JCIT, Noida V. M/s. Vocational Education Foundation, Greater Noida

ITA 4230/DEL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74084 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2008-2009
• Appeal Filed On: 11-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAMEER SHARMA
• Keywords: Depreciation; Charitable institution
• Section: 12A; 32; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH H: NEW DELHI) BEFORE SHRI J. S. REDDY, ACCOUNTANT MEMBER AND SHRI A. T. VARKEY, JUDICIAL MEMBER ITA NO.4230 /DEL/ 2013 (ASSESSMENT YEAR :2008-09) JCIT VS. VOCATIONAL EDUCATION FOUNDATION RANGE-3 PLOT NO.4, INSTITUTIONAL AREA KNOWLEDGE PARK-1, GREATER NOIDA. NOIDA. GREATER NOIDA. PAN:AAATV0779R (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE. REVENUE BY : SHRI SAMEER SHARMA, SR. DR. ORDER PER J. S. REDDY, AM: THIS IS AN APPEAL FILED BY THE REVENUE DIRECTED AG AINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) NOIDA, U.P VIDE DATED 05.04.2013 FOR THE ASSESSMENT YEAR 2008-09. 2. NONE APPEARED ON BEHALF OF THE ASSESSEE DESPITE ISSUED OF NOTICE. THERE IS NO PETITION FOR ADJOURNMENT EITHER. UNDER THE CIRCUMSTANCES WE DISPOSE OF THE CASE EX-PARTE ON MERITS QUA THE ASSE SSEE. 3. HEARD THE LD. DEPARTMENTAL REPRESENTATIVE MR. SA MEER SHARMA. 4. WE EXTRACTED PARA 2 AND 3 FOR READY REFERENCE: ITA NO.4230 /DEL/2013 2 2. THE ASSESSEE IS RUNNING A INSTITUTION AT GREATE R NOIDA, WHICH IS ENGAGED IN THE PROFESSION OF IMPARTING HIG HER PROFESSIONAL EDUCATION. THE HIGHER EDUCATION INCLUD ING PROFESSIONAL COURSES IS ALSO SUBJECTED TO THE RULES AND REGULATIONS AS PER NORMS OF THE STATE AND CENTRAL G OVERNMENT. THE FACTS OF THE CASE AND THE SUBMISSION MADE BY TH E ASSESSEE HAVE BEEN CONSIDERED CAREFULLY, AS THE ASSESSEE HAS BEEN GRANTED REGISTRATION U/S 12A BY THE LD. CIT, MEERUT VIDE CERTIFICATE NO. C. NO. (23)/ REGISTRATION/ NOIDA/ 9 7-98/17351 DATED 23.10.1997 HENCE ASSESSEE IS GRANTED EXEMPTIO N U/S 11 OF THE I. T. ACT, 1961. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT W AS NOTICED THAT THE ASSESSEE HAS CLAIMED DEPRECIATION OF RS.2,79,58,973/- AS APPLICATION OF INCOME U/S 12 OF THE ACT. THE ASSESSEE WAS SPECIFICALLY WAS ASKED VIDE ORDER SHEET DATED 01.11.2010 THAT WHY DEPRECIATION CLAIMED AS APPLICA TION OF INCOME SHOULD NOT BE DISALLOWED, SINCE THE SOCIETY IS NOT CARRYING A BUSINESS. IN COMPLIANCE TO ASSESSEE SUBM ITTED WRITTEN REPLY VIDE LETTER DATED 26.11.2010. REPLY O F THE ASSESSEE HAS BEEN CONSIDERED. ASSESSEE HAS QUOTED VARIOUS CO URT DECISIONS IN FAVOUR OF ITS CLAIM INCLUDING: CIT VS. SOCIETY OF SISTER OF ST. ANNE-1984 146 ITR 28 (KAR) CIT VS SHETH MANILAL RANCHHOEEAS VISHRAM BHAWAN TRU ST- (1992) 198 ITR 599 (GUJ) CIT VS. PROGRAMME FOR COMMUNITY ORGANISATION 248 IT R 1(S.C) SHRI MADWALLABH VISHNU DHARMASANSTHA VS. ADDL. CIT 102 TTJ 693 AHMEDABAD. CITY MONTESSORI SCHOOL VS. ACIT 64 TTJ (ALL) 475. CIT VS. PROGRAMME FOR COMMUNITY ORGANIZATION 228 IT R 620 (KER) NONE OF THESE CASES ARE OF JURISDICTIONAL ALLAHABAD HIGH COURT. MOREOVER, WHAT SUPREME COURT HAS HELD IN THE CASE O F PROGRAMME FOR COMMUNITY ORGANIZATION 248 ITR 1 IS T HAT THE INCOME OF THE TRUST SHOULD BE COMPUTED IN COMMERCIA L MANNER. ITA NO.4230 /DEL/2013 3 IT NO WHERE STATES THAT DEPRECIATION CAN BE ALLOWED AS APPLICATION OF INCOME IN THE HANDS OF THE ASSESSEE. GOING BY THE LEGAL POSITION IN ASSESSEES OWN CASE IN THE A. Y. 2005-06, AFTER CONSIDERING THE FACTS OF CASE, APPEAL TO THE ITAT H AS BEEN FILED ON THE SAME ISSUE. IN VIEW OF THE FOREGOING LEGAL POSITION, DEPRECIAT ION CANNOT BE ALLOWED AS APPLICATION OF INCOME FOR THE REASONS AS DISCUSSED HERE-UNDER: I. THE DEPRECIATION ALLOWANCE BEING NOTIONAL EXPEND ITURE CANNOT BE DEBITED TO EXPENDITURE ACCOUNT OF THE ASS ESSEE AS WHAT IS TO BE COMPUTED IS APPLICATION OF INCOME AND NOT EXPENSE. SINCE APPLICATION IS NOT DEFINED IN THE AC T, ITS MEANING HAS TO BE TAKEN FROM OXFORD ENGLISH DICTIONARY AS P ER WHICH APPLICATION MEANS THE BRINGING OF A GENERAL OR FIG URATIVE STATEMENT. THE ACTION OF BRINGING SOMETHING INTO MATERIAL OR EFFECTIVE CONTRACT WITH SOMETHING ELSE, TO USE A ND OTHER MEANINGS WHICH ARE NOT DIRECTLY RELEVANT IN THE ABO VE CASE. THE MEANINGS CLEARLY REFLECT THAT APPLICATION DOES NOT MEAN ANY THING NOTIONAL BUT A CONCRETE APPLICATION OF INCOME . THIS IS NOT THE CASE IN CASE OF DEPRECIATION, AS DEPRECIATION I S NOT A DIRECT OUT-FLOW OF FUNDS BUT IS A COMPENSATION FOR FUTURE EXPENDITURE BY A BUSINESS UNIT ON FIXED ASSETS. IN CASE OF A SO CIETY, SINCE CAPITAL EXPENSE ITSELF AT THE FIRST STAGE OF EXPEND ITURE IS ALLOWED AS APPLICATION, THEREFORE, FURTHER ALLOWANCE OF DEP RECIATION AS APPLICATION OF INCOME WOULD AMOUNT TO DOUBLE DEDUCT ION AND HENCE THIS NOTIONAL EXPENDITURE ON DEPRECIATION IS DISALLOWED AS DOUBLE APPLICATION OF SAME AMOUNT. II. DEPRECIATION IS A SPECIFIC ALLOWANCE WHICH HAS BEEN PROVIDED U/S 32 OF THE INCOME TAX ACT AND THUS HAS BEEN SPECIFICALLY PROVIDED FOR CALCULATION OF INCOME U/S 28 I.E INCOME UNDER THE HEAD BUSINESS AND PROFESSION. IN SECTION 11, WE ARE NOT COMPUTING INCOME UNDER THE HEAD BUS INESS AND PROFESSION BUT ONLY INCOME FROM PROPERTY HELD UN DER THE TRUST. THIS CAN NEVER BE TAKEN TO BE SAME AS INCO ME FROM BUSINESS & PROFESSION. ITA NO.4230 /DEL/2013 4 III. AS PER A DEPARTMENTAL CIRCULAR INCOME HAS TO B E COMPUTED IN A COMMERCIAL MANNER. HOWEVER THE QUESTI ON ARISES WHETHER AN ASSET WHOSE ENTIRE COST HAS BEEN ALLOWED AS DEDUCTION BY WAY OF EXEMPTION U/S 11 SHOULD BE CONS IDERED FOR THE BENEFIT OF DEPRECIATION. THIS ISSUE HAS BEEN DE CIDED BY THE HONBLE SUPREME COURT IN THE CASE OF ESCORTS LTD. V S. UNION OF INDIA 1993, 199 ITR PAGE 43, THE HONBLE SUPREME CO URT IN THIS CASE HAS DECIDED THAT DOUBLE TAX OR WEIGHTED D EDUCTION CANNOT BE INFERRED. WHERE-EVER THE LEGISLATURE WANT ED TO GIVE SUCH DEDUCTION, IT HAS SPECIFICALLY SAID SO. THE HO NBLE COURT HAS OBSERVED THAT THE DOUBLE DEDUCTION CANNOT BE A MATTER OF INFERENCE. IT MUST BE PROVIDED FOR IN CLEAR AND EXP RESS LANGUAGE WITH REGARD TO THE FACT OF ITS UN-USUAL NATURE AND ITS SERIOUS IMPACT ON THE REVENUE OF THE STATE. THEREFORE, IT I S REASONABLE TO COME TO THE CONCLUSION THAT IN THE ABSENCE OF EX PRESSED PROVISION, DEPRECIATION CANNOT BE ALLOWED ON ASSETS WHOSE COST HAS ALREADY BEEN ALLOWED AS APPLICATION. THE DEPRECIATION CALIM AS APPLICATION OF INCOME, HA S BEEN DISALLOWED EARLIER BY THE ASSESSING OFFICER I.E FOR THE A. Y. 2001-02 TO 2005-06 AND DEPARTMENT HAS FILED 2 ND APPEAL ON THE SAME ISSUE IN ASSESSEES OWN CASE. THUS THE DEPRECI ATION AMOUNTING TO RS.2,79,58,973/- AS APPLICATION OF FUN DS IS NOT ALLOWED. ACCORDINGLY, DEPRECIATION OF RS.2,79,58,97 3/- IS NOT TREATED AS APPLICATION OF INCOME U/S 11 OF THE ACT. ADDITION:RS.2,79,58,973/- FURTHER THE ASSESSEE HAS ALSO CLAIMED, THE EXCESS A PPLICATION MADE DURING THE YEAR AND EXCESS APPLICATION OF INCO ME OF EARLIER YEARS TO BE CARRIED FORWARD AND TO BE SET O FF AGAINST THE FUTURE INCOME. THE ASSESSEES CLAIM TO CARRY FORWAR D THE EXCESS APPLICATION IS NOT ALLOWED BECAUSE AS PER PROVISION U/S 11 OF IT ACT, 1961 NO SUCH CARRY FORWARD OF EXCESS APPLICATI ON IS ALLOWABLE. 5. AGGRIEVED, THE REVENUE IS IN APPEAL ON THE FOLLO WING GROUNDS: ITA NO.4230 /DEL/2013 5 1. THAT THE CIT (A) HAS ERRED IN LAW AND IN FACTS BY HOLDING THAT DEPRECIATION OF RS.2,79,58,973/- DEBITED TO IN COME & EXPENDITURE ACCOUNT IS AN ALLOWABLE EXPENDITURE U/ S 11 OF THE I. T. ACT,1961, WITHOUT APPRECIATING FACTS THAT DEP RECIATION IS NOT A REAL EXPENDITURE BUT A NOTIONAL EXPENDITURE O NLY. 2. THAT THE CIT (A) HAS ERRED IN LAW AND ON FACTS B Y HOLDING THAT THE SOCIETY IS ALLOWED TO CARRY FORWARD EXCESS APPLICATION OF CURRENT YEAR AND TO SET OFF THE SAME AGAINST THE INCOME OF THE SUBSEQUENT YEARS, WITHOUT APPRECIATING THE FACT THA T AS PER PROVISION OF SECTION U/S11, NO SUCH CARRY FORWARD E XCESS APPLICATION OF CURRENT YEAR AND TO SET OFF THE SAME AGAINST THE INCOME OF THE SUBSEQUENT YEARS, WITHOUT APPRECIATIN G THE FACT THAT AS PER PROVISION OF SECTION U/S 11, NO SUCH CA RRY FORWARD OF EXCESS APPLICATION IS ALLOWABLE. 3. THAT THE ORDER OF CIT (A) DESERVES TO BE SET ASI DE AND THE ORDER OF THE ASSESSING OFFICER BE RESTORED. 6. AFTER CONSIDERING THE SUBMISSIONS OF THE LD. DEP ARTMENTAL REPRESENTATIVE, WE HOLD AS FOLLOWS: I HAVE CAREFULLY, CONSIDERED THE APPELLANTS SUBM ISSION IN THIS REGARD AND RESPECTFULLY FOLLOWING THE JUDGMENT DATE D 19/11/2010 PASSED BY THE HONBLE ITAT, DELHI BENCH- H, NEW DELHI IN ITA NO. 1708 TO 1711-IT/ DEL/2010 FOR THE A. YS. 2001-02, 2002-03, 2004-05 & 2005-06 WHEREBY THE TRI BUNAL HAS DISMISSED THE APPEAL FILED BY THE DEPARTMENT, I T IS HELD THAT THE AMOUNT OF DEPRECIATION DEBITED TO THE ACCOUNT O F CHARITABLE INSTITUTIONS IS TO BE ALLOWED AS DEDUCTION TO ARRIV E AT THE INCOME AVAILABLE FOR APPLICATION TO CHARITABLE OR RELIGIOU S PURPOSES. ACCORDINGLY THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DEPRECIATION OF RS.2,79,58,973/- AS C LAIMED BY THE ASSESSEE IS HEREBY DELETED. ITA NO.4230 /DEL/2013 6 7. THE HONBLE DELHI HIGH COURT HAS APPROVED SAME V IEW TAKEN BY THE ITAT ON THIS ISSUE. THUS WE DO NOT FIND ANY INFIRMI TY IN THE ORDER OF THE FIRST APPELLATE AUTHORITY. IN THE RESULT GROUND NO.1 DECI DED AGAINST THE ASSESSEE. 8. IN GROUND NO.2, THE LD. CIT (A) HAS AT PAGE 14 HELD AS FOLLOWS: IN THE LIGHT OF ABOVE JUDGMENT OF HONBLE HIGH COU RT THE APPELLANT HAS PLEADED THAT SINCE THERE WAS NO CONTR ARY JUDGMENT OF ANY OTHER HIGH COURT OF THE COUNTRY, THEN THE PR ESENT JUDGMENT GIVEN BY THE HONBLE DELHI HIGH COURT BECO MES THE LAW OF LAND AND NEEDS TO BE FOLLOWED BY ONE AND ALL . I HAVE GONE THROUGH THE SUBMISSION OF THE APPELLANT AND ON CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, RESPECTFULLY FOLLOWING THE JUDGMENT OF HONBLE DELH I HIGH COURT IN THE CASE OF DIRECTOR OF INCOME TAX VS. RAG UVANSHI CHARITABLE TRUST IN ITA NO. 1075 OF 2008 DATED 27/1 0/2010, THE APPELLANT SOCIETY IS ALLOWED TO CARRY FORWARD T HE DEFICIT OF THE CURRENT YEAR AND TO SET OFF THE SAME AGAINST TH E INCOME OF THE SUBSEQUENT YEARS. 9. THE LD. DR COULD NOT CITE ANY CONTRARY DECISION. HENCE WE UPHOLD HIS ORDER OF THE LD. CIT (A) AND DISMISS THIS APPEAL OF THE ASSESSEE. ORDER PRONOUNCED IN THE OPEN COURT ON 28 .01.2014 A FTER CONCLUSION OF THE HEARING. SD/- SD/- (A. T. VARKEY) (J. S. REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 28 TH DAY OF JANUARY, 2014 S.SINHA COPY FORWARDED TO ITA NO.4230 /DEL/2013 7 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. CIT(ITAT), NEW DELHI. AR,ITAT NEW DELHI.