ITO (EXEMPTION), Kota V. KRISHI UPAJ MANDI SAMITI, Kota

ITA 451/JPR/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2002 (ITAT-JAIPUR)
• Duration Of Justice: 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 01-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROSHANTA MEENA
• Assessee Lawyers: DEEPAK PARIK
• Keywords: Capital asset; Depreciation; Charitable institution; Additional evidence; Benefit of exemption; Capital expenditure
• Section: 12A; 32; 6; 12; 11

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKWY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA-@ ITA NO.451/JP/2017 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2004-05 INCOME TAX OFFICER(EXEMPTION), KOTA CUKE VS. M/S KRISHI UPAJ MANDI SAMITI, BHAMASHAH MANDI, KOTA LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAALK0392B VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS @ REVENUE BY : SMT ROSHANTA MEENA (JCIT) FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI DEEPAK PARIK (ADV.) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 12/10/2017 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 17/10/2017 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A), KOTA DATED 15.03.2017 FOR ASSESSMENT YEAR 2004-05 W HEREIN THE REVENUE HAS TAKEN FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE CIT(A) HAS ERRED IN ALLOWING CLAIM OF DEPRECIATION ON FIXED ASSETS IN SPITE OF THE FACT THAT THE SAME WAS ALLOWED AS APPL ICATION OF INCOME U/S 11 AT THE TIME OF PURCHASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE CIT(A) HAS ERRED IN ALLOWING DEPRECIATION WITHOUT A PPRECIATING THE FACT THAT THE APPLICATION OF 100% EXPENDITURE OF THE CAP ITAL ASSET IS ALREADY ALLOWED AS CAPITAL EXPENDITURE HENCE FURTHER ALLOWA NCE OF THE DEPRECIATION ON THE SAME CAPITAL ASSET WOULD AMOUNT TO DOUBLE ALLOWANCE. ITA NO. 451/JP/2017 ITO(EXEMPTION), KOTA VS M/S KRISHI UPAJ MANDI SAMITI, KOTA 2 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE CIT(A) HAS ERRED IN ALLOWING DEPRECIATION WITHOUT A PPRECIATING THE FACT THAT THE ASSESSEE HAS NOT CARRIED OUT THE BUSINESS ACTIVITIES BUT THE RECEIPTS UTILIZED FOR CHARITY. AS THERE WAS NO BUSI NESS ACTIVITY THE CLAIM OF DEPRECIATION WAS NOT ALLOWABLE, THE DEPRECIATION IS ALLOWABLE ONLY IN THE CASE OF BUSINESS OR PROFESSION OR IN THE CASE O F INCOME FROM OTHER SOURCES. 2. FIRSTLY, IT IS NOTED THAT THIS IS THE SECOND ROUND OF APPELLATE PROCEEDINGS WHEREIN THE MATTER HAS COME UP BEFORE THIS TRIBUNAL . IN THE FIRST ROUND, THE LD. CIT(A) HAS HELD THAT THE ASSESSEE WAS NOT ENTIT LED TO THE BENEFIT OF EXEMPTION U/S 11 & 12 OF THE ACT IN THE ABSENCE OF THE AUDIT REPORT EVEN THOUGH THE ASSESSEE WAS REGISTERED U/S 12A OF THE A CT. ON APPEAL, THE CO- ORDINATE BENCH, VIDE ITS ORDER DATED 27.2.2015 ADMI TTED THE ADDITIONAL EVIDENCE IN THE FORM OF THE AUDIT REPORT AND THE MA TTER WAS SET ASIDE TO THE FILE OF LD. CIT(A) TO EXAMINE THE CLAIM OF EXEMPTIO N U/S 11 & 12 AS PER LAW. 3. IN THE SET ASIDE PROCEEDINGS, THE LD. CIT(A) HAS HE LD THAT AS THE ASSESSEE HAS APPLIED 100% OF RECEIPT FOR CHARITABLE PURPOSES, IT IS ELIGIBLE FOR EXEMPTION U/S 11 & 12 OF THE ACT. FURTHER IN RESPEC T OF RENTAL INCOME FROM THE SHOPS WHICH WERE HELD AS INCOME FROM HOUSE PROP ERTY BY THE ASSESSING OFFICER, IT WAS HELD THAT THE ASSESSEE IS ENTITLED FOR EXEMPTION U/S 11 & 12 OF THE ACT SINCE THE INCOME FROM ASSETS ARE EARNED IN THE NORMAL COURSE OF THE ACTIVITIES OF THE MANDI. IN RESPECT OF DISALLOWANCE OF DEPRECIATION AMOUNTING TO RS. 5,74,58,572/- MADE BY THE ASSESSING OFFICER, THE LD. CIT(A) HELD THAT SINCE THE ENTIRE INCOME IS ALLOWED AS BEING APPLIED FOR THE PURPOSE OF TRUST, THE EXPENDITURE ON DEPRECIATION DEDUCTION WILL BE A LSO DEEMED TO BE ALLOWED WITHIN THE OVERALL CLAIM. THE REVENUE HAS NOT CHALL ENGED THE ELIGIBILITY OF THE ASSESSEE FOR EXEMPTION U/S 11 & 12 OF THE ACT. HOWE VER, AS FAR AS ALLOWANCE OF DEPRECIATION ON THE FIXED ASSETS IS CONCERNED, T HE SAME IS BEING CHALLENGED BEFORE US BY WAY OF PRESENT APPEAL. ITA NO. 451/JP/2017 ITO(EXEMPTION), KOTA VS M/S KRISHI UPAJ MANDI SAMITI, KOTA 3 4. AT THE OUTSET, THE LD AR SUBMITTED THAT THE ISSUE I S COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE RAJASTH AN HIGH COURT IN CASE OF CIT VS. KRISHI UPAJ MANDI SAMITI REPORTED IN 388 ITR 605 (RAJ) AND THE SAME MAY KINDLY BE FOLLOWED. 5. PER CONTRA, THE LD DR RELIED ON THE ORDER OF THE AO AND SUBMITTED THAT CIT(A) HAS ERRED IN ALLOWING CLAIM OF DEPRECIATION ON FIXED ASSETS IN SPITE OF THE FACT THAT THE SAME WAS ALLOWED AS APPLICATION O F INCOME U/S 11 AT THE TIME OF PURCHASE. IT WAS FURTHER SUBMITTED THAT THE REVENUE HAS NOT ACCEPTED THE ABOVE SAID DECISION OF THE HONBLE RAJASTHAN HI GH COURT. 6. IN CASE OF ACIT(EXEMPTION), JAIPUR V. MAHIMA SHIKSH A SAMITI (ITA NO. 30,31,105 &106/JP/2016) DATED MARCH 3, 2017 (WHERE ONE OF US WAS A PARTY), FOLLOWING THE DECISION OF THE HONBLE RAJAS THAN HIGH COURT IN THE CASE OF KRISHI UPAJ MANDI SAMITI (SUPRA), WE HAVE ALREAD Y TAKEN A VIEW THAT THE DEPRECIATION IS HELD ADMISSIBLE TO THE ASSESSEE UND ER THE PROVISIONS OF SECTION 32 OF THE ACT IN RESPECT OF ASSETS ON WHICH EXEMPTI ON HAS BEEN CLAIMED AND ALLOWED UNDER SECTION 11 OF THE ACT. THE RELEVANT FINDINGS ARE REPRODUCED AS UNDER: 99. THE SUBJECT ISSUE IS NO MORE RES INTEGRA. AS P ER HONBLE KARNATAKA HIGH COURT, THE PLAIN LANGUAGE OF THE AMENDMENT BY WAY O F INSERTION OF SUBSECTION 6 TO SECTION 11 ESTABLISHES THE INTENT OF THE LEGIS LATURE IN DENYING THE DEPRECIATION DEDUCTION IN COMPUTING THE INCOME OF C HARITABLE TRUST PROSPECTIVELY WITH EFFECTIVE FROM 1.4.2015. THIS VI EW IS FURTHER SUPPORTED BY THE NOTES ON CLAUSES IN FINANCE [NO.2] BILL, 2014, MEMO EXPLAINING PROVISIONS AND CIRCULARS ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES IN THIS REGARD. 100. FURTHER, RECENTLY, THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. KRISHI UPAJ MANDI SAMITI REPORTED IN 388 ITR 605 (RAJ) HAS HELD AS UNDER: ITA NO. 451/JP/2017 ITO(EXEMPTION), KOTA VS M/S KRISHI UPAJ MANDI SAMITI, KOTA 4 (5) THE ASSESSEE IS A CHARITABLE INSTITUTION REGIS TERED U/S 12A OF THE ACT, 1961 AND 100 PER CENT CAPITAL EXPENDITURE WAS AVAILED BY IT AGAINST THE ASSET CONCERNED, I.E. A BUILDING. SECT ION 32(1) OF THE ACT, 1961 PROVIDES FOR DEPRECATION IN RESPECT OF BUILDIN G, PLANT AND MACHINERY OWNED BY THE ASSESSEE AND USED FOR BUSINE SS PURPOSES. INCOME OF THE CHARITABLE TRUST LIKE THE PRESENT ASS ESSEE DERIVES FROM THE DEPRECIABLE HEADS IS ALSO LIABLE TO BE COMPUTED ON COMMERCIAL BASIS, HOWEVER, WHILE DOING SO IT IS TO BE KEPT IN MIND THAT ULTIMATELY THE ASSESSEE IS A CHARITABLE INSTITUTION AND ITS IN COME FOR TAX PURPOSES IS REQUIRED TO BE DETERMINED BY TAKING INTO CONSIDER ATION PROVISIONS OF SECTION 11 OF THE ACT OF 1961 AFTER EXTENDING NORM AL DEPRECIATION AND DEDUCTIONS FROM ITS GROSS INCOME. IN COMPUTING TH E INCOME OF A CHARITABLE INSTITUTION/TRUST DEPRECIATION OF ASSETS OWNED BY SUCH INSTITUTION IS A NECESSARY DEDUCTION ON COMMERCIALS , HENCE, THE AMOUNT OF DEPRECIATION HAS TO BE DEDUCTED TO ARRIVE AT THE INCOME AVAILABLE. (6) IN VIEW OF THE DISCUSSIONS MADE ABOVE, WE FIND OURS ELVES IN AGREEMENT WITH THE VIEW TAKEN BY THE BOMBAY HIGH CO URT IN DIT (EXEMPTIONS) VS. FRAMJEE CAWASJEE INSTITUTE (SUPRA) AND THE CIT VS. INSTITUTE OF BANKING (SUPRA). THE SUBSTANTIAL QUE STION FRAMED IN THE INSTANT MATTER, THUS IS ANSWERED IN THE TERMS THAT THE INCOME TAX APPELLATE TRIBUNAL RIGHTLY ALLOWED DEPRECIATION CLA IMED BY THE ASSESSEE SOCIETY ON CAPITAL ASSETS FOR WHICH CAPITAL EXPENDI TURE WAS ALREADY GIVEN IN THE YEAR UNDER CONSIDERATION. 101. THE LD DR SUBMITTED THAT THE REVENUE HAS NOT ACCEPTED THE SAID ABOVE DECISION OF THE HONBLE RAJASTHAN HIGH COURT AND A PRAYER FOR SPECIAL LEAVE PETITION AGAINST THE SAID ORDER HAS SINCE BEEN ADMI TTED BY THE HONBLE SUPREME COURT. IN HIS REJOINDER, THE LD AR SUBMITTE D THAT THE ADMITTING OF AN SLP AGAINST THE ORDER OF HONBLE RAJASTHAN HIGH COU RT IS NO BAR FOR THE ITA NO. 451/JP/2017 ITO(EXEMPTION), KOTA VS M/S KRISHI UPAJ MANDI SAMITI, KOTA 5 TRIBUNAL AND ANY OF THE LOWER AUTHORITIES TO FOLLOW SUCH BINDING DECISION OF THE JURISDICTIONAL HIGH COURT UNLESS THE OPERATION OF SUCH ORDER HAS BEEN STAYED BY THE HONBLE SUPREME COURT. 102. RESPECTFULLY FOLLOWING THE DECISION OF HONBL E KARNATAKA HIGH COURT WHEREIN THE AMENDMENT TO SECTION 11 (6) HAS BEEN HE LD PROSPECTIVE IN NATURE WITH EFFECT FROM 01-04-2015 AND THE HONBLE RAJASTH AN HIGH COURT DECISION (SUPRA), THE DEPRECIATION IS HELD ADMISSIBLE TO THE ASSESSEE SOCIETY UNDER THE PROVISIONS OF SECTION 32 OF THE ACT IN RESPECT OF A SSETS ON WHICH EXEMPTION HAS BEEN ALLOWED UNDER SECTION 11 OF THE ACT. THE GROUND TAKEN BY THE ASSESSEE SOCIETY IS THUS ALLOWED. 7. IN THE INSTANT CASE, THE YEAR UNDER CONSIDERATIO N BEING AY 2004-05, THE PROVISIONS OF SECTION 11 (6) ARE NOT APPLICABLE FOL LOWING THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF DIT V. AL- AMEEN CHARITABLE FUND TRUST REPORTED IN 383 ITR 517 WHERE THE SAID PROVI SIONS HAVE BEEN HELD APPLICABLE PROSPECTIVE WITH EFFECT FROM 01-04-2015. FURTHER, FOLLOWING THE DECISION OF THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF KRISHI UPAJ MANDI SAMITI (SUPRA), THE ASSESSEE IS HELD ELIGIBLE FOR D EPRECIATION ALLOWANCE UNDER THE PROVISIONS OF SECTION 32 OF THE ACT IN RESPECT OF ASSETS ON WHICH EXEMPTION HAS BEEN CLAIMED AND ALLOWED UNDER SECTIO N 11 OF THE ACT. THE GROUNDS OF APPEAL TAKEN BY THE REVENUE ARE THUS DIS MISSED. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 17/10/2017. SD/- SD/- FOT; IKWY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED:- 17/10/2017 *GANESH KR ITA NO. 451/JP/2017 ITO(EXEMPTION), KOTA VS M/S KRISHI UPAJ MANDI SAMITI, KOTA 6 VKNS'K DH IZFRFYFI VXZSF'KR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT - INCOME TAX OFFICER (EXEMPTION), KOTA 2. IZR;FKHZ@ THE RESPONDENT - M/S KRISHI UPAJ MANDI SAMITI, KOTA 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDRVIHY@ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 451/JP/2017) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR.