DCIT (E) 2(1), NAVI MUMBAI V. PADMASHREE DR.D.Y. PATIL UNIVERSITY, MUMBAI

ITA 6636/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1300 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2017
• Appeal Filed By: Department
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 11-11-2016
• Court: TRIBUNAL
• Department Lawyers: BEENA SANTOSH
• Keywords: Depreciation; Charitable institution
• Section: 143(3); 32; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM ITA NO. 6636 / MUM/20 1 6 ( ASSESSMENT YEAR : 2012 - 13 ) DCIT (E) 2 (1), NAVI MUMBAI 400 706 VS. PADMASHREE DR. D.Y. PATIL UNIVERSITY, R.NO.519, 5 TH FLOOR, PIRAMAL CHAMBER , LALBAUG, LOWER PAREL, MUMBAI 400 077 PAN/GIR NO. APPELLANT ) .. RESPONDENT ) REVENUE BY MS. BEENA SANTOSH ASSESSEE BY NONE DATE OF HEARING 20 / 04/ 201 7 DATE OF PRONOUNCEME NT 20 / 04 /201 7 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) - 1, MUMBAI DATED 17/08/2016 FOR THE A.Y. 2012 - 13, IN THE MATTER OF ORDER PASSED U/S. 143(3) OF THE IT ACT. 2. THE ONLY GRIEVANCE OF REVENUE RELATES TO ALLOWING ASSESSEES CLAIM OF DEPRECIATION ON FIXED ASSETS. 3. NOBODY APPEARED ON BEHALF OF THE ASSESSEE, THE BENCH DECIDED TO DISPOSE THE APPEAL IN SO FAR AS ISSUE UNDER CONSIDERATION IS COVERED BY THE ORDER OF BOMBAY HIGH COURT IN CASE OF INSTITUTE OF BANKING AND PERSONNEL SELECTION 264 ITR 110. ITA NO. 6636/MUM/2016 PADMASHREE DR. D.Y. PATIL UNIVERSITY 2 4. FACTS IN BRIEF ARE THAT ASSESSEE IS A CHARITABLE TRUST REGISTERED U/S.12A. DURING THE COURSE OF SCRUTINY ASSESSMENT, AO DECLINED ASSESSEES CLAIM OF DEPRECIATION, WHICH WAS ALLOWED BY CIT(A) AFTER OBSERVING A S UNDER: - 5.2 I HAVE CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE, GONE THROUGH TH E ASSESSMENT ORDER OF THE A. O AND THE SUBMISSIONS OF THE APPELLANT AND ALSO DISCUSSED THE CASE WITH THE AR OF THE APPELLANT. THE CONTENTIONS AND SUBMISSIONS OF THE APPE LLANT ARE BEING DISCUSSED AND DECIDED HERE IN UNDER: I. AN IDENTICAL ISSUE HAD ARISEN IN APPELLANT'S OWN CASE FOR A.Y. 2010 - 11 WHEREIN MY ID. PREDECESSOR VIDE ORDER DATED 8.1.2015 HAS DECIDED THE ISSUE OBSERVING AS UNDER: '5.2 I HAVE CONSIDERED THE FAC TS AND CIRCUMSTANCES OF THE CASE, THE ASSESSMENT ORDER OF THE A.O AND THE SUBMISSIONS OF THE APPELLANT. THE APPELLANT HAS RELIED ON THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN CIT VS. INSTITUTE OF BANKING PERSONNEL SELECTION (2003) 264 ITR 110 . THE HON. HIGH COURT HAS DECIDED THIS ISSUE RAISED IN GROUND NO. 1 OF THE REFERENCE BEFORE HON. HIGH COURT IN THE FOLLOWING MANNER - 3. AS STATED ABOVE, THE FIRST QUESTION WHICH REQUIRES CONSIDERATION BY THIS COURT IS W HETHER DEPRECIATION WAS ALLOWABLE ON THE ASSETS, THE COST OF WHICH HAS BEEN FULLY ALLOWED AS APPLICATION OF INCOME UNDER SECTION 11 IN THE PAST YEARS? IN THE CASE OF CIT V. MUNISUVRAT JAIN 1994 TAX LAW REPORTER, 1084 THE FACTS WERE AS FOLLOWS. THE ASSESSEE WAS A CHARITABLE TRUST. IT WAS RE GISTERED AS A PUBLIC CHARITABLE TRUST. IT WAS ALSO REGISTERED WITH THE COMMISSIONER, PUNE. THE ASSESSEE DERIVED INCOME FROM THE TEMPLE PROPERTY WHICH WAS A TRUST PROPERTY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEARS 1977 - 78, 1978 - 79 AN D 1979 - 80, THE ASSESSEE CLAIMED DEPRECIATION ON THE VALUE OF THE BUILDING AT THE RATE OF 2.5 PER CENT AND THEY ALSO CLAIMED DEPRECIATION ON FURNITURE AT THE RATE OF 5 PER CENT. THE QUESTION WHICH AROSE BEFORE THE COURT FOR DETERMINATION WAS: WHETHER DEPREC IATION COULD BE DENIED TO THE ASSESSEE, AS EXPENDITURE ON ACQUISITION OF THE ASSETS HAD BEEN TREATED AS APPLICATION OF INCOME IN THE YEAR OF ACQUISITION? IT WAS HELD BY THE BOMBAY HIGH COURT THAT SECTION 11 OF THE INCOME TAX ACT MAKES PROVISION IN RESPECT OF COMPUTATION OF INCOME OF THE TRUST FROM THE PROPERLY HELD FOR CHARITABLE OR RELIGIOUS PURPOSES AND IT ALSO PROVIDES FOR APPLICATION AND ACCUMULATION OF INCOME. ON THE OTHER HAND, SECTION 28 OF THE INCOME TAX ACT DEALS WITH CHARGEABILITY OF ITA NO. 6636/MUM/2016 PADMASHREE DR. D.Y. PATIL UNIVERSITY 3 INCOME FROM P ROFITS AND GAINS OF BUSINESS AND SECTION 29 PROVIDES THAT INCOME FROM PROFITS AND GAINS OF BUSINESS SHALL BE COMPUTED IN ACCORDANCE WITH SECTION 30 TO SECTION 43C, THAT, SECTION 32(1) OF THE ACT PROVIDES FOR DEPRECIATION IN RESPECT OF BUILDING, PLANT AND M ACHINERY OWNED BY THE ASSESSEE AND USED FOR THE BUSINESS PURPOSES. IT FURTHER PROVIDES FOR DEDUCTION SUBJECT TO SECTION 34. IN THAT MATTER ALSO, A SIMILAR ARGUMENT, AS IN THE PRESENT CASE, WAS ADVANCED ON BEHALF OF THE REVENUE, NAMELY, THAT DEPRECIATION CA N BE ALLOWED AS DEDUCTION ONLY UNDER SECTION 32 OF THE INCOME TAX ACT AND NOT UNDER GENERAL PRINCIPLES. THE COURT REJECTED THIS ARGUMENT. IT WAS HELD THAT NORMAL DEPRECIATION CAN BE CONSIDERED AS A LEGITIMATE DEDUCTION IN COMPUTING THE REAL INCOME OF THE A SSESSEE ON GENERAL PRINCIPLES OR UNDER SECTION 11(1)(A) OF THE INCOME TAX ACT. THE COURT REJECTED THE ARGUMENT ON BEHALF OF THE REVENUE THAT - SECTION 32 OF THE INCOME TAX ACT WAS THE ONLY SECTION GRANTING BENEF IT OF DEDUCTION ON ACCOUNT OF DEPRECIATION. I T WAS HELD THAT INCOME OF A CHARITABLE TRUST DERIVED FROM BUILDING, PLANT AND MACHINERY AND FURNITURE WAS LIABLE TO BE COMPUTED IN NORMAL COMMERCIAL MANNER ALTHOUGH THE TRUST MAY NOT BE CARRYING ON ANY BUSINESS AND THE ASSETS IN RESPECT WHEREOF DEPRECIATIO N IS CLAIMED MAY NOT BE BUSINESS ASSETS. IN ALL SUCH CASES, SECTION 32 OF THE INCOME TAX ACT PROVIDING FOR DEPRECIATION FOR COMPUTATION OF INCOME DERIVED FROM BUSINESS OR PROFESSION IS NOT APPLICABLE. HOWEVER, THE INCOME OF THE TRUST IS REQUIRED TO BE COMP UTED UNDER SECTION 11 ON COMMERCIAL PRINCIPLES AFTER PROVIDING FOR ALLOWANCE FOR NORMAL DEPRECIATION AND DEDUCTION THEREOF FROM GROSS INCOME OF THE TRUST. IN VIEW OF THE AFORESTATED JUDGMENT OF THE BOMBAY HIGH COURT, WE ANSWER QUESTION NO. 1 IN THE AFFIRMA TIVE I.E., IN FAVOUR OF THE ASSESSE E AND AGAINST THE DEPARTMENT. (2003 131 TAXMAN 386 BOM) THUS RESPECTFULLY FOLLOWING THE DECISION OF THE HON. JURISDICTIONAL HIGH COURT, THE A. 0 IS DIRECTED TO ALLOW THE DEPRECIATION. ACCORDINGLY GROUND NO. 1 AND 2 OF APPEAL ARE ALLOWED. II. AS THERE IS NO CHANGE IN FACTS, OBSERVATIONS OF THE AO IN THE ASSESSMENT ORDER AND SUBMISSIONS OF THE APPELLANT IN THE YEAR UNDER CONSIDERATION AS COMPARED TO A.Y. 2010 - 11, THE AO IS DIRECTED TO FOLLOW THE ABOVE FINDINGS FOR THIS Y EAR AS WELL AFTER DUE VERIFICATION OF FACTS. III. THE GROUNDS OF APPEAL NO. 1, 2 AND 3 ARE THEREFORE ALLOWED. ITA NO. 6636/MUM/2016 PADMASHREE DR. D.Y. PATIL UNIVERSITY 4 5. AS THE ISSUE UNDER CONSIDERATION IS COVERED BY THE DECISION OF JURISDICTIONAL HIGH COURT IN CASE OF INSTITUTE OF BANKING PERSONNEL (SUPRA), WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A) ALLOWING ASSESSEES CLAIM OF DEPRECIATION. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 20 / 04 /2017 S D/ - ( R.C.SHA RMA ) ACCOUNTANT MEMBER MUMBAI ; DATED 20 / 04 /201 7 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//