DCIT, Udupi V. M/s Manipal Hotel & Restaurant Management College Trust, Manipal

ITA 640/BANG/2014

• Counselvise Citation: 64021114 RSA 2014
• Duration Of Justice: 1 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 25-08-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 12-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: L V BHASKAR REDDY
• Keywords: Depreciation; Charitable institution; Tax effect; Capital expenditure
• Section: 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE A BENCH, BANGALORE BEFORE SMT ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI ABRAHAM P GEORGE, ACCOUNTANT MEMBER ITA NO.640(BNG.)/2014 (ASSESSMENT YEAR : 2011-12) THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-1, UDUPI APPELLANT VS M/S MANIPAL HOTEL & RESTAURANT MANAGEMENT COLLEGE T RUST, VALLEY VIEW INTERNATIONAL, MANIPAL PAN NO.AAATM2175J RESPONDENT REVENUE BY : SHRI L.V.BHASKAR REDDY, JCI T ASSESSEE BY : SMT. SHEETAL, ADVOCATE DATE OF HEARING : 25-08-201 5 DATE OF PRONOUNCEMENT : 31-08-2015 O R D E R PER SMT ASHA VIJAYARAGHAVAN, JM: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST AN ORDER OF THE CIT(A), MYSORE DATED 05-03-2014 FOR THE ASSESSMENT YEAR 2011-12. 2. THE ASSESSEE IS A TRUST AND ACTS AS A SUPPORTIN G UNIT PROVIDING PRACTICAL TRAINING FACILITIES TO THE STUDENTS UNDER GOING HOTEL MANAGEMENT COURSE IN MANIPAL UNIVERSITY. FOR THE ASSESSMENT Y EAR 2011-12 THE 2 ITA NO.640(B)/2014 ASSESSEE HAD FILED ITS RETURN OF INCOME ON 29-09-20 11 DECLARING THEREIN DEFICIT OF RS.33,46,065/- AND CLAIMED ITS INCOME AS EXEMPT U/S 10(23)(C)(VI) OF THE IT ACT, 1961. 3. THE AO DISALLOWED THE DEPRECIATION CLAIMED AMOU NTING TO RS.83,57,496/- ON ADDITION TO FIXED ASSETS AS APPLI CATION OF INCOME. THE AO FURTHER, DISALLOWED SET OFF OF BROUGHT FORWARD D EFICIT OF EARLIER YEARS FROM THE CURRENT YEARS SURPLUS AND BALANCE UNABSOR BED BROUGHT FORWARD DEFICIT TO BE CARRIED FORWARD TO THE SUBSEQUENT ASS ESSMENT YEARS AS APPLICATION OF INCOME. 4. ON FURTHER APPEAL BEFORE THE CIT(A), IT WAS BRO UGHT TO THE NOTICE OF THE CIT(A) THAT THE DECISION OF THE HONBLE KERA LA HIGH COURT, WHICH WAS RELIED ON BY THE LEARNED AO IN THE CASE OF LISS IE MEDICAL INSTITUTION VS CIT KOCHI(ITA NO.42 OF 2011) HAS BEEN DEALT BY THE BANGALORE BENCH IN THE CASE OF ACIT VS ADICHUNCHUNAGIRI SHIKSHANA T RUST (19 ITR (TRIB.) 828 WHICH WAS DECIDED IN FAVOUR OF ASSESSEE. . T HE LEARNED AR ALSO RELIED ON THE DECISION OF ITAT, BANGALORE BENCH IN ONE OF THE ASSESSEES GROUP TRUSTS CASE DR. T.M.A.PAI FOUNDATION IN ITA NO.486 TO 491(B)/2009 DATED 16-02-2010 FOR THE ASSESSMENT YEA R 2001-02 TO 2006- 3 ITA NO.640(B)/2014 07, WHEREIN THE TRIBUNAL HAS ALLOWED DEPRECIATION C LAIMED ON CAPITAL EXPENDITURE AND THE ISSUE IS DECIDED AGAINST THE DE PARTMENT. 5. WITH REGARD TO THE ISSUE OF SET OFF OF UNABSORB ED BROUGHT FORWARD DEFICIT FOR THE ASSESSMENT YEAR 2001-02 TO 2007-08 FROM THE CURRENT YEARS SURPLUS AS APPLICATION OF INCOME AND BALANCE UNABSORBED DEFICIT OF RS.11,30,84,893/- TO BE CARRIED FORWARD TO THE SUBS EQUENT YEARS AS APPLICATION, THE LEARNED AR RELIED ON THE DECISIONS OF DR.T.M.A.PAI FOUNDATION IN ITA NOS.486 TO 491/B/2009 DATED 16-02 -2010 FOR THE ASSESSMENT YEAR 2001-02 TO 2006-07. THE CIT(A) FO LLOWED THE DECISION IN THE CASE OF DR.T.M.A.PAI FOUNDATION IN ITA NO.496 T O 491(B)/2009 (CITED SUPRA), AND ALLOWED THE APPEAL FILED BY THE ASSESSE E. 6. AGGRIEVED THE DEPARTMENT IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS; 1.THE ORDER OF LEARNED CIT(A) IS AGAINST LAW AND FACTS OF THE CASE. DEPRECIATION 2.1 . THE LEARNED CIT (A) ERRED IN ALLOWING ASSESSEE'S CLAIM FOR DEPRECIATION ON ASSETS PUT INTO USE DURIN G THE ACCOUNTING YEAR RELEVANT TO THIS ASST YEAR, EVEN TH OUGH THE ENTIRE COST OF THESE ASSETS HAVE BEEN CLAIMED BY TH E 4 ITA NO.640(B)/2014 ASSESSEE AS AN APPLICATION OF INCOME FOR CHARITABLE ACTIVITIES. 2.2. THE LEARNED CIT (A) ERRED IN NOT FOLLOWING THE RATIO LAID DOWN BY THE HON'BLE APEX COURT IN THE CASE OF ESCOR TS LTD AND ANOTHER VS UNION OF INDIA - 199 ITR 43 - WHEREIN IT IS HELD THAT A D OUBLE DEDUCTION CANNOT BE PRESUMED IN THE ABSENCE OF A CL EAR STATUTORY INDICATION. 2.3. THE LEARNED CIT (A) FAILED TO TAKE COGNIZANCE OF THE FACT THAT ALLOWING OF TOTAL COST OF THE ASSET AS AN APPLICATION OF INCOME AND ALLOWING OF DEPRECIATION ON THE VALUE OF SUCH ASSETS IN THE SAME YEAR RESULTS IN DOUBLE DEDUCTION AND IS NOT ADMISSIBLE IN THE ABSEN CE OF CLEAR STATUTORY INDICATION. 2 . 4. THE LEARNED CIT(A) ERRED IN NOT FOLLOWING THE RA TIO LAID DOWN BY THE HON'BLE KERALA HIGH COURT IN THE CASE O F LISSIE MEDICAL INSTITUTION ITA NO. 42 OF 2011 DATED 17.02.2012 WHEREIN IT IS HELD THAT IN ORDER TO REFL ECT THE TRUE INCOME TO BE AVAILABLE FOR APPLICATION FOR CHA RITABLE PURPOSES, THE ASSESSEE SHOULD WRITE BACK IN THE ACC OUNTS THE DEPRECIATION AMOUNT TO FORM PART OF THE INCOME TO BE ACCOUNTED FOR APPLICATION FOR CHARITABLE PURPOSES. 2.5. THE LEARNED CIT(A) FAILED TO CONSIDER THAT TH E DECISION IN THE CASE OF CIT VS. INSTITUTE OF BANKING - 264 ITR 110 (BOM) IS REGARDING ALLOWING OF DEPRECIATION ON ASSETS WHOSE VALUE WAS ALLOWED IN THE PRECEDING YEARS AS AN APPLICATIO N OF 5 ITA NO.640(B)/2014 INCOME, AND NOT ON ALLOWING OF DEPRECIATION IN THE SAME ASSESSMENT YEAR IN WHICH THE COST WAS ALLOWED AS AN APPLICATION OF INCOME AND THEREFO RE, IS DISTINGUISHABLE. 2.6 THE ORDER OF CIT(A) MAY BE SET ASIDE AND THAT O F THE AO BE RESTORED BY PLACING RELIANCE ON THE RECENT JU DGMENT OF HONBLE HIGH COURT OF DELHI IN THE CASE OF DIT ( EXEMPN.) VS CHARANJIV CHARITABLE TRUST DATED 18-03-2014 IN I TA NO.321 TO 323/2013 WHEREIN IT IS HELD THAT TRIBUNAL WAS NOT JUSTIFIED IN DIRECTING THE ALLOWANCE OF DEPRECI ATION IN RESPECT OF ASSETS, THE COST OF WHICH HAS BEEN ALLOW ED AS DEDUCTION AS APPLICATION OF INCOME OF THE TRUST. CARRY FORWARD OF DEFICIT: 3.1 THE LD.CIT(A) ERRED IN DIRECTING THE AO TO ALLO W CARRY FORWARD OF DEFICIT OF ASSESSMENT YEARS 2001-02 AND ONWARDS FOR SET OFF AGAINST THE SURPLUS OF ASST YEAR 2006-0 7, WHEN THERE IS NO PROVISION IN THE IT ACT TO ALLOW CARRY FORWARD OF SUCH DEFICIT, AND THE NUMBER OF YEARS FOR WHICH SUC H CARRY FORWARD OF DEFICIT FOR SET OFF CAN BE ALLOWED. THE LD. CIT(A) ERRED IN NOT SPECIFYING THE PROVISIONS OF THE IT AC T WHILE DIRECTING THE AO TO ALLOW CARRY FORWARD OF DEFICIT. 3.2 THE LD.CIT(A) ERRED IN PLACING RELIANCE ON THE DECISION IN THE CASE OF CIT VS INSTITUTE OF BANKING 264 ITR 110 (BOM.) FOR ALLOWING CARRY FORWARD AND SET OFF OF DEFICIT OF E ARLIER YEARS, 6 ITA NO.640(B)/2014 EVEN THOUGH SAID DECISION WAS NOT PURSUED IN FURTHE R APPEAL IN VIEW OF NIL TAX EFFECT INVOLVED, AND AS PER SEC. 268A THE SAID DECISION IS NOT BINDING IN RESPECT OF THIS ASSESSEE . THE LD.CIT9A) ALSO ERRED IN THE CASE OF UNION OF INDIA VS DHARENDRA TEXTILES PROCESSORS (2008) 306 ITR 277 (S C) WHEREIN THE APEX COURT HELD THAT THE HONBLE HIGH C OURTS CAN ONLY INTERPRET THE LAW AND NOT LEGISLATE AND LEGISL ATIVE CASUS OMISSUS CANNOT BE SUPPLIED BY JUDICIAL INTERPRETATI VE PROCESS. 4. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING THE ORDERS OF CIT(A) MAY BE SET ASIDE ON THESE POINTS AND THAT OF AO BE RESTORED. 7. WE FIND THAT AT PARA-5.3 OF THE ORDER IN THE CA SE OF DR.T.M.A PAI FOUNDATION IN ITA NO.1140(B)/2013 DATED 21-03-2014 IT WAS HELD AS FOLLOWS; 5.3 WE HAVE HEARD BOTH THE PARTIES AND PERUSED AN D CAREFULLY CONSIDERED THE MATERIAL ON RECORD, INCLUD ING THE JUDICIAL DECISIONS CITED. WE FIND THAT THE ISSUE OF THE ASSESSEE CLAIM FOR DEPRECIATION WAS CONSIDERED BY THE CO-ORD INATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE F OR THE AY: 2006-07 IN ITA NOS.491/BANG/2009 DATED 16-02-2010 WHERE THE ISSUE WAS HELD IN FAVOUR OF THE ASSESSEE. IN COMING TO THIS FINDING, THE TRIBUNAL FOLLOWED ITS O WN ORDER OF EVEN DATE IN THE CASES OF ACADEMY OF GENERAL EDUCAT ION IN ITA NO.485/BANG/2009) HOLDING AS UNDER; 7 ITA NO.640(B)/2014 AFTER CONSIDERING THE RIVAL SUBMISSIONS, RESPECTF ULLY FOLLOWING THE DECISION OF THE HONBLE BOMBAY HIGH C OURT IN THE CASE OF INSTITUTE OF BAKING (SUPRA) WE HOLD THA T THE CIT(A) WAS JUSTIFIED IN ALLOWING THE ASSESSEES CLAIM OF D EPRECIATION ON NEW ASSET PUT INTO USE DURING THE ACCOUNTING YEA R, EVEN IF THE ENTIRE COST OF THESE ASSETS HAVE BEEN CLAIMED BY THE ASSESSEE AND ALLOWED AS AN APPLICATION OF THE INCOM E FOR CHARITABLE PURPOSES FOLLOWING THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF INSTITUTE OF BANKING AND OF TH E CO- ORDINATE BENCH OF THE TRIBUNAL IN THE ASSESSEES OW N CASE FOR THE AY: 2006-07 IN ITA NO.491/BANG/2009 AND IN ITA NO.485/BANG/2009 DATED 16-02-2010, WE UPHOLD THE OR DER OF THE LEARNED CIT(A) IN ALLOWING THE ASSESSEES CL AIM FOR DEPRECIATION ON NEW ASSETS HAVE BEEN CLAIMED BY THE ASSESSEE AS AN APPLICATION OF ITS INCOME FOR CHARIT ABLE PURPOSES. WE, ACCORDINGLY, DISMISS THE GROUNDS AT S L.NO2.1 TO 2.5 RAISED BY THE REVENUE. 8. AS FAR AS THE ISSUE OF CARRY FORWARD OF DEFICIT OF EARLIER YEARS ARE CONCERNED, THE ISSUE AGAIN COVERED BY THE DECISION IN THE CASE OF DR.T.M.A PAI FOUNDATION (SUPRA), VIDE ITS ORDER DATED 21-03- 2014 WHICH IS AS UNDER; 8 ITA NO.640(B)/2014 6.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD INC LUDING THE JUDICIAL DECISION CITED AS POINTED OUT BY THE LEARN ED AR, THE ISSUE OF THE ASSESSEES CLAIM FOR ALLOWING BROUGHT FORWARD DEFICIT OF EARLIER YEARS, WAS CONSIDERED BY THE CO- ORDINATE BENCH OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FO R AY: 2006-07A IN ITA NO.491/BANG/2009 DATED 16-02-2010 WHEREIN AT PARA-25 THEREOF THE ISSUE WAS DECIDED I N FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY HOLDING AS UNDER; 25. COMING TO CARRY FORWARD OF DEFICIT OF EARLIER YEARS, THIS GROUND OF REVENUE IS LIABLE TO BE DISMISSED. IN THE OTHER CASES FOR THE ASSESSMENT YEARS 2002-03 TO 2005-06, WE ALLOWED THE APPEAL OF THE REVENUE FOR THE REASON TH AT THE ORDER WAS PASSED U/S 154 AND THE ISSUE WAS BEYOND T HE SCOPE OF SEC.154. COMING TO ASSESSMENT YEAR 2006-0 7, THIS GROUND BY REVENUE IS LIABLE TO BE DISMISSED BECAUSE , ON MERITS, WE HAVE HELD THAT THOUGH THE POINT IS TO BE DECIDED IN THE ASSESSEES FAVOUR FOR EARLIER YEARS, SINCE IT I S A DEBATABLE POINT, IT CANNOT BE CONSIDERED U/S 154, WHEREAS HIS ORDER BY THE AO WAS U/S 143(3). THEREFORE, THIS GROUND BY THE REVENUE FOR THE YEAR UNDER CONSIDERATION IS LIABLE TO BE DISMISSED. 9 ITA NO.640(B)/2014 FOLLOWING THE AFORESAID DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE F OR THE AY: 2006-07 WE UPHOLD THE ORDER OF THE LEARNED CIT(A) I N ALLOWING THE CLAIM OF THE ASSESSEE IN RESPECT OF CA RRY FORWARD OF DEFICIT OF EARLIER YEARS AND ACCORDINGLY, WE DIS MISS THE GROUNDS AT SL.NOS.3.1 AND 3.2 RAISED BY THE REVENUE . FOR BOTH THE ISSUES I.E DEPRECIATION AND CARRY FORW ARD OF DEFICIT THE CO- ORDINATE BENCH HAS PASSED AN ORDER IN THE EARLIER Y EAR 2010-11 IN THE ASSESSEES OWN CASE IN ITA NO.1142(BANG)/2013 DATED 31-10-2014. FOLLOWING THE DECISION IN ASSESSEES OWN CASE FOR T HE AY: 2010-11, WE DISMISS THE APPEAL OF THE REVENUE FOR THE AY: 2011- 12. 9. IN THE RESULT, APPEAL FILED BY THE REVENUE IS D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 31 ST AUGUST, 2015. SD/- (ABRAHAM P GEORGE) SD/- (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER PLACE : BANGALORE DATED : 26-08-2015 AM* 10 ITA NO.640(B)/2014 COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A)-II BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER, AR, ITAT, BANGALORE