Market Committee, Panchkula V. ITO, Panchkula

ITA 79/CHANDI/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2477 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 30-01-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: HARISH NAYYAR
• Keywords: Capital asset; Depreciation; Charitable institution
• Section: 143(3); 12AA; 32; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B,CHANDIGARH BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER AND MS SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 79/CHD/2013 ASSESSMENT YEAR:2008-09 THE MARKET COMMITTEE, VS THE ITO, WARD-3, NEW GRAIN MARKET, PANCHKULA. PANCKULA. PAN NO. AAAM-0072G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI HARISH NAYYAR RESPONDENT BY : SHRI MANJIT SI NGH DATE OF HEARING : 20.06.2013 DATE OF PRONOUNCEMENT : 26.6.2013 ORDER PER SUSHMA CHOWLA, JM THE ASSESSEE HAS FILED THE APPEAL AGAINST THE ORDER OF CIT(A), DATED 13.01.2012 RELATING TO ASSESSMENT YEAR 2008-09 AGAI NST THE ORDER PASSED UNDER SECTION 143(3) OF THE I.T. ACT, 1961. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL: 1. THAT THE ORDER PASSED BY ID AO IS ILLEGAL, AR BITRARY HAS BEEN PASSED IN A HASTE AND HAS IGNORED BASIC ASPECTS AND FACTS OF THE CASE THUS CAUSING UNDUE HARDSHIP TO THE ASSESSES. 2. THE SECOND GROUND OF APPEAL IS TO CHALLENGE TH E CONFIRMATION OF ADDITION OF RS.2675815 MADE ON ACCOUNT OF DEPREC IATION. THE ADDITION HAS BEEN MADE WITHOUT CONSIDERING THE FACT S OF THE CASE AND JUDICIAL PRECEDENTS. THE ADDITION IS ILLEGAL, N OT BONAFIDE AND DESERVES TO BE DELETED. IT IS PRAYED THAT THE ADDITION OF RS.2675815 MAY BE ORDERED TO BE DELETED. 2 3. THAT THE APPELLANT CRAVES TO ADD, DELETE, CON CEDE, AND MODIFY ANY OR ALL THE GROUNDS OF APPEAL AT THE TIME OF HEA RING OF APPEAL. 3. GROUND NO. 1 RAISED BY THE ASSESSEE IS GENERAL I N NATURE AND HENCE, THE SAME IS DISMISSED. 4. THE ISSUE IN GROUND NO.2 RAISED BY THE ASSESSEE IS AGAINST THE ADDITION OF RS.26,75,815/- MADE ON ACCOUNT OF DISALLOWANCE O F DEPRECIATION. 5. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E WAS A CHARITABLE INSTITUTION AND HAD BEEN REGISTERED U/S 12AA OF THE INCOME-TAX ACT AS CHARITABLE INSTITUTION VIDE ORDER DATED 7.9.2005. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD CLAIMED DEPRECIATIO N OF RS.26,75,815/- ON FIXED ASSETS. THE AO NOTED THAT THE ASSESSEE HAD C LAIMED THE ENTIRE COST OF FIXED ASSETS AS APPLICATION OF INCOME IN THE YEAR O F PURCHASE ITSELF. THE AO WAS OF THE VIEW THAT THE DEPRECIATION CLAIMED ON TH E SAME ASSETS ON WHICH APPLICATION OF FUNDS HAD BEEN CLAIMED AND ALLOWED, WOULD AMOUNT TO MORE THAN 100% DEDUCTION ON THE SAME AMOUNT. IN VIEW TH EREOF THE AO, FOLLOWING THE RATIO LAID DOWN BY THE HON'BLE APEX COURT IN ES CORTS LTD. V UNION OF INDIA 199 ITR 43 (S.C) DENIED THE CLAIM OF DEPRECIA TION ON THE SAID FIXED ASSETS, RESULTING IN ADDITION OF RS.26,75,815/-. T HE CIT(APPEALS) UPHELD THE ORDER OF AO. 6. THE LD. AR FOR THE ASSESSEE AT THE OUTSET POINTE D OUT THAT THE ISSUE RAISED VIDE PRESENT GROUND OF APPEAL IS CLEARLY COV ERED BY THE ORDER OF HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT V MARKET COMMITTEE, PIPLI REPORTED IN (2011) 330 ITR 16 (P&H) WHEREIN THE HON 'BLE HIGH COURT, AFTER DISTINGUISHING THE RATIO LAID DOWN IN ESCORTS LTD. V UOI (SUPRA) HAD ALLOWED DEPRECIATION ON CAPITAL ASSETS, PURCHASE VALUE OF W HICH HAD BEEN CONSIDERED FOR DETERMINING THE QUANTUM OF FUNDS WHICH HAVE TO BE APPLIED FOR THE PURPOSE OF THE TRUST IN TERMS OF SECTION 11 OF THE INCOME-TAX ACT. 3 7. THE LD. DR FOR THE REVENUE PLACED RELIANCE ON TH E ORDERS OF THE AUTHORITIES BELOW AND THE RATIO LAID DOWN BY THE HO N'BLE SUPREME COURT IN ESCORTS LTD.V UOI (SUPRA). 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING IN THE PRESENT APPEAL IS IN RELATION TO THE CLAIM OF DEPRECIATION ON FIXED ASSETS, PURCHASE VALUE OF WHICH HAS BEEN CLAI MED AS APPLICATION OF INCOME BY THE ASSESSEE TRUST IN TERMS OF SECTION 11 OF THE ACT. THE ASSESSEE HAD CLAIMED THE VALUE OF ASSETS PURCHASED BY IT AS APPLICATION OF THE INCOME IN THE YEAR OF PURCHASE ITSELF. DURING THE YEAR UND ER CONSIDERATION, THE ASSESSEE HAD CLAIMED DEPRECIATION ON THE SAID ASSET S WHICH WAS DENIED TO THE ASSESSEE BY BOTH THE AO AND THE CIT(APPEALS). 9. WE FIND THAT IDENTICAL ISSUE OF CLAIM OF DEPRECI ATION ON ASSETS, VALUE OF WHICH HAD BEEN SHOWN AS APPLICATION OF INCOME FOR T HE PURPOSE OF TRUST IN TERMS OF SECTION 11 OF THE ACT, AROSE BEFORE THE HO N'BLE PUNJAB & HARYANA HIGH COURT IN CIT V MARKET COMMITTEE, PIPLI (SUPRA) . THE HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT V MARKET COMMITTEE, PIPLI HAD ALLOWED THE CLAIM OF DEPRECIATION ON ASSETS, PURCHASE VALUE OF WHICH ASSETS HAD ALREADY BEEN UTILIZED AS APPLICATION OF INCOME IN TERMS OF SECTI ON 11 OF THE ACT AND HAD ALSO DISTINGUISHED THE RATIO LAID DOWN BY THE HON'B LE APEX COURT IN ESCORTS LTD. V UOI (SUPRA) OBSERVING AS UNDER : 8. IN ALL FAIRNESS TO THE LEARNED COUNSEL FOR THE REVENUE, REFERENCE IS MADE TO THE JUDGEMET OF THE HON'BLE APEX COURT IN E SCORT LTD.'S CASE (SUPRA), ON WHICH RELIANCE HAS BEEN PLACED BY THE L EARNED COUNSEL FOR THE REVENUE. THE HON'BLE SUPREME COURT IN THAT CASE WAS DEALING WITH A CASE RELATING TO TWO DEDUCTIONS BOTH UNDER SS. 10(2)(VI) AND 10(2)(XIV) OF THE 1922 ACT OR BOTH UNDER SS. 32(1) (II) AND 35(L)(IV) OF THE ACT. THE ASSESSEE THEREIN HAD INCURRED EXPENDITURE OF A CAPI TAL NATURE ON SCIENTIFIC RESEARCH RELATING TO THE BUSINESS WHICH RESULTED INTO ACQUISITION OF AN ASSET. THE ASSESSEE HAD SOUGHT TO CLAIM A SPECIFIED PERCENTAGE OF THE WRITTEN DOWN VALUE OF THE ASSET A S DEPRECIATION AND AT THE SAME TIME CLAIMED DEDUCTION, IN FIVE CONSECUTIV E YEARS OF THE 4 EXPENDITURE INCURRED ON THE ACQUISITION OF THE ASSE T. THE APEX COURT OBSERVED : 'WHERE A CAPITAL ASSET USED FOR SCIENTIFIC RESEARCH RELATED TO THE BUSINESS OF THE ASSESSEE IS ALSO IPSO FACTO AN ASSE T USED FOR THE PURPOSE OF THE BUSINESS, IT IS IMPOSSIBLE TO CONCEIVE OF TH E LEGISLATURE HAVING ENVISAGED A DOUBLE DEDUCTION IN RESPECT OF THE SAME EXPENDITURE, ONE BY WAY OF DEPRECIATION UNDER S. 32 OF THE IT ACT, 1961 AND OTHER BY WAY OF ALLOWANCE UNDER S. 35(L)(IV) OF A PART OF THE CAPIT AL EXPENDITURE ON SCIENTIFIC RESEARCH, EVEN THOUGH THE TWO HEADS OF D EDUCTION DO NOT COMPLETELY OVERLAP AND THERE IS SOME DIFFERENCE IN THE RATIONALE OF THE TWO DEDUCTIONS IT WAS FURTHER RECORDED THAT : 'THERE IS A FUNDAMENTAL, THOUGH UNWRITTEN, AXIOM TH AT NO LEGISLATURE COULD HAVE AT ALL INTENDED A DOUBLE DEDUCTION IN RE GARD TO THE SAME BUSINESS OUTGOING; AND, IF IT IS INTENDED, IT WILL BE CLEARLY EXPRESSED. IN OTHER WORDS, IN THE ABSENCE OF CLEAR STATUTORY INDI CATION TO THE CONTRARY, THE STATUTE SHOULD NOT BE READ SO AS TO PERMIT AN A SSESSEE TWO DEDUCTIONS..' 9. IN THE PRESENT CASE, THE ASSESSEE IS NOT CLAIMIN G DOUBLE DEDUCTION ON ACCOUNT OF DEPRECIATION AS HAS BEEN SUGGESTED BY LE ARNED COUNSEL FOR THE REVENUE. THE INCOME OF THE ASSESSEE BEING EXEMPT, T HE ASSESSEE IS ONLY CLAIMING THAT DEPRECIATION SHOULD BE REDUCED FROM T HE INCOME FOR DETERMINING THE PERCENTAGE OF FUNDS WHICH HAVE TO B E APPLIED FOR THE PURPOSES OF THE TRUST. THERE IS NO DOUBLE DEDUCTION CLAIMED BY THE ASSESSEE AS CANVASSED BY THE REVENUE. JUDGMENT OF T HE HON'BLE SUPREME COURT IN ESCORTS LTD. &. ANR. (SUPRA) IS DISTINGUIS HABLE FOR THE ABOVE REASONS. IT CANNOT BE HELD THAT DOUBLE BENEFIT IS G IVEN IN ALLOWING CLAIM FOR DEPRECIATION FOR COMPUTING INCOME FOR PURPOSES OF S. 11. THE QUESTIONS PROPOSED HAVE, THUS, TO BE ANSWERED AGAIN ST THE REVENUE AND IN FAVOUR OF THE ASSESSEE. THE APPEAL IS DISMISSED. 10. THE ISSUE BEFORE US IS IDENTICAL TO THE ISSUE I N THE CASE OF ANOTHER MARKET COMMITTEE BEFORE THE HON'BLE PUNJAB & HARYAN A HIGH COURT AND FOLLOWING THE SAID RATIO, WE DIRECT THE AO TO ALLOW THE CLAIM OF DEPRECIATION ON FIXED ASSETS AT RS.26,75,815/- AND RE-DETERMINE THE INCOME OF ASSESSEE 5 TRUST FOR THE YEAR UNDER CONSIDERATION. THE GROUND OF APPEAL NO.2 RAISED BY THE ASSESSEE IS, THUS ALLOWED. 11. THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 26 TH DAY OF JUNE, 2013. SD/- SD/- (T.R.SOOD) (SUSHMA CHOW LA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 26 TH JUNE,2013 POONAM COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH