. ITO(E), New Delhi V. M/s. Sanskriti Educational Society, New Delhi

ITA 6232/DEL/2013

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 2917 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 29-12-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 22-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIMA BARNWAL
• Assessee Lawyers: K C JAIN
• Keywords: Depreciation; Charitable institution; Condonation of delay; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G , NEW DELHI BEFORE SH. N. K. SAINI, AM AND SH. A. T. VARKEY , JM ITA NO. 6232/DEL/2013 : ASSTT. YEAR : 2010 - 11 INCOME TAX OFFICER (E), TRUST WA RD - I, NEW DELHI VS SANSKRITI EDUCATIONAL SOCIETY, K - 1/49, (BASEMENT), CHITTARANJAN PARK, NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AA CTS9946B ASSESSEE BY : SH. K. C. JAIN, ADV. REVENUE BY : SMT. ANIMA BARNWAL , SR. DR DATE OF H EARING : 29.12 .2015 DATE OF PRONOUNCEMENT : 01.01 .2015 ORDER PER N. K. SAINI, AM : THIS IS AN APPEAL BY THE DEPARTMENT AGAINST THE ORDER DATED 04.09.2013 OF LD. CIT(A) - X X I , NEW DELHI . 2. FOLLOWING GROUND S HAVE BEEN RAISED IN THIS A PPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.2,06,40,329/ - MADE BY THE AO ON ACCOUNT OF CLAIM OF DEPRECIATION. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN IGNORING THE FACT THAT IN A CASE WHERE CAPITAL EXPENDITURE HAS BEEN CLAIMED AS APPLICATION OF INCOME FOR THE OBJECT OF THE TRUST, FURTHER ALLOWANCE OF DEDUCTION ON ACCOUNT OF DEPRECIATION WILL AMOUNT TO DOUBLE DEDUCTION. ITA NO . 6232 /DEL /201 3 SANSKRITI EDUCATIONAL SOCIETY 2 3 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN IGNORING THE FACT THAT THE CBDT HAS GIVEN CLARIFICATION TO HON BLE HIGH COURT OF KERALA IN PURSUANCE OF THE INTERLOCUTORY ORDER DATED 03.01.2011 IN THE CASE OF LISS IE MEDICAL INSTITUTION VS CIT, ITA NO. 42 OF 2011 AND CONVEYED ITS VIEW ON ALLOWANCE OF DEPRECIATION THAT SUCH NOTIONAL STATUTORY DEDUCTIONS LIKE DEPRECIATION, IF CLAIMED AS DEDUCTION WHILE COMPUTING OF INCOME, IS REQUIRED TO BE ADDED BACK WHILE COMPUTING THE INCOME FOR THE PURPOSE OF APPLICATION IN THE INCOME AND EXPENDITURE ACCOUNT. 4. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER OR AMEND ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARING. 3. THE ONLY GRIEVANCE OF THE DEPARTMENT IN THIS APPEAL REL ATES TO THE DELETION OF ADDITION OF RS.2,06,40,329/ - MADE BY THE AO ON ACCOUNT OF CLAIM OF DEPRECIATION. 4. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE CLAIMED THE DEPRECIATION OF RS.2.06 CRORES WHICH HAD BEEN DISALLOWED BY THE AO ON THE GROUND THAT THE ASSESSEE WAS CLAIMING DOUBLE DEDUCTION AS THE PURCHASE OF FIXED ASSETS WAS CLAIMED AS AN EXPENDITURE. ITA NO . 6232 /DEL /201 3 SANSKRITI EDUCATIONAL SOCIETY 3 5. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) WHO ALLOWED THE CLAIM BY FOLLOWING THE ORDERS OF HIS PREDECESSOR FOR THE ASSESS MENT YEARS 2007 - 08 TO 2009 - 10. 6 . NOW THE DEPARTMENT IS IN APPEAL. 7. AT THE VERY OUTSET OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IS COVERED BY VARIOUS DECISIONS OF COORDINATE BENCHES OF ITAT . HE SUBMITTED THAT IN ASSESSEE S OWN CASE, THE ITAT, G BENCH VIDE ORDER DATED 17.05.2013 IN ITA NO. 3879/DEL/2010 & 42/DEL/2012 FOR THE ASSESSMENT YEAR S 2007 - 08 & 2008 - 09 RESPECTIVELY AND VIDE ORDER DATED 12.12.2013 IN ITA NO. 3511/DEL/2013 FOR THE ASSESSMENT YEAR 2009 - 10 HAS DISMISSED THE REVENUE S APPEAL ON THE SIMILAR GROUNDS. IT WAS ALSO SUBMITTED THAT THE HON BLE JURISDICTIONAL HIGH COURT HAS DISMISSED THE REVENUE S APPEAL IN ASSESSEE S OWN CASE VIDE ORDER DATED 18.11.2014 IN ITA NOS. 348, 463 & 464/DEL/2014 . THE LD. COUNSEL FOR TH E ASSESSEE PRAYED THAT THE ORDER OF THE LD. CIT(A) BE UPHELD AND THE APPEAL OF THE REVENUE BE DISMISSED. 8 . IN HER RIVAL SUBMISSIONS THE LD. DR ALTHOUGH SUPPORTED THE ORDER OF THE AO BUT COULD NOT CONTROVERT THE AFORESAID CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE. 9 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IT IS NOTICED ITA NO . 6232 /DEL /201 3 SANSKRITI EDUCATIONAL SOCIETY 4 THAT IN ASSESSEE S OWN CASE , THE HON BLE JURISDICTIONAL HIGH COURT HAS DISMISSED THE REVENUE S APPEAL A ND DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. THE RELEVANT FINDINGS ARE GIVEN IN PARAS 9 TO 12 OF THE AFORESAID REFERRED TO ORDER DATED 18.11.2014 WHICH READ AS UNDER: 9. TO OUR MIND, THEREFORE, THE ISSUE HAS BEEN EXAMINED IN DEPTH AND DETAIL TWICE AND THUS THERE IS NO ERROR IN THE IMPUGNED ORDERS PASSED BY THE TRIBUNAL. HOWEVER, LEARNED COUNSEL FOR THE REVENUE HAS DRAWN OUR ATTENTION TO THE DECISION DATED 18TH MARCH, 2014 IN ITA NO. 322 - 323/2013 TITLED DIRECTOR OF INCOME TAX (EXEMPTION) VERSUS CHARANJI V CHARITABLE TRUST, WHEREIN IT HAS BEEN HELD: - 30. SO FAR AS THE CLAIM OF DEPRECIATION IS CONCERNED THE DECISION OF THE TRIBUNAL CANNOT BE COUNTENANCED. THE TRIBUNAL HAS OVERLOOKED THAT THE COST OF THE ASSETS HAS ALREADY BEEN ALLOWED AS A DEDUCTION AS A PPLICATION OF INCOME, AS HELD BY THE CIT (APPEALS) AS WELL AS THE ASSESSING OFFICER. IT WAS THEIR VIEW THAT ALLOWING DEPRECIATION IN RESPECT OF ASSETS, THE COST OF WHICH WAS EARLIER ALLOWED AS DEDUCTION AS APPLICATION OF INCOME OF THE TRUST, WOULD ACTUALLY AMOUNT TO DOUBLE DEDUCTION ON THE BASIS OF THE RULING OF THE SUPREME COURT IN ESCORTS LTD. VS. UOI (SUPRA). IN RESPECT OF THE ADDITIONS TO THE FIXED ASSETS MADE DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2006 - 07, THE CIT (APPEALS) HELD THAT SINCE THE COST OF THE ASSETS WAS NOT ALLOWED AS A DEDUCTION BY WAY OF APPLICATION OF INCOME, DEPRECIATION SHOULD BE ALLOW ED . THE CIT (APPEALS) HAS THUS MADE A DISTINCTION BETWEEN ASSETS THE COST OF WHICH WAS ALLOWED AS DEDUCTION AS APPLICATION OF INCOME AN D ASSETS, THE COST OF WHICH WAS NOT SO ALLOWED. THE TRIBUNAL HAS NOT KEPT THIS DISTINCTION IN VIEW, BUT HAS PROCEEDED TO RELY UPON A JUDGMENT OF THIS COURT IN DIT VS. VISHWA JAGRATI MISSION (SUPRA). IN THE ITA NO . 6232 /DEL /201 3 SANSKRITI EDUCATIONAL SOCIETY 5 JUDGMENT OF THIS COURT THE QUESTION WAS WHETHER TH E INCOME OF THE ASSESSEE, WHICH WAS A CHARITABLE TRUST, SHOULD BE COMPUTED ON COMMERCIAL PRINCIPLES AND IF SO, WHETHER DEPRECIATION ON FIXED ASSETS USED FOR CHARITABLE PURPOSES SHOULD BE ALLOWED AS A DEDUCTION. THIS COURT NOTICED THAT THERE WAS A CONSENSUS OF JUDICIAL OPINION ON THIS ASPECT AND HELD, AFTER REFERRING TO THOSE AUTHORITIES AS WELL AS A CIRCULAR OF THE CBDT ISSUED ON 19.07.1968, THAT WHILE COMPUTING THE INCOME OF THE TRUST AVAILABLE FOR APPLICATION FOR CHARITABLE PURPOSES, DEPRECIATION ON ASSET S USED FOR CHARITABLE PURPOSES SHOULD BE ALLOWED. THE POINT TO BE NOTICED IS THAT IN THIS JUDGMENT, THIS COURT REFERRED TO AND DISTINGUISHED THE JUDGMENT OF THE SUPREME COURT IN ESCORTS LTD. (SUPRA) ON THE GROUND THAT IN ESCORTS (SUPRA), THE SUPREME COURT WAS CONCERNED WITH A CASE WHERE THE DEDUCTION OF THE COST OF THE ASSET WAS ALLOWED UNDER SECTION 35(1) AS CAPITAL EXPENDITURE INCURRED ON SCIENTIFIC RESEARCH AND, THEREFORE, NO DEDUCTION FOR DEPRECIATION ON THE VERY SAME ASSETS WAS HELD ALLOWABLE UNDER GEN ERAL PRINCIPLES OF TAXATION, AS IT WOULD AMOUNT TO DOUBLE DEDUCTION. THE JUDGMENT OF THIS COURT IN DIT VS. VISHWA JAGRATI MISSION REINFORCES THE PRINCIPLE THAT IF THE COST OF THE ASSET HAS BEEN ALLOWED AS DEDUCTION BY WAY OF APPLICATION OF INCOME THEN DEPR ECIATION ON THE SAME ASSET CANNOT BE ALLOWED IN THE COMPUTATION OF THE INCOME OF THE TRUST. THE DISTINCTION HAS NOT BEEN KEPT IN VIEW BY THE TRIBUNAL WHICH SEEMS TO HAVE ERRONEOUSLY RELIED ON THE JUDGMENT OF THIS COURT TO DIRECT ALLOWANCE OF DEPRECIATION E VEN IN RESPECT OF ASSETS, THE COST OF WHICH HAS ALREADY BEEN ALLOWED AS APPLICATION OF INCOME. WE ACCORDINGLY HOLD THAT THE TRIBUNAL WAS NOT JUSTIFIED IN DIRECTING THE ALLOWANCE OF DEPRECIATION IN RESPECT OF SUCH ASSETS. ITA NO . 6232 /DEL /201 3 SANSKRITI EDUCATIONAL SOCIETY 6 10. THE AFORESAID PARAGRAPH REFE RS TO THE DECISION IN THE CASE OF VISHWA JAGRITI MISSION (SUPRA) BUT RATIO WAS DISTINGUISHED ON THE GROUND THAT IN THE SAID CASE THE COURT WAS CONCERNED WITH COMPUTATION OF INCOME OF A CHARITABLE TRUST/INSTITUTION ON COMMERCIAL PRINCIPLES AND IF SO WHETHER DEPRECIATION ON FIXED ASSETS USED FOR CHARITABLE PURPOSES SHOULD BE ALLOWED AS A DEDUCTION. THE CONSENSUS OF JUDICIAL OPINION ON THE SAID ASPECT WAS REFERRED TO. IT IS NOTICEABLE THAT IN CHARANJIV CHARITABLE TRUST (SUPRA) IT STANDS OBSERVED THAT THE TRIBU NAL OVERLOOKED THE FACT THAT THE COST OF ASSET HAD BEEN ALLOWED AS A DEDUCTION AND THEREAFTER DEPRECIATION WAS BEING CLAIMED. THE SAID CASE, THEREFORE, APPEARS TO BE A PECULIAR ONE WHEREIN DEDUCTION AS EXPENDITURE AND DEPRECIATION WAS BEING CLAIMED SIMUL TANEOUSLY, WHILE COMPUTING THE TAXABLE INCOME UNDER THE HEAD PROFITS AND GAINS FROM BUSINESS . THE SAID DECISION DATED 18TH MARCH, 2014 DOES NOT REFER TO THE DECISION IN INDIAN TRADE PROMOTION ORGANISATION (SUPRA) WHICH WAS DECIDED ON 27TH NOVEMBER, 2013. THE JUDGMENT IN THE CASE OF INDIAN TRADE PROMOTION ORGANISATION (SUPRA) WAS NOT CITED AND REFERRED TO. THE JUDGMENT IN THE CASE OF CHARANJIV CHARITABLE TRUST (SUPRA) IS AUTHORED BY THE SAME JUDGE, WHO HAS ALSO AUTHORED THE DECISION IN THE CASE OF VISHWA J AGRITI MISSION (SUPRA). IT IS OBVIOUS THAT IN CHARANJIV CHARITABLE TRUST (SUPRA), THE DIVISION BENCH COULD NOT HAVE TAKEN A DIFFERENT VIEW ON THE LEGAL RATIO AS INTERPRETED IN VISHWA JAGRITI MISSION (SUPRA). FURTHER, THE DECISIONS IN THE CASE OF VISHWA JAG RITI MISSION AND INDIAN TRADE PROMOTION ORGANISATION (SUPRA) BEING PRIOR IN POINT OF TIME WOULD ACT AS BINDING PRECEDENTS AND COULD NOT HAVE BEEN OVERRULED OR DISSENTED FROM BY A COORDINATE DIVISION BENCH. 11. BY FINANCE (NO. 2) ACT OF 2014, SUB - SECTION (6) TO SECTION 11 STANDS INSERTED WITH EFFECT FROM 1ST APRIL, 2015 TO THE EFFECT THAT WHERE ANY INCOME IS REQUIRED TO BE APPLIED, ACCUMULATED OR SET APART FOR APPLICATION, THEN FOR SUCH PURPOSES THE INCOME ITA NO . 6232 /DEL /201 3 SANSKRITI EDUCATIONAL SOCIETY 7 SHALL BE DETERMINED WITHOUT ANY DEDUCTION OR ALLOW ANCE BY WAY OF DEPRECIATION OR OTHERWISE IN RESPECT OF AN ASSET, THE ACQUISITION OF WHICH HAS BEEN CLAIMED AS APPLICATION OF INCOME UNDER THIS SECTION IN THE SAME OR ANY OTHER PREVIOUS YEAR. THE LEGAL POSITION, THEREFORE, WOULD UNDERGO A CHANGE IN TERMS OF SECTION 11(6), WHICH HAS BEEN INSERTED AND APPLICABLE WITH EFFECT FROM 1ST APRIL, 2015 AND NOT TO THE ASSESSMENT YEARS IN QUESTION. THE NEWLY ENACTED SUBSECTION RELATES TO APPLICATION OF INCOME. 12. IN THESE CIRCUMSTANCES, WE DO NOT FIND ANY MERIT IN TH E APPEALS IN THE CASE OF INDRAPRASTHA CANCER SOCIETY, ABUL KALAM AZAD ISLAMIC AWAKENING AND IN THE CASE OF M/S SANSKRITI EDUCATIONAL SOCIETY (ITA NO. 348/2014). SIMILARLY, WE DO NOT THINK IT IS NECESSARY AND REQUIRED THAT WE SHOULD ISSUE NOTICE IN THE APPL ICATION FOR CONDONATION OF DELAY FILED IN THE CASE OF M/S SANSKRITI EDUCATIONAL SOCIETY (ITA NOS. 463 AND 464/2014) AS ON MERITS THE REVENUE IS NOT ENTITLED TO SUCCEED. IN THESE APPEALS, THE APPLICATIONS FOR CONDONATION OF DELAY SHALL BE TREATED AS DISMISS ED AND AS A SEQUITUR THE APPEALS WILL BE TREATED AS DISMISSED. 10. THEREFORE, RESPECTFULL Y FOLLOWING THE AFORESAID REFERRED TO ORDER DATED 18.11.2014 IN ASSESSEE S OWN CASE , WE DO NOT SEE ANY MERIT IN THIS APPEAL OF THE DEPARTMENT. 11 . IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS DISMISSED. ( ORDER PRON OUNCED IN THE COURT ON 01/01 /2015 ) SD/ - SD/ - ( A. T. VARKEY ) (N. K. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 01/01 /2015 *SUBODH*