ITO (E) 2(2), MUMBAI V. RUSTOM IRANI FOUNDATION IDEAL FARM, MUMBAI

ITA 69/MUM/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5435 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Appeal Filed On: 04-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAM TIWARI LD
• Assessee Lawyers: SATISH R MODYLD
• Keywords: Depreciation; Charitable institution; Tax effect; Capital expenditure
• Section: 143(3); 12A; 32; 28; 11

Judgement Text

ITA NO.69/MUM/2017 RUSTOM IRANI FOUNDATION ASSESSMENT YEAR-2012-13 IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI , , BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO.69/MUM/2017 ( / ASSESSMENT YEAR: 2012-13) INCOME TAX OFFICER ( EXEMPTIONS ) - 2(2) ROOM NO.502, 5 TH FLOOR PIRAMAL CHAMBERS, LALBAUG LOWER PAREL, MUMBAI-400 077 / VS. RUSTOM IRANI FOUNDATION IDEAL FARM, WEST OF RAILWAY LINE DAHISAR(W) MUMBAI-400 068 ./ PAN : AAATR-2735-D ( ! /APPELLANT ) : ( '# ! / RESPONDENT ) A SSESSEE BY : SATISH R. MODY, LD. AR RE VENUE BY : RAM TIWARI, LD. DR / DATE OF HEARING : 19/07/2018 / DATE OF PRONOUNCEMENT : 25/07/2018 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY REVENUE FOR ASSESSMENT YEAR [AY] 2012-13 CONTEST THE ORDER OF THE LD. COMMISSIONER OF INCOME -TAX (APPEALS)-1 [CIT(A)], MUMBAI, APPEAL NO.CIT(A)-I/IT/E-II(106)/2015-16 DATED 14/10/2016 BY RAISING THE FOLLOWING EFFECTIVE GROUN DS OF APPEAL: - ITA NO.69/MUM/2017 RUSTOM IRANI FOUNDATION ASSESSMENT YEAR-2012-13 2 1. WHETHER ON THE FACTS OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN ALLOWING THE APPEAL OF THE ASSESSEE ON ACCOUNT OF DISALLOWIN G DEPRECIATION ON FIXED ASSETS OF RS.95,97,199/- IN CONTRAVENTION OF THE DE CISION OF ESCORTS LTD. V. UOI 199 ITR 43 WHEREIN IT WAS HELD THAT SINCE SECTION 1 1 OF THE INCOME TAX ACT PROVIDES FOR DEDUCTION CAPITAL EXPENDITURE INCURRED ON ASSETS ACQUIRED FOR THE OBJECTS OF THE TRUST AS APPLICATION AND DOES NOT SP ECIFICALLY & EXPRESSLY PROVIDE FOR DOUBLE DEDUCTION ON ACCOUNT OF DEPRECIATION ON THE SAME VERY ASSETS ACQUIRED FROM SUCH CAPITAL EXPENDITURE, NO DEDUCTIO N SHALL BE ALLOWED 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 APPEAL, WHEN THE DELHI HIGH COURT IN THE CASE OF CHIRANJIV CHARITABLE TRUST AND KERALA HIGH COURT IN THE CASE OF LISSIE MEDICAL INSTITUTIONS VS CIT 6 DTR (KER) 372 HAS DECIDED THE ISSUE IN THE FAVOUR OF THE DEPARTMENT AFTER CONSIDERING THE DECISION OF HONBL E SUPREME COURT IN 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 IN RELYING UPON THE JUDGMENT OF HONBL E HIGH COURT IN THE CASE OF CIT VS INSTITUTE OF BANKING PERSONNEL SELECTION WIT HOUT APPRECIATING THE FACT THAT DEPARTMENT HAS NOT ACCEPTED THE DECISION ON ME RIT, BUT DUE TO SMALLNESS OF TAX EFFECT APPEAL WAS NOT FILED BEFORE HONBLE S UPREME COURT. ALSO THE LD. CIT(A) ERRED IN RELYING UPON THE JUDGMENT OF HONBL E HIGH COURT IN THE CASE OF CIT VS. SHRI VILE-PARLE KELVANI MANDAL, WITHOUT APP RECIATING THE FACT THAT DEPARTMENT HAS NOT ACCEPTED THE DECISION ON MERIT A ND FILED SLP, BUT SUBSEQUENTLY WITHDRAWN THE SAME AS THERE WAS NO CLA IM OF DEPRECIATION ON EXEMPTED ASSETS. 4. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING THE CLAIM OF DEPRECIATION WITHOUT APPRECIATING THE FACT THAT REVENUE HAS FILED SLPS IN OTHER CASES INCLUSIV E THE CASE OF G.D. BIRLS MEDICAL RESEARCH & EDUCATIONAL FOUNDATION (S.L.P.(C ) NO. 24904 OF 2016 (CA.NO. 8294 OF 2016) IN WHICH LEAVE HAS BEEN GRANT ED AND THE ISSUE IS PENDING FOR ADJUDICATION IN ALL THE CASES BEFORE TH E HONBLE APEX COURT. 5. WHETHER ON THE FACTS OF THE CASE AND IN LAW THE LD.CIT(A) ERRED IN ALLOWING THE CARRY FORWARD OF DEFICIT OF RS.27,72,434/- AND ALLOWING SET OFF AGAINST THE INCOME OF THE SUBSEQUENT YEARS. 6. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING THE CLAIM OF THE ASSESSEE FOR CARRY FORWARD FOR THE SAID DEFICIT, IGNORING THE FACT THAT THERE WAS NO EXPRES S PROVISION IN THE IT ACT, 1961 PERMITTING ALLOWANCE OF SUCH CLAIM. 7. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING THE CLAIM OF THE ASSESSEE FOR CARRY FORWARD OF THE SAID DEFICIT BY RELYING UPON THE JUDGMENT OF HONBLE BOM BAY HIGH COURT IN THE CASE OF INSTITUTE OF BANKING PERSONNEL SELECTION, IGNORI NG THE FACT THAT EH DEPARTMENT HAS NOT ACCEPTED THE SAID DECISION OF TH E JURISDICTIONAL HIGH COURT ON MERIT OF THE CASE, BUT DUE TO SMALLNESS OF TAX E FFECT APPEAL WAS NOT FILED BEFORE HONBLE SUPREME COURT. HOWEVER, ON THIS ISSU E THE DEPARTMENT HAS FILED SLPS BEFORE THE APEX COURT IN OTHER CASES INC LUSIVE OF THE CASE OF MIDC(SPL (CIVIL) 9891 OF 2014) IN WHICH LEAVE HAS B EEN GRANTED AND THE ISSUE IS PENDING FOR ADJUDICATION IN ALL CASES BEFO RE THE HONBLE SUPREME COURT. 8. THE APPELLANT PRAYS THAT THE ORDER OF THE COMMIS SIONER OF INCOME TAX (APPEALS)-I, MUMBAI BE SET ASIDE AND THAT OF THE AS SESSING OFFICER BE RESTORED. 9. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. ITA NO.69/MUM/2017 RUSTOM IRANI FOUNDATION ASSESSMENT YEAR-2012-13 3 THE ASSESSMENT FOR IMPUGNED AY WAS FRAMED BY LD. INCOME TAX OFFICER [EXEMPTIONS]-2(2), MUMBAI [AO] U/S. 143(3) OF THE I NCOME TAX ACT, 1961 ON 18/03/2015 WHEREIN THE INCOME OF THE ASSESSEE TR UST HAS BEEN ASSESSED AT RS.68.21 LACS AS AGAINST NIL RETURN FILED BY THE ASSESSEE ON 26/09/2012 ALONG WITH INCOME AND EXPENDITURE ACCOUNT, BALANCE SHEET AND AUDIT REPORT IN FORM NO.10B. THE ASSESSEE TRUST WAS REGISTERED U/S 12A UNDER INCOME TAX AS WELL AS WITH CHARITY COMMISSIONER MUMBAI AND STATE TO BE ENGAGED IN THE FIELD OF EDUCATION. 2.1 DURING ASSESSMENT PROCEEDINGS, IT WAS NOTED THA T THE ASSESSEE CLAIMED DEPRECIATION OF RS.95.97 LACS ON CERTAIN FI XED ASSETS, THE PURCHASE OF WHICH WAS ALSO CLAIMED AS APPLICATION O F TRUST INCOME AND THEREFORE, THE SAME, IN THE OPINION OF LD. AO, AMOU NTED TO DOUBLE DEDUCTION. THE ASSESSEE DEFENDED THE SAME ON THE ST RENGTH OF CERTAIN JUDICIAL PRONOUNCEMENTS, HOWEVER, NOT CONVINCED, LD . AO DISALLOWED THE AFORESAID DEPRECIATION OF RS.95.97 LACS. 2.2 THE SECOND ISSUE IS RELATED WITH SET-OFF OF BRO UGHT FORWARD LOSSES OF RS.27.72 LACS PERTAINING TO EARLIER YEARS WHICH HAV E BEEN DENIED BY LD. AO IN TERMS OF STATUTORY PROVISIONS AS CONTAINED IN SECTION 11, 72 & 74A. 3. AGGRIEVED, THE ASSESSEE CONTESTED THE SAME WITH SUCCESS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 14/10/2016 WHE REIN BOTH THE CLAIM OF THE ASSESSEE WERE ALLOWED IN TERMS OF JUDG MENT OF HONBLE BOMBAY HIGH COURT RENDERED IN INSTITUTE OF BANKING PERSONNEL 264 ITR 110. AGGRIEVED, THE REVENUE IS IN FURTHER APPEAL BEFORE US. 4. THE LD. AUHTORIZED REPRESENTATIVE FOR ASSESSEE [ AR], SHRI SATISH R.MODY SUBMITTED THAT THE CASE WAS SQUARELY COVERED BY THE DECISION OF ITA NO.69/MUM/2017 RUSTOM IRANI FOUNDATION ASSESSMENT YEAR-2012-13 4 HIGHER JUDICIAL AUTHORITIES WHEREAS LD. DEPARTMENTA L REPRESENTATIVE [DR], SHRI RAM TIWARI, SUPPORTED THE REASONING OF LD. AO. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED RELEVANT MATERIAL ON RECORD. SO FAR AS THE DEPRECIATION CLAIM IS CONC ERNED, WE FIND THAT THE ISSUE SQUARELY STANDS COVERED IN ASSESSEES FAVOR B Y THE RECENT DECISION OF HONBLE SUPREME COURT TITLED AS CIT VS. RAJASTHAN & GUJARATI CHARITABLE FOUNDATION, POONA [89 TAXMANN.COM 127] WHICH HAS BEEN RENDERED AFTER CONSIDERING THE DECISIONS OF CIT V. INSTITUTE OF BANKING PERSONNEL SELECTION (IBPS) [2003] 131 TAXMAN 386 (B OM.) & LISSIE MEDICAL INSTITUTIONS V. CIT [2012] [348 ITR 344 (KE R.)]. THE HONBLE COURT HAS CONCLUDED THE MATTER IN THE FOLLOWING MANNER:- 2. AFTER HEARING LEARNED COUNSEL FOR THE PARTIES, W E ARE OF THE OPINION THAT THE AFORESAID VIEW TAKEN BY THE BOMBAY HIGH COURT CORRE CTLY STATES THE PRINCIPLES OF LAW AND THERE IS NO NEED TO INTERFERE WITH THE SAME. 3. IT MAY BE MENTIONED THAT MOST OF THE HIGH COURTS HAVE TAKEN THE AFORESAID VIEW WITH ONLY EXCEPTION THERETO BY THE HIGH COURT OF KE RALA WHICH HAS TAKEN A CONTRARY VIEW IN 'LISSIE MEDICAL INSTITUTIONS V. CIT [2012] 24 TAXMANN.COM 9/209 TAXMAN 19 (MAG.)/348 ITR 344 (KER.)'. 4. IT MAY ALSO BE MENTIONED AT THIS STAGE THAT THE LEGISLATURE, REALISING THAT THERE WAS NO SPECIFIC PROVISION IN THIS BEHALF IN THE INCOME TAX ACT, HAS MADE AMENDMENT IN SECTION 11(6) OF THE ACT VIDE FINANCE ACT NO. 2/201 4 WHICH BECAME EFFECTIVE FROM THE ASSESSMENT YEAR 2015-2016. THE DELHI HIGH COURT HAS TAKEN THE VIEW AND RIGHTLY SO, THAT THE SAID AMENDMENT IS PROSPECTIVE IN NATURE. 5. IT ALSO FOLLOWS THAT ONCE ASSESSEE IS ALLOWED DE PRECIATION, HE SHALL BE ENTITLED TO CARRY FORWARD THE DEPRECIATION AS WELL. 6. FOR THE AFORESAID REASONS, WE AFFIRM THE VIEW TA KEN BY THE HIGH COURTS IN THESE CASES AND DISMISS THESE MATTERS. RESPECTFULLY FOLLOWING THE SAME, WE DISMISS THE GRO UNDS RAISED BY THE REVENUE IN THIS REGARD. 6. SO FAR AS THE SET-OFF OF BROUGHT FORWARD BUSINES S LOSSES ARE CONCERNED, WE FIND THAT THIS ISSUE ALSO STAND SQUAR ELY COVERED BY THE DECISION OF HONBLE BOMBAY HIGH COURT RENDERED IN CIT V. INSTITUTE OF ITA NO.69/MUM/2017 RUSTOM IRANI FOUNDATION ASSESSMENT YEAR-2012-13 5 BANKING PERSONNEL SELECTION (IBPS) [2003] 131 TAXMA N 386 (BOM.) W HEREIN THE HONBLE COURT HAS HELD AS UNDER:- 5. NOW COMING TO QUESTION NO. 3, THE POINT WHICH AR ISES FOR CONSIDERATION IS: WHETHER EXCESS OF EXPENDITURE IN THE EARLIER YEARS CAN BE ADJUSTED AGAINST THE INCOME OF THE SUBSEQUENT YEAR AND WHETHER SUCH ADJU STMENT SHOULD BE TREATED AS APPLICATION OF INCOME IN SUBSEQUENT YEAR FOR CHARIT ABLE PURPOSES? IT WAS ARGUED ON BEHALF OF THE DEPARTMENT THAT EXPENDITURE INCURRED IN THE EARLIER YEARS CANNOT BE MET OUT OF THE INCOME OF THE SUBSEQUENT YEAR AND TH AT UTILIZATION OF SUCH INCOME FOR MEETING THE EXPENDITURE OF EARLIER YEARS WOULD NOT AMOUNT TO APPLICATION OF INCOME FOR CHARITABLE OR RELIGIOUS PURPOSES. IN THE PRESEN T CASE, THE ASSESSING OFFICER DID NOT ALLOW CARRY FORWARD OF THE EXCESS OF EXPENDITUR E TO BE SET OFF AGAINST THE SURPLUS OF THE SUBSEQUENT YEARS ON THE GROUND THAT IN THE C ASE OF A CHARITABLE TRUST, THEIR INCOME WAS ASSESSABLE UNDER SELF-CONTAINED CODE MEN TIONED IN SECTION 11 TO SECTION 13 OF THE INCOME-TAX ACT AND THAT THE INCOM E OF THE CHARITABLE TRUST WAS NOT ASSESSABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUS INESS' UNDER SECTION 28 IN WHICH THE PROVISION FOR CARRY FORWARD OF LOSSES WAS RELEV ANT. THAT, IN THE CASE OF A CHARITABLE TRUST, THERE WAS NO PROVISION FOR CARRY FORWARD OF THE EXCESS OF EXPENDITURE OF EARLIER YEARS TO BE ADJUSTED AGAINST INCOME OF SUBSEQUENT YEARS. WE DO NOT FIND ANY MERIT IN THIS ARGUMENT OF THE DEPAR TMENT. INCOME DERIVED FROM THE TRUST PROPERTY HAS ALSO GOT TO BE COMPUTED ON COMME RCIAL PRINCIPLES AND IF COMMERCIAL PRINCIPLES ARE APPLIED THEN ADJUSTMENT O F EXPENSES INCURRED BY THE TRUST FOR CHARITABLE AND RELIGIOUS PURPOSES IN THE EARLIE R YEARS AGAINST THE INCOME EARNED BY THE TRUST IN THE SUBSEQUENT YEAR WILL HAVE TO BE REGARDED AS APPLICATION OF INCOME OF THE TRUST FOR CHARITABLE AND RELIGIOUS PU RPOSES IN THE SUBSEQUENT YEAR IN WHICH ADJUSTMENT HAS BEEN MADE HAVING REGARD TO THE BENEVOLENT PROVISIONS CONTAINED IN SECTION 11 OF THE ACT AND THAT SUCH AD JUSTMENT WILL HAVE TO BE EXCLUDED FROM THE INCOME OF THE TRUST UNDER SECTION 11(1)(A) OF THE ACT. OUR VIEW IS ALSO SUPPORTED BY THE JUDGMENT OF THE GUJARAT HIGH COURT IN THE CASE OF CIT V. SHRI PLOT SWETAMBER MURTI PUJAK JAIN MANDAL [1995] 211 ITR 29 3. ACCORDINGLY, WE ANSWER QUESTION NO. 3 IN THE AFFIRMATIVE I.E., IN FAVOUR O F THE ASSESSEE AND AGAINST THE DEPARTMENT. THE REVENUE IS UNABLE TO BRING ON RECORD ANY CONTRA RY DECISION OR CONTROVERT THE FACT THAT THE ABOVE DECISION HAS NOT BEEN STAYED / REVERSED BY ANY HIGHER JUDICIAL AUTHORITY. ACCORDIN GLY, THESE GROUNDS STAND DISMISSED. 7. RESULTANTLY, THE REVENUES APPEAL STAND DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH JULY,2018 ITA NO.69/MUM/2017 RUSTOM IRANI FOUNDATION ASSESSMENT YEAR-2012-13 6 SD/- SD/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 25.07.2018 SR.PS:-THIRUMALESH ! / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. '# ! / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. ) *' + , + , / DR, ITAT, MUMBAI 6. * ,-. / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI