ADIT (E), New Delhi V. The Delhi Public School Society, New Delhi

ITA 4081/DEL/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65727 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2009-2010
• Appeal Filed On: 31-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUSHMA SINGH
• Keywords: Depreciation; Charitable institution; Rule of consistency; Question of law; Capital expenditure
• Section: 12AA; 10; 11

Judgement Text

ITA NO. 4081/DEL/2012 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H, NEW DELHI BEFORE SHRI U.B.S. BEDI, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 4081/DEL/2012 A.Y. : 2009-10 ASSTT. DIRECTOR OF INCOME TAX (E), TRUST CIRCLE-IV, NEW DELHI VS. THE DELHI PUBLIC SCHOOL SOCIETY, DPS STAFF FLATS F BLOCK, EAST OF KAILASH, NEW DELHI 110 065 (PAN/GIR NO. : AAATT0740J) (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSESSEE BY : SH. HIREN MEHTA, CA DEPARTMENT BY : SMT. SUSHMA SINGH, C.I.T. (D.R.) ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-XXI, NEW DEL HI DATED 22.5.2012 PERTAINING TO ASSESSMENT YEAR 2009-10. 2. AT THE OUTSET LD. COUNSEL OF THE ASSESSEE SUBMI TTED THAT THE ISSUES INVOLVED IN THE PRESENT CASE ARE COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF ITAT IN ASSESSEES OWN CASE AND / OR BY THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT. 3. THE FIRST GROUND RAISED IS THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. COMMISS IONER OF INCOME TAX (A) HAS ERRED IN DELETING THE ADDITION O F ` ITA NO. 4081/DEL/2012 2 8,25,84,616/- MADE BY THE ASSESSING OFFICER IN RESP ECT OF FRANCHISEE FEES RECEIVED BY THE DPS SOCIETY FROM DIFF ERENCE SATELLITE SCHOOLS WHICH ARE RUNNING UNDER THE NAME AND LOGO OF DELHI PUBLIC SCHOOL HAVING DIFFERENT MANAGEMENT THAT T HE DPS SOCIETY. 4. ON THE ABOVE ISSUE AT THE THRESHOLD, LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF T HE ASSESSEE BY THE DECISION OF THE ITAT IN ASSESSEES OWN CASE FOR PRE CEDING YEAR. HENCE, HE SUBMITTED THAT THE ISSUE SHOULD BE DECIDED IN FAV OUR OF THE ASSESSEE. LD. DEPARTMENTAL REPRESENTATIVE ON THE OT HER HAND COULD NOT CONTROVERT THE SUBMISSION THAT THE ISSUE IS COVE RED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN ASSESS EES OWN CASE. 5. WE HAVE CAREFULLY CONSIDER THE SUBMISSIONS AND PE RUSED THE RECORDS. WE FIND THAT THE TRIBUNAL IN I.T.A. NO. 4 344/DEL/2011 A.Y. 2008-09 IN ASSESSEES OWN CASE VIDE ORDER DATED 20. 9.2012, HAD CONCLUDED AS UNDER:- 16. IN VIEW OF ABOVE JUDGEMENTS BY THE ITAT AND COMMISSIONER OF INCOME TAX(A) FROM AY 1998-99 TO 2007-08, WE OBSERVE THAT THE AMOUNT RECEIVED BY THE ASSESSEE SOCIETY FROM VARIOUS SATELLITE SCHOOLS WHI CH ARE RUNNING UNDER THE NAME AND LOGO OF DPS HAVING A DIFFERENT MANAGERIAL SET UP THAN THE ASSESSEE DPS SOCIETY WAS CONSIDERED AS NOT LIABLE TO TAX AND ADDITIONS MADE BY THE ASSESSING OFFICER IN THIS REGA RD HAD BEEN DELETED FOLLOWING PRINCIPLE OF CONSISTENCY . FROM THE ASSESSMENT ORDER FOR THE YEAR UNDER CONSIDERATION, WE ARE UNABLE TO SEE ANY REASONABLE OR ITA NO. 4081/DEL/2012 3 SOUND REASON FOR DEVIATION FROM THE STAND TAKEN BY THE REVENUE AUTHORITIES IN ASSESSEES OWN CASES RELATED TO THE IMMEDIATELY PRECEDING YEARS. WE ALSO OBSERVE THAT THE ASSESSING OFFICER HAS NOT BROUGHT ANY SUBSTANTIAL OR INCRIMINATING CAUSE AGAINST THE ASSESSEE SOCIETY WHICH SUPPORTED HIM IN HIS ACTION TO CONSIDER THE FEE RECEIVED FROM SATELLITE SCHOOLS LIA BLE TO BE TAXED IN THE HANDS OF ASSESSEE SOCIETY. 17. PER CONTRA, FROM A PLAIN READING OF IMPUGNED ORDE R IN THIS REGARD, WE OBSERVE THAT THE COMMISSIONER OF INCOME TAX(A) RIGHTLY FOLLOWED THE JUDGMENT OF ITAT AND THE FIRST APPELLATE AUTHORITY I.E. COMMISSIONER O F INCOME TAX(A) PASSED IN ASSESSEES OWN CASE IN THIS REGARD HAD RIGHTLY CONSIDERED THAT THE AMOUNT OF FEE S RECEIVED FROM SATELLITE SCHOOLS WAS NOT LIABLE TO T AX FOR THE YEAR UNDER CONSIDERATION. HENCE, HE RIGHTLY DELETED THE ADDITION. ACCORDINGLY, WE ARE UNABLE T O SEE ANY INFIRMITY OR PERVERSITY IN THE IMPUGNED ORDER . THEREFORE, WE HAVE NO REASON TO INTERFERE WITH THE SAME. ON THE BASIS OF FOREGOING DISCUSSIONS, WE AR RIVE TO A CONCLUSION THAT GROUND NO. 1 IS DEVOID OF MERI TS AND DESERVES TO BE DISMISSED AND WE DISMISS THE SAME. 6. IN VIEW OF THE AFORESAID DECISION OF THE ITAT I N ASSESSEES OWN CASE, WE DO NOT FIND ANY INFIRMITY OR ILLEGALITY IN THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (A). ACCORDINGLY, WE UPH OLD THE SAME. IN THE RESULT, THIS ISSUE RAISED BY THE REVENUE STA NDS DISMISSED. ITA NO. 4081/DEL/2012 4 7. THE ANOTHER GROUND RAISED BY THE REVENUE IS THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED IN ALLOWING THE DEPRECIATION AMOUNTING TO ` 12,20,91,839/- AS IN A CASE WHERE THE CAPITAL EXPENDITURE HAS BEEN TREATED TO HAVE BE EN APPLIED FOR THE OBJECT OF THE TRUST, ALLOWANCE OF DEDUCTION ON ACCOUNT OF DEPRECIATION WILL AMOUNT TO DOUBLE DEDUCTION. 8. ON THIS ISSUE, LD. COUNSEL OF THE ASSESSEE SUBMI TTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE D ECISION OF THE ITAT IN ASSESSEES OWN CASE FOR PRECEDING YEAR AS WELL AS B Y THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT. HENCE, HE SUBMITTED THAT THE ISSUE SHOULD BE DECIDED IN FAVOUR OF THE ASSESSEE. LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND COULD NOT CONTRO VERT THE SUBMISSION THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE. 9. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AN D PERUSED THE RECORDS. WE FIND THAT THE TRIBUNAL IN I.T.A. NO. 4344/DEL/2011 A.Y. 2008-09 IN ASSESSEES OWN CASE VIDE ORDER DATED 20. 9.2012, HAD CONCLUDED AS UNDER:- 22. IN VIEW OF ABOVE SUBMISSIONS AND AFTER CAREFUL CONSIDERATION OF THE RATIO OF JUDGMENTS CITED BEFORE US, WE ARE OF THE VIEW THAT THE ASSESSING OFFICER DISALLOWED THE CLAIM OF DEPRECIATION IGNORING THE FACT THAT THE ASSESSEE SOCIETY IS A CHARITABLE SOCIETY AND IN A CASE WHERE CAPITAL EXPENDITURE HAS BEEN TREATED TO HAVE BEEN APPLIED FOR THE OBJECT OF THE TRUST, THE ITA NO. 4081/DEL/2012 5 ALLOWANCE OF DEDUCTION ON ACCOUNT OF DEPRECIATION WOULD NOT AMOUNT TO DOUBLE DEDUCTION. THE ASSESSING OFFICER RELIED ON THE JUDGMENT OF HONBLE APEX COURT IN THE CASE OF ESCORTS LTD. (SUPRA) WHICH WAS CAREFULLY CONSIDERED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF VISHWA JAGRITI MISSION (SUPRA) BY HONBLE HIGH COURT OF PUNJAB & HARYANA IN THE CASE OF M/S TINY TOTS EDUCATION SOCIETY WHEREIN THEIR LORDSHIPS AFTER CAREFUL SCRUTINY OF THE FACTS AND CIRCUMSTANCES HELD THAT IN THE CASE OF ESCORTS LTD., THE HONBLE SUPREME COURT WAS NOT CONCERNED WITH THE CASE OF CHARITABLE TRUST OR INSTITUTION INVOLVING THE QUESTION AS TO WHETHER ITS INCOME SHOULD BE COMPUTED ON COMMERCIAL PRINCIPLES TO DETERMINE THE AMOUNT OF INCOME AVAILABLE FOR APPLICATION OF CHARITABLE PURPOSES. SECONDLY, BEFORE THE HONBLE SUPREME COURT, THERE WAS AN ISSUE OF CLAIMING DEDUCTION OF THE COST OF ASSET U/S 35(1) OF THE ACT WHICH ALLOWED DEDUCTION FOR CAPITAL EXPENDITURE INCURRED ON SCIENTIFIC RESEARCH. 23. HONBLE JURISDICTIONAL HIGH COURT OF DELHI AND HONBLE PUNJAB & HARYANA HIGH COURT HAVE HELD THAT THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF ESCORTS LTD. IS INAPPLICABLE TO THE CASES OF CHARITABLE TRUST WHEREIN THE ISSUE OF COMPUTATION OF ITS INCOME SHOULD BE ON ITA NO. 4081/DEL/2012 6 COMMERCIAL PRINCIPLE IN ORDER TO DETERMINE THE AMOUNT OF INCOME AVAILABLE FOR APPLICATION TO SERVE THE CHARITABLE PURPOSES OF THE SOCIETY/TRUST. 24. IN VIEW OF ABOVE, WE HOLD THAT THE ASSESSING OFFICER IGNORED THE FACT THAT THE ASSESSEES CLAIM OF DEPRECIATION WAS ALLOWED IN THE EARLIER ASSESSMENT YEARS AND THERE WAS NO SUBSTANTIAL CAUSE FOR DEVIATING FROM ITS STAND OF THE REVENUE, THEREFORE, WE DECLINE TO APPROVE THE ASSESSMENT ORDER IN THIS REGARD. 25. ON THE OTHER HAND, THE LD. COMMISSIONER OF INCOME TAX(A) RIGHTLY HELD THAT THE PECULIAR FACTS AND CIRCUMSTANCES OF THE PRESENT CASE RELATE TO A CHARITABLE INSTITUTION AND THIS IS DISTINGUISHABL E FROM THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF ESCORTS LTD. (SUPRA). HE ALSO RIGHTLY HELD THAT THE ASSESSEE IS NOT CLAIMING DOUBLE DEDUCTION ON ACCOUNT OF DEPRECIATION AS HAS BEEN HELD BY THE ASSESSING OFFICER. THE ASSESSEE IS ONLY CLAIMING THAT DEPRECIATION SHOULD BE REDUCED FROM THE INCOME FOR DETERMINING THE PERCENTAGE OF FUNDS WHICH HAVE TO BE APPLIED FOR THE PURPOSE OR OBJECTS OF THE ASSESSEE TRUST BECAUSE THE INCOME OF THE ASSESSEE IS BEING EXEMPT FROM TAX. IN VIEW OF ABOVE, THE LD. COMMISSIONER OF INCOME TAX(A) ITA NO. 4081/DEL/2012 7 WAS JUSTIFIED IN HOLDING THAT THE CLAIM OF DEPRECIATION CANNOT BE HELD AS DOUBLE DEDUCTION OR BENEFIT FOR COMPUTING THE INCOME FOR THE PURPOSES OF SECTION 11 OF THE ACT. 26. THE LD. COMMISSIONER OF INCOME TAX(A) ALSO CONSIDERED THE JUDGMENTS OF THE ITAT AND HIS COORDINATE FIRST APPELLATE AUTHORITIES I.E. COMMISSIONER OF INCOME TAX(A) PASSED IN ASSESSEES OWN CASES RELATED TO IMMEDIATELY PRECEDING YEARS FROM THE ASSESSMENT YEAR UNDER CONSIDERATION. HE RIGHTLY FOLLOWED THE PRINCIPLE OF CONSISTENCY IN THE FINDINGS AS THERE WAS NO SUFFICIENT CAUSE FOR DEVIATION FROM EARLIER STAND TAKEN BY THE FIRST APPELLATE AUTHORITY IN AY 2006- 07 AND 2007-08. ACCORDINGLY, WE ARE UNABLE TO SEE ANY INFIRMITY IN THE IMPUGNED ORDER IN THIS REGARD. FINALLY, WE HOLD THAT GROUND NO. 2 OF THE REVENUE IS ALSO DEVOID OF MERITS AND DESERVES TO BE DISMISSED AND WE DISMISS THE SAME. 10. FURTHERMORE, WE NOTE THE HONBLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF D.I.T. VS. VISHWA JAGRITI MIS SION IN I.T.A. NO. 140/2012 VIDE ORDER DATED 29.3.2012. IN THIS CASE THE LD. COMMISSIONER OF INCOME TAX (A) ON THE BASIS OF THE ORDER PASSED BY THE LD. DIRECTOR OF INCOME TAX (EXEMPTIONS) ACCEPTED THE ASSESSEES CLAIM FOR EXEMPTION U/S. 11. AS REGARDS THE CLAIM O F DEPRECIATION ON FIXED ASSETS UTILIZED FOR CHARITABLE OBJECTS OF THE TRUST, HE ACCEPTED THE ASSESSEES CLAIM. THE TRIBUNAL CONFIRMED THE DECISI ON OF THE LD. ITA NO. 4081/DEL/2012 8 COMMISSIONER OF INCOME TAX (A) ON APPEAL. ON APPEA L THE JURISDICTIONAL HIGH COURT HAS HELD AS UNDER:- THERE IS NO DISPUTE THAT THE ASSESSEE HAS BEEN GRANTED REGISTRATION U/S. 12AA AND, THEREFORE, IT WAS ENTITLED TO EXEMPTION OF ITS INCOME U/S. 11. THE ONLY QUESTION IS WHETHER THE INCOME OF THE ASSESSEE SHOULD BE COMPUTED ON COMMERCIAL PRINCIPLES AND IN DOING SO WHETHER DEPRECIATION ON FIXED ASSETS UTILIZED FOR THE CHARITABLE PURPOSES SHOULD BE ALLOWED. ON THIS ISSUE, THERE SEEMS TO BE A CONSENSUS OF JUDICIAL THINKING; HAVING REGARD TO THE CONSENSUS OF JUDICIAL OPINION, WE ARE NOT INCLINED TO ADMIT THE APPEAL AND FRAME ANY SUBSTANTIAL QUESTION OF LAW. THERE DOES NOT APPEAR TO BE ANY CONTRARY VIEW PLAUSIBLE ON THE QUESTION RAISED BEFORE US AND AT ANY RATE NO JUDGEMENT TAKING A CONTRARY VIEW HAS BEEN BROUGHT TO OUR NOTICE. 11. IN VIEW OF THE ABOVE MENTIONED DECISION OF TH E ITAT IN ASSESSEES OWN CASE AS WELL AS THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT, WE DO NOT FIND ANY INFIR MITY OR ILLEGALITY IN THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (A), HENCE , WE UPHOLD THE SAME ON THIS ISSUE. IN THE RESULT, THIS GROUND RAIS ED BY THE REVENUE STANDS DISMISSED. 12. THE LAST GROUND RAISED BY THE REVENUE IS THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CO MMISSIONER ITA NO. 4081/DEL/2012 9 OF INCOME TAX (A) HAS ERRED IN ALLOWING THE DEFICIT OF EARLIER ASSESSMENT, AS THERE IS NO PROVISION FOR SET OFF LO SSES U/S. 11, 12 & 13 OF THE I.T. ACT, 1961. 13. ON THIS ISSUE ASSESSING OFFICER NOTED THAT AN AMOUNT OF ` 53,43,18,044/- HAS BEEN CLAIMED AS SET OFF OF EXCES S OF EXPENDITURE OF EARLIER ASSESSMENT YEARS AND AN AMOUNT OF ` 81,79,5 6,420/- HAS BEEN CARRIED FORWARD. ACCORDING TO THE ASSESSING OFFI CER ASSESSEES CASE WAS REQUIRED TO BE COMPUTED IN ACCORDANCE WITH SECTI ON 11, 12 & 13 WHERE THERE IS NO PROVISION FOR SET ON AND SET OFF LOSSES. HENCE, THE ASSESSING OFFICER HELD THAT THE SET OFF OF EXCESS EXPENDITURE CLAIMED IN THE RETURN WAS NOT ALLOWED. 14. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (A) REFERRED THE DECISION OF THE JURISDICTIONAL HIGH CO URT IN THE CASE OF LD. DIRECTOR OF INCOME TAX VS. RAGHUVANSHI CHARITABLE TR UST 197 TAXMAN 170 AND DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE . 15. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEA L BEFORE US. 16. WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT O F THE MATERIAL PRODUCED AND PRECEDENT RELIED UPON. LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF TH E ASSESSEE BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF RAGHUVANSHI CHARITABLE TRUST (SUPRA). THE LD. DEPAR TMENTAL REPRESENTATIVE COULD NOT PRODUCE ANY DECISION CONTR ARY IN THIS REGARD. 17. HENCE, UPON CAREFUL CONSIDERATION, WE FIND THA T THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF D.I.T. VS. RAGHUVANSHI CHARITABLE TRUST (SUPRA) HAS HELD AS UNDER (HEADS N OTES ONLY):- ITA NO. 4081/DEL/2012 10 SECTION 11 OF THE INCOME TAX ACT, 1961 CHARITA BLE OR RELIGIOUS TRUST - EXEMPTION OF INCOME FROM PROPERTY HELD UNDER WHETHER A TRUST CAN BE ALLOWE D TO CARRY FORWARD DEFICIT OF CURRENT YEAR AND TO SET OFF SAME AGAINST INCOME OF SUBSEQUENT YEARS HELD, YES WHETHER ADJUSTMENT OF DEFICIT OF CURRENT YEAR AGAI NST INCOME OF SUBSEQUENT YEAR WOULD AMOUNT TO APPLICATION OF INCOME OF TRUST FOR CHARITABLE PURPOS ES IN SUBSEQUENT YEAR WITHIN MEANING OF SECTION 11(1)(A ) - HELD, YES. 18. IN VIEW OF THE AFORESAID EXPOSITION BY THE H ONBLE JURISDICTIONAL HIGH COURT, WE FIND THAT THERE IS NO INFIRMITY IN TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX (A), ACCORDINGLY, WE UPHO LD THE SAME. IN THE RESULT, THE ISSUE RAISED BY THE REVENUE STANDS DISMISSED. 19. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19/10/2012. SD/- SD/- [ [[ [U.B.S. BEDI U.B.S. BEDI U.B.S. BEDI U.B.S. BEDI] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 19/10/2012 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES