ITO(E), Jaipur V. MUDGAL EDUCATION TRUST, Jaipur

ITA 58/JPR/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1977 (ITAT-JAIPUR)
• Duration Of Justice: 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 05-06-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 16-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: MUKESH KHANDELWAL C A DHK
• Keywords: Capital asset; Depreciation; Charitable institution; Capital expenditure
• Section: 143(3); 6; 11

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH HKKXPUN] YS[KK LNL; ,OA JH DQY HKKJR] U;KF;D LNL; DS LE{K BEFORE: SHRI BHAGCHAND, AM AND SHRI KUL BHARAT, JM VK;DJ VIHY LA-@ ITA NO. 58/JP/2017 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2012-13. THE INCOME TAX OFFICER (E), WARD-1, JAIPUR. CUKE VS. M/S. MUDGAL EDUCATION TRUST, F-124, RAM NAGAR EXTENSION, SWEG FARM, SODALA, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AACTM 4648 L VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI R.A. VERMA (ADDL. CIT) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI MUKESH KHANDELWAL (CA) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 27.07.2017. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 31/07/2017. VKNS'K@ ORDER PER SHRI KUL BHARAT, JM. THIS APPEAL BY THE BY THE REVENUE IS FILED AGAINST THE ORDER OF LD. CIT (A)-III, JAIPUR DATED 24.10.2016 PERTAINING TO ASSESSMENT YE AR 2012-13. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE LD. CIT (A) HAS ERRED IN ALLOWING CLAIM OF DEPRECIATION ON FIXE D ASSETS IN SPITE OF THE FACT THAT THE SAME WAS ALLOWED AS APPLICATIO N OF INCOME U/S 11 AT THE TIME OF PURCHASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE LD. CIT (A) HAS ERRED IN ALLOWING DEPRECIATION WITHOUT APPRECIA TING THE FACT THAT THE APPLICATION OF 100% EXPENDITURE OF THE CAPITAL ASSET IS ALREADY ALLOWED AS CAPITAL EXPENDITURE HENCE FURTHER ALLOWA NCE OF THE DEPRECIATION ON THE SAME CAPITAL ASSET WOULD AMOUNT TO DOUBLE ALLOWANCE. 2 ITA NO. 58/JP/2017 M/S. MUDGAL EDUCATION TRUST, JAIPUR. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE LD. CIT (A) HAS ERRED IN ALLOWING DEPRECIATION WITHOUT APPRECIA TING THE FACT THAT THE ASSESSEE HAS NOT CARRIED OUT THE BUSINESS ACTIV ITIES BUT THE RECEIPTS UTILIZED FOR CHARITY. AS THERE WAS NO BUSI NESS ACTIVITY THE CLAIM OF DEPRECIATION WAS NOT ALLOWABLE, THE DEPREC IATION IS ALLOWABLE ONLY IN THE CASE OF BUSINESS OR PROFESSIO N OR IN THE CASE OF INCOME FROM OTHER SOURCES. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E CASE OF THE ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMEN T UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS TH E ACT) WAS FRAMED VIDE ORDER DATED 29/30.03.2015. WHILE FRAMING THE ASSESSMENT, THE AO MADE DISALLOWANCE OF DEPRECIATION AND ALSO DISALLOWANCE OUT OF INTEREST EXPENSES. AGGRIEVED BY THIS, THE ASSESSEE PREFERRED APPEAL BEFORE LD. CIT (A), WHO A FTER CONSIDERING THE SUBMISSIONS PARTLY ALLOWED THE APPEAL. WHILE PARTLY ALLOWING TH E APPEAL, THE LD. CIT (A) DELETED THE DISALLOWANCE OF DEPRECIATION. AGAINST THIS, REV ENUE IS IN APPEAL BEFORE THIS TRIBUNAL. 3. GROUND NOS. 1, 2 & 3 ARE AGAINST DELETION OF DIS ALLOWANCE OF DEPRECIATION. THE LD. D/R SUPPORTED THE ORDER OF THE AO. HOWEVER , HE CONCEDED THAT THE ISSUE IS DECIDED AGAINST THE REVENUE BY THE HONBLE JURISDIC TIONAL HIGH COURT IN THE CASE OF CIT VS. KRISHI UPAJ MANDI SAMITI, 388 ITR 605. 3.1. ON THE CONTRARY, THE COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSION AS MADE IN THE WRITTEN SUBMISSION, WHICH ARE REPRODUCE D HEREUNDER :- IN THIS CASE THE LD. AO AFTER REJECTING THE ASSE SSEE BENEFIT OF SECTION 11 DISALLOWED THE CLAIM OF THE ASSESSEE FOR RS. 1,41,56,708/- ON ACCOUNT OF DEPRECIATION BY STATING THAT CLAIM OF DEPRECIATION AMOUNTS TO DOUBLE DEDUCTION AS THE ASS ESSEE HAD ALREADY BEEN GRANTED THE BENEFIT OF COST OF THE ASS ETS BY 3 ITA NO. 58/JP/2017 M/S. MUDGAL EDUCATION TRUST, JAIPUR. CONSIDERING THE SAME AS APPLICATION OF FUNDS. THE L D. CIT (A) ALLOWED THE BENEFIT OF DEPRECIATION BY RELYING ON T HE JUDGEMENT OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF PRINCIPAL CIT VS. SRI SRI ADICHUNCHUNAGIRI SHIKSHANA TRUST (72 TA XMANN.COM 133). THE LD. ITO HAS CHALLENGED THE ACTION OF THE LD. CI T (A) IN HIS APPEAL. THE ASSESSEE RELIES ON THE JUDGEMENT OF THIS HONBL E ITAT IN THE CASE OF ACIT (EXEMPTION), JAIPUR V/S MAHIMA SHI KSHA SAMITI (ITA NO. 30, 31, 105 & 106/JP/2016 ORDER DATED 03 .03.2017) WHEREIN THIS ISSUE WAS DEALT WITH AT LARGE AND WAS DECIDED IN FAVOUR OF THE ASSESSEE. VIDE FINANCE ACT, 2014 AN AMENDMENT WAS BROUGHT IN SECTION 11 BY INSERTING SUB SECTION 6 VIDE WHICH CLAIM OF D EPRECIATION IN CASE OF THOSE ASSETS WHOSE COST HAS BEEN ALLOWED TH E BENEFIT OF APPLICATION OF FUNDS, HAS BEEN DISALLOWED. THIS AME NDMENT IS EFFECTIVE W.E.F. 01.04.2015. IN THE CASES OF DIT V /S INDRAPRASTHA CANCER SOCIETY (112 DTR 345 DEL HC), S ANTOKBA TRUST V/S ITO (ITA NO. 241 & 242/JP/2014 JAIPUR I TAT) AND DIT V/S AL-AMEEN CHARITABLE FUND TRUST (ITA APPEAL NO. 62 AND 414 OF 2010 KARNATAKA HIGH COURT) IT HAS BEEN HEL D THAT SUCH AMENDMENT IN SECTION 11 VIDE FINANCE ACT, 2014 IS P ROSPECTIVE IN NATURE AND IS APPLICABLE W.E.F. 01.04.2015 ONLY. PRIOR TO 01.04.2015 I THE BENEFIT OF DEPRECIATION WAS HELD T O BE ALLOWABLE TO THE CHARITABLE TRUSTS IN ADDITION TO C ONSIDERATION OF THE SAME FOR APPLICATION PURPOSES U/S 11. THE HON BLE RAJASTHAN HIGH COURT IN THE CASE OF CIT V. KRISHI U PAJ MANDI SAMITI REPORTED IN 388 ITR 605 HAS HELD THAT FOR PR OPER WORKING OF COMMERCIAL PROFIT DEPRECIATION HAS TO BE ALLOWED EVEN IF 100% EXPENDITURE ON FIXED ASSETS HAS BEEN ALLOWED A S APPLICATION OF FUNDS. THEREFORE THE LD. CIT (A) HAS CORRECTLY ALLOWED THE BENEFIT OF DEPRECIATION AND THE DEPARTMENTAL APPEAL IS LIABLE TO BE DISMISSED. 3.2. WE HAVE HEARD RIVAL CONTENTIONS, PERUSED THE M ATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELO W. THE ONLY ISSUE REQUIRES TO BE DECIDED IS WHETHER THE LD. CIT (A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE OF 4 ITA NO. 58/JP/2017 M/S. MUDGAL EDUCATION TRUST, JAIPUR. DEPRECIATION. WE FIND THAT THE LD. CIT (A) HAS DEC IDED THE ISSUE IN PARA 6.3 OF HIS ORDER AS UNDER :- 6.3. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, FINDINGS OF THE AO AND SUBMISSION OF THE APPELLANT. IT IS SE EN THAT THE RAJASTHAN HIGH COURT IN CASE OF CIT VS. KRISHI UPAJ MANDI SAMITI AND OTHER HIGH COURTS ALSO HELD THAT DEPRECIATION O N FIXED ASSETS IS SEPARATELY ALLOWABLE EVEN THOUGH ENTIRE F IXED ASSETS WERE ALLOWED AS APPLICATION OF INCOME. RESPECTFULLY FOLLOWING THE SAME, THE DISALLOWANCE MADE BY THE AO IS DELETE D. SINCE THE ISSUE IS NOW DECIDED AGAINST THE REVENUE BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. KRISHI UPAJ MANDI SAMI TI (SUPRA), RESPECTFULLY FOLLOWING THE SAME, WE DO NOT SEE ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT (A) WHICH IS HEREBY AFFIRMED. THE GROUNDS RAISED ARE DISMISSED. 4. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 31.07.2 017. SD/- SD/- ( HKKXPUN ( DQY HKKJR ) ( BHAGCHAND) ( KUL BHARAT ) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 31/07/2017. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- THE ITO (EXEMPTION), WARD-1, JAI PUR. 2. THE RESPONDENT M/S. MUDGAL EDUCATION TRUST, JA IPUR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 58/JP/2017) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 5 ITA NO. 58/JP/2017 M/S. MUDGAL EDUCATION TRUST, JAIPUR.