The DCIT (Exemptions), Circle-2, Ahmedabad V. Sardar Patel Education Trust, Anand

ITA 424/AHD/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 2407 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 20-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LALIT P JAIN
• Keywords: Capital asset; Business income; Depreciation; Charitable institution; Capital expenditure
• Section: 12A; 32; 28; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER & SHRI AMARJIT SINGH, ACCOUNTANT MEMBER) ITA. NO: 424/AHD/2017 (ASSESSMENT YEAR: 2012-13) DEPUTY COMMISSIONER OF INCOME-TAX (EXEMPTIONS), CIRCLE-2, AHMEDABAD V/S SARDAR PATEL EDUCATION TRUST C/O. C.P. PATEL & F.H.SHAH COMMERCE COLLEGE, BHALEJ ROAD, ANAND-388001 (APPELLANT) (RESPONDENT) PAN: AABTS2321M APPELLANT BY : SHRI LALIT P JAIN, SR. D. R. RESPONDENT BY : NONE ( )/ ORDER DATE OF HEARING : 24-08-2018 DATE OF PRONOUNCEMENT : 30-08-2018 PER MAHAVIR PRASAD, JUDICIAL MEMBER 1. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-9, AHMEDABAD DATED 06.12.2016 PERTAINING TO A.Y. 2012- 13 AND FOLLOWING GROUNDS HAVE BEEN TAKEN: ITA NO. 424/ AHD/2017 . A.Y. 2012-13 2 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE IS THE LD. CIT (A) JUSTIFIED IN ALLOWING THE DEPRECIATION OF RS.84,35, 041/-WHICH AMOUNT TO DOUBLE DEDUCTION AS 100% DEDUCTION WAS ALREADY ALLOWED TO THE ASSESSEE AS APPLICATION OF INCOME. 2.ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ID. COMMISSIONER OF INCOME-TAX (APPEAL) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSE SSING OFFICER. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE A SSESSEE TRUST IS VERY OLD TRUST ENGAGED IN THE EDUCATIONAL ACTIVITIES AT ANAND. THE TRUST CLAIMS EXEMPTION U/S 11 OF THE I.T. ACT. THE ASSESSEE TRUST IS REGISTERE D UNDER SECTION 12A OF THE ACT, VIDE REGISTRATION NO-BRD/EXEMPTION/110-16-S/99-2000 DATED 26-11-1999. THE TRUST IS ALSO REGISTERED U/S 80G(5) OF THE INCO ME TAX ACT, 1961. 3. IT WAS SEEN THAT THE TRUST HAS CLAIMED DEPRECIATION TO THE EXTENT OF RS. 84,35,041/- FOR THE RELEVANT PERIOD. THE AR OF THE ASSESSEE WAS ASKED BY THE A.O. AS TO WHY THE CLAIM OF DEPRECIATION SHOULD NOT BE DISALLOWED IN VIEW OF THE FACT THAT CAPITAL EXPENDITURE IS ALLOWED AS APP LICATION OF INCOME IN CASE OF A TRUST. 4. THEREAFTER FOLLOWING REPLY WAS FILED BY THE LD. A.R . : AS REGARDS THE SHOW CAUSE AS TO WHY DEDUCTION ON AC COUNT OF DEPRECIATION CLAIMED BY THE TRUST SHOULD NOT BE DISALLOWED TREAT ING THE SAME AS DOUBLE DEDUCTION AS THE ASSESSEE TREATS CAPITAL EXPENDITUR E ON ACQUISITION OF ASSETS AS APPLICATION OF INCOME U/S 11 OF THE ACT, IT IS RESP ECTFULLY SUBMITTED THAT THE SAME IS PERMISSIBLE IN VIEW OF THE FOLLOWING JUDICIAL PRONO UNCEMENT WHEREIN IT HAS BEEN SPECIFICALLY AND UNAMBIGUOUSLY HELD AS FOLLOWS: - ALLOWING DEPRECIATION IN THE COMPUTATION OF INCOME TO BE APPLIED WILL NOT LEAD TO A DOUBLE DEDUCTION: - DEDUCTION OF DEPRECIATION IS DIFFERENT FROM APPL ICATION OF INCOME, AS HAS BEEN EXPLAINED IN FOLLOWING CASE LAW S: - ITA NO. 424/ AHD/2017 . A.Y. 2012-13 3 IN CIT V/S RAIPUR PALLOTTINE SOCIETY 180ITR 579 (MP ), IT WAS HELD THAT DEPRECIATION ON ASSETS HELD BY ASSESSEE-TRUSL PROVI DED IN BOOKS OF ACCOUNTS IS ALLOWABLE. IF DEPRECIATION IS NOT ALLOWED AS A NECE SSARY DEDUCTION FOR COMPUTING THE INCOME OF CHARITABLE INSTITUTION, THEN THERE WO ULD BE NO WAY TO PRESERVE THE CORPUS OF THE TRUST FOR DERIVING INCOME. THE REVENU E'S CONTENTION THAT DEPRECIATION UNDER SEC. 32 OF THE ACT COULD BE ALLO WED ONLY WHEN INCOME WAS COMPUTED UNDER THE HEAD 'BUSINESS' FALLING UNDER SE C. 28 OF THE ACT WAS NOT ACCEPTED AND IN THIS REGARD, THE COURT RELIED ON TH E OBSERVATIONS OF THE KARNATAKA HIGH COURT IN CIT VS. SOCIETY OF THE SISTERS OF ST. ANNE 146 ITR 28 (KAR). IN DIRECTOR OF INCOME TAX (EXEMPTION) V/S FRAMJEE C AWASJEE INSTITUTE 109 CTR 463 (BOM), THE COURT HELD THAT DEPRECIATION ON DEPRECIABLE AS SETS HAD TO BE TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE TRUST ALTHOUGH THE AMOUNT SPENT ON ACQUIRING SUCH ASSETS HAD BEEN TREATED AS APPLICATI ON OF INCOME OF TRUST IN THE YEAR IN WHICH ASSETS WERE ACQUIRED. THE TRIBUNAL HA D CLARIFIED THE POSITION BY STATING THAT: 'WHEN THE ITO SAYS THAT FULL EXPENDIT URE HAS BEEN ALLOWED IN THE YEAR OF THE ACQUISITION OF THE ASSETS, WHAT HE REAL LY MEANS IS THAT THE AMOUNT SPENT ON ACQUIRING THESE ASSETS HAD BEEN TREATED AS APPLI CATION OF INCOME OF THE TRUST IN THE YEAR IN WHICH THE INCOME WAS SPENT IN ACQUIRING THESE ASSETS. THIS DOES NOT MEAN THAT IN COMPUTING INCOME FROM THOSE ASSETS IN SUBSEQUENT YEARS, DEPRECIATION IN RESPECT OF THOSE ASSETS CANNOT BE T AKEN INTO ACCOUNT.' AS THE POSITION WAS CLEAR, THE COURT DECLINED THE REFERENC E. IN CIT V/S TINY TOTS EDUCATION SOCIETY 330 ITR 21 ( P&H), THE COURT HELD THAT DEPRECIATION IS ALLOWABLE ON CAPITAL ASSETS FROM TH E INCOME OF CHARITABLE TRUST FOR DETERMINING THE QUANTUM OF FUNDS WHICH HAVE TO BE A PPLIED FOR THE PURPOSES OF THE TRUST IN TERMS OF SEC. 11. THE PROVISION RELATING T O COMPULSORY APPLICATION OF INCOME IS ALTOGETHER A DIFFERENT CONCEPT AND WOULD COME INTO PLAY ONLY AFTER THE INCOME IS DETERMINED. IN DETERMINING THE INCOME, DE PRECIATION HAS TO BE TAKEN INTOACCOUNT. APPLICATION OF INCOME IS NOT COMPUTATI ON OF INCOME OF THE CHARITABLE INSTITUTION. THEREFORE, THE QUESTION WHETHER DEPRECIATION IS TO BE ALLOWED OR NOT HAS NOTHING TO DO WITH THE APPLICATION OF INCOME. I NCOME IS ALWAYS TO BE COMPUTED ON COMMERCIAL PRINCIPLES AND AS PER SYSTEM OF ACCOUNTING FOLLOWED BY THE ASSESSEE, SUBJECT ALWAYS TO THE STATUTORY PROVI SIONS. A SIMILAR VIEW HAS BEEN HELD IN CIT V/S MARKET COMM ITTEE, PIPLI 330 ITR 16 (P&H) WHEREIN DEPRECIATION WAS ALLOWED ON CAPITAL ASSETS OF THE CHARITABLE TRUST FOR DETERMINING THE QUANTUM OF FUNDS TO BE APPLIED FOR THE PURPOSES OF THE TRUST IN TERMS OF SEC. 11. THE COURT WAS OF THE VIEW THAT DE PRECIATION IN CASE OF TRUSTS WAS NOT A DOUBLE DEDUCTION AS IT WAS NOT AN EXPENDITURE ; IT ONLY REDUCED THE PERCENTAGE OF FUNDS AVAILABLE FOR CHARITABLE OR REL IGIOUS PURPOSES. IT NEGATIVED ITA NO. 424/ AHD/2017 . A.Y. 2012-13 4 THE CLAIM OF THE REVENUE WHICH RELIED ON THE DECISI ON IN ESCORTS LTD. V/S UNION OF INDIA (1993) 199 ITR 43 (SC). THE ESCORTS LTD. CASE WAS DISTINGUISHED BY THE P&H COURT IN MARKET COMMITTEE, PIPLI (SUPRA), WHEREIN THE HIGH COURT DISTINGUISHED THE CASE AS F OLLOWS: IN THE ESCORTS CASE, TWO DEDUCTIONS -WERE CLAIMED U NDER BOTH SECTIONS 32 (1) (II) AND 35(1)(IV) OF THE ACT. THE ASSESSEE THEREIN HAD INCURRED EXPENDITURE OF A CAPITAL NATURE ON SCIENTIFIC RESEARCH RELATING TO T HE BUSINESS WHICH RESULTED IN ACQUISITION OF AN ASSET, AND HAD CLAIMED DEPRECIATI ON ON THE ASSET UNDER SECTION 32 AND 100% DEDUCTION AS EXPENDITURE ON SCIENTIFIC RESEARCH UNDER SECTION 35(L)(IV). THE APEX COURT HAD OBSERVED THAT: '.... WHERE A CAPITAL ASSET USED FOR SCIENTIFIC RESEARCH RELATED TO THE BUSINESS OF THE ASSESSEE IS ALSO IPSO FACTO AN ASSET USED FOR THE PURPOSE OF THE BUSINESS, IT IS I MPOSSIBLE TO CONCEIVE OF THE LEGISLATURE HAVING ENVISAGED A DOUBLE DEDUCTION IN RESPECT OF THE SAME EXPENDITURE, ONE BY WAY OF DEPRECIATION UNDER SEC. 32 OF THE IT ACT, 1961 AND OTHER BY WAY OF ALLOWANCE UNDER SEES. 35(L)(IV) OF A PART OF THE CAPITAL EXPENDITURE ON SCIENTIFIC RESEARCH, EVEN THOUGH THE TWO HEADS OF DEDUCTION DO NOT COMPLETELY OVERLAP AND THERE IS SOME DIFFERENCE IN THE RATIONALE OF THE TWO DEDUCTIONS...... ' HOWEVER, IN THE INSTANT CASE, THE TRUST IS NOT CLAI MING DOUBLE DEDUCTION ON ACCOUNT OF DEPRECIATION. THE INCOME OF THE ASSESSEE BEING EXEMPT, THE ASSESSEE IS ONLY CLAIMING THAT DEPRECIATION SHOULD BE REDUCED F ROM THE INCOME FOR DETERMINING THE PERCENTAGE OF FUNDS WHICH HAVE TO B E APPLIED FOR THE PURPOSES OF THE TRUST. IT CANNOT BE HELD THAT DOUBLE BENEFIT IS GIVEN IN ALLOWING THE CLAIM FOR DEPRECIATION FOR COMPUTING INCOME FOR THE PURPOSES OF SEC. 11. HENCE, THE ESCORTS CASE WAS DISTINGUISHED AND RELIANCE WAS PLA CED BY THE COURT ON CIT VS. SOCIETY OF THE SISTERS OF ST. ANNE, CIT VS. RAIPUR PALLOTTINE SOCIETY, CIT VS. SHETH MANILAL RANCHHODDAS VISHRAM BHAVAN TRUST (GUP 198 I TR 598, ETC. SUBSEQUENT TO LISSSIE CASE (WHICH HAS CREATED MUCH HUE AND CRY IN THE DEPARTMENT REGARDING DEPRECIATION CLAIM), THE HIGH COURT OF DELHI DEALT WITH A SIMILAR ISSUE IN DIT VS. VISHWA JAGRITI MISSION AND ONCE AGAIN DISTINGUISHED THE ESCORTS LTD. CASE (SUPRA). IN DIT VS. VISHWA JASRIT I MISSION (2012) 73 DTK (DEL) 195, THE COURT HELD THAT IN COMPUTING THE INCOME OF A C HARITABLE INSTITUTION/TRUST, DEPRECIATION OF ASSETS OWNED BY THE TRUST/INSTITUTI ON IS A NECESSARY DEDUCTION ON COMMERCIAL PRINCIPLES. THE AMOUNT OF DEPRECIATION D EBITED TO THE ACCOUNTS OF THE CHARITABLE INSTITUTION HAS TO BE DEDUCTED TO ARRIVE AT THE INCOME AVAILABLE FOR APPLICATION TO CHARITABLE AND RELIGIOUS PURPOSES. I T ALSO DISTINGUISHED THE ESCORTS LTD. CASE AND HELD THAT: '.... IN THE ESCORTS CASE, THE SUPREME COURT WAS NOT CONCERNED WITH THE CASE OF A CHARITABLE TRUST/INSTI TUTION INVOLVING THE QUESTION AS TO WHETHER ITS INCOME SHOULD BE COMPUTED ON COMMERC IAL PRINCIPLES IN ORDER TO DETERMINE THE AMOUNT OF INCOME AVAILABLE FOR APPLIC ATION TO CHARITABLE PURPOSES. IT WAS A CASE WHERE THE ASSESSEE WAS CARRYING ON BU SINESS AND THE STATUTORY COMPUTATION PROVISIONS OF CHAPTER IV-D OF THE ACT W ERE APPLICABLE. IN THE PRESENT CASE, WE ARE NOT CONCERNED WITH THE APPLICABILITY O F THESE PROVISIONS. WE ARE CONCERNED ONLY WITH THE CONCEPT OF COMMERCIAL INCOM E AS UNDERSTOOD FROM THE ACCOUNTING POINT OF VIEW. EVEN UNDER NORMAL COMMERC IAL ACCOUNTING PRINCIPLES, ITA NO. 424/ AHD/2017 . A.Y. 2012-13 5 THERE IS AUTHORITY FOR THE PROPOSITION THAT DEPRECI ATION IS A NECESSARY CHARGE IN COMPUTING TIN 1 NET INCOME. SECONDLY, THE SUPREME COURT WAS CONCER NED WITH THE CASE WHERE THE ASSES SEE HAD CLAIMED DEDUCTION OF T HE COST OF THE ASSET UNDER SECTION 35 (1) OF THE ACT, WHICH ALLOWED DEDUCTION FOR CAPITAL EXPENDITURE INCURRED ON SCIENTIFIC RESEARCH. THE QUESTION WAS W HETHER AFTER CLAIMING DEDUCTION IN RESPECT OF THE COST OF THE ASSET UNDER SECTION 35 (1), CAN THE ASSESSEE AGAIN CLAIM DEDUCTION ON ACCOUNT OF DEPRECIATION IN RESPECT OF THE SAME ASSET. THE SUPREME COURT RULED THAT, UNDER GENERAL PRINCIP LES OF TAXATION, DOUBLE DEDUCTION IN REGARD TO THE SAME BUSINESS OUTGOING I S NO! INTENDED UNLESS CLEARLY EXPRESSED. THE PRESENT CASE IS NOT ONE OF THIS TYPE , AS RIGHTLY DISTINGUISHED BY THE CIT(APPEALS). ' ALSO, IN CIT VS. INSTITUTE OF BANKING PERSONNEL 264 ITR 110 (BOM), THE COURT FOLLOWED THE PRINCIPLE LAID DOWN IN CIT VS. MUNISUV RAT JAIN (1994) TAX LR 1084 (BOM) AND HELD THAT DEPRECIATION IS ALLOWABLE ON TH E ASSETS THE COST OF WHICH HAS BEEN FULLY ALLOWED AS APPLICATION OF INCOME UNDER S EC. 11 IN PAST YEARS. THE COURT REJECTED THE ARGUMENT OF THE REVENUE THAT THA T DEPRECIATION CAN BE ALLOWED AS DEDUCTION ONLY UNDER SEC. 32 OF THE IT ACT AND N OT UNDER GENERAL PRINCIPLES; AND HELD THAT NORMAL DEPRECIATION CAN BE CONSIDERED AS A LEGITIMATE DEDUCTION IN COMPUTING THE REAL INCOME OF THE ASSESSEE ON GENERA L PRINCIPLES OR UNDER SEC. 11(1) (A) OF THE IT ACT. IT HELD THAT INCOME OF A C HARITABLE TRUST DERIVED FROM BUILDING, PLANT AND MACHINERY AND FURNITURE WAS LIA BLE TO BE COMPUTED IN NORMAL COMMERCIAL MANNER ALTHOUGH THE TRUST MAY NOT BE CAR RYING ON ANY BUSINESS AND THE ASSETS IN RESPECT WHEREOF DEPRECIATION IS CLAIM ED MAY NOT BE BUSINESS ASSETS. IN ALL SUCH CASES, SEC. 32 OF THE IT ACT PROVIDING FOR DEPRECIATION FOR COMPUTATION OF INCOME DERIVED FROM BUSINESS OR PROFESSION IS NO T APPLICABLE. HOWEVER, THE INCOME OF THE TRUST IS REQUIRED TO BE COMPUTED UNDE R SEC. 11 ON COMMERCIAL PRINCIPLES AFTER PROVIDING FOR ALLOWANCE FOR NORMAL DEPRECIATION AND DEDUCTION THEREOF FROM GROSS INCOME OF THE TRUST. FOLLOWING THESE JUDGMENTS, THE INCOME TAX APPELLATE TRIBUNALS HAVE ALSO DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND ALLOWED DEP RECIATION IN THE FOLLOWING CASES: COIMBATORE STOCK EXCHANGE LTD, V/S DEPARTMENT OF INCOME TAX ITO(OSD) V/S M/S. THE EDUCATIONAL TRUST OF THE SEVENTH DAY ADVENTISTS IN ITA NO. 640/MDS/2009 DDIT (EXEMPTIONS) V/S M/S. ST. JOHN'S EDUCATIONAL TRUST IN ITA NOS. 987 TO 990/MDS/2010 DATED 18.10.201 MOREOVER, THE JURISDICTIONAL, BINDING AND HONOURABL E AHMEDABAD ITAT IN ADIT (EXEMPTION) V/S FRIENDS OF WWB, INDIA, (ITA NO. 2658/AHD/2012), AFTER DULY CONSIDERING THE DECISIONS OF ESCORTS LTD, AND LISSIE MEDICAL INSTITUTIONS HAS DISTINGUISHED THE SAME, AND AFTER ELABORATELY D ISCUSSING THE ISSUE VIS-A-VIS A PLETHORA OF CASE LAWS, ALLOWED CLAIM OF DEPRECIATIO N AS WELL AS CAPITAL EXPENDITURE. SIMILAR VIEW WAS EXPRESSED BY THE AHME NDABADITAT IN 102 TTJ 653. ITA NO. 424/ AHD/2017 . A.Y. 2012-13 6 II. NOW COMING TO THE CASE OF LISSIE MEDICAL INSTITUTIONS V/S CIT (KERALA) 24 TAXMANN.COM 9 WHICH HAS CREATED MUCH HUE AND CRY IN THE DEPARTMEN T, IT IS PERTINENT TO NOTE THAT THE SAID DECISION WAS ON DIF FERENT FACTS AS MENTIONED BELOW: - A. THE DECISION OF HONOURABLE KERALA HIGH COURT IN LISSIE MEDICAL INSTITUTIONS WAS ON SECTION 32 R.W.S. 11(1) (A) OF THE ACT AND IN CASE OF A TRU ST CARRYING ON BUSINESS (I.E. BUSINESS WAS HELD IN TRUST) AND W HERE CLAIM WAS MADE U/S 32 OUT OF SUCH BUSINESS INCOME, IN THIS REGARD THE FOL LOWING IS WORTH TAKING NOTE OF: - 'SECTION 32, READ WITH SECTION 11, OF THE INCOME-TA X ACT, 1961 - DEPRECIATION -ALLOWANCE/RATE OF - ASSESSMENT YEAR 2 005-06 - WHETHER IF ASSESSEE TREATS EXPENDITURE ON ACQUISITION OF ASSET S AS APPLICATION OF INCOME FOR A CHARITABLE , PURPOSES UNDER SECTION 11(1)(A), ASSESSEE CANNOT CLAIM DEPRECIATION ON VALUE OF SUCH ASSETS - HELD, YES' 'IT IS SETTLED POSITION THROUGH SEVERAL DECISIONS O F THE HIGH COURTS AND THE SUPREME COURT THAT WHEN BUSINESS IS HELD IN TRUST B Y CHARITABLE INSTITUTIONS INCOME FROM BUSINESS HAS TO BE COMPUTED BY GRANTING DEDUCTIONS PROVIDED UNDER SECTIONS 30 TO 43D AS PROVIDED UNDER SECTION 29. [PARA 5] ' THE HONOURABLE HIGH CONN ALSO RELIED ON THE DECISIO N OF ESCORTS LTD, V/S UNION OF INDIA (SO 199 ITR 43, WHICH WAS ALSO ON SECTION 32 R.W.S. 35(2) (IV) WHEREIN IT WAS HELD THAT 'WHEN ENTIRE EXPENDITURE O N SCIENTIFIC RESEARCH WAS ALLOWED U/S 35, DEPRECIATION U/S 32 CANNOT BE ALLOW ED ON THE SAME. ' THUS, AS IT IS CLEAR FROM THE SPECIFIC FINDINGS IN THE AFORESAID RULINGS, THE DECISIONS WERE W.R.T. SECTION 32 OF THE ACT. HERE I T IS NEEDLESS TO MENTION THAT FOR DISALLOWING ANYTHING U/S 32 THERE HAS TO BE A C LAIM BY THE ASSESSEE U/S 32 OUT OF WHICH SOMETHING OR THE ENTIRE CLAIM COULD BE DISALLOWED. IN THE PRESENT CASE, THE TRUST IS NOT ENGAGED IN ANY BUSINESS ACTI VITY AND THUS THERE IS NO BUSINESS INCOME AND HENCE THERE IS NO CLAIM OF DEPR ECIATION U/S 32 OF THE ACT. HENCE, NOTHING COULD BE DISALLOWED U/S 32 OF THE AC T AS ALSO THE DECISIONS CITED ABOVE ARE CLEARLY DISTINGUISHABLE ON FACTS. B. FURTHER, IN THE AFORESAID DECISION OF LISSIE MEDICA T INSTITUTIONS (KERALA), THE HONOURABLE KERALA HIGH COURT HAS CATEGORICALLY OBSE RVED AS FOLLOWS:- ITA NO. 424/ AHD/2017 . A.Y. 2012-13 7 'AS RIGHTLY POINTED OUT BY THE ASSESSEE, THE SYSTEM OF ALLOWING DEPRECIATION WAS FOLLOWED BY THE ASSESSEE FOR SEVERAL YEARS AND IT WAS CONSISTENT WITH THE VIEW TAKEN BY THE SEVERAL HIGH COURTS IN INDIA. THE RE IS FORCE IN THIS CONTENTION BECAUSE ASSESSEE CANNOT BE TAKEN BY SURP RISE BY DISALLOWING DEPRECIATION WHICH WAS BEING ALLOWED FOR SEVERAL YE ARS AND TO DEMAND TAX FOR ONE YEAR AFTER MAKING DISALLOWANCE. THE ASSESSE E SHOULD BE ALLOWED TO WRITE BACK THE DEPRECIATION FOR THIS YEAR AND EVEN FOR PREVIOUS YEARS AND THEN ALLOW THE SAME TO BE CARRIED FORWARD FOR APPLICATIO N FOR SUBSEQUENT YEARS. IT IS FOR THE ASSESSEE TO WRITE BACK DEPRECIATION AND IF SO DONE THE ASSESSING OFFICER WILL MODIFY THE ASSESSMENT DETERMINING HIGH ER INCOME AND ALLOW RECOMPUTED INCOME WITH THE DEPRECIATION WRITTEN BAC K BY THE ASSESSEE TO BE CARRIED FORWARD FOR SUBSEQUENT YEARS FOR APPLICATIO N FOR CHARITABLE PURPOSES. [PARA 8] ' THUS, EVEN OTHERWISE, THE ADDITION COULD NOT BE MAD E TO THE TOTAL INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION ON AC COUNT OF DISALLOWANCE OF DEPRECIATION, AS PER THE CATEGORICAL AND SPECIFIC D IRECTIONS OF THE HONOURABLE HIGH COURT. C. WITHOUT PREJUDICE, IN THE WORST SCENARIO AND PRESUM ING AND PRETENDING THAT THE DECISION OF HONOURABLE KERALA HIGH COURT IS NOT W.R.T. SECTION 32 BUT W.R.T. THE COMPUTATION OF INCOME OF TRUST UNDER NOR MAL CIRCUMSTANCES, IT IS SIGNIFICANT TO CONSIDER THE FOLLOWING: - I. WITH ALL RESPECT, HONOURABLE KERALA HIGH COURT IS A NON-JURISDICTIONAL COURT. II. THE SIMULTANEOUS CLAIM OF DEPRECIATION AND CA PITAL EXPENDITURE HAS BEEN ALLOWED AND DECIDED IN FAVOUR OF ASSESSEE BY V ARIOUS OTHER HONOURABLE COURTS INCLUDING JURISDICTIONAL HIGH COURT OF GUJAR AT (THIS FACT IS ALSO ACKNOWLEDGED BY THE HONOURABLE KERALA HIGH COURT AS CITED IN POINT (B) ABOVE). THE ISSUE IS IN FAVOUR OF ASSESSEE AS PER J URISDICTIONAL TRIBUNAL (AS CITED ABOVE) AS WELL. III. THE HONOURABLE TRIBUNAL HAS DISTINGUISHED THE DECISION OF KERALA HIGH COURT ON FACTS AND IN LAW AND GIVEN A DETAILED REAS ONING FOR THE SAME. ALL THE AFORESAID CIRCUMSTANCES REQUIRE RECALLING T HE DECISION OF HONOURABLE SUPREME COURT IN CIT V/S VEGETABLE PRODU CTS LTD. (SO (88 ITR 192) WHEREIN THEIR LORDSHIPS HAVE HELD THAT ' IF TWO CO NTRARY VIEWS ARE TAKEN BY THE DIFFERENT HIGH COURTS OR IF TWO VIEWS ARE POSSIBLE, VIEW ITA NO. 424/ AHD/2017 . A.Y. 2012-13 8 FAVOURABLE TO THE ASSESSEE SHOULD BE ADOPTED'. THUS, EVEN ON THIS COUNT AND WITH DUE RESPECT THE DECISION OF HONOURABLE KERALA HIGH COURT FAILS TO APPLY. IN VIEW OF THE ABOVE FUELS, THE PROVISIONS OF ACT A S WELL AS THE RATIO LAID DOWN BY BINDING JUDICIAL PRONOUNCEMENTS, THE ASSESSEE CAN CLAIM DEDUCTION OF DEPRECIATION AS WELL AS CAPITAL EXPENDITURE AS APPL ICATION OF INCOME U/S 11 AS THE SAME DOES NOT AMOUNT TO 'DOUBLE DEDUCTION'. THUS,DEPRECIATION CANNOT BE DISALLOWED EVEN IF THE CAPITAL EXPENDITURE ON AC QUISITION OF ASSETS IS CLAIMED AS APPLICATION OF INCOME. 5. THE ABOVE SAID REPLY WAS CONSIDERED BY THE LD. A.O. BUT WAS NOT CONVINCED WITH HIM AND HENCE HE DISALLOWED THE ENTIRE CLAIM O F DEPRECIATION OF RS. 8435041/- AND ADDED TO THE INCOME OF THE ASSESSEE. 6. AGAINST THE SAID ORDER, ASSESSEE PREFERRED FIRST ST ATUTORY APPEAL BEFORE THE LD. CIT(A) WHO ALLOWED THE APPEAL OF THE ASSESSEE. 7. NOW DEPARTMENT IS BEFORE US. NONE APPEARED ON BEHA LF OF THE ASSESSEE AND WE HAVE HEARD THE LD. D.R. ON THE BASIS OF RECORD A VAILABLE WITH US AND WE ARE OF THE CONSIDERED OPINION THAT ASSESSEE CASE IS FUL LY COVERED BY THE JUDGMENT OF SUPREME COURT IN THE MATTER OF CIT VS. RAJASTHAN & GUJARATI CHARITABLE FOUNDATION POONA (2018) (402 ITR 441) HAS HELD MATT ER IN FAVOUR OF THE ASSESSEE WITH THE FOLLOWING DETAILS: 3. AS STATED ABOVE, THE FIRST QUESTION WHICH REQUIR ES CONSIDERATION BY THIS COURT IS: WHETHER DEPRECIATION WAS ALLOWABLE ON THE ASSETS, THE COST OF WHICH HAS BEEN FULLY ALLOWED AS APPLICATION OF INCO ME UNDER SECTION 11 IN THE PAST YEARS? IN THE CASE OF CIT V. MUNISUVRAT JA IN 1994 TAX LAW REPORTER, 1084 THE FACTS WERE AS FOLLOWS. THE ASSES SEE WAS A CHARITABLE TRUST. IT WAS REGISTERED AS A PUBLIC CHARITABLE TRU ST. IT WAS ALSO REGISTERED WITH THE COMMISSIONER OF INCOME TAX, PUN E. THE ASSESSEE DERIVED INCOME FROM THE TEMPLE PROPERTY WHICH WAS A TRUST PROPERTY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR ASS ESSMENT YEARS 1977- ITA NO. 424/ AHD/2017 . A.Y. 2012-13 9 78, 1978-79 AND 1979-80, THE ASSESSEE CLAIMED DEPRE CIATION ON THE VALUE OF THE BUILDING @2% AND THEY ALSO CLAIMED DEPRECIA TION ON FURNITURE @ 5%. THE QUESTION WHICH AROSE BEFORE THE COURT FOR D ETERMINATION WAS : WHETHER DEPRECIATION COULD BE DENIED TO THE ASSESSE E, AS EXPENDITURE ON ACQUISITION OF THE ASSETS HAD BEEN TREATED AS APPLI CATION OF INCOME IN THE YEAR OF ACQUISITION? IT WAS HELD BY THE BOMBAY HIGH COURT THAT SECTION 11 OF THE INCOME TAX ACT MAKES PROVISION IN RESPECT OF COMPUTATION OF INCOME OF THE TRUST FROM THE PROPERTY HELD FOR CHAR ITABLE OR RELIGIOUS PURPOSES AND IT ALSO PROVIDES FOR APPLICATION AND A CCUMULATION OF INCOME. ON THE OTHER HAND, SECTION 28 OF THE INCOME TAX ACT DEALS WITH CHARGEABILITY OF INCOME FROM PROFITS AND GAINS OF B USINESS AND SECTION 29 PROVIDES THAT INCOME FROM PROFITS AND GAINS OF BUSI NESS AHLL BE COMPUTED IN ACCORDANCE WITH SECTION 30 TO SECTION 43C. THAT, SECTION 32(1) OF THE ACT PROVIDES FOR DEPRECIATION IN RESPECT OF BUILDIN G, PLANT AND MACHINERY OWNED BY THE ASSESSEE AND USED FOR BUSINESS PURPOSE S. IT FURTHER PROVIDES FOR DEDUCTION SUBJECT TO SECTION 34. IN THAT MATTER ALSO, A SIMILAR ARGUMENT, AS IN THE PRESENT CASE, WAS ADVANCED ON B EHALF OF THE REVENUE, NAMELY, THAT DEPRECIATION CAN BE ALLOWED AS DEDUCTI ON ONLY UNDER SECTION 32 OF THE INCOME TAX ACT AND NOT UNDER GENERAL PRIN CIPLES. THE COURT REJECTED THIS ARGUMENT. IT WAS HELD THAT NORMAL DEP RECIATION CAN BE CONSIDERED AS A LEGITIMATE DEDUCTION IN COMPUTING T HE REAL INCOME OF THE ASSESSEE ON GENERAL PRINCIPLES OR UNDER SECTION 11( 1)(A) OF THE INCOME TAX ACT THE COURT REJECTED THE ARGUMENT ON BEHALF O F THE REVENUE THAT SECTION 32OF THE INCOME TAX ACT WAS THE ONLY SECTIO N GRANTING BENEFIT OF DEDUCTION ON ACCOUNT OF DEPRECIATION. IT WAS HELD T HAT INCOME OF A CHARITABLE TRUST DERIVED FORM BUILDING, PLANT AND M ACHINERY AND FURNITURE WAS LIABLE TO BE COMPUTED IN NORMAL COMMERCIAL MANN ER ALTHOUGH THE TRUST MAY NOT BE CARRYING ON ANY BUSINESS AND THE A SSETS IN RESPECT WHEREOF DEPRECIATION IS CLAIMED MAY NOT BE BUSINESS ASSETS. IN ALL SUCH CASES, SECTION 32 OF THE INCOME TAX ACT PROVIDING F OR DEPRECIATION FOR COMPUTATION OF INCOME DERIVED FROM BUSINESS OR PROF ESSION IS NOT APPLICABLE. HOWEVER, THE INCOME OF THE TRUST IS REQ UIRED TO BE COMPUTED UNDER SECTION 11 ON COMMERCIAL PRINCIPLES AFTER PRO VIDING FOR ALLOWANCE FOR NORMAL DEPRECIATION AND DEDUCTION THEREOF FROM GROSS INCOME OF THE TRUST. IN VIEW OF THE AFORESATATED JUDGMENT OF THE BOMBAY HIGH CURT, WE ANSWER QUESTION NO. 1 IN THE AFFIRMATIVE I.E., IN F AVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT. 4. QUESTION NO. 2 HEREIN IS IDENTICAL TO THE QUESTI ON WHICH WAS RAISED BEFORE THE BOMBAY HIGH COURT IN THE CASE OF DIRECTO R OF INCOME-TAX ITA NO. 424/ AHD/2017 . A.Y. 2012-13 10 (EXEMPTION) V. FRAMJEE CAWASJEE INSTITUTE [1993] 10 9 CTR 463. IN THAT CASE, THE FACTS WERE AS FOLLOWS: THE ASSESSEE WAS T HE TRUST. IT DERIVED ITS INCOME FROM DEPRECIABLE ASSETS. THE ASSESSEE TOOK I NTO ACCOUNT DEPRECIATION ON THOSE ASSETS IN COMPUTING THE INCOM E OF THE TRUST. THE ITO 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 ASSI STANT APPELLATE COMMISSIONER. THE APPEAL WAS REJECTED. THE TRIBUNAL , HOWEVER, TOOK THE VIEW THAT WHEN THE ITO STATED THAT FULL EXPENDITURE HAD BEEN ALLOWED IN THE YEAR OF ACQUISITION OF THE ASSETS, WHAT HE REAL LY MEANT WAS THAT THE AMOUNT SPENT ON ACQUIRING THOSE ASSETS HAD BEEN TRE ATED AS 'APPLICATION OF INCOME' OF THE TRUST IN THE YEAR IN WHICH THE INCOM E WAS SPENT IN ACQUIRING THOSE ASSETS. THIS DID NOT MEAN THAT IN C OMPUTING INCOME FROM THOSE ASSETS IN SUBSEQUENT YEARS, DEPRECIATION IN R ESPECT OF THOSE ASSETS CANNOT BE TAKEN INTO ACCOUNT. THIS VIEW OF THE TRIB UNAL HAS BEEN CONFIRMED BY THE BOMBAY HIGH COURT IN THE ABOVE JUD GMENT. HENCE, QUESTION NO. 2 IS COVERED BY THE DECISION OF THE BO MBAY HIGH COURT IN THE ABOVE JUDGMENT. CONSEQUENTLY, QUESTION NO. 2 IS ANS WERED IN THE AFFIRMATIVE I.E., IN FAVOUR OF THE ASSESSEE AND AGA INST THE DEPARTMENT. AFTER HEARING LEARNED COUNSEL FOR THE PARTIES, WE A RE OF THE OPINION THAT THE AFORESAID VIEW TAKEN BY THE BOMBAY HIGH COURT CORRE CTLY STATES THE PRINCIPLES OF LAW AND THERE IS NO NEED TO INTERFERE WITH THE SAME . IT MAY BE MENTIONED THAT MOST OF THE HIGH COURTS HA VE TAKEN THE AFORESAID VIEW WITH ONLY EXCEPTION THERETO BY THE HIGH COURT OF KE RALA WHICH HAS TAKEN A CONTRARY VIEW IN 'LISSIE MEDICAL INSTITUTIONS V. CO MMISSIONER OF INCOME TAX'. IT MAY ALSO BE MENTIONED AT THIS STAGE THAT THE LEG ISLATURE, 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 BECAME EFFECTIVE FROM THE ASSESSMENT YEAR 2015-2016. THE DELHI HIGH COURT HAS TAKEN THE VIEW AND RIGHTLY SO, THAT THE SAID AMENDMENT IS PROSPECT IVE IN NATURE. IT ALSO FOLLOWS THAT ONCE ASSESSEE IS ALLOWED DEPRE CIATION, HE SHALL BE ENTITLED TO CARRY FORWARD THE DEPRECIATION AS WELL. FOR THE AFORESAID REASONS, WE AFFIRM THE VIEW TAKEN BY THE HIGH COURTS IN THESE CASES AND DISMISS THESE MATTERS. ITA NO. 424/ AHD/2017 . A.Y. 2012-13 11 8. RESPECTFULLY FOLLOWING THE HONBLE SUPREME COURT OR DER, WE DISMISSED THE APPEAL OF THE DEPARTMENT. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS D ISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 30 08- 2 018 SD/- SD/- (AMARJIT SINGH) (MAHAVIR PRASAD) ACCOUNTANT MEMBER TRUE COPY JUDICIAL MEMBER AHMEDABAD: DATED 30 /08/2018 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD