DCIT (E) 1(1), MUMBAI V. K J SOMAIYA MEDICAL TRUST, MUMBAI

ITA 6646/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8249 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 11-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Keywords: Depreciation; Charitable institution; Tax effect; Capital expenditure
• Section: 143(3); 12A; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B, MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH , JUDICIAL MEMBER ITA NO. 6646/MUM/2016 : A.Y : 2012 - 13 DY. CIT (EXEMPTIONS) - 1(1), MUMBAI (APPELLANT) VS. K.J. SOMAIYA MEDICAL TRUST SOMAIYA BHAVAN, 45 - 47, MAHATMA GANDHI ROAD, MUMBAI 400 001 (RESPONDENT) PAN : AAATK4296Q APPELLANT BY : SHRI SUMAN KUMAR RESPONDENT BY : MS. ARATI VISSANJI DATE OF HEARING : 07/11/2017 DATE OF PRONOUNCEMENT : 30 /11/2017 O R D E R PER G.S. PANNU , AM : THE CAPTIONED APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF CIT(A) - 1, MUMBAI DATED 25.08.2016 PERTAINING TO THE ASSESSMENT YEAR 2012 - 13 , WHICH IN TURN HAS ARISEN FROM THE ORDER PASSED BY THE ASSESSING OFFICER DATED 27.03.2015 UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. IN ITS APPEAL, REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 2 K.J. SOMAIYA MEDICAL TRUST ITA NO. 6646 /MUM/2016 1. WHETHER ON THE FACTS OF THE CASE AND IN LAW THE ID.CIT(A) ERRED IN ALLOWING THE APPEAL OF THE ASS ESSEE ON ACCOUNT OF DISALLOWING DEPRECIATION ON FIXED ASSETS OF RS. 69,43,629/ - IN CONTRAVENTION OF THE DECISION OF ESCORTS LTD. VS. UOI 199 ITR 43 WHEREIN IT WAS HELD THAT SINCE SECTION 11 OF THE INCOME TAX ACT PROVIDES FOR DEDUCTION CAPITAL EXPENDITURE I NCURRED ON ASSETS ACQUIRED FOR THE OBJECTS OF THE TRUST AS APPLICATION AND DOES NOT SPECIFICALLY & EXPRESSLY PROVIDE FOR DOUBLE DEDUCTION ON ACCOUNT OF DEPRECIATION ON THE SAME VERY ASSETS ACQUIRED FROM SUCH CAPITAL EXPENDITURE, NO DEDUCTION SHALL BE ALLOW ED U/S.32 FOR THE SAME OR ANY OTHER PREVIOUS YEAR IN RESPECT OF THAT ASSET AS IT AMOUNTS TO CLAIMING A DOUBLE DEDUCTION. 2. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT(A)ERRED IN ALLOWING THE DEPRECIATION, WHEN THE DEL HI HIGH COURT IN THE CASE OF CHARANJIV CHARITABLE TRUST AND KERALA HIGH COURT IN THE CASE OF LISSIE MEDICAL INSTITUTIONS VS CIT 76 DTR (KER) 372 HAS DECIDED THE ISSUE IN THE FAVOUR OF THE DEPARTMENT AFTER CONSIDERING THE DECISION OF HON'BLE SUPREME COURT I N THE CASE OF ESCORTS LTD (199 ITR 43). 3. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT(A) ERRED RELYING UPON THE JUDGEMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS INSTITUTE OF BANKING PERSONNEL SERVICES WITHOUT APPRECIATING THE FACT THAT DEPARTMENT HAS NOT ACCEPTED THE DECISION ON MERIT, BUT DUE TO SMALLNESS OF TAX EFFECT APPEAL WAS NOT FILED BEFORE HON'BLE SUPREME COURT. HOWEVER, THE ISSUE IS PENDING FOR ADJUDICATION BEFORE HON'BLE SUPREME COURT IN OTHER CASES. 4. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A), MUMBAI ERRED IN ALLOWING THE PHARMACY SHOP'S INCOME U/S 11(4A) OF THE INCOME TAX ACT, DISALLOWED BY THE AO, HELD THAT ACTIVITY OF RUNNING A PHARMACY SHOP IS INCIDENT AL TO THE ATTAINMENT OF THE OBJECTS OF THE TRUST AS WELL AS RUNNING SHOP IS NOT A PLANNED ACTIVITY, THOUGH ASSESSEE IS PAYING VAT ON SALES, WITH AN INTENTION OF EARNING INCOME SIDE BY SIDE. 5. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE AND IN LAW THE ID.CIT(A) ERRED IN RELYING UPON THE ORDER OF PREDECESSOR FOR A.Y. 2010 - 11, IN ASSESSEE'S OWN CASE WITHOUT APPRECIATING THE FACT THAT DEPARTMENT HAS NOT 3 K.J. SOMAIYA MEDICAL TRUST ITA NO. 6646 /MUM/2016 ACCEPTED THE DECISION ON MERIT AND FILED APPEAL BEFORE HON'BLE ITAT, WHICH IS PENDING. 6. TH E APPELLANT PRAYS THAT THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - I, MUMBAI BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. ALTHOUGH THE REVENUE HAS RAISED MULTIPLE GROUNDS OF APPEAL, BUT THE DISPUTE INVOLVED IN THIS APPEAL IS O N TWO ISSUES. FIRSTLY, THE REVENUE IS AGGRIEVED BY THE DECISION OF THE CIT(A) IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE BENEFIT OF DEPRECIATION. SECONDLY, THE REVENUE IS AGGRIEVED BY THE DECISION OF CIT(A) IN DELETING THE ADDITION ON ACCOUNT OF INC OME FROM RUNNING THE PHARMACY SHOP. 4. IN THIS BACKGROUND, NOW WE MAY REFER TO THE RELEVANT FACTS. THE RESPONDENT - ASSESSEE IS A CHARITABLE ORGANISATION REGISTERED U/S 12A OF THE ACT AND IS ENGAGED IN ACTIVITIES OF CHARITABLE NATURE. THE ASSESSING OFFICE R NOTICED THAT ASSESSEE HAD CLAIMED DEPRECIATION ALLOWANCE OF RS. 69,43,629 / - ON THE COST OF FIXED ASSETS, WHEREAS SUCH COST OF FIXED ASSETS HAS ALSO BEEN TAKEN AS AN APPLICATION OF INCOME WHILE COMPUTING THE TOTAL INCOME. ACCORDING TO THE ASSESSING OFFICE R, THIS AMOUNTED TO A DOUBLE DEDUCTION AND HE, THEREFORE, DISALLOWED THE ASSESSEES CLAIM FOR DEPRECIATION. THE CIT(A) HAS SINCE ALLOWED THE CLAIM OF THE ASSESSEE FOLLOWING THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF INSTITUTE OF BANKING PERSONNEL SELECTION, 264 ITR 110 (BOM) . 5. BEFORE US, THE ONLY PLEA OF THE DEPARTMENT IS THAT THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF INSTITUTE OF BANKING PERSONNEL SELECTION (SUPRA) HAS NOT BEEN ACCEPTED BY THE DEPARTMENT 4 K.J. SOMAIYA MEDICAL TRUST ITA NO. 6646 /MUM/2016 ON MERITS AND ON SIMILAR ISSUE, A SLP NO. 9891 OF 2014 HAS BEEN FILED BEFORE THE HON'BLE SUPREME COURT IN THE CASE OF MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION (MIDC) . FURTHER, IT IS CONTESTED THAT ALLOWING OF DEPRECIATION WOULD AMOUNT TO A DOUBLE DEDUCTION, W HICH WAS IMPERMISSIBLE HAVING REGARD TO THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF ESCORTS LTD., 199 ITR 43 (SC) . 6. WE FIND THAT THE DECISION IN THE CASE OF ESCORTS LTD. (SUPRA) BEING RELIED UPON BY THE REVENUE BEFORE US HAS BEEN CONSIDERED BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF INDRAPRASTHA CANCER SOCIETY, (2014) 112 DTR 345 DATED 18.11.2014, WHEREIN IT HAS BEEN OPINED THAT THE ALLOWANCE OF DEPRECIATION IN SIMILAR SITUATION WOULD NOT AMOUNT TO A DOUBLE DEDUCTION. FURTHER, IT IS NOT ED THAT THE HON'BLE DELHI HIGH COURT IN THE CASE OF VISHWA JAGRITI MISSION, ITA NO. 140/2012 DATED 29.3.2012 ALSO ALLOWED A SIMILAR CLAIM AFTER ANALYSING THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF ESCORTS LTD. (SUPRA) , WHICH IS BEING RELIED U PON BY THE REVENUE. THE HON'BLE SUPREME COURT HAS ALSO DISMISSED THE SLP FILED BY THE DEPARTMENT AGAINST THE SAID DECISION OF THE HON'BLE DELHI HIGH COURT VIDE SLP NO. 19321 OF 2013. WE FIND THAT THE HON'BLE BOMBAY HIGH COURT SUBSEQUENT TO THE DECISION I N THE CASE OF INSTITUTE OF BANKING PERSONNEL SELECTION (SUPRA) CONSIDERED A SIMILAR ARGUMENT OF THE REVENUE IN THE CASE OF M/S. MUMBAI EDUCATION TRUST, ITA NO. 11/2014 DATED 3.5.2016 AND ALLOWED THE CLAIM OF THE ASSESSEE. IN FACT, ONE OF THE GROUND OF APP EAL URGED BY THE REVENUE BEFORE THE HON'BLE HIGH COURT, WHICH READ S AS UNDER : - 5 K.J. SOMAIYA MEDICAL TRUST ITA NO. 6646 /MUM/2016 (A) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE AND IN LAW, THE TRIBUNAL WAS JUSTIFIED IN CONFIRMING THE ORDER OF THE CIT(A) TO ALLOW THE CLAIM OF DEPRECIATION RELYING ON THE DECISION OF THIS COURT IN THE CASE OF CIT V/S. INSTITUTE OF BANKING PERSONNEL SERVICES REPORTED IN 264 ITR 110 (BOM) IGNORING THE RATIO OF HON'BLE SUPREME COURT JUDGMENT IN THE CASE OF ESCORTS LTD. V/S. UNION OF INDIA (199 ITR 43) WHEREIN HO N'BLE SUPREME COURT HAS HELD THAT DOUBLE DEDUCTION CANNOT BE PRESUMED IF THE SAME IS NOT SPECIFICALLY PROVIDED BY LAW, IN ADDITION TO NORMAL DEDUCTION? STAND ON SAME FOOTING AS ARE BEING CANVASSED IN GROUNDS OF APPEAL NO. 1 TO 3 BEFORE US IN THE INSTANT CASE. THUS, THERE IS NO ERROR ON THE PART OF THE CIT(A) IN FOLLOWING THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF INSTITUTE OF BANKING PERSONNEL SELECTION (SUPRA) AND ALLOWING THE STAND OF THE ASSESSEE. THE OTHER ARGUMENT TAKEN BY THE REVENUE THAT ITS SLP FILED BEFORE THE HON'BLE SUPREME COURT IS PENDING ON A SIMILAR ISSUE IS OF NO CONSEQUENCE INASMUCH AS THE BINDING JUDGMENTS OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF INSTITUTE OF BANKING PERSONNEL SELECTION (SUPRA) AS WELL AS IN THE CASE OF M/S. MUMBAI EDUCATION TRUST (SUPRA) CONTINUE TO SUBSIST. THEREFORE, IN THIS BACKGROUND, WE FIND NO MERIT IN THE GROUND RAISED BY THE REVENUE AND THE SAME IS ACCORDINGLY DISMISSED. 7 . INSOFAR AS THE SECOND ISSUE RAISED BY THE REVENUE WITH REGARD TO DELETION OF ADDITION OF INCOME FROM RUNNING THE PHARMACY SHOP IS CONCERNED, WE FIND THAT THE ISSUE IS FULLY COVERED BY THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF BAUN FOUNDATION TRUST , (2013) 251 CTR (BOM) AND M/S. FRANCISCAN SISTERS OF ST. JOSEPH SOCIETY NO. VIII VS. JCIT(E) IN ITA NO. 1897(MDS)/2013 AY 2009 - 10 , WHICH HAS 6 K.J. SOMAIYA MEDICAL TRUST ITA NO. 6646 /MUM/2016 BEEN FOLLOWED BY THE CIT(A) IN DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. THEREFORE, ON THIS ASPECT ALSO, WE FIND NO ERROR ON THE PART OF THE CIT(A) IN ALLOWING THE CLAIM OF THE ASSESSEE, WHICH WE HEREBY AFFIRM. 8 . RESULTANTLY, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 3 0 T H NOVEMBER, 2017. SD/ - SD/ - ( PAWAN SINGH ) JUDICIAL MEMBER (G.S. PANNU) ACCOUNTANT MEMBER MUMBAI, DATE : 3 0 T H NOVEMBER , 201 7 *SSL* COPY TO : 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT(A) CONCERNED 4) THE CIT CONCERNED 5) THE D.R, B BENCH, MUMBAI 6) GUARD FILE BY ORDER DY./ASSTT. REGISTRAR I.T.A.T, MUMBAI