ITO (E)-I (1), MUMBAI V. ANJUMAN I-ISLAM'S TIBBA COLLEGE & HOSPITAL PUBLIC CHARITABLE TRUST, MUMBAI

ITA 4002/MUM/2017

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 6018 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 01-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SACHIDANANDA DUBE
• Assessee Lawyers: JAYESH CHUGH
• Keywords: Depreciation; Charitable institution; Capital expenditure
• Section: 201; 264; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A , MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO. 4002/MUM/2017 ASSESSMENT YEAR : 2012 - 13 INCOME TAX OFFICER(EXEMPTIONS) - 1(1), MUMBAI VS. M/S. ANJUMAN I - ISLAMS TIBBA COLLEGE & HOSPITAL PUBLIC CHARITABLE TRUST, 60, YARI ROAD, VERSOVA, MUMBAI [PAN : AA ATA 5635 M ] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SACHIDANANDA DUBE RESPONDENT BY : SHRI JAYESH CHUGH , A R DATE OF HEARING : 0 5 - 12 - 201 8 DATE OF PRONOUNCEMENT : - 31 - 12 - 201 8 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: TH IS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), MUMBAI - 1, DATED 09 - 03 - 2017 . ITA NO. 4002/MUM/2017 : 2 : 2. THE ISSUE RAISED BY THE REVENUE IN GROUND NOS. 1, 2 & 3 ARE AGAINST THE ORDER OF CIT(A), DIRECTING THE AO TO ALLOW DEPRECIATION OF RS. 10,29,516/ - ON FIXED ASSETS AS AGAINST THE ORDER OF AO HOLDING THAT THE ENTIRE CAPITAL EXPENDITURE INCURRED ON ACQUISITION OF FIXED ASSETS HAS BEEN ALLOWED U/S. 11 OF THE INCOME TAX ACT (ACT) AND THUS, CHALLENGING THE ORDER OF CIT(A) , WHICH HAS RESULTED IN TO DOUBLE DEDUCTION OF THE SAME AMOUNT, FIRST BY WAY OF CLAIM ING DEDUCTION OF EXPENDITURE U/S. 11 OF THE ACT AT THE TIME OF ACQUISITION OF ASSETS AND THEREAFTER BY WAY OF DEPRECIATION. THE AO REJECTED THE CLAIM OF ASSESSEE BY RELYING ON THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF ESCORTS LIMITED VS. UNION BANK OF INDIA [199 ITR 43] , WHEREIN IT HAS BEEN HELD THAT DOUBLE DEDUCTION CANNOT BE ALLOWED UNDER ANY CIRCUMSTANCES. AO FURTHER OBSERVED THAT THE RATIO LAID DOWN BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. INSTITUTE OF BANKING PERSON NEL SEL ECTION [264 ITR 110] (BOM) , WHICH WAS PRONOUNCED BY THE HON'BLE HIGH COURT WITHOUT TAKING INTO CONSIDERATION RATIO LAID DOWN BY THE HON'BLE APEX COURT IN THE CASE OF ESCORTS LIMITED VS. UNION BANK OF INDIA (SUPRA) AND ALSO NOTED THAT THE DECISION OF THE HON'BLE J URISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. INSTITUTE OF BANKING PERSONNEL ITA NO. 4002/MUM/2017 : 3 : SEL ECTION (SUPRA) HAS BEEN ACCEPTED BY THE REVENUE IN VIEW OF LOW TAX INVOLVED AND NOT ON MERITS. THE AO ALSO RELIED ON THE DECISION OF THE HON'BLE KERALA HIGH COURT I N THE CASE OF LISSIE MEDICAL INSTITUTION VS. KOCHI IN IT APPEAL NO. 42 OF 2011, DT. 17 - 02 - 2012, WHEREIN THE CLAIM OF DOUBLE DEDUCTION OF ASSESSEE WAS REJECTED. SIMILARLY, THE HON'BLE DELHI HIGH COURT IN THE CASE OF CHIRANJIV CHARITABLE TRUST IN ITA NO. 321/2013 VIDE ITS ORDER DT. 18 - 03 - 2 014 HAS GIVEN THE SAME VIEW. FINALLY , AO REJECTED THE CLAIM OF ASSESSEE BY FRAMING ASSESSMENT U/S. 14 3(3) OF THE ACT, DT. 21 - 03 - 2015. 3 . IN THE APPELLATE PROCEEDINGS, CIT(A) ALLOWED THE CLAIM OF ASSESSEE , AFTER TAKING INTO ACCOUNT THE CONTENTION S OF ASSESSEE, WHICH HAS BEEN REPRODUCED BY THE CIT(A) IN PAGE NOS. 12 TO 14 OF THE APPELLATE ORDER. LD. CIT(A) ALLOWED THE APPEAL OF ASSESSEE. LD. CIT(A) WHILE DECIDING THE APPEAL, RELIED ON THE DECISION S OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. INSTITUTE OF BANKING PERSONNEL SELECTION (SUPRA) AND DIRECTOR OF INCOME TAX(EXEMPTIONS), MUMBAI VS. SHRI VILE PARLE KELAVANI MANDAL [2015] [58 TAXMANN.COM 28 8] . ITA NO. 4002/MUM/2017 : 4 : 4 . AFTER HEARING THE RIVAL CONTENTIONS, PERUSING THE MATERIAL ON RECORD, INCLUDING THE IMPUGNED ORDER, WE OBSERVE THAT THE ISSUE OF ALLOWABILITY OF DEPRECIATION OF FIXED ASSETS IN THE CASE OF PUBLIC CHARITABLE TRUST HAS BEEN SETTLED BY THE HON'BLE SUPR EME COURT IN THE CASE OF CIT VS. RAJASTHAN AND GUJARATI CHARITABLE FOUNDATION, POONA VID E CIVIL APPEAL NO. 7186 OF 2014, A COPY OF WHICH HAS BEEN PLACED IN THE PAPER BOOK AS EXHIBIT A. FURTHER, THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. INSTITUTE OF BANKING PERSONNEL SELECTION (SUPRA) AND IN THE CASE OF DIRECTOR OF INCOME TAX(EXEMPTIONS), MUMBAI VS. SHRI VILE PARLE KELAVANI MANDAL (SUPRA) HAS HELD THAT THERE IS NOTHING LIKE DOUBLE DEDUCTION AND WHEN THE ASSESSEE HAS ACQUIRED AN AS SET FROM THE INCOME OF THE TRUST AND THEREAFTER, CLAIMED THE DEPRECIATION ON THE USE OF FIXED ASSETS, SUCH DEPRECIATION CLAIM DOES NOT MEAN DOUBLE DEDUCTION. ACCORDINGLY, WE DO NOT FIND ANY REASON TO DEVIATE FROM THE FINDINGS OF THE LD. CIT(A) AND THEREFO RE, WE UPHOLD THE ORDER OF CIT(A) ON THIS ISSUE. GROUNDS RAISED BY REVENUE ON THIS ISSUE ARE DISMISSED. 5 . THE SECOND ISSUE RAISED BY REVENUE IN GROUND NOS. 4 TO 6 IS AGAINST THE ORDER OF CIT(A), DIRECTING THE AO TO ALLOW THE ITA NO. 4002/MUM/2017 : 5 : CARRY FORWARD LOSS OF RS. 1,81,10,140/ - AND ALLOW THE SET OFF AGAINST THE SUBSEQUENT YEARS INCOME. 5 .1. THE FACTS IN BRIEF ARE THAT DURING THE YEAR, ASSESSEE HAS INCURRED DEFICIT OF RS. 1,81,10,140/ - IN THE COMPUTATION OF INCOME AND CLAIMED CARRY FORWARD TO THE SUBSEQUENT YEARS. HOWEVER, AO DISAGREED WITH THE TREATMENT OF ASSESSEE AND CALLED UPON THE ASSESSEE TO JUSTIFY THE CARRY FORWARD LOSS TO THE SUBSEQUENT YEARS, WHICH WAS REPLIED BY ASSESSEE VIDE WRITTEN SUBMISSION DATED 1 9 - 02 - 2015 WHICH REPRODUCED BY THE AO IN PARA 4.2 OF THE ASSESSMENT ORDER . THE AO AFTER CONSIDERING THE REPLY OF ASSESSEE, REJECTED THE SAME BY RELYING ON VARIOUS DECISIONS AND GIVING DETAILED REASONING WHICH HAS BEEN INCORPORATED IN PARA 4.3 OF THE ASSESSMENT ORDER AND FINALLY REJE CTED THE CLAIM ON THE GROUND THAT ASSESSEE HAS INCURRED EXPENDITURE OUT OF THE CORPUS OR LOANS AND ADVANCES TAKEN. ACCORDINGLY ASSESSEE IS NOT ENTITLED ANY CARRY FORWARD OF SUCH LO SSES/DEFICIT . 5 .2. IN THE APPELLATE PROCEEDINGS, LD. CIT( A) AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE, ALLOWED THE APPEAL OF ASSESSEE BY OBSERVING AND HOLDING AS UNDER: ITA NO. 4002/MUM/2017 : 6 : 5.2 I HAVE CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE, GONE THROUGH THE ASSESSMENT ORDER OF THE A.O AND THE SUBMISSIONS OF THE APPE LLANT AND ALSO DISCUSSED THE CASE WITH THE AR OF THE APPELLANT. THE CONTENTIONS AND SUBMISSIONS OF THE APPELLANT ARE BEING DISCUSSED AND DECIDED HERE IN UNDER: I. RELYING UPON SEVERAL CASE LAWS THE APPELLANT STATED THAT DEFICIT OF THE CURRENT YEAR IS REQUIRED TO BE CARRIED FORWARD TO THE SUBSEQUENT YEARS. ON PERUSAL OF THE FACTS I FIND THAT THE CASE OF APPELLANT IS SQUARELY COVERED BY THE JUDGEMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF INSTITUTE OF BANKING PERSONNEL 264 ITR 110 WHEREIN THE HON. JURISDICTIONAL HIGH COURT HAS OBSERVED AS UNDER ............'5, NOW COMING TO QUESTION NO, 3, THE POINT WHICH ARISES FOR CONSIDERATION IS: WHETHER EXCESS OF EXPENDITURE IN THE EARLIER YEARS CAN BE ADJUSTED AGAINST THE INCOME OF THE SUBSEQUENT YEAR AND WHETHER SUCH ADJUSTMENT SHOULD BE TREATED AS APPLICATION OF INCOME IN SUBSEQUENT YEAR FOR CHARITABLE PURPOSES? IT WAS ARGUED ON BEHALF OF THE DEPARTMENT THAT EX PENDITURE INCURRED IN THE EARLIER YEARS CANNOT BE MET OUT OF THE INCOME OF THE SUBSEQUENT YEAR AND THAT UTILIZATION OF SUCH INCOME FOR MEETING THE EXPENDITURE OF EARLIER YEARS WOULD NOT AMOUNT TO APPLICATION OF INCOME FOR CHARITABLE OR RELIGIOUS PURPOSES. IN THE PRESENT CASE, THE ASSESSING OFFICER DID NOT ALLOW CARRY FORWARD OF THE EXCESS OF EXPENDITURE TO BE SET OFF AGAINST THE SURPLUS OF THE SUBSEQUENT YEARS ON THE GROUND THAT IN THE CASE OF A CHARITABLE TRUST, THEIR INCOME WAS ASSESSABLE UNDER SELF - CONTA INED CODE MENTIONED IN SECTION 11 TO SECTION 13 OF THE INCOME TAX ACT AND THAT THE INCOME OF THE CHARITABLE TRUST WAS NOT ASSESSABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS' UNDER SECTION 28 IN WHICH THE PROVISION FOR CARRY FORWARD OF LOSSES WAS RELE VANT. THAT, IN THE CASE OF A CHARITABLE TRUST, THERE WAS NO PROVISION FOR CARRY FORWARD OF THE EXCESS OF EXPENDITURE OF EARLIER YEARS TO BE ADJUSTED AGAINST INCOME OF SUBSEQUENT YEARS. WE DO NOT FIND ANY MERIT IN THIS ARGUMENT OF THE DEPARTMENT. INCOME DER IVED FROM THE TRUST PROPERTY HAS ALSO GOT TO BE COMPUTED ON COMMERCIAL PRINCIPLES AND IF COMMERCIAL PRINCIPLES ARE APPLIED THEN ADJUSTMENT OF EXPENSES INCURRED BY THE TRUST FOR CHARITABLE AND RELIGIOUS PURPOSES IN THE EARLIER YEARS AGAINST THE INCOME EARNE D BY THE TRUST IN THE SUBSEQUENT YEAR WILL HAVE TO BE REGARDED AS APPLICATION OF INCOME OF THE TRUST FOR CHARITABLE AND RELIGIOUS PURPOSES IN THE SUBSEQUENT YEAR IN WHICH ADJUSTMENT HAS BEEN MADE HAVING REGARD TO THE BENEVOLENT PROVISIONS CONTAINED IN SECT ION 11 OF THE ACT AND THAT SUCH ADJUSTMENT WILL HAVE TO BE EXCLUDED FROM THE INCOME OF THE TRUST UNDER SECTION LL(L)(A) OF THE ACT. OUR VIEW IS ALSO SUPPORTED BY THE JUDGMENT OF THE GUJARAT HIGH COURT IN THE CASE OF CIT V. SHRI PLOT SWETAMBER MURTI PUJAK J AIN MANDAL (1995) 211 ITR 293 (GUJ). ACCORDINGLY, WE ANSWER QUESTION NO. 3 IN THE AFFIRMATIVE I.E., IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT.' ITA NO. 4002/MUM/2017 : 7 : II. RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE HON. HIGH COURT AS ABOVE, THE AO IS DIRECTED TO AL LOW THE CARRY FORWARD OF DEFICIT IN THE SUCCEEDING YEARS AFTER DUE VERIFICATION OF FACTS. III. GROUNDS OF APPEAL NO. 1 AND 1.1 ARE THEREFORE ALLOWED. 6 . WE HAVE HEAR D BOTH THE PARITIES AND PERUS ED THE MATERIAL PLACED ON RECORD, INCLUDING THE IMPUGNED ORDER. IT IS AN UNDISPUTED FACT THAT DURING THE YEAR, ASSESSEE HAS DEFICIT OF RS. 1,81,10,140/ - A S HIS GROSS EXPENDITURE EXCEEDED THE GROSS INCOME AND CLAIMED THE SAME TO SUBSEQUENT YEAR FOR BEING SET OFF AGAINST THE SUBSEQUENT YEAR S . HOWEVER, AO DISALLOWED THE SAME BY HOLDING THAT IF THE DEFICIT IS ALLOWED TO BE CARRIED FORWARD; THE SAME WOULD RESULT IN DOUBLE DEDUCTION TO ASSESSEE. THE LD. CIT(A) IN THE APPELLATE PROCEEDINGS , AFTER RELYING ON THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. INSTITUTE OF BANKING PERSONNEL SELECTION (SUPRA) , ALLOWED THE APPEAL OF ASSESSEE. IN THE PRESENT FACTS AND CIRCUMSTANCES OF THE CASE AND AFTER PERUSING THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. INSTITUTE OF BANKING PERSONNEL SELECTION (SUPRA), WE ARE OF THE VIEW THAT THE LD. CIT(A) HAS CORRECTLY ALLOWED THE CARRY FORWARD OF DEFICIT OF RS. 1,81,10,140/ - TO THE FOLLOWING YEARS FOR CLAIMING SET OFF. THEREFORE, WE DO NOT FIND ANY REASON TO ITA NO. 4002/MUM/2017 : 8 : DEVIATE FROM THE ORDER OF CIT(A). ACCORDINGLY, WE UPHOLD THE SAME. GROUNDS RAISED BY REVENUE O N THIS ISSUE ARE ALSO DISMISSED. 7 . IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST DAY OF DECEMBER, 2018 SD/ - SD/ - (MAHAVIR SINGH) (RAJESH KUMAR) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI; / DATED : 31 ST DECEMBER, 2018 TNMM / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) , MUMBAI 4. / CIT, MUMBAI 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE ITA NO. 4002/MUM/2017 : 9 : / BY ORDER, //TRUE COPY// / (DY./ASST. REGISTRAR) , / ITAT, MUMBAI