Deputy Director of Income Tax (Exemption) , Bangalore V. M/s chamundi Charity Trust, Bangalore

ITA 418/BANG/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7645 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 21-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PADMAMEENAKSHI J
• Keywords: Depreciation; Charitable institution
• Section: 143(3); 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, BENGALURU BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO , ACCOUNTANT MEMBER ITA NO. 418 /BANG/201 7 (ASSESSMENT YEAR: 2013 - 14 ) DY. DIRECTOR OF INCOME - TAX (EXEMPTIONS) , BENGA LURU. VS. APPELLANT M/S.CHAMUNDI CHARITY TRUST, BENGALURU. PAN: AAATC 1477 H RESPONDENT APPELLANT BY : SMT.PADMAMEENAKSHI, JCIT(DR) RESPONDENT BY : SHRI PRANAV KRISHNA, ADVOCATE. DATE OF HEARING : 18/07/2018 DATE OF PRONOUN CEMENT : 27 /07/2018 O R D E R PER INTURI RAMA RAO, JM : TH IS AN APPEAL FILED BY THE REVENUE DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) - 14 [CIT(A)], LTU, BENGALURU, DATED 25 / 1 1/201 6 FOR THE ASSESSMENT YEAR 201 3 - 1 4 . 2. THE REVENUE RAISED THE FOLLOWING GROUNDS OF APPEAL: ITA NO . 418 /BANG/201 7 PAGE 2 OF 5 THE REVENUE ALSO RAISED THE FOLLOWING ADDITIONAL GROUNDS: ITA NO . 418 /BANG/201 7 PAGE 3 OF 5 2. BRIEFLY THE FACTS OF THE CASE ARE THAT T HE RESPONDENT - ASSESSEE IS A CHARITABLE TRUST REGISTERED UNDER THE PROVISIONS OF THE INCO ME - TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT ] . IT IS ENGAGED IN RUNNING A SCHOOL IN KOTTAIYUR. THE R ETURN OF INCOME FOR THE ASSESSMENT YEAR 201 3 - 14 WAS FILED ON 29/09/2013 CLAIMING LOSS OF RS.2,00,71,290/ - AFTER CLAIMING EXEMPTION U/S 11 OF THE INCOME - TAX ACT, 1961 [HEREINAFTER REFERRED TO AS 'THE ACT' FOR SHORT]. AFTER PROCESSING THE RETURN OF INCOME UNDER THE PROVISIONS OF SECTION 143(1) OF THE ACT, THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT VIDE ORDER DATED 29/01/2016 . WHILE DOING SO, THE AO HAD NOT ALLOWED CARRY FORWARD OF EXCESS APPLICATION OF INCOME TO FUTURE YEARS AND HAS ALSO NOT ALLOWED DEPRECIATION AS APPLICATION OF INCOME . 3 . BEING AGGRIEVED, AN APPEAL WAS FILED BEFORE THE LD. CIT(A), WHO VIDE IMPUGNED ORDER, DIRECTED THE AO TO ALLOW SET OFF OF EXCESS EXPENDITURE WITH CURRENT YEAR S INCOME AND ALLOW CARRY FORWARD OF EXCESS APPLICATION TO SUBSEQUENT YEARS AND HAD ALLOWED DEPRECIATION AS APPLICATION OF INCOME FOLLOWING THE RATIO LAID DOWN BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SOCIETY OF THE SISTERS OF ST.ANNE (146 ITR 28) AND THE DECISION OF THE TRIBUNAL IN THE CASE OF JYOTHI CHARITABLE TRUST (60 TAXMANN.COM 165)(BANG - TRIB.). 4 . BEING AGGRIEVED BY THIS ORDER, THE REVENUE IS IN APPEAL BEFORE US IN THE PRESENT APPEALS. ITA NO . 418 /BANG/201 7 PAGE 4 OF 5 5 . WE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE RAISED BY THE REVENUE IN THE PRESENT APPEALS IS COVERED AGAINST THE REVENUE BY THE DECISION OF THE HON BLE APEX COURT IN THE CASE OF COMMISSIONER OF INCOME TA X VS. RAJASTHAN & GUJARATI CHARITABLE FOUNDATION POONA (2018)(89 TAXMAN.COM127)(SC) WHEREIN IT WAS HELD AS UNDER: 1 ......................................................... 4. QUESTION NO. 2 HEREIN IS IDENTICAL TO THE QUESTION WHICH WAS RAIS ED BEFORE THE BOMBAY HIGH COURT IN THE CASE OF DIRECTOR OF INCOME - TAX (EXEMPTION) V. FRAMJEE CAWASJEE INSTITUTE [1993] 109 CTR 463 . IN THAT CASE, THE FACTS WERE AS FOLL OWS: 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 ITO HELD THAT DEPRECIATION COULD NOT BE TAKEN INTO ACCOUNT BECAUSE, FULL C APITAL 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 ITO STATED THAT FULL EXPENDIT URE 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 AS SETS. THIS DID NOT MEAN THAT IN COMPUTING INCOME FROM THOSE ASSETS IN SUBSEQUENT YEARS, DEPRECIATION IN RESPECT OF THOSE ASSETS CANNOT BE TAKEN 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.' 2. AFTER HEARING LEARNED COUNSEL FOR THE PA RTIES, WE ARE OF THE OPINION THAT THE AFORESAID VIEW TAKEN BY THE BOMBAY HIGH COURT CORRECTLY STATES THE PRINCIPLES OF LAW AND THERE IS NO NEED TO INTERFERE WITH THE SAME. 3. IT MAY BE MENTIONED THAT MOST OF THE HIGH COURTS HAVE TAKEN THE AFORESAID VIEW WI TH ONLY EXCEPTION THERETO BY THE HIGH COURT OF KERALA WHICH HAS TAKEN A CONTRARY VIEW IN ' LISSIE MEDICAL INSTITUTIONS V. CIT [2012] 24 TAXMANN.COM 9/209 TAXMAN 19 (MAG.) /348 ITR 344 (KER.) '. ITA NO . 418 /BANG/201 7 PAGE 5 OF 5 4. IT MAY ALSO BE MENTIONED AT THIS STAGE THAT THE LEGISLATURE, REALISING THAT THERE WAS NO SPECIFIC PROVISION IN THIS BEHALF IN THE INCOME TAX ACT, HAS MADE AMENDMENT IN SECTION 11(6) OF THE ACT VIDE FINANCE ACT NO. 2/2014 WHICH BEC AME EFFECTIVE FROM THE ASSESSMENT YEAR 2015 - 2016. THE DELHI HIGH COURT HAS TAKEN THE VIEW AND RIGHTLY SO, THAT THE SAID AMENDMENT IS PROSPECTIVE IN NATURE. 5. IT ALSO FOLLOWS THAT ONCE ASSESSEE IS ALLOWED DEPRECIATION, HE SHALL BE ENTITLED TO CARRY FORWARD THE DEPRECIATION AS WELL. 6. FOR THE AFORESAID REASONS, WE AFFIRM THE VIEW TAKEN BY THE HIGH COURTS IN THESE CASES AND DISMISS THESE MATTERS. SINCE T HE DECISION OF THE CIT(A) IS IN CONSONANCE WITH THE LAW LAID BY THE HON BLE APEX COURT IN THE CASE OF RA JASTHAN & GUJARATI CHARITABLE FOUNDATION POONA (SUPRA), WE DO NOT FIND ANY FALLACY IN THE REASONING ADOPTED BY THE LD. CIT(A) AND THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE DISMISSED. 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH JULY 2018 S D/ - SD/ - (N.V.VASUDEVAN) ( INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT M EMBER PLACE : BENGALURU. D A T E D : 27 /07/2018 SRINIVASULU, SPS COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A) 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY INCOME - TAX APPELLA TE TRIBUNAL BANGALORE