The Assistant Commissioner of Income Tax (E) Circle-1, Bangalore V. M/s Green Wood High School , Bangalore

ITA 749/BANG/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7526 (ITAT-BANGALORE)
• Duration Of Justice: 5 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 03-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B R RAMESH
• Keywords: Capital asset; Depreciation; Charitable institution; Capital expenditure
• Section: 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER A ND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 749 /BANG/201 7 ASSESSMENT YEAR : 20 12 - 13 THE ASSISTANT COMMISSIONER OF INCOME TAX (E), CIRCLE 1, BANGALORE. VS. M/S. GREEN WOOD HIGH SCHOOL, NO. 377, 3 RD BLOCK, SARJAPUR ROAD, KORAMANGALA, BANGALORE 560 034. PAN: AAATG 6125A APPELLANT RESPONDENT ASSESSEE BY : NONE REVENUE BY : SHRI B.R. RAMESH, JCIT (DR) DATE OF HEARING : 28 .0 9 .201 7 DATE OF PRONOUNCEMENT : 28 .09 .2017 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS IS A REVENUES APPEAL DIRECTED AGAINST THE ORD ER OF LD. CIT (A)-14, LTU, BANGALORE DATED 29.12.2016 FOR ASSESSMENT YEAR 2012 -13. 2. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER. ON DISALLOWANCE OF DEPRECIATION: (I) THE CIT(A) HAS FAILED TO APPRECIATE THE FACT TH AT THE HON'BLE KERALA HIGH COURT IN THE CASE OF LISSIE MEDICAL INT UITIONS VS. CIT (348 ITR 344) HAS HELD THAT DEPRECIATION CANNOT BE ALLOWED ON ASSETS, WHERE COST OF SUCH ASSETS HAS ALREADY BEEN ALLOWED AS APPLICATION OF INCOME IN THE YEAR OF ACQUISITION/ PURCHASE OF ASSE T. (II) THE CIT(A) HAS FAILED TO APPRECIATE THAT THE H ON'BLE SUPREME COURT IN THE CASE OF ESCORTS LTD. & ANOTHER VS. UNI ON OF INDIA (199 ITR 43), WHILE DEALING WITH THE ISSUE OF ALLOWANCE OF EXPENDITURE ON SCIENTIFIC RESEARCH U/S 35(1)(IV) [CORRESPONDING TO SECTION 10(2) (XIV) OF THE I.T. ACT, 1922] HELD THAT ANY EXPENDITURE OF A CAPITAL NATURE (OR INCURRED TOWARDS PURCHASE OF CAPITAL ASSETS) ON SCI ENTIFIC RESEARCH ALLOWED AS DEDUCTION U/S 35(1)(IV) CANNOT BE ALLOWE D ONCE AGAIN AS DEDUCTION IN THE FORM OF DEPRECIATION ON SUCH CAPIT AL ASSETS. WHILE ITA NO.749/BANG/2017 PAGE 2 OF 4 DOING SO, IT WAS OBSERVED BY THE HON'BLE SUPREME CO URT THAT NO LEGISLATURE COULD HAVE AT ALL INTENDED A DOUBLE DED UCTION IN REGARD TO THE SAME BUSINESS OUTGOING AND IF IT IS INTENDED, I T WOULD BE CLEARLY EXPRESSED IN THE STATUTE ITSELF. ACCORDINGLY, IT WA S HELD THAT EVEN IN ABSENCE OF CLEAR STATUTORY INDICATION TO CONTRARY, STATUTE SHOULD NOT BE READ SO AS TO PERM IT AN ASSESSEE TWO DEDUCTIONS I. E. ONCE IN THE FORM OF EXPENDITURE INCURRED TOWARDS PURCHASE OF CAPITAL ASSETS AND SECONDLY, IN THE FORM OF DEPRECIATION ON SUCH CAPIT AL ASSETS. IT WAS ALSO HELD THAT EVEN BEFORE THE AMENDMENT OF THE ACT IN THE FORM OF INSERTION OF CLAUSE (IV) OF SUB SECTION (2) OF SECT ION 35 BY FINANCE ACT, 1980, PROHIBITING ALLOWANCE OF DEPRECIATION, THE AC T DID NOT PERMIT A DEDUCTION FOR DEPRECIATION IN RESPECT OF COST OF CA PITAL ASSET ACQUIRED FOR THE PURPOSE OF SCIENTIFIC RESEARCH TO THE EXTEN T SUCH COST HAD BEEN WRITTEN OFF/ CLAIMED AS DEDUCTION U/S 35(1)(IV) ON THE GROUND THAT THE AMENDMENT ONLY SET OUT MORE CLEARLY AND CATEGORICAL LY WHAT THE PROVISION INTENDED EVEN EARLIER. III) THE CIT(A) HAS FAILED TO APPRECIATE THE FACT T HAT THE ISSUE INVOLVED IN RESPECT OF CAPITAL EXPENDITURE ON SCIENTIFIC RES EARCH U/S 35(1)(1V) IS SIMILAR TO THAT OF ISSUE INVOLVED IN RESPECT OF ALL OWANCE OF EXPENDITURE INCURRED TOWARDS PURCHASE OF CAPITAL ASSETS FOR CHA RITABLE PURPOSES AS APPLICATION OF INCOME U/S 11(1)(A). ACCORDINGLY, TH E LAW LAID DOWN BY THE HON'BLE SUPREME COURT IS SQUARELY APPLICABLE TO TAXATION OF CHARITABLE/ RELIGIOUS TRUST OR INSTITUTION U/S 11, 12 AND 13 OF THE I.T. ACT. IV) THOUGH THE FINANCE ACT, 2014 HAS AMENDED THE IN COME TAX ACT, 1961 WITH REGARD TO NON-ALLOWANCE OF DEPRECIATION T O CHARITABLE/ RELIGIOUS TRUST OR INSTITUTION ON THE VALUE OF ASSE TS WHICH HAS ALREADY BEEN ALLOWED AS APPLICATION OF INCOME U/S 11(1) BY INSERTING SUB- SECTION (6) OF SECTION 11, W.E.F 01.04.2015, SUCH A MENDMENT CANNOT BE CONSTRUED AS EFFECTIVE PROSPECTIVELY INASMUCH AS IN ACCORDANCE WITH THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF ESCORTS LTD. & ANOTHER VS. UNION OF INDIA (SUPRA), THE AMENDMENT ONLY SET OUT MORE CLEARLY AND CATEGORICALLY WHAT TH E LEGISLATURE HAD INTENDED AND CONVEYED U/S 11(1) EVEN EARLIER TO THE SAID AMENDMENT. AS SUCH, THE AMENDMENT SHALL BE CONSIDERED AS CLARI FICATORY IN NATURE MAKING IT CLEAR THAT THE ASSESSEE IS NOT ENTITLED T O CLAIM DOUBLE DEDUCTION IN RESPECT OF SAME EXPENDITURE U/S 11(1) AS APPLICATION OF INCOME AND ALSO DEPRECIATION SIMULTANEOUSLY. 2) ON SET-OFF OF EXCESS EXPENDITURE/APPLICATION/DEF ICIT/ LOSS:- A) THE CIT (A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW SET-OFF OF EXCESS EXPENDITURE/APPLICATION PERTAININ G TO CURRENT ASST.YEAR AND EARLIER YEARS AGAINST THE INCOME OF T HE FUTURE ASST.YEAR WITHOUT APPRECIATING THE FACT THAT AS PER THE SCHEM E OF TAXATION OF CHARITABLE OR RELIGIOUS TRUST/INSTITUTION AS CODIFI ED U/S.11,12 AND 13, THERE IS NO PROVISION FOR COMPUTING LOSS FROM PROPE RTY HELD UNDER TRUST/INSTITUTION ON ACCOUNT OF EXCESS APPLICATION OF INCOME/FUNDS OF ITA NO.749/BANG/2017 PAGE 3 OF 4 THE TRUST. B) THE CIT (A) HAS FAILED TO APPRECIATE THE FACT TH AT THE NORMAL COMPUTATION OF INCOME UNDER RESPECTIVE HEADS AS ENV ISAGED U/S 15 TO 59 ARE NOT APPLICABLE TO THE COMPUTATION OF INCOME IN RESPECT OF CHARITABLE TRUST/INSTITUTION FOR THE PURPOSE OF CLA IMING EXEMPTION UNDER SEC.11, 12 AND 13 AND, THEREFORE, THE PROVISI ONS RELATING TO SET- OFF OF LOSS FROM ONE SOURCE AGAINST THE INCOME FROM ANOTHER SOURCE, SET-OFF OF LOSS FROM ONE HEAD AGAINST INCOME FROM A NOTHER HEAD AND CARRY FORWARD AND SET-OFF OF LOSS AGAINST THE INCOM E OF SUBSEQUENT YEARS AS ENVISAGED U/S 70 TO 79 ARE ALSO NOT APPLIC ABLE TO THE CHARITABLE TRUSTS/INSTITUTIONS. C) THE CIT (A) HAS FAILED TO DISCUSS THE ISSUE IN D ETAIL BRINGING OUT THE FACTS AND APPLYING THE RELEVANT PROVISIONS OF THE A CT, BUT CAME TO A CONCLUSION THAT EXCESS EXPENDITURE/EXCESS APPLICATI ON SHALL BE ALLOWED TO BE CARRIED FORWARD AND SET-OFF AGAINST T HE INCOME OF THE FUTURE ASSESSMENT YEARS AND, THEREBY, RENDERING THE ORDER PERVERSE. 3. NONE APPEARED ON BEHALF OF THE ASSESSEE ON THE A PPOINTED DATE OF HEARING IN SPITE OF NOTICE AND HENCE, THE APPEAL OF THE REVENU E WAS HEARD EX-PARTE QUA THE ASSESSEE BECAUSE IT WAS SEEN THAT BOTH THE ISSU ES INVOLVED IN THE PRESENT APPEAL ARE COVERED IN FAVOUR OF THE ASSESSEE BY VAR IOUS JUDICIAL PRONOUNCEMENTS AS NOTED BY THE LD. CIT(A) IN HIS OR DER. THE LD. DR OF REVENUE SUPPORTED THE ASSESSMENT ORDER. 4. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. DR OF REVENUE AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FI ND THAT THE FIRST ISSUE INVOLVED IN THIS APPEAL IS REGARDING CLAIM OF DEPRECIATION O F THE ASSESSEE FOR RS. 2,32,54,346/- WHICH WAS DISALLOWED BY THE AO ON THE GROUND THAT IT LED TO DOUBLE DEDUCTION SINCE THE CAPITAL ASSET ON WHICH D EPRECIATION IS BEING CLAIMED HAD BEEN ALREADY ALLOWED AS APPLICATION OF INCOME I N EARLIER YEARS. THIS ISSUE WAS DECIDED BY LD. CIT(A) BY FOLLOWING THE TRIBUNAL ORDER RENDERED IN THE CASE OF JYOTHY CHARITABLE TRUST (2015) AS REPORTED IN 60 TAXMAN.COM 165 DATED 11.06.2015. NO DIFFERENCE IN FACTS COULD BE POINTE D OUT BY LD. DR OF REVENUE AND THEREFORE, BY RESPECTFULLY FOLLOWING THIS TRIBU NAL ORDER, WE DECLINE TO INTERFERE IN THE ORDER OF CIT(A) ON THIS ISSUE. 5. THE SECOND ISSUE INVOLVED IS REGARDING SET OFF O F EXCESS EXPENDITURE / APPLICATION / DEFICIT / LOSS. THIS ISSUE WAS DECID ED BY LD. CIT(A) IN FAVOUR OF THE ITA NO.749/BANG/2017 PAGE 4 OF 4 ASSESSEE AS PER PARA NO. 11.7 OF HIS ORDER WHICH IS REPRODUCED BELOW FOR THE SAKE OF READY REFERENCE. THIS PARA READS AS UNDER. 11. HOWEVER, THE JURISDICTIONAL ITAT ORDER IN THE C ASE OF ACIT VS CITY HOSPITAL CHARITABLE TRUST (2015) 42 ITR(TRIB) 583 (BANGALORE) AND DCIT VS MANIPAL ACADEMY OF HIGHER EDUCATION (20 15) 44 ITR(TRIB) 18 (BANGALORE) HAS CONSIDERED THE ISSUE I N FAVOUR OF THE ASSESSEE. THE DEPARTMENT HAS FILED APPEAL ON SIMILA R ISSUE BEFORE THE HON'BLE KARNATAKA HIGH COURT WHICH IS PENDING. RESP ECTFULLY FOLLOWING THE JURISDICTIONAL ITAT ORDER IN THE ABOV E CASES, THIS GROUND OF APPEAL IS ALLOWED. 6. SINCE THE LD. DR OF REVENUE COULD NOT POINT OUT ANY DIFFERENCE IN FACTS IN THE PRESENT CASE AND THESE CASES WHERE THE TRIBUNAL HAD ALREADY DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE, WE FIND NO REASON TO INT ERFERE IN THE ORDER OF LD. CIT(A) ON THIS ISSUE ALSO. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE SAME DATE AFTER COMPLETION OF HEARING. SD/- SD/- (VIJAL PAL RAO) (ARUN KUMAR G ARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 28 TH SEPTEMBER, 2017. / MS/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.