ACIT, New Delhi V. Centre for Advanced Education, New Delhi

ITA 640/DEL/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6983 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 03-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Depreciation; Charitable institution; Benefit of exemption; Capital expenditure
• Section: 12A; 12AA; 264; 32; 12; 28; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B , NEW DELHI BEFORE MS. SUSHMA CHO WLA , JUDICIAL MEMBER DR. B. R. R. KUMAR , ACCOUNTANT MEMBER ITA NO. 640/DEL./2017 : ASSTT. YEAR : 2012 - 1 3 ACIT, CIRCLE - 1(1), NEW DELHI - 110002 VS CENTRE FOR ADVANCED EDUCATION, A - 193, OKHLA INDUSTRIAL AREA, PHASE - 1, NEW DELHI - 110020 (APPELLANT) (RESPONDENT) PAN NO. A A AAC1953B ASSESSEE BY : NONE REVENUE BY : MS. NIDHI SRIVASTAVA , CIT DR DATE OF HEAR ING: 01 . 10 .201 9 DATE OF PRONOUNCEMENT: 22 .10 .201 9 ORDER PER DR. B. R. R. KUMAR , A CCOUNTANT M EMBER : THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF THE L D. CIT(A) - 40 , NEW DELHI DATED 28.11.2016 . 2. FOLLOWING GROUND HAS BEEN RAISED BY THE REVENUE: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT (A) HAS ERRED IN IGNORING THE FACT THAT THE ASSESSEE LIKE CHARITABL E 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. THE INCOME AND EXPENDITURE IS COMPUT ED ON THE BASIS OF APPLICATION OF INCOME FOR CHARITABLE OR RELIGIOUS PURPOSE AND THE DEDUCTION IS ALLOWED OF THE ENTIRE EXPENDITURE INCLUDING THE CAPITAL EXPENDITURE FOR PURCHASE OF CAPITAL ASSET U/S 11(1). 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE WAS ACCORDED REGISTRATION U/S 12AA VIDE ORDER DATED 25.02.2004 OF DIT(E). THE ITA NO . 640 /DEL/201 7 CENTRE FOR ADVANCED EDUCATION 2 ASSESSEE SOCIETY WAS INCORPORATED WITH THE OBJECTIVE TO PROMOTE AND IMPROVE EDUCATION, PARTICULARLY ADVANCE EDUCATION AND IS RUNNING A MANAGEMENT INSTITUTE, IN THE NAME OF INSTITUTE OF MANAGEMENT TECHNOLOGY (IMT) AT KATOL ROAD, NAGPUR AS IN THE PAST. THE INSTITUTE AT HYDERABAD NAMELY INSTITUTE OF MANAGEMENT TECHNOLOGY HYDERABAD , SURVEY NO.38, CHERALAGUDA VILLAGE SHAMSHABAD MANDAL, RANGAREDDY, HYDERABAD IS IN THE PROCE SS OF BEING SET UP & CONSTRUCTION ACTIVITIES ARE GOING ON. THE ASSESSING OFFICER HELD THAT THE ACTIVITIES OF THE ASSESSEE SOCIETY ARE IN ACCORDANCE WITH THE MOA BASED ON THE COPY OF WHICH HAS BEEN FURNISHED. THE ASSESSING OFFICER ALSO HELD THAT THE ACTIVIT IES CARRIED OUT BY THE ASSESSEE ARE COVERED WITHIN THE MEANING OF EDUCATION AS PER THE DEFINITION OF CHARITABLE PURPOSE CONTAINED IN SECTION 2(15) OF THE I.T. ACT, 1961. SO, THE BENEFIT OF EXEMPTION OF INCOME UNDER THE PROVISIONS OF SECTION 11 & 12 IS BEING ALLOWED TO THE ASSESSEE. 4. THE ASSESSING OFFICER HELD THAT THE ASSESSEE TRUST HAS CLAIMED DEPRECIATION OF RS.5,00,31,420/ - AS APPLICATION OF INCOME WHICH IS NOT ALLOWABLE SINCE THE BENEFIT OF APPLICATION OF FUND HAS ALREADY BEEN CLAIMED WHEN THE FI XED ASSETS WERE ACQUIRED. IT WAS HELD THAT THIS CLAIM TANTAMOUNTS TO DOUBLE DEDUCTION. 5. FURTHER, THE ASSESSING OFFICER CONSIDERED VIEW OF THE CBDT THAT WHERE AN ASSESSEE HAS ACQUIRED AN ASSET THROUGH APPLICATION OF INCOME AND HAS ALSO CLAIMED THIS AMOU NT AS EXPENDITURE ACCOUNT, DEPRECIATION ON SUCH ASSET WOULD NOT BE ALLOWABLE TO THE ASSESSEE. FURTHER, IT WAS HELD THAT SUCH NOTIONAL STATUTORY DEDUCTIONS LIKE DEPRECIATION, IF CLAIMED AS DEDUCTION WHILE COMPUTING THE INCOME OF 'PROPERTY HELD UNDER TRUST' UNDER THE RELEVANT HEAD OF INCOME, IS REQUIRED TO BE ADDED BACK WHILE COMPUTING THE INCOME FOR THE PURPOSES OF APPLICATION IN THE ITA NO . 640 /DEL/201 7 CENTRE FOR ADVANCED EDUCATION 3 INCOME EXPENDITURE ACCOUNT WHICH WOULD IMPLY THAT A CORRECT FIGURE OF SURPLUS FROM THE TRUST PROPERTY IS REFLECTED IN THE INCO ME & EXPENDITURE ACCOUNT OF THE TRUST/SOCIETY TO DETERMINE THE INCOME FOR THE PURPOSE OF APPLICATION UNDER SECTION 11 OF THE INCOME - TAX ACT. 6. THE ASSESSING OFFICER RELIED ON THE DECISION RENDERED BY THE HON'BLE KERALA HIGH COURT IN THE CASE OF M/S LISS IE MEDICAL INSTITUTIONS IN ITA NO. 42 OF 2011 [348 ITR 344 (KER)(2012)] AND ON THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF DIT(E) VS CHARANJIV CHARITABLE TRUST IN ITA NO. 321/2013 AND IN ITA NO. 322/2013 DATED 18.03.2014. HENCE, IT WAS HELD THA T THE CLAIM OF DEPRECIATION OF RS. 5,00,31,420/ - IS NOT ALLOWED TO ASSESSEE AS APPLICATION OF INCOME. 7. THE LD. CIT (A) DELETED THE ADDITION BASED ON THE JUDGMENT OF HON BLE HIGH COURT OF DELHI IN THE CASE OF DIT(E) VS INDRAPRASHTA CANCER SOCIETY IN ITA NO. 240, 348, 406, 464, 463 OF 2014 VIDE ORDER DATED 18.11.2014 WHEREIN THE HON BLE HIGH COURT ALLOWED DEPRECIATION ON THE ASSETS OF THE ASSESSEE. 8. THE ISSUE OF CLAIM OF DEPRECIATION BY THE ASSESSEE S ACCORDED REGISTRATION U/S 12AA , HAS BEEN SETTLED BY THE JUDGMENT OF HON BLE SUPREME COURT. THE HON BLE APEX COURT UPHELD THE DECISION OF THE BOMBAY HIGH COURT (BOMBAY HC) IN THE CASE OF COMMISSIONER OF INCOME TAX V. INSTITUTE OF BANKING PERSONNEL SELECTION (IBPS) , ([2003] 264 ITR 110 (B OMBAY) ) WHEREIN IT WAS HELD THAT THE INCOME OF AN INSTITUTION WAS TO BE COMPUTED ON COMMERCIAL PRINCIPLES, AFTER PROVIDING FOR ALLOWANCE FOR NORMAL DEPRECIATION. SIMILAR, DECISION HAS BEEN DELIVERED IN THE CASE OF RAJASTHAN AND GUJARATI CHARITABLE FOUNDATI ON POONA WHICH IS A CHARITABLE INSTITUTION REGISTERED UNDER SECTION 12A OF THE ACT. IN ITA NO . 640 /DEL/201 7 CENTRE FOR ADVANCED EDUCATION 4 THAT CASE, I N ACCORDANCE WITH SECTION 11(1)(A) OF THE ACT, THE ENTIRE EXPENDITURE INCURRED BY THE ASSESSEE FOR THE ACQUISITION OF CAPITAL ASSETS WAS TREATED AS, 'APPLIC ATION OF INCOME FOR CHARITABLE PURPOSES'. THE CLAIM FOR DEPRECIATION ON THESE ASSETS, WAS ALLOWED BY THE JURISDICTIONAL HIGH COURT AGAINST WHICH THE TAX AUTHORITIES WERE IN APPEAL BEFORE THE HON BLE SUPREME COURT. THE HON BLE SUPREME COURT NOTED THAT SEVER AL HIGH COURTS ACROSS THE COUNTRY HAD DECIDED THE ISSUE IN FAVOUR OF INSTITUTIONS BY RELYING ON THE DECISION OF INSTITUTE OF BANKING PERSONNEL SELECTION (IBPS) . THE BOMBAY HC IN THAT CASE HAD BASED ITS DECISION ON COMMISSIONER OF INCOME TAX V. MUNISUVRAT J AIN , ( 1994 TAX LAW REPORTER, 1084 ) ANOTHER DECISION OF THE HON BLE BOMBAY H IGH C OURT , WHEREIN THE ASSESSEE WAS A REGISTERED PUBLIC CHARITABLE TRUST THAT DERIVED INCOME FROM A TEMPLE PROPERTY THAT BELONGED TO THE TRUST. THE ASSESSEE CLAIMED DEPRECIATION ON SUCH PROPERTY AND FURNITURE, AND THE QUESTION BEFORE THE HON BLE BOMBAY HIGH COURT WAS WHETHER DEPRECIATION COULD BE DENIED TO THE ASSESSEE , SINCE THE EXPENDITURE ON ACQUISITION OF ASSETS HAD BEEN TREATED AS APPLICATION OF INCOME IN THE YEAR OF ACQUISITION OF THE ASSETS. THE HON BLE BOMBAY HIGH COURT , IN ITS JUDGMENT HIGHLIGHTED THAT, WHILE SECTION 11 OF THE ACT PROVIDES FOR COMPUTATION OF IN COME OF INSTITUTIONS FROM THE PROPERTY HELD FOR CHARITABLE OR RELIGIOUS PURPOSES, AND FOR THE APPLICATION AND ACCUMULATION OF INCOME, SECTION 28 OF THE ACT DEALS WITH CHARGEABILITY OF INCOME FROM PROFITS AND GAINS OF BUSINESS. THE HON BLE BOMBAY HIGH COURT ALSO NOTED THAT SECTION 29 PROVIDES FOR CALCULATION OF SUCH INCOME IN ACCORDANCE WITH SECTIONS 30 TO 43C OF THE ACT. THEREAFTER, THE HON BLE BOMBAY HIGH COURT LAID DOWN THAT EVEN THOUGH SECTION 32 OF THE ACT (WHICH PROVIDES FOR DEPRECIATION FOR COMPUTATIO N OF INCOME DERIVED FROM BUSINESS OR PROFESSION) IS NOT APPLICABLE TO AN INSTITUTION SINCE IT DOES NOT CARRY ON BUSINESS, THE INCOME OF ITA NO . 640 /DEL/201 7 CENTRE FOR ADVANCED EDUCATION 5 AN INSTITUTION DERIVED FROM BUILDING, PLANT AND MACHINERY, AND FURNITURE WAS LIABLE TO BE COMPUTED IN A NORMAL COMMERCIA L MANNER UNDER SECTION 11 OF THE ACT, BASED ON COMMERCIAL PRINCIPLES, AND AFTER PROVIDING FOR ALLOWANCE FOR NORMAL DEPRECIATION, AND DEDUCTION OF THE DEPRECIATION FROM GROSS INCOME OF THE INSTITUTION. ACCORDINGLY, IT WAS HELD THAT, NORMAL DEPRECIATION COUL D BE CONSIDERED AS A LEGITIMATE DEDUCTION IN COMPUTING THE REAL INCOME OF THE TAXPAYER ON GENERAL PRINCIPLES, OR UNDER SECTION 11(1)(A) OF THE ACT. ( DAKSHA BAXI) 9. SINCE, THE MATTER STANDS SETTLED BY THE JUDGMENT OF THE HON BLE APEX COURT, WE HEREBY DECL INE TO INTERFERE WITH THE ORDER OF THE LD. CIT (A) IN ALLOWING THE CLAIM OF DEPRECIATION TO THE ASSESSEE. 10 . IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED . ORDER PRON OUNC ED IN THE OPEN COURT ON 22 /10 /2019 SD/ - SD/ - ( S USHMA CHO WLA ) ( DR. B. R. R. KUMAR ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 22 /10 /2019 *SUBODH* COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(APPEALS) 5 . DR: ITAT ASSISTANT REGISTRAR