DCIT, BHILWARA V. M/s. Shri Ram Niwas Dham Trust, BHILWARA

ITA 389/JODH/2014

• Counselvise Citation: 38923314 RSA 2014
• Duration Of Justice: 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 30-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAI SINGH
• Assessee Lawyers: ARUN KABRA
• Keywords: Capital asset; Depreciation; Charitable institution
• Section: 12AA; 11; 32

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL : JODHPUR BENC H : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NOS. 389 & 390/JODH/2014 (A.YS. 2009-10 & 2010-11) DCIT , CIRCLE, BHILWARA. VS. M/S. SHRI RAM NIWAS DHAM TRUST, RAMDWARA, SHAHPURA, DISTRICT BHILWARA. (APPELLANT) PAN NO. AACTS 2872 E (RESPONDENT) ASSESSEE BY : SHRI ARUN KABRA. DEPARTMENT BY : SHRI JAI SINGH - D.R. DATE OF HEARING : 27/08/2014. DATE OF PRONOUNCEMENT : 28/08/2014. O R D E R PER N.K. SAINI, A.M THESE TWO APPEALS BY THE DEPARTMENT HAVING COMMON ISSUE ARE DIRECTED AGAINST COMMON ORDER DATED 21/04/2014 OF L D. CIT(A), AJMER. THEREFORE, THESE ARE BEING DISPOSED OFF BY THIS CON SOLIDATED ORDER FOR THE SAKE OF BREVITY AND CONVENIENCE. 2 THE ONLY EFFECTIVE GROUND RAISED IN I.T.A.NO. 389/ JODH/2014 READS AS UNDER:- 2 THE LD. CIT(A), AJMER IN THE PRESENT FACTS AND CI RCUMSTANCES OF THE CASE HAS ERRED IN:- 1. DELETING THE ADDITION OF RS. 1,06,64,880/- MADE BY THE A.O. ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION, WITHOUT APPRECIATING THE FACTS OF THE CASE. 2. THE APPELLANT CRAVES TO ADD, AMEND, ALTER, DELET E OR MODIFY THE ABOVE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. 3. SIMILAR GROUND HAS BEEN RAISED FOR THE A.Y. 2010-1 1, THE ONLY DIFFERENCE IS IN THE AMOUNT INVOLVED. THEREFORE, O UR FINDINGS GIVEN IN RESPECT OF A.Y. 2009-10 WILL BE APPLICABLE WITH THE SAME FORCE FOR THE A.Y. 2010-11. 4. FACTS RELATING TO THIS CASE, IN BRIEF, ARE THAT TH E ASSESSEE FILED THE RETURN OF INCOME ON 23/09/2009 DECLARING TOTAL INCO ME AT RS. NIL IN THE CAPACITY OF THE TRUST. DURING THE COURSE OF ASSESS MENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD CLAIM ED DEPRECIATION OF RS. 1,06,64,880/- U/S. 32 OF THE I.T. ACT, 1961 (HEREIN AFTER REFERRED TO AS THE ACT IN SHORT). THE ASSESSING OFFICER REFERRE D TO THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF ESCROTS LTD. V S. UNION OF INDIA REPORTED AT 199 ITR 43 WHEREIN IT WAS HELD THAT WHE N THE DEDUCTION U/S. 35(2)(IV) IS ALLOWED IN RESPECT OF CAPITAL EXPENDIT URE ON SCIENTIFIC RESEARCH, DEPRECIATION IS NOT ALLOWED U/S. 32 OF TH E ACT ON THE SAME 3 ASSET. THE ASSESSING OFFICER WHILE DISALLOWING THE CLAIM OF THE ASSESSEE OBSERVED AS UNDER:- AS PER ACT ON THE SAME ASSETS DOUBLE DEDUCTION IS NOT ALLOWABLE. IN THIS CASE THE EXPENDITURE ON THE CAPITAL ASSETS ARE FULL Y ALLOWED, THEREFORE, ON THE SAME ASSETS IN THIS CASE NO DEPRECIATION IS TO BE ALLOWED IN THE P & L ACCOUNT /INCOME & EXPENDITURE ACCOUNT, THEREFORE, I DISALLOW CLAIMED DEPRECIATION OF RS. 1,06,64,880/- IT IS DEDUCTED FR OM THE DECLARED EXPENDITURE OVER THE RECEIPTS. 5. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER T O THE LD. CIT(A) AND SUBMITTED AS UNDER:- THE DEPRECIATION IS ALLOWABLE ON THE CAPITAL ASSE TS EVEN WHEN ENTIRE COST OF THE CAPITAL ASSET HAS ALREADY BEEN CONSIDERED AS AP PLICATION OF INCOME AND RELIED UPON THE DECISION OF HONBLE PUNJAB AND HARY ANA HIGH COURT IN CASE OF CIT VS. DESH BHAGAT MEMORIAL EDUCATION TRUST (20 10) 2 SET 333 WHERE IT HAS BEEN HELD AFTER DISTINGUISHING THE DECISION IN CASE OF ESCORTS LIMITED & ANR. VS. UNION OF INDIA 199 ITR 43 AS UNDER: THE INCOME OF THE ASSESSEE BEING EXEMPT, THE ASSES SEE IS ONLY CLAIMING THAT DEPRECIATION SHOULD BE REDUCED FROM THE INCOME FOR DETERMINING THE PERCENTAGE OF FUNDS WHICH HAVE TO BE APPLIED FOR TH E PURPOSES OF THE TRUST/ SOCIETY. THERE IS NO DOUBLE DEDUCTION CLAIMED BY TH E ASSESSEE. IT CANNOT BE HELD THE DOUBLE BENEFIT IS GIVEN IN ALLOWING CLAIM FOR DEPRECIATION FOR COMPUTING INCOME FOR PURPOSES OF SECTION 11. THE ASSESSEE FURTHER RELIED UPON THE FOLLOWING DECI SIONS FOR ALLOWING THE CLAIM OF DEPRECIATION ON THE ASSETS OWNED BY IT: (I) CIT VS. SHRI GUJRATI SAMAJ (REGD.) (2012) 349 ITR 559 (MP) (II) CIT VS. TINY TOTS EDUCATION SOCIETY (2011) 330 ITR 0021 (P&H-HC) (III) CIT VS. MARKET COMMITTEE (2011) 330 ITR 0016 (P&H- HC) (IV) ORDER OF THE CIT(APPEALS) AJMER DATED 29.05.2009 I N APPEAL NO. 161/2008-09 IN CASE OF M/S LAXMI NARAIN TRUST, BHIL WARA. 6 . THE LEARNED CIT(A), AFTER CONSIDERING THE SUBMISS IONS OF THE ASSESSEE, DELETED THE DISALLOWANCE BY OBSERVING IN PARA 3.4 OF THE IMPUGNED ORDER WHICH READ AS UNDER:- 4 I HAVE CONSIDERED THE CONTENTIONS OF THE APPELLAN T AS WELL AS ASSESSMENT ORDER. IT IS SEEN AS PER THE COMPUTATION IN THE ASS ESSMENT ORDER THAT LOSS OF RS. 1,63,45,359 WAS SHOWN BY THE ASSESSEE. OUT OF I T, AO HAS REDUCED THE DEPRECIATION OF RS. 1,06,64,880 AND DETERMINED THE NET LOSS AT RS. 55,85,479. THE AO HAS DISALLOWED THE DEPRECIATION I N CASE OF A CHARITABLE TRUST RELYING UPON THE HONBLE SUPREME COURT DECISI ON IN CASE OF ESCORTS LIMITED & ANR VS. UNION OF INDIA & ORS CITED AT 199 ITR 43. HOWEVER, THE ASSESSEE HAS POINTED OUT THAT THE DECI SION IN THE CASE OF ESCORTS LIMITED & ANR VS. UNION OF INDIA RELIED UPO N BY THE AO IS REGARDING CLAIM OF DEDUCTION U/S 35 FOR THE EXPENDI TURE ON SCIENTIFIC RESEARCH WHERE IT HAS BEEN HELD THAT ONCE DEDUCTION U/S 35 WAS ALLOWED, DEPRECIATION U/S 32 WAS NOT AVAILABLE EITHER IN THE SAME OR OTHER PREVIOUS YEARS. THE ASSESSEE HAD POINTED OUT THAT T HIS DECISION HAD BEEN CONSIDERED BY HONBLE PUNJAB AND HARYANA HIGH COURT IN CASE OF CIT VS. DESH BHAGAT MEMORIAL EDUCATION TRUST IN ORDER DATED 10.08.2010 AND IT HAS BEEN HELD AS UNDER: CHARITABLE TRUSTCOMPUTATION OF INCOME ALLOWABILIT Y OF DEPRECIATION THE ASSESSEE WAS A SOCIETY REGISTERED UNDER SECTION 12-AA OF THE ACT. THE ASSESSEE CLAIMED DEPRECIATION ON TH E CAPITAL ASSETS WHICH WAS NOT ALLOWED BY AO ON THE GROUND THAT INCOME OF THE ASSESSEE BEING EXEMPT, ALLOWING THE CLAIM OF DEPRECIATION WILL AMO UNT TO GIVING OF DOUBLE BENEFIT. RELIANCE WAS PLACED ON JUDGMENT OF THE SUPREME COURT IN ESCORTS LTD. V. UOI (1993) 199 ITR 43 (SC). THE TRI BUNAL HELD THAT EVEN IF INCOME OF THE ASSESSEE WAS EXEMPT, CLAIM FOR DEPREC IATION HAD TO BE ALLOWED ON BUSINESS PRINCIPLES FOR DETERMINATION OF EXTENT OF APPLICATION OF INCOME OF THE ASSESSEE TO COMPLY WITH THE STATUT ORY REQUIREMENTS. HELD: THE ASSESSEE WAS NOT CLAIMING DOUBLE DEDUCTIO N ON ACCOUNT OF DEPRECIATION. THE INCOME OF THE ASSESSEE BEING EXEM PT, THE ASSESSEE WAS ONLY CLAIMING THAT DEPRECIATION SHOULD BE REDUCED F ROM THE INCOME FOR DETERMINING THE PERCENTAGE OF FUNDS WHICH HAVE TO B E APPLIED FOR THE PURPOSES OF THE TRUST. THERE WAS NO DOUBLE DEDUCTIO N CLAIMED BY THE ASSESSEE. IT CANNOT BE HELD THAT DOUBLE BENEFIT WAS GIVEN IN ALLOWING CLAIM FOR DEPRECIATION FOR COMPUTING INCOME FOR PUR POSES OF SECTION 11. [PARA 6] FURTHER, THE ASSESSEE HAS RELIED UPON THE DECISION IN THE CASE OF CIT VS. SHRI GUJRATI SAMAJ (REGD.) (2012) 349 ITR 559 (MP) WHERE IT HAS BEEN HELD AS UNDER: CHARITABLE TRUSTCOMPUTATION OF INCOMEALLOWABILIT Y OF DEPRECIATION IF DEPRECIATION IS NOT ALLOWED AS A N ECESSARY DEDUCTION IN COMPUTING THE INCOME OF A CHARITABLE TRUST, THEN TH ERE WOULD BE NO WAY TO PRESERVE THE CORPUS OF THE TRUSTASSESSEE CHARIT ABLE TRUST IS ENTITLED TO DEPRECIATION CIT VS. RAIPUR PALLOTTINE SOCIETY (1989) 80 CTR (MP) 127 : (1989) 180 ITR 579 (MP) FOLLOWED 5 SIMILARLY IT HAS BEEN HELD IN THE CASE OF CIT VS. T INY TOTS EDUCATION SOCIETY 330 ITR 0021 (P&H-HC) AS UNDER: CHARITABLE TRUSTEXEMPTION UNDER SECTION 11 DEPRE CIATION WHETHER ALLOWABLE EVEN THOUGH SECTION 11 DEDUCTION IS ALLOW ED -ASSESSEE, REGISTERED UNDER SECTION 12AA CALCULATED DEPRECIATI ON FOR PURPOSE OF SHOWING AMOUNT UTILIZED. AO DISALLOWED DEPRECIATION ON THE GROUND THAT ASSESSEE BEING EXEMPT, CLAIM OF DEPRECIATION WOULD AMOUNT TO TAKING OF DOUBLE BENEFIT. CIT (A) ACCEPTED ASSESSEES APPEAL HOLDING THAT DEDUCTION FOR COMPUTING INCOME TO PRESERVE CORPUS OF TRUST WA S PERMISSIBLE AND DID NOT AMOUNT TO DOUBLE BENEFIT. TRIBUNAL UPHELD CIT(A ) S VIEW HOLDING THAT QUESTION WHETHER DEPRECIATION IS TO BE ALLOWED OR N OT HAS NOTHING TO DO WITH THE APPLICATION OF INCOME BECAUSE INCOME IS AL WAYS TO BE COMPUTED ON COMMERCIAL PRINCIPLES AND AS PER SYSTEM OF ACCOU NTING FOLLOWED BY ASSESSEE, SUBJECT ALWAYS TO THE STATUTORY PROVISION S. HELD: AS OBSERVED BY SUPREME COURT IN CIT VS. MARKET COMMITTEE (2011) 33 0 ITR' 16 (P&H) ASSESSEE WAS NOT CLAIMING DOUBLE DEDUCTION ON ACCOU NT OF DEPRECIATION AS HAS BEEN SUGGESTED BY REVENUE. THE INCOME OF ASS ESSEE BEING EXEMPT, ASSESSEE WAS ONLY CLAIMING THAT DEPRECIATION SHOULD BE REDUCED FROM INCOME FOR DETERMINING PERCENTAGE OF FUNDS WHICH HA VE TO BE APPLIED FOR THE PURPOSES OF TRUST. THERE IS NOT DOUBLE DEDUCTIO N CLAIMED BY ASSESSEE AS CANVASSED BY REVENUE. IT CANNOT BE HELD THAT DOU BLE BENEFIT IS GIVEN IN ALLOWING CLAIM FOR DEPRECIATION FOR COMPUTING INCOM E FOR PURPOSES OF SECTION 11. [PARAS 5 & 6] THE AO HAS ALSO RELIED ON THE DECISION OF THE ITAT COCHIN BENCH IN CASE OF DDIT (EXEMPTION) VS. ADI SANKARA TRUST IN ORDER DAT ED 16.06.2011 IN SUPPORT OF THE DISALLOWANCE ON ACCOUNT OF DEPRECIAT ION IN CASE OF A TRUST. HOWEVER, IN SUBSEQUENT DECISION DATED 08.07.2011 IN CASE OF CIT VS. GUJRATI SAMAJ (REGD.) HONBLE MP HIGH COURT HAS HEL D THAT CHARITABLE TRUST IS ENTITLED FOR CLAIM OF DEPRECIATION ON THE ASSETS OWNED BY IT AS DISCUSSED EARLIER. IN VIEW OF ABOVE DISCUSSION, DISALLOWANCE MADE BY T HE AO ON ACCOUNT OF DEPRECIATION IS DELETED. NOW THE DEPARTMENT IS IN APPEAL. 7 . LEARNED D.R. STRONGLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT WHEN THE INCOME WAS EXEMPTED AND FUNDS WERE UTILIZED TO ACQUIRE ASSETS FROM THE EXEMPTED INCOME THEN THE DEPRECIATION ON SAID ASSET WAS NOT ALLOWABLE. 6 8 . IN HIS RIVAL SUBMISSIONS, LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW A ND STRONGLY SUPPORTED THE IMPUGNED ORDER PASSED BY THE LD. CIT( A). 9 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PA RTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RE CORD. IN THE PRESENT CASE, IT IS NOTICED THAT THE VIEW TAKEN BY THE LD. CIT(A) IS SUPPORTED BY THE JUDGMENTS OF HON'BLE MADHYA PRADESH HIGH COURT AND PUNJAB & HARYANA HIGH COURT IN THE AFORESAID REFERRED TO CAS ES. WE, THEREFORE, DO NOT SEE ANY VALID GROUND TO INTERFERE WITH THE OBSE RVATIONS MADE IN THE IMPUGNED ORDER BY THE LD. CIT(A) AND DO NOT SEE ANY MERIT IN THESE APPEALS OF THE DEPARTMENT. 10 . IN THE RESULT, APPEALS OF THE DEPARTMENT ARE DISM ISSED. (ORDER PRONOUNCED IN THE COURT ON 28 TH AUGUST, 2014). SD/- SD/- (HARI OM MARATHA) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 28 TH AUGUST, 2014. VR/- COPY TO: 7 1. THE APPELLANT 2. THE RESPONDENT 3. THE LD.CIT 4. THE CIT(A) 5. THE D.R SR. PRIVATE SECRETARY, ITAT, JODHPUR.