Guru Nanak Mission Trust, Hyd, Hyderabad V. DDIT (Exemptions)-1, Hyd, Hyderabad

ITA 854/HYD/2015

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1868 (ITAT-HYDERABAD)
• Duration Of Justice: 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 24-02-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 24-06-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAMAKRISHNA BANDI
• Assessee Lawyers: MOHD FAKRUDDIN
• Keywords: Depreciation; Charitable institution; Revenue expenditure; Capital expenditure
• Section: 143(3); 12A; 12AA; 32; 2; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A (SMC) : HYDERABAD BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER ITA.NO.854/HYD/2015 ASSESSMENT YEAR 2010-2011 GURU NANAK MISSION TRUST, HYDERABAD. PAN A ABTG0502G VS. THE DDIT(E) - I, HYDERABAD. (APPELLANT) (RESPONDENT) FOR ASSESSEE : MR. MOHD. FAKRUDDIN FOR REVENUE : MR. RAMAKRISHNA BANDI DATE OF HEARING : 22 .07.2015 DATE OF PRONOUNCEMENT : 05 .0 8 .2015 ORDER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-9, HYDERABAD DA TED 28.05.2015 FOR THE A.Y. 2010-2011 AND ARISES OUT OF THE ASSESSMENT COMPLETED UNDER SECTION 143(3) OF THE I. T. ACT, 1961. 2. BRIEFLY STATED, THE ASSESSEE IS A TRUST AND IT IS REGISTERED UNDER SECTION 12AA OF THE I.T. ACT, 1961 VIDE ORDER OF DIT(E), HYDERABAD IN F.NO.DIT(E)/HYD/12A/1 30 (02)/07-08, DATED 16.11.2009 W.E.F. 01.04.2007. THE ASSESSEE TRUST FILED ITS RETURN OF INCOME FOR A.Y. 2010- 2011 ON 28.09.2010 DECLARING NIL INCOME. THE RETURN OF INCOME WAS INITIALLY PROCESSED UNDER SECTION 143(1) OF THE I.T. ACT ON 24.05.2011. LATER, THIS CASE WAS SELECT ED FOR SCRUTINY UNDER CASS. NOTICE UNDER SECTION 143(2) WA S 2 ITA.NO.854/HYD/2015 GURU NANAK MISSION TRUST, HYDERABAD. ISSUED ON 28.09.2011. DURING THE SCRUTINY, THE COMPUTATION WAS RE-WORKED AS UNDER : GROSS RECEIPTS AS PER I & E A/C. RS.78,87,453 85% OF THE ABOVE RS.67,04,335 LESS: APPLICATION OF INCOME (I) REVENUE EXPENDITURE RS.12,41,230 (II) CAPITAL EXPENDITURE FOR ACQUISITION OF ASSETS RS. 7,59,474 (III) REPAYMENT OF LOAN BALANCE RS.40,85,000 RS.60,85,704 BALANCE RS. 6,18,631 2.1. THE A.O. HELD THAT THERE WAS A SHORT-FALL OF APPLICATION OF INCOME AND BROUGHT TO TAX THE TOTAL INCOME OF THE ASSESSEE AT RS.6,18,631. AGGRIEVED BY THIS ASSESSMENT, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) ON THE FOLLOWING GROUNDS : 1. THE ORDER OF THE ASSESSING OFFICER IS CONTRARY TO LAW AND FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE A.O. ERRED IN NOT TREATING THE DEPRECIATION ON THE BUILDING AS APPLICATION OF INCOME, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE. 3. THE A.O. SIMILARLY ERRED IN NOT TREATING THE REPAYMENT OF LOAN IN RESPECT OF CAR AS APPLICATION OF INCOME, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE. 4. THE A.O. ERRED IN BRINGING TO TAX THE ALLEGED DEFIC IT OF RS.6,18,631 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE. 5. THE A.O. ERRED IN NOT APPRECIATING THE FACT THAT THERE WAS A CARRIED FORWARD DEFICIT OF 3 ITA.NO.854/HYD/2015 GURU NANAK MISSION TRUST, HYDERABAD. RS.1,46,73,291 FOR THE AY 2008-09 AND EVEN ASSUMING WITHOUT ADMITTING THAT THERE IS A SHORT FALL IN APPLICATION OF INCOME FOR THIS YEAR, HE OUG HT TO HAVE SET OFF THE SAID SHORT FALL AGAINST THE DEF ICIT FOR THE A Y 2008-09 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE. 6. THE A.O. ERRED IN RESTRICTING THE CREDIT FOR TDS TO RS.12,08,494 AGAINST RS.12,45,700 CLAIMED BY THE APPELLANT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE. 3. THE LD. CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE TRUST AND DISMISSED GROUND NOS. 2 AND 5. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSES SEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL ON THE FO LLOWING GROUNDS : 1. THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) IS CONTRARY TO LAW AND FADS AND CIRCUMSTANCES OF THE CASE. 2. THE LD. CIT(A) ERRED IN NOT TO DIRECTING THE ALLOWANCE OF DEPRECIATION CLAIMED BY THE APPELLANT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE. 3. THE LD. CIT(A) ERRED IN NOT FOLLOWING THE DECISION OF JURISDICTIONAL TRIBUNAL IN THE CASE OF AP OLYMPIC ASSOCIATION 151 LTD 627, HYDERABAD, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE. 4. THE LD. CIT(A) ERRED IN NOT APPRECIATING THE FAC T THAT THERE WAS A CARRIED FORWARD DEFICIT OF RS.1,46,73,291 FOR THE ASSESSMENT YEAR.2008- 09 AND EVEN ASSUMING WITHOUT ADMITTING THAT THERE IS A SHORT FALL IN APPLICATION OF INCOME FOR THIS YEAR, HE OUGHT TO HAVE DIRECTED THE INCOME- TAX OFFICER TO SET OFF THE SAID SHORT FALL AGAINST 4 ITA.NO.854/HYD/2015 GURU NANAK MISSION TRUST, HYDERABAD. THE DEFICIT FOR THE ASSESSMENT YEAR. 2008-09, ON THE FACTS AND THE IN THE CIRCUMSTANCES OF THE CASE. 5. THE APPELLANT CRAVES LEAVE TO, ADD TO, ALTER OR AMEND ANY OF THE AFORESAID GROUNDS AS ADVISED ON OR BEFORE THE DATE OF HEARING. 4. I HAVE HEARD ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. GROU ND NOS. 1 AND 5 ARE GENERAL IN NATURE AND DO NOT REQUI RE ANY SPECIFIC ADJUDICATION. THE CRUX OF THE ISSUE AS INV OLVED IN GROUND NOS. 2 AND 3 IS, WHETHER THE ASSESSEE TRUST IS ENTITLED FOR DEPRECIATION ON BUILDING BEING AN ALLO WABLE DEDUCTION OUT OF THE INCOME OF THE TRUST IN SPITE O F THE FACT THAT THE ENTIRE COST OF THE ASSET WAS DEDUCTED WHILE COMPUTING AMOUNT APPLIED TOWARDS THE OBJECT OF THE TRUST. THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF A.P . OLYMPIC ASSOCIATION VS. ADIT(E) (2014) 30 ITR (TRIB U.) 314 (HYD.) HAS CATEGORICALLY HELD THAT CHARITABLE O R RELIGIOUS TRUST REGISTERED UNDER SECTION 12AA CAN C LAIM BENEFIT UNDER SECTION 11 IN THE FORM OF APPLICATION OF FUNDS AS WELL AS DEPRECIATION UNDER SECTION 32 IN R ESPECT OF THE PROPERTY HELD UNDER THE TRUST. THEREFORE, TH E LD. CIT(A) ERRED IN DISALLOWING THE DEPRECIATION UNDER SECTION 32. ON THE OTHER HAND, THE LEARNED D.R. SUBMITS THA T IT IS NOTHING BUT A DOUBLE DEDUCTION AND THEREFORE, THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION SINCE THE EN TIRE COST OF THE ASSET STANDS ALLOWED BY WAY OF APPLICATION O F INCOME UNDER SECTION 11(1) OF THE ACT. THEREFORE, T HE 5 ITA.NO.854/HYD/2015 GURU NANAK MISSION TRUST, HYDERABAD. DEPRECIATION CLAIMED BY THE ASSESSEE UNDER SECTION 32(1) IS NOT ALLOWABLE. THE LEARNED D.R. ALSO RELIED ON T HE DECISION OF THE APEX COURT IN THE CASE OF ESCORTS L TD., VS. UNION OF INDIA (1993) 199 ITR 43 (SC) AND SUBMITTED THAT THERE IS NO ERROR IN THE FINDING OF THE LD. CIT(A). 5. I HAVE GONE THROUGH THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF ESCORTS LTD., (SUPRA) RELIED UPON BY THE LEARNED D.R. I FIND THAT THIS JU DGMENT IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. THERE ARE TWO REASONS AS TO WHY THE SAID JUDGMENT CANNOT APPL Y TO THE FACTS OF THE PRESENT CASE. FIRSTLY, THE HONBLE SUPREME COURT WAS NOT CONCERNED WITH THE CASE OF A CHARITAB LE TRUST/INSTITUTION INVOLVING THE QUESTION AS TO WHET HER ITS INCOME SHOULD BE COMPUTED ON COMMERCIAL PRINCIPLES IN ORDER TO DETERMINE THE INCOME AVAILABLE FOR APPLICA TION TO CHARITABLE PURPOSES. IT WAS A CASE WHERE ASSESSEE W AS CARRYING ON BUSINESS AND THE STATUTORY COMPUTATION PROVISIONS OF CHAPTER-IV-D OF THE ACT WERE APPLICAB LE. IN THE PRESENT CASE, I AM NOT CONCERNED WITH THE APPLICABILITY OF THESE PROVISIONS. I AM CONCERNED O NLY WITH THE CONCEPT OF COMMERCIAL INCOME AS UNDERSTOOD FROM THE ACCOUNTING POINT OF VIEW. EVEN UNDER NORMAL COMMERC IAL ACCOUNTING PRINCIPLES, THERE IS AUTHORITY FOR THE PROPOSITION THAT DEPRECIATION IS A NECESSARY CHARGE FOR COMPUTING THE NET INCOME. SECONDLY, THE HONBLE SUPREME COURT WAS CONCERNED WITH THE CASE WHERE THE ASSESSEE HAD CLAIMED DEDUCTION OF THE COST OF THE A SSET UNDER SECTION 35(1) OF THE ACT, WHICH ALLOWED DEDUC TION 6 ITA.NO.854/HYD/2015 GURU NANAK MISSION TRUST, HYDERABAD. FOR CAPITAL EXPENDITURE INCURRED ON SCIENTIFIC RESE ARCH. THE QUESTION WAS WHETHER AFTER CLAIMING DEDUCTION I N RESPECT OF THE COST OF THE ASSET UNDER SECTION 35(1 ), THE ASSESSEE CAN AGAIN CLAIM DEDUCTION ON ACCOUNT OF DEPRECIATION IN RESPECT OF THE SAME ASSET. THE HON BLE APEX COURT RULED THAT, UNDER GENERAL PRINCIPLES OF TAXATION, DOUBLE DEDUCTION IN REGARD TO THE SAME BU SINESS OUTGOING IS NOT INTENDED UNLESS CLEARLY EXPRESSED. THE PRESENT CASE IS NOT ONE OF THIS TYPE. 6. I HAVE ALSO PERUSED THE ORDER OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF A. P. OLYMPIC ASSOCIATION VS. ADIT(E) (SUPRA), WHICH IS S QUARELY APPLICABLE TO THE FACTS OF THE PRESENT CASE. IN THA T ORDER, THE COORDINATE BENCH OF THE TRIBUNAL HAS CATEGORICA LLY HELD THAT CHARITABLE OR RELIGIOUS TRUST REGISTERED UNDER SECTION 12A CAN CLAIM BENEFIT UNDER SECTION 11 IN T HE FORM OF APPLICATION OF FUNDS AS WELL AS DEPRECIATIO N UNDER SECTION 32 IN RESPECT OF THE PROPERTY HELD UNDER TH E TRUST. THE SAME OPINION WAS FOLLOWED BY THE ITAT, BANGALOR E TRIBUNAL IN THE CASE OF ACIT VS. ADICHUNCHANAGIRI SHIKSHANA TRUST (2013) 31 TAXMANN.COM 157 (BANG.) (TRIBU.). THE JUDGMENT RELIED UPON BY THE LEARNED D .R. IN THE CASE OF ESCORTS LTD., VS. UNION OF INDIA (SUPRA ) IS DISTINGUISHABLE ON FACTS. APART FROM THIS, AS AND W HEN THE LEGISLATION DOES NOT INTEND TO GIVE BENEFIT FOR DOU BLE DEDUCTION, THERE IS A SPECIFIC RESTRICTION IN THE P ROVISION ITSELF. FOR EXAMPLE, SECTION 32(1)(B) READ WITH SEC TION 42 SO FAR AS SECTION 11 IS CONCERNED, THERE IS NO SUCH BAR FOR 7 ITA.NO.854/HYD/2015 GURU NANAK MISSION TRUST, HYDERABAD. THE A.Y. 2010-2011. FURTHER, THE LEGISLATURE MADE A N AMENDMENT BY FINANCE (NO.2) ACT OF 2014, SUB-SECTIO N (6) TO SECTION 11 STANDS INSERTED W.E.F. 01.04.2015 AND THE SAME IS PROSPECTIVE IN NATURE. THEREFORE, RESPECTF ULLY FOLLOWING THE DECISION OF COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF A.P. OLYMPIC ASSOCIATION VS . ADIT(E) (SUPRA), I ALLOW THE GROUND NOS.2 AND 3 OF THE ASSESSEES APPEAL. 7. THE ISSUE INVOLVED IN GROUND NO.4 RELATIN G TO THE ALTERNATIVE CLAIM OF THE ASSESSEE HAS BECOME INFRUC TUOUS AS A RESULT OF OUR DECISION ON GROUND NOS. 2 AND 3. THE SAME IS ACCORDINGLY DISMISSED. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 05.08.2015. SD/- (P.M. JAGTAP) ACCOUNTANT MEMBER DATED 05 TH AUGUST, 2015. VBP/- COPY TO 1. GURU NANAK MISSION TRUST, HYDERABAD. C/O. M/S. M.A. MOHIADDIN & CO., CHARTERED ACCOUNTANTS, 307, LENAINE ESTATE, 5-9-189, ABID ROAD, HYDERABAD 500 001. 2. THE DDIT (E) - I, HYDERABAD 3. CIT(A) - 9, HYDERABAD 4. PR. COMMISSIONER OF INCOME TAX (EXEMPTIONS), HYDERABAD 5. D.R. ITAT A (SMC) BENCH, HYDERABAD. 6. GUARD FILE