ITO (E) 2(1), MUMBAI V. M.L CHARITABLE TRUST, MUMBAI

ITA 4272/MUM/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4489 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 29-12-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 09-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K DHONDIAL J
• Assessee Lawyers: DIPAK J SHUKLA
• Keywords: Capital asset; Depreciation; Charitable institution; Capital expenditure
• Section: 32; 11

Judgement Text

, - , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC, MUMBAI , ! ' , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, ITA NO.4272/MUM/2015 ASSESSMENT YEAR: 2010-11 ITO-(E)2(1), ROOM NO.512, 5 TH FLOOR, PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI-400012 / VS. M.L. CHARITABLE TRUST, 228, PRAGATI INDUSTRIAL ESTATE, N.M. JOSHI MARG, LOWER PAREL, MUMBAI-400011 / REVENUE / ASSESSEE P.A. NO. AAAJ M2638B C.O. NO. 120/MUM/2015 (ARISING OUT OF ITA NO.4272/MUM/2015) ASSESSMENT YEAR: 2010-11 M.L. CHARITABLE TRUST, 228, PRAGATI INDUSTRIAL ESTATE, N.M. JOSHI MARG, LOWER PAREL, MUMBAI-400011 / VS. ITO-(E)2(1), ROOM NO.512, 5 TH FLOOR, PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI-400012 / ASSESSEE / REVENUE P.A. NO.AAATK0474C $ % & / REVENUE BY SHRI A.K.DHONDIAL JCIT-DR $ % & / ASSESSEE BY SHRI DIPAK J. SHUKLA ITA NO.4272/MUM/2015 & C.O. NO.120/MUM/2015 M. L. CHARITABLE TRUST 2 / DATE OF HEARING 05/01/2016 & / DATE OF ORDER: 05/01/2016 & / O R D E R THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DAT ED 29/04/2015 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI, WHEREAS, THE ASSESSEE HAS PREFERRED CROSS OBJECTION AGAINST THE FINDING/DIRECTION CONTAINED IN THE ORDER UNDER APPEAL. 2. FIRST, I SHALL TAKE UP APPEAL OF THE REVENUE (I TA NO.4272/MUM/2015), WHEREIN, FIRST GROUND RAISED PER TAINS TO ALLOWING THE APPEAL OF THE ASSESSEE ON ACCOUNT O F DEPRECIATION ON FIXED ASSET AMOUNTING TO RS.1,77,57 ,583/- IN CONTRAVENTION OF THE DECISION IN ESCORTS LTD. VS UO I 199 ITR 43. 2.1. DURING HEARING, THE CRUX OF ARGUMENT ADVANCED BY SHRI A.K.DHONDIAL, LD. DR, IS IDENTICAL TO THE GROU ND RAISED BY CONTENDING THAT IN VIEW OF THE DECISION IN ESCOR TS LTD., SECTION 11 OF THE ACT PROVIDES DEDUCTION OF CAPITAL EXPENDITURE INCURRED ON ASSET ACQUIRED FOR THE OBJE CTS OF THE TRUST, THUS, NO DEDUCTION SHALL BE ALLOWED U/S 32 F OR THE SAME AS IT AMOUNTS TO DOUBLE DEDUCTION. 2.2. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE, SHRI DIPAK J. SHUKLA, DEFENDED THE CONCLU SION ARRIVED AT IN THE IMPUGNED ORDER BY CONTENDING THAT THE ITA NO.4272/MUM/2015 & C.O. NO.120/MUM/2015 M. L. CHARITABLE TRUST 3 TRIBUNAL FOR ASSESSMENT YEAR 2007-08, IN THE CASE O F ASSESSEE VIDE ORDER DATED 03/10/2012 (ITA NO.3209/MUM/2011) DECIDED THE ISSUE IN FAVOUR OF TH E ASSESSEE BY DISMISSING THE APPEAL OF THE REVENUE. T HIS FACTUAL MATRIX WAS NOT CONTROVERTED BY LD. DR. 2.3. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN VIEW OF THE ABOVE, WE ARE REPRODUCING HEREUNDER THE RELEVANT PO RTION FROM THE AFORESAID ORDER DATED 03/10/2012 FOR READY REFERENCE:- THE PRESENT APPEAL AND THE CROSS OBJECTIONS ARE DIR ECTED AGAINST THE ORDER DT.15.11.2010 PASSED BY THE CIT(A)-1, MUMBAI. FOLLOWING GROUNDS OF APPEAL HAVE BEEN RAISED BY THE ASSESSING OFFICER (AO): 1)ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID.CIT(A) ERRED IN ALLOWING THE ASSESEES CLAIM OF DEPRECIATI ON OF RS. 1,39,49,018/- WITHOUT APPRECIATING THE FACT THAT THE SAID CLAIM OF DE PRECIATION AMOUNTS TO CLAIMING A DOUBLE DEDUCTION, WHICH IN VIEW OF THE RATIO OF THE JUDGEMENTS IN THE CASES OF ESCORTS LTD. VS. UNIO N OF INDIA (1993) 199 ITR 43 AND (1992) 65 TAX MAN 320 (SC) IN THE CASE J.K .SYNTHETICS LTD. VS. UNION OF INDIA CANNOT BE ALLOWED. 2)THE APPELLANT PRAYS THAT THE ORDER OF THE LD.CIT (AP PEALS)-1, MUMBAI BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RES TORED. 3)THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 2.FOLLOWING CROSS OBJECTIONS WERE FILED BY THE ASSES SEE-TRUST : 1.THE LEARNED C.I.T(A) ERRED IN NOT CONSIDERING THE GROUNDS OF APPEAL SUBMITTED BY THE RESPONDENT THAT REPAYMENT OF LOANS BY THE RESPONDENT ITA NO.4272/MUM/2015 & C.O. NO.120/MUM/2015 M. L. CHARITABLE TRUST 4 OF RS.1,55,09,525/. BE ALLOWED AS APPLICATION OF IN COME OF THE RESPONDENT IN ACCORDANCE WITH PROVISIONS OF SEC. 11 O F THE I.T.ACT, 1961. 2.THE RESPONDENT PRAYS THAT THE ASSESSING OFFICER BE D IRECTED TO ALLOW REPAYMENT OF LOANS OF RS.1,55,09,525/- AS APPLICATI ON OF INCOME IN ACCORDANCE WITH PROVISIONS OF SEC. 11 OF I. T. ACT. 3.THE RESPONDENT CRAVES LEAVE TO ADD TO, AMEND, ALTER OR AMPLIFY THE GROUNDS OF CROSS OBJECTION. 3.ASSESSEE-TRUST FILED ITS RETURN OF INCOME ON 31.1 1.2007 DECLARING TOTAL INCOME AT RS.NIL. ASSESSMENT ORDER WAS PASSED U/S.143(3) OF THE INCOME-TAX ACT, 1961(ACT) ON 21.12.2009 DETERMI NING THE TOTAL INCOME AT RS. 1,02,34,564/-.DURING THE ASSESSMENT P ROCEEDINGS AO FOUND THAT THE ASSESSEE TRUST HAD CLAIMED AN AMOUNT OF RS.1.39 CRORES ON ACCOUNT OF DEPRECIATION ON ASSETS,COST OF WHICH HAD BEEN CLAIMED TO BE APPLICATION WITHIN THE MEANING OF SEC TION 11(1)(A) OF THE ACT FOR THE PURPOSES OF AVAILING EXEMPTION U/S. 11 OF THE ACT. 4. AO HELD THAT THE CLAIM OF DEPRECIATION AS APPLIC ATION OF INCOME U/S.11(1)(A) AGAINST THE INCOME OF THE CURRENT AY A MOUNTED TO CLAIMING DOUBLE DEDUCTION,THAT CAPITAL EXPENDITURE INCURRED ON THESE ASSETS HAD ALREADY BEEN ALLOWED AS APPLICATION OF I NCOME,THAT THE JUDGMENT OF INSTITUTE OF BANKING PERSONNEL SELECTIO N (2003) 264 ITR 110 HAD NOT BEEN ACCEPTED ON MERITS BY THE DEPARTME NT. RELYING UPON THE ORDERS OF THE ESCORTS LTD. (199 ITR 43) AN D J. K. SYNTHETICS LTD. (65TAXMANN 320) HE DISALLOWED THE CLAIM OF THE ASSESSEE ON ACCOUNT OF DEPRECIATION AMOUNTING TO RS.1.39 CRORES . ITA NO.4272/MUM/2015 & C.O. NO.120/MUM/2015 M. L. CHARITABLE TRUST 5 5. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRS T APPELLATE AUTHORITY (FAA). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE TRUST AND THE ASSESSMENT ORDER HE HELD THAT THE FAC TS OF THE CASE OF THE ESCORTS LTD. (SUPRA) WERE DIFFERENT, THAT DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF INSTITUTE OF BANKING PERSONNEL SELECTION (SUPRA) WAS SQUARELY APPLICABLE IN THE CASE UNDER CONSIDERATION, THAT DEPRECIATION WAS ALLOWABL E EXPENDITURE IN THE CASE OF THE APPELLANT TRUST. HE ALLOWED THE APP EAL FILED BY THE ASSESSEE TRUST AND DELETED THE ADDITION MADE BY THE A.O. 6. BEFORE US, DR (DEPARTMENTAL REPRESENTATIVE) RELI ED UPON THE ORDER OF THE A.O. AND SUBMITTED THAT THE ISSUE WAS DECIDED BY THE HONBLE HIGH COURT OF BOMBAY IN FAVOUR OF THE ASSES SEE IN THE CASE OF INSTITUTE OF BANKING PERSONNEL SELECTION (SUPRA) . HE FURTHER RELIED UPON THE ORDER OF THE HONBLE HIGH COURT OF PUNJAB AND HARYANA IN THE CASE OF MARKETING COMMITTEE, PIPLI, (330 ITR 16 ). 6.1.WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATTER BEFORE US.WE FIND THAT THE ISSUE OF ALLOWABILITY OF DEPRECIATION;ON CAPITAL ASSET FROM THE INCOME OF THE CHARITABLE TRU ST FOR DETERMINING THE QUANTUM OF FUNDS WHICH HAVE BEEN APPLIED FOR TH E PURPOSE OF TRUST IN TERMS OF SECTION 11; HAS BEEN DECIDED IN F AVOUR OF THE ASSESSEE BY THE ORDER OF THE HONBLE HIGH COURTS OF BOMBAY AND PUNJAB AND HARYANA.THE HONBLE BOMBAY HIGH COURT HA S HELD, IN THE CASE OF INSTITUTE OF BANKING PERSONNEL SELECTIO N(SUPRA), AS UNDER :- ITA NO.4272/MUM/2015 & C.O. NO.120/MUM/2015 M. L. CHARITABLE TRUST 6 NORMAL DEPRECIATION CAN BE CONSIDERED AS A LEGITIM ATE DEDUCTION IN COMPUTING THE REAL INCOME OF THE ASSES SEE ON GENERAL PRINCIPLES OR UNDER SECTION 11(1)(A) OF THE INCOME- TAX ACT, 1961. INCOME OF A CHARITABLE TRUST DERIVED FROM BUILDING, PLANT AND MACHINERY AND FURNITURE IS LIAB LE TO BE COMPUTED IN A NORMAL COMMERCIAL MANNER 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 ACT PR OVIDING FOR DEPRECIATION, FOR COMPUTATION OF INCOME DERIVED FRO M BUSINESS OR PROFESSION IS NOT APPLICABLE. HOWEVER, THE INCOME OF THE TRUST IS REQUIRED TO BE COMPUTED UNDE R SECTION 11 ON COMMERCIAL PRINCIPLES AFTER PROVIDING FOR ALL OWANCE FOR NORMAL DEPRECIATION AND DEDUCTION THEREOF FROM THE GROSS INCOME OF THE TRUST. INCOME DERIVED FROM THE TRUST PROPERTY HAS ALSO GOT TO BE COMPUTED ON COMMERCIAL PRINCIPLES AND IF COMMERCIAL PRINCIPLES ARE APPLIED THEN ADJUSTMENT OF EXPENSES INCURRED BY THE TRUST FOR CHARITABLE AND RELIGIOUS PURPOSES IN THE EARLIER YEARS AGAINST THE INCOME EARNED BY THE TRUS T IN THE SUBSEQUENT YEAR WILL HAVE TO BE REGARDED AS APPLICA TION OF INCOME OF THE TRUST FOR CHARITABLE AND RELIGIOUS PU RPOSES IN THE SUBSEQUENT YEAR IN WHICH ADJUSTMENT HAD BEEN MA DE HAVING REGARD TO THE BENEVOLENT PROVISIONS CONTAINE D IN SECTION 11 OF THE ACT AND SUCH ADJUSTMENT WILL HAVE TO BE EXCLUDED FROM THE INCOME OF THE TRUST UNDER SECTION 11(1)(A). ITA NO.4272/MUM/2015 & C.O. NO.120/MUM/2015 M. L. CHARITABLE TRUST 7 7. RESPECTFULLY FOLLOWING THE ORDER OF THE HONBLE BOMBAY HIGH COURT, WE DECIDE GROUND NOS. 1, 2 & 3 AGAINST THE A .O. 8. AS A RESULT, THE APPEAL FILED BY THE REVENUE STA NDS DISMISSED. 9. CROSS OBJECTIONS, FILED BY THE ASSESSEE-TRUST, W ERE NOT PRESSED BY THE AR BEFORE US, HENCE SAME ARE REJECTED. 10. AS A RESULT, THE CROSS OBJECTIONS FILED BY THE ASSESSEE-TRUST STAND DISMISSED. 2.4. THE FACTS, IN BRIEF, ARE THAT THE ASSESSING OFFICER/DDIT(E), WHILE COMPLETING ASSESSMENT DISALL OWED DEPRECIATION OF RS.1,77,57,583/- FOR COMPUTING THE INCOME OF THE TRUST, REQUIRED TO BE APPLIED TO THE OBJECTS OF THE TRUST IN ACCORDANCE WITH THE PROVISIONS OF SECTION 11 AND OT HER APPLICABLE PROVISIONS OF THE ACT. THE ASSESSEE CLAI MED DEPRECIATION OF RS.1,77,57,583/- IN ITS INCOME AND EXPENDITURE ACCOUNT FOR THE YEAR ENDING ON 31/03/20 10. ON APPEAL, THE LD. COMMISSIONER OF INCOME TAX (APPEALS ), GRANTED RELIEF TO THE ASSESSEE. THE REVENUE IS AGGR IEVED AND IS IN APPEAL BEFORE THIS TRIBUNAL. IF THE OBSERVAT ION MADE IN THE ASSESSMENT ORDER, LEADING TO ADDITION MADE TO T HE TOTAL INCOME, CONCLUSION DRAWN IN THE IMPUGNED ORDER, MAT ERIAL AVAILABLE ON RECORD, ASSERTIONS MADE BY THE LD. RES PECTIVE COUNSEL AND THE CONCLUSION DRAWN IN THE ORDER OF TH E TRIBUNAL, IF KEPT IN JUXTAPOSITION AND ANALYZED, I FIND THAT IN THE AFORESAID ORDER OF THE TRIBUNAL, THE DECISION F ROM HONBLE HIGH COURTS OF BOMBAY AND PUNJAB & HARYANA HAVE BEE N DULY CONSIDERED ALONG WITH THE CASE OF INSTITUTE OF BANKING ITA NO.4272/MUM/2015 & C.O. NO.120/MUM/2015 M. L. CHARITABLE TRUST 8 PERSONAL SELECTION AND THEREAFTER DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. IT IS ALSO NOTED THAT THE AFORESAI D DECISION OF THE TRIBUNAL, THAT TO IN THE CASE OF ASSESSEE WAS A FFIRMED BY HONBLE JURISDICTIONAL HIGH COURT VIDE ORDER DATED 18/03/2013 (INCOME TAX APPEAL (L) NO.264 OF 2013), DISMISSING THE APPEAL OF THE REVENUE, THUS, I AFFIR M THE STAND OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS). 3. THE NEXT GROUND RAISED BY THE REVENUE, PERTAINS TO ALLOWING CARRY FORWARD OF DEFICIT OF RS.4,51,81,027 /- AND ALLOWING SET OF AGAINST THE INCOME OF SUBSEQUENT YE AR ALLOWING THE DEFICIT/CARRY FORWARD OF DEFICIT. 3.1. THE CRUX OF ARGUMENT ADVANCED BY LD. DR IS IDENTICAL TO THE GROUND RAISED BY DEFENDING THE ASS ESSMENT ORDER BY CONTENDING THAT ALLOWING DEFICIT TANTAMOUN T TO DOUBLE DEDUCTION. ON THE OTHER HAND, THE LD. COUNSE L FOR THE ASSESSEE DEFENDED THE CONCLUSION ARRIVED AT IN THE IMPUGNED ORDER BY PLACING RELIANCE UPON THE DECISION IN THE CASE OF INSTITUTE OF BANKING (264 ITR 110) (BOM.) 3.2. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT THE LD. ASSESSING OFFICER DISALLOWED CARRY FORWARD OF DEFICIT OF RS.4,51,81,027/- BY HOLDING THAT IT AMOU NTS TO DOUBLE DEDUCTION BY CONSIDERING THE PROVISION OF SE CTION 72 OF THE ACT. THE ASSESSEE, BEFORE THE LD. COMMISSION ER OF ITA NO.4272/MUM/2015 & C.O. NO.120/MUM/2015 M. L. CHARITABLE TRUST 9 INCOME TAX (APPEALS), VIDE SUBMISSIONS DATED 28/04/ 2015 EXPLAINED THE FACTS. THE LD. COMMISSIONER OF INCOM E TAX (APPEALS) BROADLY DECIDED THE ISSUE AND ALLOWED THE CARRYING FORWARD OF DEFICIT. THE REVENUE IS AGGRIEVED AND IS IN APPEAL BEFORE THIS TRIBUNAL. IT IS NOTED THAT THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF INSTITUTE OF BANKING PERSONAL (264 ITR 110) HELD THAT SUCH DEFICIT IS AL LOWED TO SET OFF AGAINST THE INCOME OF THE TRUST IN SUBSEQUENT Y EARS. RESPECTFULLY FOLLOWING THE DECISION, I FIND NO INFI RMITY IN THE CONCLUSION OF THE LD. COMMISSIONER OF INCOME TAX (A PPEALS). 4. SO FAR AS, THE CROSS OBJECTION OF THE ASSESSEE (C.O. NO.120/MUM/2015) IS CONCERNED. THE ASSESSEE IS AGGR IEVED BY THE DIRECTION TO THE ASSESSING OFFICER IN REMAND ING THE MATTER BACK TO EXAMINE THE CLAIM OF THE ASSESSEE FO R CARRY FORWARD OF EXCESS EXPENDITURE U/S 11 OF THE ACT. 4.1. THE LD. DR, DEFENDED THE DIRECTION, WHEREAS, THE ASSESSEE IS AGGRIEVED BY SUCH DIRECTION. 4.2. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. I FIND T HAT IN THE CONCLUDING PARA OF THE IMPUGNED ORDER, THE LD. COMM ISSIONER OF INCOME TAX (APPEALS) HAS OBSERVED THAT THE CLAIM OF SET OFF OF EXCESS EXPENDITURE U/S 11 OF THE ACT IS SEPARATE LY ALLOWABLE SUBJECT TO FULFILLMENT OF CERTAIN CONDITI ONS AND THEREFORE, DIRECTED THE ASSESSING OFFICER TO VERIFY THE CLAIM ITA NO.4272/MUM/2015 & C.O. NO.120/MUM/2015 M. L. CHARITABLE TRUST 10 AND WHETHER THE CONDITIONS HAS BEEN FULFILLED OR NO T. I FIND NO INFIRMITY IN THE DIRECTION AS IT IS THE DUTY OF THE ASSESSEE TO EXPLAIN WHETHER THE EXPENDITURE HAS BEEN INCURRE D IN ACCORDANCE WITH LAW. HIS DIRECTION IS THEREFORE, AF FIRMED. FINALLY, THE APPEAL OF THE REVENUE AND CROSS OBJECT ION OF THE ASSESSEE, BOTH ARE DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN T HE PRESENCE OF LD. REPRESENTATIVE OF BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 05/01/2016. SD/- (JOGINDER SINGH) ! ' / JUDICIAL MEMBER MUMBAI; DATED : 05/01/2016 F{X~{T? P.S / ! & $ )!*+ ,&+-* / COPY OF THE ORDER FORWARDED TO : 1. '#$%& / THE APPELLANT 2. '(%& / THE RESPONDENT. 3. ) ) * ( '#$ ) / THE CIT, MUMBAI. 4. ) ) * / CIT(A)- , MUMBAI 5. -./ ' , ) '#$ ' 1 , / DR, ITAT, MUMBAI 6. /2 3$ / GUARD FILE. & / BY ORDER, (-# ' //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI