ADIT (E)-II(2), MUMBAI V. ADITYA BIRLA FOUNDATION, MUMBAI

ITA 5922/MUM/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5673 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 27-02-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 28-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M L PERUMAL
• Assessee Lawyers: MANISH V SHAH
• Keywords: Depreciation; Charitable institution; Capital expenditure
• Section: 12A; 32

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A MUMBAI . . , / , BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER /AND SHRI SANJAY ARORA, ACCOUNTANT MEMBER . / ITA NO. 5922/MUM/2012 ' ' ' ' # # # # / ASSESSMENT YEAR 2009-10 THE DDIT(E) 11(2), 5 TH FLOOR, PIRAMAL CHAMBERS, LALBAUG, MUMBAI 400012. ' ' ' ' / VS. ADITYA BIRLA FOUNDATION, C-1, ADITYA BIRLA CENTRE, S.K.AHIRE MARG, WORLI, MUMBAI 400030 $ ./ % ./ PAN/GIR NO. : AAATA0382P ( $& / APPELLANT ) .. ( '($& / RESPONDENT ) APPELLANT BY : SHRI M.L.PERUMAL RESPONDENT BY : SHRI MANISH V. SHAH ' ) *+ / DATE OF HEARING : 27/02/2014 ,# ) *+ / DATE OF PRONOUNCEMENT : 27/02/2014 - / O R D E R PER I.P.BANSAL, JM: THIS IS AN APPEAL FILED BY THE REVENUE. IT IS DIRECTED AGAINST THE ORDER PASSED BY LD. CIT(A)-1 MUMBAI DATED 16/07/2012 FOR THE ASSESSMENT YEAR 2009-10. THE GROUNDS OF APPEAL READ AS UNDER: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE A.O. TO ALLOW THE CLAIM OF D EPRECIATION AMOUNTING TO RS. 3,75,52,814/- RELYING ON THE DECISION OF THE HONBL E BOMBAY HIGH COURT IN THE CASE OF CIT VS. INSTITUTE OF BANKING PERSONNEL SERV ICES REPORTED IN 264 ITR 110 (BOM) IGNORING THE RATIO OF JUDGEMENT OF HONBLE SU PREME COURT IN THE CASE OF ESCORTS LTD. VS. UNION OF INDIA (1991TR 43)WHEREIN HONBLE SUPREME COURT HAS . / ITA NO. 5922/MUM/2012 ' ' ' ' # # # # / ASSESSMENT YEAR 2009-10 2 HELD THAT DOUBLE DEDUCTION CANNOT BE PRESUMED IF TH E SAME IS NOT SPECIFICALLY PROVIDED BY LAW, IN ADDITION TO NORMAL DEDUCTION. 2. THAT WITHOUT PREJUDICE TO GROUND NO. 1 ABOVE, TH E LD. CIT(A) OUGHT TO HAVE HELD THAT DEDUCTION OF DEPRECIATION U/S 32 WHICH FALLS U NDER THE HEAD PROFIT AND GAINS FROM BUSINESS AND PROFESSION OF THE INCOME TAX ACT , 1961 WOULD NOT BE AVAILABLE TO THE ASSESSEE TRUST WHOSE INCOME IS OTHERWISE NOT ASSESSABLE UNDER THE ABOVE HEAD. 3. THAT WITHOUT PREJUDICE TO GROUND NO. 1 AND 2 ABO VE, THE LD. CIT(A)OUGHT TO HAVE REJECTED THE CLAIM OF DEPRECIATION, SINCE THE VALUE OF THE ASSET, THE COST OF WHICH HAS ALREADY BEEN ALLOWED AS A DEDUCTION ON AC COUNT OF APPLICATION OF INCOME, WOULD BE TREATED AS NIL FOR THE PURPOSE OF DEPRECIATION. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE AO TO ALLOW THE DEFIC IT (ON ACCOUNT OF EXCESS OF EXPENDITURE OVER INCOME) TO BE CARRIED FORWARD WITH OUT APPRECIATING THE FACT THAT THIS WOULD HAVE THE EFFECT OF GRANTING DOUBLE BENEF IT TO THE ASSESSEE, FIRST AS ACCUMULATION OF INCOME U/S 11(1)(A) OR AS CORPUS DONATION U/S 11(1)(A) IN THE EARLIER YEARS OR CURRENT YEAR AND THEN AS APPLICAT ION OF INCOME U/S 11(1)(A) IN THE CURRENT OR SUBSEQUENT YEARS WHICH WAS LEGALLY N OT PERMISSIBLE. 5. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING THE CLAIM OF THE ASSESSEE FOR CARRY FORWARD OF THE SAID DEFICIT IGNORING THE FACT THAT THERE WAS NO EXPRESS PROVISION IN THE I.T.ACT, 1961 PERMITTING ALLOWANCE OF SUCH CLAIM. 2. THE ASSESSEE IS A TRUST CREATED AND REGISTERED WITH CHARITY COMMISSIONER AS WELL AS UNDER SECTION 12A OF THE IN COME TAX ACT, 1961 (THE ACT). THE ACTIVITIES OF THE TRUST ARE TO PROVIDE F INANCIAL ASSISTANCE TO VARIOUS CHARITABLE INSTITUTIONS FOR MEDICAL RELIEF, SPORTS AND CULTURAL ACTIVITIES. WHILE COMPUTING THE INCOME THE AO DISALLOWED DEPRECIATION UNDER SECTION 11(1) OF THE ACT ON THE GROUND THAT CAPITAL EXPENDITURE ON T HESE ASSETS HAD BEEN CLAIMED AS APPLICATION OF INCOME, THEREFORE, ALLOWI NG DEPRECIATION WOULD AMOUNT TO CLAIM OF DOUBLE DEDUCTION. BEFORE LD. CI T(A) IT WAS PLEADED THAT SUCH DISALLOWANCE BY THE AO IS CONTRARY TO THE DECI SION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. INSTITUTE OF BANK ING PERSONNEL, 264 ITR 110 (BOM). FINDING FORCE IN SUCH CLAIM OF THE ASSESSEE LD. CIT(A) HAS DELETED THE ADDITION OF RS.3,75,52,814/- ON ACCOUNT OF DEPRECIA TION. THE DEPARTMENT IS AGGRIEVED, HENCE, HAS FILED GROUND NO.1 TO 3 TO AG ITATE SUCH DECISION OF LD. CIT(A). . / ITA NO. 5922/MUM/2012 ' ' ' ' # # # # / ASSESSMENT YEAR 2009-10 3 3. AS IT CAN BE SEEN FROM THE GROUNDS RAISED BY T HE REVENUE, THE DELETION IS MAINLY AGITATED ON THE BASIS OF DECISION OF HON BLE SUPREME COURT IN THE CASE OF ESCORTS LTD. VS. UNION OF INDIA, 199 ITR 43 (SC). DURING THE COURSE OF HEARING LD. AR DREW OUR ATTENTION TOWARDS LATEST D ECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF DIRECTOR OF INCOME TAX (E XEMPTION), MUMBAI VS. GKR CHARITIES, (2013) 32 TAXMANN.COM 208 (BOMBAY). COP Y OF THIS DECISION IS PLACED AT PAGES 4 TO 5 OF THE PAPER BOOK. OUR ATTE NTION WAS DRAWN TO THE FOLLOWING QUESTION ADDRESSED BY THE REVENUE TO BE ADJUDICATED BY THE HONBLE HIGH COURT: (B) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE TRIBUNAL WAS CORRECT IN LAW IN IGNORING THE STAND O F THE REVENUE THAT ALLOWANCE OF DEPRECIATION ON THE ASSETS, THE COST OF WHICH HAS A LREADY BEEN ALLOWED AS A DEDUCTION ON ACCOUNT OF APPLICATION OF INCOME, WOUL D AMOUNT TO DOUBLE DEDUCTION WHICH IS LEGALLY NOT PERMISSIBLE IN VIEW OF THE JUD GMENT OF THE SUPREME COURT IN THE CASE OF ESCORTS LTD. V. UNION OF INDIA 199 ITR 443 ? THE AFOREMENTIONED QUESTION WAS ADJUDICATED WITH TH E FOLLOWING OBSERVATION: 3. SO FAR QUESTIONS (B) & (C) ARE CONCERNED, COUNSE L FOR THE PARTIES AGREE THAT THE ISSUE ARISING HEREIN ARE COVERED BY THE DECISION OF THIS COURT IN THE MATTER OF CIT V. INSTITUTE OF BANKING PERSONNEL SELECTION (JBP$ [ 20031 264 ITR 110 / 131 TAXMAN 386 IN FAVOUR OF THE ASSESSEE AND AGAINST TH E REVENUE. IN THESE CIRCUMSTANCES, WE DO NOT SEE ANY REASON TO ENTERTAI N QUESTIONS (B) & (C). 4. IN THIS VIEW OF THE SITUATION, AS THE ISSUE IS DIRECTLY COVERED BY THE AFOREMENTIONED OBSERVATIONS OF JURISDICTIONAL HIGH COURT, WE DECLINE TO INTERFERE IN THE RELIEF GRANTED BY LD. CIT(A) AND GROUND NO.1 TO 3 RAISED BY THE REVENUE ARE DISMISSED. 5. APROPOS GROUND NO. 4 & 5, THE GRIEVANCE OF THE R EVENUE IS REGARDING THE DIRECTION OF LD. CIT(A) VIDE WHICH IT HAS BEEN HELD THAT ALLOWANCE OF CARRY FORWARD DEFICIT OF RS.3,92,18,813/- SHOULD BE CONSIDERED IN THE LIGHT OF DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. INSTITUTE OF BANKING PERSONNEL (SUPRA) AND ALLOWED THE CAPITAL EXPENDITURE TO THE EXTENT OF SU RPLUS AND BALANCE BE ALLOWED TO CARRY FORWARD. HOWEVER, LD. CIT(A) HAS ALSO HELD T HAT THE DEFICIT IN EACH YEAR SHOULD BE WORKED OUT WITHOUT CONSIDERING THE ACCUMULATION OF 25%/15%. AGAINST SUCH . / ITA NO. 5922/MUM/2012 ' ' ' ' # # # # / ASSESSMENT YEAR 2009-10 4 DIRECTION OF LD.CIT(A) THE REVENUE IS AGGRIEVED AN D, HENCE, HAS FILED AFOREMENTIONED GROUNDS. 6. THIS ISSUE WAS STATED TO BE COVERED NOT ONLY BY THE AFOREMENTIONED DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. IN STITUTE OF BANKING PERSONNEL (SUPRA) BUT ALSO BY THE LATER DECISION OF HONBLE J URISIDICTIONAL HIGH COURT IN THE CASE OF DIRECTOR OF INCOME TAX (EXEMPTION) VS. GEM & JE WELLERY EXPORTS PROMOTION COUNCIL ORDER DATED 15/2/2011 IN INCOME TAX APPEAL NO.(LOD) NO.113 OF 2010. COPY OF THIS ORDER IS FILED AT PAGES 14 TO 16 OF TH E PAPER BOOK. FOLLOWING QUESTION WAS RAISED BY THE REVENUE BEFORE HONBLE BOMBAY HIGH C OURT FOR ADJUDICATION: WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE TRIBUNAL WAS RIGHT IN DIRECTING THE AO TO SET OFF THE DEFICT OF EARLIER YEARS TO THE SURPLUS OF THIS YEAR AND CONSIDER SUCH ADJUSTMENT AS APPLICATION OF INCOME FOR CHARITABLE PURPOSE? HONBLE COURT HAS ADJUDICATED THE QUESTION WITH THE FOLLOWING OBSERVATION: 4. AS REGARDS SECOND QUESTION IS CONCERNED, COUN SEL ON BOTH SIDES AGREED THAT THE SAID QUESTION IS COVERED AGAINST THE REVENUE B Y THE DECISION OF THIS COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. INSTITUT E OF BANKING REPORTED IN (2003) 264 ITR 110. IN THIS VIEW OF THE MATTER, WE SEE NO MERIT IN THE APPEAL AND THE SAME IS DISMISSED WITH NO ORDER AS TO COSTS. 7. IN THIS VIEW OF THE SITUATION, AFTER HEARING BOT H THE PARTIES WE FIND NO SUBSTANCE IN GROUNDS NO.4 & 5 RAISED BY THE REVENUE . THESE GROUNDS ARE DISMISSED. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27/02/2014 - ) ,# . /'0 27/02/2014 ) 1 SD/- SD/- ( / SANJAY ARORA ) ( . . / I.P. BANSAL ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; /' DATED 27/02/2014 . / ITA NO. 5922/MUM/2012 ' ' ' ' # # # # / ASSESSMENT YEAR 2009-10 5 - - - - ) )) ) '*2 '*2 '*2 '*2 32#* 32#* 32#* 32#* / COPY OF THE ORDER FORWARDED TO : 1. $& / THE APPELLANT 2. '($& / THE RESPONDENT. 3. 4 ( ) / THE CIT(A)- 4. 4 / CIT 5. 251 '*' , , / DR, ITAT, MUMBAI 6. 16 7 / GUARD FILE. -' -' -' -' / BY ORDER, (2* '* //TRUE COPY// 8 88 8 / 9 9 9 9 (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . ' . ./ VM , SR. PS