DCIT (E), Ghaziabad V. M/s Lord Krishna Educational Trust, Ghaziabad

ITA 4837/DEL/2016

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 8974 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-10-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Appeal Filed On: 09-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR VIJAY KUMAR CHADHA SENIOR
• Keywords: Depreciation; Charitable institution; Condonation of delay; Capital expenditure; Set aside
• Section: 12A; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D : NEW DELHI) BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.4837/DEL./2016 (ASSESSMENT YEAR : 2013-14) DCIT (EXEMPTION), CIRCLE, VS. M/S. LORD KRISHNA EDUCATIONAL TRUST, GHAZIABAD. DELHI HAPUR ROAD, NH 24, GHAZIABAD. (PAN : AAATL3887E) (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE REVENUE BY : DR. VIJAY KUMAR CHADHA, SENIOR DR DATE OF HEARING : 19.09.2019 DATE OF ORDER : 01.10.2019 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : APPELLANT, DCIT (EXEMPTION), CIRCLE, GHAZIABAD (HE REINAFTER REFERRED TO AS THE REVENUE) BY FILING THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 17.06.2016 PASSED BY THE COMMISSIONER OF INCOME - TAX (APPEALS), GHAZIABAD QUA THE ASSES SMENT YEAR 2013-14 ON THE GROUNDS INTER ALIA THAT :- 1. THE LD. COMMISSIONER OF INCOME TAX (APPEAL) HAS ERRED IN LAW AND ON FACTS IN ALLOWING THE APPEAL OF THE A SSESSEE ON THE DISALLOWANCE OF DEPRECIATION OF RS.2,43,51,815/- IG NORING THE FACTS. 2. THE ORDER OF LD. CIT (A) BE CANCELLED AND THE OR DER OF THE AO BE RESTORED. ITA NO.4837/DEL./2016 2 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE ISSUE AT HAND ARE : ASSESSEE TRUST IS ENGAGED IN RUNNING EDU CATIONAL INSTITUTION AND HAS BEEN GRANTED REGISTRATION UNDER SECTION 12A OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT) WITH APPROVAL U/S 8 0G. ASSESSING OFFICER (AO) NOTICED FROM THE INCOME AND EXPENDITURE ACCOUN T THAT THE TOTAL RECEIPT DURING THE YEARS WAS AT RS.13,03,03,110/- A GAINST WHICH APPLICATION OF INCOME HAS BEEN SHOWN AT RS.11,64,1 5,880/- WITH CAPITAL EXPENDITURE AT RS.17,69,765/- DURING THE YEAR UNDER ASSESSMENT. AO DISALLOWED THE CLAIMED DEPRECIATION BY THE ASSESSEE TO THE TUNE OF RS.2,43,51,815/- ON ACCOUNT OF APPLICATION OF INCOM E FOR CHARITABLE PURPOSE AND THEREBY ASSESSED THE TOTAL INCOME AT RS .1,46,78,000/- AGAINST THE DECLARED RETURNED INCOME AT NIL. 3. ASSESSEE CARRIED THE MATTER BY WAY OF APPEAL BEF ORE THE LD. CIT (A) WHO HAS DELETED THE ADDITION BY ALLOWING THE AP PEAL. FEELING AGGRIEVED, THE ASSESSEE HAS COME UP BEFORE THE TRIB UNAL BY WAY OF FILING THE PRESENT APPEAL. 4. ASSESSEE HAS NOT PREFERRED TO PUT IN APPEARANCE DESPITE ISSUANCE OF THE NOTICE AND CONSEQUENTLY, WE PROCEED ED TO DECIDE THE PRESENT APPEAL WITH THE ASSISTANCE OF THE LD. D R AS WELL AS ON THE BASIS OF DOCUMENTS AVAILABLE ON THE FILE. 5. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIV E FOR THE REVENUE TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ITA NO.4837/DEL./2016 3 ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 6. BARE PERUSAL OF THE IMPUGNED ORDER PASSED BY THE LD. CIT (A) APPARENTLY SHOWS THAT THE ADDITION MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION CLAIMED BY THE ASSE SSEE HAS BEEN RIGHTLY DELETED BY THRASHING THE FACTS IN THE LIGHT OF THE LAW OF THE LAND. FOR READY PERUSAL, OPERATIVE PART OF THE IMP UGNED ORDER IS EXTRACTED AS UNDER :- HAVING CONSIDERED FACTS AND CIRCUMSTANCE OF THE C ASE, I FIND THAT HON'BLE DELHI HIGH COURT IN THE CASE OF C HIRANJIV CHARITABLE TRUST (ITA NO.322-323/2013 DATED 18.03.2 014) AFTER DISCUSSING ITS JUDGMENT IN THE CASE OF DIT VS. VISH WA JAGRITI MISSION, 262 CTR 558 (DEL) HAD HELD THAT CLAIM OF D EPRECIATION AMOUNTS TO DOUBLE DEDUCTION. HOWEVER, IN THE CASE OF M/S. INDRAPRASTHA CANCER SOCIETY (INCOME TAX APPEAL NO.2 40/2014 DATED 18.11.2014), THE HONBLE DELHI HIGH COURT HAV ING DISCUSSED THE DECISION OF KARNATAKA HIGH COURT IN L ISSIE MEDICAL INSTITUTE (SUPRA) AND SUPREME COURT DECISIO N IN CASE OF ESCORTS LIMITED (SUPRA) AS WELL AS ITS OWN DECISION S IN VISHWA JAGRITI MISSION (SUPRA) OVERRULED ITS OWN DECISION IN CHIRANJI CHARITABLE MISSION (SUPRA). REFERRING TO PARA 30 OF CHIRANJIV CHARITABLE MISSION, IT HELD IN CASE OF INDRAPRASTHA CANCER SOCIETY THAT:- '10. THE AFORESAID PARAGRAPH REFERS TO THE DECISION IN THE CASE OF VISHWA JAGRITI MISSION (SUPRA) BUT RATIO WA S DISTINGUISHED ON THE GROUND THAT IN THE SAID CASE T HE COURT WAS CONCERNED WITH COMPUTATION OF INCOME OF A CHARITABLE TRUST/INSTITUTION ON COMMERCIAL PRINCIPL ES AND IF SO WHETHER DEPRECIATION ON FIXED ASSETS USED FOR CHARITABLE PURPOSES SHOULD BE ALLOWED AS A DEDUCTIO N. THE CONSENSUS OF JUDICIAL OPINION ON THE SAID ASPEC T WAS REFERRED TO. IT IS NOTICEABLE THAT IN CHARANJIV CHA RITABLE TRUST (SUPRA) IT STANDS OBSERVED THAT THE TRIBUNAL OVERLOOKED THE FACT THAT THE COST OF ASSET HAD BEEN ALLOWED AS A 'DEDUCTION' AND THEREAFTER DEPRECIATION WAS BE ING CLAIMED. THE SAID CASE, THEREFORE, APPEARS TO BE A PECULIAR ONE WHEREIN DEDUCTION AS EXPENDITURE AND DEPRECIATI ON WAS BEING CLAIMED SIMULTANEOUSLY, WHILE COMPUTING T HE ITA NO.4837/DEL./2016 4 TAXABLE INCOME UNDER THE HEAD 'PROFITS AND GAINS FR OM BUSINESS'. THE SAID DECISION DATED 18TH MARCH, 2014 DOES NOT REFER TO THE DECISION IN INDIAN TRADE PROMOTION ORGANIZATION (SUPRA) WHICH WAS DECIDED ON 27TH NOVEMBER, 2013. THE JUDGMENT IN THE CASE OF INDIAN TRADE PROMOTION ORGANIZATION (SUPRA) WAS NOT CITED AND REFERRED TO. THE JUDGMENT IN THE CASE OF CHARANJIV CHARITABLE TRUST (SUPRA) IS AUTHORED BY THE SAME JU DGE, WHO HAS ALSO AUTHORED THE DECISION IN THE CASE OF V ISHWA JAGRITI MISSION (SUPRA). IT IS OBVIOUS THAT IN CHAR ANJIV CHARITABLE TRUST (SUPRA), THE DIVISION BENCH COULD NOT HAVE TAKEN A DIFFERENT VIEW ON THE LEGAL RATIO AS INTERPRETED IN VISHWA JAGRITI MISSION (SUPRA). FURT HER, THE DECISIONS IN THE CASE OF VISHWA JAGRITI MISSION AND INDIAN TRADE PROMOTION ORGANISATION (SUPRA) BEING P RIOR IN POINT OF TIME WOULD ACT AS BINDING PRECEDENTS AN D COULD NOT HAVE BEEN OVERRULED OR DISSENTED FROM BY A COORDINATE DIVISION BENCH. 11. BY FINANCE (NO.2) ACT OF 2014, SUB-SECTION (6) TO SECTION II STANDS INSERTED WITH EFFECT FROM 1ST APR IL, 2015 TO THE EFFECT THAT WHERE ANY INCOME IS REQUIRED TO BE APPLIED, ACCUMULATED OR SET APART FOR APPLICATION, THEN FOR SUCH PURPOSES THE INCOME SHALL BE DETERMINED WITHOU T ANY DEDUCTION OR ALLOWANCE BY WAY OF DEPRECIATION O R OTHERWISE IN RESPECT OF AN ASSET, THE ACQUISITION O F WHICH HAS BEEN CLAIMED AS APPLICATION OF INCOME UNDER THI S SECTION IN THE SAME OR ANY OTHER PREVIOUS YEAR. THE LEGAL POSITION, THEREFORE, WOULD UNDERGO A CHANGE IN TERM S OF SECTION 11 (6), WHICH HAS BEEN INSERTED AND APPLICA BLE WITH EFFECT FROM 1ST APRIL, 2015 AND NOT TO THE ASS ESSMENT YEARS IN QUESTION. THE NEWLY ENACTED- SUB- SECTION RELATES TO APPLICATION OF INCOME. 12. IN THESE CIRCUMSTANCES, WE DO NOT FIND ANY MERI T IN THE APPEALS IN THE CASE OF INDRAPRASTHA CANCER S OCIETY, ABUL KALAM AZAD ISLAMIC AWAKENING AND IN THE CASE O F M/S SANSKRITI EDUCATIONAL SOCIETY (ITA NO.348/2014) . SIMILARLY, WE DO NOT THINK IT IS NECESSARY AND REQU IRED THAT WE SHOULD ISSUE NOTICE IN THE APPLICATION FOR CONDONATION OF DELAY FILED IN THE CASE OF M/S SANSK RITI EDUCATIONAL SOCIETY (ITA NOS. 463 AND 464/2014) AS ON MERITS THE REVENUE IS NOT ENTITLED TO SUCCEED. IN T HESE APPEALS, THE APPLICATIONS FOR CONDONATION OF DELAY SHALL BE TREATED AS DISMISSED AND AS A SEQUITUR THE APPEA LS WILL BE TREATED AS DISMISSED.' BESIDES, THIS ISSUE HAS ALSO BEEN DECIDED BY HON'BL E JURISDICTIONAL ITAT DELHI IN CASE OF THE BHARDWAJ W ELFARE TRUST IN ITA NO. 1979 & 25645/DE1L2013 DATED 13.02.2015 A ND SD ITA NO.4837/DEL./2016 5 COLLEGE SOCIETY ITA NO.3640/2012 DATED 11.07.2014 I N FAVOUR OF THE APPELLANT IN VIEW OF THESE JUDGMENTS OF JURISDI CTIONAL ITAT AND HON'BLE DELHI HIGH COURT HAVING DECIDED IN INDR APRASTHA CANCER SOCIETY (SUPRA) THAT IN CHIRANJIV CHARITABLE TRUST (SUPRA) DIVISIONAL BENCH COULD NOT HAVE TAKEN A DIFFERENT V IEW ON LEGAL RATIO AS INTERPRETED IN VISHWA JAGRITI MISSION (SUP RA) AND THAT DECISION OF M/S VISHWA JAGRITI MISSION (SUPRA) AND INDIAN TRADE PROMOTION ORGANIZATION ITA NO. 7/2013 WOULD ACT AS BINDING PRECEDENT AND COULD NOT HAVE BEEN OVERRULED OR DISS ENTED FROM BY COORDINATE BENCH, RESPECTFULLY FOLLOWING THESE J UDGMENTS, I AM OF THE CONSIDERED OPINION THAT THE ASSESSEE IS E NTITLED TO CLAIM OF DEPRECATION. DISALLOWANCE OF DEPRECIATION OF RS. 2,43,51,815/- IS THEREFORE, DELETED. 7. AO DISALLOWED THE CLAIM OF ASSESSEE OF DEPRECIAT ION OF RS.2,43,51,815/- ON ACCOUNT OF APPLICATION OF INCOM E FOR CHARITABLE PURPOSE ON THE GROUND THAT THE SAME IS NOT ALLOWABL E AS AT THE TIME OF ACQUIRING FIXED ASSETS, CAPITAL EXPENDITURE HAS ALREADY BEEN ALLOWED IN RESPECTIVE YEARS AND IT WOULD AMOUNT TO DOUBLE DEDUCTION. HOWEVER, BY NOW, IT IS SETTLED PRINCIPL E OF LAW THAT WHEN INCOME OF THE ASSESSEE IS EXEMPT, THE ASSESSEE S CLAIM THAT DEPRECIATION SHOULD BE REDUCED FROM THE INCOME FOR DETERMINING THE PERCENTAGE OF FUNDS TO BE APPLIED FOR THE PURPO SE OF TRUST CANNOT BE DISALLOWED ON THE GROUND THAT THE SAME AM OUNTS TO DOUBLE BENEFIT IN ALLOWING THE CLAIM OF DEPRECIATIO N FOR COMPUTING INCOME FOR THE PURPOSE OF SECTION 11 OF THE ACT. 8. SINCE THE IMPUGNED ORDER PASSED BY THE LD. CIT ( A) IS BASED UPON THE DECISIONS OF HONBLE JURISDICTIONAL HIGH C OURT CITED AS DIRECTOR OF INCOME-TAX VS. VISHWA JAGRITI MISSION 2 62 CTR 558 (DEL.) WHEREIN DECISION OF HONBLE SUPREME COURT IN CASE OF ITA NO.4837/DEL./2016 6 ESCORTS LTD. VS. UOI 199 ITR 43 (SC) HAS BEEN DISTINGUISHED. THE ASSESSEES CLAIM OF DEPRECIATION IN THE INCOME AND EXPENDITURE ACCOUNT IS ALLOWABLE AND IT CANNOT BE HELD THAT THE DOUBLE BENEFIT WAS GIVEN IN ALLOWING THE CLAIM FOR DEPRECIATION FO R COMPUTING INCOME FOR THE PURPOSES OF SECTION 11 OF THE ACT. 9. COORDINATE BENCH OF THE TRIBUNAL IN CASE OF ITO (E) VS. S.D. COLLEGE SOCIETY (LAHORE) IN ITA NO.3640/DEL/2012 VI DE ORDER DATED 11.07.2014 DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE BY RETURNING FOLLOWING FINDINGS :- 3. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND HAVE PERUSED THE RECORD OF THE CASE. WE FIND TH AT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY VARIO US DECISIONS RELIED UPON BY THE ASSESSEE. WE FIND THAT ON THIS I SSUE, IN THE CASE OF J.D. TYTLER SCHOOL SOCIETY (SUPRA), THE ITAT HAS HELD AS UNDER: HELD, DISMISSING THE APPEAL, THAT IN ACCORDANCE WI TH THE DIRECTIONS ISSUED BY THE DIRECTORATE OF EDUCATION, THE SCHOOL WAS ENTITLED TO COLLECT THE DEVELOPMENT FUND FOR THE PURPOSE OF SUPPLANTING THE RESOURCES FOR PURCHASE, UPGRADATION AND REPLACEMENT OF FURNITURE, FIXTURES AND EQUIPMENT. THE FUND COLLECTED FROM THE STUDENTS WAS UTILIZED FOR DEVELOPMENT OF AMENITIES FOR THE BENEF IT AND WELFARE OF THE CHILDREN. THE SCHOOL HAD DURING THE PREVIOUS YEAR PROVIDED A SWIMMING POOL AND OTHER GA MES FACILITIES AND COMPUTERS AND TESTING EQUIPMENT IN T HE SCIENCE LABORATORIES. FOR ALL THOSE ACTIVITIES THE SCHOOL COLLECTED THE DEVELOPMENT FUND WHICH WAS TREATED AS CAPITAL FUND BEING EARMARKED FOR DEVELOPMENT OF THE ACTIVITIES. THIS SYSTEM OF ACCOUNTING HAD BEEN FOLL OWED BY THE ASSESSEE IN EARLIER ASSESSMENT YEARS ALSO AND I T WAS NOT DISTURBED BY THE DEPARTMENT, HENCE WHEN THE COLLECTION WAS MEANT FOR BEING SPENT ON ACTIVITIES IN THE CAPITAL FIELD, IT COULD NOT BE TREATED AS REVENUE R ECEIPT. THE DECISION OF THE COMMISSIONER (APPEALS) WAS JUST IFIED. THE ASSESSEE CLAIMED DEPRECIATION IN THE INCOME AND EXPENDITURE ACCOUNT. THE ASSESSING OFFICER HELD THA T SINCE ITA NO.4837/DEL./2016 7 THE BENEFIT OF APPLICATION OF FUND HAD ALREADY BEEN TAKEN WHEN THE ASSETS WERE PURCHASED, THE CLAIM OF THE AS SESSEE WAS NOT ALLOWABLE AND DISALLOWED THE CLAIM OF THE DEPRECIATION. THE COMMISSIONER (APPEALS) DECIDED IN FAVOUR OF THE ASSESSEE. ON APPEAL BY THE DEPARTMENT : HELD, DISMISSING THE APPEAL, THAT IT WAS NOT A CASE OF DOUBLE DEDUCTION AND DEPRECIATION HAD TO BE ALLOWED . 3.1. THE ORDER OF THE CIT(A) BEING IN CONFORMITY WI TH THE AFOREMENTIONED DECISIONS, WE SEE NO REASON TO INTER FERE WITH THE SAME. ACCORDINGLY, ORDER OF CIT(A) IS CONFIRMED. 10. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, FINDI NG NO ILLEGALITY OR PERVERSITY IN THE IMPUGNED ORDER PASS ED BY THE LD. CTI (A), PRESENT APPEAL FILED BY THE REVENUE IS HER EBY DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 1 ST DAY OF OCTOBER, 2019. SD/- SD/- (N.K. BILLAIYA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 1 ST DAY OF OCTOBER, 2019 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A), GHAZIABAD. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.