ASSTT CIT (E) -I(1), MUMBAI V. COSMOPOLITAN EDUCATION SOCIETY, MUMBAI

ITA 3772/MUM/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 101121 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2015
• Appeal Filed By: Department
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 18-06-2015
• Court: TRIBUNAL
• Department Lawyers: NEELIMA V NADKARNI
• Assessee Lawyers: V G SHINDE
• Keywords: Depreciation; Charitable institution; Revised return; Capital expenditure
• Section: 12A; 32; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER I.T.A. NO. 3772/M/2015 (AY:2010 - 2011 ) I.T.A. NO. 3 773 /M/2015 (AY: 2011 - 201 2 ) ACIT(E) - 1(1), R.NO.506, 5 TH FLOOR, PIRAMAL CHAMBER, LALBAUG, MUMBAI 400 012. / VS. COSMOPOLITAN EDUCATION SOCIETY, D.N. NAGAR, LINK ROAD, ANDHERI (E), MUMBAI 400001. ./ PAN : AAATC1726F ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : MS. NEELIMA V. NADKARNI, DR / RESPONDENT BY : SHRI V.G. SHINDE / DATE OF HEARING : 27.8 .2015 / DATE OF PRONOUNCEMENT : 23 .9 .2015 / O R D E R PER D. KARUNAKARA RAO, AM: THERE ARE TWO APPEALS UNDER CONSIDERATION INVOLVING THE AYS 2010 - 11 AND 2011 - 12. BOTH THESE APPEALS ARE FILED BY THE REVENUE AGAINST THE COMMON ORDER OF THE CIT (A) - 7, MUMBAI DATED 13.3.2015. SINCE, THE REVENUE RAISED THE IDENTICAL ISSUES IN BOTH THESE APPEALS, THEREF ORE, FOR THE SAKE OF CONVENIENCE, THEY ARE CLUBBED, HEARD COMBINEDLY AND DISPOSED OF IN THIS CONSOLIDATED ORDER. APPEAL WISE ADJUDICATION IS GIVEN IN THE FOLLOWING PARAGRAPHS OF THIS ORDER. ITA NO. 3772/M/2015 (AY 2010 - 2011) 2. THIS APPEAL FILED BY THE REVENUE ON 18.6.2015 IS AGAINST THE SAID ORDER OF THE CIT (A) - 7, MUMBAI DATED 13.3.2015. IN THIS APPEAL, REVENUE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. WHETHER ON THE FACTS OF THE CASE AND IN LAW, THE CIT (A) ERRED IN ALLOWING THE APPEAL OF THE ASSESSEE ON ACCOUNT OF DISALLOWING DEPRECIATION ON FIXED ASSETS OF RS. 1,14,71,022/ - 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, 1961 PROVIDES FOR DEDUCTION OF CAP ITAL EXPENDITURE INCURRED ON ASSETS ACQUIRED FOR THE OBJECTS OF THE TRUST AS APPLICATION AND DOES NOT SPECIFICALLY 2 AND EXPRESSLY PROVIDE FOR DOUBLE DEDUCTION ON ACCOUNT OF DEPRECIATION ON THE SAME VERY ASSETS ACQUIRED FROM SUCH CAPITAL EXPENDITURE, NO DEDU CTION 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 CIRCUMSTANCES OF CASE AND IN LAW, THE LD CIT (A) ERRED IN ALLOWING THE APPEAL, W HEN 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 ISSUE IN FAVOUR OF THE DEPARTMENT AFTER CONSIDERING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ESCORTS LTD (199 ITR 43). 3. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE , WHO IS AN EDUCATIONAL INSTITUTION, FILED THE RETURN OF INCOME DECLARING THE TOTAL RECEIPTS OF RS. 7,61,71,555/ - WHICH INCLUDES GRANTS FRO M GOVERNMENT WORTH RS. 3,42,93,958/ - . IN THE RETURN OF INCOME, ASSESSEE CLAIMED TOTAL EXPENDITURE ON OBJECTS OF RS. 7,68,00,473/ - WHICH INCLUDES CLAIM OF DEPRECIATION OF RS. 30,08,625/ - AND AMOUNT TRANSFERRED TO STATUTORY FUND OF RS. 1,20,00,000/ - . IN TH E REVISED RETURN , ASSESSEE CLAIMED FURTHER DEPRECIATION OF RS. 75,62,757/ - IN ADDITION TO THE EARLIER DEPRECIATION. IN THIS REGARD, ASSESSEE WAS ASKED TO EXPLAIN THE SAME. NOT SATISFIED WITH THE EXPLANATION AND SUBMISSIONS OF THE ASSESSEE AO PROCEEDED TO MAKE A DISALLOWANCE OF RS. 1,14,71,022/ - (IE RS. 39,08,265/ - + RS. 75,62,757/ - ) AND HELD THAT THE ASSESSEES CLAIM OF DEPRECIATION AMOUNTS TO DOUBLE DEDUCTION WHICH IS NOT ALLOWABLE AS PER THE RATIO LAID DOWN THE JUDGMENT OF THE APEX COURT IN THE CASE OF E SCORTS LTD VS. UNION OF INDIA (199 ITR 43). ACCORDINGLY, AO DETERMINED THE ASSESSED INCOME AT RS. 38,53,614/ - . AGGRIEVED WITH THE SAID DECISION OF THE AO, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 4. DURING THE PROCEEDI NGS BEFORE THE FIRST APPELLATE AUTHORITY, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, CIT (A) DELETED THE DISALLOWANCE OF DEPRECIATION OF RS. 1,14,71,022/ - AND HELD THAT THE SAID JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF ESCORTS LTD (SUPRA) IS NOT APPLICABLE TO A CHARITABLE ORGANIZATION AS IT PERTAINS TO CLAIM OF DEPRECIATION UNDER ANOTHER SECTION OF THE ACT WHEN OR MORE DEPRECIATION HAD ALREADY BEEN PROVIDED U/S 35 OF THE ACT . AGGRIEVED WITH THE DECISION OF THE CIT (A), REVENUE IS I N APPEAL BEFORE THE TRIBUNAL BY RAISING THE ABOVE MENTIONED GROUNDS. 5. DURING THE PROCEEDINGS BEFORE THE TRIBUNAL , LD COUNSEL FOR THE ASSESSEE HEAVILY RELIED ON THE ORDER OF THE CIT (A) AND REITERATED SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. 3 6. ON THE OTHER HAND, LD DR FOR THE REVENUE RELIED ON THE ORDER OF THE AO. 7. I HAVE HEARD LD REPRESENTATIVES OF BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE RE LEVANT MATERIAL PLACED ON RECORD . ON PERUSAL OF THE ORDER OF TH E CIT (A) IN GENERAL AND PARAS FROM 3.2 TO 3.4 IN PARTICULAR , I FIND THE SAME ARE RELEVANT IN THIS REGARD. CONSIDERING THE IMPORTANCE OF THE SAID PARAS 3.2 AND 3.4 OF THE IMPUGNED ORDER, THE SAME ARE EXTRACTED AS UNDER: 3.2. I HAVE CONSIDERED THE ABOVE S UBMISSIONS OF THE APPELLANT AS WELL AS THE FACTS OF THE CASE. I HAVE ALSO GONE THROUGH THE DOCUMENTS FILED BY THE APPELLANT IN THIS REGARD. FROM THE RECORDS OF THE CASE, IT IS EVIDENT THAT THE AO RELIED ON THE JUDGMENT OF HONBLE SUPREME COURT IN THE CAS E OF ESCORTS LTD VS. UOI, 199 ITR 43 AND CONCLUDED THAT THE SAME WILL PREVAIL, WHICH SPECIFICALLY LAID DOWN THE LAW THAT IN NO CIRCUMSTANCES THE BENEFIT OF DOUBLE DEDUCTION CAN BE CLAIMED AND ALLOWED. IT IS SEEN THAT THE ISSUE UNDER CONSIDERATION IS COVER ED IN FAVOUR OF THE APPELLANT AND IT HAS BEEN HELD BY VARIOUS COURTS THAT DEPRECIATION IS TO BE ALLOWED EVEN IF THE ENTIRE COST OF THE ASSET WAS TREATED AS APPLICATION / EXPENDITURE IN THE YEAR OF PURCHASE . ....... ....... 3.3. THE DECISION OF THE HONBL E SUPREME COURT IN THE CASE OF ESCORTS LTD (SUPRA) WILL NOT APPLY TO A CHARITABLE ORGANIZATION AS IT PERTAINS TO CLAIM OF DEPRECIATION UNDER ANOTHER SECTION OF THE ACT WHEN 100% OR MORE DEPRECIATION HAD ALREADY BEEN PROVIDED U/S 35. THE HONBLE SUPREME COURT IN THAT CASE WAS DEALING WITH A CASE RELATING TO TWO DEDUCTIONS BOTH UNDER SECTIONS 10 (2)(VI) AND 10(2)(XIV) OF THE 1922 ACT OR BOTH UNDER SECTION 32(1)(II) AND 35(1)(IV) OF THE ACT. THE ASSESSEE THEREIN HAD INCURRED EXPENDITUR E OF A CAPITAL NATURE ON SCIENTIFIC RESEARCH RELATING TO THE BUSINESS WHICH RESULTED INTO ACQUISITION OF AN ASSET. THE ASSESSEE HAD SOUGHT TO CLAIM A SPECIFIC PERCENTAGE OF THE WRITTEN DOWN VALUE OF THE ASSET AS DEPRECIATION AND AT THE SAME TIME CLAIMED D EDUCTION, IN FIVE CONSECUTIVE YEARS OF THE EXPENDITURE INCURRED ON THE ACQUISITION OF THE ASSET. THE JUDGMENT OF THE HONBLE SUPREME COURT IN ESCORTS LTD IS THUS DISTINGUISHABLE FOR THE ABOVE REASONS. MOREOVER, THE SUPREME COURT DECISION HAS BEEN DISTING UISHED INTER ALIA BY THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF MARKET COMMITTEE PIPLI AND TINY TOTS EDUCATION SOCIETY (BOTH SUPRA) AS WELL AS MUMBAI AND CHENNAI TRIBUNALS IN THE CASES LISTED ABOVE. 3.4. FURTHER, HONBLE BOMBAY HIGH COURT IN THE CASE OF DIT (E) VS. FRAMJEE CAWASJEE INSTITUTE (SUPRA), HAS HELD THAT EVEN IF THE AMOUNT SPENT ON ACQUIRING DEPRECIABLE ASSET WAS TREATED AS APPLICATION OF INCOME OF THE TRUST IN THE YEAR OF ACQUISITION, DEPRECIATION WOULD STILL BE ALLOWABLE IN SUBSEQUENT YEARS . THIS DECISION OF THE HONBLE BOMBAY HIGH COURT WAS FOLLOWED IN CIT VS. INSTITUTE OF BANKING PERSONNEL SELECTION (SUPRA) AND CIT VS. SANJEEVAN VIDYALAYA TRUST (SUPRA). HENCE, I DIRECT THE AO TO DELETE THE DISALLOWANCE OF DEPRECIATION OF RS. 1,14,71,022/ - IN AY 2010 - 2011 AND RS. 68,89,365/ - IN AY 2011 - 2012. 8. F ROM ABOVE, IT IS VERY CLEAR THAT THE JUDGMENT OF APEX COURT IN THE CASE OF ESCORTS LTD (SUPRA) RELIED ON BY THE AO WHILE MAKING THE DISALLOWANCE IS NOT APPLICABLE TO A CHARITABLE ORGANIZATION , LIKE THE ASSESSEE IN THE PRESENT CASE WHICH IS REGISTERED U/S 12A OF THE ACT, SINCE IT PERTAINS TO THE CLAIM OF DEPRECIATION UNDER THE PROVISIONS OF SECTION 35 OF THE ACT . FURTHER, AS PER THE PROPOSITION LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF DIT (E) VS. FRAMJEE CAWASJEE INSTITUTE (SUPRA) EXPENDITURE ON ACQUISITION OF DEPRECIABLE ASSET WAS TREATED AS APPLICATION OF INCOME OF THE TRUST IN THE YEA R OF ACQUISITION, DEPRECIATION IS ALLOWABLE IN SUBSEQUENT YEARS . T H E S A I D J U D G M E N T I S B I N D I N G O N T H E M U M B A I B E N C H E S O F T H E T R I B U N A L . CONSIDERING THE ABOVE PROPOSITIONS, IN MY OPINION, CIT (A) HAS RIGHTLY ADJUDICATED THE ISSUE AND DELETED THE DISALLOWANCE MADE BY THE AO. IN 4 MY CONSIDERED OPINION, THE DECISION TAKEN BY THE CIT (A) IN ALLOWING THE ASSESSEES APPEAL IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 9. REGARDING THE APPEAL ITA NO.3773/M/2015 (AY 2011 - 2012), THE REVENUE HAS RAISED THE ID ENTICAL GROUNDS TO THAT OF THE ONES ADJUDICATED BY ME WHILE ADJUDICATING THE APPEAL FOR THE AY 2010 - 2011. CONSIDERING THE COMMONALITY OF THE ISSUE S RAISED IN THE INSTANT APPEAL, MY DECISION GIVEN ON THE REVENUES APPEAL FOR THE AY 2010 - 11, IN THE ABOVE PA RAGRAPHS OF THIS ORDER, SQUARELY APPLIES TO THE PRESENT APPEAL TOO. CONSIDERING THE SAME, GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 10. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 2 3 R D SE PTEMBER, 2015. S D / - (D. KARUNAKARA RAO) ACCOUNTANT MEMBER MUMBAI ; 2 3 . 9 .2015 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI