The DCIT (Exemptions), Circle-2, Ahmedabad V. Shree Satya Sai Education Trust, Surat

ITA 470/AHD/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 2402 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 23-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LALIT P JAIN
• Keywords: Depreciation; Income from undisclosed sources; Charitable institution; Cost of acquisition; Capital expenditure
• Section: 143(3); 32; 10; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER & SHRI AMARJIT SINGH, ACCOUNTANT MEMBER) ITA. NO: 470/AHD/2017 (ASSESSMENT YEAR: 2012-13) DEPUTY COMMISSIONER OF INCOME-TAX (EXEMPTIONS), CIRCLE-2, AHMEDABAD V/S SHREE SATYA SAI EDUCATION TRUST 8, SARDAR NAGAR SOCIETY, SUMUL DAIRY ROAD, SURAT-395004 (APPELLANT) (RESPONDENT) PAN: AAATA4252C APPELLANT BY : SHRI LALIT P. JAIN, SR. D .R. RESPONDENT BY : NONE ( )/ ORDER DATE OF HEARING : 28 -08-201 8 DATE OF PRONOUNCEMENT : 30 -08-2018 PER MAHAVIR PRASAD, JUDICIAL MEMBER 1. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-9, AHMEDABAD DATED 06.12.2016 PERTAINING TO A.Y. 2012- 13 AND FOLLOWING GROUNDS HAVE BEEN TAKEN: ITA NO 470/A HD/2017 . A.Y. 2012-13 2 1.WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE IS THE LD. CIT (A) JUSTIFIED IN ALLOWING THE DEPRECIATION OF RS. 1,68,86,407/-WHICH AMOUNT T O DOUBLE DEDUCTION AS 100% DEDUCTION WAS ALREADY ALLOWED TO THE ASSESSEE AS APPLICATION OF I NCOME. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E ID. COMMISSIONER OF INCOME-TAX (APPEAL) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFI CER. 2. THE FACTS OF THE CASE ARE THAT DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, IT WAS SEEN THAT ASSESSEE HAS CLAIMED DEPRECIATION OF RS. 1,68,86,407/- AS WELL AS ADDITION TO FIX ASSETS AS APPLICATION OF INCOME. AS PER LD. A.O. THIS WOULD AMOUNT DOUBLE DEDUCTION AND HEN CE ASSESSEE WAS SHOW CAUSED AS TO WHY THE SAME SHOULD NOT B E DISALLOWED . 3. IN RESPONSE TO THE NOTICE, ASSESSEE FILED FOLLOWING REPLY: FOR CLAIMING DEDUCTION OF DEPRECIATION AS APPLICATI ON OF INCOME, THE RELIANCE HAS BEEN PLACED UPON THE FOLLOWING VARIOUS JUDGMENTS OF THE HON'BLE HIGH COURT S:- COMMISSIONER OF INCOME TAX V/S. DEVI SAKUNTALA THAR AL CHARITABLE FOUNDATION AND OTHERS (2013)358 ITR 452 (MP). DIRECTOR OF INCOME-TAX V/S. VISHWA JAGRITI MISSION( 2012)73DTR(DEL) 195. COMMISSIONER OF INCOME TAX V/S. SHRIGUJARATI SAMAJ (REGD) (2011) 64 DTR (MP) NOKIA CORPORATION V/S. DIRECTOR OF INCOME TAX (INTE RNATIONAL TAXATION) &ANR (2007) 2LL CTR(DEL)48. COMMISSIONER OF INCOME TAX V/S. INSTITUTION OF BANK ING PERSONNEL SELECTION (2003) 185 CTR (BOM) 492. DIRECTOR OF INCOME TAX (EXEMPTION) V/S. FRAMJEE CAW ASJEE INSTITUTE (1993) 109 CTR (BOM)463. COMMISSIONER OF INCOME TAX V/S. RAIPURPALLOTTINE SOCIETY(1989)80CTR : (MP) 127. COMMISSIONER OF INCOME TAX V/S- SOCIETY OF THE SIST ER OF ST ANNE (1984) 39 CTR (KAR)9. SHRI GOVINDRAM SEKSARIA CHARITY V/S: INCOME TAX O FFICER & ORS. (1987)65CTR (MP)29. ITA NO 470/A HD/2017 . A.Y. 2012-13 3 WITHOUT PREJUDICE TO OUR ABOVE SUBMISSION, WE HAVE TO DRAW YOUR GOODSELFS KIND ATTENTION TO THE RELEVA NT PROVISIONS, WHICH HAVE BEEN INSERTED BY THE FINANCE ACT, 2014 INSERTED AFTER THE SEVENTEENTH PROVISO TO CLAUSE (23C) OF SECTION 10 THAT WITH EFFECT FROM ASS ESSMENT YEAR 2015-16 TO PROVIDE THAT ONCE THE COST OF ACQUISITION OF ANY ASSET IS ALLOWED AS DEDUCTION BY WAY OF APPLICATION OF INCOME TO INSTITUTION CLA IMING EXEMPTION U/SEC. 10 (23C) OF THE ACT THEN, NO DEPREC IATION IN RESPECT OF SUCH ASSET SHALL BE ALLOWABLE AS DEDUCTION BY WAY OF APPLICATION OF INCOME TO THE CO NCERNED TRUST/INSTITUTION. HOWEVER, SINCE IN THE AMENDING ACT ITSELF IT HAS BEEN SPECIFICALLY PROVIDED THAT SUCH PROVISIONS OF LAW SHALL BE A OPERATIONAL FROM ASSESSMENT YEAR 2015-16 ONLY, IT CLEARLY EMERGES THAT IN THE PRECEDING ASSESSMENT YEARS THE: CLAIM OF DEPRECIATION BY WAY O F APPLICATION OF INCOME SHALL BE ALLOWABLE- TO A TR UST CLAIMING EXEMPTION U/SEC. 10(23C)OF THE ACT. WE TAKE THIS OPPORTUNITY TO SUBMIT BEFORE YOUR GOOD SELF THAT THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF 'ESCORT LIMITED'' REPORTED IN 199 IT R 43 CITED BY YOUR GOODSELF WAS DELIVERED BY THE HON'BLE SUPREME COURT IN CONNECTION WITH SECTION 35 OF THE ACT WHEREAS WE HAVE CLAIMED THE EXEMPTION OF INCOME U/S. 10(23C)OF THE ACT.AS YOUR GOODSELF IS AWARE THE HON 'BLE SUPREME COURT HAS HOT DELIVERED THE ABOVE JUDGMENT IN RELATION TO THE PRO VISIONS OF SECTION 10(23C) OF THE ACT. IN SUPPORT OF OUR ABOVE SUBMISSION WE DRAW YOUR GOODSELF KIND AT TENTION TO THE VARIOUS JUDGMENTS CITED BY US IN SUPPORT OF OUR REQUEST TO GRANT THE DEPRECIATION AS CLAIMED BY US; MAJORITY OF WHICH HAVE BEEN DELIVER ED AFTER THE ABOVE JUDGMENT OF HON'BLE SUPREME COURT WH ICH WAS DELIVERED IN YEAR 1992. YOUR GOODSELF WILL AGREE WITH US THAT IF THE HONBLE HIGH COURTS WOULD HAVE BEEN OF THE OPINION THAT ON ACCOUNT OF ABOVE JUDGMENT OF HONBLE SUPREME COURT D EPRECIATION CLAIM CANNOT BE ALLOWED TO THE INSTITUTIONS CLAIMING EXEMPTIONS /DEDUCTIONS OF INC OME U/S. 10(23C) / 11 OF THE ACT THEN THE VARIOUS HON'BLE HIGH COURT WOULD NOT HAVE DELIVERED THE ABOVE JUDGMENT AFTER THE YEAR 1992 WHEN HON'BLE SUPREME COURT HAS ALREADY DELIVERED THE ABOVE JUDGM ENT IN THE YEAR 1992 SINCE THE HON'BLE HIGH COURTS ARE BOUND TO FOLLOW THE JUDGMENT OF THE HONB LE SUPREME COURT. IN FURTHER SUBSTANTIATION OF OUR ABOVE SUBMISSION T O THE EFFECT THAT THE -ABOVE JUDGMENT DELIVERED BY THE HON'BLE SUPREME COURT DOES NOT UNFAVORABLY COVER THE CASES OF INSTITUTIONS .CLAIMING EXEMPTIONS / DEDUCTIONS U/S. 10(23C) /1 1 OF THE ACT WE ALSO RELY ON THE FACT THAT THE PARLIAMENT HAS MADE NECESSARY CHANGES IN THE PROVISIONS OF SECTION 10(2 3C)/ 11 OF THE ACT CLEARLY STATED TO BE EFFECTIVE FR OM 01.04.2015 AND NOT PRIOR TO THAT DAY. YOUR GODDSELF WILL APPRECIATE THAT IF THE PARLIAMEN T AND THE LEGISLATION WOULD HAVE BEEN OF THE OPINIO N THAT BY VIRTUE OF THE ABOVE JUDGMENT OF THE HONBLE SUPREME COURT CLAIM FOR DEPRECIATION OF THE INSTITUTION CLAIMING EXEMPTIONS / DEDUCTIONS U/S. 1 0(23C) / 11 OF THE ACT BECOMES LIABLE TO BE REJECTED ITA NO 470/A HD/2017 . A.Y. 2012-13 4 THEN THE AMENDMENT AS DESCRIBED ABOVE WOULD NOT HAV E BEEN MADE IN THE PROVISIONS OF SECTION 10(23C) OF THE ACT OR SECTION 11 OF THE ACT STATED TO BE OPERATI ONAL FROM THE ASSESSMENT YEAR 2015-16 SINCE THE JUDGMENT OF THE HON'BLE SUPREME COURT IS CONSIDERED TO BE THE LAW OF LAND. YOUR GOODSELF WILL APPRECIATE THAT NO AMENDMENT DES CRIBED ABOVE IN SECTION 10(23C)/ 11 OF THE ACT WOULD HAVE BEEN NECESSARY WHEN THERE IS ALREADY AN EXISTING LAW LAID DOWN TO THAT EFFECT BY THE HON'BLE SUPREME COURT MUCH EARLIER FROM 1992. YOUR GOODSELF WILL THEREFORE FIND THAT THE CASE LAW CITED BY YOUR GOODSELF DOES NOT UNFAVORABLY COYER OUR CASE SO FAR AS THE SAME RELATES TO OUR CLAIM OF DEP RECIATION. IT IS, THEREFORE, REQUESTED THAT DEPRECIATION CLAIM ED BY WAY OF APPLICATION OF INCOME TO BE ALLOWED TO OUR TRUST/INSTITUTION. 5.THE SUBMISSION OF THE ASSESSEE IS TAKEN NOTE OF B UT WAS NOT CONSIDERED BECAUSE IN THE CASE OF THE TR UST THE WHOLE COST OF THE ASSETS IS TREATED AS APPLICAT ION OF FUNDS FOR THE PURPOSE OF OBJECTS OF THE TRUS T. THIS BASICALLY AMOUNTS TO 100% DEDUCTION OR DEPRECIATION . THEREFORE, ANY FURTHER ALLOWANCE OF DEPRECIATION WILL AMOUNT TO DOUBLE DEDUCTION IN VIEW OF THE DECI SION OF THE SUPREME COURT IN THE CASE OF ESCORTS LT D (199 ITR 43), WHEREIN THE SUPREME COURT HELD THAT W HEN DEDUCTION U/S.35(2)(IV) WAS ALLOWED IN RESPECT OF CAPITAL EXPENDITURE ON SCIENTIFIC RESEAR CH NO DEPRECIATION WAS TO BE ALLOWED U/S. 32 ON THE SAME ASSETS. THE APEX COURT FURTHER OBSERVED THAT DOUBLE DEDUCTION IS INTENDED UNLESS THERE IS CLEAR STATUT ORY INDICATION TO THE CONTRARY. 'IT IS IMPOSSIBLE TO CONCEIVE OF THE LEGISLATURE HA VING ENVISAGED A DOUBLE DEDUCTION IN RESPECT OF THE SAME EXPENDITURE, EVEN THOUGH IT IS TRUE THAT THE TWO HE ADS OF THE DEDUCTION (I.E., DEPRECIATION AND SCIENT IFIC RESEARCH EXPENDITURE) DO NOT COMPLETELY OVERLAP AND THERE IS SOME DIFFERENCE IN/THE RATIONALE OF THE T WO DEDUCTIONS. NO LEGISLATURE COULD HAVE AT ALL INTEND ED A DOUBLE DEDUCTION IN REGARD TO THE SAME BUSINES S OUTGOING, AND IF IT WAS INTENDED IT WOULD BE CLEARL Y EXPRESSED. THEREFORE, EVEN IN THE ABSENCE OF DEAR STATUTORY INDICATION TO THE CONTRARY, THE STATUTE S HOULD NOT BE READ, SO AS TO PERMIT AN ASSESSEE TWO DEDUCTIONS -BOTH UNDER SECTIONS 10(2)(VI) AND SECTI ON 10(2)(XIV) UNDER THE 1922 ACT OR UNDER SECTIONS32(1)(II) AND 35(2)(IV) OF THE 196L ACT -QUA THE SAME EXPENDITURE. THUS, EVEN BEFORE THE 1980 AMENDMENT, THE ACT DID NOT PERMIT A DEDUCTION FOR DE PRECIATION IN RESPECT OF THE COST OF A CAPITAL ASSE T ACQUIRED FOR PURPOSES OF SCIENTIFIC RESEARCH TO THE EXTENT SUCH COST HAD BEEN WRITTEN OFF UNDER SECTIO N 10(2)(XIV)/35(1) AND (2). THE MERE FACT THAT A BASE LESS CLAIM WAS RAISED BY SAME OVER-ENTHUSIASTIC ASSESSEES WHO SOUGHT A DOUBLE ALLOWANCE OR THAT SUC H CLAIMS MAY PERHAPS HAVE BEEN ACCEPTED BY SOME AUTHORITIES, WAS NOT SUFFICIENT TO ATTRIBUTE ANY AM BIGUITY OR DOUBT AS TO THE TRUE SCOPE OF THE PROVIS IONS AS THEY STOOD EARLIER.' ITA NO 470/A HD/2017 . A.Y. 2012-13 5 5.1FURTHER, IN A RECENT DECISION IN THE CASE OF LIS SIE MEDICAL INSTITUTIONS V/S. COMMISSIONER OF INCOM E- TAX, KOCHI, 348 ITR 344,THE HON'BLE HIGH COURT OF KER ALA HAS HELD THAT - 'WHEN THE EXPENDITURE INCURRED FOR ACQUISITION OF D EPRECIABLE ASSETS ITSELF IS TREATED AS APPLICATION OF INCOME FOR CHARITABLE PURPOSES UNDER SECTION 11(1)( A), SHOULD NOT THE COST OF SUCH ASSETS TO BE TREATE D AS NIL FOR THE ASSESSEE AND IN THAT SITUATION DEPRECIA TION TO BE GRANTED TURNS OUT TO BE .NIL. HOWEVER, IF DEPRECIATION PROVIDED IS CLAIMED ON NOTIONAL COST A FTER THE ASSESSEE CLAIMS 100 PER CENT OF THE COST I NCURRED FOR IT AS APPLICATION OF INCOME FOR CHARITABLE PURP OSES, THE DEPRECIATION SO CLAIMED HAS TO BE WRITTEN BACK AS INCOME AVAILABLE. IN FACT, GOING BY THE SEVERAL DECISIONS OF THE VARIOUS HIGH COURTS, THE CHARITABLE INSTITUTIONS WILL BE GENERATING UNACCOUNTED INCOME EQUAL TO THE DEPRECIATION AMOUNT CLAIMED ON A YEAR TO YEAR BASIS WHICH IS NOTHING BUT BLACK MONEY. THE VI EWS FROM THE CENTRAL BOARD OF DIRECT TAXES HAVE BEEN OBTAINED ON THE ISSUES. [PARA.6]. 5.2 THE HON 'BLE HIGH COURT OF KERALA, IN THE SAID OR DER, HAS REFERRED TO DECISIONS OF VARIOUS HIGH. COURTS INCLUDING THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT V/S.. SHETH MANILAL RANCHHODDAS VISHRAMSHAVAN. TRUST, 198 ITR598(GUJ.) AND HELD THAT 'WE DO NOT FIND IN ANY OF THESE DECISIONS THIS ASPECT IS CONSIDERED AND DISCU SSED BY ANY OF THE HIGH COURTS.'. THE HON'BLE ITAT, COCHIN BENCH HAS ALSO SUPPORTED THE SAID VIEW WHILE DECIDING THE CASE OF DDIT(E) RANGE-11, ERNAKULAM V/S. ADI SANKARA TRUST IN FAVOUR OF THE RE VENUE. FURTHER, THE HON'BLE GUJARAT HIGH COURT HAS ADMITTED THE APPEAL OF THE REVENUE IN RESPECT OF DISALLOWANCE OF DEPRECIATION AND TO TAKE A CONSISTE NT VIEW, THE CLAIM OF DEPRECIATION OF RS.1,68,86,40 7/- IS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 4.1 ON THIS ISSUE APPELLANT MADE FOLLOWING SUBMISSI ON:- - 'MAYIT PLEASE YOUR HONOUR: UNDER THE INSTRUCTIONS AND ON THE BASIS OF INFORMAT ION AND EXPLANATIONS GIVEN BY MY ABOVE CLIENT, I HA VE TO SUBMIT AS UNDER WITH THE PRAYER TO ALLOW THE ABO VE APPEAL. (1) GROUND NO, 1: PRAYER TO DELETE THE DISALLOWANCE OF CLAIM OF DEPRECIATION OF RS.1,68,86,407/- A) FROM THE CONTENTS OF THE ASSESSMENT ORDER, YOUR HONOU R WOULD FIND THAT THE ID. A.O. HAS MADE THE IMPUGNED DISALLOWANCE ON THE BASIS THAT SINCE T HE COST OF THE ASSETS ON WHICH THE APPELLANT HAS CLAIMED DEPRECIATION OF RS. 1, 68, 86,407/- HAVE BE EN ALLOWED AS APPLICATION OF INCOME AGAINST THE INCOME OF THE APPELLANT TRUST U/S. 11 OF THE ACT, NO DEPRECIATION ON THE COST OF SUCH ASSETS IS ALLOWABLE WHILE COMPUTING THE INCOME OF THE APPELLA NT TRUST. (B) AS YOUR HONOUR IS AWARE, THE CASE OF YOUR APPELL ANT IS FAVORABLY COVERED BY THE JUDGMENT OF THE HON'BLE JURISDICTIONAL GUJARAT HIGH COURT IN THE CASE OF CIT V/S. SHETH MANILAL RANCHHODDAS ITA NO 470/A HD/2017 . A.Y. 2012-13 6 VISHRAM BHAVAN 'TRUST (1992) ,198-JTR-598 (GUJ). CO PY OF THE JUDGEMENT IS ENCLOSED AT PAGE NO. 11. BESIDES, AS YOUR HONOUR IS ALSO AWARE, IN THE UNDERN OTED CASES THE VARIOUS HON'BLE HIGH COURTS HAVE ALSO HELD 'IN 'FAVOUR OF YOUR APPELLANT. (I) COMMISSIONER OF INCOME TAX V/S. DEVI SAKUNTALA THARAL CHARITABLE FOUNDATION AND OTHERS (2013) 358 ITR 452 (MP). COPY OF THE JUDGMENT IS EN CLOSED AT PAGES NO. 12 & 13. (II) DIRECTOR OF INCOME TAX Y/S-VISHWA JAGNTI MISS ION (201 2)73 DTR (DEL) 195. COPY OF THE JUDGMENT IS ENCLOSED AT PAGES NO, 14TO16. (III) COMMISSIONER OF INCOME TAX V/S, SHRI GUJARATI SAMAJ (REGD) (2011) 64 DTR (MP) 76. COPY OF THE JUDGMENT IS ENCLOSED AT PAGES NO, 17 TO 21. (IV) COMMISSIONER OF INCOME TAX V/S. INSTITUTION OF BANKING PERSONNEL SELECTION (2003) 185CTR(BOM) 492. COPY OF THE JUDGMENT IS ENCLOSED A T PAGES NO. 22 & 23. (V) DIRECTOR OF INCOME TAX (EXEMPTION) V/S. FRAMJEE CAWASJEE JNSTITUTE .(1993) I09 CTR (BOM) 463. COPY OF : THE JUDGMENT IS ENCLOSED AT PAGE NO. 24: . : ; (VI)COMMISSIONER OF INCOME TAX V/S. RAIPURPALFOTTIN E SOCIETY (1989) 80 CTR (MP) 127. COPY OF THE JUDGMENT IS ENCLOSED AT PAGE NO, 25. (VII) COMMISSIONER OF INCOME TAX V/S. SOCIETY OF TH E SISTER OF ST ANNE (1984) 39 CTR (KAR)9. COPY OF THE JUDGMENT IS ENCLOSED AT PAGES NO . 26 :& 27. (VIII) SHRI GOVINDRAM SEKSARIA CHARITY V/S. INCOME TAX OFFICER & ORS, (1987) 65 CTR {MP) 29. COPY OF THE JUDGMENTS ENCLOSED(AT PAGES. N O.28&29. . (C) FROM PERUSAL OF ABOVE JUDGMENTS INCLUDING THAT OF THE HON'BLE JURISDICTIONAL GUJARAT HIGH COURT, YOUR HONOUR WOULD FIND THAT ALL THE HON'BLE HI GH COURTS NAVE CLEARLY LAID DOWN THAT IN THE CASE OF CHARITABLE TRUSTS, WHILE DETERMINING THE IN COME OF THE TRUST, THE DEPRECIATION ON THE ASSETS O F THE TRUST IS REQUIRED TO BE ALLOWED AS DEDUCTION EV EN WHEN THE COST OF ASSETS ON WHICH DEPRECIATION IS CLAIMED I$ ALLOWED AS APPLICATION OF INCOME OF THE 4. BUT LD. A.O. WAS NOT CONVINCED WITH THE PLEA OF THE ASSESSEE AND HE DISALLOWED THE DEPRECIATION OF RS. 1,68,86,407/-. 5. AGAINST THE SAID ORDER, ASSESSEE PREFERRED FIRST ST ATUTORY APPEAL BEFORE THE LD. CIT(A) WHO ALLOWED THE APPEAL OF THE ASSESSEE. 6. NOW DEPARTMENT IS BEFORE US. IN THIS CASE, LD. A.O. COMPLETED THE ASSESSMENT U/S. 143(3) OF THE ACT BY PASSING AN ORDER DATED 23 .03.2015 WHEREBY THE TOTAL ITA NO 470/A HD/2017 . A.Y. 2012-13 7 INCOME OF ASSESSEE WAS DETERMINED AT RS. 1,68,86,40 7/- AND DISALLOWED THE DEPRECIATION TO THE TUNE OF ABOVE SAID AMOUNT. AND IN APPEAL LD. CIT(A) DECIDED THE MATTER IN FAVOUR OF THE ASSESSEE. 7. WE HAVE GONE THROUGH THE RELEVANT RECORD AND THE IM PUGNED ORDER. NONE APPEARED ON BEHALF OF ASSESSEE AND WE HAVE HEARD TH E LD. D.R. IN OUR CONSIDERED OPINION, THIS CASE IS SQUARELY COVERED B Y THE JUDGMENT OF SUPREME COURT IN THE CASE OF CIT VS. RAJASTHAN & GUJARATI C HARITABLE FOUNDATION POONA (2018) (402 ITR 441) HAS HELD MATTER IN FAVOU R OF THE ASSESSEE WITH THE FOLLOWING DETAILS: 3. AS STATED ABOVE, THE FIRST QUESTION WHICH REQUIR ES CONSIDERATION BY THIS COURT IS: WHETHER DEPRECIATION WAS ALLOWABLE ON THE ASSETS, THE COST OF WHICH HAS BEEN FULLY ALLOWED AS APPLICATION OF INCO ME UNDER SECTION 11 IN THE PAST YEARS? IN THE CASE OF CIT V. MUNISUVRAT JA IN 1994 TAX LAW REPORTER, 1084 THE FACTS WERE AS FOLLOWS. THE ASSES SEE WAS A CHARITABLE TRUST. IT WAS REGISTERED AS A PUBLIC CHARITABLE TRU ST. IT WAS ALSO REGISTERED WITH THE COMMISSIONER OF INCOME TAX, PUN E. THE ASSESSEE DERIVED INCOME FROM THE TEMPLE PROPERTY WHICH WAS A TRUST PROPERTY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR ASS ESSMENT YEARS 1977- 78, 1978-79 AND 1979-80, THE ASSESSEE CLAIMED DEPRE CIATION ON THE VALUE OF THE BUILDING @2% AND THEY ALSO CLAIMED DEPRECIA TION ON FURNITURE @ 5%. THE QUESTION WHICH AROSE BEFORE THE COURT FOR D ETERMINATION WAS : WHETHER DEPRECIATION COULD BE DENIED TO THE ASSESSE E, AS EXPENDITURE ON ACQUISITION OF THE ASSETS HAD BEEN TREATED AS APPLI CATION OF INCOME IN THE YEAR OF ACQUISITION? IT WAS HELD BY THE BOMBAY HIGH COURT THAT SECTION 11 OF THE INCOME TAX ACT MAKES PROVISION IN RESPECT OF COMPUTATION OF INCOME OF THE TRUST FROM THE PROPERTY HELD FOR CHAR ITABLE OR RELIGIOUS PURPOSES AND IT ALSO PROVIDES FOR APPLICATION AND A CCUMULATION OF INCOME. ON THE OTHER HAND, SECTION 28 OF THE INCOME TAX ACT DEALS WITH ITA NO 470/A HD/2017 . A.Y. 2012-13 8 CHARGEABILITY OF INCOME FROM PROFITS AND GAINS OF B USINESS AND SECTION 29 PROVIDES THAT INCOME FROM PROFITS AND GAINS OF BUSI NESS AHLL BE COMPUTED IN ACCORDANCE WITH SECTION 30 TO SECTION 43C. THAT, SECTION 32(1) OF THE ACT PROVIDES FOR DEPRECIATION IN RESPECT OF BUILDIN G, PLANT AND MACHINERY OWNED BY THE ASSESSEE AND USED FOR BUSINESS PURPOSE S. IT FURTHER PROVIDES FOR DEDUCTION SUBJECT TO SECTION 34. IN THAT MATTER ALSO, A SIMILAR ARGUMENT, AS IN THE PRESENT CASE, WAS ADVANCED ON B EHALF OF THE REVENUE, NAMELY, THAT DEPRECIATION CAN BE ALLOWED AS DEDUCTI ON ONLY UNDER SECTION 32 OF THE INCOME TAX ACT AND NOT UNDER GENERAL PRIN CIPLES. THE COURT REJECTED THIS ARGUMENT. IT WAS HELD THAT NORMAL DEP RECIATION CAN BE CONSIDERED AS A LEGITIMATE DEDUCTION IN COMPUTING T HE REAL INCOME OF THE ASSESSEE ON GENERAL PRINCIPLES OR UNDER SECTION 11( 1)(A) OF THE INCOME TAX ACT THE COURT REJECTED THE ARGUMENT ON BEHALF O F THE REVENUE THAT SECTION 32OF THE INCOME TAX ACT WAS THE ONLY SECTIO N GRANTING BENEFIT OF DEDUCTION ON ACCOUNT OF DEPRECIATION. IT WAS HELD T HAT INCOME OF A CHARITABLE TRUST DERIVED FORM BUILDING, PLANT AND M ACHINERY AND FURNITURE WAS LIABLE TO BE COMPUTED IN NORMAL COMMERCIAL MANN ER 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 INCOME TAX ACT PROVIDING F OR DEPRECIATION FOR COMPUTATION OF INCOME DERIVED FROM BUSINESS OR PROF ESSION IS NOT APPLICABLE. HOWEVER, THE INCOME OF THE TRUST IS REQ UIRED TO BE COMPUTED UNDER SECTION 11 ON COMMERCIAL PRINCIPLES AFTER PRO VIDING FOR ALLOWANCE FOR NORMAL DEPRECIATION AND DEDUCTION THEREOF FROM GROSS INCOME OF THE TRUST. IN VIEW OF THE AFORESATATED JUDGMENT OF THE BOMBAY HIGH CURT, WE ANSWER QUESTION NO. 1 IN THE AFFIRMATIVE I.E., IN F AVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT. 4. QUESTION NO. 2 HEREIN IS IDENTICAL TO THE QUESTI ON WHICH WAS RAISED BEFORE THE BOMBAY HIGH COURT IN THE CASE OF DIRECTO R OF INCOME-TAX (EXEMPTION) V. FRAMJEE CAWASJEE INSTITUTE [1993] 10 9 CTR 463. IN THAT ITA NO 470/A HD/2017 . A.Y. 2012-13 9 CASE, THE FACTS WERE AS FOLLOWS: THE ASSESSEE WAS T HE TRUST. IT DERIVED ITS INCOME FROM DEPRECIABLE ASSETS. THE ASSESSEE TOOK I NTO ACCOUNT DEPRECIATION ON THOSE ASSETS IN COMPUTING THE INCOM E OF THE TRUST. THE ITO HELD THAT DEPRECIATION COULD NOT BE TAKEN INTO ACCOUNT BECAUSE, FULL CAPITAL EXPENDITURE HAD BEEN ALLOWED IN THE YEAR OF ACQUISITION OF THE ASSETS. THE ASSESSEE WENT IN APPEAL BEFORE THE ASSI STANT APPELLATE COMMISSIONER. THE APPEAL WAS REJECTED. THE TRIBUNAL , HOWEVER, TOOK THE VIEW THAT WHEN THE ITO STATED THAT FULL EXPENDITURE HAD BEEN ALLOWED IN THE YEAR OF ACQUISITION OF THE ASSETS, WHAT HE REAL LY MEANT WAS THAT THE AMOUNT SPENT ON ACQUIRING THOSE ASSETS HAD BEEN TRE ATED AS 'APPLICATION OF INCOME' OF THE TRUST IN THE YEAR IN WHICH THE INCOM E WAS SPENT IN ACQUIRING THOSE ASSETS. THIS DID NOT MEAN THAT IN C OMPUTING INCOME FROM THOSE ASSETS IN SUBSEQUENT YEARS, DEPRECIATION IN R ESPECT OF THOSE ASSETS CANNOT BE TAKEN INTO ACCOUNT. THIS VIEW OF THE TRIB UNAL HAS BEEN CONFIRMED BY THE BOMBAY HIGH COURT IN THE ABOVE JUD GMENT. HENCE, QUESTION NO. 2 IS COVERED BY THE DECISION OF THE BO MBAY HIGH COURT IN THE ABOVE JUDGMENT. CONSEQUENTLY, QUESTION NO. 2 IS ANS WERED IN THE AFFIRMATIVE I.E., IN FAVOUR OF THE ASSESSEE AND AGA INST THE DEPARTMENT. AFTER HEARING LEARNED COUNSEL FOR THE PARTIES, WE A RE OF THE OPINION THAT THE AFORESAID VIEW TAKEN BY THE BOMBAY HIGH COURT CORRE CTLY STATES THE PRINCIPLES OF LAW AND THERE IS NO NEED TO INTERFERE WITH THE SAME . IT MAY BE MENTIONED THAT MOST OF THE HIGH COURTS HA VE TAKEN THE AFORESAID VIEW WITH ONLY EXCEPTION THERETO BY THE HIGH COURT OF KE RALA WHICH HAS TAKEN A CONTRARY VIEW IN 'LISSIE MEDICAL INSTITUTIONS V. CO MMISSIONER OF INCOME TAX'. IT MAY ALSO BE MENTIONED AT THIS STAGE THAT THE LEG ISLATURE, REALISING THAT THERE WAS NO SPECIFIC PROVISION IN THIS BEHALF IN THE INCOME TAX ACT, HAS MADE AMENDMENT IN SECTION 11(6) OF THE ACT VIDE FINANCE ACT NO. 2/ 2014 WHICH BECAME EFFECTIVE ITA NO 470/A HD/2017 . A.Y. 2012-13 10 FROM THE ASSESSMENT YEAR 2015-2016. THE DELHI HIGH COURT HAS TAKEN THE VIEW AND RIGHTLY SO, THAT THE SAID AMENDMENT IS PROSPECT IVE IN NATURE. IT ALSO FOLLOWS THAT ONCE ASSESSEE IS ALLOWED DEPRE CIATION, HE SHALL BE ENTITLED TO CARRY FORWARD THE DEPRECIATION AS WELL. FOR THE AFORESAID REASONS, WE AFFIRM THE VIEW TAKEN BY THE HIGH COURTS IN THESE CASES AND DISMISS THESE MATTERS. 8. RESPECTFULLY FOLLOWING THE ABOVE SAID APEX COURT JU DGMENT, WE DISMISSED THE APPEAL OF THE DEPARTMENT. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN OPEN COURT ON 30 - 08- 2018 SD/- SD/- (AMARJIT SINGH) (MAHAVIR PRASAD) ACCOUNTANT MEMBER TRUE COPY JUDICIAL MEMBER AHMEDABAD: DATED 30/08/2018 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD