The DCIT (Exemptions), Circle-2, Ahmedabad V. Sumandeep Vidhyapith, Baroda

ITA 471/AHD/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 2409 (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: 2013-2014
• Appeal Filed On: 23-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KRISHNA MURARI
• Keywords: Depreciation; Charitable institution; Capital expenditure
• Section: 143(3); 12A; 32; 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: 471/AHD/2017 (ASSESSMENT YEAR: 2013-14) DEPUTY COMMISSIONER OF INCOME-TAX (EXEMPTIONS), CIRCLE-2, AHMEDABAD V/S SUMANDEEP VIDHYAPITH SUMANMDEEP CAMPUS VILAGE-PIPARIA TAL- WAGHODIA, BARODA (GUJARAT)-391760 (APPELLANT) (RESPONDENT) PAN: AAATK4485H APPELLANT BY : SHRI KRISHNAMURARI, CIT/D R RESPONDENT BY : WRITTEN SUBMISSIONS ( )/ 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 14.12.2016 PERTAINING TO A.Y. 2013- 14 AND FOLLOWING GROUNDS HAVE BEEN TAKEN: ITA NO. 471/ AHD/2017 . A.Y. 2013-1 4 2 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE IS THE LD. CIT (A) JUSTIFIED IN ALLOWING THE DEPRECIATION OF RS. 10,10,97,9897-WHIC H AMOUNT TO DOUBLE DEDUCTION AS 100% DEDUCTION WAS ALREADY ALLOWED TO THE ASSESSEE AS AP PLICATION OF INCOME. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME-TAX (APPEAL) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFI CER. 2. BRIEFLY FACTS OF THE CASE ARE THAT THE APPELLANT IS A PUBLIC CHARITABLE TRUST ENGAGED IN CARRYING CHARITABLE ACTIVITIES WHICH MAI NLY INCLUDE PROVIDING HEALTHCARE RELIEF TO MANKIND AND TO IMPART EDUCATIO N IN SUPPORT OF THE MAIN OBJECT THROUGH ITS HOSPITALS, DHIRAJ GENERAL HOSPIT AL AND K. M. SHAH DENTAL COLLEGE, S B K S MEDICAL COLLEGE AND OTHER MEDICAL AID CENTERS. 3. THE APPELLANT TRUST IS REGISTERED UNDER THE BOMBAY PUBLIC TRUST ACT, 1950 WITH THE JOINT CHARITY COMMISSIONER, VADODARA VIDE REGIS TRATION NO. E/2926/VADODARA. IT IS ALSO REGISTERED UNDER SECTIO N 12A OF THE INCOME TAX ACT, 1961 VIDE REGISTRATION NO. BRD/EXEMPTION/110-0 2-K/2000-01 DATED 12/06/2000. THE TRUST IS ALSO APPROVED U/S 80G(5) OF THE INCOME TAX ACT, 1961 VIDE BRD/CIT-III/TECH/101-138-S/2009-10. FURTH ER, THE UNIVERSITY GRANT COMMISSION, NEW DELHI HAS DECLARED THE TRUST AS DEEMED UNIVERSITY VIDE NOTIFICATION F NO. 6-106/2004(CPP-I) DATED 09.03.20 07. 4. THE APPELLANT TRUST FILED ITS RETURN OF INCOME ON 2 9.09.2013 DECLARING ITS TOTAL INCOME AT RS. NIL AFTER CLAIMING EXEMPTION OF RS.L, 03,45,58,199/- U/S. 11 OF THE ACT. 4. IN THE ASSESSMENT MADE U/S. 143(3) VIDE ORDE R DATED 10.03.2016, THE A.O. HAS DETERMINED TOTAL INCOME OF THE APPELLANT TRUST AT RS. 1,28,04,630/- AFTER MAKING DISALLOWANCE OF DEPRECIATION OF RS. 10,10,97 ,989/-. ITA NO. 471/ AHD/2017 . A.Y. 2013-1 4 3 RE.: DISALLOWANCE OF DEPRECATION OF RS. 10,10,97,98 9/- 5. DURING THE YEAR UNDER CONSIDERATION, THE ASS ESSEE HAS CLAIMED DEPRECIATION AMOUNTING TO RS.10,10,97,989/- FROM ITS TOTAL INCOM E. 6. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. VIDE SHOW CAUSE NOTICE DATED 03.09.2015 PROPOSED TO DISALLOW THE DE PRECIATION CLAIM OF RS. 10,10,97,989/- ON THE GROUND THAT THE APPELLANT HAS ALSO CLAIMED CAPITAL EXPENDITURE IN RESPECT ADDITIONS MADE TO FIXED ASSE TS AS APPLICATION OF INCOME AND THEREFORE THE DEPRECIATION CLAIM RESULTS INTO D OUBLE DEDUCTION. 7. IN RESPONSE, THE APPELLANT VIDE LETTER DATED 13.10.2015 SUBMITTED TO THE A.O. AS UNDER: 'THE TRUST HAS CLAIMED DEPRECIATION OF RS. 10,10,97 ,989/- IN THE RETURN OF INCOME. THE TRUST HAS ALSO CLAIMED CAPITAL EXPENDIT URE OFRS.27,42,20,903/- ON ACQUISITION OF FIXED ASSETS AS APPLICATION OF INCO ME IN THE RETURN OF INCOME. YOUR GOODS ELF HAS THEREFORE PROPOSED TO MAKE DISAL LOWANCE OF DEPRECIATION CLAIMED BY THE ASSESSEE TRUST ON THE CONTENTION THAT CAPITAL C OST FOR ACQUISITION OF ASSETS IS ALSO BEING CLAIMED AS APPLICATION OF INCOME. IN THIS CONNECTION, WE OBJECT TO THE PROPOSED DISAL LOWANCE ON THE FOLLOWING GROUNDS : 1. THE PROVISIONS OF SECTION 11 AS APPLICABLE FOR THE YEAR UNDER ASSESSEE DO NOT EXPRESSLY RESTRICT AN ASSESSEE TO CLAIM DEPRECIATIO N AND CAPITAL COST OF ASSETS AS APPLICATION OF INCOME WHILE COMPUTING ITS TOTAL INC OME. 2. IT IS SUBMITTED THAT THE ASSESSEE TRUST IS ENTI TLED TO CLAIM DEPRECIATION AS WELL AS COST OF CAPITAL EXPENDITURE AS APPLICATION OF INCOM E AND THE SAID CLAIM IS FULLY SUPPORTED BY CATENA OF DECISIONS HOLDING THE SAID V IEW. 5. BUT LD. A.O. WAS NOT SATISFIED WITH THE CONTENTION OF THE ASSESSEE AND HE DISALLOWED THE DEPRECIATION OF RS. 10,10,97,989/-. ITA NO. 471/ AHD/2017 . A.Y. 2013-1 4 4 6. AGAINST THE SAID ORDER, ASSESSEE PREFERRED FIRST ST ATUTORY APPEAL BEFORE THE LD. CIT(A) WHO ALLOWED THE APPEAL OF THE ASSESSEE. 7. NOW DEPARTMENT IS BEFORE US. NONE APPEARED ON BEHAL F OF THE ASSESSEE BUT WRITTEN SUBMISSION HAVE BEEN FILED BY THE ASSESSEE AND REQUESTED THAT AFTER CONSIDERING THE WRITTEN SUBMISSION ORDER MAY BE PAS SED. 8. WE HAVE GONE THROUGH THE RELEVANT RECORD AND THE IM PUGNED ORDER AND HEARD THE LD. D.R. IN OUR CONSIDERED OPINION, THIS CASE I S SQUARELY COVERED BY THE JUDGMENT OF SUPREME COURT IN THE MATTER OF CIT VS. RAJASTHAN & GUJARATI CHARITABLE FOUNDATION POONA (2018) (402 ITR 441) HA S HELD MATTER IN FAVOUR 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 ITA NO. 471/ AHD/2017 . A.Y. 2013-1 4 5 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 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. ITA NO. 471/ AHD/2017 . A.Y. 2013-1 4 6 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 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'. ITA NO. 471/ AHD/2017 . A.Y. 2013-1 4 7 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 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. 9. RESPECTFULLY FOLLOWING THE AFORESAID APEX COURT JUD GMENT, WE HOLD THAT 100% DEPRECIATION WOULD BE ALLOWED ON ASSETS OF THE ASSE SSEE. THUS, WE DISMISS THE APPEAL OF THE REVENUE. 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