Dadha & Co Golden Jubliee Trust, CHENNAI V. DDIT, CHENNAI

ITA 581/CHNY/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9708 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-04-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 04-04-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 23-03-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SRINIVAS
• Assessee Lawyers: D ANAND
• Keywords: Business income; Depreciation; Charitable institution; Revised return; Capital expenditure
• Section: 63

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B B ENCH, CHENNAI . . . , . , & BEFORE SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NO.581/MDS/2015 ( / ASSESSMENT YEARS: 2011-12) M/S. DADHA & CO GOLDEN JUBILEE TRUST, 268, LLOYDS ROAD, ROYAPETTAH, CHENNAI-600 014. VS THE DEPUTY DIRECTOR OF INCOME TAX (EXEMPTIONS-1), 121, GANDHI ROAD, NUNGAMBAKKAM, CHENNAI - 34. PAN:AAATD2527M ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. D.ANAND, ADVOCATE /RESPONDENT BY : MR.SRINIVAS, JCIT /DATE OF HEARING : 4 TH APRIL, 2016 /DATE OF PRONOUNCEMENT : 7 TH APRIL, , 2016 / O R D E R PER A. MOHAN ALANKAMONY, AM: THIS APPEAL IS FILED BY THE ASSESSEE AGGRIEVED BY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APP EALS)- 17, CHENNAI DATED 07.01.2015 IN ITA NO.1052 /13-14 PASSED UNDER SECTION143(3) R.W.S. 250(6) OF THE A CT. 2. THE ASSESSEE HAS RAISED SEVERAL GROUNDS IN ITS APPEAL, HOWEVER, THE CRUX OF THE ISSUE IS THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE ORDER OF THE LEARNED ASSESSING OFFIC ER IN DISALLOWING THE DEPRECIATION AMOUNTING TO RS.13,16, 574/-. 2 ITA NO.581/MDS/2015 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE TR UST REGISTERED UNDER SECTION 12A(A) OF THE ACT FILED I TS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2011-12 ON 30.09.20 11 AND SUBSEQUENTLY REVISED RETURN WAS FILED ON 17.02. 2012 ADMITTING GROSS RECEIPTS OF RS.1,93,58,073/- AND DE CLARED LOSS OF RS.15,96,250/- AFTER CLAIMING EXEMPTION UN DER SECTION 11 OF THE ACT. DURING THE COURSE OF ASSESS MENT PROCEEDINGS, THE LEARNED ASSESSING OFFICER NOTICED FROM THE INCOME & EXPENDITURE ACCOUNT OF THE ASSESSEE TRUST THAT IT HAD CLAIMED ` 13,16,574/- AS DEPRECIATION. THE LEARNED ASSESSING OFFICER WAS OF THE VIEW THAT THE CLAIM OF DEPRECATION WOULD AMOUNT TO DOUBLE DEDUCTION BECAUS E THE ENTIRE COST OF THE ASSETS WAS CLAIMED AS APPLICATIO N OF INCOME TOWARDS THE OBJECTS OF THE TRUST. THEREFORE, THE LEARNED ASSESSING OFFICER CITING CERTAIN DECISIONS WAS OF THE VIEW THAT THE CLAIM OF DEPRECIATION CANNOT BE CONSI DERED FOR ARRIVING AT THE INCOME OF THE ASSESSEE. ON APPEAL, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) CONFIR MED THE ORDER OF THE LEARNED ASSESSING OFFICER AGAINST WHICH THE ASSESSEE IS IN APPEAL BEFORE US. 3 ITA NO.581/MDS/2015 4. THE LEARNED AUTHORIZED REPRESENTATIVE VEHEMENTLY ARGUED BY STATING THAT DEDUCTION ON ACCOUNT OF DEPR ECIATION HAS TO BE ALLOWED FOR COMPUTING THE INCOME OF THE T RUST ON COMMERCIAL PRINCIPLES. 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE ARGUED I N SUPPORT OF THE ORDERS OF THE REVENUE AND PLACED REL IANCE IN THE DECISION OF THE CHENNAI BENCH OF THE TRIBUNAL I N THE CASE ANJUMAN-E-HIMAYATH-E-ISLAM VS. ADIT(EXEMPTIONS ), ORDER DATED 02.06.2015. 6. WE HAVE HEARD RIVAL SUBMISSIONS AND CAREFULLY PE RUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THI S ISSUE IS DECIDED BY THE CHENNAI BENCH OF THE TRIBUNAL IN ITA NO.2271/MDS/2014 IN THE CASE OF THE ANJUMAN-E-HIMAY ATH- E-ISLAM VS. ADIT(EXEMPTIONS) VIDE ORDER DATED 02.06 .2015. THE RELEVANT PORTION OF THE ORDER IS REPRODUCED HER EIN BELOW FOR REFERENCE:- 5.1 GROUND NO.(II) - DISALLOWANCE OF THE DEPRECIATION W HILE COMPUTING THE INCOME OF THE ASSESSEE TRUST . THE ASSESSEE TRUST HAD CLAIMED DEPRECIATION ON THE ASSETS AS APPLICATION OF INCOME IN THE RETURN OF INCOME. THE LD. ASSESSING OFFICER OPINED THAT THE CLAIM OF DEPRECIATION BY TH E ASSESSEE 4 ITA NO.581/MDS/2015 WOULD AMOUNT TO DOUBLE DEDUCTION BECAUSE THE ENTIRE COST OF ASSET HAS ALREADY BEEN CLAIMED AS APPLICATION OF IN COME IN THE YEAR IN WHICH THE ASSETS WERE PURCHASED. THEREAFTER , THE LD. ASSESSING OFFICER CITING CERTAIN DECISIONS HELD THA T THE CLAIM OF DEPRECIATION CANNOT BE CONSIDERED AS APPLICATION OF INCOME. ON APPEAL, THE LD. CIT (A) WAS ALSO OF THE VIEW OF THE LD. ASSESSING OFFICER AND THEREFORE CONFIRMED LD. ASSESSING OFFIC ERS ORDER. 5.2 WE FIND THIS ISSUE IS ELABORATELY DISCUSSED IN THE CASE OF LISSIE MEDICAL INSTITUTION VS. CIT REPORTED IN [201 2] 348 ITR 344(KER.) AND HELD THE ISSUE AGAINST THE ASSESSEE. WHILE DOIN G SO, THE HONBLE KERALA HIGH COURT HAD CONSIDERED TH E CIRCULAR NO.5P(LLX-6) DATED 19.06.1968 WHICH HAS NOT BEEN CONSIDERED BY THE OTHER DECISIONS. THE CIRCULAR NO. 5P(LLX-6) IS REPRODUCED HEREIN BELOW FOR REFERENCE:- 1. CIRCULAR NO. 5-P (LXX-6) OF 1968, DATED 19-6-196 8. SUBJECT : SECTION 11CHARITABLE TRUSTSINCOME REQUI RED TO BE APPLIED FOR CHARITABLE PURPOSEINSTRUCTIONS REGARDI NG. IN BOARD'S CIRCULAR NO. 2-P(LXX-5) OF 1963, DATED T HE 15TH MAY, 1963, IT WAS EXPLAINED THAT A RELIGIOUS OR CHARITAB LE TRUST CLAIMING EXEMPTION UNDER SECTION 11(1) OF THE INCOME- TAX AC T, 1961, MUST SPEND AT LEAST 75 PER CENT OF ITS TOTAL INCOME, FOR RELIGIOUS OR CHARITABLE PURPOSES. IN OTHER WORDS, IT WAS NOT PER MITTED TO ACCUMULATE MORE THAN 25 PER CENT OF ITS TOTAL INCOM E. THE QUESTION HAS BEEN RECONSIDERED BY THE BOARD AND THE CORRECT LEGAL POSITION IS EXPLAINED BELOW. 2. SECTION 11(1) PROVIDES THAT SUBJECT TO THE PROVI SIONS OF SECTIONS 60 TO 63 'THE FOLLOWING INCOME SHALL NOT BE INCLUDE D IN THE TOTAL INCOME OF THE PREVIOUS YEAR . . . '. THE REFERENCE IN SUB-SECTION (A) IS INVARIABLY TO 'INCOME' AND NOT TO 'TOTAL INCOME'. THE EXPRESSION 'TOTAL INCOME' HAS BEEN SPECIFICALLY DEFINED IN SECTION 2(45) OF THE ACT AS 'THE TOTAL AMOUNT OF INCOME . . . COMPUTED IN THE MANNER LAID DOWN IN THIS ACT'. IT WOULD ACCORDINGLY BE INCORRECT TO ASSIGN TO THE WORD 'INCOME' USED IN SECTION 11(1 )(A), THE SAME MEANING AS HAS BEEN SPECIFICALLY ASSIGNED TO T HE EXPRESSION 'TOTAL INCOME' VIDE SECTION 2(45). 3. IN THE CASE OF A BUSINESS UNDERTAKING HELD UNDER TRUST, ITS 'INCOME' WILL BE THE INCOME AS SHOWN IN THE ACCOUNT S OF THE UNDERTAKING. UNDER SECTION 11(4), ANY INCOME OF THE BUSINESS UNDERTAKING DETERMINED BY THE INCOME-TAX OFFICER IN ACCORDANCE WITH THE PROVISIONS OF THE ACT, WHICH IS IN EXCESS OF THE INCOME AS SHOWN IN ITS ACCOUNTS, IS TO BE DEEMED TO HAVE BEEN APPLIED TO PURPOSES OTHER THAN CHARITABLE OR RELIGIOUS, AND HE NCE IT WILL BE CHARGED TO TAX UNDER SUB-SECTION (3). AS ONLY THE I NCOME DISCLOSED BY THE ACCOUNT WILL BE ELIGIBLE FOR EXEMPTION UNDER SECTION 11(1), THE 5 ITA NO.581/MDS/2015 PERMITTED ACCUMULATION OF 25 PER CENT WILL ALSO BE CALCULATED WITH REFERENCE TO THIS INCOME. 4. WHERE THE TRUST DERIVES INCOME FROM HOUSE PROPER TY, INTEREST ON SECURITIES, CAPITAL GAINS, OR OTHER SOURCES, THE WO RD 'INCOME' SHOULD BE UNDERSTOOD IN ITS COMMERCIAL SENSE, I.E., BOOK INCOME , AFTER ADDING BACK ANY APPROPRIATIONS OR APPLICATIONS THER EOF TOWARDS THE PURPOSES OF THE TRUST OR OTHERWISE, AND ALSO AFTER ADDING BACK ANY DEBITS MADE FOR CAPITAL EXPENDITURE INCURRED FOR TH E PURPOSES OF THE TRUST OR OTHERWISE. IT SHOULD BE NOTED, IN THIS CON NECTION, THAT THE AMOUNTS SO ADDED BACK WILL BECOME CHARGEABLE TO TAX UNDER SECTION 11(3) TO THE EXTENT THAT THEY REPRESENT OUT GOINGS FOR PURPOSES OTHER THAN THOSE OF THE TRUST. THE AMOUNTS SPENT OR APPLIED FOR THE PURPOSES OF THE TRUST FROM OUT OF T HE INCOME COMPUTED IN THE AFORESAID MANNER, SHOULD BE NOT LES S THAN 75 PER CENT OF THE LATTER, IF THE TRUST IS TO GET THE FULL BENEFIT OF THE EXEMPTION UNDER SECTION 11(1). 5. TO SUM UP, THE BUSINESS INCOME OF THE TRUST AS DISC LOSED BY THE ACCOUNTS PLUS ITS OTHER INCOME COMPUTED ABOVE, WILL BE THE 'INCOME' OF THE TRUST FOR PURPOSES OF SECTION 11(1) . FURTHER, THE TRUST MUST SPEND AT LEAST 75 PER CENT OF THIS INCOM E AND NOT ACCUMULATE MORE THAN 25 PER CENT THEREOF. THE EXCES S ACCUMULATION, IF ANY, WILL BECOME TAXABLE UNDER SEC TION 11(1). AFTER CONSIDERING THE CIRCULAR, THE HONBLE KERALA HIGH COURT HELD AS FOLLOWS:- HELD, THAT AFTER WRITING OFF THE FULL VALUE OF THE CAPITAL EXPENDITURE ON ACQUISITION OF ASSETS AS APPLICATION OF INCOME F OR CHARITABLE PURPOSES AND WHEN THE ASSESSEE AGAIN CLAIMED THE SA ME AMOUNT IN THE FORM OF DEPRECIATION, SUCH NOTIONAL C LAIM BECAME A CASH SURPLUS AVAILABLE WITH THE ASSESSEE, WHICH W AS OUTSIDE THE BOOKS OF ACCOUNT OF THE TRUST UNLESS IT WAS WRI TTEN BACK WHICH WAS NOT DONE BY THE ASSESSEE. IT WAS NOT PERMISSIBL E FOR A CHARITABLE INSTITUTION TO GENERATE INCOME OUTSIDE T HE BOOKS IN THIS FASHION AND THERE WOULD BE VIOLATION OF SECTION 11( 1)(A). IT WAS FOR THE ASSESSEE TO WRITE BACK THE DEPRECIATION AND IF THAT WAS DONE, THE ASSESSING OFFICER WOULD MODIFY THE ASSESS MENT DETERMINING HIGHER INCOME AND ALLOW RECOMPUTED INCO ME WITH THE DEPRECIATION WRITTEN BACK BY THE ASSESSEE TO BE CARRIED FORWARD FOR SUBSEQUENT YEARS FOR APPLICATION FOR CH ARITABLE PURPOSES . FURTHER HONBLE CALCUTTA HIGH COURT HAS HELD IN THE CASE DCIT VS. GIRDHARILAL SHEWNARAIN TANTIA TRUST REPORTED IN [1993] 199 ITR 15(CAL.) THAT THE INCOME CONTEMPLATED BY THE PROVISIONS OF SECTION 11 IS THE REAL INCOME AND NOT THE INCOME AS ASSESSED OR ASSESSABLE. RESPECTFULLY FOLLOWING THE DECISION OF THE HONBL E 6 ITA NO.581/MDS/2015 KERALA HIGH COURT AND TAKING CUE FROM THE DECISION OF THE HONBLE CALCUTTA HIGH COURT , WE DO NOT FIND ANY HESITATION TO CONFIRM THE ORDER OF THE LD. CIT(A) AND ALSO THE VI EWS EXPRESSED BY HIM IN HIS ORDER. ACCORDINGLY THIS APPEAL IS HEL D IN FAVOUR OF THE REVENUE. 7. FOLLOWING THE ABOVE REFERRED ORDER OF THE CHEN NAI BENCH OF THE TRIBUNAL, WE HEREBY CONFIRM THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND DECIDE THE ISSUE AGAINST THE ASSESSEE. IT IS ALSO PERTINENT TO MENTION THAT THE LEARNED CIT(A) HAS PLACED RELIANCE IN THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE CIT V/S CH ARANJIV TRUST DATED MARCH 2014 IN ARRIVING AT HIS DECISION. 8. IN THE RESULT THE APPEAL OF THE ASSESSEE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 7 TH APRIL, 2016 SD/- SD/- ( . . . ) ( . ) (N.R.S.GANESAN) ( A.M OHAN ALANKAMONY ) # % / JUDICIAL MEMBER % / ACCOUNTANT MEMBER # /CHENNAI, ( /DATED 7 TH APRIL, 2016 SOMU *+ ,+ /COPY TO: 1. APPELLANT 2. RESPONDENT 3. - () /CIT(A) 4. - /CIT 5. + 1 /DR 6. /GF .