BREACH CANDY HOSPITAL TRUST, MUMBAI V. ACIT (E) - 1(1), MUMBAI

ITA 3698/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 3437 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 28-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAMATHA MULLAMUDI
• Assessee Lawyers: SHYAM SUNDER SHARMA
• Keywords: Capital asset; Depreciation; Charitable institution
• Section: 12A; 264; 32; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI BEFORE S/SHRI SAKTIJIT DEY, JUDICIAL MEMBER & MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER ITA NO.3698/MUM/2018 ASSESSMENT YEAR 2012-13 BREACH CANDY HOSPITAL TRUST, 60A, BHULABHAI DESAI ROAD, MUMBAI 400 012. PAN AAATB0214D VS. ACIT (E) - 1(1), MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI KETAN VED & SHRI SHYAM SUNDER SHARMA RESPONDENT BY : MS SAMATHA MULLAMUDI DATE OF HEARING : 0 1 . 1 0.201 9 DATE OF PRONOUNCEMENT : 11 . 10 .2019 O R D E R PER SAKTIJIT DEY, JUDICIAL MEMBER: THIS IS AN APPEAL BY THE ASSESSEE AGAINST ORDER, D ATED 05.03.2018, OF LEARNED CIT(A)-3, MUMBAI, FOR THE A.Y. 2012-13. 2. GROUND NOS. 1 TO 3 ARE ON THE ISSUE OF CLAIM OF DEPRECIATION OF RS. 8,14,49,109/-. 3. BRIEFLY, THE FACTS ARE THE ASSESSEE IS A TRUST A ND REGISTERED AS A CHARITABLE ORGANIZATION WITH THE DIRECTOR OF INCOME TAX (EXEMPTIONS), MUMBAI, U/S. 12A OF THE ACT. IT IS ALSO REGISTERED WITH CHARITY COMMISSIONER, MUMBAI. BASICALLY, THE ASSESSEE IS MAINTAINING AND RUNNING A HOSPITAL FOR ITA NO.3698/MUM/2018 BREACH CANDY HOSPITAL TRUST 2 TREATMENT OF DISEASES TO PERSONS OF ALL COMMUNITIES . FOR THE ASSESSMENT YEAR UNDER DISPUTE, ASSESSEE FILED ITS RETURN OF IN COME ON 28.09.2012 DECLARING NIL INCOME AFTER CLAIMING EXEMPTION U/S . 11 OF THE ACT. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER, WHIL E VERIFYING THE RETURN OF INCOME AS WELL AS FINANCIAL STATEMENTS OF THE ASSES SEE NOTICED THAT THOUGH THE ASSESSEE HAD CLAIMED EXEMPTION IN RESPECT OF AN AMOUNT OF RS. 8,14,49,109/- SPENT ON ACQUIRING CAPITAL ASSETS BY TREATING IT AS APPLICATION OF FUNDS, STILL, IT HAS DEBITED AN AMOU NT OF RS. 8,14,49,109/- TO THE INCOME AND EXPENDITURE ACCOUNT TOWARDS CLAIM OF DEPRECIATION ON THE VERY SAME ASSETS. THIS, ACCORDING TO THE ASSESSING OFFICER, WOULD RESULT IN DOUBLE BENEFIT. HE, THEREFORE, CALLED UPON THE ASS ESSEE TO JUSTIFY THE CLAIM OF DEPRECIATION. IN RESPONSE, ASSESSEE SUBMITTED THAT DEPRECATION HAS TO BE TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE T RUST, ALTHOUGH, THE AMOUNT SPENT IN ACQUIRING THE ASSETS HAD BEEN TREAT ED AS APPLICATION OF INCOME OF TRUST IN THE YEAR IN WHICH ASSETS WERE AC QUIRED. THE ASSESSING OFFICER, HOWEVER, DID NOT FIND MERIT IN THE SUBMISS IONS OF THE ASSESSEE. RELYING ON THE DECISION OF THE HONBLE SUPREME COUR T IN THE CASE OF ESCORTS LTD. VS. UNION OF INDIA 199 ITR 43, HE HELD THAT ON CE THE AMOUNT OF RS. 8,14,49,109/- WAS ALLOWED AS EXEMPT U/S 11 OF THE A CT ON ACCOUNT OF APPLICATION OF INCOME IN THE YEAR IN WHICH THE ASSE TS WERE ACQUIRED, THE ASSESSEE WOULD NOT BE ELIGIBLE FOR DEPRECIATION ON SUCH ASSETS. WHILE DOING SO, HE OBSERVED THAT THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE ITA NO.3698/MUM/2018 BREACH CANDY HOSPITAL TRUST 3 OF CIT VS. INSTITUTE OF BANKING PERSONNEL SELECTION (2003) 264 ITR 110, WOULD NOT BE APPLICABLE AS IT HAS NOT TAKEN NOTE OF THE R ATIO LAID DOWN IN THE CASE OF ESCORTS LTD. (SUPRA). ACCORDINGLY, HE DISALLOWED A SSESSEES CLAIM OF DEPRECIATION. BEING AGGRIEVED, ASSESSEE CHALLENGED THE DISALLOWANCE BEFORE LEARNED CIT(A). 4. AFTER TAKING NOTE OF THE DECISION OF HONBLE SUP REME COURT IN THE CASE OF CIT VS. RAJASTHAN & GUJARATI CHARITABLE FOUNDATI ON POONA (2019) 89 TAXMANN.COM 127, THOUGH, LEARNED CIT(A) HELD THAT T HE ASSESSEE IS ENTITLED TO CLAIM DEPRECIATION HOWEVER, HE DIRECTED THE ASSE SSING OFFICER TO ALLOW THE SAME AS PER THE PROVISIONS OF SECTION 32 OF THE ACT . BEING AGGRIEVED WITH THE AFORESAID DIRECTION OF LEARNED CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 5. LEARNED AR SUBMITTED, THOUGH, LEARNED CIT(A) WAS CORRECT IN ALLOWING ASSESSEES CLAIM OF DEPRECIATION HOWEVER, THE PROVI SIONS OF SECTION 32 OF THE ACT IS NOT APPLICABLE TO THE ASSESSEE TRUST. FURTH ER, HE SUBMITTED, WHILE DECIDING ASSESSEES APPLICATION U/S. 154 OF THE ACT IN THIS REGARD, LEARNED CIT(A) HAS AGAIN MADE A MISTAKE BY DIRECTING THE AS SESSING OFFICER TO ALLOW DEPRECIATION AS PER SECTION 11 OF THE ACT. THE LEA RNED AR SUBMITTED IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CAS E OF CIT VS. RAJASTHAN & GUJARATI CHARITABLE FOUNDATION POONA (SUPRA), THE I SSUE STANDS SQUARELY SETTLED IN FAVOUR OF THE ASSESSEE AND WHILE COMPUTI NG INCOME THE ASSESSEE IS ITA NO.3698/MUM/2018 BREACH CANDY HOSPITAL TRUST 4 ELIGIBLE TO CLAIM DEPRECIATION. THUS, THE ASSESSEE HAVING CLAMED SUCH DEPRECIATION IN THE INCOME AND EXPENDITURE ACCOUNT, IT IS ALLOWABLE. 6. THE LEARNED DR RELIED UPON THE OBSERVATIONS OF L EARNED CIT(A). 7. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE HAVE ALSO APPLIED OUR MIND TO THE DECIS IONS RELIED UPON. AT THE OUTSET, WE MUST OBSERVE, THE FACT THAT THE ASSESSEE IS ENTITLED TO CLAIM DEPRECIATION IS NOT IN DISPUTE AS LEARNED CIT(A) HA S ACCEPTED ASSESSEES CLAIM AND THE REVENUE HAS NOT CONTESTED THE AFORESAID DEC ISION OF LEARNED CIT(A). BE THAT AS IT MAY, THE SHORT ISSUE BEFORE US IS, WH ETHER THE ASSESSEE IS ENTITLED TO CLAIM DEPRECIATION ON THE ASSETS, THE E XPENDITURE INCURRED IN RESPECT OF WHICH HAS ALREADY BEEN ALLOWED AS APPLIC ATION OF INCOME U/S. 11 OF THE ACT IN THE YEAR OF ACQUISITION OF ASSETS. IN T HE CASE OF CIT VS. INSTITUTE OF BANKING PERSONNEL SELECTION (SUPRA), THE HONBLE JU RISDICTIONAL HIGH COURT HELD THAT THOUGH A CHARITABLE TRUST MAY NOT BE CARR YING ON ANY BUSINESS AND THE ASSETS IN RESPECT WHEREOF DEPRECIATION IS CLAIM ED MAY NOT BE BUSINESS ASSETS, HOWEVER, THE INCOME OF THE TRUST HAS TO BE COMPUTED U/S. 11 ON COMMERCIAL PRINCIPLES AFTER PROVIDING FOR ALLOWANCE FOR NORMAL DEPRECIATION AND DEDUCTION THEREOF FROM GROSS INCOME OF THE TRUS T. FURTHER, IN THE CASE OF DIRECTOR OF INCOME-TAX (EXEMPTION) VS. FRAMJEE CAWA SJEE INSTITUTE (1993) 109 CTR 463, THE HONBLE JURISDICTIONAL HIGH COURT APPROVED THE VIEW OF THE TRIBUNAL IN HOLDING THAT, THOUGH, EXPENDITURE INCUR RED IN ACQUIRING THE ASSETS ITA NO.3698/MUM/2018 BREACH CANDY HOSPITAL TRUST 5 WAS ALLOWED AS APPLICATION OF INCOME U/S. 11(1)(A) OF THE ACT IN THE YEAR OF ACQUISITION, HOWEVER, DEPRECIATION IN RESPECT OF TH OSE ASSETS WHILE COMPUTING INCOME IN SUBSEQUENT YEARS HAVE TO BE ALLOWED. THE AFORESAID DECISIONS OF THE HONBLE JURISDICTIONAL HIGH COURT NOW STAND APP ROVED BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. RAJASTHAN AND GUJARATI CHARITABLE FOUNDATION POONA (SUPRA). THUS, AS PER THE RATIO L AID DOWN IN THE DECISIONS REFERRED TO ABOVE, NORMAL DEPRECIATION CAN BE CONSI DERED AS A LEGITIMATE DEDUCTION IN COMPUTING THE REAL INCOME OF THE TRUST ON GENERAL PRINCIPLES OR U/S. 11(1)(A) OF THE ACT. WHILE CONCLUDING SO, THE HONBLE COURT NEGATED REVENUES CONTENTION THAT SECTION 32 IS THE ONLY PR OVISION UNDER WHICH DEPRECIATION CAN BE GRANTED. WE MAY HASTEN TO ADD, THE AFORESAID LEGAL POSITION STANDS SUBSTANTIALLY ALTERED AFTER INTRODU CTION OF SUB SECTION (6) TO SECTION 11 OF THE ACT BY FINANCE (NO.2) ACT, 2014, W.E.F. 1.4.2015, WHEREIN ALLOWANCE OF DEDUCTION ON ACCOUNT OF DEPRECIATION O R OTHERWISE HAS BEEN SPECIFICALLY PROHIBITED. HOWEVER, THIS AMENDMENT B EING PROSPECTIVE WOULD NOT BE APPLICABLE TO THE IMPUGNED ASSESSMENT YEAR. IN VIEW OF THE AFORESAID, ASSESSEES CLAIM OF DEPRECIATION STANDS ALLOWED. C ONSEQUENTLY, GROUNDS ARE ALLOWED. 8. IN VIEW OF OUR DECISION IN THE AFORESAID GROUNDS , GROUND NOS. 4 AND 5 HAVE BECOME CONSEQUENTIAL REQUIRING NO FURTHER ADJU DICATION ITA NO.3698/MUM/2018 BREACH CANDY HOSPITAL TRUST 6 9. IN THE RESULT, THE APPEAL IS ALLOWED AS INDICAT ED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 11 TH DAY OF OCTOBER, 2019. SD/- SD/- (MANOJ KUMAR AGGARWAL) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDI CIAL MEMBER MUMBAI; DATED : 11 TH OCTOBER, 2019. SA COPY OF THE ORDER FORWARDED TO : 1. THE APP E L L ANT. 2. THE RESPONDENT. 3. T HE CIT(A), MUMBAI. 4. THE CIT 5. DR, B BENCH, ITAT, MUMBAI BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, MUMBAI