The Assistant Commissioner Of Income Tax (Exemptions), Circle - 1, Mangaluru V. M/s. Karnataka Law Society, Belgavi

ITA 544/BANG/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7547 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 08-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PRATHIBA
• Keywords: Depreciation; Retrospective amendment; Question of law
• Section: 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A. K. GARODIA, ACCOUNTANT MEMBER ITA NOS.544 TO 549/BANG/2017 ASSESSMENT YEARS : 2007-08 TO 2012-13 THE ASST. COMMISSIONER OF INCOME TAX (EXEMPTIONS), CIRCLE-1, MANGALURU. VS. M/S. KARNATAKA LAW SOCIETY, RPD COLLEGE ROAD, TILAKWADI, BELGAVI. PAN : AAAT 3599 E APPELLANT RESPONDENT REVENUE BY : SHRI. SANJAY KUMAR, CIT-DR ASSESSEE BY : SMT. PRATHIBA, ADVOCATE DATE OF HEARING : 21.09.2017 DATE OF PRONOUNCEMENT : 27.09.2017 O R D E R PER SUNIL KUMAR YADAV, JUDICIAL MEMBER THESE APPEALS ARE PREFERRED BY THE REVENUE AGAINST THE ORDER OF CIT(A) ON COMMON GROUNDS. FOR THE SAKE OF REFERENCE, WE EXTR ACT THE GROUNDS RAISED IN ITA NO.544/BANG/2017 AS UNDER: 1. THE ORDER OF THE LD. CIT (A) IS OPPOSED TO LAW AND FACTS OF THE CASE. 2. THE LD. CIT(A) HAS ERRED IN ALLOWING THE ASSESSE E'S CLAIM OF DEPRECIATION AND NOT CONSIDERING THE JUDGMENT OF TH E HON'BLE KERALA HIGH COURT IN THE CASE OF LISSIE MEDICAL INSTITUTION DT. 17.02.2012 . 3. THE LD. CIT(A) HAS ALSO FAILED TO APPRECIATE THE FACT THAT DEPRECIATION IS ADMISSIBLE ONLY IN RESPECT OF ASSETS USED BY THE AS SESSEE FOR THE PURPOSE OF ITA NOS. 544 TO 549/BANG/2017 PAGE 2 OF 4 BUSINESS OR PROFESSION. SINCE THE ASSESSEE IS NOT E NGAGED IN BUSINESS BUT UNDERTAKING CHARITABLE/ RELIGIOUS ACTIVITIES, THE B ENEFIT OF DEPRECIATION SHOULD NOT BE AVAILABLE TO IT. 4. FOR THESE AND SUCH OTHER GROUNDS IT IS URGED THAT T HE ORDER OF THE LD. CIT(A), ON THE ABOVE POINTS MAY BE SET ASIDE AND TH E ORDER OF THE ASSESSING OFFICER BE RESTORED. 5. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND A LL OR ANY OF THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF THE HEAR ING OF THE APPEAL. 2. DURING THE COURSE OF HEARING, THE LEARNED COUNSE L FOR THE ASSESSEE HAS CONTENDED THAT THE IMPUGNED ISSUE IS SQUARELY COVER ED BY THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE ASSESSEES OWN CAS E IN WHICH IT HAS BEEN HELD THAT DEPRECIATION IS TO BE ALLOWED IN THE CASE OF ASSESS EE ENJOYING THE BENEFIT OF SECTION 11 OF THE ACT IGNORING THE FACT THAT THE ENTIRE COS T HAS BEEN FULLY ALLOWED AS APPLICATION OF INCOME UNDER SECTION 11 OF THE ACT. COPY OF THE JUDGMENT OF JURISDICTIONAL HIGH COURT IS PLACED ON RECORD AND F OR THE SAKE OF REFERENCE WE EXTRACT THE RELEVANT PORTION IN THE ASSESSEES OWN CASE IN ITA NO.200/2015: 1. BOTH THE LEARNED COUNSELS SUBMITTED BEFORE US T HAT THE CONTROVERSY INVOLVED IN THE PRESENT CASE IS COVERED BY THE DECISION OF THE CO-O RDINATE BENCH OF THIS COURT IN THE CASE OF THE DIRECTOR OF INCOME TAX(EXEMPTIONS) VS. AL-AM EEN CHARITABLE FUND TRUST (ITA NO.62/2010 AND CONNECTED MATTERS) DECIDED ON 22.02. 2016, IN WHICH FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F COMMISSIONER OF INCOME TAX VS. VATIKA TOWNSHIP P. LTD. [(2014) 367 ITR 466(SC)], T HE DIVISION BENCH OF THIS COURT HELD THAT THE AMENDMENT OF SECTION 11(6) OF THE INC OME TAX ACT, 1961 WAS PROSPECTIVE IN APPLICATION AND WOULD APPLY FROM THE ASSESSMENT YEAR 2015-16 ONWARDS ONLY. THE ASSESSMENT YEAR IN THE PRESENT CASE BEFORE US IN IT A NO.94/PNJ/2014 IS A.Y. 2010-11 FOR THE RESPONDENT-ASSESSEE/KARNATAKA LAW SOCIETY, TILAKAWADI, BELAGAVI. 2. THE RELEVANT EXTRACT OF THE JUDGMENT OF THE DIVI SION BENCH OF THIS COURT IN THE AFORESAID CASE OF AL-AMEEN CHARITABLE FUND(SUPRA) IS QUOTED BELOW FOR READY REFERENCE:- ITA NOS. 544 TO 549/BANG/2017 PAGE 3 OF 4 24. THE CONSTITUTION BENCH OF THE APEX COURT IN VAT IKA TOWNSHIP(P) LTD.S CASE (SUPRA), HAD LAID DOWN GENERAL PRINCIPLES CONCERNING RETROSP ECTIVELY IN PARAGRAPHS 33 AND 34, AND THE SAME IS EXTRACTED HEREUNDER: 33. WE WOULD ALSO LIKE TO POINT OUT, FOR THE SAKE OF COMPLETENESS, THAT WHERE A BENEFIT IS CONFERRED BY A LEGISLATION, THE RULE AGAINST A R ETROSPECTIVE CONSTRUCTION IS DIFFERENT. IF A LEGISLATION CONFERS A BENEFIT ON SOME PERSONS BUT WITHOUT INFLICTING A CORRESPONDING DETRIMENT ON SOME OTHER PERSON OR ON THE PUBLIC GEN ERALLY, WHERE TO CONFER SUCH BENEFIT APPEARS TO HAVE BEEN THE LEGISLATORS OBJECT, THEN T HE PRESUMPTION WOULD BE THAT SUCH A LEGISLATION, GIVING IT A PURPOSIVE CONSTRUCTION, WO ULD WARRANT IT TO BE GIVEN A RETROSPECTIVE EFFECT. THIS EXACTLY IS THE JUSTIFICA TION TO TREAT PROCEDURAL PROVISIONS AS RETROSPECTIVE. IN GOVERNMENT OF INDIA & ORS. VS. IN DIAN TOBACCO ASSOCIATION, THE DOCTRINE OF FAIRNESS WAS HELD TO BE RELEVANT FACTOR TO CONSTRUE A STATUTE CONFERRING A BENEFIT, IN THE CONTEXT OF IT TO BE GIVEN A RETROSP ECTIVE OPERATION. THE SAME DOCTRINE OF FAIRNESS, TO HOLD THAT A STATU TE WAS RETROSPECTIVE IN NATURE, WAS APPLIED IN THE CASE OF VIJAY VS. STATE OF MAHARASHT RA & ORS. IT WAS HELD THAT WHERE A LAW IS ENACTED FOR THE BENEFIT OF COMMUNITY AS A WH OLE, EVEN IN THE ABSENCE OF A PROVISION THE STATUTE MAY BE HELD TO BE RETROSPECTI VE IN NATURE. HOWEVER, WE ARE CONFRONTED WITH ANY SUCH SITUATION HERE. 34. IN SUCH CASE, RETROSPECTIVELY IS ATTACHED TO BE NEFIT THE PERSONS CONTRADICTION TO THE PROVISION IMPOSING A SAME BURDEN OR LIABILITY WHERE THE PRESUMPTION ATTACHES TOWARDS PROSPECTIVITY. IN THE INSTANT CASE, THE PROVISO ADD ED TO SECTION 113 OF THE ACT IS NOT BENEFICIAL TO THE ASSSESSEE. ON THE CONTRARY, IT IS A PROVISION, WHICH IS ONEROUS TO THE ASSESSEE. THEREFORE, IN A CASE LIKE THIS, WE HAVE T O PROCEED WITH THE NORMAL RULE OF PRESUMPTION AGAINST RETROSPECTIVE OPERATION. THUS, THE RULE AGAINST RETROSPECTIVE OPERATION IS A FUNDAMENTAL RULE OF LAW THAT NO STAT UTE SHALL BE CONSTRUED TO HAVE A RETROSPECTIVE OPERATION UNLESS SUCH A CONSTRUCTION APPEARS VERY CLEARLY IN THE TERMS OF THE ACT, OR ARISES BY NECESSARY AND DISTINCT IMPLIC ATION. DOGMATICALLY FRAMED, THE RULE IS NO MORE THAN A PRESUMPTION, AND THUS COULD BE DISPL ACED BY OUT WEIGHTING FACTORS. 25. THE APEX COURT IN THE SAID JUDGMENT, WHILE INTE RPRETING THE PROVISO, WHETHER TO BE APPLIED RETROSPECTIVELY OR PROSPECTIVELY, HAS CONSI DERED THE NOTES ON CLAUSES APPENDED, THE FINANCE BILL AND THE UNDERSTANDING OF THE CENTR AL BOARD OF DIRECT TAXES IN THIS REGARD. THE APEX COURT HAS ALSO TAKEN COGNIZANCE OF THE FACT THAT THE LEGISLATURE IS FULLY AWARE OF 3 CONCEPTS IN SO FAR AS AMENDMENTS MADE TO A STATUTE: I) PROSPECTIVE AMENDMENTS WITH EFFECT FROM A FIXED DATE; II) RETROSPECTIVE AMENDMENTS WITH EFFECT FROM A FIX ED ANTERIOR DATE; AND III) CLARIFICATORY AMENDMENTS WHICH ARE PROSPECTIVE IN NATURE.KK KEEPING IN VIEW, THE AFORESAID PRINCIPLES ENUNCIATE D BY THE APEX COURT, IN VATIKA TOWNSHIP (P) LTD.S CASE (SUPRA), IT WOULD BE SAFEL Y HELD THAT SECTION 11(6) OF THE ACT IS PROSPECTIVE IN NATURE AND OPERATES WITH EFFECT FROM 01.04.2015. THIS IS FURTHER CLARIFIED ITA NOS. 544 TO 549/BANG/2017 PAGE 4 OF 4 WHEN COMPARED WITH CERTAIN OTHER PROVISIONS WHICH H AVE BEEN MADE RETROSPECTIVELY IN THE SAME FINANCE ACT. 26. FOR THE FOREGOING REASONS, WE ANSWER THE QUESTI ON OF LAW IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 27. IN THE RESULT, ALL THE APPEALS ARE DISMISSED. 3. IN VIEW OF THE CONTROVERSY BEING COVERED BY THE AFORESAID DECISION AGAINST THE REVENUE WITH WHICH WE RESPECTFULLY AGREE, THE PRESE NT APPEAL FILED BY THE REVENUE IS ALSO LIABLE TO BE DISMISSED AND THE QUESTION OF LAW FRAMED IN THE PRESENT MEMO OF APPEAL WHICH IS QUOTED BELOW IS LIABLE TO BE ANSWERED IN F AVOUR OF THE ASSESSEE AND AGAINST THE REVENUE: WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE TRIBUNAL IS RIGHT IN LAW IN ALLOWING DEPRECIATION CLAIMED BY THE ASSESSEE IGNOR ING THE FACT THAT THE ENTIRE COST OF ASSET HAS BEEN FULLY ALLOWED AS APPLICATION OF INCO ME UNDER SECTION 11 OF THE IT ACT? 4. ACCORDINGLY, WE ANSWER THE AFORESAID QUESTION OF LAW IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THE APPEAL OF REVENUE STANDS DISMISSED. NO COSTS. 3. FOLLOWING THE JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE ASSESSEES OWN CASE, WE DECIDE THESE APPEALS BY CONFIRMING THE ORDER OF CIT(A) WHO HAS RIGHTLY ADJUDICATED THE ISSUE. 4. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. PRONOUNCED IN THE OPEN COURT ON 27 TH SEPTEMBER, 2017. SD/- SD/- BANGALORE. DATED: 27 TH SEPTEMBER, 2017. /NSHYLU/* COPY TO: 1. APPELLANTS 2. RESPONDENT 3. CIT 4. DR 4. GUARD FILE BY ORDER SR. PRIVATE SECRETARY, ITAT, BANGALORE. (A. K. GARODIA) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER