DCIT (E), New Delhi V. M/s Shri Ram Scientific and Industrial Research Foundation, New Delhi

ITA 6629/DEL/2015

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5897 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2011-2012
• Appeal Filed On: 14-12-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Capital asset; Depreciation; Charitable institution; Opportunity of being heard; Additional evidence
• Section: 12A; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : F , NEW DELHI BEFORE SH. AMIT SHUKLA , JUDICIAL M EMBER AND SH. O.P. KANT , ACCOUNTANT MEMBER ITA NO . 6629 /DE L/ 2015 ASSESSMENT YEAR: 2011 - 12 DCIT(E), CIRCLE - 2(1), NEW DELHI VS. SHRI RAM SCIENTIFIC AND INDUSTRIAL RESEARCH FOUNDATION, 8E, DIAMOND PRESS BUILDING, RANI JHANSI ROAD, JHANDEWALAN EXTN., NEW DELHI PAN : AAATS0867K ( APPELLANT ) (RESPONDENT) ORDER PER O.P. KANT , A. M. : THIS APPEAL BY THE R EVENUE IS DIRECTED AGAINST ORDER DATED 11/09/2015 PASSED BY THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) - 40, NEW DELHI , [IN SHORT THE LD. CIT(A) ] FOR ASSESSMENT YEAR 2011 - 12, RAISING FOLLOWING GROUNDS: ON THE F ACT S AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT( A) HAS ERRED IN ALLOWING THE EXEMPTION U/S 11 DISREGARDING THE FACTS OF THE CASE. APPELLANT BY MS. PARAMITA TRIPATHI, CIT(DR) RESPONDENT BY SH. R.K. KAPOOR, CA DATE OF HEARING 21.05.2018 DATE OF PRONOUNCEMENT 30.05.2018 2 ITA NO.6629/DEL/2015 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN IGNORING THAT FACT THAT ASSESSEE S SERVICES FALL UNDER THE LAST LIMB OF SECTION 2(15) OF THE SINCE ASSESSEE IS GENERATING INCOME FROM COMMERCIAL ACTI VITIES . 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN ADMITTING THE ADDITIONAL GROUND OF THE ASSESSEE WITHOUT GIVING THE OPPORTUNITY OF BEING HEARD TO THE AO UNDER RULE 46A TO GIVE COMMENTS/COUNTER THE SAME. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED BY HOLDING THAT THE ASSESSEE BE ALLOWED EXEMPTION U/S 10(21) IGNORING THE F THAT IN THE REVISED NOTIFICATION DATED 27.10.1987, CBDT HAS ACCORDED ITS APPROVAL AND NOTIFIED THE ASSESSEE AS OTHER INSTITUTION . 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN REL YING ON TRIBUNAL S ORDER AND GRANTING ALLOWABILITY OF LOAN REPAYMENT IN CONTRADICTION OF THE FACT THAT THE ISSUE IS SUBJUDICE BEFORE THE HON BLE HIGH COURT. 2. B RIEFLY STATED FACTS OF THE CASE ARE THAT IN THE YEAR UNDER CONSIDERATI ON I.E. ASSESSMENT YEAR 2011 - 12 , THE ASSESSEE FILED RETURN OF INCOME ON 29/07/2011 DECLARING N IL INCOME. THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER S ECTION 143(2) OF THE INCOME - TAX ACT , 1961 ( IN SHORT THE ACT ) WAS ISSUED AND COMPLIED WITH. IN THE SCRUTINY PROCEEDI NGS, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE SOCIETY WAS REGISTERED UNDER SECTION 12A OF THE OF THE ACT VIDE ORDER OF EVEN NUMBER DATED 02/02/2005 ISSUED BY THE DIRECTOR OF INCOME TAX (E XEMPTION), NEW DELHI. HE ALSO NOTED T H E C L A I M O F T H E ASSESSEE T H A T I T WAS ENTITLE D TO BENEFIT UNDER SECTION 10(21) OF THE ACT , BEING NOTIFIED UNDER SECTION 35(1)(II) OF THE ACT, VIDE NOTIFICATION NO. 32/2008 UNDER THE CATEGORY OF OTHER INSTITUTION . 3 ITA NO.6629/DEL/2015 2.1 T HE ASSESSING OFFICER HAS NOTED THAT THOUGH THE ASSESSEE CLAIMED ELIGIBILITY OF B ENEF IT UNDER SECTION 10(21) OF ACT , SINCE INCEPTION UPTO ASSESSMENT YEAR 19 95 - 96 AND AFTER THAT FROM ASSESSMENT YEAR 1999 - 2000 TILL 2008 - 09, BUT THE ASSESSEE HAD FILED ITS RETURN OF INCOME CLAIMING EXEMPTION U/S 11 AND 12 OF THE ACT , STATED TO BE A CHARITABLE INSTITUTION CARRYING ON ACTIVITY OF GENERAL PUBLIC UTILITY. HOWEVER, FROM ASSESSMENT YEAR 2009 - 10, THE ASSESSEE HAS STOPPED CLAIMING EXEMPT ION UNDER SECTION 11(1) OF THE ACT AND STARTED FILING ITS RETURN OF INCOME , CLAIMING EXEMP TI ON UNDER SECTION 10(21) OF THE ACT . THE ASSESSING OFFICER NOTED THAT IN THE YEAR UNDER CONSIDERATION ALSO , THE EXEMPTION HAS BEEN CLAIM ED UNDER SECTION 10(21) OF THE ACT . 2.2 THE LD. ASSESSING OFFICER, FURTHER OBSERVED THAT THE ASSESSEE REQUESTED BE FORE THE CENTRAL BOARD OF DIRECT T AXES (IN SHORT THE CBDT ) FOR CHANGE OF CATEGORY FROM OTHER INSTITUTION TO RESEARCH ASSOCIATION BUT THE SAID REQUEST OF THE ASSESSEE WAS NOT ACCEPTED AND AGAINST WHICH THE ASSESSEE FILED WRIT PETITION BEFORE THE HON BLE HIGH COURT. THE HON BLE HIGH COURT REMANDED THE MATTER TO THE CBDT FOR DE CIDING A FRESH. AGAIN THE CBDT VIDE LETTER DATED 20/03/2012, REJECTED THE REQUEST OF THE ASSESSEE FOR CHANGE OF CATEGORY FROM OTHER INSTITUTION TO RES EARCH ASSOCIATION . ON FURTHE R W RIT BY THE ASSESSEE, THE HON BLE HIGH COURT QUASHED THE ORDER OF THE CBDT AND DIRECTED THE CBDT TO R EFER THE MATTER TO THE CENTRAL G OVERNMENT. ACCORDING TO THE ASSESSING OFFICER, AGAINST THE SAID ORDER OF THE HON BLE HIGH COURT, THE CBDT HAS FILED A REV IEW PETITION, WHICH IS PENDING FOR ADJUDICATION. 4 ITA NO.6629/DEL/2015 2.3 IN VIEW OF THE ABOVE FACTS, THE ASSESSING OFFICER HELD THAT THE ASSESSEE HAS NOT BEEN NOTIFIED BY THE CBDT AS S CIENTIFIC RESEARCH ASSOCIATION FOR GRANT ING BENEFIT UNDER SECTION 10(21 ) OF THE ACT AND , THEREFORE , NO BENEFIT OF S ECTION 10(21) OF THE ACT CAN BE GRANTED TO THE ASSESSEE. 2.4 IN THE ASSESSMENT ORDER DATED 31/03/2014, PASSE D UNDER SECT ION 143 (3) OF THE ACT , THE ASSESSING OFFICER PARTICULARLY MENTIONED THAT THE ASSESSEE HAD FILED ITS RETURN OF INCOME BY CLAIMING BENEF IT UNDER SECTION 10(21) OF THE ACT , AND THE EXEMPTION UNDER SAID SECTION BECOMES INADMISSIBLE DURING THE PERIOD UNDER ASSESSMENT. ALTERNATIVELY, HE ALSO OBSERVED THAT THE RECEIPTS ARISING OUT OF ACTIVITY OF THE ASSESSEE , ARE IN THE NATURE OF BUSINESS OR COMMERCE AND FALLS UNDER THE LIMB ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY AND ACCORDINGLY , BOTH THE PROVIS O S TO SECTION 2(15) ARE APPLICABLE IN THE CASE AS THE AGGREGATE VALUE OF RECEIPTS ARE MORE THAN RS. 10 LACS . 2.5 THE ASSESSING OFFICER ALSO DISALLOWED REP AYMENT OF LOAN AMOUNTING TO RS.2 , 50,00,000 / - TO THE WORLD B ANK AS AN APPLICATION OF INCOME FOR THE OBJECTS OF THE TRUST. 2.6 IN ADDITION TO THE ABOVE DISALLOWANCE, HE ALSO MADE OTHER DISALLOWANCE S ; HOWEVER, THE SAME ARE NOT IN DISPUT E BEFORE THE T RIBUNAL. 2.7 ON FURTHER APPEAL, THE LD. CIT(A) ALLOWED THE EXEMPT ION UNDER SECTION 11(1) OF THE ACT RELYING ON THE DECISION OF THE HON BLE DELHI HIGH COURT IN THE CASE OF INDIA TRADE PROMOTION ORGANIZATION VS. DGIT (E) , 53 TAXMANN.COM 404 (DELHI). THE FINDING OF THE LD . CIT(A) IS REPRODUCED AS UNDER : 5 ITA NO.6629/DEL/2015 3.3 I HAVE CONSIDERED THE ORDER OF THE AO AND THE SUBMISSIONS OF THE ASSESSEE AND I FIND CONSIDERABLE MERIT IN THE SUBMISSIONS OF THE ASSESSEE. THE ASSESSEE IS A CHAR ITABLE SOCIETY AND IS INVOLVED FOR THE PROMOTION SCIENTIFIC RESEARCH AND ENGAGED IN THE GENERAL PUBLIC ACTIVITY. 3.4 RECENTLY THE HON'BLE DELHI HIGH COURT IN THE CASE OF INDIA TRADE PROMOTION ORGANIZATION VS. DGIT(E), 53 TAXMANN.COM 404 (DELHI) 2015 (ORDER DATED 22/01/2015) HAS UPHELD THE CONSTITUTION VALIDITY OF THE PROVISO OF SECTION 2(15) WHICH WAS UNDER CHALLENGE BEING DISCRIMINATORY IN VIEW OF THE ARTICLE 14 (EQUALITY BEFORE LAW) OF THE CONSTITUTION OF INDIA BUT THE HON'BLE HIGH COURT HAS READ DOWN THE STRICT AND LITERAL INTERPRETATION OF THE PROVISO OF SECTION 2(15) AND HAS HELD THAT MERE RECEIPT OF FEE OR CHARGE CANNOT BE SAID THAT THE ASSESSEE IS INVOLVED IN ANY TRADE, COMMERCE OR BUSINESS AND HAS ACCORDINGLY ALLOWED THE RELIEF TO THE ITPO CASE VIDE PARA 58 AND 59 OF THE ORDER. 3.5 AFTER CONSIDERING ALL THE FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE VIEW THAT THERE IS NO PROPER JUSTIFICATION FOR DENYING THE EXEMPTION AND THE PROVISO OF SECTION 2(15) IS NOT ATTRACTED IN THIS CASE AND ACCORDINGLY THE AO IS DIRECTED TO ALLOW THE E XEMPTION U/S 11(1) WITH ALL THE CONSEQUENTIAL BENEFITS. THE ADDITIONAL GROUND OF APPEAL TAKEN BY THE ASSESSEE IS ALLOWED. 2.8 THE LD. CIT(A) ALSO ALLOWED EXEMPTI ON UNDER SECTION 10(21) OF THE ACT, RELYING ON THE DECISION OF THE T RIBUNAL DATED 16/11/2004 FOR ASSESSMENT YEAR S 1997 - 97 TO 1998 - 99. THE LD. CIT(A) ALSO ALLOWED REPAYMENT OF LOAN AS APPLICATION OF INCOME. 2.9 AGGRIEVED, THE R EVENUE IS IN APPEAL BEFORE THE T RIBUNAL RAISING THE GROUNDS A S REPRODUCED ABOVE. 3. THE FIRST GROUND OF THE A PPEAL RELATES TO EXEMPTION ALLOWED UNDER SECTION 1 1(1) OF THE ACT. IN GROUND NO. 2 OF THE APPEAL, THE 6 ITA NO.6629/DEL/2015 R EVENUE HAS CHALLENGED ADMITTING OF ADDITIONAL GROUND FOR ALLOWING EXEMPTION UNDER SECTION 11( 1) OF THE ACT BY THE LD. CIT(A), WITHOUT GIVING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. IN GROUND NO.2 , IT IS M ENTIONED THAT IN V IEW OF RULE 46A OF INCOME TAX R ULES, 1962 , THE ASSESSING OFFICER SHOULD HAVE BEEN GIVEN OPPORTUNITY TO COMMENT/COUNTER THE ADDITIONAL GROUNDS. 3.1 IN RELATION TO GROUND NO. 2 , THE LD. DR AGREED THAT RULE 46A OF THE R ULES IS RELATED TO ADDITIONAL EVIDENCES AND NOT RELATED TO ADDITIONAL GROUND RAISED, BUT HE SUBMITTED THAT THE ASSESSING OFFICER SHOULD HAVE BEEN PROVIDED OPPORTUNITY OF BEING HEARD ON THE ADDITIONAL GROUND RAI SED BEFORE THE LD. CIT(A). ON THE CONTRARY, THE LD. COUNSEL SUBMITTED THAT THE APP ELLATE AUTHORITY CAN ADMIT A LEGAL GROUND RAISED AT ANY STAGE OF APPEAL A S HELD BY THE HON BLE SUPREME COURT IN THE CASE OF NTPC LTD. VS CIT 229 ITR 383. 3.2 IN RELATION TO GROUND NO. 1, THE LD. DR SUBMITTED THA T IN THE RETURN OF INCOME FILED, THE ASSESSEE CLAIMED ONLY EXEMPTI ON UNDER SECTION 10(21) OF THE ACT AND THEREFORE , THE ASSESSING OFFICER HAS NOT EXAMINED THE QUESTION OF EXEMPTION U/S 11(1) OF THE ACT IN THAT PERSPEC TIVE AND DID NOT MAKE ENQUIRIES FOR DECIDING ALLOW ABILITY OF EXEMPT ION UNDER SECTION 11(1) OF THE ACT . HE FURTHER SUBMITTED THAT THE LD. CIT(A) HAS NOT COMPARED THE FACTS OF THE CASE OF THE A SSESSEE WITH THE CASE OF INDIA TRADE P ROMOTION ORGANIZATION (SUPRA) RELIE D UPON BY HIM. ACCORDING TO HIM , IN ABSENCE OF FACTUAL ANALYSIS OF THE CASE IN HAND, THE RELIANCE PLACED BY THE LD. CIT(A) ON THE DECISION OF THE HON BLE HIGH COURT 7 ITA NO.6629/DEL/2015 IS NOT JUSTIFIED AND THE ISSUE NEED TO BE RESTORED TO THE FILE OF THE LD. CIT( A) FOR DECIDING A FRESH. 3.3 THE LD. COUNSEL , ON THE OTHER HAND , SUBMITTED THAT THE FINDING THAT PROVISO TO SECTION 2(15) OF THE ACT IS NOT ATTRACTED IN THE CASE OF THE ASSESSEE, I S A MATTER OF FACT FINDING AND NOTHING CONTRARY HAS BEEN BROUGHT ON RECORD BY THE LD. DR AND , THUS , THE FINDING OF THE LD. CIT(A) SHOULD BE UPHELD. 3.4 WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE NOTE THAT BEFORE THE LD. CIT(A) THE ASSESSEE RAISE D THE ADDITIONAL GROUND FOR ALLOWING EXEMPT IO N UNDER SECTION 11(1) OF THE ACT . THE LD. CIT(A) ADJUDICATED THIS ADDITIONAL GROUND WITHOUT MENTIONING , WHETHER HE ADMITTED OR NOT. THE ASSESSING OFFICER DID NOT ADJUDICATE THE ALLOWABILITY OF EXEMPTION U/S 11(1) OF THE ACT, EXPRESSLY. BEFORE ADJUDICATING ON THE ISSUE , T HE LD. CIT(A) HAS ALSO NOT CALLED FOR ANY COMMENTS OR OBJECTION FROM THE ASSESSING OFFICER IN RESPECT OF THE GROUND, WHICH IN OUR OPINION IS IN VIO LATION OF PRINCIPLE OF NATURAL J USTICE. WE ALSO NOTE THAT THE ASSESSING OFFICER, IN THE ASSESS MENT ORDER , HAS MAINLY FOCUSED ON THE EXEMPTION UNDER SECTION 10(21) OF THE ACT , WHICH WAS CLAIMED BY THE ASSESSEE IN THE RETURN OF INCOME. THE ASSESSEE HAS NOT MADE ANY CLAIM OF EXEMPTION UNDER SECTION 11(1) OF THE ACT IN THE RETURN OF INCOME. THE ASSESS ING OFFICER HAS GIVEN HISTORICAL BACKGROUND OF THE EXEMPTION CLAIMED UNDER SECTION 11(1) OF THE ACT, WHICH WAS CLAIMED UP TO THE ASSESSMENT YEAR 2008 - 09. IN OUR OPINION, THOUGH THE ASSESSING OFFICER HAS GIVEN REFERENCE TO SECTION 2(15) OF THE ACT AND ITS PROVISO, THE FACT S OF THE CASE HAVE NOT BEEN EXAMINED FROM THE PERSPECTIVE OF CLAIM OF THE ASSESSEE UNDER SECTION 11(1) OF THE ACT . 8 ITA NO.6629/DEL/2015 WE HAVE ALSO NOTED THAT THE LD. CIT(A) HAS ALSO NOT MADE ANY ANALYSIS OF THE FACT S OF THE CASE IN HAND AND COMPARIS ON OF THE FACT S OF THE CASE OF INDIA TRADE PROMOTION ORGANIZATION (SUPRA) RELIED UPON BY HIM. THE KIND OF ACTIVITY CARRIED OUT DURING THE YEAR UNDER CONSIDERATION AND , WHETHER THE SAME ARE HIT BY THE PROVISO TO SECTION 2(15) OF THE ACT , NEED TO BE EXAMINED PROPERLY BEFORE ARRIVING AT ANY CONCLUSION , WHETHER THE ASSESSEE WAS ENGAGED IN ANY KIND OF ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS . IN VIEW OF THE FACT , WE FEEL IT APPROPRIATE TO RESTORE THIS ISSUE TO THE FILE OF THE LD. CIT(A) FOR DECIDING AFRESH IN ACCORDANCE WITH LAW AFTER PROVIDING OPPORTUNITY OF BEING HEARD TO BOTH THE ASSESSEE AS WELL AS TO THE ASSESSING OFFICER. THUS , THE GROUND NO. 2 OF THE APPEAL IS ALLOWED, WHEREAS THE GROUND NO. 1 OF THE APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 4. THE GROUND NO. 3 OF THE APPEAL RELATES TO EXEMPTION UNDER SECTION 10(21) OF THE ACT , WHICH H A S B E E N ALLOWED BY THE LD. CIT(A) FOLLOWING THE ORDER OF THE T RIBUNAL DATED 16/11/2004. 4.1 BEFORE US, THE LD. DR SUBMITTED THAT WHETHER THE ASSESSEE HAS BEEN NOTIF IED UNDER SECTION 35(1)(II) OF THE ACT BY THE CBDT AS S CIENTIFIC R ESEARCH ASSOCIATION, IS NOT CLEAR IN VIEW OF THE PENDENCY OF THE REVIEW P ETITION OF THE CBDT STATED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. ACCORDING TO HIM, THE LD. CIT(A) HAS NO T VERIFIED THIS FACTUAL MATRIX AND , THEREFORE , MATTER MIGHT BE RESTORED TO HIM FOR DECIDING AFTER VERIFYING THE FACTUAL POSITION OF THE REVIEW P ETITION AND ANY SUBSEQUENT ORDER PASSED BY THE CBDT. 4.2 ON THE CONTRARY, THE LD. COUNSEL OF THE ASSESS EE, RELIED ON THE ORDER OF THE T RIBUNAL DATED 07/03/2018 FOR ASSESSMENT YEARS 9 ITA NO.6629/DEL/2015 2009 - 10 AND 2010 - 11, WHEREIN THE ASSESSEE HAS BEEN ALLOWED EXEMPTION UNDER SECTION 10(21) OF THE ACT, FOLLOWING THE EARLIER ORDER OF THE TRIBUNAL DATED 16/11/2004 FOR ASSESSMENT YEAR 1996 - 97 TO 1998 - 99. 4.3 WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE NOTE THAT THE T RIBUNAL , IN ORDER DATED 07/03/2018 IN ITA NO. 2681 AND 2682/DEL/2015 , HAS RELIED MAINLY ON THE ORDER DATED 16/11/2004 OF THE TRIBUNA L. THE T RIBUNAL IN ORDER DATED 07.03.2018 HAS NOT TAKEN INTO CONSIDERATION THE STATUS OF THE LITIGATION PENDING BEFORE THE HON BLE DELHI HIGH COURT REGARDING NOTIFICATION OF THE ASSESSEE UNDER SCIENTIFIC RESEARCH ASSOCIATION . IN THE FACTS AND CIRCUMSTANC ES OF THE CASE, WE FEEL IT APPROPRIATE TO RESTORE THIS ISSUE TO THE FILE OF THE LD. CIT(A) FOR VERIFYING THE STATUS OF LITIGATION IN THE MATTER OF NOTIFYING THE ASSESSEE AS SCIENTIFIC R ESEARCH ASSOCIATION AND , THEREAFTER , TO TAKE A DECISION IN ACCORDANCE WITH LAW AFTER PROVIDING OPPORTUNITY OF BEING HEARD TO BOTH THE PARTIES. T HE GROUND OF THE APPEAL OF THE R EVENUE IS, ACCORDINGLY , ALLOWED FOR STATISTICAL PURPOSES. 5. IN GROUND NO. 4, THE R EVENUE HAS CHALLENGED THE APPLICATION OF LOAN REPAYMENT ALLOWED B Y THE LD. CIT(A) TOWARDS INCOME. 5.1 THE LD. DR SUBMITTED THAT THIS ISSUE HAS BEEN DECID ED AGAINST THE ASSESSEE BY THE TRIBUNAL IN ITA NO. 920/D EL/2012 FOR ASSESSMENT YEAR 2008 - 09. 5.2 THE LD. C OUNSEL OF THE ASSESSEE ALSO ACCEPTED THAT THE ISSUE IN DISPUT E HAS BEEN DECID ED AGAINST THE ASSESSEE BY THE T RIBUNAL IN ASSESSMENT YEAR 2008 - 09. BUT THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT RECENTLY THAT THE HON BLE SUPREME COURT IN THE 10 ITA NO.6629/DEL/2015 CASE OF RAJASTHAN AND GUJARATI CHARITABLE F OUNDATI ON, POONA (2018) 253 TAXMAN 165, HAS ALLOWED APPLICATION OF DEPRECIATION IN RESPECT OF THE ASSETS, ALTHOUGH THE EXPENDITURE FOR ACQUISITION OF THE CAPITAL ASSET WAS ALREADY ALLOWED AS APPLICATION OF INCOME FOR CHARITABLE PURPOSES. ACCORDING TO HIM, FOLLOWI NG THE ABOVE DECISION, THE REPAYMENT OF LOAN SHOULD ALSO BE ALLOWED TO THE ASSESSEE. 5.3 WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE ISSUE OF APPLICATION OF LOAN REPAYMENT AGAINST THE INCOME FOR CHARITABLE PURPOSES HAS BEEN DISCUSSED AT LENGTH IN THE CASE OF THE ASSESSEE IN ITA NO. 920/D EL/2012 FOR ASSESSMENT YEAR 2008 - 09. THE RELEVANT EXTRACT OF THE SAID ORDER ARE REPRODUCED AS UNDER: 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ADDITIONAL EVIDENCES HAVE BEEN FILED BY THE ASSESSEE IN COMPLIANCE TO THE DIRECTION OF THE HON BLE COURT, WHICH IS NECESSARY FOR DISPOSAL OF THIS APPEAL AND, THEREFORE, WE ADMIT THESE ADDITIONAL EVIDENCES UNDER RULE 29 OF THE INCOME - TAX (APPELLATE TRIBUNA L) RULES, 1963. WE ALSO FIND THAT THE LEARNED DEPARTMENTAL REPRESENTATIVE WAS ALLOWED SUFFICIENT TIME TO GO THROUGH THOSE EVIDENCES, HOWEVER, SHE DID NOT RAISE ANY OBJECTIONS IN RESPECT OF RELIABILITY OF THOSE EVIDENCES. 14. FROM THE FACTS OF THE CASE, W E FIND THAT LOAN UNDER REFERENCE WAS SANCTIONED IN THE YEAR 1990 AND FINAL AMOUNT OF DISBURSEMENT OF THE LOAN WAS RECEIVED BY THE ASSESSEE COMPANY IN MARCH, 1996. ON PERUSAL OF THE STATEMENT OF INCOME FILED FOR THE ASSESSMENT YEARS 1992 - 93 TO 1999 - 2000 D URING WHICH THE LOAN WAS RECEIVED BY THE ASSESSEE, WE FIND THAT APPARENTLY THE LOAN UNDER REFERENCE RECEIVED FROM WORLD BANK HAS NOT BEEN SHOWN AS INCOME IN ANY OF THE YEAR CONCERNED. FURTHER, WE FIND FROM THE STATEMENT OF TOTAL INCOME THAT THE COST OF FIX ED ASSETS ACQUIRED DURING THE RELEVANT YEARS 11 ITA NO.6629/DEL/2015 HAS BEEN CLAIMED AS APPLICATION OF INCOME. IN THE NOTE APPENDED TO DEPRECIATION CHART FOR THE ASSESSMENT YEAR 1992 - 93 ENCLOSED ALONG WITH THE BALANCE SHEET AND PROFIT AND LOSS ACCOUNT, IT IS MENTIONED THAT ADDIT IONS INCLUDE ASSETS AMOUNTING TO RS.91,31,124/ - (PREVIOUS YEAR RS.75,50,597/ - ) PURCHASED UNDER THE INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA LTD. (TECHNOLOGY SERVICE REVOLVING FUND) SCHEME. SIMILAR NOTES HAVE BEEN PROVIDED IN CASE OF OTHER ASS ESSMENT YEARS INVOLVED. THE ASSESSMENT YEAR WISE DEDUCTION CLAIMED FOR COST OF FIXED ASSET IS AS UNDER . SL. NO. ASSESSMENT YEAR COST OF FIXED ASSET CLAIMED AS DEDUCTION (IN RS.) 1. 1992 - 93 1,73,58,448/ - 2. 1993 - 94 1,08,17,964/ - 3. 1994 - 95 1,10,97,687/ - 4. 1995 - 96 1,86,70,264/ - 5. 1996 - 97 3,30,21,268/ - 6. 1997 - 98 2,01,21,185/ - 7. 1998 - 99 2,72,73,985/ - 15. FURTHER, ON PERUSAL OF THE STATEMENT OF COMPUTATION OF INCOME, WE FIND THAT IN THE ASSESSMENT YEARS FROM 1992 - 93 TO ASSESSMENT YEAR 1998 - 99, THE DEPRECIATION PROVIDED IN THE BOOKS OF ACCOUNTS HAS BEEN REDUCED FROM THE EXPENDITURE CLAIMED TOWARDS APPLICATION OF INCOME, WHICH MEANS THE DEPRECIATION HAS NOT BEEN CLAIMED AS APPLICATION OF INCOME. FROM THE ASSESSMENT YEAR 1999 - 2000 ONW ARDS TILL THE ASSESSMENT YEAR UNDER CONSIDERATION ALSO THE DEPRECIATION HAS NOT BEEN CLAIMED TOWARDS APPLICATION OF THE INCOME. 16. IN VIEW OF ABOVE OBSERVATIONS, IT IS CLEAR THAT THE ASSESSEE HAS NOT SHOWN THE LOANS RECEIVED AS ITS INCOME OR RECEIPT, IN THE YEAR IN WHICH SUCH LOAN WAS RECEIVED BY THE ASSESSEE AND, THEREFORE, THE REPAYMENT ALSO CANNOT BE ALLOWED AS AN EXPENDITURE OR APPLICATION OF INCOME. FURTHER, WE FIND THAT LOAN MONEY OBTAINED HAS BEEN SHOWN AS APPLICATION ON ACQUISITION OF FIXED ASSETS AND, THEREFORE, THE ASSESSEE HAS ALREADY CLAIMED LOAN AS DEDUCTION OR APPLICATION OF INCOME AND THEREFORE, IN OUR OPINION, ALLOWING APPLICATION OF REPAYMENT OF LOAN WILL AMOUNT TO DOUBLE DEDUCTION. 12 ITA NO.6629/DEL/2015 17. AS REGARD THE CBDT CIRCULAR, THE HON BLE SUPREME COURT IN THE CASE OF CIT VS. RAJENDRA PODDAR CHARITABLE TRUST (1987) 164 ITR 666 HAS HELD THAT CIRCULAR IN QUESTION CANNOT OVERRIDE THE LAW. THE RELEVANT FINDINGS OF THE APEX COURT ARE AS UNDER: 18. WE ARE ENTIRELY UNABLE TO UPHOLD THIS CONTENTION. WHEN THE INCOME OF A CHARITABLE TRUST IS SET APART OR ACCUMULATED, IT CAN ONLY BE WITH THE OBJECT OF APPLICATION OF THE AMOUNT FOR CHARITABLE PURPOSES. THE RELIEF GRANTED BY S. 11(1)(A) IS LIMITED ONLY TO CASES WHERE ACCUMULATION HAS BEEN MADE OF ONLY 25 PER CENT OF THE INCOME OF A PARTICULAR YEAR. THE MERE FACT THAT THE ASSESSEE HAD APPLIED ITS ACCUMULATED INCOME OF THE EARLIER YEARS FOR THE PURPOSE OF CHARITY WILL NOT ABSOLVE THE ASSESSEE OF ITS DUTY TO APPLY ITS INCOME FOR THE PURPOSE OF CHAR ITY IN THE CURRENT YEAR NOR WILL IT ENLARGE THE LIMIT OF THE AMOUNT WHICH IS PERMITTED TO BE ACCUMULATED BY S. 11(1)(A). AN ASSESSEE MAY BORROW MONEY AND SPEND IT FOR CHARITABLE OBJECT. THE CIRCULAR MERELY RECOGNISES THAT IN SUCH A CASE, APPLICATION OF INC OME FOR REPAYMENT OF A LOAN TAKEN FOR CHARITABLE PURPOSE WILL AMOUNT TO APPLICATION OF INCOME FOR CHARITABLE PURPOSE. THE CIRCULAR, HOWEVER, DOES NOT PERMIT AN ASSESSEE TO ACCUMULATE MORE THAN 25 PER CENT OF ITS INCOME OR RS. 10,000, WHICHEVER IS HIGHER (F OR THE PURPOSE OF CHARITY). THE WORDING OF S. 11 IS CLEAR AND UNAMBIGUOUS. THE RELIEF IS LIMITED TO THE AMOUNT OF INCOME OF A CHARITABLE TRUST ACTUALLY APPLIED FOR CHARITABLE PURPOSE. ACCUMULATION OF INCOME IS PERMITTED ONLY TO THE EXTENT AND SUBJECT TO TH E CONDITIONS LAID DOWN IN THAT SECTION. AN ASSESSEE CAN ACCUMULATE OR SET APART ONLY 25 PER CENT OF THE INCOME OF THE TRUST OR RS. 10,000, WHICHEVER IS HIGHER, IN A GIVEN YEAR. THE CIRCULAR DOES NOT SEEK TO AND CANNOT ENLARGE THE SCOPE OF THE SECTION. (EM PHASIS SUPPLIED BY US) 18. IN VIEW OF DISCUSSION ABOVE, IN COMPLIANCE TO THE DIRECTIONS OF THE HON BLE HIGH COURT, WE HOLD THAT THE ASSESSEE HAS ALREADY BEEN ALLOWED COST OF ADDITION TO ASSET ACQUIRED OUT OF THE LOANS AS APPLICATION OF INCOME IN RELEVANT YEARS AND 13 ITA NO.6629/DEL/2015 THEREFORE ASSESSEE CANNOT BE ALLOWED THE REPAYMENT OF LOAN AS APPLICATION OF THE INCOME, ACCORDINGLY WE UPHOLD THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) ON THE ISSUE IN DISPUTE. 5.4 THE MAIN ISSUE IN THE CASE OF THE ASSESSEE IS THAT LOANS RECEIVED OR THE MONEY BORROWED BY THE ASSESSEE HAS NOT BEEN SHOWN AS INCOME AT ANY POINT OF TIME BY THE ASSESSEE. THE FIXED ASSETS ACQUIRED OUT OF THE LOAN OR THE BORROWED MONEY HAVE ALREADY BEEN C LA IMED AS APPLICATION OF INCOME . IN SUBSEQUENT YEARS, T HE ASSESSEE STARTED RE PAYING THE LOANS TO THE LENDERS . NOW, THE ASSESSEE WANTS TO CLAIM REPAYMENT OF THE LOAN AS APPLICATION TOWARDS THE INCOME FOR CHARITABLE PURPOSES. IN NORMAL COURSE OF BUSINESS , LOAN S RECEIVED BY THE ASSESSEE ARE NOT PART OF THE PROFIT AND LOSS ACCOUNT. THE LOANS RECEIVED ARE REFLECTED IN THE BALANCE SHEET . SIMILARLY, THE LOAN REPAID IS ALSO NOT PART OF THE PROFIT AND LOSS ACCOUNT IN NORMAL COURSE OF THE ACCOUNTING. THE SECTION 29 OF THE ACT PROVIDES THAT INCOME UNDER THE HEAD PROFIT AND GAINS OF BUSINESS SHALL BE COMPUTED IN ACCORDANCE WITH SECTION 30 TO SECTION 43C OF THE ACT. THE REPAYMENT OF LOAN IS NOT AN ALLOWABLE DEDUCTION AGAINST PROFIT AND GAINS OF THE BUSI NESS EVEN UNDER SECTION 30 TO 43 C OF THE ACT. IN THE CASE OF RAJASTHAN GUJARATI C HARITABLE F OUNDATION (SUPRA) , THE HON BLE SUPREME COURT ALLOWED THE APPLICATION OF THE DEPRECIATION, WHICH BEING ALLOWABLE AS ONE OF THE ITEM S UNDER THE HEAD PROFIT AND GAINS OF THE BUSINESS . THE HON BLE COURT HELD THAT NORMAL DEPRECIATION CAN BE CONSIDERED AS LEGITIMATE DEDUCTION IN COMPUTING THE REAL INCOME OF THE ASSESSEE ON GENERAL PRINCIPLE OR UNDER SECTION 11(1)(A) OF THE ACT . BUT , WE FIND 14 ITA NO.6629/DEL/2015 THAT , THE REPAYMENT OF THE LOA N IS NOT ALLOWED IN THE PROFIT AND LOSS ACCOUNT EVEN UNDER TH E GENERAL PRINCIPLES. THEREFORE, IN OUR OPINION, THE RATIO OF THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF RAJASTHAN GUJARAT I CHARITABLE F OUNDATION, POONA (SUPRA) IS NOT APPLICABLE AN D THE ASSESSEE IS NOT ELIGIBLE FOR APPLICATION OF LOAN REPAYMENT AGAINST THE INCOME FOR CHARITABLE PURPOSES. WE ALSO NOTE THAT THE T RIBUNAL IN ORDER DATED 07/ 03/2018 IN ITA NO. 2681 & 2682/D EL/2015 HAS ALSO DISALLO WED APPLICATION OF LOAN REPAYMENT FOLLOWIN G THE ORDER OF THE T RIBUNAL DATED 30/09/2016 IN IT A NO. 920/DEL/2016. IN VIEW OF THE AFORESAI D DISCUSSION, THE GROUND OF APPEAL OF THE R EVENUE IS ALLOWED. 6. THE GROUND NO. 5 OF THE APPEAL IN GENERAL IN NATURE, WE ARE NOT REQUIRED TO ADJUDICATE UPON. 7. IN THE RESULT, APPEAL OF THE R EVENUE IS ALLOWED PARTLY FOR STATISTICAL PURPOSES. THE DECISION IS PRONOUN CED IN THE OPEN COURT ON 3 0 T H MAY , 201 8 . S D / - S D / - ( AMIT SHUKLA ) ( O.P. KANT ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 3 0 T H MAY , 201 8 . RK / - (D.T.D . ) COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR ASST. REGISTRAR, ITAT, NEW DELHI