ITO (E)1(1), MUMBAI V. BURHANI QARDAN HASAN TRUST, MUMBAI

ITA 3810/MUM/2015

• Counselvise Citation: 381019914 RSA 2015
• Duration Of Justice: 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 22-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K RAVIKIRAN
• Keywords: Depreciation; Charitable institution; Earning of tax free income; Capital expenditure
• Section: 12A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ' SMC ' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT ITA NO. 3810/MUM/2015 (ASSESSMENT YEAR: 2010 - 11 ) INCOME TAX OFFICER VS. BURHANI QARDAN HASAN A TRUST (EXEMPTION ) - 1(1) 5TH FLOOR, ROOM NO. 508 PIRMAL CHAMBERS, LALBAUG MUMBAI 400012 3RD FLOOR, AMATULLAH MAMZIL 65, BAZARGATE STREET, FORT MUMBAI 400001 PAN - AAATB0459J APPELLANT RESPONDENT APPELLANT BY: SHRI K. RAVIKIRAN RESPONDENT BY: NONE DATE OF HEARING: 05.10. 2015 DATE OF PRONOUNCEMENT: 05 . 10 .2015 O R D E R PER D. MANMOHAN, V.P. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) - 7, MUMBAI AND IT PERTAINS TO A.Y. 2010 - 11. 2. FOLLOWING GROUNDS WERE URGED BEFORE THE TRIBUNAL: - 1. WHETHER ON THE FACTS OF THE CASE AND IN LAW THE LD.CIT(A) ERRED IN ALLOWING THE APPEAL OF THE ASSESSEE ON ACCOUNT OF DISALLOWING DEPRECIATION ON FIXED ASSETS OF RS.22,24,298/ - 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 PROVIDES FOR DEDUCTION CAPITAL EXPENDITURE INCURRED ON ASSETS ACQUIRED FOR THE OBJECTS OF THE TRUST AS APPLICATION AND DOES NOT SPECIFICALLY & EXPRESSLY PROV IDE FOR DOUBLE DEDUCTION ON ACCOUNT OF DEPRECIATION ON THE SAME VERY 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 AMOUNTS TO CLAIMING A DOUBLE DED UCTION. 2. WHETHER, ON THE FACTS AND IN THE CIRCUMSTAN CES OF THE CASE AND IN LAW THE L D CIT(A) ERRED IN ALLOWING THE ITA NO. 3810/MUM/2015 INCOME TAX OFFICER 2 APPEAL, WHEN THE DELHI HIGH COURT IN THE CASE OF CHARANJIV CHARITABLE TRUST AND K ERALA HIGH COURT IN THE CASE 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 OF THE CASE AND IN LA W THE L D. CIT(A) ERRED IN ALLOWING THE CARRY FORWARD OF DEFICIT OF RS.48,62,100/ - AND ALLOWING SET OFF AGAINST THE INCOME OF THE SUBSEQUENT YEARS, ALLOWING THE DEFICIT WILL TANTAMOUNT TO DOUBLE DEDUCTION ON ACCOUNT OF EXPENDITURE OUT OF EXEMPT INCOME. 4. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN ALLOWING TO CARRY FORWARD OF DEFICIT ON ACCOUNT OF EXCESS EXPENDITURE WITHOUT APPRECIATING THE FACT THAT THIS WOULD HAVE THE EFFECT OF GRANTING DOUBLE BENEFIT TO THE ASSESSEE, FIRST AS 'ACCUMULATION' OF INCOME U/S.11(1)(A) OR AS CORPUS DONATION U/S.11(1)(D) IN EARLIER YEARS/CURRENT YEAR AND THEN AS 'APPLICATION' OF INCOME U1S.11(1)(A) IN THE SUBSEQUENT YEARS WHICH WAS LEGALLY NOT PERMISSIBLE.? 5. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN ALLOWING THE CLAIM OF THE ASSESSEE FOR CARRY FORWARD OF THE SAID DEFICIT, IGNORING THE FACT THAT THERE WAS NO EXPRESS PROVISION IN THE I T ACT, 1961 PERMITTING ALLOWANCE OF SUCH CLAIM.' 3. NONE APPEARED ON BEHALF OF THE ASSESSEE THOUGH NOTICE WAS SERVED BY RPAD. I THEREFORE PROCEED TO DISPOSE OF THE APPEAL EXPARTE, QUA THE ASSESSEE. 4. ASSESSEE IS ADMITTEDLY A CHARITABLE TRUST WITH THE MAIN OBJECT OF PROVIDING INTEREST FREE LOANS TO THOSE DESERVING AND TO PROVIDE RELIEF TO THE POOR. ASSESSEE IS REGISTERED UNDER SECTION 12A OF THE ACT AS A CHARITABLE SOCIETY. FOR THE YEAR UNDER CONSIDERATION ASSESSEE DECLARED DEFICIT OF ` 48,62,100/ - FOR CLAIMING EXEM PTION UNDER SECTION 11 OF THE ACT. IT HAS ALSO FILED, ALONG WITH ITS RETURN, INCOME & EXPENDITURE ACCOUNT, BALANCE SHEET AND AUDIT REPORT IN FORM NO. 10B. WHEN THE CASE WAS TAKEN UP FOR SCRUTINY THE AO NOTICED THAT THE ASSESSEE CLAIMED DEPRECIATION OF ` 22, 24,298/ - ON FIXED ASSETS. THE EXPENDITURE ITA NO. 3810/MUM/2015 INCOME TAX OFFICER 3 INCURRED ON ACQUIRING THESE ASSETS HAS ALREADY BEEN CLAIMED AS APPLICATION OF INCOME IN THE EARLIER YEARS. ACCORDING TO THE AO, CLAIMING DEPRECIATION ON FIXED ASSETS WOULD AMOUNT TO CLAIM OF DOUBLE DEDUCTION, WHICH IS NOT PERMISSIBLE IN THE LIGHT OF THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF ESCORTS LTD. VS. UOI 199 ITR 43 AND ACCORDINGLY THE CLAIM OF DEPRECIATION WAS REJECTED. 5. IT WAS ALSO NOTICED THAT THE ASSESSEE CLAIMED BENEFIT OF CARRY FORWA RD OF DEFICIT. IN THIS REGARD THE AO OBSERVED THAT THE DEFICIT ARISES ON ACCOUNT OF EXCESS EXPENDITURE OVER THE REVENUE AND IN SUCH A SITUATION ONE HAS TO EXPLAIN AS TO WHAT IS THE SOURCE OF EXCESSIVE EXPENDITURE OVER THE REVENUE GENERATED. NATURALLY SUCH FUNDS CAN COME FROM THREE SOURCES, I.E. WHEN CORPUS FUNDS ARE UTILISED, ACCUMULATIONS ARE UTILISED OR LOAN RAISED. IN THE INSTANT CASE NO LOAN WAS RAISED. ON CORPUS FUNDS AND ACCUMULATIONS THE ASSESSEE HAS ENJOYED EXEMPTION AND HENCE PERMITTING CARRY FORWA RD WILL AMOUNT TO DOUBLE DEDUCTION, WHICH IS CONTRARY TO LAW. HERE ALSO THE AO RELIED UPON THE DECISION OF THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE AKHEY RAM ISHWARI PRASAD TRUST VS. CIT 130 TAXMAN 827. ACCORDINGLY HE DISALLOWED THE CLAIM OF BENEFIT OF CARRY FORWARD. 6. ON AN APPEAL FILED BY THE ASSESSEE THE LEARNED CIT(A) FOLLOWED THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. INSTITUTE OF BANKING 264 ITR 110 TO HOLD THAT THE CLAIM OF DEPRECIATION AS WELL AS CARRY FORWARD BENEFIT WOU LD NOT AMOUNT TO CLAIM OF DOUBLE DEDUCTION AND ACCORDINGLY DECIDED THE MATTER IN FAVOUR OF THE ASSESSEE. 7. AGGRIEVED, REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. AT THE TIME OF HEARING THE LEARNED D.R. ADMITTED THAT THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF ESCORTS LTD. (SUPRA) IS NOT DIRECTLY ON THE ISSUE ON HAND WHEREAS THE HON'BLE BOMBAY HIGH COURT HAS CONSIDERED THIS ISSUE AND HELD THAT WHILE PURCHASING THE ASSET IT WOULD AMOUNT TO APPLICATION OF INCOME FOR CHARITABLE PURPOSES BUT AT ITA NO. 3810/MUM/2015 INCOME TAX OFFICER 4 THE SAME TIME STATUTORY DEDUCTION IS ALLOWABLE ON THE ASSETS SO PURCHASED WHICH WOULD NOT AMOUNT TO DOUBLE DEDUCTION. IN FACT IN ASSESSEES OWN CASE FOR EARLIER YEAR THE CIT(A) ALLOWED THE PLEA OF THE ASSESSEE WHICH WAS ALSO TAKEN ON RECORD BY THE LEARNED CIT(A). HOWEVER, THE LEARNED D.R. RELIED UPON THE VIEW TAKEN BY THE AO. 8. HAVING REGARD TO THE CIRCUMSTANCES OF THE CASE I AM OF THE VIEW THAT THE LEARNED CIT(A) , HAVING FOLLOWED THE DECISION OF THE JURISDICTIONAL HIGH COURT AS WELL AS THE DECISION OF HIS PREDECESSO R IN ASSESSEES OWN CASE FOR EARLIER YEAR , HIS ORDER DOES NOT CALL FOR ANY INTERFERENCE. I THEREFORE DISMISS THE APPEAL FILED BY THE REVENUE. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH OCTOBER , 2015. SD/ - (D. MANMOHAN) VICE PRESIDENT MUMBAI, DATED: 5 TH OCTOBER , 2015 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 7 , MUMBAI 4. THE PR. CIT (EXEMPTION) , MUMBAI 5. THE DR, SMC BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI