ACIT (E), Circle- 2(1), New Delhi V. Nav Nirman Sewa Samiti, Delhi

ITA 6282/DEL/2017

AI Insights

The case revolves around the appeal by the Revenue against the decision of the CIT(A) which allowed the depreciation claimed by Nav Nirman Sewa Samiti and permitted the carry forward of the deficit for the assessment year 2014-15. The primary issues were the allowability of depreciation on fixed assets and the treatment of accumulated deficits. The Assessing Officer had disallowed the depreciation and restricted the claim for accumulation of income, which was contested by the assessee. The CIT(A) reversed the AO's decision, leading to the Revenue's appeal to the Tribunal. The Tribunal, referencing relevant judicial precedents and specific amendments to the Income Tax Act, upheld the CIT(A)'s decision.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 113815 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 22-01-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 09-10-2017
• Other Referred Cases: DIT (Exemption) vs. Indraprastha Cancer Society, DIT vs. Raghuvanshi Charitable Trust, CIT vs. Rajasthan and Gujarati Charitable Foundation, Pune
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: NAVIDITA
• Keywords: Capital asset; Depreciation; Charitable institution; Capital expenditure; CHAPTER IV
• Section: 32; 11; 143(3); 80G; 12A; 12AA; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH ‘E’ : NEW DELHI) BEFORE SH. SHAMIM YAHYA, ACCOUNTANT MEMBER AND SH. ANUBHAV SHARMA, JUDICIAL MEMBER ITA No. 6282/Del/2017, A.Y. 2014-15 ACIT(E), Circle-2(1), New Delhi Vs. Nav Nirman Sewa Samiti, B N-9, Shalimar Bagh (East), Delhi-110088 PAN : AAAAN6370R Appellant Respondent Assessee by Ms. Navidita, Adv. Revenue by Sh. Jitender Chand, Sr. DR Date of hearing: 23.01.2023 Date of Pronouncement: 07.02.2023 ORDER Per Anubhav Sharma, JM : The appeal has been filed by the Revenue against order dated 03.07.2017 in Appeal No. 225/2016-17 assessment year 2014-15 passed by Commissioner of Income Tax (appeals)-40, New Delhi (hereinafter referred to as the First Appellate Authority or in short ‘Ld. F.A.A.’) in regard to the appeal before it arising out of assessment order dated 22/12/2016 u/s 143(3) of the Income Tax Act, 1961 passed by DCIT (Exemptions), Circle-2(1), New Delhi (hereinafter referred to as the Assessing Officer or ‘AO’). ITA No. 6282.Del.2017 Nav Nirman Sewa Samiti 2 2. The facts of the case are that the assessee has filed its return on 23.09.2014. The assessee is an association of persons being a society registered under society registration act and is approved under section 12AA and 80G of the act. The assessee is engaged in running an educational institute under name of Samalkha group of Institution, Samalkha, Haryana. During under consideration the assessee has invested Rs.92,05,962 in acquisition of fixed assets and claimed the same application of funds while calculating the income. Further to arrive at the income on commercial basis has charged and claimed depreciation of Rs 3,04,41,942. 2.1 Further the assessee has claimed carried forward of excess expenditure over income accounting to Rs 3,77,64,727 being deficit for the year to arrive at the deficit on commercial basis. The case was selected for scrutiny. The issue was of allowability of depreciation. The learned assessing officer allowed the claim of the assessee as far as acquisition of fixed assets are concerned but disallowed its claim toward depreciation to the extent of Rs 3,04,41,942 on the assumption that such allowance shall of double deduction. 2.2 The assessee during the year derived income from property held under the samiti for charitable purposes and is allowed to set apart upto 15% of such income and the amount as such set apart is not included in the total income of the previous year of the samiti. However the AO did not allow the claim of accumulation as such under seetion 11(1) (a) and restricted the claim upto Rs. 1,37,14,631 as against the claim of the assessee for Rs. 2,10,37,413 (15% of Rs. 14,02,49,420). 2.3 Further, the point of allowability of carried forward of deficit from one year to succeeding year was discussed during the proceedings and the learned assessing officer disallowed the claim of the assessee for carry forward of Rs. 3,77,64,724/- being the deficit for the year and also the claim for brought ITA No. 6282.Del.2017 Nav Nirman Sewa Samiti 3 forward deficit. Thus he disallowed the claim of the assessee for carry forward to the extent of Rs. 3,77,64,724 /- for year and brought forward deficit from preceding years. 3. Ld. CIT(A) had deleted the addition by following relevant findings under in para 4.1.5; 4.2.2; 4.3.2. and which are reproduced as under :- “4.1.5 A bare reading of the provisions relating to income from property held for charitable purposes shows that depreciation per se was not allowed as a deduction in the case of charitable or religious institutions. This issue has been laid to rest by amendment to section 11 by the Finance (No. 2) Act, 2014 which is effective from the assessment year 2015-16 and subsequent years. However, relying on the latest decision of the Hon'ble Delhi High Court in the matter of DIT (Exemption) vs. Indraprastha Cancer Society (supra), the claim of depreciation of the appellant is allowed. Ground of appeal No. 1 hence, allowed. 4.2.2 In this case of Programme for Community Organisation (supra), the assessee-trust received donations in the aggregate sum of Rs. 2,57,376. It applied there out for its charitable purposes the aggregate sum of Rs. 1,70,369 leaving a balance of Rs. 87,010. The Assessing Officer granted exemption under section 11 at 25% on balance amount of Rs. 87,010. The assessee, on appeal, contended that exemption should be granted on total income derived. The Commissioner (Appeals), the Tribunal and the High Court reversed the order of the Assessing Officer. In this case the Hon'ble Supreme Court held as under: "Having regard to the plain language of the above provision, it is clear that a charitable or religious trust is entitled to accumulate twenty-five per cent of its income derived from property held under trust. For the present purpose, the donations, the assessee received, in the sum of Rs. 2,57,376 would constitute its property and it was entitled to accumulate twenty-five per cent thereout. It was unclear on what basis the revenue contended that it was entitled to accumulate only twenty-five per cent of Rs. 87,010. For the aforesaid reasons, the civil appeal was dismissed." “4.3.2 After considering all the facts and circumstances of the case and respectfully following the orders of my Id. predecessors for assessment years 2010-11 and 2011-12 and ITA No. 6282.Del.2017 Nav Nirman Sewa Samiti 4 my own orders for assessment year 2012 - 13 wherein the benefit of carry forward of deficit has been allowed to the appellant and also relying on the decision of the Hon'ble Delhi High Court in the matter of DIT vs. Raghuvanshi Charitable Trust (supra), Assessing Officer is directed to allow carry forward of the net deficit of the current year. This ground of appeal is allowed.” 4. The revenue is in appeal raising following grounds :- 1. On the basis of facts and circumstances of the case and in law, the Ld. CIT(A) has erred in allowing depreciation as already claimed by assessee as capital expenditure in earlier years. 2. The Ld. CIT(A) has erred in allowing the appeal of the assessee by ignoring the fact in the case of charitable or religious institutions, the assessee is not eligible for any type of depreciation as the entire expenditure for the purchase of capital assets is allowed as a deduction and the same is treated as application of income u/s 11(1) and claiming and claiming depreciation on the same capital assets is a double deduction and is not as per law as these capital assets are not used for the purpose of business or profession as provided u/s 32(1). 3. The Ld. CIT(A) has erred in allowing the appeal of the assessee by ignoring the fact that assessee like charitable or religious institutions are governed by almost the separate or independent provisions of section 11,12, 12A ,12AA & 13 and these provisions are independent code in itself in Chapter III of the Income Tax Act, 1961 and claim of depreciation u/s 32 comes under Chapter IV of the Act under the head „D‟ - Profit and Gains of Business or Profession and depreciation is allowed when capital assets are used for the purpose of business. 4. On the facts and circumstances of the case and in law the Ld CIT(A) has erred in holding that the insertion of section 11(6) brought into the Act with effective from 01.04.2015 is ' prospective in nature and therefore shall not apply on the case of the present assessment year i.e. A.Y. 2014457 ITA No. 6282.Del.2017 Nav Nirman Sewa Samiti 5 5. On the factrs and circumstances of the case and in law, Ld. CIT(A) has erred in law in allowing the claim of carry forward of accumulation u/s 1 l(l)(a). 6. On the facts and circumstances of the case and in law, Ld. CIT(A) has erred in law in allowing the claim of carry forward of losses disregarding the fact that set-off and earn forward of losses are dealt with by the provisions of Section 70 to 74 of the Income Tax Act. 7. On the facts and circumstances of the case and in law, Ld. CIT(A) has erred in law in allowing the claim of carry forward of application beyond 85% by relying on the judgements of Hon‟ble Supreme Court. While the facts of these two cases viz. S.R.M.M. CT.M. TIRUPPANI TRUST V. The Commissioner of Income Tax (1998) 230 ITR 636 and Addl. Commissioner of Income Tax V. A.L.N. Rao Charitable Trust (1995) 2016 ITR 69 are different from the present case and cannot be applied in this case. 8. The appellant craves leave to add, to alter or amend any ground of appeal raised above at the time of hearing.” 5. Heard and perused the record. 6. Ld. DR supported the orders of Ld. AO however could not assert anything with regard to fact that revenue’s appeal for assessment year 2010-11 and 2011-12 stand dismissed vide ITA No. 2620 and 2621/Del/2015 order dated 27.04.2018 and for assessment year 2012-13 vide ITA no. 645/Del/2017 order dated 11.05.2021. Hon’ble Supreme Court of India in CIT vs. Rajasthan and Gujarati Charitable Foundation, Pune reported in 402 ITR 441(SC) has settled the issue in Civil Appeal No. 7186 of 2014 vide order dated 13.12.2017 and specifically observing and taking into cognizance the fact that amendment brought in Section 11(6) of the Act vide Finance Act, no. 2 / 2014 is prospective in nature, from assessment year 2015-1,6 while the present year under consideration is A.Y. 2014-15. Therefore the findings of Ld. CIT(A) in regard to ground no 4 needs no interference and consequently the ground no 1 to 4 stands decided against the Revenue. ITA No. 6282.Del.2017 Nav Nirman Sewa Samiti 6 7. As with regard to ground no5 and 6 again the Ld. DR could not set anything to take a contrary view taken by coordinate benches in assesse’s own cases in aforesaid appeals for AYs 2010-11,11-12 and 12-13. Consequently these grounds have no substance. 8. In regard to ground no 7, Ld DR again could not cite any judgment to be followed other than one followed by the Ld. CIT(A) in giving the reasoned findings. The issue is squarely covered by the two judgments relied by Ld. CIT(A). This ground also has no force. 9. Thus, there is no error in the findings of Ld. CIT(A) requiring interference. So the grounds raised by revenue have no substance. Consequently, the Appeal of revenue is dismissed. Order pronounced in the open court on 07 th February, 2023. -Sd/- -Sd/- (SHAMIM YAHYA) (ANUBHAV SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER Date:-07.02.2023 *Binita, SR.P.S* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI