ITO (E) II(1), MUMBAI V. THE WATCH TOWER BIBLE AND TRACT SOCIETY OF INDIA, MUMBAI

ITA 4283/MUM/2011

• Counselvise Citation: 428319914 RSA 2011
• Duration Of Justice: 1 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2007-2008
• Appeal Filed On: 26-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CULLA MUMBAI PANGIR NO AAATT D
• Assessee Lawyers: MUNDAR VAIDYA SHRI PAVAN VED
• Keywords: Depreciation; Charitable institution; Revised return
• Section: 14A; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G BEFORE SHRI D. MANMOHAN (VP) & SHRI RAJENDRA (AM) I.T.A.NO. 4283/MUM/2011 (ASSESSMENT YEAR : 2007-08) ITO (E)-II(1) ROOM NO. 509 PIRAMAL CHAMBERS LALBAUG PAREL MUMBAI-400 012. VS. THE WATCH TOWER BIBLE AND TRACT SOCIETY OF INDIA 167 SHETH MOTISHAH ROAD BYCULLA MUMBAI-400 027. APPELLANT RESPONDENT PAN/GIR NO. : AAATT0149D ASSESSEE BY : SHRI MUNDAR VAIDYA DEPARTMENT BY : SHRI PAVAN VED DATE OF HEARING : 30.5.2012 DATE OF PRONOUNCEMENT : 6.6.2012 ORDER PER D.MANMOHAN (VP) :- THIS APPEAL IS FILED AT THE INSTANCE OF THE REVENU E AND IT PERTAINS TO A.Y. 2007-08. 2. THE ASSESSEE IS ADMITTEDLY AN ASSOCIATION OF PER SONS (TRUST) REGISTERED WITH CHARITY COMMISSIONER AS WELL AS U/S .12A OF THE INCOME TAX ACT, 1961. THE PRINCIPAL OBJECTS OF THE TRUST ARE RELIGIOUS AND EDUCATIONAL ACTIVITIES - EXTENDING BENEFITS TO ALL PERSONS IRRESPECTIVE OF RELIGION, CASTE OR GENDER. FOR A.Y. 2007-08 THE AS SESSEE DECLARED NIL INCOME AND ANNEXED THERETO AUDITED BALANCE-SHEET, I NCOME & EXPENDITURE ACCOUNT ETC. THE ASSESSEE HAS ALSO FILE D FORM 10B. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE EARNED INCOME FROM SALE O F RELIGIOUS AND EDUCATIONAL BOOKS AND MAGAZINES AND WHILE COMPUTING INCOME THEREON IT CLAIMED DEDUCTION TOWARDS DEPRECIATION ETC. THE WATCH TOWER BIBLE AND TRACT SOCIETY OF INDIA 2 4. IN THE OPINION OF THE ASSESSING OFFICER DEPRECIA TION IS NOT ALLOWABLE AS DEDUCTION AND HENCE AMOUNT WAS ADDED T O THE INCOME FROM OTHER SOURCES. IT MAY BE NOTICED THAT NO REASONS WE RE GIVEN BY THE ASSESSING OFFICER FOR COMING TO SUCH A CONCLUSION. 5. INITIALLY THE ASSESSEE DECLARED ACCUMULATED INCO ME U/S. 11(2) OF THE ACT AT ` 1,02,00,000/-. HOWEVER DURING THE COURSE OF ASSESS MENT PROCEEDINGS, VIDE LETTER DATED 20.11.2009 THE ASSES SEE CLAIMED ` 2,80,00,000/- REFERABLE TO ACCUMULATION OF INCOME U /S. 11(2) OF THE ACT. A FRESH FORM 10 DATED 15.10.2009 WITH COPY OF RESOL UTION PASSED AT THE MEETING OF THE GOVERNING BODY HELD ON 14.10.2009 WA S ALSO FILED BEFORE THE ASSESSING OFFICER. HOWEVER, THE ASSESSING OFFIC ER WAS OF THE OPINION THAT THE ASSESSEE CANNOT CLAIM ENHANCED AMOUNT OF E XEMPTION U/S. 11(2) OF THE ACT SINCE HE HAS ORIGINALLY FILED FORM 10 AND COPY OF RESOLUTION CLAIMING ACCUMULATION OF ` 1,02,00,000/- ONLY. IN HIS OPINION THE DECISION OF HON'BLE APEX COURT IN THE CASE OF G OETZE INDIA LTD. (284 ITR 323) SQUARELY APPLIES TO THE INSTANT CASE IN AS MUCH AS ANY SUBSEQUENT CLAIM OF HIGHER ACCUMULATION CAN BE MADE ONLY BY WAY OF REVISED RETURN AND NOT OTHERWISE. HE ACCORDINGLY RE STRICTED THE CLAIM U/S. 11(2) TO A SUM OF ` 1,02,00,000/- ONLY. 6. AGGRIEVED, THE ASSESSEE CONTENDED BEFORE LEARNED CIT(A) THAT PUBLISHING AND PRINTING ACTIVITY IS ONE COMPOSITE A CTIVITY FOR WHICH SEPARATE BOOKS OF ACCOUNT ARE MAINTAINED I.E. DONAT IONS ACCOUNT, FOREIGN CONTRIBUTION ACCOUNT AND PRINTERY ACCOUNT. THE AGG REGATE DEPRECIATION PROVIDED IN ACCOUNTS WAS ` 6.09 CRORES UNDER FOLLOWING HEADS :- DONATION AND FOREIGN CONTRIBUTION : ` 4,02,36,909.34 PRINTERY ACCOUNT : ` 2,07,45,117.72 ------------------------ : ` 6,09,82,027.06 ------------------------- DEPRECIATION OF ` 2,07 CRORES WAS CLAIMED AS DEDUCTION ALONGWITH OTH ER EXPENDITURE INCURRED ON PRINTING ETC. IT WAS ALSO S UBMITTED THAT IN RESPECT OF DEPRECIATION PROVIDED ON OTHER ASSETS TH E ASSESSEE DID NOT CLAIM TO BE AN APPLICATION OF INCOME NOR DOES IT CL AIM IT TO BE A DEDUCTION FROM THE INCOME IN ANY MANNER. IT WAS ALSO CONTENDE D THAT DURING THE THE WATCH TOWER BIBLE AND TRACT SOCIETY OF INDIA 3 COURSE OF ASSESSMENT PROCEEDINGS ASSESSEE FILED REV ISED FORM NO. 10 DECLARING ` 2,80,00,000/- AS ACCUMULATION U/S. 11(2) OF THE AC T WHICH WAS NOT TAKEN INTO CONSIDERATION BY THE ASSESSING O FFICER. CASE OF THE ASSESSEE IS THAT THE DECISION OF HON'BLE APEX COURT IN THE CASE OF GOETZE INDIA LTD. VS. CIT (284 ITR 323) IS NOT APPLICABLE TO THE FACTS OF THE CASE SINCE IT SPEAKS OF CLAIM OF DEDUCTION TOWARDS EXPEN DITURE WHEREAS, IN THE INSTANT CASE, IT WAS A CLAIM OF HIGHER ACCUMULATION WHICH STANDS ON A DIFFERENT FOOTING. 7. LEARNED CIT(A) DISCUSSED THE ISSUE ELABORATELY. IN THE LIGHT OF THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE O F CIT VS. INSTITUTE OF BANKING PERSONNEL SELECTION (264 ITR 110) LEARNED C IT(A) DIRECTED THE ASSESSING OFFICER TO ALLOW DEPRECIATION TO THE APPE LLANT. 8. SINCE THE ASSESSEE HAS ALSO FURNISHED DETAILED E XPLANATION WITH REGARD TO ITS ALTERNATIVE CONTENTION LEARNED CIT(A) OBSERVED THAT THE CLAIM OF THE ASSESSEE DESERVES ACCEPTANCE IN THE LIGHT OF THE DECISION OF HON'BLE APEX COURT IN THE CASE OF NAGPUR HOTEL OWNERS ASSO CIATION (247 ITR 201) WHEREIN, THE COURT HELD THAT A TRUST CAN FILE FORM NO. 10 UNDER RULE 17 AT ANY TIME BEFORE COMPLETION OF ASSESSMENT PROCEEDINGS. HE ACCORDINGLY ACCEPTED THE ALTERNATIVE CONTENTION OF THE ASSESSEE. 9. AGGRIEVED BY THE ORDER OF LEARNED CIT(A), THE RE VENUE IS IN APPEAL BEFORE US. 10. LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED T HAT SECTION 11(1) OF THE I.T. ACT REFERS TO DONATIONS ETC. RECEIVED B Y THE ASSESSEE WHICH ARE LIABLE FOR TAXATION UNLESS OTHERWISE SHOWN TO HAVE BEEN APPLIED FOR CHARITABLE PURPOSES. IN OTHERWORDS, THERE SHOULD BE APPLICATION OF INCOME FOR CHARITABLE PURPOSES. THE EXPRESSION SUC H INCOME IS APPLIED TO SUCH PURPOSES REFERS TO ACTUAL EXPENDITURE AND IT DOES NOT INCLUDE DEDUCTION TOWARDS DEPRECIATION. IN THE INSTANT CASE THE ASSESSEE-TRUST CLAIMED DEDUCTION OF DEPRECIATION AS THOUGH IT AMOU NTS TO APPLICATION OF INCOME. SINCE DEPRECIATION IS NOT ACTUAL OUTGO BUT ONLY A CHARGE TO THE PROFITS AND GAINS OF BUSINESS TO ARRIVE AT THE CORR ECT TAXABLE INCOME IT CANNOT BE TREATED AS APPLICATION OF INCOME. AS REGA RDS DECISION OF THE WATCH TOWER BIBLE AND TRACT SOCIETY OF INDIA 4 HON'BLE BOMBAY HIGH COURT REFERRED TO BY LEARNED CI T(A) [264 ITR 110 (BOM)], LEARNED CIT-DR CONTENDED THAT HON'BLE JURIS DICTIONAL HIGH COURT HAD NOT TAKEN NOTE OF THE PRINCIPLES LAID DOWN BY H ON'BLE APEX COURT IN THE CASE OF ESCORTS LTD. VS. UOI (199 ITR 43). HON' BLE SUPREME COURT OBSERVED THAT ORDINARILY DOUBLE DEDUCTION IS NOT PE RMISSIBLE UNDER THE ACT UNLESS THERE IS A SPECIFIC MENTION IN THE STATU TE. BY APPLYING THE SAID PRINCIPLE, CLAIM OF DEPRECIATION IN THE INSTANT CAS E WOULD AMOUNT TO DOUBLE DEDUCTION IN AS MUCH AS AT THE TIME OF PURCH ASE OF PRINTING MACHINERY THE ASSESSEE WOULD HAVE CLAIMED APPLICATI ON OF INCOME WHEREBY, HE DERIVED THE BENEFIT OF THE PROVISIONS O F SECTION 11 AND AGAIN TO CLAIM DEPRECIATION ON THAT WOULD AMOUNT TO DOUBL E CLAIM IN THE FORM OF APPLICATION OF INCOME; IN AS MUCH AS, AT THE SEC OND STAGE THERE WAS NO APPLICATION SINCE WHATEVER INCOME WAS DIVERTED FOR PURCHASE OF MACHINERY WAS ALREADY TAKEN INTO CONSIDERATION IN T HE EARLIER YEARS AND INCOME EQUIVALENT TO THE AMOUNT SET OFF FOR PURCHAS E OF MACHINERY WAS NOT BROUGHT TO TAX. HE THEN REFERRED TO THE DECISIO NS OF ITAT COCHIN BENCH IN THE CASE OF ADI SANKARA TRUST AND ALSO KER ALA HIGH COURT IN THE CASE OF LISSIE MEDICAL INSTITUTIONS (2012) TIOL 303 KERALA-IT TO SUBMIT THAT DOUBLE DEDUCTION IS NOT PERMISSIBLE WHE REAS HON'BLE BOMBAY HIGH COURT HAD OVERLOOKED THE DECISION OF HO N'BLE APEX COURT IN THE CASE OF ESCORTS LTD. & ORS. (SUPRA). IN THE ALT ERNATIVE HE CONTENDED THAT THE LEGISLATIVE INTENTION CAN BE UNDERSTOOD FR OM THE LANGUAGE USED IN SECTION 14A OF THE ACT WHEREBY NO EXPENDITURE IS ALLOWABLE IN RESPECT OF INCOME WHICH IS EXEMPT. IN THE INSTANT CASE THE ACTUAL COST OF THE ASSETS WAS MET BY THE ASSESSEE BY AVAILING EXEMPTIO N IN THE FORM OF APPLICATION OF INCOME AND THUS ON APPLICATION OF SE CTION 43(1) OF THE ACT IT CANNOT BE SAID THAT ANY DEPRECATION CAN BE ALLOW ED TO THE ASSESSEE SINCE ACTUAL COST HAS TO BE REDUCED BY THE AMOUNT M ET FROM OTHER SOURCES (IN THE INSTANT CASE FROM EXEMPT SOURCE). H E THUS CONTENDED THAT THE ASSESSEE IS NOT ENTITLED TO CLAIM DEPRECIATION PARTICULARLY BECAUSE THE ASSESSEE WAS NOT CARRYING ON ANY BUSINESS AND IT MA Y NOT BE PRINTING AND SELLING THE BOOKS WITH A PROFIT MOTIVE. WITH R EGARD TO THE ALTERNATIVE CLAIM THE CASE OF LEARNED DEPARTMENTAL REPRESENTATI VE IS THAT THE ASSESSEE SEEKS BENEFIT U/S. 11(2) OF THE ACT I.E. A CCUMULATION OF HIGHER INCOME, WITHOUT FILING REVISED RETURN WHICH IS NOT PERMISSIBLE IN LAW. IN THE WATCH TOWER BIBLE AND TRACT SOCIETY OF INDIA 5 THIS REGARD LEARNED DEPARTMENTAL REPRESENTATIVE AD VERTED OUR ATTENTION U/S. 119(2)(B) OF THE ACT TO SUBMIT THAT IN CASE OF A GENUINE HARDSHIP THE CBDT IS EMPOWERED TO ADMIT A CLAIM OF DEDUCTION ETC . BELATEDLY. SUCH A POWER IS NOT VESTED IN ANY OTHER AUTHORITY UNDER TH E STATUTE. THEREFORE STATUTORY MANDATE CANNOT BE WATERED DOWN BY PERMITT ING APPELLATE TRIBUNAL OR ANY OTHER BODY TO INTERPRET RULE 17 LIB ERALLY. THIS ASPECT WAS NOT CONSIDERED BY THE APEX COURT IN THE CASE OF NAG PUR HOTEL OWNERS ASSOCIATIONS (SUPRA) AND HENCE CASE LAW RELIED UPON BY THE ASSESSEE IS DISTINGUISHABLE ON FACTS. IT WAS ALSO CONTENDED THA T FORM NO. 10 SPECIFIES THAT A NOTICE TO THE PRESCRIBED AUTHORITY U/S. 11(2) OF THE I.T. ACT HAS TO BE GIVEN SPECIFYING THAT BEFORE EXPIRY O F SIX MONTHS COMMENCING FROM THE END OF EACH PREVIOUS YEAR THE A MOUNT SO ACCUMULATED OR SET APART HAS BEEN/WILL BE INVESTED OR DEPOSITED IN ANY ONE OR MORE OF THE FORMS OR MODES SPECIFIED IN SECT ION 11(5) OF THE ACT WHEREAS, IN THE INSTANT CASE A REVISED FORM WAS FIL ED LONG AFTER THE PERIOD OF EXPIRY OF SIX MONTHS HENCE, IT IS CONTRARY TO TH E PROCEDURE PRESCRIBED THEREIN AND HENCE EVEN ON THAT ACCOUNT, THE BENEFIT PROVIDED U/S. 11(2) CANNOT BE AVAILED OF BY THE ASSESSEE. HE THUS STRO NGLY SUPPORTED THE ORDER PASSED BY THE ASSESSING OFFICER. 11. ON THE OTHER HAND LEARNED COUNSEL APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT LEARNED CIT-DR ADVANCED ITS ARGUMENTS ON CERTAIN ASSUMPTIONS WHICH ARE CONTRARY TO FACTS. IN THIS REGARD HE REFERRED TO PAGE 3 OF THE STATEMENT OF FACTS, FILED BEFORE LEARNED CIT(A), WHEREIN THE ASSESSEE CATEGORICALLY STATED THAT ALL THE CONDITIONS LAID DOWN IN SECTION 11(2) ARE FULFILLED AND FUNDS WERE SET APART FOR INVESTMENT BEFORE THE END OF THE PREVIOUS YEAR AND FRESH NOTICE IN FORM NO. 10 WAS ALSO FILED. THIS FACT WAS NOT DISPUTED B Y LEARNED CIT(A) AND NO SPECIFIC GROUND WAS RAISED BY THE REVENUE IN THE GROUNDS OF APPEAL FILED BEFORE THE TRIBUNAL. THEREFORE ASSUMPTION OF LEARNED DEPARTMENTAL REPRESENTATIVE, THAT ASSESSEE HAS NOT FOLLOWED THE CONDITIONS PRESCRIBED IN SECTION 11, IS NOT ONLY CONTRARY TO LAW BUT ON F ACTS. AT ANY RATE, DECISION IN THE CASE OF GOETZE INDIA (SUPRA) IS DIS TINGUISHABLE ON FACTS IN AS MUCH AS IN THE AFORECITED CASE HON'BLE APEX COUR T WAS DEALING WITH THE CLAIM OF DEDUCTION WHEREAS THE ASSESSEE HEREIN DID NOT MAKE ANY THE WATCH TOWER BIBLE AND TRACT SOCIETY OF INDIA 6 FRESH CLAIM OF DEDUCTION BUT MERELY GAVE NOTICE OF THE COMPLIANCE U/S. 11(2) OF THE ACT I.E. WITH REGARD TO ENHANCEMENT OF DEPOSITS. RELIANCE WAS PLACED UPON THE FOLLOWING DECISIONS IN SUPPORT OF H IS CONTENTION THAT PROPER CLAIM OF EXEMPTION U/S. 11 CAN BE MADE AT AN Y TIME BEFORE COMPLETION OF ASSESSMENT. CIT VS. SOCIETY OF THE SISTERS OF STOCK-IN-TRADE. A NNE, 146 ITR 26 (KARNATAKA) NAGPUR HOTEL OWNERS ASSOCIATION, 247 ITR 201 (SC) CIT VS. SIMLA CHANDIGARH DIOCESE SOCIETY, 318 ITR 96 12. HE FURTHER SUBMITTED THAT THREE MEMBERS BENCH OF TH E HON'BLE APEX COURT HAS TAKEN A VIEW, IN THE CASE OF NAGPUR OWNERS ASSOCIATION THAT INTIMATION REQUIRED U/S. 11 HAS TO BE FURNISHE D BEFORE THE ASSESSING AUTHORITY BEFORE COMPLETION OF ASSESSMENT AND IT IS NOT MANDATORY THAT IT HAS TO BE FURNISHED ALONGWITH RETURN OF INCOME WHER EAS, IN THE CASE OF GOETZ INDIA (SUPRA) THE BENCH CONSTITUTED BY TWO JU DGES AND HENCE THE DECISION OF LARGER BENCH HAS TO BE PREFERRED. 13. WITH REGARD TO THE MAIN CONTENTION THAT THE ASS ESSEE IS ENTITLED TO CLAIM DEDUCTION TOWARDS DEPRECIATION THE ASSESSEE R ELIED UPON THE CIRCULAR ISSUED BY THE CBDT (NO. 5P DATED 19.6.1968 ) WHICH IN TURN WAS REFERRED TO AND APPLIED IN THE FOLLOWING CASES :- M/S. SRI RENGALATCHUMI EDUCATIONAL TRUST (ITA NOS. 681 & 682/MDS/2010 & ITA NOS. 89 & 90/MDS/2009 DATED 25.3 .2011) DIT VS. FRAMJEE CAWASJEE INSTITUTE (109 CTR 463)(BO M) CIT VS. INSTITUTE OF BANKING (264 ITR 110) (BOM) (DECISION OF SUPREME COURT IN THE CASE OF ESCORTS LTD. CONSIDERED AND DISTINGUISHED) M/S. BOMMANJI DINSHAW PETIT PARSEE (ITA NO. 3259/MU M/2011 DATED 20.3.2012) PARMESHWARIDEVI GORDHANDAS GARODIA CHARITABLE TRUST ( ITA NO. 4108/MUM/2010 DATED 10.8.2011) DIT VS. VISHWA JAGRITI MISSION (2012) TIOL-271 (DE LHI HC) IT WAS SUBMITTED THAT IN ALL THESE CASES DECISION OF SUPREME COURT IN THE CASE OF ESCORTS LTD. WAS REFERRED TO AND DISTIN GUISHED BY HOLDING THAT CLAIM OF DEPRECIATION WOULD NOT AMOUNT TO DOUBLE DE DUCTION IN THE CIRCUMSTANCES OF THE CASE. HE THUS STRONGLY SUPPORT ED THE ORDER PASSED BY LEARNED CIT(A). THE WATCH TOWER BIBLE AND TRACT SOCIETY OF INDIA 7 14. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED THE RECORD. AS COULD BE NOTICED FROM THE DETAILED O RDER PASSED BY THE LEARNED CIT(A) AS WELL AS THE DECISIONS RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE, THE CONTENTIONS RAISED BY THE LEA RNED CIT(DEPARTMENTAL REPRESENTATIVE ) RUNS CONTRARY TO THE DECISION OF T HE APEX COURT IN THE CASE OF NAGPUR HOTEL OWNERS ASSOCIATION (SUPRA) VI S--VIS THE FRESH NOTICE GIVEN IN FORM 10 BEFORE COMPLETION OF ASSESS MENT; WITH REGARD TO CLAIM OF DEPRECIATION THE ISSUE STANDS COVERED BY T WO ORDERS OF ITAT MUMBAI BENCH (SUPRA) AS WELL AS THE DECISION OF HON 'BLE DELHI HIGH COURT IN THE CASE OF VISWA JAGRITI MISSION WHEREIN THE COURT OBSERVED THAT DECISION OF APEX COURT IN THE CASE OF ESCORTS LTD.(SUPRA) HAS NO APPLICATION IN THESE CIRCUMSTANCES. IN THE LIGHT OF THE AFORECITED DECISIONS WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY LEARNED CIT(A). WE, THEREFORE, AFFIRM THE ORDER OF LEARNED CIT(A) AND DISMISS THE APPEAL FILED BY THE REVENUE. ORDER HAS BEEN PRONOUNCED ON 6 TH DAY OF JUNE, 2012. SD/- (RAJENDRA) ACCOUNTANT MEMBER SD/- (D. MANMOHAN) VICE-PRESIDENT DATED : 6 TH JUNE, 2012. COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)-CONCERNED. 4. THE CIT, CONCERNED. 5. THE DR CONCERNED, MUMBAI 6. GUARD FILE BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI PS