INCOME TAX OFFICER(E)-2(3), MUMBAI V. M/S.SHREE KANCHI MAHASWAMI CHANDRASEKARENDRA SARASWATI PEETAROHANA SHATABDI, MUMBAI

ITA 5582/MUM/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4241 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2012-2013
• Appeal Filed On: 04-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATISH CHANDRA RAJORE
• Assessee Lawyers: SHAPARIA MEHTA
• Keywords: Capital asset; Depreciation; Charitable institution; Capital expenditure
• Section: 143(3); 12A; 10B; 264; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G MUMBAI BEFORE SHRI PAWAN SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 5582/MUM/2017 ASSESSMENT YEAR: 2012 - 13 INCOME TAX OFFICER - 2(3), FLAT NO. 4, PLOT NO. 258, KAILASH BHAVAN CHS LTD. SION ROAD, SION (W), MUMBAI - 400022. VS. M/S SHREE KANCHI MAHASWAMI CHANDRASEKARENDRA SARAWATI PEETAROHANA SHATABADI ROOM NO. 513, 5 TH FLOOR, PIRAMAL CHAMBERS, LALBAUG, LOWER PAREL, MUMBAI - 400012. PAN NO. AAFTS5660K APPELLANT RESPONDENT REVENUE BY : MR. SATISHCHANDRARAJORE, DR ASSESSEE BY : MR. SHAPARIA MEHTA, AR DATE OF HEARING : 13 /03/2019 DATE OF PRONOUNCEMENT: 13/03/2019 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE REVENUE . THE RELEVANT ASSESSMENT YEAR IS 2012 - 1 3 . THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 1 , MUMBAI [IN SHORT CIT(A)] AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) OF THE INCOME TAX ACT 1961, (THE ACT). 2 . WE BEGIN WITH THE 1 ST , 2 ND AND 3 RD GROUND OF APPEALS AND DISCUSS THEM TOGETHER AS THEY ADDRESS A COMMON ISSUE. BRIEFLY STATED, THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR (AY) 2012 - 13 ON 28.09.2012 ALONG WITH INCOME AND EXPENDITURE ACCOUNT, BALANCE M/S SHREE KANCHI ITA NO. 5582/MUM/201 7 2 SHEET AND AUDIT REPORT IN FORM NO. 10B DECLARING DEFICIT OF RS.7,42,24,955/ - . THE ASSESSEE - TRUST IS REGISTERED U/S 12A OF THE ACT AND ALSO REGISTERED WITH THE CHARITY COMMISSIONER, MUMBAI. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE - TRUST CLAIMED DEPRECIATION OF RS. 16,84,767/ - AND DEPRECIATION PROVISION OF RS.2,07,82,071/ - . IT IS OBSERVED BY THE ASSESSING OFFICER (A O) THAT THE ASSESSEE - TRUST HAS CLAIMED DEPRECIATION AND ALSO CAPITAL EXPENDITURE VIZ. ADDITION TO FIXED ASSETS IN THE COMPUTATION OF INCOME AND THE SAME AMOUNTS TO DOUBLE DEDUCTION. IN RESPONSE TO A QUERY RAISED BY THE AO, THE ASSESSEE RELIED ON THE DECISI ON OF THE HONBLE BOMBAY HIGH COURT IN CIT V. INSTITUTE OF BANKING PERSONNEL SELECTION 264 ITR 110 (BOM), WHEREIN IT IS HELD THAT DEPRECIATION SHOULD BE ALLOWED EVEN ON ASSETS, THE COST OF WHICH HAS BEEN ALLOWED AS EXEMPT U/S 11 OF THE ACT. HOWEVER, THE AO WAS NOT CONVINCED WITH THE ABOVE REPLY OF THE ASSESSEE AND RELYING ON THE DECISION OF THE HONBLE KERALA HIGH COURT IN LISSIE MEDICAL INSTITUTION V. CIT (ITA NO. 42 OF 2011) DATED 17.02.2012 , DISALLOWED THE DEPRECIATION OF RS.16,84,767/ - AND DEPRECIATION PROVISION OF RS.2,07,82,071/ - . 3. IN APPEAL, THE LD. CIT(A), FOLLOWING THE DECISION IN INSTITUTE OF BANKING PERSONNEL (SUPRA) AND ANOTHER DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF DIRECTOR OF INCOME TAX (EXEMPTIONS), MUMBAI V. SHRI VILE PAR LE KELAVANI MANDAL (2015) 58 TAXMANN.COM 288 , DIRECTED THE AO TO ALLOW THE CLAIM OF DEPRECIATION AS APPLICATION OF INCOME U/S 11 OF THE ACT, AFTER DUE VERIFICATION OF FACTS. 4. BEFORE US, THE LD. DR RELIES ON THE ORDER OF THE AO . O N THE OTHER HAND THE LD. COUNSEL OF THE ASSESSEE RELIES ON THE DECISION IN CIT V. RAJASTHAN & GUJARAT CHARITABLE FOUNDATION POONA [2018] 89 M/S SHREE KANCHI ITA NO. 5582/MUM/201 7 3 TAXMANN.COM 127 (SC) AND THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE AY 2013 - 14. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. THE ISSUE IS SETTLED BY THE ORDER OF THE HONBLE SUPREME COURT IN RAJASTHAN & GUJARAT CHARITABLE FOUNDATION POONA (SUPRA), WHEREIN IT IS HELD THAT IN CASE OF CHARITABLE INST ITUTION REGISTERED U/S 12A, EVEN THOUGH EXPENDITURE INCURRED FOR ACQUISITION OF CAPITAL ASSETS WAS TREATED AS APPLICATION OF INCOME FOR CHARITABLE PURPOSES U/S 11(1)(A), YET DEPRECIATION WOULD BE ALLOWED ON ASSETS SO PURCHASED (POSITION PRIOR TO 01.04.2015 ). THUS FOLLOWING THE ABOVE DECISION, WE UPHOLD THE ORDER OF THE LD. CIT(A) AND DISMISS THE 1 ST , 2 ND AND 3 RD GROUNDS OF APPEAL OF THE REVENUE. 6. NOW WE TURN TO THE 4 TH , 5 TH AND 6 TH GROUND OF APPEAL AND DISCUSS THEM TOGETHER AS THEY ADDRESS A COMMON ISS UE. THE ASSESSEE - TRUST HAS CLAIMED AN AMOUNT OF RS.7,42,24,955/ - AS DEFICIT FOR SETTING IT OFF IN FUTURE YEARS. IN THE ASSESSMENT, THE AO DISALLOWED THE ABOVE CLAIM OF THE ASSESSEE. IN APPEAL, THE LD. CIT(A), FOLLOWING THE DECISION OF THE HONBLE BOMBAY HI GH COURT IN INSTITUTE OF BANKING PERSONNEL (SUPRA), DIRECTED THE AO TO ALLOW THE CARRY FORWARD OF DEFICIT IN SUCCEEDING YEARS, AFTER DUE VERIFICATION OF FACTS. 7. BEFORE US, THE LD. DR RELIES ON THE ORDER OF THE AO, WHEREAS THE LD. COUNSEL OF THE ASSESSEE RELIES ON THE ORDER OF THE LD. CIT(A). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. AS RIGHTLY QUOTED BY THE LD. CIT(A), THE HONBLE M/S SHREE KANCHI ITA NO. 5582/MUM/201 7 4 BOMBAY HIGH COURT HAS HELD IN INSTITUTE OF BANKING PERSONNEL (SUPRA) THAT : INCOM E DERIVED FROM THE TRUST PROPERTY HAS ALSO GOT TO BE COMPUTED ON COMMERCIAL PRINCIPLES AND IF COMMERCIAL PRINCIPLES ARE APPLIED THEN ADJUSTMENT OF EXPENSES INCURRED BY THE TRUST FOR CHARITABLE AND RELIGIOUS PURPOSES IN THE EARLIER YEARS AGAINST THE INCOME EARNED BY THE TRUST IN THE SUBSEQUENT YEAR WILL HAVE TO BE REGARDED AS APPLICATION OF INCOME OF THE TRUST FOR CHARITABLE AND RELIGIOUS PURPOSES IN THE SUBSEQUENT YEAR IN WHICH ADJUSTMENT HAS BEEN MADE HAVING REGARD TO THE BENEVOLENT PROVISIONS CONTAINED IN SECTION 11 OF THE ACT AND THAT SUCH ADJUSTMENT WILL HAVE TO BE EXCLUDED FROM THE INCOME OF THE TRUST UNDER SECTION 11(1)(A) OF THE ACT. FACTS BEING IDENTICAL, WE FOLLOW THE ABOVE DECISION AND UPHOLD THE ORDER OF THE LD. CIT(A). 9 . IN THE RESULT, THE APPEAL FILED BY THE R EVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13/03/2019. SD/ - SD/ - (PAWAN SINGH) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 13/03/2019 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (SR. PRIVATE SECRETARY) ITAT, MUMBAI