M/s. Kiwanis Club of New Delhi, New Delhi V. ITO, New Delhi

ITA 6769/DEL/2014

• Counselvise Citation: 676920114 RSA 2014
• Duration Of Justice: 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 2
• Next Hearing Date: 14-07-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 15-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANOJ KUMAR CHOPRA
• Assessee Lawyers: PAWAN KUMAR ASSTT TO
• Keywords: Capital asset; Depreciation; Charitable institution; Capital expenditure
• Section: 12AA; 32; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : SMC-2 NEW DELHI BEFORE SHRI J.SUDHAKAR REDDY ACCOUNTANT MEMBER ITA NO: 6769/DEL/2014 ASSTT. YEAR : - 2010-11 KIWANIS CLUB OF NEW DELHI VS. ITO B-35, QUTAB INSTITUTIONAL AREA TRUST WARD-IV NEW DELHI 110 016 NEW DELHI. (PAN AAATK1181A) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PAWAN KUMAR. ASSTT. TO ADVOC ATE RESPONDENT BY :SHR I MANOJ KUMAR CHOPRA, SR. DR DATE OF HEARING :14 .7.2015 DATE OF PRONOUNCEMENT: 17.7.2 015 O R D E R PER J.SUDHAKAR REDDY, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE DI RECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) DATED 9.10.20 14 FOR THE ASSESSMENT YEAR 2010-11 ON THE FOLLOWING GROUNDS :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN C ONFIRMING THE ADDITION OF RS. 8,68,723/- MADE BY THE AO WITHOUT A PPRECIATING THAT THE DEPRECIATION IS TO BE TREATED AS APPLICATION OF INC OME FOR THE PURPOSE OF SECTION 11 OF THE INCOME TAX ACT AS HAS BEEN DECIDE D IN VARIOUS COURT CASES AS UNDER :- - AS PER CIT VS. SETH MANILAL RANCHHODDAS VISHRAM B HAVAN TRUST (1992) 105 CTR (GUJ.) 303, AND - ITA NO. 6769/DEL/2014 M/S. KIWANIS CLU B OF NEW DELHI VS. CIT 2 - CIT VS TINY TOTS EDUCATION SOCIETY (2010) 191, TAXM AN 49 (DELHI-TRIB) (MAG.). A TRUST CAN CLAIM DEPRECIATION ON ASSETS EVEN IF THE COST OF ASSETS HAS BEEN FULLY ALLOWED AS APP LICATION OF INCOME UNDER SECTION 11 IN PAST YEARS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN IGNORING THE JUDGMENT OF THE HO NBLE ITAT DELHI IN THE CASE OF ITO(E) VS. S.D. COLLEGE SOCIETY (LAHORE ) ITA NO. 3640/DEL/2012 AS SUBMITTED BEFORE HIM. 2. I HAVE HEARD SHRI MANOJ KUMAR CHOPRA, SR. DR ON BEHALF OF THE REVENUE. SHRI PAWAN KUMARS REQUEST FOR ADJOURNMENT IS REJECTED AND THE CASE IS DISPOSED OFF EX PARTE ON MERITS. 3. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND A PERUSAL OF THE PAPERS ON RECORD AND THE ORDERS OF T HE AUTHORITIES BELOW I HOLD AS FOLLOWS :- 4. FACTS OF THE CASE :- THE FACTS EMANATING FROM THE ORDER OF THE AO AND T HE SUBMISSIONS OF THE ASSESSEE IS THAT THE ASSESSEE IS A CHARITABLE SOCIE TY REGISTERED UNDER THE SOCIETY REGISTRATION ACT, 1860 AND IS ALSO REGISTER ED U/S 12AA(1) OF THE INCOME TAX ACT, 1961 DATED.....THE ASSESSEE IS A CH ARITABLE SOCIETY AND IS INVOLVED IN MANUFACTURING AND SUPPLYING OF ARTIFICI AL LIMBS TO THE PEOPLE FREE OF COST. THE ASSESSEE ENJOYS THE EXEMPTION U/S 11(1 ) BUT HAS ALSO CLAIMED DEPRECIATION ON THE CAPITAL ASSETS/FIXED ASSETS. TH E AO HAS DENIED THE CLAIM OF DEPRECIATION OF RS. 8,68,723/- MAINLY ON THE GRO UND THAT THE ASSESSEE HAS ALREADY CLAIMED THE APPLICATION OF MONEY FOR THE PU RCHASE OF CAPITAL ASSET IN THE INCOME AND EXPENDITURE ACCOUNT AND AS SUCH IT I S A DOUBLE DEDUCTION AND THE SAME ASSETS VIDE THE ORDER OF THE AO. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF THE AO AND IT IS SUBMITTED THAT THE AO IS NOT JUSTIFIED TO DISALLOW THE DEPRECIATIO N AS THE SAME IS CLAIMED ON THE COMMERCIAL PRINCIPLES AND THE ASSESSEE ALSO REL IED ON VARIOUS CASE LAWS IN SUPPORTS OF ITS CLAIM. ITA NO. 6769/DEL/2014 M/S. KIWANIS CLU B OF NEW DELHI VS. CIT 3 5. THE FIRST APPELLATE AUTHORITY CONFIRMED TH E ACTION OF THE AO BY HOLDING AS FOLLOWS:- 3.2. I HAVE CONSIDERED THE ORDER OF THE AO AND TH E SUBMISSIONS OF THE ASSESSEE AND I DO NOT FIND ANY MERIT IN THE SUB MISSIONS OF THE ASSESSEE. THE ASSESSES LIKE CHARITABLE OR RELIGIOUS INSTITUTIONS ARE GOVERNED BY THE INDEPENDENT PROVISIONS OF SECTIONS 11,12,12A, 12AA & 13 AND THESE PROVISIONS ARE INDEPENDENT CODES UNDER CHAPTER 3 OF THE INCOME TAX ACT, 1961. THE INCOME AND EXPENDITURE IS COMPUTED ON THE BASIS OF APPLICATION OF INCOME FOR CHARITABLE O R RELIGIOUS PURPOSES AND THE DEDUCTION IS ALLOWED OF THE ENTIRE EXPENDIT URE INCLUDING THE EXPENDITURE FOR PURCHASE OF CAPITAL ASSETS U/S 11(1 ). THE CLAIM OF DEPRECIATION U/S 32 COMES UNDER CHAPTER 4 OF THE I. T. ACT, 1961 UNDER THE HEAD D PROFITS AND GAINS OF BUSINESS OR PRO FESSION AND THE DEPRECIATION IS ALLOWED WHEN THE CAPITAL ASSETS ARE USED WHOLLY OR PARTLY FOR THE PURPOSE OF BUSINESS. IN THE CASE OF CHARITABLE OR RELIGIOUS INSTITUTIONS THE ASSESSE IS NOT ELIGIBLE FOR ANY TY PE OF DEPRECIATION AS THE ENTIRE EXPENDITURE FOR THE PURCHASE OF THE CAP ITAL ASSETS IS ALLOWED AS A DEDUCTION AND THE SAME IS TREATED AS APPLICATI ON OF INCOME U/S 11(1) AND CLAIMING THE DEPRECIATION ON THE SAME CAP ITAL ASSETS IS A DOUBLE DEDUCTION AND IS NOT AS PER LAW AS THESE CAP ITAL ASSETS ARE NOT USED FOR THE PURPOSE OF BUSINESS OR PROFESSION. THE HONBLE DELHI HIGH COURT IN THE CASE OF DIT (EXEMPTION) VS. CHARANJIV CHARITABLE TRUST IN IT APPEAL NO. 321 TO 323 OF 2013 VIDE THE ORDER DAT ED 18.3. 2014 HAS HELD THAT THE DEPRECIATION IS NOT ALLOWABLE IN THE CASE OF CHARITABLE OR RELIGIOUS INSTITUTIONS VIDE PARA 30. AFTER CONSIDER ING ALL THE FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE VIEW THAT IT IS NOT ONLY ILLEGAL BUT ALSO IMMORAL AND UNETHICAL TO CLAIM DEPRECIATIO N ON THE CAPITAL ASSETS AS THE ENTIRE CAPITAL EXPENDITURE HAS BEEN C LAIMED AS A DEDUCTION AND AS APPLICATION OF INCOME U/S 11(1) AN D AS SUCH THERE IS NO MERIT IN THE SUBMISSIONS OF THE ASSESSEE AND ACC ORDINGLY THE SAME IS DISMISSED. 6. AGGRIEVED THE ASSESSEE IS IN APPEAL. AFTER H EARING RIVAL CONTENTIONS WE FIND THAT THE JURISDICTIONAL HIGH COURT IN THE CASE OF DIRECT OR INCOME TAX VS. JAGRITI MISSION (2013) 262 CTR 558 (DEL) HELD AS FOLLOWS :- ALLOWABILITY OF DEPRECIATION ON FIXED ASSETS UTILI ZED FOR THE CHARITABLE PURPOSE-SOCIETY REGISTERED U/S 12A-HELD THAT :- HAV ING REGARD TO THE CONSENSUS OF JUDICIAL OPINION ON THE PRECISE QUESTI ON IT IS HELD THAT CLAIM OF DEPRECIATION ON FIXED ASSETS UTILIZED FOR THE CHARITABLE PURPOSES HAS TO BE ALLOWED WHILE ARRIVING AT THE IN COME AVAILABLE FOR APPLICATION TO CHARITABLE AND RELIGIOUS PURPOSES, S INCE THE INCOME OF ITA NO. 6769/DEL/2014 M/S. KIWANIS CLU B OF NEW DELHI VS. CIT 4 THE SOCIETY SHOULD BE COMPUTED ON THE BASIS OF COMM ERCIAL PRINCIPLES. ORDER OF TRIBUNAL UPHELD APPEAL OF REVENUE DISMIS SED. 7. RESPECTFULLY FOLLOWING THIS BINDING DECIS ION I UPHOLD THE CONTENTION OF THE ASSESSEE AND ALLOW THIS APPEAL. 8. IN THE RESULT APPEAL OF THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH JULY, 2015. SD/- (J. SUDHAKAR REDDY) ACCOUNTANT MEMBER DATED: THE 17 TH JULY 2015 VEENA COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GUARD FILE BY ORDER DY. REGISTRAR SL. NO. DESCRIPTION DATE 1. DATE OF DICTATION BY THE AUTHOR 14.7.2015 2. DRAFT PLACED BEFORE THE DICTATING MEMBER 16.7.2 015 3. DRAFT PLACED BEFORE THE SECOND MEMBER 4. DRAFT APPROVED BY THE SECOND MEMBER 5. DATE OF APPROVED ORDER COMES TO THE SR. PS 6. DATE OF PRONOUNCEMENT OF ORDER 7. DATE OF FILE SENT TO THE BENCH CLERK 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER