ITO (E)-II(1), MUMBAI V. PARMESHWARIDEVI GORDHANDAS GARODIA CHARITABLE TRUST, MUMBAI

ITA 4108/MUM/2010

• Counselvise Citation: 410819914 RSA 2010
• Duration Of Justice: 1 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 01-08-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 20-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARTHSARTHI NAIK
• Assessee Lawyers: DR K SHIVARAM
• Keywords: Depreciation; Charitable institution; Capital expenditure
• Section: 12A; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, C, MUMBAI BEFORE SHRI R V EASWAR, PRESIDENT AND SHRI B RAMAKOTAIAH, ACCOUNTANT MEMBER I T A NO: 4108/MUM/2010 (ASSESSMENT YEAR: 2007-08) INCOME TAX OFFICER (EXEMPTION) II (1) APPELLAN T VS PARMESHWARIDEVI GORDHANDAS GARODIA RESPONDENT CHARITABLE TRUST, MUMBAI (PAN: AAATP0083C) ASSESSEE BY: DR K SHIVARAM REVENUE BY: MR PARTHSARTHI NAIK DATE OF HEARING: 01.08.2011 DATE OF PRONOUNCEMENT: 10.08.2011 O R D E R R V EASWAR, PRESIDENT: THIS IS AN APPEAL BY THE DEPARTMENT AND IT RELATES TO THE ASSESSMENT YEAR 2007-08. THE FOLLOWING GROUNDS HAV E BEEN TAKEN:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LEARNED CIT(A), MUMBAI HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS.58,24,330/- MADE ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION INSPITE OF THE FACT THAT THE ASSESSEE HAD ALREADY CLAIMED THE CAPITAL EXPENDITURE ON ASSETS AS EXPENSES AND THE CLAIM OF DEPRECIATION ON ASSETS WAS IN ADDITION TO THE CAPITAL EXPENDITURE CLAIMED. ITA NO: 4108/MUM/2010 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LEARNED CIT(A), MUMBAI ERRED IN DIRECTING THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS.58,24,230/- MADE ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION NOTWITHSTANDING THE RATIO LAID DOWN BY THE SUPREME COURT IN THE CASE OF ESCORTS LTD. VS. UNION OF INDIA REPORTED IN 199 ITR 43 THAT IN NO CIRCUMSTANCES BENEFIT OF DOUBLE DEDUCTION CAN BE CLAIMED AND ALLOWED. 2. THE ASSESSEE IS A TRUST AND REGISTERED AS A CHAR ITABLE ORGANIZATION UNDER SECTION 12A OF THE INCOME TAX AC T, 1961 AND ALSO WITH THE CHARITY COMMISSIONER, MUMBAI ON 27.12 .1971. IN THE INCOME AND EXPENDITURE ACCOUNT FILED FOR THE YEAR U NDER APPEAL ALONG WITH THE RETURN OF INCOME, THE ASSESSEE CLAIM ED DEPRECIATION OF ` 58,24,330/-. THE ASSESSING OFFICER TOOK THE VIEW T HAT THE DEPRECIATION WAS NOT ALLOWABLE BECAUSE THE ASSETS O N WHICH DEPRECIATION WAS CLAIMED WERE ALREADY ALLOWED AS AP PLICATION OF INCOME FROM THE TRUST PROPERTY AS PER THE PROVISION S OF SECTION 11 OF THE ACT. THE ASSESSEE, HOWEVER, SUBMITTED THAT ACC ORDING TO THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF CIT VS. INSTITUTE OF BANKING (2003) 264 ITR 110 (BOM), THE DEPRECIATION WAS ALLOWABLE NOTWITHSTANDING THAT THE ACQUISITION OF THE ASSETS WERE ALLOWED AS APPLICATION OF INCOME UNDER SECTION 11(1)(A) OF THE ACT. THE ASSESSING OFFICER, HOWEVER, OBSERVED THAT THERE IS NO REFERENCE IN THE AFORESAID JUDGMENT TO THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF ESCORTS LTD. VS. UNION OF INDI A (1993) 199 ITR 43 (SC) WHERE DOUBLE DEDUCTION, ONCE AS COST OF THE ASSET AND AGAIN AS DEPRECIATION THEREON, WAS PROHIBITED. HE THEREFORE ADDED ITA NO: 4108/MUM/2010 3 BACK THE DEPRECIATION OF ` 58,24,330/- TO THE INCOME OF THE ASSESSEE. 3. ON APPEAL, THE CIT(A) ALLOWED THE ASSESSEES CLA IM ON THE BASIS OF THE JUDGMENT OF THE BOMBAY HIGH COURT CITE D SUPRA, AGAINST WHICH THE REVENUE HAS COME IN APPEAL. 4. WE HAVE CAREFULLY CONSIDERED THE FACTS AND THE R IVAL CONTENTIONS. IN CIT VS. INSTITUTE OF BANKING (SUPR A), THE BOMBAY HIGH COURT HELD THAT WHILE COMPUTING THE INCOME OF A TRUST, BOTH THE CAPITAL EXPENDITURE ON ACQUISITION OF ASSETS AND TH E DEPRECIATION ON THE SAID ASSETS WERE ALLOWABLE, THE CAPITAL EXPENDI TURE BEING ALLOWED AS APPLICATION OF INCOME OF THE TRUST AND D EPRECIATION BEING ALLOWABLE AS A LEGITIMATE DEDUCTION IN COMPUTING TH E REAL INCOME OF THE ASSESSEE ON GENERAL PRINCIPLES. IN COMING TO T HIS CONCLUSION THE HIGH COURT FOLLOWED ITS EARLIER DECISION IN CIT VS. MUNISUVARAT JAIN (1994) TAX LAW REPORTER 1084 (BOM). THE SUPRE ME COURT IN THE JUDGMENT CITED SUPRA HELD THAT IT IS A FUNDAMEN TAL AND UNWRITTEN AXIOM THAT NO LEGISLATURE COULD HAVE INTENDED A DOU BLE DEDUCTION IN REGARD TO THE SAME BUSINESS OUTGOING AND IF IT I S SO INTENDED, IT WILL BE CLEARLY EXPRESSED. ON THIS BASIS THE SUPRE ME COURT REFUSED TO ALLOW A DEDUCTION OF DEPRECIATION ON ASSETS USED FOR SCIENTIFIC RESEARCH, SINCE THE ACQUISITION OF THE ASSETS THEMS ELVES WERE ALLOWABLE AS DEDUCTION, EVEN THOUGH THE EXPENDITURE REPRESENTED CAPITAL EXPENDITURE. BOTH THESE JUDGMENTS HAVE BEE N CONSIDERED BY THE PUNJAB & HARYANA HIGH COURT IN A RECENT DECI SION IN CIT VS. MARKET COMMITTEE, PIPLI (2011) 330 ITR 16 (P & H). IN THIS CASE THE ASSESSEE WAS A TRUST REGISTERED UNDER THE INCOM E TAX ACT AS A ITA NO: 4108/MUM/2010 4 CHARITABLE TRUST. THE ASSESSING OFFICER DISALLOWED DEPRECIATION ON THE ASSETS ON THE GROUND THAT SINCE THE INCOME WAS EXEMPT, ALLOWING DEPRECIATION TO ASCERTAIN WHETHER THE REQU IRED PERCENTAGE OF FUNDS WERE APPLIED FOR THE PURPOSES OF THE TRUST WOULD AMOUNT TO CONFERRING DOUBLE BENEFIT. HIS VIEW WAS AFFIRMED B Y THE CIT(A) BUT THE TRIBUNAL ALLOWED THE ASSESSEES APPEAL. ON FUR THER APPEAL BY THE REVENUE TO THE HIGH COURT, IT WAS HELD THAT THE INCOME OF THE ASSESSEE BEING EXEMPT, THE ASSESSEE WAS ONLY CLAIMI NG THAT DEPRECIATION SHOULD BE REDUCED FROM THE INCOME FOR DETERMINING THE PERCENTAGE OF FUNDS WHICH HAD TO BE APPLIED FOR THE PURPOSES OF THE TRUST. THERE WAS THUS NO DOUBLE DEDUCTION CLAIMED BY THE ASSESSEE. IN COMING TO THIS CONCLUSION THE PUNJAB & HARYANA HIGH COURT, INTER ALIA, FOLLOWED THE JUDGMENT OF THE HON BLE BOMBAY HIGH COURT CITED ABOVE AND DISTINGUISHED THE JUDGMENT OF THE SUPREME COURT CITED SUPRA. IN THIS VIEW OF THE MATTER, AND RESPECTFULLY FOLLOWING THE JUDGMENT OF THE PUNJAB & HARYANA HIGH COURT AND THE BOMBAY HIGH COURT CITED ABOVE, WE AFFIRM THE DECISI ON OF THE CIT(A) AND DISMISS THE APPEAL FILED BY THE REVENUE WITH NO ORDER AS TO COSTS. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH AUGUST 2011. SD/- SD/- (B RAMAKOTAIAH) (R V EASWAR) ACCOUNTANT MEMBER PRESIDE NT MUMBAI, DATED 10 TH AUGUST 2011 SALDANHA ITA NO: 4108/MUM/2010 5 COPY TO: 1. PARMESHWARIDEVI GORDHANDAS GARODIA CHARITABLE TRUST 153, GARODIA NAGAR, GHATKOPAR (EAST) MUMBAI 400 077 2. ITO (EXEMPTION) II (1), MUMBAI 3. DIT-EXEMPTION, MUMBAI 4. CIT(A)-1, MUMBAI 5. DR C BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI