Apeejay Education Trust , Kolkata V. ADIT (E)-II, Kolkata , Kolkata

ITA 49/KOL/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 8109 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 08-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AGAINST DATED PASSED
• Keywords: Depreciation; Charitable institution; Question of law
• Section: 12A; 195; 32

Judgement Text

PAGE | 1 IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A, KOLKATA BEFORE SH. P.M.JAGTAP, VICE PRESIDENT & SH.S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO.49/KOL/2018 (ASSESSMENT YEAR-2010-11) ORDER PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER THIS APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 22.08.2017 PASSED BY CIT(A)-25, KOLKATA FOR AY 2010-11. 2. THE ONLY ISSUE IS TO BE DECIDED AS TO WHETHER THE CIT(A) JUSTIFIED IN CONFIRMING THE DISALLOWANCE MADE BY THE AO IN DENYING DEPRECIATION ON ASSETS WHICH WERE ACQUIRED APPLICATION OF INCOME IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A TRUST REGISTERED U/S 12A OF THE INCOME TAX ACT, 1961 (IN SHORT ACT) AND GOT APPROVAL U/S 10(23C)(VI) OF THE ACT. THE ASSESSEE TRUST RUNS TWO SCHOOLS UNDER THE NAME AND STYLE AS APPEJAY SCHOOL HAVING AT PARK STREET AND SALT LAKE, KOLKATA. ACCORDING TO AO, THE INCOME OF THE ASSESSEE INCLUDES FEE RECEIVED, INTEREST INCOME, MISCELLANEOUS INCOME, RENT ETC. AND SAID INCOME WAS APPLIED FOR THE OBJECT OF THE TRUST. APEEJAY EDUCATION TRUST, APEEJAY HOUSE, 15 PARK STREET, KOLKATA-700016. PAN-AAATA4462E VS A.D.I.T (E)-II, 10B, MIDDLETON ROW, KOLKATA. (APPELLANT) (RESPONDENT) APPELLANT BY SH.ASHISH BRAHMA, FCA RESPONDENT BY SH.C.J.SINGH, JCIT, SR.DR DATE OF HEARING 12.06.2019 DATE OF PRONOUNCEMENT 17.07.2019 ITA NO.49/KOL/2018 (ASSESSMENT YEAR-2010-11) PAGE | 2 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT THE ASSESSEE HAS ACQUIRED ASSETS THROUGH APPLICATION OF INCOME AND CLAIMED THE SAID AMOUNT AS EXPENDITURE IN ITS INCOME AND EXPENDITURE ACCOUNT AT CLAIMED DEPRECIATION ON SUCH ASSETS. THE AO HELD SUCH NOTIONAL STATUTORY DEDUCTION LIKE DEPRECIATION WHILE COMPUTING THE INCOME OF THE PROPERTY HELD UNDER TRUST IS NOT AVAILABLE. ACCORDINGLY, HE ADDED AN AMOUNT OF RS.13,25,825/- (RS.4,41,588/- + RS.8,84,237/-) TO THE TOTAL INCOME OF THE ASSESSEE. 5. BEFORE CIT(A), THE ASSESSEE PLACED RELIANCE ON SEVERAL DECISIONS WHICH WERE REFLECTED IN THE IMPUGNED ORDER AT PAGE NO.23. BUT, HOWEVER, THE CIT(A) UPHELD THE VIEW OF AO IN DENYING THE ALLOWANCE OF DEPRECIATION. THE RELEVANT PORTION OF WHICH IS REPRODUCED HEREIN BELOW:- 13. WE HAVE CAREFULLY GONE THROUGH ALL THE JUDGMENTS AND DECISIONS CITED BY THE LD. COUNSEL FOR THE ASSESSEE, WHICH ARE AS UNDER:- 1. DIT V. VISHWA JAGRITI MISSION (2012) 73 DTR (DEL) 195 2. CIT V. MARKET COMMITTEE, PIPLI (2011) 330 ITR 16 (P&H) 3. CIT V. SOCIETY OF SISTERS OF ST.ANNE (1984) 146 ITR 28 (KAR) 4. CIT V. BHORUKA PUBLIC WELFARE TRUST (1999) 240 ITR 513 (CAL) 5. CIT V. TINY TOTS EDUCATION SOCIETY (2011) 330 ITR 21 (P&H) 6. CIT V. SHETH MANILAL RANCHHODDAS (1992) 198 ITR 598 (GUJ) VISHRAM BHAVAN TRUST 7. CIT V. RAIPUR PALLOTTINE SOCIETY (1989) 180 ITR 579 (MP) 8. CIT V. INSTITUTE OF BANKING PERSONNEL (2003) 264 ITR 110 (BOM) SELECTION 9. DIT(E) V. FRAMJEE CAWASJEE (1993) 109 CTR (BORN) 463 INSTITUTE 10. DDIT V. LAKSHMI SARASWATHI LTA NO.452/MDS/2014 EDUCATIONAL TRUST CHENNAI ITAT 11. APOLLO HOSPITALS EDUCATIONAL TRUST V.ITA NO.2090/MDS/2012 DCIT CHENNAI ITAT 12. SERVICES ASSOCIATION OF SEVENTH DAY ITA NO. 1853/MDS/20 11 - ADVENTISTS PVT. LTD. V. ITO CHENNAI ITAT 13. SERVICES ASSOCIATION OF SEVENTH DAY ITA NO.427/MDS/2012 ADVENTISTS PVT. LTD. V. ITO CHENNAI ITAT 14. ACIT V. MAMALLAN EDUCATIONAL TRUST ITA NO.1808/MDS/2012 CHENNAI ITAT 15. DCIT V. MAMALLAN EDUCATIONAL TRUST ITA NO.91/MDS/2013 CHENNAI ITAT 16. ITO V. SRI RANGANATHAR TRUST ITA NO.1954/MDS/2012 CHENNAI ITAT 17. ITO V. KGISL TRUST ITA NO.1813/MDS/2012 CHENNAI ITAT 18. CIT V. RAO BAHADUR CALAVALA CUNNAN (1982) 135 ITR 485 (MAD) CHETTY CHARITIES 19. DEVI KARUMARIAMMAN EDUCATIONAL (2015) 60 TAXMANN.COM TRUST V. DCIT (EXEMPTIONS) 439 (MADRAS) 20. ITO V. THE GRD TRUST ITA NO.2537/MDS/2014 CHENNAI ITAT. AFTER GOING THROUGH ALL THE JUDGMENTS I DECISIONS, WE FIND THAT THE CONFLICT BETWEEN THE COMMERCIAL PRINCIPLE OR CUSTOMARY PRACTICE IN COMPUTING INCOME AND THE PROVISIONS OF SECTION 32 WERE NOT BROUGHT TO THE NOTICE OF THE COURTS/ TRIBUNAL. ITA NO.49/KOL/2018 (ASSESSMENT YEAR-2010-11) PAGE | 3 THEREFORE, THOSE JUDGMENTS/ DECISIONS ARE NOT APPLICABLE TO THE FACTS OF THE CASE. IN VIEW OF THE ABOVE DISCUSSION, WE FIND NO MERIT IN THE APPEAL OF THE ASSESSEE. ACCORDINGLY, THE SAME IS DISMISSED.' KEEPING IN VIEW THE AFORESAID FACTS AND RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE ITAT, THE DEPRECIATION DISALLOWED BY THE A.O IS HEREBY UPHELD AND ALL THE GROUNDS OF THE APPEAL ARE DISMISSED. 