AP Industrial Infrastructure Coporation Ltd., Hyderabad V. Asst. DIT(Exemptions)-III, Hyderabad

ITA 811/HYD/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69844 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2003-2004
• Appeal Filed On: 23-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G M BELAGALI
• Assessee Lawyers: B SATYANARAYANA MURTHY
• Keywords: Revision of order; Depreciation; Charitable institution; Principle of natural justice
• Section: 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA.NO.811/HYD/2012 ASSESSMENT YEAR 2003-2004 A.P. INDUSTRIAL INFRASTRUCTURE CORPORATION LTD. HYDERABAD 29. PAN AABCA9029K VS. THE ASST. DIRECTOR OF INCOME TAX (E)-III, HYDERABAD. (APPELLANT) (RESPONDENT) FOR APPELLANT : SHRI B.SATYANARAYANA MURTHY (A.R. ) FOR RESPONDENT : SHRI G.M.BELAGALI (CIT) DATE OF HEARING : 18.09.2013 DATE OF PRONOUNCEMENT : 18.09.2013 ORDER PER SMT. ASHA VIJAYARAGHAVAN, J.M. 1. THIS APPEAL IS AGAINST THE ORDER OF CIT U/S 263 DIRECTING THE AO TO RE-EXAMINE THE TAXABLE INCOME OF THE ASSESSEE . THE ASSESSEE IS A COMPANY HAVING REGISTRATION U/S.12A AND CLAIMI NG EXEMPTION U/S.11. IT FILED RETURN ADMITTING INCOME AT NIL. THE CASE WAS PROCESSED U/S.143(1). NOTICE U/S.148 WAS ISSUED. THE RE- ASSESSMENT WAS COMPLETED DETERMINING THE PROFIT @ RS.1,89,96,346/. 2. HOWEVER, THE CIT ISSUED NOTICE U/S.263 ON 5.3.12 STATING THAT THE ASSESSEE HAD CLAIMED DEPRECIATION OF RS.2,81,0 2,656/-. AS THE ENTIRE AMOUNT OF PROCUREMENT OF ASSET WAS ALREADY C LAIMED AS 2 ITA.NO.811/HYD/2012 AP INDUSTRIAL INFRASTRUCTURE CORPORATION LTD. APPLICATION OF INCOME THE ASSESSEE CANNOT CLAIM DEP RECIATION AGAIN ON THE VERY SAME ASSETS FOR DETERMINING THE TAXABLE INCOME. ACCORDINGLY HE RELIED ON THE DECISION OF THE TRIBUN AL OF KOCHIN IN THE CASE OF DDIT (E) VS. ADI SANKARA TRUST (46 SOT 0230) AND DDIT (E) VS. LISSIE MEDICAL MEDICAL INSTITUTIONS, K OCHIN. THE COMMISSIONER, THEREFORE DIRECTED THE AO TO REDO THE ASSESSMENT AFTER CONSIDERING THE ISSUE OF DISALLOW ABILITY OF DEPRECIATION TO THE EXTENT OF RS.2,81,02,656/- AND GRANTING EXEMPTION U /S.11 IN COMPUTING THE TAXABLE INCOME. 3. AGGRIEVED THE ASSESSEE IS ON APPEAL BEFORE US. W E FIND THAT THE APPEAL IS FILED BEFORE THE TRIBUNAL DELAYED BY 04 DAYS. WE ARE SATISFIED WITH THE REASONS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE AND THEREFORE, CONDONE THE DELAY. WE FIND THAT THE GRANTING OF DEPRECIATION WHILE DETERMINING THE INCO ME OF CHARITABLE INSTITUTION IS A DEBATABLE ISSUE AND THERE ARE DECI SIONS TO THE EFFECT THAT DEPRECIATION SHOULD BE GRANTED FOR CHARITABLE INSTITUTION NOTWITHSTANDING THE FACT THAT AT THE TIME OF PURCHA SE AND THE COST OF SUCH ASSETS HAVE BEEN TREATED AS APPLICATION OF INCOME (CIT VS MARKET COMMITTEE, PIPLI (2011) 330 ITR 16 (P & H). IT IS THEREFORE CLEAR THAT THERE ARE TWO VIEWS POSSIBLE ON ALLOWABI LITY OF DEPRECIATION FOR CHARITABLE INSTITUTION AND THE VIE W TAKEN BY THE AO FOR ALLOWING DEPRECIATION CANNOT BE SAID TO BE UNSU STAINABLE IN LAW. THEREFORE FOLLOWED THE DECISION OF APEX COURT IN TH E CASE OF MALABAR INDUSTRIAL COMPANY LTD. VS. CIT (2000) 243 ITR 83 ( SC), HELD AS FOLLOWS : A BARE READING OF PROVISIONS OF S. 263 MAKES IT CLE AR THAT THE PREREQUISITE TO EXERCISE OF JURISDICTION B Y THE CIT SUO MOTU UNDER IT, IS THAT THE ORDER OF THE ITO IS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTER ESTS OF THE REVENUE. THE CIT HAS TO BE SATISFIED OF TWIN 3 ITA.NO.811/HYD/2012 AP INDUSTRIAL INFRASTRUCTURE CORPORATION LTD. CONDITIONS, NAMELY, (I) THE ORDER OF THE AO SOUGHT TO BE REVISED IS ERRONEOUS; AND (II) IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IF ONE OF THEM IS ABSENT IF THE ORDER OF THE ITO IS ERRONEOUS BUT IS NOT PREJUDICIA L TO THE REVENUE OR IF IT IS NOT ERRONEOUS BUT IS PREJUDICIA L TO THE REVENUERECOURSE CANNOT BE HAD TO S. 263(1). THERE CAN BE NO DOUBT THAT THE PROVISION CANNOT BE INVOKE D TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE AO; IT IS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. AN IN CORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS. IN THE SAME CATEGORY FALL ORDERS PASSED WITHOUT APPLYING THE PRINCIPLES OF NATURAL JUSTICE OR WITHOUT APPLICATION OF MIND. THE PHRASE PREJUDICIA L TO THE INTERESTS OF THE REVENUE IS NOT AN EXPRESSION OF ART AND IS NOT DEFINED IN THE ACT. UNDERSTOOD IN ITS OR DINARY MEANING IT IS OF WIDE IMPORT AND IS NOT CONFINED TO LOSS OF TAX. THE SCHEME OF THE ACT IS TO LEVY AND COLLEC T TAX IN ACCORDANCE WITH THE PROVISIONS OF THE ACT AND THIS TASK IS ENTRUSTED TO THE REVENUE. IF DUE TO AN ERRONEOUS ORDER OF THE ITO, THE REVENUE IS LOSING TAX LAWFULLY PAYA BLE BY A PERSON, IT WILL CERTAINLY BE PREJUDICIAL TO THE I NTERESTS OF THE REVENUE. THE PHRASE PREJUDICIAL TO THE INTE RESTS OF THE REVENUE HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE AO. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF AO CANNOT B E TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVE NUE, FOR EXAMPLE, WHEN AN ITO ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE; OR WHERE TWO VIEWS ARE POSSIBLE AND THE IT O HAS TAKEN ONE VIEW WITH WHICH THE CIT DOES NOT AGRE E, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDIC IAL TO THE INTERESTS OF THE REVENUE UNLESS THE VIEW TAKEN BY THE ITO IS UNSUSTAINABLE IN LAW. DAWJEE DADABHOY & CO. VS. S.P. JAIN & ANR. (1957) 31 ITR 872 (CAL) : TC 57R.129, CIT VS. T. NARAYANA PAI (1975) 98 ITR 422 (KAR) : TC 57R.185, CIT VS. GABRIEL INDIA LTD. (1993) 114 CTR (BOM) 81 : (1993) 203 ITR 108 (BOM) : TC 57R.21 3 AND CIT VS. SMT. MINALBEN S. PARIKH (1995) 127 CTR (GUJ) 333 : (1995) 215 ITR 81 (GUJ) : TC 57R.312 APPROVED; VENKATAKRISHNA RICE CO. VS. CIT (1987) 62 CTR (MAD) 152 : (1987) 163 ITR 129 (MAD) : TC 57R.3 03 DISAPPROVED. 4 ITA.NO.811/HYD/2012 AP INDUSTRIAL INFRASTRUCTURE CORPORATION LTD. 4. BEING SO, THE ORDER OF AO GRANTING DEPRECIATION CANNOT BE CONSIDERED AS ERRONEOUS AND THEREFORE THE CIT DID N OT HAVE JURISDICTION TO REVISE THE ORDER OF ASSESSING OFFIC ER U/S.263 ON THE ISSUE OF GRANT DEPRECIATION IN COMPUTING THE INCOME OF THE ASSESSEE. 5. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18.09.2013. SD/- SD/- (CHANDRA POOJARI) (SMT. ASHA VIJAYARAGHAVAN ) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATE 18.09.2013 VBP/- 1. A.P. INDUSTRIAL INFRASTRUCTURE CORPORATION LTD. HYDERABAD 29. C/O. VENUGOPAL & CHENOY, CHARTERED ACCOUNTANTS, 4-1 -889/16/2, TILAK ROAD, HYDERABAD 500 001. 2. THE ASST. DIRECTOR OF INCOME TAX (E)-III, HYDERA BAD 3. COMMISSIONER OF INCOME TAX-1 (INCHARGE) CHIEF CO MMISSIONER OF INCOME TAX (OSD), 3 RD FLOOR ANNEXE, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD 500 004. 4. ADDL. CIT, RANGE - 1, HYDERABAD 5. D.R. ITAT B BENCH, HYDERABAD.