOVE AMENDED PROVISION, WHICH IS APPLICABLE W.E.F. ASSESSMENT YEAR 2015 - 2016, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR ALLOWING ASSESSEES CLAIM FOR DEPRECIATION RELYING ON THE DECISION OF JURISDICTIONAL HIGH COURT IN RESPECT OF ASSESSMENT YEARS FA L LING PRIOR TO 2015 - 2016. THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. INSTITUTE OF BANKING PERSONNEL (2003) 185 CTR 492 (BOM) IS SQUARELY APPLICABLE IN THIS CASE. 5 .9 IT IS PERTINENT TO MENTION HERE THAT IN THIS CASE H ONBLE DELHI HIGH COURT WHILE ALLOWING ASSESSEES CLAIM FOR DEPRECIATION HAS ALREADY BEEN DEALT WITH THE DE CISION OF HON BLE KERALA HIGH COURT IN THE CASE OF LISSIE MEDICAL INSTITUTIONS, 245 KLR 525 AS RELIED ON BY THE LD. DR. HONBLE HIGH COURT HAS FURTHER OBSERVED THAT DECISION OF HONBLE SUPREME COURT IN THE ITA NO S . 3421& 342 2 /1 5 8 CASE OF ESC ORTS LTD. (SUPRA) IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE AND OBSERVED AS UNDER : - '13. THE JUDGMENT OF THE SUPREME COURT IN ESCORTS LIMITED VS. UNION OF INDIA (SUPRA) HAS BEEN RIGHTLY HELD TO BE INAPPLICABLE TO THE PRESENT CASE. THERE ARE TWO REASONS AS TO WHY THE JUDGMENT CANNOT BE APPLIED TO THE PRESENT CASE. FIRSTLY, THE SUPREME COURT WAS NOT CONCERNED WITH THE CASE OF A CHARITABLE TRUST/INSTITUTION INVOLVING THE QUESTION AS TO WHETHER ITS INCOME SHOULD BE COMPUTED ON COMMERCIAL PRINCIPLES IN ORDER TO DETERMINE THE AMOUNT OF INCOM E AVAILABLE FOR APPLICATION TO CHARITABLE PURPOSES. IT WAS A CASE WHERE THE ASSESSEE WAS CARRYING ON BUSINESS AND THE STATUTORY COMPUTATION PROVISIONS OF CHAPTER IV - D OF THE ACT WERE APPLICABLE. IN THE PRESENT CASE, WE ARE NOT CONCERNED WITH THE APPLICABIL ITY OF THESE PROVISIONS. WE ARE CONCERNED ONLY WITH THE CONCEPT OF COMMERCIAL INCOME AS UNDERSTOOD FROM THE ACCOUNTING POINT OF VIEW. EVEN UNDER NORMAL COMMERCIAL ACCOUNTING PRINCIPLES, THERE IS AUTHORITY FOR THE PROPOSITION THAT DEPRECIATION IS A NECESSAR Y CHARGE IN COMPUTING THE NET INCOME. SECONDLY, THE SUPREME COURT WAS CONCERNED WITH THE CASE WHERE THE ASSESSEE HAD CLAIMED DEDUCTION OF THE COST OF THE ASSET UNDER SECTION 35(1) OF THE ACT, WHICH ALLOWE D DEDUCTION FOR CAPITAL EXPENDITURE INCURRED 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 OF DEPRECIATION IN RESPECT OF THE SAME ASSET. THE SUPREME COURT RULED THAT, UNDER GENERAL PRINCIPLES OF TAXATION, DOUBLE DEDUCTION IN REGARD TO THE SAME BUSINESS OUTGOING IS NOT INTENDED UNLESS CLEARLY EXPRESSED. THE PRESENT CASE IS N OT ONE OF THIS TYPE, AS RIGHTLY DISTINGUISHED BY THE CIT(APPEALS).' 5 .10 HONBLE KERALA HIGH COURT HAS ALSO DEALT WITH THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CHARANJIV CHARITABLE TRUST, ORDER DATED 18 - 3 - 2015 AS RELIED ON BY THE LD. DR AND OBSERVED THAT IT HAS NOT DISCUSSED EARLIER DECISION OF DELHI HIGH COURT IN THE CASE OF VISHWA JAGRATI MISSION, 262 CTR (DEL) 558 AND INDIAN TRADE PROMOTION ORGANISATION, ITA NO. 7/2013, BEING PRIOR IN POINT OF TIME WOULD ACT AS BINDING PRECEDENTS . IN VIEW OF THE ABOVE DISCUSSIONS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR ALLOWING ASSESSEES CLAIM FOR DEDUCTION OF INTEREST. G R OUND NOS. 1 & 2 OF THE APPEAL ARE DISMISSED. ITA NO S . 3421& 342 2 /1 5 9 6 . GROUND NOS.3, 4 & 5. THESE GROUNDS ARE ON THE SAME DISPUTE AND THUS WI LL BE DEALT IN SIMULTANEOUSLY. DURING THE YEAR, THE ASSESSEE HAS DEFICIT OF RS. 2,78,24,26,641/ - WHICH IT CARRIED FORWARD TO THE NEXT YEAR TO BE SET OFF AGAINST THE INCOME OF THE SUBSEQUENT YEARS. 6 .1 THE LD. AO HAS OBJECTED ABOVE ACTION OF THE ASSESSEE AND PASSED HIS ASSESSMENT ORDER MENTIONING THEREIN : - IT IS SEEN THAT THE ABOVE CLAIM IS PRESUMABLY BASED ON THE PROVISIONS UNDER SECTION 72 PROVIDED IN CHAPTER VI OF I. T. ACT, WHICH PROVIDES FOR 'CARRY FORWARD & SET OFF OF BUSINESS LOSSES' DEALING WITH BU SINESS INCOME. THE PROVISIONS OF SECTION 11, 12 AND 13 DEALING WITH INCOME OF CHARITABLE INSTITUTIONS ARE SILENT ABOUT ANY SUCH PROVISION AND DO NOT PROVIDE FOR THE CARRY FORWARD AND SET OFF OF LOSSES/EXCESS APPLICATION OF A PARTICULAR YEAR AGAINST THE INC OME OF SUBSEQUENT YEARS. IT IS SEEN THAT THE ASSESSEE IS PLACING THE RELIANCE ON THE RATIO OF HON'BLE MUMBAI HIGH COURT IN 264 I TR 110 INSTITUTE OF BANKING PERSONNEL VS C I T. IT IS FURTHER SEEN THAT IN THE AFORESAID RATIO, NO SLP WAS FILED BY THE DEPARTMENT ON THE GROUND OF LOW TAX EFFECT, NOT ON MERITS OF THE ISSUE. THEREFORE, THERE B E ING NO PROVISION FOR CARRY FORWAR D OF EXCESS APPLICATION AS LOSS U/S. 11 TO THE SUBSEQUENT YEARS, THE SAME IS DISALLOWED. 6 .2 AGGRIEVED WITH THE ORDER OF LD. AO THE ASSESSEE FILED APPEAL WITH THE LD. CIT(A). IN HIS ORDER, THE LD. CIT(A) ALLOWED THE APPEAL OF ASSESSEE. HE MENTIONED AS UNDER : - 6.2 I HAVE CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ASSESSMENT ORDER OF THE A.O AND THE SUBMISSIONS OF THE APPELLANT. T HE ISSUE OF EXCESS APPLICATION OF EARLIER YEARS TO BE CARRIED FORWARD IS DECIDED IN FAVOUR OF THE APPELLANT IN THE DECISION OF THE HIGHER JUDICIAL FORUMS AS REFERRED AND RELIED BY THE APPELLANT. THEREFORE, RESPECTFULLY FOLLOWING THE DECISIONS RELIED UPON B Y THE APPELLANT AND APPLICABLE UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, GROUND NOS. 3 AND 4 FOR BOTH THE YEARS I.E. A.YRS. 2010 - 11 AND 2011 - 12 ARE ALLOWED. HOWEVER, THE A. O IS DIRECTED TO VERIFY THE CLAIM OF C/F OF EARLIER YEAR DEFICITS AMOUNTING TO RS. RS.2, 01 ,37,85,581 / - UPTO A.Y. 2010 - 11 AND RS~ 2,78,24,26,641/ - UPTO A.Y. 2011 - 12, THAT SUCH AMOUNTS ARE PART OF 'EXCESS EXPENDITURE OF EARLIER YEARS', AND SUCH AMOUNTS ARE LIABLE TO BE CONSIDERED AS PART OF 'APPLICATION OF INCOME' IN THE RESPECTIVE YEA RS. IT MAY FURTHER BE VERIFIED THAT SUCH EXCESS EXPENDITURE OF EARLIER YEARS CLAIMED IS OUT OF INCOME OF THE RESPECTIVE YEARS. 6 .3 AGGRIEVED WITH THE ORDER OF LD. CIT(A) THE REVENUE FILED APPEAL WITH THIS BENCH. ITA NO S . 3421& 342 2 /1 5 10 6 .4 THE ASSESSEE SUBMITTED AS BELOW : - (I ) THE CARRY FORWARD OF THIS EXCESS APPLICATION AS DEFICIT/LOSS TO THE SUBSEQUENT YEARS IS REQUIRED TO BE IN COMPLIANCE WITH THE PROVISIONS FOR THE A CT. HENCE THE DEFICIT OF THE CURRENT YEAR IS TO BE ALLOWED TO BE CARRY FORWARD TO SUBSEQUENT YEARS. (II) I T IS SETTLED LAW THAT EXCESS OF EXPENDITURE IN EARLIER YEAR CAN BE ADJUSTED AGAINST INCOME OF SUBSEQUENT YEAR. SUCH ADJUSTMENT IS TO BE TREATED AS APPLICATION OF INCOME IN SUCH SUBSEQUENT YEAR FOR CHARITABLE PURPOSES. (III) THIS PROPOSITION IS LAID DOWN I N CIT V. SHRI PLOT SWETAMBER MURTI PUJAK JAIN MANDAL (1995) 211 ITR 293 (GUJ) CIT V. SHRI PLOT SWETAMBER MURTI PUJAK JAIN MANDA1 (1994) 119 CTR (GUJ) 144. CIT V. MAHARANA OF MEWAR CHARITABLE FOUNDATION (1987) 164 ITR 439 (RAJ) CIT V. MAHARANA OF MEWAR CHAR ITABLE FOUNDATION (1987) 60 CTR (RAJ) 40. (IV) HENCE THE DEFICIT AS PER COMPUTATION OF INCOME IS CORRECTLY SHOWN AT RS.2,782,426,641 / - . THE QUESTION OF DISALLOWANCE OF DEPRECIATION OF RS.23,25,84,521/ - DOES NOT ARISE AS IT IS AS PER COMMERCIAL PRINCIPLES AND BASED ON JUDICIAL PRONOUNCEMENT. THE CURRENT YEAR DEFICIT AND EARLIER YEARS DEFICIT SHOULD BE ALLOWED AS PER COMPUTATION OF INCOME. (V) THE ASSESSEE FURTHER SUBMITTED AS BELOW : - '1. THE IT O AT PAGE 6 OF HIS ORDER HAS CLEARLY MENTIONED THAT THERE IS NO SPECIFIC PROVISION FOR CARRY FORWARD OF LOSS AND THE DECISION OF INSTITUTE OF BANKING WAS NOT ACCEPTABLE TO THE DEPARTMENT BUT WAS NOT CHALLENGED BEFORE THE SUPREME COURT. 2. THE ITO(E)(L) WAS OF THE VIEW THAT CARRY FORWARD OF LOSS WOULD NOT BE ALLO WED IN VIEW OF THE FACT THAT 'THE PROVISIONS OF SECTION 11,12 & 13 DEALING WITH INCOME OF CHARITABLE INSTITUTIONS ARE SILENT ABOUT ANY SUCH PROVISION AND DO NOT PROVIDE FOR THE CARRY FORWARD AND SET OFF OF ITA NO S . 3421& 342 2 /1 5 11 LOSSES/EXCESS APPLICATION OF A PARTICULAR YEAR AGA INST THE INCOME OF SUBSEQUENT YEARS. IT IS SEEN THAT THE ASSESSEE IS PLACING THE RELIANCE ON THE RATIO OF HON'BLE MUMBAI HIGH COURT IN 264 ITR 110 INSTITUTE OF BANKING PERSONAL VIS. CIT. IT IS FURTHER SEEN THAT IN THE AFORESAID RATIO, NO SLP WAS FILED BY T HE DEPARTMENT ON THE GROUND OF LOW TAX EFFECT, NOT ON MERITS OF THE ISSUE. THEREFORE, THERE BEING NO PROVISION FOR CARRY FORWARD OF EXCESS APPLICATION AS LOSS/DEFICIT U/S. 11 TO THE SUBSEQUENT YEARS, THE SAME IS LIABLE TO BE DISALLOWED. ' 3. IT MAY BE N OTED THAT IDENTICAL QUESTIONS OF LAW WITH IDENTICAL ARGUMENT HAVE BEEN DIGESTED IN THE ORDER BY THE HIGH COURT OF BOMBAY IN DIRECTOR OF INCOME TAX (E) VIS. NAJAM BAUG TRUST, AND THERETO THE APPEAL OF THE DEPARTMENT WAS DISMISSED. 4. IN LIGHT OF THE ABOV E, THE ASSESSEE IS ENTITLED TO CLAIM CARRY FORWARD LOSS IN THE LIGHT OF THE DECISION OF INSTITUTION OF BANKING 264 ITR 110 (BOM) AND RECONFIRMED AND REAFFIRMED IN CASE OF DIT(E) V/S. NAJAM BAUG . 6 .5 THE LD. DR REITERATED THE ORDER OF LD. AO AND EMPHASIZE D THAT LOSS ON CHARITABLE ACTIVITIES CANNOT BE ALLOWED TO BE CARRIED FORWARD ON THE LINE OF COMMERCIAL ESTABLISHMENT U/S.72 OF THE ACT. 6 . 6 I HAVE CONSIDERED THE ARGUMENT PUT FORWARD BY BOTH THE PARTIES. THE ISSUE OF EXCESS APPLICATION OF INCOME OF EARLIE R YEARS TO BE CARRIED FORWARD IS DECIDED IN FAVOUR OF THE ASSESSEE IN THE DECISION OF HIGHER JUDICIAL FORUM AS REFERRED TO AND RELIED BY THE CIT(A) . THEREFORE, RESPECTFULLY FOLLOWING THE DECISION RELIED UPON BY THE CIT(A) AND APPLICABLE UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THESE GROUNDS OF THE REVENUE ARE DISMISSED. 7 . IN THE RESULT, BOTH APPEAL S OF THE DEPARTMENT ARE DISMISSED. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 30 /07 / 201 5 . SD/ - ( . . ) ( R.C.SHARMA ) / ACCOUNTANT MEMBER MUMBAI ; DATED 30 /07 /201 5 . . /PKM , . / PS ITA NO S . 3421& 342 2 /1 5 12 / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / T HE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY/
