DCIT (E) 2(1), MUMBAI V. SOCIETY OF THE SERVANTS OF THE HOLY SPIRIT, MUMBAI

ITA 7021/MUM/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6051 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Assessment Year: 2013-2014
• Appeal Filed On: 01-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARJU GARODIA
• Keywords: Depreciation; Charitable institution; Capital expenditure
• Section: 32; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA , A M AND SHRI SANDEEP GOSAIN, JM ./ I.T.A. NO. 7021/MUM/2016 ( / ASSESSMENT YEAR: 2013 - 14 ) DY. CIT(EXEMPT IONS) 2(1) HOLY SPIRIT HOSPITAL, MAHAKALI CAVES ROAD, ANDHERI (E), MUMBAI - 400 093 / VS. SOCIETY OF THE SERVANTS OF THE HOLY SPIRIT ROOM NO. 519, 5 TH FLOOR, PIRAMAL CHAMBERS, LALBAUG, LOWER PAREL, MUMBAI - 400 012 ./ ./ PAN/GIR NO. AAAAS 0148 J ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : MS. ARJU GARODIA / RESPONDENT BY : SHRI DHARAN GANDHI / DATE OF HEARING : 04.06.2018 / DATE OF PRONOUNCEMENT : 02.07 .2018 / O R D E R PER S HAMIM YAHYA, A. M.: T HIS IS AN APPEAL BY THE R EVENUE ARISING OUT OF THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 27.09.2016, PERTAINING TO ASSESSMENT YEAR 2013 - 14 . 2. THE GROUN DS OF APPEAL READ AS UNDER : 1. 'WHETHER ON THE FACTS OF THE CASE AND IN LAW THE ID. CIT(A) ERRED IN ALLOWING THE APPEAL OF THE ASSESSEE ON ACCOUNT OF DISALLOWING DEPRECIATION ON FIXED ASSETS OF RS. 6,82,68,576/ - IN CONTRAVENTION OF THE DECISION OF ESCORT S LTD. VS UOI 1 99 ITR 43 WHEREIN IT WAS HELD THAT SINCE 'SECTION 11 OF THE INCOME TAX ACT PROVIDES FOR DEDUCTION OF CAPITAL EXPENDITURE INCURRED ON ASSETS ACQUIRED FOR THE OBJECTS OF THE TRUST AS APPLICATION AND DOES NOT SPECIFICALLY AND EXPRESSLY PROVIDE FOR DOUBLE 2 ITA NO. 7021/MUM/2016 SOCIETY OF THE SERVANTS OF THE HOLY SPIRIT DEDUCTION ON ACCOUNT OF DEPRECIATION ON THE SAME VERY ASSETS ACQUIRED FROM SUCH CAPITAL EXPENDITURE, NO DEDUCTION 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 DEDUCT ION. 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 CHARANJIV CHARITABLE TRUST AND KERALA HIGH COURT IN THE CASE OF LISSIE MEDICAL INSTITUTIO NS VS CIT 76 DTR (KER) 372 HAS DECIDED THE ISSUE IN THE FAVOUR OF THE DEPARTMENT AFTER CONSIDERING THE DECISION OF THE HON'BLE 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 HON'BLE HIGH COURT IN THE CASE OF CIT VS. INSTITUTE OF BANKING PERSONNEL SELECTION WITHOUT APPRECIATING THE FACT THAT THE DEPARTMENT HAS NOT ACCEPTED THE DECISION ON MERIT, BUT DUE TO SMALLNESS OF TAX E FFECT APPEAL WAS NOT FILED BEFORE HON'BLE SUPREME COURT. ALSO THE ID CIT (A) ERRED IN RELYING UPON THE JUDGMENT OF THE HON'BLE HIGH COURT IN THE CASE OF CIT VS, SHRI VILE - PARLE KELVANI MANDAL, WITHOUT APPRECIATING THE FACT THAT DEPARTMENT HAS NOT ACCEPTED THE DECISION ON MERIT AND FILED SLP, BUT SUBSEQUENTLY WITHDRAWN THE SAME AS THERE WAS NO CLAIM OF DEPRECIATION ON EXEMPTED ASSETS. HOWEVER, THE ISSUE IS PENDING FOR ADJUDICATION BEFORE HON'BLE SUPREME IN OTHER CASES. 4. THE APPELLANT PRAYS THAT THE ORDE R OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 1, MUMBAI BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. THE ASSESSEE IN THIS CASE IS A T RUST . THE ONLY ISSUE RAISED RELATES TO DI SALLOWANCE OF THE DEPRECIATION. 4. WE H AVE HEARD BOTH THE COUN SEL AND PERUSED THE RECORDS. IT TRANSPIRES THAT UPON ASSESSING OFFICER S D ISALLOWANCE ON THE ABOVE SAID ISSUE , THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ALLOWED THE ASSESSEE'S APPEAL BY FOLLOWING THE HON'BLE JURISDICTIONAL HIGH COURT DIRECT DECISION ON THE ISSUE. 5. BOTH THE COUNSEL FAIRLY AGREED THAT THE ISSUES ARE COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT RELIED UPON BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS). THE R EVENUE HAS ALSO AGREED TO THIS I N THE GROUNDS O F APPEAL 3 ITA NO. 7021/MUM/2016 SOCIETY OF THE SERVANTS OF THE HOLY SPIRIT RAISED HEREIN ABOVE , AS IT IS MENTIONED THAT THE DEPARTMENT HAS NOT ACCEPTED THE HONBLE HIGH COURT 'S DECISION ON THIS ISSUE. BE AS IT MAY , THE HON'BLE JURISDICTIONAL HIGH COURT D ECISION IS BINDING UPON THE ITAT. IN THIS REGARDS , WE MAY GAINFULLY REFER TO THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ON THE ISSUE AS UNDER: 5.2. I HAVE CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE, GONE THROUGH THE ASSESSMENT ORDER OF THE A.O AND THE SUBMISSIONS OF THE APPELLANT AND A LSO DISCUSSED THE CASE WITH THE AR OF THE APPELLANT. THE CONTENTIONS AND SUBMISSIONS OF THE APPELLANT ARE BEING DISCUSSED AND DECIDED HERE IN UNDER: I. THE ASSESSING OFFICER HAS NOT TREATED THE DEPRECIATION AS APPLICATION OF INCOME ON THE GROUND THAT IT AM OUNTS TO DOUBLE DEDUCTION. APPELLANT HAS SUBMITTED THAT IN A NUMBER OF JUDGMENTS, DEPRECIATION HAD BEEN ALLOWED AS APPLICATION OF INCOME U/S. 11. CASE LAWS RELIED UPON BY THE ASSESSING OFFICER HAVE ALSO BEEN DISTINGUISHED. IN THIS REGARD I FIND THAT THE IS SUE IS DIRECTLY COVERED IN APPELLANT'S FAVOUR BY THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. INSTITUTE OF BANKING PERSONNEL 264 ITR 110 WHEREIN THE HON'BLE COURT HAS OBSERVED AS UNDER: ' 4. QUESTION NO. 2 HEREIN IS IDENTICAL TO THE QUE STION WHICH WAS RAISED BEFORE THE BOMBAY HIGH COURT IN THE CASE OF DIRECTOR OF INCOME TAX (EXEMPTION) V. FRAMJEE CAWASJEE INSTITUTE (1993) 109 CTR 463 (BOM). IN THAT CASE, THE FACTS WERE AS FOLLOWS: THE ASSESSEE WAS THE TRUST. IT DERIVED ITS INCOME FROM DEPRECIABLE ASSETS. THE ASSESSEE TOOK INTO ACCOUNT DEPRECIATION ON THOSE ASSETS IN COMPUTING THE INCOME OF THE TRUST, THE INCOME TAX OFFICER HELD THAT DEPRECIATION COULD NOT BE TAKEN INTO ACCOUNT BECAUSE, FULL CAPITAL EXPENDITURE HAD BEEN ALLOWED IN THE Y EAR OF ACQUISITION OF THE ASSETS. THE ASSESSEE WENT IN APPEAL BEFORE THE ASSISTANT APPELLATE COMMISSIONER. THE APPEAL WAS REJECTED. THE TRIBUNAL, HOWEVER, TOOK THE VIEW THAT WHEN THE INCOME TAX OFFICER STATED THAT FULL EXPENDITURE HAD BEEN ALLOWED IN THE Y EAR OF ACQUISITION OF THE ASSETS, WHAT HE REALLY MEANT WAS THAT THE AMOUNT SPENT ON ACQUIRING THOSE ASSETS HAD BEEN TREATED AS 'APPLICATION OF INCOME' OF THE TRUST IN THE YEAR IN WHICH THE INCOME WAS SPENT IN ACQUIRING THOSE ASSETS. THIS DID NOT MEAN THAT IN COMPUTING INCOME FROM THOSE ASSETS IN SUBSEQUENT YEARS, DEPRECIATION IN RESPECT OF THOSE ASSETS CANNOT BE TAKEN INTO ACCOUNT. THIS VIEW OF THE TRIBUNAL HAS BEEN CONFIRMED BY, THE BOMBAY HIGH COURT IN THE ABOVE JUDGMENT. HENCE, QUESTION NO. 2 IS COVERED BY THE DECISION OF THE BOMBAY HIGH COURT IN THE ABOVE JUDGMENT. CONSEQUENTLY, QUESTION NO. 2 IS ANSWERED IN THE AFFIRMATIVE I.E., IN FAVOUR OF THE ASSESSEE AND AGAINST, THE DEPARTMENT. 4 ITA NO. 7021/MUM/2016 SOCIETY OF THE SERVANTS OF THE HOLY SPIRIT II. IN A RECENT JUDGEMENT IN CASE OF DIRECTOR OF INCOME - TAX (EXEMPTION S), MUMBAI V, SHRI VILE PARLE KELAVANI MANDAL[2015] 58 TAXMANN.COM 288 HON'BLE BOMBAY HIGH COURT HELD : A S FAR AS QUESTION NO,4 IS CONCERNED, THIS COURT HAS REPEATEDLY HELD THAT THERE IS NOTHING LIKE DOUBLE DEDUCTION. WHEN THE ASSESSEE HAS ACQUIRED AN ASS ET FROM THE INCOME OF THE TRUST AND THEREAFTER THE AMOUNT THAT IS CLAIMED IS THE DEPRECIATION ON THE USE OF THE ASSETS, SUCH DEPRECIATION CLAIM DOES NOT MEAN DOUBLE DEDUCTION. THE DEDUCTION EARLIER CLAIMED IS TOWARDS TOWARDS APPLICATION OF FUNDS OF THE TRU ST FOR ACQUIRING ASSETS. THE LATTER IS DEPRECIATION AND IT IS PERMISSIBLE DEDUCTION CONSIDERING THE USE OF THE ASSETS. THIS HAS BEEN CLARIFIED REPEATEDLY BY THIS COURT. IF ANY REFERENCE IS REQUIRED THEN THE CASE OF CIT V. INSTITUTION OF BANKING PERSONNEL S ELECTION (IBP5) [2003] 110/131 TAXMAN 386 (BOM.) IS ENOUGH.' II I. RESPECTFULLY FOLLOWING THE ABOVE OBSERVATIONS OF HON'BLE JURISDICTIONAL HIGH COURT, THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE CLAIM OF DEPRECIATION AS APPLICATION OF INCOME U/S. 11 OF THE I. T. ACT AFTER DUE VERIFICATION. IV. GROUND OF APPEAL NO. 1 IS THEREFORE ALLOWED. 6. AS REGARDS GROUND NO. 2 IT WAS MENTIONED BY THE APPELLANT THAT IN CASE GROUND NO. 1 IS ALLOWED, GROUND NO. 2 NEEDS NO ADJUDICATION. HENCE THIS GROUND OF APPEAL BECOM ES INFRUCTUOUS AND DISMISSED. 6. SINCE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS FOLLOWED THE HON'BLE JURISDICTIONAL HIGH COURT DECIS ION MENTIONED HERE IN ABOVE , WE NOT FIND ANY INFIRMITY IN THE SAME. HENCE , WE UPHOLD THE ORDER OF THE LD. COMMISSIO NER OF INCOME TAX (APPEALS). 7. FURTHERMORE , THE HONBLE APEX COURT IN THE CASE OF CIT VS. RAJASTHAN & GUJARATI CHARITABLE FOUNDATION [2018] 402 ITR 441 (S C ) HAS AFFIRMED THE ABOVE PROPOSITION. 8. IN THE RESUL T, THIS APPEAL BY THE REVENUE STANDS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 02.07.2018 SD/ - SD/ - ( SANDEEP GOSAIN ) (S HAMIM YAHYA) / J UDICIAL MEMBER / A CCOUNTANT MEMBER MUMBAI ; DATED : 02.07.2018 5 ITA NO. 7021/MUM/2016 SOCIETY OF THE SERVANTS OF THE HOLY SPIRIT . . ./ ROSHANI , SR. PS / 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 F ILE / B Y ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI