I.T.O. (EXEMPTION), MUMBAI V. PARMESHWARDEVI GORDHANDAS GARODIA CHARITABLE TRUST, MUMBAI

ITA 5987/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71815 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 01-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJEEV JAIN
• Keywords: Depreciation; Charitable institution; Capital expenditure
• Section: 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C, MUMBAI . . , ! ' #'' '$ , % ! & BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER . : 5987 / / 2012 A.Y. 2009-2010 ITA NO. : 5987/MUM/2012 (ASSESSMENT YEAR: 2009-2010) ITO(E) II(1), R. NO. 509, PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI -400 012 VS PARMESHWARDEVI GORDHANDAS GARODIA CHARITABLE TRUST, 153, GARODIA NAGAR, GHATKOOPAR (EAST), MUMBAI -400 077 PAN: AAATP 0083 C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SANJEEV JAIN RESPONDENT BY : DR. K. SHIVARAM SHRI RAHUL K. HAKANI /DATE OF HEARING : 28-11-2013 / DATE OF PRONOUNCEMENT : 06-12-2013 * O R D E R #'' '$ , : PER VIVEK VARMA, JM: THE INSTANT APPEAL ARISES FROM THE ORDER OF CIT(A) 1, MUMBA I, DATED 26.07.2012, WHEREIN, THE DEPARTMENT HAS RAISED THE FOLLOWING GROUNDS: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, AND IN LAW, THE LEARNED CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE CLAIM OF DEPRECIATION AMOUNTING TO RS. 64,40,828/-, RELYING ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. INSTITUTE OF BANKING PERSONNEL SERVICES REPORTED IN 264 ITR 110 (BORN) IGNORING THE RATIO OF JUD GMENT OF HONBLE SUPREME COURT IN THE CASE OF ESCORTS LTD. VS. UNION O F INDIA (199 ITR 43) WHEREIN HONBLE SUPREME COURT IN THE HAS HELD THAT DOUBLE DEDUCTION CANNOT BE PRESUMED IF THE SAME IS NOT SPECIFICALLY PROVIDED BY LA W, IN ADDITION TO NORMAL DEDUCTION. 2. THAT WITHOUT PREJUDICE TO GROUND NO.1 ABOVE, THE LD. CIT(A) OUGHT TO HAVE HELD THAT DEDUCTION OF DEPRECIATION U/S.32 WHICH FALLS UNDER THE HEAD PROFITS AND GAINS FROM BUSINESS AND PROFESSION OF THE INCOME TA X ACT, 1961 WOULD NOT BE AVAILABLE TO THE ASSESSEE TRUST WHOSE INCOME IS OTHERWIS E NOT ASSESSABLE UNDER THE ABOVE HEAD. 3. THAT WITHOUT PREJUDICE TO GROUND NO.1 AND 2 ABOV E, THE LD. CIT(A) OUGHT TO HAVE REJECTED THE CLAIM OF DEPRECIATION, SINCE THE VALUE OF THE ASSET, THE COST OF WHICH PARMESHW ARDEVI GORDHANDAS GARODIA CHARITABLE TRUST ITA 5987/MUM/2012 2 HAS ALREADY BEEN ALLOWED AS A DEDUCTION ON ACCOUNT OF A PPLICATION OF INCOME, WOULD BE TREATED AS NIL FOR THE PURPOSE OF DEPRECIATIO N. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE BR OUGHT FORWARD DEFICIT OF RS. 42,11,211/- TO BE SET OFF AGAINST INCOME OF THE CU RRENT YEAR, WITHOUT APPRECIATING THE FACT THAT THIS WOULD HAVE THE EFFECT OF GRANTING DOUBLE BENEFIT TO THE ASSESSEE, FIRST AS ACCUMULATION OF INCOME U/S 11 (1)(A) OR AS CORPUS DONATION U/S 11(1)(D) IN THE EARLIER YEARS AND THEN AS AP PLICATION OF INCOME U/S 11(1)(A) IN THE CURRENT YEAR WHICH WAS NOT LEGALLY N OT PERMISSIBLE. 5. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN THE LAW, THE LD. CIT(A) ERRED IN ALLOWING THE CLAIM OF THE ASSESSEE FOR SE T OFF OF THE SAID BROUGHT FORWARD DEFICIT, IGNORING THE FACT THAT THERE WAS NO EX PRESS PROVISION IN THE INCOME TAX ACT, 1961 PERMITTING ALLOWANCE OF SUCH CLAIM . 6. THE APPELLANT PRAYS THAT THE ORDER OF THE COMMISSION ER OF INCOME TAX (APPEALS) -1, MUMBAI BE SET-ASIDE AND THAT OF THE ASSESSING OFFI CER BE RESTORED. 2. AT THE TIME OF HEARING BEFORE US, THE AR POINTED OUT T HAT GROUNDS NO. 1, 2 & 3 ARE COVERED BY THE ORDER OF THE COORDINATE BENCHES MUMBAI IN ITA NO. 4108/MUM/2010 IN THE ASSESSEE S OWN CASE IN ASSESSMENT YEAR 2007-08 AND ALSO BY THE ORDER OF HONBLE BOMBAY HIGH COURT IN THE CASE OF DIT(EXMP) VS GKR CHARIT IES IN ITA NO. 2060 OF 2012 DATED 08.03.2013. THE AR POINTED OUT THA T THE COORDINATE BENCH HELD, 4. WE HAVE CAREFULLY CONSIDERED THE FACTS AND THE RIV AL CONTENTIONS. IN CIT VS. INSTITUTE OF BANKING (SUPRA), THE BOMBAY HIGH COURT HE LD THAT WHILE COMPUTING THE INCOME OF A TRUST, BOTH THE CAPITAL EXPENDITURE ON ACQUISITION OF ASSETS AND THE DEPRECIATION ON THE SAID ASSETS WERE ALLOWABLE, THE C APITAL EXPENDITURE BEING ALLOWED AS APPLICATION OF INCOME OF THE TRUST AND DEPRECIATION BEING ALLOWABLE AS A LEGITIMATE DEDUCTION IN COMPUTING THE REAL IN COME OF THE ASSESSEE ON GENERAL PRINCIPLES. IN COMING TO THIS CONCLUS ION THE HIGH COURT FOLLOWED ITS EARLIER DECISION IN CIT VS MUNISUVARAT JAIN (1 994) TAX LAW REPORTER 1084 (BOM). THE SUPREME COURT IN THE JUDGMENT CITED S UPRA HELD THAT IT IS A FUNDAMENTAL AND UNWRITTEN AXIOM THAT NO LEGISLATURE CO ULD HAVE INTENDED A DOUBLE DEDUCTION IN REGARD TO THE SAME BUSINESS OUTGOING AND IF IT IS SO INTENDED, IT WILL BE CLEARLY EXPRESSED. ON THIS BASIS THE S UPREME COURT REFUSED TO ALLOW A DEDUCTION OF DEPRECIATION ON ASSETS USED FOR SCIENTIFIC RESEARCH, SINCE THE ACQUISITION OF THE ASSETS THEMSELVES WERE ALLOWABLE AS DEDUCTION, EVEN THOUGH THE EXPENDITURE REPRESENTED CAPITAL EXPENDITURE . BOTH THESE JUDGMENTS HAVE BEEN CONSIDERED BY THE PUNJAB & HARYANA HIGH COU RT IN A RECENT DECISION IN CIT VS MARKET COMMITTEE, PIPLI (2011) 330 ITR 16 (P & H). IN THIS CASE THE ASSESSEE WAS A TRUST REGISTERED UNDER THE INCOME TAX ACT AS A CHARITABLE TRUST. THE ASSESSING OFFICER DISALLOWED DEPRECIATION ON THE AS SETS ON THE GROUND THAT SINCE THE INCOME WAS EXEMPT, ALLOWING DEPRECIATION TO ASC ERTAIN WHETHER THE REQUIRED PERCENTAGE OF FUNDS WERE APPLIED FOR THE PURP OSES OF THE TRUST WOULD AMOUNT TO CONFERRING DOUBLE BENEFIT. HIS VIEW WAS AFFIRM ED BY THE CIT(A) BUT THE TRIBUNAL ALLOWED THE ASSESSEES APPEAL. ON FURTHER AP PEAL BY THE REVENUE TO THE HIGH COURT, IT WAS HELD THAT THE INCOME OF THE ASS ESSEE BEING EXEMPT, THE ASSESSEE WAS ONLY CLAIMING THAT DEPRECIATION SHOULD B E REDUCED FROM THE INCOME FOR DETERMINING THE PERCENTAGE OF FUNDS WHICH HA D TO BE APPLIED FOR THE PURPOSES OF THE TRUST. THERE WAS THUS NO DOUBLE DED UCTION CLAIMED BY THE ASSESSEE. IN COMING TO THIS CONCLUSION THE PUNJAB & HAR YANA HIGH COURT, INTER ALIA, FOLLOWED THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT CITED ABOVE AND DISTINGUISHED THE JUDGMENT OF THE SUPREME COURT CITED SUPRA. IN THIS VIEW OF THE MATTER, AND RESPECTFULLY FOLLOWING THE JUDGMENT OF THE PUNJAB & HARYANA HIGH COURT AND THE BOMBAY HIGH COURT CITED ABOVE, WE AFFI RM THE DECISION OF THE PARMESHW ARDEVI GORDHANDAS GARODIA CHARITABLE TRUST ITA 5987/MUM/2012 3 CIT(A) AND DISMISS THE APPEAL FILED BY THE REVENUE WITH NO ORDER AS TO COSTS. 3. THE DR ACCEPTED THE FACTUAL POSITION, HOWEVER, HE PLACE D RELIANCE ON THE ORDER OF THE AO. 4. AFTER GOING THROUGH THE ORDERS AS CITED BY THE AR, W E ARE OF THE OPINION THAT THE ISSUE RAISED IN THE GROUNDS ARE FULLY COV ERED. WE, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINA TE BENCH IN THE ASSESSEES OWN CASE AND THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GKR CHARITIES, DO NOT FIND ANY REASO N TO DISTURB THE FINDINGS AND ORDER OF THE CIT(A). 5. GROUNDS NO. 1, 2 & 3 ARE, THEREFORE, REJECTED. 6. GROUNDS 4 & 5. 7. AT THE TIME OF HEARING, THE AR POINTED OUT THAT THE IMPUGNED ISSUE IS COVERED BY THE DECISION OF HONBLE BOMBAY HIGH CO URT IN THE CASE OF CIT VS INSTITUTE OF BANKING, REPORTED IN 264 ITR 110, WHEREIN AT PAGE 115, IT HAS BEEN HELD : (I) THAT THE TRIBUNAL WAS RIGHT IN LAW IN DIRECTIN G THE ASSESSING OFFICER TO ALLOW DEPRECIATION ON THE ASSETS, THE COST OF WHICH HAD B EEN FULLY ALLOWED AS APPLICATION OF INCOME UNDER SECTION 11 IN THE PAST YEARS. CIT VS MUNISUVARAT JAIN [1994] TAX LR 1084 (BOM) FO LLOWED. (II) THAT THE TRIBUNAL WAS JUSTIFIED IN LAW IN DIR ECTING THE ASSESSING OFFICER TO ALLOW DEPRECIATION OF RS. 49,453 ON ASSETS RECEIVED ON TRANSFER, WHEN THE ASSESSEE HAD NOT INCURRED THE COST OF ACQUIRING THE ASSETS. DIRECTOR OF INCOME-TAX (EXEMPTION) VS FRAMJEE CAWAS JEE INSTITUTE [1993] 109 CTR 463 (BOM) FOLLOWED. (III) THAT THE TRIBUNAL WAS JUSTIFIED IN LAW IN AL LOWING CARRY FORWARD OF THE DEFICIT OF EARLIER YEARS AND SET OFF AGAINST THE SURPLUS OF THE SUBSEQUENT YEAR. CIT VS SHRI PLOT SWETAMBER MURTI PUJAK JAIN MANDAL [1995] 211 ITR 293 (GUJ) FOLLOWED. 8. THE DR ACCEPTED THE FACTUAL POSITION, HOWEVER, HE PLACE D RELIANCE ON THE ORDER OF THE AO. 9. RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE BOMBAY HIGH COURT ON THE IMPUGNED ISSUE, WE DO NOT FIND ANY REASON T O DISTURB THE FINDINGS AND DECISION OF CIT(A), WHICH WE SUSTAIN. 10. GROUNDS 6 AND 7 ARE GENERAL IN NATURE. PARMESHW ARDEVI GORDHANDAS GARODIA CHARITABLE TRUST ITA 5987/MUM/2012 4 11. IN THE RESULT, THE APPEAL FILED BY THE DEPARTMENT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH DECEMBER, 2013. SD/- SD/- ( . . ) ( #'' '$ ) ! ! (P.M. JAGTAP) (VIVEK VARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 6 TH DECEMBER, 2013 / COPY TO:- 1) / THE APPELLANT. 2) / THE RESPONDENT. 3) ! !' ( ) - 1 MUMBAI / THE CIT (A)-1 MUMBAI. 4) $ !% () 3 MUMBAI / THE DIT(EXEMPT)-3 MUMBAI, 5) &'( ) , ! ) , *+, / THE D.R. C BENCH, MUMBAI. 6) ($ - COPY TO GUARD FILE. !./0 / BY ORDER / / TRUE COPY / / 1 / 2 +3 ! ) , *+, DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI *562 . . * CHAVAN, SR. PS