ITO (E) (1), MUMBAI V. THE BHATIA GENERAL HOSPITAL, MUMBAI

ITA 5674/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83956 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 14-10-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 08-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEK BATRA
• Assessee Lawyers: AJAY SINGH SHRI R V SHAH
• Keywords: Depreciation; Charitable institution; Additional depreciation; Earning of tax free income; Additional evidence; Capital expenditure
• Section: 32; 11

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BE NCH, MUMBAI , !' # # # # , , !' $ BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER ./I .T.A. NO. 5674/MUM/2011 ( % % % % / ASSESSMENT YEAR : 2007-08 THE ITO (E) 1 (1), PIRAMAL CHAMBERS, PAREL, MUMBAI-400 012 / VS. THE BHATIA GENERAL HOSPITAL, TARDEO ROAD, NANA CHOWK, MUMBAI '& ./ '( ./ PAN/GIR NO. :AAATT 3440K ( &) / APPELLANT ) .. ( *+&) / RESPONDENT ) &) , / APPELLANT BY: SHRI VIVEK BATRA *+&) - , / RESPONDENT BY: SHRI AJAY SINGH SHRI R.V. SHAH - ./ / DATE OF HEARING :14.10.2014 01% - ./ / DATE OF PRONOUNCEMENT :20.10.2014 !2 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-1, MUMBAI DT.15.3.2011 PERTAINING TO A.Y.200 7-08. 2. THE GRIEVANCES OF THE REVENUE READ AS UNDER: ITA NO. 5674/M/2011 2 1. WHETHER ON THE FACTS OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN ALLOWING THE APPEAL OF THE ASSESSEE ON ACCOUNT OF DISALLOWING DEPRECIATION ON FIXED ASSETS OF RS. 83,15,210/- IN CONTRAVENTION OF THE DECISION OF ESC ORTS LTD. VS UOI 199 ITR 43 WHEREIN IT WAS HELD THAT SINCE SE C. 11 OF THE I.T. ACT PROVIDES FOR DEDUCTION CAPITAL EXPENDI TURE INCURRED ON AN ASSET ACQUIRED FOR THE OBJECTS OF TH E TRUST AS APPLICATION AND DOES NOT SPECIFICALLY & EXPRESSLY P ROVIDE FOR DOUBLE DEDUCTION ON ACCOUNT OF DEPRECIATION ON THE SAME VERY ASSETS ACQUIRED FROM SUCH CAPITAL EXPENDITURE , NO DEDUCTION SHALL BE ALLOWED U/S. 32 FOR THE SAME OR ANY OTHER PREVIOUS YEAR IN RESPECT OF THAT ASSET AS IT AMOUNT S TO CLAIMING A DOUBLE DEDUCTION. 2. WHETHER ON THE FACTS OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN ALLOWING THE CARRY FORWARD OF DEFIC IT AND ALLOWING SET OFF AGAINST THE INCOME OF THE SUBSEQUE NT YEARS, AS ALLOWING THE DEFICIT WILL TANTAMOUNT TO DOUBLE D EDUCTION ON ACCOUNT OF EXPENDITURE OUT OF EXEMPT INCOME 3. THE ASSESSEE IS A CHARITABLE TRUST RUNNING A HOS PITAL. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS CLAIMED THE ADDITIO NAL DEPRECIATION OF RS. 83,15,310/- IN ADDITION TO THE NORMAL DEPRECIATION OF RS. 2,14,29,366/-. THE ASSESSEE WAS ASKED TO JUSTIFY ITS CLAIM. IT WAS EXPLAINED THAT DURING THE YEAR, THE ASSESSEE HAS CLAIMED ADDITIONAL DEPRE CIATION OF RS. 83,15,310/- ON HOSPITAL EQUIPMENT , FURNITURE & FIX TURE WHICH HAS COMPLETED 10 YEARS OF USEFUL LIFE AND COMPUTER WHIC H HAS COMPLETED 3 YEARS OF USEFUL LIFE. THE ADDITIONAL DEPRECIATION HAS BEEN CLAIMED ON ASSET WHICH HAS OUTLIVED ITS USEFUL LIFE. TO SUBST ANTIATE, THE ASSESSEE RELIED UPON CERTAIN JUDICIAL DECISIONS. 3.1. AFTER EXAMINING THE FACTS IN THE LIGHT OF THE JUDICIAL DECISIONS, THE AO WAS OF THE OPINION THAT VARIOUS HIGH COURTS HAVE DELIBERATED THE ISSUE AND HAVE CAME TO THE CONCLUSION THAT THE TRUS T TOO CAN CLAIM THE ITA NO. 5674/M/2011 3 DEPRECIATION ON THE ASSETS ACQUIRED BY THEM. ACCOR DING TO THE AO, THE ASSESSEE WAS ENTITLED FOR THE DEPRECIATION WHICH IT HAS CLAIMED AS PER THE RATES SPECIFIED UNDER THE I.T. RULES BUT IN SO FAR AS THE CLAIM OF ADDITIONAL DEPRECIATION IS CONCERNED, THE CONTENTION OF THE AS SESSEE CANNOT BE ACCEPTED AS THE ASSESSEE HAS DEVIATED FROM THE PROV ISION OF DEPRECIATION PROVIDED IN THE STATUTE. THE AO WAS OF THE OPINION THAT IF THE ASSETS HAVE OUTLIVED THEIR USEFUL LIFE, THE ASSESSEE SHOULD HA VE SOLD THEM AS SCRAP. NO EVIDENCE IN SUPPORT OF THIS HAS BEEN FILED, THE AO ACCORDINGLY DISALLOWED THE CLAIM OF DEPRECIATION OF RS. 83,15,3 10/-. 3.2. PROCEEDING FURTHER, THE AO NOTICED THAT THERE WAS A DEFICIT OF RS. 2,04,79,427/- APPEARING IN THE COMPUTATION OF INCOM E FURNISHED BY THE ASSESSEE. THE DEFICIT WAS ON ACCOUNT OF EXCESS EXP ENDITURE CLAIMED OVER THE REVENUE. DRAWING SUPPORT FROM THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ESCORTS LTD. VS UOI 199 ITR 43 , THE AO DECLINED TO ALLOW THE CLAIM OF THE ASSESSEE TO TREAT THE DEFICI T OF RS. 2,04,79,427/- AS APPLICATION OF INCOME FOR ENJOYING EXEMPTION IN THE SUCCESSIVE YEAR. 4. AGGRIEVED BY THESE TWO FINDINGS, THE ASSESSEE CA RRIED THE MATTER BEFORE THE LD. CIT(A) 4.1. AFTER CONSIDERING THE FACTS AND THE SUBMISSION S, THE LD. CIT(A) TRANSMITTED THE ADDITIONAL EVIDENCES TO THE AO CALL ING FOR A REMAND REPORT. THE AO FILED THE REPORT DT. 4.1.2011 WHICH IS PLACED AT PAGE-87 TO 89 OF THE PAPER BOOK. THE ADDITIONAL EVIDENCES WER E IN THE FORM OF CERTIFICATES CERTIFYING THAT THE ASSETS HAVE OUTLIV ED THEIR USEFUL LIFE. THESE CERTIFICATES ARE AT PAGE-21, 35 AND 42 OF THE PAPER BOOK. IN HIS REMAND REPORT, THE AO INSTEAD OF VERIFYING THE VERACITY OF THE CERTIFICATES QUESTIONED THE ADMISSION OF ADDITIONAL EVIDENCES BY THE LD. CIT(A). THE ITA NO. 5674/M/2011 4 LD. CIT(A) WHILE DECIDING THE ISSUE DREW SUPPORT FR OM THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF INSTIT UTE OF BANKING PERSONNEL SELECTION 264 ITR 110 AND CONCLUDED BY O BSERVING THAT THE INCOME OF THE TRUST IS REQUIRED TO BE COMPUTED U/S. 11 ON COMMERCIAL PRINCIPLES AFTER PROVIDING FOR ALLOWANCE FOR NORMA L DEPRECIATION AND DEDUCTION THEREOF FROM GROSS INCOME OF THE TRUST. THE LD. CIT(A) WENT ON TO DELETE THE DISALLOWANCE OF DEPRECIATION AND F OR SIMILAR REASONS ALLOWED THE ASSESSEE TO CARRY FORWARD OF DEFICIT IN ACCORDANCE TO THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF INSTITUTE OF BANKING PERSONNEL SELECTION (SUPRA). 5. AGGRIEVED BY THIS, THE REVENUE IS BEFORE US. 6. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SUP PORTED THE FINDINGS OF THE AO. 7. THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. 8. IN SO FAR AS THE CLAIM OF ADDITIONAL DEPRECIATIO N OF RS. 83,15,310/- IS CONCERNED, WE FIND THAT THE ASSESSEE HAS GIVEN S UFFICIENT REASONS FOR CLAIMING THE SAME, IN SUPPORT, CERTIFICATES WERE FI LED WHICH WERE ALSO BEFORE THE LOWER AUTHORITIES. THE ASSESSEE IS RUNN ING A HOSPITAL. THE ASSETS WHICH HAVE OUTLIVED THEIR LIVES CANNOT BE SO LD AS SCRAP AS PER THE RULES GOVERNING THE HOSPITAL, THE ASSESSEE WAS LEFT WITH NO CHOICE BUT TO CLAIM THE SAME AS ADDITIONAL DEPRECIATION. THE HON BLE HIGH COURT OF BOMBAY IN THE CASE OF INSTITUTE OF BANKING PERSONNE L SELECTION (SUPRA) HAS LAID DOWN THE RATIO THAT THE INCOME OF THE TRUS T IS REQUIRED TO BE COMPUTED U/S. 11 ON COMMERCIAL PRINCIPLES. AS THE LD. CIT(A) HAS ITA NO. 5674/M/2011 5 ALLOWED THE CLAIM DRAWING SUPPORT FROM THIS DECISIO N OF THE HONBLE BOMBAY HIGH COURT, NO INTERFERENCE IS CALLED FOR. GROUND NO. 1 IS ACCORDINGLY DISMISSED. 9. GROUND NO. 2 RELATES TO THE CLAIM OF CARRY FORWA RD OF DEFICIT TO BE SET OFF AGAINST THE INCOME OF THE SUBSEQUENT YEARS. 10. AS WE HAVE MENTIONED ELSEWHERE THAT THE INCOME HAS TO BE COMPUTED ON COMMERCIAL PRINCIPLES LIKE BUSINESS LOS S WHICH IS ALLOWED TO BE CARRIED FORWARD AND SET OFF WITH THE PROFIT OF S UBSEQUENT YEARS. SIMILARLY, THE DEFICIT IN THE CASE OF A TRUST IS AL LOWED TO BE CARRIED FORWARD TO BE SET OFF IN SUBSEQUENT YEARS. THAT BEING SO, FINDINGS OF THE LD. CIT(A) NEED NO INTERFERENCE. 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20.10.2014 SD/- SD/- (VIVEK VARMA ) (N.K. BILLAIYA) !' / JUDICIAL MEMBER !' / ACCOUNTANT MEMBER MUMBAI; 3! DATED : 20.10.2014 . . ./ RJ , SR. PS ITA NO. 5674/M/2011 6 !2 !2 !2 !2 - -- - *. *. *. *. 4%. 4%. 4%. 4%. / COPY OF THE ORDER FORWARDED TO : 1. &) / THE APPELLANT 2. *+&) / THE RESPONDENT. 3. 5 ( ) / THE CIT(A)- 4. 5 / CIT 5. 67 *. , , / DR, ITAT, MUMBAI 6. 78 9 / GUARD FILE. !2 !2 !2 !2 / BY ORDER, +. *. //TRUE COPY// : :: : / ; ; ; ; ' ' ' ' (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI