ITO (E) 2(3), MUMBAI V. SADHU VASWANI MISSION BOMBAY, MUMBAI

ITA 4144/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7838 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 06-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N HEMLATHA
• Assessee Lawyers: M SUBRAMANIAN
• Keywords: Depreciation; Charitable institution; Tax effect; Capital expenditure
• Section: 11

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI , BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ./ I.T.A. NO. 4144/MUM/2017 ( / ASSESSMENT YEAR: 2013 - 14 ) ITO(E) - 2(3), ROOM NO. 513, PIRAMAL CHAMBERS, LAL BAUG, PAREL MUMBAI - 400 012 / VS. SADHU VASWANI MISSION 13/14, GEETANJALI, BEHIND RADIO CLUB, COLABA, MUMBAI - 400 005 ./ ./ PAN/GIR NO. AACTS 1706 P ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : MS. N. HEMLATHA / RESPONDENT BY : SHRI M. SUBRAMANIAN / DATE OF HEARING : 09.10.2017 / DATE OF PRONOUNCEMENT : 29.12 .2017 / O R D E R PER SHAMIM YAHYA , A. M.: T HIS IS AN APPEAL BY THE R EVENUE A RISING OUT OF THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 17.03.2017, PERTAINING TO ASSESSMENT YEAR 2013 - 14. 2. THE GROUNDS OF APPEAL READ AS UNDER : 1 . ''WHETHER ON THE FACTS OF THE CASE AND IN LAW THE ID.CLT(A) ERRED IN ALLOWING THE APPEAL OF THE ASSESSEE ON ACCOUNT OF DISALLOWING DEPRECIATION ON 2 ITA NO. 4144/MUM/2017 (A.Y. 2013 - 14) ITO(E) VS. SADHU VASWANI MISSION FIXED ASSETS OF RS. 1,01,33,995/ - IN CONTRAVENTION OF THE DECISION OF ESCORTS LTD . VS. UO1 799 ITR 43 WHEREIN IT WAS HELD THAT SINCE SECTION 77 OF THE INCOME TAX ACT PROVIDES FOR DEDUCTION CAPITAL EXPENDITURE INCURRED ON ASSETS ACQUIRED FOR THE OBJECTS OF THE TRUST AS APPLICATION AND DOES NOT SPECIFICALLY 6 1 EXPRESSLY PROVIDE FOR DOUB LE DEDUCTION ON ACCOUNT OF DEPRECIATION ON THE SAME VERY ASSETS ACQUIRED FROM SUCH CAPITAL EXPENDITURE, NO DEDUCTION SHALL BE ALLOWED U/S.32 FOR THE SAME OR ANY OTHER PREVIOUS YEAR IN RESPECT OF THAT ASSET AS IT AMOUNTS TO CLAIMING A DOUBLE DEDUCTION.' 2. 'WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE ID. CIT(A) ERRED IN ALLOWING THE APPEAL, WHEN THE DELHI HIGH COURT IN THE CASE OF CHARANJIV CHARITABLE TRUST AND KERALA HIGH COURT IN THE CASE OFLISSIE MEDICAL INSTITUTIONS VS CIT 76 DTR (KER) 372 HAS DECIDED THE ISSUE IN THE FAVOUR OF THE DEPARTMENT AFTER CONSIDERING THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF ESCORTS LTD (799 ITR 43).' 3. 'W HE THER, ON THE FACTS AND IN THE CIRCUMSTANCES OF (HE CASE AND IN LAW, THE L D. CIT (A) ERRED IN ALLOWING T H E DEPRECIATION CLAIM OF THE ASSESSEE B \ J RELYING UPON THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF INSTITUTE OF BANKING PERSONNEL SELECTION, IGNORING THE FACT THAT THE DEPARTMENT LIAS NOT ACCEPTED THE SAID DECISIO N O) THE JURISDICTIONAL HIGH COURT ON MERIT OF THE CASE, BUT DUE TO SMALLNESS OF TAX EFFECT APPEAL WAS NOT FILED BEFORE HON'BLE SUPREME COURT. ALSO, THE ID CIT (A) ERRED IN RELYING UPON THE JUDGMENT OF HON'BLE HIGH COURT IN THE CASE OF CIT VS. SHRI VILE - PA RLE KELVANI MANDAL, WITHOUT APPRECIATING THE FACT THAT DEPARTMENT HAS NOT ACCEPTED THE DECISION ON MERIT AND FILED SLP, BUT SUBSEQUENTLY WITHDRAWN THE SAME AS THERE WAS NO CLAIM OF DEPRECIATION ON EXEMPTED ASSETS. MOREOVER, THE REVENUE HAS FILED SLPS ON TH IS ISSUE IN OTHER CASES INCLUSIVE THE CASE OF G.D. BIRLA MEDICAL RESEARCH 6 1 EDUCATIONAL FOUNDATION (S.L.P.(C) NO. 24904 OF 20'16(C.A.NO.S294 OF 2016) AND IN THIS CASE LEAVE HAS BEEN GRANTED IN/ THE HOJI'BLE APEX COURT AND IN ALL CASES ISSUE IS PENDING FOR ADJUDICATION BEFORE THE HON'BLE APEX COURT.. 4. 'THE APPELLANT PRAYS THAT THE ORDER OF THE COMMIS SIONER OF INCOME TAX (APPEALS) - I, MUMB AI BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED.' 3. THE ASSESSEE IN THIS CASE IS A TRUST. THE ISSUE AR ISING OUT OF THE ABOVE GROUNDS OF APPEAL RELATES TO DISALLOWANCE OF THE DEPRECIATION. 4. I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. IT TRANSPIRES THAT UPON ASSESSING OFFICERS DISALLOWANCE ON THE ABOVE SAID ISSUE, THE LD. COMMISSIONER OF 3 ITA NO. 4144/MUM/2017 (A.Y. 2013 - 14) ITO(E) VS. SADHU VASWANI MISSION INCOM E TAX (APPEALS) HAS ALLOWED THE ASSESSEES APPEAL BY FOLLOWING THE HON'BLE JURISDICTIONAL HIGH COURT DIRECT DECISION ON THE ISSUE . BOTH THE COUNSEL FAIRLY AGREED THAT TH IS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HON'BLE JURISDICTIONA L HIGH COURT RELIED UPON BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS). THE R EVENUE HAS ALSO AGREED TO THIS IN THE GROUNDS FOR APPEAL RAISED HEREIN ABOVE , AS IT IS MENTIONED THAT DEPARTMENT HAS NOT ACCEPTED THE HONBLE HIGH COURT S DECISION ON THIS ISSUE . BE AS IT MAY , THE HONBLE J URISDICTIONAL HIGH COURT DECISION IS BINDING UPON THE ITAT. IN THIS REGARD , I MAY GAINFULLY REFER TO THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ON T HE ISSUE AS UNDER : DISALLOWANCE OF DEPRECIATION; THE LD CIT (A) HAS HELD AS UNDER : 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 APPELLANT AND ALSO DISCUSSED THE CASE WITH THE AR OF THE APPELLANT. THE CONTENTIONS AND SUBMISSI ONS OF THE APPELLANT ARE BEING DISCUSSED AND DECIDED HERE IN UNDER: I. AFTER CAREFUL CONSIDERATION OF THE FACTS AND THE LEGAL POSITION, I FIND THAT THE CASE OF THE APPELLANT IS DIRECTLY COVERED BY THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CA SE OF 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 QUESTION WHICH WAS RAISED BEFORE THE BOMBAY HIGH COURT IN THE CASE OF DIRECTOR OF INCOME TAX (EXEMPTION) V. FRA MJEE CAWASJEE INSTITUTE (1993) 109 CTR 463 (BOM). IN THAT CASE, THE FACTS WERE AS FOLLOWS: THE ASSESSEE WAS THE TRUST. IT DERIVED ITS INCOME FROM DEPRECIABLE ASSETS. THE ASSESSEE TOOK INTO ACCOUNT DEPRECIATION ON THOSE ASSETS IN COMPUTING THE INCOME OF THE TRUST. THE INCOME TAX OFFICER HELD THAT DEPRECIATION COULD NOT BE TAKEN INTO ACCOUNT BECAUSE, FULL CAPITAL EXPENDITURE HAD BEEN ALLOWED IN THE YEAR OF ACQUISITION OF THE ASSETS. THE ASSESSEE WENT IN APPEAL BEFORE THE ASSISTANT APPELLATE COMMISSIONER. THE APPEAL WAS REJECTED. THE TRIBUNAL, HOWEVER, TOOK THE VIEW THAT WHEN THE INCOME TAX 4 ITA NO. 4144/MUM/2017 (A.Y. 2013 - 14) ITO(E) VS. SADHU VASWANI MISSION OFFICER STATED THAT FULL EXPENDITURE HAD BEEN ALLOWED IN THE YEAR OF ACQUISITION OF THE ASSETS, WHAT HE REALLY MEANT WAS THAT THE AMOUNT SPENT 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 THOSE ASSETS. THIS DID NOT MEAN THAT IN COMPUTING INCOME FROM THOSE ASSETS IN SUBSEQUENT YEARS, DEPRECIATION IN RESPECT OF THOSE ASSETS CANNOT BE TA KEN INTO ACCOUNT. THIS VIEW OF THE TRIBUNAL HAS BEEN CONFIRMED BY, THE BOMBAY HIGH COURT IN THE ABOVE JUDGMENT. HENCE, QUESTION NO. 2 IS COVERED BY THE DECISION OF THE BOMBAY HIGH COURT IN THE ABOVE JUDGMENT. CONSEQUENTLY, QUESTION NO. 2 IS ANSWERED IN THE AFFIRMATIVE I.E., IN FAVOUR OF THE ASSESSEE AND AGAINST, THE DEPARTMENT. II. IN A RECENT JUDGEMENT IN CASE OF DIRECTOR OF INCOME - TAX (EXEMPTIONS), MUMBAI V. SHRI VILE PARLE KELAVANI MANDAL [2015] 58 TAXMANN.COM 288 HON'BLE BOMBAY HIGH COURT HELD: 'AS FAR AS QUESTION NO.4 IS CONCERNED, THIS COURT HAS REPEATEDLY HELD THAT THERE IS NOTHING LIKE DOUBLE DEDUCTION. WHEN THE ASSESSEE HAS ACQUIRED AN ASSET FROM THE INCOME OF THE TRUST AND THEREAFTER THE AMOUNT THAT IS CLAIMED IS THE DEPRECIATION ON THE USE OF THE ASSETS, SUCH DEPRECIATION CLAIM DOES NOT MEAN DOUBLE DEDUCTION. THE DEDUCTION EARLIER CLAIMED IS TOWARDS TOWARDS APPLICATION OF FUNDS OF THE TRUST FOR ACQUIRING ASSETS. THE LATTER IS DEPRECIATION AND IT IS PERMISSIBLE DEDUCTION CONSIDERING THE USE OF THE ASSETS. THIS HAS BEEN CLARIFIED REPEATEDLY BY THIS COURT. IF ANY REFERENCE IS REQUIRED THEN THE CASE OF CIT V. INSTITUTION OF BANKING PERSONNEL SELECTION (IBPS) [2003] 264 ITR 110/131 TAXMAN 386 (BOM.) IS ENOUGH.' III. RESPECTFULLY FOLLOWING THE ABOVE OB SERVATIONS OF HON'BLE JURISDICTIONAL HIGH COURT, THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE CLAIM OF DEPRECIATION OF RS. 1,01,33,995/ - AS APPLICATION OF INCOME U/S. 11 OF THE I. T. ACT, TO THE APPELLANT AFTER DUE VERIFICATION OF FACTS. 5. SINCE THE LD . COMMISSIONER OF INCOME TAX (APPEALS) HAS FOLLOWED THE HON'BLE JURISDICTIONAL HIGH COURT DECISION MENTIONED HERE - IN - ABOVE , I DO NOT FIND ANY INFIRMITY IN THE SAME. HENCE , I U PHOLD THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS). 5 ITA NO. 4144/MUM/2017 (A.Y. 2013 - 14) ITO(E) VS. SADHU VASWANI MISSION 6. IN THE RESULT , TH IS APPEAL FILED BY THE R EVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29.12.2017 SD/ - (S HAMIM YAHYA ) / A CCOUNTANT MEMBER MUMBAI ; DATED : 29.12.2017 . . ./ ROSHANI , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI