ADIT (E)I(2), MUMBAI V. SHANMUKHANANDA FINE ARTS & SANGEETHA SABHA, MUMBAI

ITA 5913/MUM/2012

• Counselvise Citation: 591319914 RSA 2012
• Duration Of Justice: 2 year(s) 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 08-12-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 28-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K ATRI
• Assessee Lawyers: V MOHAN
• Keywords: Depreciation; Charitable institution; Unabsorbed depreciation
• Section: 12A; 32; 11

Judgement Text

, , ,, , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E MUMBAI , .. , ! ' BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI B.R.BASKARAN, ACCOUNTANT MEMBER . / ITA NO.5913/MUM/2012 # # # # / ASSESSMENT YEAR: 2008-09 ADIT, (E)I(2) ROOM NO.504, PIRAMAL CHAMBERS, 5 TH FLOOR, PAREL, MUMBAI-400012 VS. SRI SHANMUKHANANDA FINE ARTS & SANGEETHA SABHA, 291, COMRAD HARBANSLAL MARG, SION, (EAST), MUMBAI-400022 ( $ / REVENUE) ( %&'( / RESPONDENT ) P.A. NUMBER : AAATS2694E $ ) )) ) * * * * /REVENUE BY : SHRI A.K. ATRI-CIT-DR %& '( ) )) ) * * * * /RESPONDENT BY : SHRI V.MOHAN ) +, / DATE OF HEARING : 08/12/2014 -.# ) +, / DATE OF PRONOUNCEMENT : 08/12/2014 !/ !/ !/ !/ / O R D E R PER JOGINDER SINGH (JM) : THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DATE D 09/07/2012 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI, ON THE GROUND THAT THE LD. COMMISSIONER OF INCOME TAX (APP EALS) ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE CLAIM OF DEPRECIATION 2 SHANMUKHANANDA FINE ARTS & SANGEETHA SABHA AMOUNTING TO RS.1,22,90,991/- AFTER PLACING RELIANC E UPON THE DECISION FROM HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF INSTITUTE OF BANKING PERSONAL SERVICES (264 ITR 110 ) (BOM) IGNORING THE DECISION FROM HONBLE APEX COURT IN THE CASE OF ESCORTS LTD. VS UOI (199 ITR 43) (SC) AND FURTHER OUGHT TO HAVE HEL D THAT THE DEDUCTION OF DEPRECIATION U/S 32 FALLS UNDER THE HE AD PROFIT & GAINS FROM BUSINESS AND PROFESSION, THUS WOULD NOT BE AVA ILABLE TO THE ASSESSEE TRUST WHOSE INCOME IS OTHERWISE NOT ASSESS ABLE UNDER THE ABOVE HEAD. 2. DURING HEARING OF THIS APPEAL, SHRI A.K. ATRI, L D. CIT-DR ADVANCED HIS ARGUMENTS WHICH ARE IDENTICAL TO THE G ROUND RAISED BY FURTHER SUBMITTING THAT THE LD. COMMISSIONER OF INC OME TAX (APPEALS) OUGHT TO HAVE REJECTED THE CLAIM OF DEPRE CIATION, SINCE, THE VALUE OF ASSETS, THE COST OF WHICH HAS ALREADY BEEN ALLOWED AS DEDUCTION ON ACCOUNT OF APPLICATION OF INCOME, THUS , IT WOULD BE TREATED AS NIL FOR THE PURPOSES OF DEPRECIATION. T HE LD.CIT-DR ALSO CHALLENGED ALLOWING THE CLAIM OF ASSESSEE FOR CARRY FORWARD OF DEFICIT OF EARLIER YEARS. ON THE OTHER HAND, THE LD. COUNS EL FOR THE ASSESSEE, SHRI V. MOHAN DEFENDED THE CONCLUSION ARR IVED AT IN THE IMPUGNED ORDER BY FURTHER SUBMITTING THAT IDENTICAL LY FOR A.Y. 2009-10, SUCH CLAIM OF THE REVENUE WAS ADJUDICATED UPON BY THE TRIBUNAL VIDE ORDER DATED 30/05/2014 (ITA NO.5914/M UM/2012). THE LD. AR ALSO PLACED ON RECORD THE COPY OF THE OR DER ALONGWITH ANOTHER ORDER OF THE TRIBUNAL FOR A.Y. 2007-08 (ITA NO.4966/MUM/2011. 3 SHANMUKHANANDA FINE ARTS & SANGEETHA SABHA 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED THE MATERIAL AVAILABLE ON RECORD. IN VIEW OF THE ABOVE , WE ARE REPRODUCING HEREUNDER THE RELEVANT PORTION OF THE O RDER DATED 30/05/2014 (ITA NO.5914/MUM/2012). 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE TRUST WAS REGISTERED AS A CHARITABLE ORGANISATION WITH THE CH ARITY COMMISSIONER, MUMBAI AND WAS ALSO GRANTED REGISTRAT ION UNDER SECTION 12A BY THE DIT(E), MUMBAI, AS ITS OBJECTS W ERE FALLING WITHIN CHARITABLE ACTIVITIES AS DEFINED UNDER SECTI ON 2(15). THE ASSESSING OFFICER NOTED THAT THE ASSESSEE TRUST HAD CHANGED ITS OBJECTS VIDE ITS APPLICATION FILED BEFORE CHARITY COMMISSIO NER, WHO HAS ALLOWED THE NECESSARY CHANGES IN THE OBJECTS OF THE ASSESSEE TRUST. IN VIEW OF THIS CHANGE OF OBJECTS, THE REGISTRATION SO GRANTED EARLIER WAS WITHDRAWN VIDE ORDER DATED 02.02.11 BY DIT (E) PASSED UNDER SECTION 12AA(3). 2.1 AGGRIEVED BY THE SAID ORDER, THE ASSESSEE TRUST HAD PREFERRED AN APPEAL BEFORE THE ITAT, WHEREIN THE IT AT ALLOWED THE ASSESSEE'S APPEAL AND THE CANCELLATION OF REGIS TRATION WAS SET ASIDE. THUS ASSESSEE'S REGISTRATION GRANTED EARLIER UNDER SECTION 12A WAS CONTINUED. THE ASSESSING OFFICER HELD THAT, SINCE THE DEPARTMENT HAS NOT ACCEPTED THE DECISION OF THE ITA T AND FURTHER APPEAL HAS BEEN FILED, THEREFORE, THE ASSESSEE WOUL D NOT BE ELIGIBLE FOR EXEMPTION UNDER SECTION 11. ACCORDINGL Y, HE TAXED THE SURPLUS AND DISALLOWED THE EXPENSES. 4 SHANMUKHANANDA FINE ARTS & SANGEETHA SABHA 2. IN THE FIRST APPEAL, THE ID. CIT(A) BASED ON THE DE CISION OF THE ITAT DIRECTED THE AO TO ALLOW THE BENEFITS UNDE R SECTION 11, AS ASSESSEE'S REGISTRATION UNDER SECTION 12A HA S BEEN UPHELD BY THE TRIBUNAL. 4. BEFORE US THE ID. D.R. SUBMITTED THAT THE MATTER IS ONLY BEING CONTESTED TO KEEP THE ISSUE ALIVE AS THE APPEAL AGA INST THE TRIBUNAL'S ORDER DATED 09.11.11 HAS BEEN CHALLENGED BEFORE THE HON'BLE HIGH COURT. ON THE OTHER HAND, THE ID. COUNSEL OF THE AS SESSEE SUBMITTED THAT ONCE THE TRIBUNAL HAS SET ASIDE THE ORDER OF T HE DIT (E) CANCELLING THE REGISTRATION, THE ASSESSEE'S REGISTR ATION UNDER SECTION 12A CONTINUES AND THEREFORE BENEFITS UNDER SECTION 11 HAVE TO BE ALLOWED. 5. WE HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE ORDER OF THE AUTHORITIES BELOW. ON SCRUTINY OF THE FACTS, WE FIND THAT THE ASSESSEE'S REGISTRATION UNDER SECTION 12A GRANT ED EARLIER BY DIT (E) WAS WITHDRAWN VIDE ITS ORDER DATED 02.02.11 UNDER SECTION 12AA(3). THIS ORDER OF THE DIT (E) HAS BEEN SET ASI DE BY THE TRIBUNAL VIDE ITS ORDER DATED 09.11.11 AND ASSESSEE 'S REGISTRATION UNDER SECTION 12A HAS BEEN UPHELD. THU S THE VERY BASIS AND FOUNDATION OF DENYING THE BENEFIT UNDER S ECTION 11 CEASES TO EXIST. ONCE THE REGISTRATION UNDER SECTION 12A C ONTINUES, THEN, IT IS AXIOMATIC THAT THE INCOME HAS TO BE COMPUTED IN ACCORDANCE WITH SECTION 11 AND BENEFIT/EXEMPTION THEREIN HAS T O BE GIVEN. THE EXEMPTION CANNOT BE DENIED SIMPLY ON THE GROUND THA T THE MATTER IS SUBJUDICE BEFORE THE HON'BLE HIGH COURT. THUS, WE D O NOT FIND ANY 5 SHANMUKHANANDA FINE ARTS & SANGEETHA SABHA MERITS IN THE GROUND NO.1 RAISED BY THE DEPARTMENT AND THE SAME IS ACCORDINGLY DISMISSED. 6. IN GROUND NO.2 THE DEPARTMENT HAS CHALLENGED THE DIREC TION OF THE ID. CIT(A) FOR ALLOWING THE CLAIM OF THE ASSESS EE FOR CARRY FORWARD OF UNABSORBED DEPRECIATION AND DEFICIT OF CURRENT A ND EARLIER YEARS AMOUNTING TO RS.23,94,22,334/- TO BE ADJUSTED AGAINST THE INCOME OF THE SUBSEQUENT YEAR. THE ID. CIT(A) HAS GIVEN THIS DIRECTION IN LIGHT OF THE DECISION OF HO N'BLE BOMBAY HIGH COURT IN THE CASE OF 'CIT VS. INSTITUTE OF BAN KING PERSONNEL' REPORTED IN 264 ITR 110. BEFORE US ID. D.R. STRONGL Y RELIED UPON THE ORDER OF THE ASSESSING OFFICER, WHEREAS THE ID. COU NSEL FOR THE ASSESSEE RELIED UPON THE DECISION OF THE HON'BLE BO MBAY HIGH COURT. 7. AFTER CAREFULLY CONSIDERING THE RELEVANT FINDING OF THE ASSESSING OFFICER AS WELL AS ID. CTT(A), WE FIND TH AT THE ISSUE OF ADJUSTMENT OF CARRY FORWARD UNABSORBED DEPRECIATION AND DEFICIT AGAINST THE INCOME OF THE SUBSEQUENT YEAR HAS BEEN UPHELD BY THE HON'BLE BOMBAY HIGH COURT, AFTER REFERRING AND RELY ING UPON THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN T HE CASE OF 'CIT VS. SHRI PLOT SWETAMBER MURTI PUJAK JAIN MANDA L' REPORTED IN (1995) 211 ITR 293 (GUJ.). THE HON'BLE BOMBAY HIGH COURT OBSERVED THAT THE INCOME DERIVED FROM TH E TRUST PROPERTY HAS TO BE COMPUTED ON COMMERCIAL PRINCIPLE S AND IF COMMERCIAL PRINCIPLES ARE APPLIED, THEN ADJUSTMENT OF EXPENSES INCURRED BY THE TRUST FOR CHARITABLE AND R ELIGIOUS PURPOSES IN THE EARLIER YEARS AGAINST THE INCOME EA RNED BY THE 6 SHANMUKHANANDA FINE ARTS & SANGEETHA SABHA TRUST IN THE SUBSEQUENT YEAR, WILL HAVE TO BE REGAR DED AS APPLICATION OF INCOME OF THE TRUST IN THE SUBSEQUENT YEAR IN WH ICH ADJUSTMENT HAS BEEN MADE. THUS, IN VIEW OF THE LAW EXPRESSED BY TH E HON'BLE JURISDICTIONAL HIGH COURT IN THIS REGARD, WE DO NOT FIND ANY MERIT IN THE GROUND RAISED BY THE DEPARTMENT AND THE SAME IS ACCORDINGLY DISMISSED. 8. IN THE RESULT, APPEAL FILED BY THE DEPARTMENT STAND S DISMISSED. 2.2. WE NOTE THAT IN THE AFORESAID ORDER THE FACTS ALONGWITH THE CASES CITED FROM BOTH SIDES HAVE BEEN DULY CONSIDER ED BY THE TRIBUNAL AND MORE SPECIFICALLY THE DECISION FROM HO NBLE JURISDICTIONAL HIGH COURT IN CIT VS INSTITUTE OF BA NKING PERSONAL (264 ITR 110) AND ANOTHER DECISION FROM HONBLE GUJ ARAT HIGH COURT REPORTED IN 211 ITR 293 (GUJ.) WITH RESPECT T O CARRY FORWARD OF UNABSORBED DEPRECIATION, THUS, WE FIND NO MERIT IN THE APPEAL OF THE REVENUE. SO FAR AS, CLAIMING OF EXEMPTION TWIC E THE TRIBUNAL VIDE ORDER 03 RD MAY 2012 BY FOLLOWING THE DECISION FROM HONBLE JURISDICTIONAL HIGH COURT DISMISSED THE APPEAL OF T HE REVENUE, WHEREIN THE DECISION FROM THE HONBLE APEX COURT IN ESCORTS LTD. (119 ITR 43)(SC) HAS ALREADY BEEN DISCUSSED. THE HON'BLE BOMBAY HIGH COURT IN THE AFORESAID CASE (264 ITR 110) OBSE RVED THAT THE INCOME DERIVED FROM THE TRUST PROPERTY HAS TO B E COMPUTED ON COMMERCIAL PRINCIPLES AND IF COMMERCIAL PRINCIPL ES ARE APPLIED, THEN ADJUSTMENT OF EXPENSES INCURRED BY TH E TRUST FOR CHARITABLE AND RELIGIOUS PURPOSES IN THE EARLIE R YEARS AGAINST THE INCOME EARNED BY THE TRUST IN THE SUBSE QUENT YEAR, 7 SHANMUKHANANDA FINE ARTS & SANGEETHA SABHA WILL HAVE TO BE REGARDED AS APPLICATION OF INCOME O F THE TRUST IN THE SUBSEQUENT YEAR IN WHICH ADJUSTMENT HAS BEEN MADE. THEREFORE, WE FIND NO MERIT IN THE APPEAL OF THE REVENUE . FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION O F HEARING ON 08/12/2014. SD/- SD/- B.R. BASKARAN JOGINDER SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED -08/12/2014 F{X~{T? P.S/. . . !/ !/ !/ !/ ) )) ) %+0 %+0 %+0 %+0 10#+ 10#+ 10#+ 10#+ / COPY OF THE ORDER FORWARDED TO : 1. '( / THE APPELLANT 2. %&'( / THE RESPONDENT. 3. 2 ( ) / THE CIT(A)- 4. 2 / CIT 5. 03 %+ , , / DR, ITAT, MUMBAI 6. 34 5 / GUARD FILE. !/ !/ !/ !/ / BY ORDER, &0+ %+ //TRUE COPY// 6 66 6 / 7 7 7 7 $ $ $ $ (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI