M/s Integrated Education Research Centre for Engineering and Management, Kolkata V. CIT(EXEMPTIONS), KOLKATA, Kolkata

ITA 620/KOL/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4687 (ITAT-KOLKATA)
• Duration Of Justice: 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-06-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 07-04-2016
• Court: TRIBUNAL
• Keywords: Capital asset; Depreciation; Charitable institution; Application of stay; Cost of acquisition; Capital expenditure
• Section: 37(1); 12A; 32; 263; 11

Judgement Text

1 1 IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KO LKATA BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI M.BALAGANESH, ACCOUNTANT MEMBER S.A.NO. 19/KOL/2016 IN ITA NO.620/KOL/2016 & ITA NO.620/KOL/2016 ASSESSMENT YEAR : 2012-13 M/S.INTEGRATED EDUCATION RESEARCH CENTRE FOR ENGINEERING AND MANAGEMENT, INTERNATIONAL TOWER, X-1, 8/3, BLOCK- EP, SECTION-V, SALT LAKE CITY, KOLKATA-700 091 PAN AAATI3264L VS. COMMISSIONER OF INCOME TAX (EXEMPTION), KOLKATA, 10, MIDDLETON ROW, KOLKATA-700 016. APPELLANT/APPLICANT RESPONDENT/RESPONDENT ASSESSEE BY : MR.S.M.SURANA, ADVOCATE REVENUE BY : MR.SNEHOTPAL DATTA, JCIT DATE OF HEARING : 20.5.2016 DATE OF PRONOUNCEMENT : 01.06.2016. O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THE ASSESSEE HAD FILED THE ABOVE STAY APPLICATION PRAYING FOR AN ORDER OF STAY OF RECOVERY OF OUTSTANDING DEMAND OF RS.24,07,700/-. WHEN THE STAY APPLICATION CAME UP FOR HEARING, WITH THE CONSENT OF PARTIES THE APPEAL ITSELF WAS TAKEN UP FOR HEARING. THE APPEAL BY THE ASSESSEE IS AN ITA NO.620/KOL/2016 M/S.INTEGRATED EDUCATION RESEAR CH CENTRE FOR ENGINEERING & MANAGEMENT. 2 APPEAL AGAINST THE ORDER DATED 9.12.2015 OF CIT(EXE MPTIONS), KOLKATA, PASSED U/S.263 OF THE INCOME TAX ACT, 1961 (ACT), R ELATING TO AY 2011-12. 2. THE ASSESSEE IS A CHARITABLE TRUST FORMED FOR CARRY ING OUT CHARITABLE PURPOSE OF PROVIDING EDUCATION. THE ASSESSEE FILED RETURN OF INCOME FOR A.Y.2012-13, DECLARING TOTAL INCOME OF RS.NIL. THE ITO, EXEMPTION-1, KOLKATA WHO WAS THE ASSESSING OFFICER (AO) OF THE A SSESSEE COMPLETED THE ASSESSMENT U/S.143(3) OF THE ACT, DETERMINING TOTAL INCOME OF THE ASSESSEE AT RS.41,615/-. THE ASSESSEE HAD CLAIMED DEPRECIAT ION OF RS.68,43,455/- AS ALLOWABLE EXPENDITURE AGAINST RECEIPTS OF THE ASSES SEE DURING THE PREVIOUS YEAR. THE SAME WAS ALLOWED BY THE AO IN THE ASSESS MENT COMPLETED U/S.143(3) OF THE ACT BY ORDER DATED 30.6.2014. 3. THE CIT (E), KOLKATA, THE RESPONDENT HEREIN WAS OF THE VIEW THAT THE AFORESAID ORDER OF THE AO ALLOWING DEPRECIATION OF RS.68,43,455/- AS ALLOWABLE EXPENDITURE AGAINST RECEIPTS OF THE ASSES SEE DURING THE PREVIOUS YEAR WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. ACCORDING TO THE RESPONDENT DEPRECIATION WAS CLAIMED ON ASSET S WHOSE COST OF ACQUISITION IN THE PREVIOUS YEAR IN WHICH IT WAS AC QUIRED HAD BEEN CLAIMED BY THE ASSESSEE AS CAPITAL EXPENDITURE AND AS APPL ICATION OF FUNDS TOWARDS THE OBJECTS OF THE TRUST AND ALLOWED AS SUCH IN SUC H ASSESSMENTS. ACCORDING TO THE RESPONDENT, ALLOWING DEPRECIATION ON THE VER Y SAME ASSETS THE COST OF ACQUISITION WAS ALLOWED AS APPLICATION OF FUNDS FOR CHARITABLE PURPOSE WOULD ITA NO.620/KOL/2016 M/S.INTEGRATED EDUCATION RESEAR CH CENTRE FOR ENGINEERING & MANAGEMENT. 3 AMOUNT TO ALLOWING DOUBLE DEDUCTION, ONCE AT THE TI ME OF ACQUISITION OF THE ASSET AS APPLICATION FOR CHARITABLE PURPOSE AND AGA IN IN THE FORM OF DEPRECIATION ON THE VERY SAME COST OVER A NUMBER OF YEARS OF LIFE OF THE ASSET. THE RESPONDENT WAS OF THE VIEW THAT THE DECI SION OF THE HONBLE SUPREME COURT IN THE CASE OF ESCORTS LIMITED & ANOTHER VS. UNION OF INDIA 199 ITR 43 WAS SQUARELY APPLICABLE, WHEREIN IT WAS HELD THAT WHEN DEDUCTION U/S 35(2)(IV) IS ALLOWED IN RESPECT OF CA PITAL EXPENDITURE ON ASSETS USED FOR SCIENTIFIC RESEARCH, NO DEPRECIATION IS AL LOWABLE U/S 32 ON THE SAME ASSET. THE RESPONDENT ACCORDINGLY ISSUED A SHOW CA USE NOTICE DATED 28.10.2015 PROPOSING TO REVISE THE ORDER OF THE AO PASSED U/S.143(3) OF THE ACT DATED 30.6.2014. 4. IN REPLY TO THE SHOW CAUSE NOTICE U/S.263 OF THE A CT, THE ASSESSEE POINTED OUT THAT IN SEVERAL DECISIONS RENDERED BY V ARIOUS HIGH COURTS, IT HAS BEEN HELD THAT DEPRECIATION CAN BE CLAIMED EVEN ON ASSETS WHOSE COST OF ACQUISITION IN THE PREVIOUS YEAR IN WHICH IT WAS AC QUIRED HAD BEEN CLAIMED BY THE ASSESSEE AS CAPITAL EXPENDITURE AND AS APPLI CATION OF FUNDS TOWARDS THE OBJECTS OF THE TRUST AND ALLOWED AS SUCH IN SUC H ASSESSMENTS. THE FOLLOWING ARE SOME OF THE JUDICIAL PRONOUNCEMENTS R EFERRED TO BY THE ASSESSEE IN ITS REPLY TO THE SHOW CAUSE NOTICE U/S. 263 OF THE ACT. (I) CIT VS. INSTITUTE OF BANKING PERSONNEL SELECTION (I BPS) (2003) 264 ITR 110(BOM). ITA NO.620/KOL/2016 M/S.INTEGRATED EDUCATION RESEAR CH CENTRE FOR ENGINEERING & MANAGEMENT. 4 (II) SOCIETY OF SISTERS OF ST. ANN, 146 ITR 28 (KAR) (III) CIT VS. DESH BHAGAT MEMORIAL EDUCATION TRUST (2011) 37(1) ITCL 131 (P & H) (IV) CIT VS. SHETH MANILAL RANCHHODDAS VISHRAM BHAVAN TR UST 198 ITR 598(GUJ.) (V) CIT VS. RAJPUR PALLOTTINE SOCIEITY 180 ITR 579 (MP ) (VI) JYOTIRMAI CLUB ITA NO.647 OF 2004 DATED 10.11.2014 FOLLOWING ITS OWN DECISION IN THE CASE OF SILIGURI REGULATED MATRKET COMMITTEE. (VII) DIT(E) VS. FRAMJEE CAWASJEE INSTITUTE 109 CTR 463 ( BOM) (VIII) DIT(E) VS. CHIRANJIV CHARITABLE TRUST 43 TAXMANN.CO M 300 (DEL.) IN THE AFORESAID DECISIONS A VIEW WAS TAKEN THE VIE W THAT WHERE CAPITAL EXPENDITURE ON ACQUISITION OF DEPRECIABLE ASSET IS CONSIDERED AS APPLICATION OF INCOME FOR CHARITABLE PURPOSE, ALLOWING DEPRECIA TION ON THE VERY SAME CAPITAL ASSET WOULD NOT AMOUNT TO DOUBLE ALLOWANCE. THE ASSESSEE ALSO POINTED OUT THAT THE DECISION OF ESCORTS LTD. (SUPRA) WILL NOT BE APPLICABLE AS IT WAS RENDERED ON A DIFFERENT SET OF FACTS. 5. THE RESPONDENT HOWEVER, HELD THAT ALLOWANCE OF DEP RECIATION WHEN THE COST HAS ALREADY BEEN RECOVERED BY WAY OF EXEMP TION AS APPLICATION OF INCOME AMOUNTS TO DOUBLE DEDUCTION AND DOUBLE BENEF IT ON THE SAME ASSET. THE RESPONDENT REFERRED TO THE DECISION OF THE OF H ON'BLE HIGH COURT OF KERALA IN THE CASE OF DDIT(E) V. LISSIE MEDICAL INSTITUTIONS, 348 ITR 344 (KER) WHEREIN IT WAS HELD THAT ALLOWING DEPRECIATION OF A DEPRECIABLE ASSET WHEN THE COST OF ACQUISITION OF DEPRECIABLE ASSET W AS ALLOWED AS APPLICATION OF INCOME FOR CHARITABLE PURPOSE AMOUNTS TO DOUBLE DEPRECIATION AND ITA NO.620/KOL/2016 M/S.INTEGRATED EDUCATION RESEAR CH CENTRE FOR ENGINEERING & MANAGEMENT. 5 THEREFORE DEPRECIATION CANNOT BE ALLOWED. THE RESPO NDENT ALSO DISTINGUISHED THE CASES CITED BY THE ASSESSEE AS FOLLOWS: 3.11 LET US NOW DISCUSS THE HIGH COURT ORDERS STAT ED THAT CLAIM OF DEPRECIATION IS ALLOWABLE EVEN IF THE COST OF THE A SSETS ARE TAKEN AS APPLICATION. SUCH CASES ARE MENTIONED IN SI NO. [IX ] TO (XI) UNDER PARA 3.8. THE LD. A/R PLACED RELIANCE ON 2 CASES THIS LIST. 3.12. IN THE CASE OF DIT(E) VS. FRAMJEE CAWASJEE IN STITUTE (SUPRA) AND CIT VS. INSTITUTE OF BANKING PERSONNEL SELECTION [SUPR A) [RELIED UPON BY THE LD. A/R] THE HONBLE MUMBAI HIGH COURT HELD THAT DEPRECI ATION IS ALLOWABLE TO TILE CHARITABLE TRUSTS EVEN IF THE COST OF SUCH ASS ETS HAS BEEN TREATED AS APPLICATION. IN CIT VS. INSTITUTE OF BANKING PERSO NNEL SELECTION (SUPRA) WHILE COMING TO THIS CONCLUSION THE HON'BLE COURT FOLLOWE D THE DECISION OF MUNISUVARAT JAIN TAX (SUPRA). IN THE CASE OF MUNISU VARAT JAIN THE POINT OF ARGUMENT OF THE REVENUE BEFORE THE COURT WAS THAT D EPRECIATION CAN BE CLAIMED U/S 32 OF THE ACT. THEREFORE AN ENTITY WHO SE INCOME IS COMPUTED ACCORDING TO THE COMMERCIAL PRINCIPLE, (LIKE TRUSTS REGISTERED U/S 12A OF THE ACT) AND NOT IN ACCORDANCE WITH CHAPTER IV OF THE A CT. IS NOT ENTITLED TO CLAIM OF DEPRECIATION. IN THIS CASE THE HON' BLE BOMBAY H IGH COURT RESTRICTED ITS DECISION ON THIS ISSUE AND DECIDED THAT DEPRECIATIO N IS ALLOWOBLE ALTHOUGH THE ASSESSEE IS NOT COVERED UNDER CHAPTER IV OF THE ACT . THE HON'BLE BOMBAY HIGH COURT. IN THIS CASE DID NOT PASS ANY COMMENT O N THE ISSUE OF DOUBLE DEDUCTION. HOWEVER WHILE HON'BLE BOMBAY HIGH COURT DECIDED THE RNATTER IN THE CASE INSTITUTE OF BANKING PERSONNEL SELECTION ( SUPRA) FOLLOWING THIS JUDGMENT ON THE ISSUE OF DEPRECIATION, ALLOWED THE CLAIM EVEN WHEN THE COST OF THE ASSET IS TAKEN AS APPLICATION IN THE YEAR OF ITS PROCUREMENT. IN BOTH THE CASES I.E. FRAMJEE CAWASJEE INSTITUTE (SUPRA) AND I NSTITUTE OF BANKING PERSONNEL SELECTION (SUPRA) THE HONBLE MUMBAI HIGH COURT DECIDED AGAINST THE REVENUE ON THIS ISSUE BUT THE RELEVANT JUDGMENT OF APEX COURT IN ESCORTS LTD. (SUPRA) WERE NOT BROUGHT TO THE NOTICE OF THE HONBLE MUMBAI HIGH COURT. SO THESE JUDGMENT WAS MADE PER INCURIUM, BUT AS NO SPECIAL LEAVE PETITION WAS FILED BY DEPARTMENT BEFORE THE HON'BL E SUPREME COURT OF INDIA, IT GAVE RISE TO THE NOTION (ALL OVER TAX INDIA) TH AT DEPORTMENT HAD ACCEPTED THE SAID JUDGEMENTS AND HENCEFORTH IT IS THE GOOD L AW. HOWEVER THE DEPARTMENT IN REALITY DID NOT ACCEPT THE JUDGEMENTS RATHER NOTED THAT THE DEPARTMENT DID NO T ACCEPT THE JUDGMENTS AND STILL HOLD THE RATIO OF ESCORTS LTD. V. UNION O F INDIA [SUPRA) AS GOOD LAW. SPECIAL LEAVE PETITIONS WERE NOT FILED BECAUSE OF T HE RESTRICTION REGARDING MONETARY LIMIT OF FILING APPEALS. 3.13 IN THE CASE OF CIT SILIGURI VS. SILIGURI REGUL ATED MARKET COMMITTEE (SUPRA) {NOT CITED BY THE LD. A/R HONBLE KOLKATA H IGH COURT DECIDED THAT ITA NO.620/KOL/2016 M/S.INTEGRATED EDUCATION RESEAR CH CENTRE FOR ENGINEERING & MANAGEMENT. 6 CLAIM OF DEPRECIATION IS TO BE ALLOWED EVEN IF THE COST OF THE ASSET IS TREATED AS APPLICATION. IN THAT CASE TILE FOLLOWING JUDGMEN TS WERE REFERRED: I.CLT VS. INSTITUTE OF BANKING PERSONNEL SELECTION REPORTED IN 264 ITR 110 {MUMBAI} [2004] II. CIT VS. MARKET COMMITTEE, PIPLI REPORTED IN 330 ITR 16 (PUNJAB & HARYANA) [2011 ] III. CIT VS. TRUSTEE OF H.E.H. NIZAM'S SUPPLEMENTAL RELIGIOUS ENDOWMENT TRUST REPORTED IN 127 ITR 378 (A.P.) [1981] IV. CLT VS. RCAO BAHADUR CALAVALA CUNNAN CHETTY CHA RITIES REPORTED IN [1982) 135 ITR 485 [MAD} V. CLT VS. BHORUKA PUBLIC WELFARE TRUST REPORTED IN 240 ITR 513 (CAL) [19991 VI. CIT VS. JAYASHREE CHAITY TRUST REPORTED IN 159 ITR 280 (CO') [1986] VII. ESCORTS LTD.( J.K. SYNTHETICS LTD.) VS UNION O F INDIA 199 ITR 43 (SC) (1993) IT IS NOTED THAT IN ANY OF THE CASE MENTIONED ABOVE , OTHER THAN INSTITUTE OF BANKING PERSONNEL SELECTION (SUPRA), MARKET COMMITT EE, PIPLI (SUPRA), AND ESCORTS LTD. (SUPRA), THE ISSUE AT HAND WAS NOT THE SITUATION WHERE CLAIM DEPRECIATION LEADS TO DOUBLE DEDUCTION. THE CASES O F LISSIE MEDICAL INSTITUTIONS VS. COMMISSIONER OF INCOME TAX (SUPRA) AND CHIRANJIV CHARITABLE TRUST (SUPRA) WERE NEITHER REFERRED TO N OR DISCUSSED. FURTHER, ALTHOUGH THE NAME OF ESCORTS LTD. (SUPRA) WAS MENTI ONED IN THE LIST OF CASES REFERRED TO, NOT A SINGLE LINE OF DISCUSSION WAS MA DE ON THIS CASE IN THE BODY OF THE ORDER. THE DETAIL OF THE ORDER OF THE APEX C OURT WAS NOT BROUGHT TO THE ATTENTION OF THE HON'BLE KOLKATA HIGH COURT. 3.14 IN THE CASE OF MARKET COMMITTEE, PIPLI (SUPRA) THE HON'BLE PUNJAB & HARYANA HIGH COURT ALLOWED CLAIM OF DEPRECIATION AS ALLOWABLE EXPENSES BUT NOT AS APPLICATION, IN CASES WHERE THE COST OF ASSE T HAS BEEN TREATED AS APPLICATION. LD. A./R ALSO RELIED UPON THIS CASE AN D THE ASSESSEE HAD MADE COMPUTATION ACCORDANCE WITH THIS CASE LAW. THE HONB LE COURT OBSERVED THAT IF CLAIM OF DEPRECIATION IS ALLOWED AS EXPENSES NO DOUBLE DEDUCTION WOULD TAKE PLACE. IN THIS JUDGMENT CASE OF ESCORTS LTD. ( SUPRA) WAS DISCUSSED. BUT ONE VERY IMPORTANT FACT WAS NOT BROUGHT TO THE ATTE NTION OF THE HON'BLE COURT. ALLOWING CLAIM OF DEPRECIATION AS ALLOWABLE EXPENSE S MEAN THE ASSESSEE IS GETTING A BENEFIT OF 85% OF SUCH CLAIM. WHILE ALLO WING THE CLAIM OF DEPRECIATION AS APPLICATION THE ASSESSEE GETS 100% BENEFIT OF SUCH CLAIM. THEREBY IN ESSENCE IF REMAINS A CASE OF DOUBLE DEDU CTION ON ONE OUTGOING. IN ONE CASE IT'S A CASE OF 100% DOUBLE DEDUCTION IN AN OTHER 85% OF DOUBLE DEDUCTION. BUT TIN BOTH THE CASES ALLOWANCE OF CLAI M OF DEPRECIATION (EITHER AS EXPENSES OR AS APPLICATION), WHEN THE COST OF THE A SSETS HAVE BEEN TREATED AS APPLICATION LEADS TO DOUBLE DEDUCTION ITA NO.620/KOL/2016 M/S.INTEGRATED EDUCATION RESEAR CH CENTRE FOR ENGINEERING & MANAGEMENT. 7 6. THE RESPONDENT ALSO REFERRED TO THE AMENDMENT BY TH E FINANCE (NO.2) ACT, 2014 W.E.F. 1.4.2015 BY INSERTION OF SUB-SECTI ON (6) TO SECTION 11 OF THE ACT, WHICH READS AS UNDER:- (6) IN THIS SECTION WHERE ANY INCOME IS REQUIRED TO BE APPLIED OR ACCUMULATED OR SET APART FOR APPLICATION, THEN, FOR SUCH PURPOSES THE INCOME SHALL BE DETERMINED WITHOUT ANY DEDUCTION OR ALLOWANCE BY WAY OF DEPRECIATION OR OTHERWISE IN RESPECT OF ANY ASSET, ACQUISITION OF WHICH HAS BEEN CLAIMED AS AN APPLICATION OF INCOME UNDER THIS SECTION IN THE SAME OR ANY OTH ER PREVIOUS YEAR. 7. ACCORDING TO THE RESPONDENT THE AFORESAID AMENDMEN T WAS CLARIFICATORY IN NATURE. THE RESPONDENT HOWEVER DI D NOT HOLD THAT THE AMENDMENT IS RETROSPECTIVE BUT MERELY OBSERVED THAT SINCE THE AMENDMENT IS CLARIFICATORY THE INTENTION OF THE LEGISLATURE WAS ALWAYS THAT THE NO DOUBLE DEDUCTION SHOULD BE ALLOWED TO AN ASSESSEE. IN COM ING TO THE ABOVE CONCLUSION, THE RESPONDENT PLACED RELIANCE ON THE D ECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ESCORTS LTD. (SUPRA) W HEREIN THE DECISION WAS RENDERED IN THE CONTEXT OF SECTION 35(2)(IV) OF THE ACT [AS IT STOOD PRIOR TO 1- 4-1980 ) WHICH PROVIDED THAT WHERE CAPITAL EXPENDIT URE IS INCURRED ON CARRYING OUT SCIENTIFIC RESEARCH AFTER THE 31ST DAY OF MARCH 1967, THE WHOLE OF SUCH CAPITAL EXPENDITURE INCURRED IN ANY PREVIOU S YEAR SHALL BE DEDUCTED FOR THAT PREVIOUS YEAR. THE ASSESSEES AFTER GETTIN G DEDUCTION OF ENTIRE CAPITAL EXPENDITURE AS DEDUCTION U/S.35(2)(IV) OF T HE ACT WERE ALSO CLAIMING SIMULTANEOUSLY ALLOWANCE OR DEDUCTION IN RESPECT OF THE SAME EXPENDITURE ONCE AGAIN UNDER SECTION 32 OF THE ACT ON ACCOUNT OF DEPRECIATION ON THE VERY SAME ASSET. THERE WAS A CONTROVERSY AS TO WHE THER SUCH A CLAIM FOR DEPRECIATION WAS VALID OR NOT. FINANCE (NO. 2) ACT , 1980 INTERVENED. IT AMENDED SECTION 35(2)( IV ) TO READ AS FOLLOWS: ITA NO.620/KOL/2016 M/S.INTEGRATED EDUCATION RESEAR CH CENTRE FOR ENGINEERING & MANAGEMENT. 8 '( IV )WHERE A DEDUCTION IS ALLOWED FOR ANY PREVIOUS YEAR UNDER THIS SECTION IN RESPECT OF EXPENDITURE REPRESENTED WHOLLY OR PARTLY BY AN ASSET, NO DEDUCTION SHALL BE ALLOWED UNDER CLAUSES ( I ), ( II ), ( IIA ), ( III ) AND ( VI ) OF SUB-SECTION (1) OF SECTION 32 FOR THE SAME OR ANY OTHER PREVIOUS YEAR IN RESPECT OF THAT ASSET;' THE QUESTION BEFORE THE HONBLE COURT WAS WHETHER N O LEGISLATURE COULD HAVE AT ALL INTENDED A DOUBLE DEDUCTION IN REGARD T O THE SAME BUSINESS OUTGOING AND IF IT IS INTENDED IT WILL BE CLEARLY E XPRESSED. THE HONBLE SUPREME COURT HELD IN THE AFFIRMATIVE. THE FURTHER QUESTION BEFORE THE HONBLE COURT WAS WHAT IS THE EFFECT OF THE STATUTO RY AMENDMENT BY INSERTION OF SEC.35A(2)(IV) OF THE ACT. THE HONBLE COURT HE LD THAT EVEN IN ABSENCE OF CLEAR STATUTORY INDICATION TO CONTRARY, STATUTE SHOULD NOT BE READ SO AS TO PERMIT AN ASSESSEE TWO DEDUCTIONS VIZ., BOTH UNDER SECTIONS 32(1)(II) AND 35(2)(IV) OF ACT, QUA SAME EXPENDITURE. THE RESPON DENT THEREFORE HELD THAT THE LEGISLATURE WOULD NEVER HAVE INTENDED TO GIVE D OUBLE DEDUCTION FOR THE SAME OUTGOING AND THAT THERE WAS THE AMENDMENT BY I NSERTION OF SEC.11(6) OF THE ACT WAS MERELY CLARIFICATORY. THE CIT ACCORDINGLY REVISED THE ORDER OF THE AO BY OBSERVING AS FOLLOWS: 3.20. IN VIEW OF THE ALL ABOVE, ASSESSMENT ORDER PA SSED BY ASSESSMENT ORDER PASSED BY ASSESSING OFFICE IN THIS CASE FOR ASSESSM ENT YEAR 2012-13 BY ALLOWING CLAIM OF DEPRECIATION OF RS.68,43,455/- IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE. HENCE THE S AME IS DISALLOWED. THE DEPRECIATION IN THIS YEAR WAS CLAIMED TO JUSTIFY OR TO MAKE UP THE APPLICATION OF INCOME. NO SUCH CLAIM WAS MADE IN PRECEDING AND SUCCEEDING YEARS AS SUFFICIENT ASSETS PURCHASED WERE AVAILABLE FOR APPL ICATION. 3.21 HENCE, THE INCOME OF THE ASSESSEE IS COMPUTED AS BELOW : TOTAL RECEIPTS AS PER INCOME & EXPENDITURE A/C. RS .3,8435,539 LESS : REVENUE & CAPITAL EXPENDITURE RS.2,68,03, 157 RS.1,16,32,382 LESS: STATUTORY ACCUMULATION @15% OF RS.3,84,35,539 RS. 57,65,330 REVISED TOTAL INCOME RS. 58,67,052 ROUNDED OFF RS. 58,67,050 8. AGGRIEVED BY THE AFORESAID ORDER OF THE CIT, THE A SSESSEE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. ITA NO.620/KOL/2016 M/S.INTEGRATED EDUCATION RESEAR CH CENTRE FOR ENGINEERING & MANAGEMENT. 9 9. THE FOLLOWING ARE THE GROUNDS OF APPEAL RAISED BY T HE ASSESSEE: 1.FOR THAT, THE ORDER OF THE LD. CLT (E) IS ARBITR ARY, ILLEGAL AND BAD IN LAW. 2. FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE L D. CI.T(E) ERRED IN APPLYING THE PROVISIONS OF SECTION 263 AND ENHANCING THE ASS ESSMENT BY DISALLOWING THE DEPRECIATION ALLOWED BY THE AO ON THE ASSETS, COMPL ETELY BY PASSING THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT WHICH WAS BINDING ON HIM TO MAINTAIN JUDICIAL DISCIPLINE. 3. FOR THAT EVEN OTHERWISE THE ORDER OF THE LD. CIT (E) IS BAD IN LAW WHEN HE HIMSELF REFERS TO TWO OPINIONS ON THE ISSUE OF ALLO WABILITY OF THE DEPRECIATION ON THE ASSETS WHICH WAS RIGHTLY ALLOWED BY THE AO. 4.FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE CA SE THE DISALLOWANCE MADE BY THE CIT MAY BE DELETED. 5. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE THE ASSESSEE MAY BE AWARDED THE COST OF APPEAL FOR NOT FOLLOWING TH E PRINCIPLES SETTLED BY THE JURISDICTIONAL HIGH COURT. 6. FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE C ASE THE ORDER OF THE CLT(E) BE MODIFIED AND THE ASSESSEE BE GIVEN THE RELIEF PR AYED FOR. 7. FOR THAT THE ASSESEE CRAVES LEAVE TO ADD, ALTER OR AMEND ANY GROUND BEFORE OR AT THE TIME OF HEARING. 10. WE HAVE HEARD THE SUBMISSIONS OF THE LD. DR, WHO RE LIED ON THE ORDER OF RESPONDENT. THE LEARNED COUNSEL FOR THE ASSESSE E REITERATED THE STAND OF THE ASSESSEE AS REFLECTED IN THE REPLY TO THE SHOW CAUSE NOTICE U/S.263 OF THE ACT. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IF DEPR ECIATION IS NOT ALLOWED AS A NECESSARY DEDUCTION FOR COMPUTING INCO ME OF CHARITABLE INSTITUTIONS, THEN THERE IS NO WAY TO PRESERVE THE CORPUS OF THE TRUST FOR DERIVING THE INCOME AS IT IS NOTHING BUT A DECREASE IN THE VALUE OF PROPERTY ITA NO.620/KOL/2016 M/S.INTEGRATED EDUCATION RESEAR CH CENTRE FOR ENGINEERING & MANAGEMENT. 10 THROUGH WEAR, DETERIORATION, OR OBSOLESCENCE. SINCE INCOME FOR THE PURPOSES OF SECTION 11(1) HAS TO BE COMPUTED IN NORMAL COMME RCIAL MANNER, THE AMOUNT OF DEPRECIATION DEBITED IN THE BOOKS IS DEDU CTIBLE WHILE COMPUTING SUCH INCOME. IT WAS SO HELD BY THE HONBLE KARNATA KA HIGH COURT IN THE CASE OF CIT VS. SOCIETY OF SISTERS OF ST. ANNE 146 ITR 28 (KAR). IT WAS HELD IN CIT VS. TINY TOTS EDUCATION SOCIEITY (2011) 330 ITR 21 (P&H) , FOLLOWING CIT VS. MARKET COMMITTEE, PIPLI (2011) 330 ITR 16 (P&H) : (2011) 238 CTR (P&H) 103 THAT DEPRECIATION CAN BE CLAIMED BY A CHARITABLE INSTITUTION IN DETERMINING PERCENTAGE OF FUNDS APPL IED FOR THE PURPOSE OF CHARITABLE OBJECTS. CLAIM FOR DEPRECIATION WILL NOT AMOUNT TO DOUBLE BENEFIT. THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF ESCORTS LTD. 199 ITR 43 (SC) HAS BEEN REFERRED TO AND DISTINGUISHED BY THE HON BLE COURT IN THE AFORESAID DECISIONS. THE ISSUE RAISED BY THE R ESPONDENT IN THE IMPUGNED ORDER IS NO LONGER RES INTEGRA AND HAS BEEN DECIDED BY THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V. MARKET COMMITTEE, PIPLI, 330 ITR 16 (P&H) . THE HONBLE PUNJAB & HARYANA HIGH COURT AFTER C ONSIDERING SEVERAL DECISIONS ON THAT ISSUE AND ALSO THE DECISI ON OF THE HONBLE SUPREME COURT IN THE CASE OF ESCORTS LTD. (SUPRA) , CAME TO THE CONCLUSION THAT DEPRECIATION IS ALLOWABLE ON CAPITAL ASSETS ON THE INCOME OF THE CHARITABLE TRUST FOR DETERMINING THE QUANTUM OF FUNDS WHICH HA VE TO BE APPLIED FOR THE PURPOSE OF TRUSTS IN TERMS OF SECTION 11 OF THE ACT . THE HONBLE PUNJAB & ITA NO.620/KOL/2016 M/S.INTEGRATED EDUCATION RESEAR CH CENTRE FOR ENGINEERING & MANAGEMENT. 11 HARYANA HIGH COURT MADE A REFERENCE TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ESCORTS LTD. (SUPRA) AND OBSERVED THAT THE HONBLE SUPREME COURT WAS DEALING WITH A CASE OF TW O DEDUCTIONS UNDER DIFFERENT PROVISIONS OF THE ACT, ONE U/S. 32 FOR DE PRECIATION AND THE OTHER ON ACCOUNT OF EXPENDITURE OF A CAPITAL NATURE INCURRED ON SCIENTIFIC RESEARCH U/S. 35(1)(IV) OF THE ACT. THE HONBLE COURT THEREAFTER HELD THAT A TRUST CLAIMING DEPRECIATION CANNOT BE EQUATED WITH A CLAIM FOR DOU BLE DEDUCTION. THE HONBLE PUNJAB & HARYANA HIGH COURT HAS ALSO MADE A REFERENCE TO THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT V. SOCIETY OF SISTERS OF ANNE, 146 ITR 28 (KAR), WHEREIN IT WAS HELD THAT U/S. 11(1) OF THE ACT, INCOME HAS TO BE COMPUTED IN NORMAL COMMER CIAL MANNER AND THE AMOUNT OF DEPRECIATION DEBITED IN THE BOOKS IS DEDU CTIBLE WHILE COMPUTING SUCH INCOME. THE HONBLE CALCUTTA HIGH COURT IN TH E CASE OF JYOTIRMAI CLUB (SUPRA) HAS ALSO TAKEN THE SAME VIEW. IN THE CASE OF SILIGURI VS. SILIGURI REGULATED MARKET COMMITTEE (SUPRA), THE HO NBLE JURISDICTIONAL HIGH COURT HAS ALSO TAKEN THE SAME VIEW. THE RESPO NDENT HAS HOWEVER OBSERVED IN HIS ORDER THAT THE CALCUTTA HIGH COURT IN THE AFORESAID DECISIONS HAS NOT PROPERLY CONSIDERED THE DECISION IN THE CAS E OF ESCORTS LTD.(SUPRA). SUCH OBSERVATIONS IN OUR VIEW WOULD NOT BE APPROPRI ATE AND CANNOT BE THE BASIS NOT TO FOLLOW THE DECISION OF HONBLE HIGH CO URT. ITA NO.620/KOL/2016 M/S.INTEGRATED EDUCATION RESEAR CH CENTRE FOR ENGINEERING & MANAGEMENT. 12 12. IN VIEW OF THE AFORESAID DECISIONS ON THE ISSUE, WE ARE OF THE VIEW THAT THE ORDER OF THE RESPONDENT CANNOT BE SUSTAINED. THE AMENDMENT BY THE FINANCE ACT (NO.2), 2014 BY INSERTION OF SEC.11(6) OF THE ACT SPECIFICALLY PROVIDING FOR NOT ALLOWING ANY DEDUCTION OR ALLOWAN CE BY WAY OF DEPRECIATION OR OTHERWISE IN RESPECT OF ANY ASSET, ACQUISITION OF WHICH HAS BEEN CLAIMED AS AN APPLICATION OF INCOME UNDER THIS SECTION IN THE SAME OR ANY OTHER PREVIOUS YEAR WAS ADMITTEDLY EFFECTIVE ON LY FROM 1.4.2014 AND DID NOT APPLY TO AY 12-13. 13. SECTION 263 OF THE ACT CONFERS POWERS ON THE CIT W HICH ARE IN THE NATURE OF SUPERVISORY POWERS IN ORDER TO PROTECT TH E INTEREST OF THE REVENUE. THE CIT IS EMPOWERED TO CALL FOR AND EXAMINE THE RE CORDS OF ANY PROCEEDING UNDER THE ACT. HE CAN THEN EXERCISE HIS POWERS IN R EVISION, IF HE IS SATISFIED THAT ANY ORDER PASSED BY THE AO IS ERRONEOUS AND PR EJUDICIAL TO THE INTEREST OF THE REVENUE. THE SUPREME COURT HAS HELD THAT BOT H THESE ELEMENTS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF TH E REVENUE MUST BE SATISFIED FOR HAVING RECOURSE TO S.263 (MALABAR IND USTRIAL CO. 243 ITR 83). EVERY LOSS OF TAX TO THE REVENUE CANNOT BE TREATED AS BEING 'PREJUDICIAL TO THE INTEREST OF THE REVENUE'. FOR EXAMPLE, WHEN THE ASSESSING OFFICER TAKES RECOURSE TO ONE OF THE TWO COURSES POSSIBLE IN LAW OR WHERE THERE ARE TWO VIEWS POSSIBLE AND THE COMMISSIONER DOES NOT AGREE WITH THE VIEW TAKEN BY THE ASSESSING OFFICER WHICH HAS RESULTED IN A LOSS AS HELD BY THE HONBLE ITA NO.620/KOL/2016 M/S.INTEGRATED EDUCATION RESEAR CH CENTRE FOR ENGINEERING & MANAGEMENT. 13 SUPREME COURT IN THE CASE OF CIT V MAX INDIA LTD. (2007) 295 ITR 282 (SC). ASSUMING ALL THAT IS STATED BY THE RESPONDEN T IN THE IMPUGNED ORDER IS TO BE ACCEPTED AS CORRECT, EVEN THEN NO REVISION CO ULD BE MADE U/S.263 OF THE ACT FOR THE REASON THAT TWO VIEWS ARE POSSIBLE ON T HE ISSUE RAISED BY THE RESPONDENT IN THE IMPUGNED ORDER. IT IS CLEAR FROM THE ORDER OF THE RESPONDENT THAT TWO DIVERGENT VIEWS HAVE BEEN EXPRE SSED BY HONBLE HIGH COURTS IN THE MATTER. THE DECISION RENDERED BY THE HONBLE CALCUTTA HIGH COURT BEING THAT OF THE JURISDICTIONAL HIGH COURT, THE VIEW TAKEN BY THE ASSESSEE HAS TO BE ACCEPTED AS CORRECT. WE ARE ALS O OF THE VIEW THAT IT WOULD NOT BE PROPER ON THE PART OF THE RESPONDENT TO CONT END THAT THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ESCORTS LT D. (SUPRA) WAS NOT BROUGHT TO THE NOTICE OF THE HONBLE CALCUTTA HIGH COURT. IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE EXERCISE OF JURISDICT ION U/S.263 OF THE ACT WOULD NOT BE PROPER. WE THEREFORE QUASH THE ORDER U/S.263 OF THE ACT AND ALLOW THE APPEAL OF THE ASSESSEE. 14. IN VIEW OF THE FACT THAT THE APPEAL ITSELF IS BEING DECIDED, WE ARE OF THE VIEW THAT THE STAY APPLICATION FILED BY THE ASS ESSEE HAS BECOME INFRUCTUOUS AND THE SAME IS DISMISSED AS INFRUCTUOU S. ITA NO.620/KOL/2016 M/S.INTEGRATED EDUCATION RESEAR CH CENTRE FOR ENGINEERING & MANAGEMENT. 14 15. IN THE RESULT THE APPEAL IS ALLOWED WHILE THE STAY APPLICATION IS DISMISSED. PRONOUNCED IN OPEN COURT ON THE 1 ST DAY OF JUNE , 2016. SD/- SD/- (M.BALAGANESH) (N.V.VASUDEVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER. KOLKATA, DATED, THE 1 ST DAY OF JUNE, 2016. RG/PS COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, KOLKATA. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT KOLKATA BENCHES