6. HAVING AGGRIEVED, THE ASSESSEE IS BEFORE US AND PLACED RELIANCE ON THE DECISION OF HONBLE HIGH COURT OF CALCUTTA IN THE CASE OF CIT VS SILIGURI REGULATED MARKET COMMITTEE [2014] 51 TAXMANN.COM 455 (CALCUTTA) . THE LD.DR RELIED ON THE ORDER OF CIT(A). 7. HEARD BOTH PARTIES AND PERUSED MATERIAL AVAILABLE ON RECORD. IT IS NOTED THAT THE HONBLE HIGH COURT OF CALCUTTA IN THE CASE OF SILIGURI REGULATED MARKET COMMITTEE (SUPRA) ADJUDICATED THE SUBSTANTIAL QUESTION OF LAW AS SUGGESTED BY THE APPELLANT-REVENUE THEREIN WHICH READS AS UNDER:- (II) WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED TRIBUNAL WAS JUSTIFIED IN LAW IN ALLOWING DEPRECIATION ON ASSETS WITHOUT CONSIDERING THE FACTS THAT THE COST OF WHICH HAS ALREADY BEEN TREATED AS APPLICATION OF INCOME FOR CHARITABLE PURPOSE AND HENCE ALLOWING DEPRECIATION ON SUCH INVESTMENT WOULD EFFECTIVELY BE ALLOWING DOUBLE DEDUCTION FROM INCOME? 8. SUPPORTING THE ABOVE SAID SUBSTANTIAL QUESTION OF LAW, THE ARGUMENTS WERE ADVANCED ON BEHALF OF THE APPELLANT-REVENUE THAT THE TRIBUNAL WAS NOT JUSTIFIED IN ALLOWING THE DEDUCTION ON ACCOUNT OF DEPRECIATION WHICH REALLY AMOUNTS TO DOUBLE DEDUCTION BECAUSE THE ASSESSEE HAS ALREADY GOT 100% DEDUCTION FOR THE ACQUISITION OF THE PROPERTY IN QUESTION. DEDUCTION ON ACCOUNT OF DEPRECIATION WOULD MEAN A DOUBLE DEDUCTION. 9. THE ASSESSEE THEREIN PLACED RELIANCE ON THE DECISIONS OF HONBLE HIGH COURT IN THE CASE OF MARKET COMMITTEE, PIPLI REPORTED 330 ITR 16. THE HONBLE HIGH COURT OF CALCUTTA WAS PLEASED TO OBSERVE AS UNDER:- 5. WE REQUESTED MR. KHAITAN, LEARNED SENIOR ADVOCATE TO ASSIST US IN RESOLVING THE ISSUE. MR. KHAITAN DREW OUR ATTENTION TO A JUDGMENT OF THE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF CIT V. MARKET COMMITTEE, PIPLI [2011] 330 ITR 16/[2012] 20 TAXMANN.COM 559 WHEREIN THE SECOND QUESTION FORMULATED ITA NO.49/KOL/2018 (ASSESSMENT YEAR-2010-11) PAGE | 4 ABOVE WAS CONSIDERED AND ANSWERED IN FAVOUR OF THE ASSESSEE. TO BE PRECISE, THE PUNJAB AND HARYANA HIGH COURT OPINED AS FOLLOWS (PAGE 20): 'IN THE PRESENT CASE, THE ASSESSEE IS NOT CLAIMING DOUBLE DEDUCTION ON ACCOUNT OF DEPRECIATION AS HAS BEEN SUGGESTED BY LEARNED COUNSEL FOR THE REVENUE. THE INCOME OF THE ASSESSEE BEING EXEMPT, THE ASSESSEE IS ONLY CLAIMING THAT DEPRECIATION SHOULD BE REDUCED FROM THE INCOME FOR DETERMINING THE PERCENTAGE OF FUNDS WHICH HAVE TO BE APPLIED FOR THE PURPOSES OF THE TRUST. THERE IS NO DOUBLE DEPRECIATION CLAIMED BY THE ASSESSEE AS CANVASSED BY THE REVENUE. THE JUDGMENT OF THE HON'BLE SUPREME COURT IN ESCORTS LTD. CASE [1993] 199 ITR 43 (SC) IS DISTINGUISHABLE FOR THE ABOVE REASONS. IT CANNOT BE HELD THAT DOUBLE BENEFIT IS GIVEN IN ALLOWING CLAIM FOR DEPRECIATION FOR COMPUTING INCOME FOR PURPOSES OF SECTION 11. THE QUESTIONS PROPOSED HAVE THUS TO BE ANSWERED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE. 10. ON PERUSAL OF THE ABOVE OBSERVATIONS OF THE HONBLE HIGH COURT, HELD THAT IT IS NOT A DOUBLE DEDUCTION ON ACCOUNT OF CLAIM OF DEPRECIATION AND AGREED WITH THE VIEW OF HONBLE HIGH COURT OF PUNJAB & HARYANA THAT IT IS A REDUCTION OF DEPRECIATION FROM THE INCOME FOR DETERMINING THE PERCENTAGE OF FUNDS WHICH HAVE TO BE APPLIED FOR THE PURPOSE OF THE TRUST. THEREFORE, IT IS CLEAR THAT THE HONBLE HIGH COURT OF CALCUTTA HELD THAT THERE IS NO DOUBLE DEDUCTION IF THE ASSESSEE CLAIMS DEDUCTION ON THE FIXED ASSETS ACQUIRED BY THE APPLICATION OF ASSESSEES INCOME. 11. FURTHER, THE ASSESSEE PLACED RELIANCE IN THE CASE OF HONBLE HIGH COURT OF BOMBAY IN THE CASE OF INSTITUTE OF BANKING PERSONAL SELECTION (IBPS) [2003] REPORTED IN 264 ITR 110 WHEREIN IDENTICAL VIEW HAS BEEN TAKEN AND WHICH IS HELD AS THAT THE INCOME OF THE TRUST IS REQUIRED TO BE COMPUTED U/S 11 ON COMMERCIAL PRINCIPLES AFTER PROVIDING ALLOWANCE FOR NORMAL DEPRECIATION AND DEDUCTION THEREOF FROM INCOME OF THE TRUST. THEREFORE, IT IS CLEAR THAT THE INCOME OF THE ASSESSEE IS TO BE COMPUTED ON COMMERCIAL PRINCIPLES THEREBY GIVING ALLOWANCE FOR NORMAL DEPRECIATION. HAVING CONSIDERED SEVERAL DECISIONS BY THE HONBLE HIGH COURT OF CALCUTTA HELD AS UNDER:- 9. MR. KHAITAN SUBMITTED THAT THIS COURT HAS ALREADY EXPRESSED THE OPINION THAT THE INCOME FROM PROPERTIES HELD UNDER A TRUST WOULD HAVE TO BE CALCULATED IN THE COMMERCIAL MANNER. HE SUBMITTED THAT ONCE THE AFORESAID PROCESS OF COMPUTATION IS PERMITTED, THE CLAIM FOR DEPRECIATION HAS TO BE ALLOWED. ITA NO.49/KOL/2018 (ASSESSMENT YEAR-2010-11) PAGE | 5 10. MR. BHOWRNICK, LEARNED ADVOCATE REPLIED BY STATING, THAT IN THE CASE OF BHERUKA PUBLIC WELFARE TRUST (SUPRA). A DIVISION BENCH OF THIS COURT HAS EXPRESSED SOME RESERVATIONS WITH REGARD TO THE AFORESAID VIEW AS REGARDS COMPUTATION OF INCOME IN A COMMERCIAL MANNER, AND, THEREFORE, THE MATTER SHOULD BE REFERRED TO A LARGER BENCH. 11. WE HAVE CONSIDERED THE SUBMISSIONS AND PERUSED THE JUDGMENTS OF THE PUNJAB AND HARYANA HIGH COURT AND THE BOMBAY HIGH COURT AS ALSO THE JUDGMENT OF THIS COURT IN THE CASE OF JAYASHREE CHARITY TRUST (SUPRA) AND IN THE CASE OF BHERUKA PUBLIC WELFARE TRUST. (SUPRA). WE ARE OF THE OPINION THAT THE VIEWS EXPRESSED IN THE CASE OF JAYASHREE CHARITY TRUST (SUPRA) ARE LOGICAL AND IN CONSONANCE WITH COMMON SENSE. THE OBJECT OF SECTION 11 OF THE INCOME-TAX ACT, 1961, IS TO FEED THE PUBLIC CHARITY. BY PERMITTING COMPUTATION OF INCOME IN A COMMERCIAL MANNER, THE OBJECT OF FEEDING THE PUBLIC CHARITY IS ACHIEVED. THE AMOUNT DEDUCTED BY WAY OF DEPRECIATION IS IN THAT CASE IS PLOUGHED BACK FOR USER ON ACCOUNT OF CHARITY. IT CANNOT BE DISPUTED THAT A BUILDING USED FOR THE PURPOSE OF CHARITY DIMINISHES IN VALUE OVER TIME LIKE ANY OTHER BUILDING. THEREFORE, PROVIDING FOR SUCH DIMINUTION OF VALUE WOULD KEEP THE CORPUS OF THE TRUST INTACT OTHERWISE THE CORPUS OF THE TRUST ITSELF IN COURSE OF TIME MAY GET DISSIPATED. 12. WE ARE, AS SUCH, IN AGREEMENT WITH THE VIEWS EXPRESSED IN THE CASE OF JAYASHREE CHARITY TRUST (SUPRA). THERE IS, AS SUCH, NO REASON WHY THE MATTER SHOULD BE REFERRED TO ANY LARGER BENCH, AS SUBMITTED BY MR. BHOWMICK. IN THE RESULT, THE APPEAL FAILS. BOTH THE QUESTIONS ARE ANSWERED IN THE AFFIRMATIVE AND IN FAVOUR OF THE ASSESSEE. THE APPEAL IS THUS DISPOSED OF. 13. WE RECORD OUR DEEP SENSE OF APPRECIATION FOR THE ASSISTANCE RENDERED BY MR. J.P. KHAITAN, LEARNED SENIOR ADVOCATE IN RESOLVING THE QUESTION OF LAW RAISED IN THIS MANNER. 12. IN THE LIGHT OF THE OBSERVATIONS MADE BY THE HONBLE HIGH COURT OF CALCUTTA, WE ARE OF THE OPINION THAT THE INCOME FROM PROPERTY HELD UNDER TRUST WOULD HAVE TO BE CALCULATED IN THE COMMERCIAL MANNER AND NOT UNDER GENERAL PRINCIPLES AND THE CLAIM FOR DEPRECIATION IS TO BE ALLOWED. THEREFORE, IN TERMS OF THE DECISIONS (SUPRA), THE ASSESSEE IS ENTITLED TO CLAIM DEPRECIATION ON THE FIXED ASSETS WHICH WERE ACQUIRED FROM THE APPLICATION OF INCOME OF THE TRUST. THEREFORE, GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17.07.2019. SD/- SD/- (P.M.JAGTAP) (S.S.VISWANETHRA RAVI) VICE PRESIDENT JUDICIAL MEMBER DATE:- 17.07.2019 *AMIT KUMAR* ITA NO.49/KOL/2018 (ASSESSMENT YEAR-2010-11) PAGE | 6 COPY FORWARDED TO: 1. APPELLANT- APEEJAY EDUCATION TRUST, APEEJAY HOUSE, 15 PARK STREET, KOLKATA-700016. 2. RESPONDENT- A.D.I.T (E)-II, 10B, MIDDLETON ROW, KOLKATA. 3. CIT-KOLKATA 4. CIT(APPEALS)-KOLKATA 5. DR: ITAT -KOLKATA BENCHES BY ORDER AR/H.O.O ITAT, KOLKATA