The Dy.DIT,(Exemption), Ahmedabad V. Gujarat Housing Board, Ahmedabad

ITA 861/AHD/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9479 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 11-02-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 26-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J P JANGID
• Assessee Lawyers: M G PATEL
• Keywords: Depreciation; Charitable institution
• Section: 143(3); 32; 27

Judgement Text

I.T.A. NO .861 /AHD/ 20 13 ASSESSMENT YEAR: 200 7 - 08 PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL, AHMEDABAD B BENCH, AHMEDABAD [CORAM : PRAMOD KUMAR AM AND KUL BHARAT JM ] I.T.A. NO. 861 /AHD/ 20 13 ASSESSMENT YEAR : 200 7 - 08 DY. DIRECTOR OF INCOME - TAX (EXEMPTION), .. .APPELLANT AHMEDABAD . VS. GU JARAT HOUSING BOARD, .. . RESPONDENT PARAGATI NAGAR, NARANPURA, AHMEDABAD. [PAN: AAALG 0206 E] APPEARANCES BY: J.P. JANGID , FOR THE APPELLANT M.G. PATEL , FOR THE RESPONDENT D ATE OF CONCLUDING THE HEARING : FEBRUARY 11 TH , 201 6 DATE OF PRONOUN CING THE ORDER : FEBRUARY 15 TH , 201 6 O R D E R PER PRAMOD KUMAR AM : 1. BY WAY OF THIS APPEAL, THE ASSESSING OFFICER HAS CHALLENGED CORRECTNESS OF THE ORDER DATED 17 TH JANUARY, 2013 PASSED BY THE LD. CIT(A) IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 ( THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR 2007 - 08, ON THE FOLLOWING GROUNDS : - T HE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN ALLOWING THE APPEAL OF THE ASSESSEE. I) THE LD. COMMISSIONER OF INCO ME TAX (APPEALS) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF DEPRECIATION OF RS.18,93,672/ - MADE BY THE ASSESSING OFFICER. I I) THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND ON FACTS IN ALLOWING DEPRECIATION ON THE ASSE TS, THE COST OF WHICH HAS ALREADY BEEN ALLOWED AS A DEDUCTION ON ACCOUNT OF APPLICATION ON INCOME AS THIS WOULD AMOUNT TO DOUBLE DEDUCTION IN VIEW OF THE DECISION OF THE HON BLE SUPREME I.T.A. NO .861 /AHD/ 20 13 ASSESSMENT YEAR: 200 7 - 08 PAGE 2 OF 6 COURT IN THE CASE OF ESCORTS LTD., 199 ITR 43 AND THE DECISION OF KERA LA HIGH COURT IN THE C A SE OF LISSIE MEDICAL INSTITUTIONS V/S. COMMISSIONER OF INCOME TAX, KOCHI, 348 ITR 344. I II ) WHETHER, ON T HE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, DEDUCTION OF DEPRECIATION U/S.32 WHICH FALLS UNDER THE HEAD PROFI T A ND G A INS FRO M BUSINESS AND PROFESSION OF THE INCOME TAX ACT, 1961 , WOULD BE AVAILABLE TO CHARITABLE TRUST WHOSE INCOME IS OTHERWISE NOT ASSESSABLE UNDER THE ABOVE HEAD. I V) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE UPHELD T HE ORDER OF THE ASSESSING OFFICER. V) IT IS, THEREFORE , PRAYED THAT THE ORDER OF T HE L D . COMMISSIONER OF INCOME TAX (APPEALS) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2. LEARNED REPRESENTATIVES FAIRLY AGREE THAT TH E ISSUE IN APPEAL IS NOW COVERED, IN FAVOUR OF THE ASSESSEE, BY A CO - ORDINATE BENCH S DECISION IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEAR 2009 - 10 IN ITA NO.2655/AHD/2012 . VIDE THIS DECISION DATED 2 2 ND MARCH, 2013 , THE TRIBUNAL HAS, INTER ALIA, OBSERVE D AS FOLLOWS : - 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. AT THE TIME OF HEARING BOTH THE PARTIES AGREED THAT THE ISSUE IS COVERED AGAINST THE REVENUE BY THE ORDERS OF THE TRIBUNAL CITED SUPRA. FURTHER, IN THE AFORESAID ORDER OF THE ITAT AHMEDABAD A BENCH ITA NO. 2658/AHD/2012 DATED 31 - 01 - 2013 CITED SUPRA THE TRIBUNAL HELD AS UNDER: 6. REGARDING GROUND NO.3 OF THE REVENUE S APPEAL, AS PER WHICH, THE CLAIM OF THE REVENUE THAT DEDUCTION U/S 32 IS ALLOWABLE WHILE COMPUT ING PROFIT AND GAINS FROM BUSINESS AND SINCE THE CHARITABLE TRUST IS NOT ENGAGED IN ANY BUSINESS, THE INCOME IS NOT ASSESSABLE UNDER THIS HEAD AND HENCE, DEPRECIATION IS NOT ALLOWABLE FOR THIS REASON ALSO. IN THIS REGARD, WE WOULD LIKE TO OBSERVE THAT IT W AS HELD BY HON BLE GUJARAT HIGH COURT AND HON BLE BOMBAY HIGH COURT THAT ALTHOUGH, THE INCOME OF THE ASSESSEE TRUST DOES NOT FALL UNDER THE HEAD INCOME FROM BUSINESS BUT STILL SUCH INCOME HAS TO BE COMPUTED ON THE BASIS OF COMMERCIAL PRINCIPLES AND THEREFO RE, DEPRECIATION HAS TO BE ALLOWED. IN THE CASE OF CIT VS SETH MANIKLAL RANCHODDAS VISHRAM BHAVAN TRUST (SUPRA), HON BLE GUJARAT HIGH COURT HAS AGREED WITH THE VIEW TAKEN BY HON BLE MADRAS HIGH COURT ON THIS ISSUE. HON BLE MADRAS HIGH COURT HAS TAKEN THIS VIEW IN THE CASE OF CIT VS RAO BAHADUR CALAVALA CUNNAN CHETTY CHARITIES AS REPORTED IN 135 ITR 485 THAT THE INCOME FROM THE PROPERTY HELD UNDER TRUST WOULD HAVE TO BE ARRIVED AT IN THE COMMERCIAL MANNER AND NOT UNDER THE VARIOUS HEADS SET OUT IN SECTION 14 . IN OUR CONSIDERED OPINION, THIS JUDGEMENT OF HON BLE GUJARAT HIGH COURT ALONG WITH THIS JUDGMENT OF HON BLE MADRAS HIGH COURT AGREED TO BY HON BLE GUJARAT HIGH COURT COVERS THIS I.T.A. NO .861 /AHD/ 20 13 ASSESSMENT YEAR: 200 7 - 08 PAGE 3 OF 6 ASPECT ALSO AGAINST THE REVENUE AND HENCE, THIS GROUND OF THE REVENUE IS ALS O LIABLE TO BE REJECTED. WE ORDER ACCORDINGLY. 7. BEFORE PARTING, WE WOULD LIKE TO OBSERVE THAT THE WRITTEN SUBMISSIONS FILED BY THE LEARNED DR AS REPRODUCED ABOVE DOES NOT RENDER ANY HELP TO THE REVENUE BECAUSE SITTING IN GUJARAT, WE ARE DUTY BOUND TO FOLLOW THE JUDGMENT OF HON BLE GUJARAT HIGH COURT IN PREFERENCE TO THE JUDGMENT OF HON BLE KERALA HIGH COURT CITED BY LEARNED DR. MOREOVER, WE ALSO FIND THAT IN THE PRESENT CASE, IT IS NOT AN ALLEGATION OF THE A. O. IN THE ASSESSMENT ORDER THAT ANY CASH OF THE ASSESSEE HAS GONE OUTSIDE THE BOOKS OF THE ASSESSEE. FACTS ARE NOT BROUGHT TO OUR NOTICE ON THE BASIS OF WHICH IT IS OBSERVED BY HON BLE KERALA HIGH COURT THAT CASH SURPLUS HAS GONE OUTSIDE THE BOOKS. GENERALLY, CLAIMING OF DEPRECIATION IN BOOKS OR IN COMPUTATION OF INCOME DOES NOT AFFECT CASH POSITION BECAUSE IT ONLY REDUCES THE PROFIT AND REDUCES THE WDV OF THE CONCERNED ASSET. REGARDING THE EXAMPLE GIVEN BY LEARNED DR IN THE WRITTEN SUBMISSIONS, WE WOULD LIKE TO OBSERVE THAT CLAIMING OF DEPRECIATIO N IS MAINLY TO BUILD FUND TO FACILITATE REPLACEMENT OF ASSET WHEN IT IS WORN OUT BECAUSE OF WEAR & TEAR OR OBSOLESCE AND HENCE, IT CANNOT BE ALLEGED THAT THERE WILL BE LEAKAGE IF DEPRECIATION IS ALLOWED. REGARDING VARIOUS SUBMISSIONS TO SAY THAT THE JUDGM ENT OF HON BLE GUJARAT HIGH COURT IS NOT APPLICABLE IN THE PRESENT CASE, WE DO NOT FIND ANY IN THE SAME BECAUSE WE HAVE ALREADY SEEN THAT GRANTING OF EXEMPTION U/S 11 AND THEN DEPRECIATION U/S 32 DOES NOT AMOUNT TO GRANTING DOUBLE DEDUCTION BECAUSE EXEMPTI ON U/S 11 IS NOT A DEDUCTION BUT EXEMPTION OF AN INCOME FROM THE LIABILITY OF TAX ON FULFILMENT OF CERTAIN CONDITIONS. FOR THE SAME REASONS, RELIANCE PLACED ON 211 ITR 293, 211 ITR 635 AND 155 ITR 120 IS MISPLACED BECAUSE THERE IS NO DOUBLE DEDUCTION IN TH E PRESENT CASE. 5.1 FURTHER, ITAT AHMEDABAD A BENCH VIDE ORDER DATED 24 - 07 - 2009 IN THE CASE OF ACIT CC 1 (3) VS AHMEDABAD SOUTH INDIAN ASSOCIATION CHARITABLE TRUST IN ITA NO.2331/AHD/2004, FOR THE ASSESSMENT YEAR 2001 - 02 ALONG WITH OTHER APPEALS HAD D ECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE, WHEREIN AT PARA 11 TO 14, IT WAS HELD AS UNDER: 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THE CASE OF CIT V. SHETH MA NILAL RANCHHODDAS VISHRAM BHAVAN TRUST (198 ITR 598) (GUJ), THE FACTS ARE THAT THE ASSESSEE WAS A TRUST REGISTERED UNDER THE PUBLIC TRUSTS ACT. THE INCOME OF THE ASSESSEE IS MAINLY FROM IMMOVABLE PROPERTY. IN THE RETURNS OF INCOME FILED FOR THE ASSESSMENT YEARS 1971 - 72 AND 1972 - 73, THE ASSESSEE CLAIMED DEPRECIATION AND CALCULATES ITS INCOME ACCORDINGLY. THE INCOME - TAX OFFICER HAS REJECTED THE CLAIM OF THE ASSESSEE AS HE WAS OF THE VIEW THAT THE INCOME FROM HOUSE PROPERTY WAS TO BE CALCULATED ACCORDING TO S ECTIONS 22 TO 27 OF THE ACT. IN APPEAL, THE APPELLATE ASSISTANT COMMISSIONER HELD OTHERWISE. THE REVENUE THEN WENT TO THE TRIBUNAL. THE TRIBUNAL DISMISSED THE APPEAL. SAME THING HAPPENED FOR THE ASSESSMENT YEAR 1972 - 73 ALSO. AT T HE INSTANCE OF I.T.A. NO .861 /AHD/ 20 13 ASSESSMENT YEAR: 200 7 - 08 PAGE 4 OF 6 REVENUE THE FOLLOWING QUESTIONS WERE REFERRED TO THE HON BLE COURT FOR THEIR DECISION. 1. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS RIGHT IN LAW IN HOLDING THAT, WHILE COMPUTING INCOME UNDER SECTION 11(1) (A) OF THE INCOME TAX AC T, 1961, DEPRECIATION HAS TO BE ALLOWED? 2 . WHETHER THE TRIBUNAL WAS RIGHT IN LAW IN HOLDING THAT, HAVING REGARD TO THE SCHEME OF THE ACT, INCOME REFERRED TO IN SECTION 11(1) (A) OF THE ACT IS TO BE COMPUTED NOT IN ACCORDANCE WITH THE PROVISIONS OF THE ACT BUT IN ACCORDANCE WITH THE NORMAL RULES OF ACCOUNTANCY UNDER WHICH THE DEPRECIATION HAS TO BE ALLOWED WHILE COMPUTING SUCH INCOME UNDER SECTION 11 (1) (A) OF THE ACT? HON BLE HIGH COURT ANSWERED THE QUESTIONS IN THE AFFIRMATIVE HOLDING THAT INCOME F ROM THE PROPERTY HELD UNDER THE TRUST SHOULD BE COMPUTED IN ACCORDANCE WITH THE NORMAL RULES OF ACCOUNTANCY IN WHICH DEPRECIATION ON HOUSE PROPERTY IS TO BE ALLOWED. IT HAS FURTHER BEEN HELD THEREIN THAT THAT THE EXPRESSION INCOME HAS TO BE UNDERSTOOD IN THE POPULAR OR GENERAL SENSE AND NOT IN THE SENSE IN WHICH THE INCOME IS ARRIVED AT FOR THE PURPOSE OF ASSESSMENT TO TAX BY APPLICATION OF SOME ARTIFICIAL PROVISIONS EITHER GIVING OR DENYING DEDUCTION. THE PROVISIONS OF INCOME - TAX ACT ARE TO COMPUTE INCOM E UNDER DIFFERENT HEADS CANNOT BE INTRODUCED TO FIND OUT THE INCOME DERIVED FROM THE PROPERTY HELD UNDER THE TRUST. SIMILAR VIEW WAS TAKEN BY THE HON BLE BOMBAY HIGH COURT IN THE CASE OF CIT V. INSTITUTE OF BANKING PERSONNEL SELECTION. 12. HOWEVER, IT IS NOT VERY CLEARLY LAID DOWN IN THESE DECISIONS REFERRED TO IN THE FOREGOING PARAGRAPH AS TO WHETHER DEPRECIATION, IN RESPECT OF ASSTS IN WHICH INVESTMENT WAS ALLOWED AS APPLICATION EARLIER, WOULD BE FURTHER CONSIDERED AS APPLICATION IN SUBSEQUENT YEAR FOR T HE PURPOSE OF TREATING 85% OF RECEIPTS AS APPLICATION AND 15% OF THE RECEIPTS FOR BEING CARRIED FORWARD I.E., WHETHER DEPRECIATION WOULD BE FURTHER TREATED AS APPLICATION FOR CHARITABLE PURPOSES. NOTWITHSTANDING, THAT THE INCOME IN THE PROPERTY HELD BY THE TRUST SHOULD BE COMPUTED IN THE NORMAL COMMERCIAL SENSE AND THEREFORE, DEPRECIATION IS REQUIRED TO BE DEDUCTED TO COMPUTE INCOME ACCORDINGLY, BUT WHAT IS COMPUTED FOR THE PURPOSES OF TAXING U/S. 11 IS THE DEFICIENCY BETWEEN 85% AND ACTUAL AMOUNT APPLIED F OR CHARITABLE PURPOSES. FOR EXAMPLE WHERE A TRUST APPLIES ONLY, SAY 60% OF ITS RECEIPTS AS APPLICATION TO CHARITABLE PURPOSES THEN 25% OF THE RECEIPTS WOULD BE TREATED AS DEFICIENCY WHICH SHOULD BE SUBJECTED TO TAX AND 15% IS ALLOWED TO BE CARRIED FORWAR D. IN OUR CONSIDERED VIEW, HON BLE BOMBAY AND GUJARAT HIGH COURT IN THE ABOVE REFERRED CASES WERE CONCERNED WITH THE COMPUTATION OF INCOME OF THE TRUST IN THE NORMAL COMMERCIAL SENSE AND HAD NOT CONSIDERED WHETHER THE AMOUNT OF DEPRECIATION WOULD BE CONSID ERED AS APPLICATION TO ARRIVE AT 85% OF THE RECEIPTS IN ADDITION TO INVESTMENT IN THE ASSET ALREADY ALLOWED AS APPLICATION IN AN EARLIER YEAR. THE ALLOWANCE OF DEPRECIATION AS FURTHER APPLICATION OF RECEIPTS IN SUBSEQUENT YEAR WOULD APPARENTLY BE A DOUBLE APPLICATION WHICH, IN OUR HUMBLE VIEW, WOULD BE APPARENTLY INCONSISTENT AS NOT SO PROVIDED IN I.T.A. NO .861 /AHD/ 20 13 ASSESSMENT YEAR: 200 7 - 08 PAGE 5 OF 6 THE LAW AND HENCE UNTENABLE APPARENTLY ILLOGICAL. NOTWITHSTANDING OUR VIEW, WE RESPECTFULLY FOLLOW THE DECISION OF HON BLE HIGH COURT IN THE CASE OF CIT V. SHETH MANILAL RANCHHODDAS VISHRAM BHAVAN TRUST (198 ITR 598), AND HOLD THAT DEPRECIATION WOULD BE FURTHER ALLOWED TO THE TRUST IN A SUBSEQUENT YEAR IN RESPECT OF THE PROPERTY WHEN WE CALCULATE ITS INCOME IN A COMMERCIAL SENSE. WE, THEREFORE, UPHOLD THE IMPUGNED ORDER OF THE LEARNED CIT(A) AND DISMISS THE GROUND RAISED BY THE REVENUE IN THIS REGARD. 13. GROUNDS NO.3 AND 4 IN EACH OF THE APPEALS FILED BY THE REVENUE ARE GENERAL IN NATURE AND NEED NO SPECIFIC ADJUDICATION. 14. IN THE RESULT, ALL THE APPEALS OF TH E REVENUE ARE DISMISSED. 5.2 RESPECTFULLY FOLLOWING THE DECISIONS OF OUR HIGHER JUDICIARY AUTHORITIES AND PREDECESSORS, WE HOLD THE ISSUE IN FAVOUR OF THE ASSESSEE. FURTHER, IT IS EXPLICITLY CLEAR THAT SECTION 11 (1) (A) OF THE ACT PROVIDES A CONDITION FOR CLAIMING EXEMPTION OF INCOME IN THE CASE OF CERTAIN ASSESSEES FROM THEIR TOTAL INCOME FOR A PARTICULAR ASSESSMENT YEAR UNDER CHAPTER III OF THE ACT VIZ. INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME , WHILE AS DEPRECIATION IS A DEDUCTION ALLOWABLE U/ S 32 OF THE ACT WHILE COMPUTING INCOME UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION AS PROVIDED UNDER CHAPTER V OF THE ACT VIZ., COMPUTATION OF TOTAL INCOME UNDER VARIOUS HEADS. THUS, BOTH THE SECTIONS 11(1) (A) OF THE ACT AND SECTION 32 OF THE ACT ARE APPLICABLE ON DIFFERENT ISSUES AND UNDER DIFFERENT CIRCUMSTANCES. ACCORDINGLY, BOTH THESE SECTIONS WILL BE APPLICABLE INDEPENDENTLY WHEN CONDITIONS STIPULATED THEREIN ARE FULFILLED. 3. WE SEE NO REASONS TO TAKE ANY OTHER VIEW OF THE MATTER THAN THE V IEW SO TAKEN BY THE CO - ORDINATE BENCH. 4. RESPECTFULLY FOLLOWING THE TRIBUNAL S DECISION DATED 2 2 ND MARCH, 201 3 , IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEAR 2009 - 10, WE A PPROVE THE ORDER OF THE LD. CIT(A) AND DECLINE TO INTERFERE IN THE MATTER. 5. IN TH E RESULT, THE APPEAL IS DISMISSED. P RONOUNCED IN THE OPEN COURT ON THIS 15 TH DAY OF FEBRUARY, 2016 . SD/ - SD/ - KUL BHARAT PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) PBN/* DATED: THE 15 TH DAY OF FEBRUARY , 201 6 . I.T.A. NO .861 /AHD/ 20 13 ASSESSMENT YEAR: 200 7 - 08 PAGE 6 OF 6 COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD