ADIT (E), New Delhi V. Natrip Implementation Society, New Delhi

ITA 4278/DEL/2012

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5505 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 06-06-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 06-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S R SENAPATI
• Keywords: Capital asset; Depreciation; Charitable institution; Capital expenditure
• Section: 143(3); 12A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : E , NEW DELHI BEFORE SH. BHAVNESH SAINI , JUDICIAL M EMBER AND SH. O.P. KANT , ACCOUNTANT MEMBER ITA NO . 4278 /DE L/ 2012 ASSESSMENT YEAR: 2009 - 10 ADIT(E), INV. CIRCLE - II, ROOM NO. 306, 3 RD FLOOR, AAYAKAR BHAWAN, DISTRICT CENTRE, LAXMI NAGAR, NEW DELHI VS. M/S. NATRIP IMPLEMENTATION SOCIETY, BBCC PLACE, SOUTH TOWER, 3 RD FLOOR, BHISHAM PITAMAH MARG, LODHI ROAD, NEW DELHI PAN : AAATN7662F ( APPELLANT ) (RESPONDENT) APPELLANT BY SH. S.R. SENAPATI, SR.DR RESPONDENT BY NONE DATE OF HEARING 24.04.2018 DATE OF PRONOUNCEMENT 08.05.2018 ORDER PER O.P. KANT , A. M. : THIS APPEAL BY THE R EVENUE IS DIRECTED AGAINST ORDER DATED 29/05/2012 PASSED BY THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) - XXI, NEW DELHI [IN SHORT THE LD. CIT(A) ] FOR ASSESSMENT YEAR 2009 - 10 , RAISING FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT( A) HAS ERRED IN ALLOWING DEPRECIATION TO THE 2 ITA NO.4278/DEL/2012 ASSESSEE IN RESPECT OF CAPITAL ASSET AS APPLICATION OF INCOME, THE COST OF WHICH, AS CAPITAL EXPENDITURE, HAS ALREADY BEEN ALLOWED BY WAY OF APPLICATION OF INCOME IN EA R LIER YEARS. 2. THE APPELLANT CRAVES LEAV E TO ADD, TO ALTER OR AMEND ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARING. 2. AT THE OUTSET, WE MAY LIKE TO MENTION THAT DESPITE NOTIFYING THE DATE OF HEARING, NONE ATTENDED ON BEHALF OF THE ASSESSEE NOR FILED ANY REQUEST FOR AD JOURNMENT. IN T HE CIRCUMSTANCES , IT IS EVIDENT THAT THE ASSESSEE IS NOT INTERESTED IN PROSECUTING THE APPEAL; ACCORDINGLY , WE HAVE HEARD THE APPEAL EX PARTE QUA THE ASSESSEE , AFTER HEARING THE ARGUMENTS OF THE LD. DEPARTMENTAL REPRESENTATIVE (DR). 3. BRIEFLY STATED FACT S OF THE CASE ARE THAT THE ASSESSEE IS A SOCIETY REGISTERED UNDER S OCIETIES R EGISTRATION ACT, 1860. THE SOCIETY IS ALSO REGISTERED UNDER SECTION 12A OF THE INCOME - TAX ACT, 1961 (IN SHORT THE ACT ). THE MAIN OBJECTS OF THE ASSESSEE SOCIETY INCLUDE CREATING WORLD - CLASS AUTOMOTIVE TESTING, VALIDATION ETC. IN THE ASSESSMENT COMPLETED UNDER SECTION 143(3) OF THE A CT ON 02/12/2011, WHILE CONSIDERING APPLICATION OF THE RECEIPT APPLIED FOR CHARITABLE PUR POSE TO THE EXTENT PRESCRIBED LIMIT ( I.E. 85%), THE ASSESSING OFFICER DENIED DEPRECIATION OF RS.1,82,24, 566/ - . ON FURTHER APPEAL, THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO ALLOW THIS CLAIM IN VIEW OF THE DECISION OF HON BLE PUNJA B AND HARYANA HIGH COURT S IN THE CASE OF TINY TOTS EDU CATION SOCIETY 330 ITR 21. THE R EVENUE HAS CHALLENGED THIS DIRECTION OF THE LD. CIT(A) BEFORE THE T RIBUNAL IN THE GROUNDS REPRODUCED ABOVE. 4. BEFORE US, THE LD. DR SUBMITTED THAT ISSUE OF ALLOWING DEP RECIATION WHILE CONSIDERING APPLICATION OF 85% RECEIPTS AGAINST 3 ITA NO.4278/DEL/2012 CHARITABLE PURPOSES, HAS BEEN DECIDED AGAINST THE ASSESSEE BY THE HON BLE DELHI HIGH CO URT IN THE CASE OF DIRECTOR OF INCOME T AX VS. CHARANJIV C HARITABLE T RUST (ITA NO. 321 TO 323 OF 2013 ) IN DECISION DATED 18/03/2014. 5. WE HAVE HEARD THE SUBMISSION OF THE LD. DR AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE ISSUE IN DISPUTE BEFORE US IS WHETHER DEPRECIATION CAN BE ALLOWED BY WAY OF APPLICATION OF INCOME , IN RESPECT OF THE ASSETS COST OF W HICH HAS ALREADY BEEN ALLOWED AS APPLICATION OF INCOME IN EARLIER YEARS . T HE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO ALLOW THE APPLICATION OF DEPRECIATION , FOLLOWING THE DECISION OF THE HON BLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF TINY TOTS ED UCATION SOCIETY (SUPRA). THE LD. DR HAS CITED BEFORE US THE DECISION OF THE HON BLE DELHI HIGH COURT IN THE CASE OF CHARANJIV CHARITABLE TRUST (SUPRA) WHEREIN THE HON BLE HIGH COURT DECLINED TO GRANT APPLICATION OF THE DEPRECIATION. THE RELEVANT FINDING TH E HON BLE HIGH COURT IS REPRODUCED AS UNDER: 30. SO FAR AS THE CLAIM OF DEPRECIATION IS CONCERNED THE DECISION OF THE TRIBUNAL CANNOT BE COUNTENANCED. THE TRIBUNAL HAS OVERLOOKED THAT THE COST OF THE ASSETS HAS ALREADY BEEN ALLOWED AS A DEDUCTION AS APPLICATION OF INCOME, AS HELD BY THE CIT (APPEALS) AS WELL AS THE ASSESSING OFFICER. IT WAS THEIR VIEW THAT ALLOWING DEPRECIATION IN RESPECT OF ASSETS, THE COST OF WHICH WAS EARLIER ALLOWED AS DEDUCTION AS APPLICATION OF INCOME OF THE TRUST, WOULD ACTUALL Y AMOUNT TO DOUBLE DEDUCTION ON THE BASIS OF THE RULING OF THE SUPREME COURT IN ESCORTS LTD. VS. UOI (SUPRA). IN RESPECT OF THE ADDITIONS TO THE FIXED ASSETS MADE DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2006 - 07, THE CIT (APPEALS) HELD THAT SINCE THE COST OF THE ASSETS WAS NOT ALLOWED AS A 4 ITA NO.4278/DEL/2012 DEDUCTION BY WAY OF APPLICATION OF INCOME, DEPRECIATION SHOULD BE ALLOW. THE CIT (APPEALS) HAS THUS MADE A DISTINCTION BETWEEN ASSETS THE COST OF WHICH W AS ALLOWED AS DEDUCTION AS APPLICATION OF INCOME AND ASSETS, THE COST OF WHICH WAS NOT SO ALLOWED. THE TRIBUNAL HAS NOT KEPT THIS DISTINCTION IN VIEW, BUT HAS PROCEEDED TO RELY UPON A JUDGMENT OF THIS COURT IN DIT VS. VISHWA JAGRATI MISSION (SUPRA). IN THE JUDGMENT OF THIS COURT THE QUESTION WAS WHETHER THE INCOME OF THE ASSESSEE, WHICH WAS A CHARITABLE TRUST, SHOULD BE COMPUTED ON COMMERCIAL PRINCIPLES AND IF SO, WHETHER DEPRECIATION ON FIXED ASSETS USED FOR CHARITABLE PURPOSES SHOULD BE ALLOWED AS A DEDUC TION. THIS COURT NOTICED THAT THERE WAS A CONSENSUS OF JUDICIAL OPINION ON THIS ASPECT AND HELD, AFTER REFERRING TO THOSE AUTHORITIES AS WELL AS A CIRCULAR OF THE CBDT ISSUED ON 19.07.1968, THAT WHILE COMPUTING THE INCOME OF THE TRUST AVAILABLE FOR APPLICA TION FOR CHARITABLE PURPOSES, DEPRECIATION ON ASSETS USED FOR CHARITABLE PURPOSES SHOULD BE ALLOWED. THE POINT TO BE NOTICED IS THAT IN THIS JUDGMENT, THIS COURT REFERRED TO AND DISTINGUISHED THE JUDGMENT OF THE SUPREME COURT IN ESCORTS LTD. (SUPRA) ON THE GROUND THAT IN ESCORTS (SUPRA), THE SUPREME COURT WAS CONCERNED WITH A CASE WHERE THE DEDUCTION OF THE COST OF THE ASSET WAS ALLOWED UNDER SECTION 35(1) AS CAPITAL EXPENDITURE INCURRED ON SCIENTIFIC RESEA RCH AND, THEREFORE, NO DEDUCTION FOR DEPRECIATION ON THE VERY SAME ASSETS WAS HELD ALLOWABLE UNDER GENERAL PRINCIPLES OF TAXATION, AS IT WOULD AMOUNT TO DOUBLE DEDUCTION. THE JUDGMENT OF THIS COURT IN DIT VS. VISHWAJAGRATI MISSION REINFORCES THE PRINCIPLE THAT IF THE COST OF THE ASSET HAS BEEN ALLOWED AS DEDUCTION BY WAY OF APPLICATION OF INCOME THEN DEPRECIATION ON THE SAME ASSET CANNOT BE ALLOWED IN THE COMPUTATION OF THE INCOME OF THE TRUST. THE DISTINCTION HAS NOT BEEN KEPT IN VIEW BY THE TRIBUNAL WHICH SEEMS TO HAVE ERRONEOUSLY RELIED ON THE JUDGMENT OF THIS COURT TO DIRECT ALLOWANCE OF DEPRECIATION EVEN IN RESPECT OF ASSETS, THE COST OF WHICH HAS ALREADY BEEN ALLOWED AS APPLICATION OF INCOME. WE ACCORDINGLY HOLD THAT THE TRIBUNAL WAS NOT JUSTIFIED IN D IRECTING THE ALLOWANCE OF DEPRECIATION IN RESPECT OF SUCH ASSETS. 5 ITA NO.4278/DEL/2012 6. HOWEVER, WE FIND THAT THE HON BLE SUPREME COURT IN A RECENT DECISION DATED 13/12/2017 IN THE CASE OF COMMISSIONER OF INCOME TAX VERSUS RAJASTHAN AND GUJARATI CHARITABLE FOUNDATION, POON A REPORTED IN (2018) 300 CTR 001(SC), HAS DECIDED THE ISSUE AND ALLOWED APPLICATION OF THE DEPRECIATION. THE HON BLE SUPREME COURT FOLLOWING THE DECISION OF THE HON BLE BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VERSUS INSTITUTE OF B ANKING P ERSONALS (IBPS) (2003) 131 TAXMAN 386 ( BOMBAY) , UPHELD THE VIEW OF THE HON BLE BOMBAY HIGH COURT IN THE CASE. THE HON BLE SUPREME COURT HELD THAT THOUGH THE AMOUNT SPENT ON ACQUISITION OF THE ASSET HAD BEEN TREATED AS APPLICATION OF THE INCOME OF T HE TRUST IN THE YEAR IN WHICH INCOME WAS SPENT IN ACQUIRING THOSE ASSETS, HOWEVER, IN SUBSEQUENT YEAR S DEPRECIATION IN RESPECT OF THOSE ASSETS CAN ALSO BE TAKEN INTO ACCOUNT FOR APPLICATION OF THE INCOME. THE HON BLE SUPREME COURT ALSO NOTED THAT LEGISLATU RE REALISING THAT THERE WAS NO SPECIFIC PROVISION IN THIS BEHALF IN THE A CT, AND THUS MADE AMENDMENT IN S ECTION 11(6) OF THE ACT, WHICH BECAME EFFECTIVE FROM THE ASSESSMENT YEAR 2015 - 16. THE HON BLE SUPREME COURT FURTHER OBSERVED THAT THE DELHI HIGH COURT HAS TAKEN THE VIEW THAT SAID AMENDMENT IS PROSPECTIVE IN NATURE. 6. IN VIEW OF THE ABOVE JUDGEMENT OF THE HON BLE SUPREME COURT, WE UPHOLD THE FINDING OF THE LD. CIT(A) ON THE ISSUE IN DISPUTE AND DISMISS THE GROUND NO. 1 OF THE APPEAL OF THE REVENUE. 7. THE GROUND NO. 2 OF THE APPEAL, BEING GENERAL IN NATURE, WHICH IS NOT REQUIRED TO ADJUDICATE UPON AND ACCORDINGLY, WE DISMISS IT AS INFRUCTUOUS. 6 ITA NO.4278/DEL/2012 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. THE DECISION IS PRONOUN CED IN THE OPEN COURT ON 8 T H M A Y , 201 8 . S D / - S D / - ( BHAVNESH SAINI ) ( O.P. KANT ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 8 T H M A Y , 201 8 . RK / - (D.T.D) COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR ASST. REGISTRAR, ITAT, NEW DELHI