DCIT (E)-2(1), MUMBAI V. MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION, MUMBAI

ITA 4104/MUM/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5489 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 05-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JACINTA ZIMIK VASHAI
• Assessee Lawyers: V SRIDHARA N; S SRIRAM
• Keywords: Depreciation; Capital expenditure
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH I, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.4104/M/2017 ASSESSMENT YEAR: 2007-08 ITA NO.4132/M/2017 ASSESSMENT YEAR: 2008-09 ITA NO.4371/M/2017 ASSESSMENT YEAR: 2009-10 ITA NO.4372/M/2017 ASSESSMENT YEAR: 2010-11 ITA NO.4105/M/2017 ASSESSMENT YEAR: 2009-10 ITA NO.4106/M/2017 ASSESSMENT YEAR: 2010-11 ITA NO.4107/M/2017 ASSESSMENT YEAR: 2012-13 ITA NO.4427/M/2017 ASSESSMENT YEAR: 2013-14 ITA NO.4428/M/2017 ASSESSMENT YEAR: 2014-15 DY. COMMISSIONER OF INCOME TAX (EXEMPTIONS) 2(1), ROOM NO.519, 5 TH FLOOR, PIRAMAL CHAMBERS, LALBAUG, LOWER PAREL, MUMBAI 400 012 VS. M/S. MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION, UDYOG SARATHI, MAHAKALI CAVES ROAD, ANDHERI (EAST), MUMBAI 400 093 PAN: AAACM3560C (APPELLANT) (RE SPONDENT) PRESENT FOR: ASSESSEE BY : SHRI V. SRIDHARAN, A.R. & SHRI S. SRIRAM, A.R. REVENUE BY : SHRI JACINTA ZIMIK VASHAI, D.R. ITA NO.4104/M/2017 & ORS. M/S. MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION 2 DATE OF HEARING : 10.07.2018 DATE OF PRONOUNCEMENT : 20.07.2018 O R D E R PER BENCH: THE ABOVE TITLED APPEALS HAVE BEEN PREFERRED BY TH E REVENUE AGAINST THE COMMON ORDER DATED 31.03.2017 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER R EFERRED TO AS THE CIT(A)] RELEVANT TO VARIOUS ASSESSMENT YE ARS. 2. THE COMMON ISSUE RAISED BY THE REVENUE IN GROUND NOS.1, 2 & 3 IS AGAINST THE ORDER OF LD. CIT(A) ALLOW ING THE DEPRECIATION ON FIXED ASSETS OF RS.1,87,76,175/- WH ICH WAS DISALLOWED BY THE AO ON THE GROUND THAT THE CAPITAL EXPENDITURE INCURRED ON FIXED ASSETS WAS ALLOWED AS DEDUCTION AS APPLICATION OF INCOME AT THE TIME OF INCURRING S AID EXPENDITURE AND THEREFORE NO DEDUCTION UNDER SECTIO N 32 OF THE ACT WAS ALLOWABLE OTHERWISE SAME WOULD BE AMOU NTING TO CLAIMING DOUBLE DEDUCTION. 3. THE FACTS IN BRIEF ARE THAT AO DURING THE ASSESS MENT PROCEEDINGS OBSERVED THAT ASSESSEE HAS CLAIMED DEPR ECIATION OF RS.1,87,76,175/- ON THE FIXED ASSETS WHICH WAS ALRE ADY ALLOWED AS DEDUCTION AS APPLICATION OF INCOME FULLY AND THUS THE SAME AMOUNTED TO DOUBLE DEDUCTION. THE AO ALSO NOTED THAT THE ASSESSEE HAD CLAIMED THE DEPRECIATION AS P ER THE DECISION IN THE CASE OF CIT VS. INSTITUTE OF BANKING PERSONNEL AND SELECTION 264 ITR 110 (BOMBAY) AND FINALLY AFTE R ITA NO.4104/M/2017 & ORS. M/S. MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION 3 DISCUSSING THE ISSUE IN PARA 4.3.1 TO 4.5.5 DISALLOWED AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 4. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) ALL OWED THE APPEAL OF THE ASSESSEE BY OBSERVING AND HOLDING AS UNDER: 9.2 I HAVE CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE, GONE THROUGH THE ASSESSMENT ORDER OF THE A.O AND THE SUBMISSIONS OF THE APPELLANT AND ALSO DISCUSSED THE CASE WITH THE AR OF THE APPELLANT. TH E CONTENTIONS AND SUBMISSIONS OF THE APPELLANT ARE BEING DISCUSSED AND DECIDED HE RE IN UNDER: I. THE ASSESSING OFFICER HAS NOT TREATED THE DEPREC IATION AS APPLICATION OF INCOME ON THE GROUND THAT IT AMOUNTS TO DOUBLE DEDUCTION. APPELLANT HAS SUBMITTED THAT IN SEVERAL JUDGMENTS, DEPRECIATION HAD BEEN ALLOWED AS APPLICATION OF INCOME U/S. 11. IN THIS REGARD I FIND THAT THE ISSUE IS DIRECTLY CO VERED IN APPELLANT'S FAVOUR BY THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE O F CIT VS. INSTITUTE OF BANKING PERSONNEL 264 ITR 110 WHEREIN THE HON'BLE COURT HAS OBSERVED AS UNDER: '4. QUESTION NO. 2 HEREIN IS IDENTICAL TO THE QUEST ION WHICH WAS RAISED BEFORE THE BOMBAY HIGH COURT IN THE CASE OF DIRECTO R OF INCOME TAX (EXEMPTION) V. FRAMJEE CAWASJEE INSTITUTE (1993) 10 9 CTR 463 (BOM). IN THAT CASE, THE FACTS WERE AS FOLLOWS: THE ASSESSEE WAS THE TRUST. IT DERIVED ITS INCOME FROM DEPRECIABLE ASSETS. THE ASS ESSEE TOOK INTO ACCOUNT DEPRECIATION ON THOSE ASSETS IN COMPUTING T HE INCOME OF THE TRUST. THE INCOME TAX OFFICER HELD THAT DEPRECIATIO N COULD NOT BE TAKEN INTO ACCOUNT BECAUSE, FULL CAPITAL EXPENDITURE HAD BEEN ALLOWED IN THE YEAR OF ACQUISITION OF THE ASSETS. THE ASSESSEE WEN T IN APPEAL BEFORE THE ASSISTANT APPELLATE COMMISSIONER. THE APPEAL WA S REJECTED. THE TRIBUNAL, HOWEVER, TOOK THE VIEW THAT WHEN THE INCO ME TAX OFFICER STATED THAT FULL EXPENDITURE HAD BEEN AL/OWED IN THE YEAR OF ACQUISITION OF THE ASSETS, WHAT HE REALLY MEANT WAS THAT THE AMOUNT SP ENT ON ACQUIRING THOSE ASSETS HAD BEEN TREATED AS 'APPLICATION OF INCOME' OF THE TRUST IN THE YEAR IN WHICH THE INCOME WAS SPENT IN ACQUIRING THO SE ASSETS. THIS DID NOT MEAN THAT IN COMPUTING INCOME FROM THOSE ASSETS IN SUBSEQUENT YEARS, DEPRECIATION IN RESPECT OF THOSE ASSETS CANN OT BE TAKEN INTO ACCOUNT. THIS VIEW OF THE TRIBUNAL HAS BEEN CONFIRMED BY, TH E BOMBAY HIGH COURT IN THE ABOVE JUDGMENT, HENCE, QUESTION NO. 2 IS COVERE D BY THE DECISION OF THE BOMBAY HIGH COURT IN THE ABOVE JUDGMENT. CONSEQ UENTLY, QUESTION NO. 2 IS ANSWERED IN THE AFFIRMATIVE I.E., IN FAVOU R OF THE ASSESSEE AND AGAINST, THE DEPARTMENT. II. IN A RECENT JUDGEMENT IN CASE OF DIRECTOR OF IN COME-TAX (EXEMPTIONS), MUMBAI V. SHRI VILE PANE KELAVANI MANDAL [2015] 58 TAXMANN.COM 288 HON'BLE BOMBAY HIGH COURT HELD: 'AS FAR AS QUESTION NO.4 IS CONCERNED, THIS COURT H AS REPEATEDLY HELD THAT THERE IS NOTHING LIKE DOUBLE DEDUCTION. WHEN THE AS SESSEE HAS ACQUIRED AN ITA NO.4104/M/2017 & ORS. M/S. MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION 4 ASSET FROM THE INCOME OF THE TRUST AND THEREAFTER T HE AMOUNT THAT IS CLAIMED IS THE DEPRECIATION ON THE USE OF THE ASSET S, SUCH DEPRECIATION CLAIM DOES NOT MEAN DOUBLE DEDUCTION. THE DEDUCTION EARL IER CLAIMED IS TOWARDS APPLICATION OF FUNDS OF THE TRUST FOR ACQUIRING ASS ETS. THE LATTER IS DEPRECIATION AND IT IS PERMISSIBLE DEDUCTION CONSID ERING THE USE OF THE ASSETS. THIS HAS BEEN CLARIFIED REPEATEDLY BY THIS COURT. IF ANY REFERENCE IS REQUIRED THEN THE CASE OF CIT VS. INSTITUTE OF BANK ING PERSONNEL SELECTION (IBPS) (2003) 264 ITR 110/131 TAXMAN 386 (BOM.) IS ENOUGH. III. AO IS DIRECTED TO FOLLOW ABOVE OBSERVATIONS OF HON'BLE JURISDICTIONAL HIGH COURT TO ALLOW APPELLANT'S CLAIM OF DEPRECIATI ON AFTER DUE VERIFICATION OF FACTS. IV. FOR STATISTICAL PURPOSES THIS GROUND OF APPEAL IS ALLOWED. 5. AFTER HEARING THE RIVAL SUBMISSIONS AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT THE ISSUE IS COVER ED SQUARELY IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HO NBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. INSTITUTE O F BANKING PERSONNEL AND SELECTION (SUPRA) WHICH HAS BEEN FOLL OWED BY THE LD. CIT(A) WHILE ALLOWING THE APPEAL OF THE ASSE SSEE. THE LD. CIT(A) ALSO REFERRED TO THE DECISION OF DIRECTOR OF INCOME TAX (EXEMPTION), MUMBAI VS. SHRI VILE PARLE KELAVANI MANDAL (2015) 58 TAXMANN.COM 288 WHEREIN THE HONBLE BOMBAY HIGH COURT HAS HELD THAT THE DEPRECIATION CLAIMED I S TOWARDS THE USE OF ASSETS AND COULD NOT BE TAKEN TO MEAN AS DOUBLE DEDUCTION FIRST BY WAY OF ALLOWING THE SAME AS APPL ICATION OF INCOME AND SECONDLY BY WAY OF DEPRECIATION ON THE S AID AMOUNT OF FIXED ASSET. WE, THEREFORE, FIND NO INFIR MITY IN THE ORDER OF LD. CIT(A) AND ARE INCLINED TO AFFIRM THE S AME BY DISMISSING THE GROUNDS RAISED BY THE REVENUE. ACCO RDINGLY, THE GROUND NOS.1, 2 & 3 ARE DISMISSED. 6. THE SECOND ISSUE RAISED BY THE REVENUE FROM GROU ND NO.4 TO 6 IS AGAINST THE DECISION OF LD. CIT(A) CHA LLENGING THE ITA NO.4104/M/2017 & ORS. M/S. MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION 5 CARRY FORWARD OF DEFICIT OF RS.40,45,02,295/- AND ALLOW ING THE SET OFF AGAINST THE INCOME OF THE SUBSEQUENT YEARS. 7. THE LD. A.R., AT THE OUTSET, SUBMITTED THAT THE IS SUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE IN ITS OWN CASE BY THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUN AL IN ITA NO.4777 & 4778/M/2009 FOR A.Y. 2004-05 & 2005-06, ITA NO.6129/M/2013 FOR A.Y. 2007-08, ITA NO.6752/M/2011 F OR A.Y. 2008-09 AND ALSO BY THE DECISION OF JURISDICTIO NAL HIGH COURT FOR A.Y. 2004-05, 2005-06 & 2007-08. 8. THE LD. D.R., ON THE OTHER HAND, RELIED ON THE ORDE R OF AO. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT TH E LD. CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESSEE BY FO LLOWING THE DECISION OF THE HONBLE JURISDICTIONAL BOMBAY HIGH COURT IN THE CASE OF CIT VS. INSTITUTE OF BANKING PERSONNEL AND SELECTION (SUPRA). WE FURTHER NOTE THAT IN ASSESSEES OWN CA SE THE ISSUE HAS BEEN SETTLED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE JURISDICTIONAL BOMBAY HIGH COURT IN VARIOUS EARLIER ASSESSMENT YEARS IN ITA NO.2651 OF 2 011 FOR A.Y. 2004-05, ITA NO.2652 OF 2011 FOR A.Y. 2005-06 AND ITA NO.288 OF 2016 FOR A.Y. 2007-08. WE, THEREFORE, DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) AND ACC ORDINGLY AFFIRM THE SAME BY DISMISSING THE GROUND NOS.4 TO 6 OF THE REVENUE. ITA NO.4104/M/2017 & ORS. M/S. MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION 6 10. GROUND NOS.7 & 8 ARE GENERAL IN NATURE AND HENCE THE SAME ARE DISMISSED ACCORDINGLY. 11. IN THE RESULT, ALL THE APPEALS OF THE REVENUE A RE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20.07.2018. SD/- SD/- (MAHAVIR SINGH) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 20.07.2018. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY /ASSTT. REGISTRAR, ITAT, MUMBAI.