DCIT (Exemption), New Delhi V. Institute of Sisters of Charity, New Delhi

ITA 4435/DEL/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2963 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 16-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Depreciation; Rectification of order; Charitable institution; Question of law; Assessment record
• Section: 143(3); 12AA; 154

Judgement Text

ITA NO. 4435/DEL/2016 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: C NEW DELHI BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER & SHRI K.N. CHARY, JUDICIAL MEMBER ITA NO.-4435/DEL/2016 ( ASSESSMENT YEAR: 2011-12) DCIT(EXEMPTION) CIRCLE 1(1), E-2 BLOCK, PRATYAKSH KAR BHAWAN, DR. SHYAMA PRASAD MUKHEREJEET, CIVIC CENTRE, NEW DELHI. VS INSTITUTE OF SISTERS OF CHARITY 21-A, RING ROAD, LAJPAT NAGAR, NEW DELHI. AAAT10168B ASSESSEE BY NONE REVENUE BY SH. ARUN KUMAR YADAV, SR. DR ORDER PER K. NARSIMHA CHARY, J.M. AGGRIEVED BY THE ORDER DATED 13.06.2016 IN APPEAL N O. 124/2015-16 REVENUE PREFERRED THIS APPEAL ON THE FO LLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD.CIT (A) HAS ERRED IN ALLOWING THE APPEAL OF THE ASSESSEE BY IGNORING THE FACT THAT IN THE CASE OF C HARITABLE OR RELIGIOUS INSTITUTIONS, THE ASSESSEE IS NOT ELIGIBL E FOR ANY TYPE OF DEPRECIATION AS THE ENTIRE EXPENDITURE FOR THE PU RCHASE OF CAPITAL ASSETS IS ALLOWED AS A DEDUCTION AND THE SAME IS TREATED AS APPLICATION OF INCOME U/S 11(1) AND CLAI MING DEPRECIATION ON THE SAME CAPITAL ASSETS IS A DOUBLE DEDUCTION DATE OF HEARING 20.12.2017 DATE OF PRONOUNCEMENT 26.12.2017 ITA NO. 4435/DEL/2016 2 AND IS NOT AS PER LAW AS THESE CAPITAL ASSETS ARE NO T USED FOR THE PURPOSE OF BUSINESS OR PROFESSION AS PROVIDED U /S 32(1). 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN IGNORING THE FACT THAT ASSESSEE LIKE CHARITABLE OR RELIGIOUS INSTITUTIONS ARE GOVERNED BY ALMOST THE SEPARATE OR INDEPENDENT PROVISIONS OF SECTION 11, 12, 12A, 12AA & 13 AND THESE PROVISIONS ARE INDEPENDENT CODE IN ITSELF IN CHAPTER III OF THE INCOME TAX ACT, 1961. THE IN COME AND EXPENDITURE IS COMPUTED ON THE BASIS OF APPLICATION OF INCOME FOR CHARITABLE OR RELIGIOUS PURPOSES AND THE DEDUCTI ON IS ALLOWED OF THE ENTIRE EXPENDITURE INCLUDING THE CAP ITAL EXPENDITURE FOR PURCHASE OF CAPITAL ASSETS U/S 11(1) . 3. THE ASSESSEE CRAVES LEAVE TO ADD, TO ALTER OR AMEND ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARIN G. 2. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS A TRUST RUNNING VARIOUS EDUCATIONAL INSTITUTIONS AND MEDICAL & SOCI AL WORK CENTERS. THE ASSESSMENT U/S 143(3) WAS COMPLETED A T NIL INCOME BY THE ASSESSING OFFICER ADIT (EXEMPTION) FO R THE A.Y. 2011-12 BY AN ORDER DATED 31.01.2014. LATER ON THE DCIT (EXEMPTION), THE THEN ASSESSING OFFICER, ON PERUSAL OF ASSESSMENT RECORD FIND THAT THE ORDER OF ASSESSMENT DATED 31.0 1.2014 WAS ERRONEOUS. THE DCIT (E) NOTICED THAT THE EARLIER A SSESSING OFFICER HAD COMPLETED THE ASSESSMENT ALLOWING THE DEPRECIAT ION CLAIM OF THE ASSESSEE AMOUNTING TO RS. 2,19,57,951/-. HE WA S OF THE VIEW THAT SINCE THE ASSESSEE IS CLAIMING EXPENDITURE ON ACCOUNT OF PURCHASE OF FIXED ASSETS, THE DEPRECIATION SHOULDN T HAVE BEEN ALLOWED. THE DCIT(E), PASSED THE RECTIFICATION ORD ER U/S 154 OF THE INCOME TAX ACT, 1961 AND RECOMPUTED THE TOTAL I NCOME AT RS. 2,19,57,951/- VIDE ORDER DATED 24.03.2015 AND ISSUE D THE DEMAND NOTICE AMOUNTING TO RS. 1,02,39,060/- FOR TH E AY 2011- 12. 3. IN APPEAL LD. CIT (A) FOLLOWED THE ORDER OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF DIT VS. VI SHWAJAGARITI MISSION 73 DTR (DEL.) 195 FOLLOWED IN DIT VS. INDRA PRASTHA ITA NO. 4435/DEL/2016 3 CANCER SOCIETY IN ITA NO. 240/2014 ORDER DATED 18.1 1.2014 AND HELD THAT IN COMPUTING THE INCOME OF A CHARITABLE T RUST, DEPRECIATION OF ASSETS OWNED BY THE TRUST IS A NECE SSARY DEDUCTION ON COMMERCIAL PRINCIPLES AND THE AMOUNT O F DEPRECIATION DEBITED TO THE ACCOUNTS OF THE CHARITA BLE INSTITUTION HAS TO BE DEDUCTED TO ARRIVE AT THE INCOME AVAILABL E FOR APPLICATION TO CHARITABLE AND RELIGIOUS PURPOSES. REVENUE IS CHALLENGING SUCH A FINDING IN THIS APPEAL. 4. IT IS THE ARGUMENT OF THE LD. DR PLACED RELIANCE ON THE RECTIFICATION ORDER DATED 24.03.2015. LD. AR SUBMI TTED THAT SINCE THE LD. CIT (A) GRANTED RELIEF TO THE ASSESSEE BY F OLLOWING THE BINDING PRECEDENTS OF THE HONBLE JURISDICTIONAL HI GH COURT THE SAME CANNOT BE INTERFERED WITH. 5. WE HAVE GONE THROUGH THE RECORD. IN CAROLEX FOUN DATION, NEW DELHI VS. DEPARTMENT OF INCOME TAX DATED 4.11.2 015 IN ITA NO. 2876/DEL/2010 A COORDINATE BENCH OF THIS TRIBUN AL HELD AS FOLLOWS: THAT THE LD. ASSESSING OFFICER HAS FAILED TO APPREC IATE THE DIFFERENCE BETWEEN THE INCOME CHARGEABLE TO TAX AND THE APPLICATION OF INCOME WHICH IS A CONDITION FOR THE PURPOSE OF EXEMPTION U/S 11. APPLICATION OF INCOME IS NOT A C OMPUTATION OF INCOME AND THE PROVISION OF APPLICATION OF INCOME WOULD COME INTO PLAY ONLY AFTER THE INCOME CHARGEABLE TO TAX IS DETERMINED. 6. THERE IS NO DISPUTE OF THE FACT THAT THE ASSESSE E HAS BEEN PURCHASING FIXED ASSETS IN THE EARLIER YEARS AND TH E SAME HAVE BEEN USED FOR CHARITABLE PURPOSES. LD. CIT (A) FOL LOWED THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF DIT VS. VISHWAJAGARITI MISSION (SUPRA) FOLLOWED BY THE HIGH COURT IN DIT VS. INRAPRASTHA CANCER SOCIETY (SUPRA), TO R EACH THE ITA NO. 4435/DEL/2016 4 CONCLUSION THAT IN COMPUTING THE INCOME OF A CHARIT ABLE INSTITUTION OF A TRUST, DEPRECIATION OF ASSETS OWNE D BY THE TRUST/INSTITUTION IS A NECESSARY DEDUCTION ON COMME RCIAL PRINCIPLES AND THE AMOUNT OF DEPRECIATION DEBITED T O THE ACCOUNTS OF THE CHARITABLE INSTITUTION HAS TO BE DEDUCTED TO ARRIVE AT THE INCOME AVAILABLE FOR APPLICATION TO CHARITABLE AND RELIGIOUS PURPOSES. THE QUESTION OF LAW THAT IS INVOLVED IN THE CASE ON HAND ALSO RELATES TO THE ALLOWABILITY OF DEPRECIATI ON ON THE ASSETS OF THE TRUST. SINCE THE LD. CIT (A) ALLOWED RELIEF TO THE ASSESSEE WHILE FOLLOWING THE JURISDICTIONAL HIGH COURTS DEC ISIONS, WHICH ARE BINDING ON THIS TRIBUNAL ALSO, WE DO NOT FIND A NY ILLEGALITY OR IRREGULARITY IN THE IMPUGNED ORDER OF THE LD. CIT ( A) AND ACCORDINGLY WE UPHOLD THE SAME. THE APPEAL IS DEVOID OF ANY MERITS AND, THEREFORE, IS DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26.12.2017 SD/- SD/- (N.K. SAINI) (K. NARSIMHA CHARY) ACCOUNTANT MEMBER JUDICIAL MEMB ER DATED: 26.12.2017 *KAVITA ARORA COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT TRUE COPY ASSISTANT REGISTRAR ITAT NEW DELHI ITA NO. 4435/DEL/2016 5