Shanthi sadan society, Kannur V. DCIT, Kannur

ITA 74/COCH/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65000 (ITAT-COCHIN)
• Duration Of Justice: 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 08-03-2012
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA
• Assessee Lawyers: RADHESH BHAT
• Keywords: Depreciation; Charitable institution; Cost of acquisition; Capital expenditure
• Section: 12A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A. 74/COCH/2012 ASSESSMENT YEAR: 2007-08 SHANTI SADAN SOCIETY, URSULINE CONVENT, PAYYAMBALAM, KANNUR [PAN: AAAAS 4053Q] VS. THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-1, KANNUR. (ASSESSEE -APPELLANT) (REVENUE-R ESPONDENT) ASSESSEE BY SHRI RADHESH BHAT REVENUE BY SMT. S. VIJAYAPRABHA, JR. DR DATE OF HEARING 19/11/2012 DATE OF PRONOUNCEMENT 07/12/2012 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 30-12-2011 PASSED BY THE LD. CIT(A)-II, KOZHIKODE AND IT RELATES TO T HE ASSESSMENT YEAR 2007-08. 2. THE ONLY ISSUE URGED IN THIS APPEAL IS WHETHER T HE LD. CIT(A) IS JUSTIFIED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER IN NO T TREATING THE DEPRECIATION AMOUNT OF RS.54.38 LAKHS AS APPLICATION OF INCOME UNDER SEC. 11(1)(A) OF THE INCOME TAX ACT. 3. THE FACTS RELATING TO THE SAME ARE STATED I N BRIEF. THE ASSESSEE IS A CHARITABLE AND RELIGIOUS INSTITUTION REGISTERED U/S. 12A OF TH E INCOME TAX ACT AND HENCE IT IS ENTITLED FOR EXEMPTION U/S. 11(1)(A) OF THE ACT. IN THE RETURN OF INCOME FILED BY IT FOR THE ASST. YEAR UNDER CONSIDERATION, THE ASSESSEE CL AIMED A DEPRECIATION AMOUNT OF RS.54,38,158/- AS APPLICATION OF INCOME AS PER THE PROVISIONS OF SEC. 11(1)(A) OF THE ACT. THE ASSESSING OFFICER NOTICED THAT THE ASSESS EE HAD ALREADY CLAIMED THE ENTIRE COST OF THE ASSETS AS APPLICATION OF FUNDS AND THE DEPRECIATION ON THE VERY SAME ASSETS I.T.A. NO.74/COCH/2012 2 IS CLAIMED AGAIN AS APPLICATION OF FUNDS. ACCORDIN GLY THE AO TOOK THE VIEW THAT THE DEPRECIATION CLAIM MADE BY THE ASSESSEE AMOUNTS TO DOUBLE DEDUCTION. ACCORDINGLY, THE ASSESSING OFFICER DID NOT TREAT THE AMOUNT OF D EPRECIATION AS APPLICATION OF INCOME. 4. THE LD. CIT(A), THOUGH DID NOT EXPLICITLY EXPRES S, CONFIRMED THE ORDER OF THE ASSESSING OFFICER ON THIS ISSUE. AGGRIEVED, THE AS SESSEE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED THE RECORD. THE LD A.R PLACED RELIANCE ON THE DECISION RENDERED BY HONBLE KERALA HIGH COURT ON 27.10.2009 IN THE CASE OF CIT VS. SREE CHITRA THIRUNAL COLLEGE IN ITA NO. 1715 OF 2009 TO CONTEND THAT THE CHARITABLE SOCIETIES ARE ENTITLED TO CLAIM DEPR ECIATION. HE ALSO PLACED RELIANCE ON VARIOUS CASE LAW RENDERED BY OTHER HIGH COURTS. 6. HOWEVER, DURING THE COURSE OF HEARING, BOTH T HE PARTIES AGREED THAT THE IMPUGNED ISSUE IS COVERED AGAINST THE ASSESSEE BY THE LATER DECISION DATED 26.10.2010 RENDERED BY THE HONBLE JURISDICTIONAL KERALA HIGH COURT IN THE CASE OF LISSIE MEDICAL INSTITUTIONS IN ITA NO.42 OF 2011. IN THE ABOVE SAID CASE, THE ASSESSING OFFICER HAD DISALLOWED THE CLAIM OF DEPRECIATION BY HOLDING THAT THE ASSESSEE IS NOT ENTITLED TO CLAIM DEPRECIATION ON THOSE ASSETS WHOSE COST OF ACQUISITION WAS CLAIM ED AS APPLICATION OF INCOME OF THE CHARITABLE TRUST FOR CHARITABLE PURPOSES, AS IT WOU LD RESULT IN DOUBLE DEDUCTION OF CAPITAL EXPENDITURE. THE VIEW OF THE AO WAS UPHELD BY THE TRIBUNAL BY FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ESCORTS LTD & OTHERS VS. UNION OF INDIA, REPORTED IN 199 ITR 43. THE ASSESSEE CHALLENGED TH E ORDER OF THE TRIBUNAL AND THE HONBLE HIGH COURT UPHELD THE ORDER OF THE TRIBUNAL WITH THE FOLLOWING OBSERVATIONS:- FOR THE FOREGOING REASONS, WE DISPOSE OF THE APPEA L BY CONFIRMING THE ORDER OF THE TRIBUNAL. HOWEVER, AS RIGHTLY POINTED OUT BY THE COUNSEL FOR THE ASSESSEE THE SYSTEM OF ALLOWING DEPRECIATI ON WAS FOLLOWED BY THE ASSESSEE FOR SEVERAL YEARS AND IT WAS CONSIST ENT WITH THE VIEW TAKEN BY SEVERAL HIGH COURTS IN INDIA IN THE DECISI ONS ABOVE CITED. WE FIND FORCE IN THIS CONTENTION BECAUSE ASSESSEE CAN NOT BE TAKEN BY SURPRISE BY DISALLOWING DEPRECIATION WHICH WAS BEIN G ALLOWED FOR SEVERAL YEARS AND TO DEMAND TAX FOR ONE YEAR AFTER MAKING DISALLOWANCE. WE FEEL ASSESSEE SHOULD BE ALLOWED T O WRITE BACK DEPRECIATION AND IF DONE THE ASSESSING OFFICER WILL MODIFY THE I.T.A. NO.74/COCH/2012 3 ASSESSMENT DETERMINING HIGHER INCOME AND ALLOW RECO MPUTED INCOME WITH THE DEPRECIATION WRITTEN BACK BY THE ASSESSEE TO BE CARRIED FORWARD FOR SUBSEQUENT YEARS FOR APPLICATION FOR CH ARITABLE PURPOSES. SINCE THE DECISION RENDERED IN THE CASE OF LISSIE M EDICAL INSTITUTIONS IS A LATER ONE, THE SAME IS BINDING ON THE PARTIES HEREIN. ACCORDINGLY , WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF LD CIT(A). 7. IN THE CASE OF LISSIE MEDICAL INSTITUTION, TH E HONBLE HIGH COURT HAS GIVEN RELIEF WITH REGARD TO THE WRITE BACK OF THE DEPRECIATION. THE LD COUNSEL FOR THE ASSESSEE REQUESTED THE TRIBUNAL TO GIVE SIMILAR DIRECTIONS A S GIVEN BY THE HONBLE HIGH COURT FOR WRITING BACK OF THE DEPRECIATION IN THE INSTANT CAS ES ALSO. HOWEVER, WE ARE DOUBTFUL WHETHER THE TRIBUNAL IS EMPOWERED TO GIVE ANY SUCH DIRECTION. THE ACCUMULATION OF INCOME, AS SUBMITTED BY LD D.R, IS GOVERNED BY THE PROVISIONS OF EXPLANATION 2 TO SEC. 11(1) AND ALSO BY SEC. 11(2) OF THE ACT. IN THE AB OVE CITED CASE, IT IS PERTINENT TO NOTE THAT THE HONBLE HIGH COURT HAS NOT MODIFIED THE AB OVE SAID PROVISIONS. INSTEAD, IT HAS GIVEN CONCESSION TO THE ASSESSEE, WHICH IN OUR VIEW , IS APPLICABLE TO THAT PARTICULAR ASSESSEE ONLY. THE ITAT, BEING A CREATURE OF STATU TE, IN OUR VIEW, CANNOT ARM ITSELF WITH ANY SUCH POWER, WHICH IS VESTED WITH THE HIGH COURT. ACCORDINGLY, WE ARE OF THE VIEW THAT THE TRIBUNAL IS NOT ENTITLED TO GIVE ANY SUCH RELIEF AS GIVEN BY THE HIGH COURT, SINCE THE TRIBUNAL HAS TO ACT WITHIN THE AUTHORITY OF THE PROVISIONS OF THE ACT. ACCORDINGLY, WE DECLINE TO GIVE ANY SUCH DIRECTION AS GIVEN BY THE HONBLE HIGH COURT. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. PRONOUNCED ACCORDINGLY ON 07-12-2012. SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 7TH DECEMBER, 2012 GJ I.T.A. NO.74/COCH/2012 4 COPY TO: 1. SHANTI SADAN SOCIETY, URSULINE CONVENT, PAYYAMBA LAM, KANNUR. 2. THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-1, KANNUR. 3. THE COMMISSIONER OF INCOME-TAX (APPEALS)-II, KOZ HIKODE. 4.THE COMMISSIONER OF INCOME-TAX, KOZHIKODE. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN