ACIT (E), Jaipur V. S.S. JAIN SUBODH SHIKSHA SAMITI, Jaipur

ITA 895/JPR/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1820 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 25-05-2017
• Assessment Year: 2013-2014
• Appeal Filed On: 10-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VARINDER MEHTA
• Assessee Lawyers: MD IQBAL
• Keywords: Capital asset; Depreciation; Charitable institution; Retrospective amendment; Question of law; Cost of acquisition; Capital expenditure
• Section: 11

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA- @ ITA NO. 895/JP/2016 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2013-14 THE ACIT(E), CIRCLE, JAIPUR. CUKE VS. M/S S.S. JAIN SUBODH SHIKSHA SAMITI, 1 SUBODH COLLEGE CAMPUS, RAMBAGH CIRCLE, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAATS3402L VIHYKFKHZ@ APP ELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : MD. IQBAL (ADV.) JKTLO DH VKSJ LS @ REVENUE BY : SHRI VARINDER MEHTA (CIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 15/12/2017 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 20/12/2017 VKNS'K@ ORDER PER: VIJAY PAL RAO, J.M. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF DATED 25.07.2017 OF CIT (A), JAIPUR FOR A.Y. 2013-14. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE CIT (A) HAS ERRED IN ALLOWING CLAIM OF DEPRECIA TION ON FIXED ASSETS IN SPITE OF THE FACT THAT THE SAME WAS ALLOW ED AS APPLICATION OF INCOME U/S 11 AT THE TIME OF PURCHAS E. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE CIT(A) HAS ERRED IN ALLOWING DEPRECIATION WITHO UT APPRECIATING THE FACT THAT THE APPLICATION OF 100% EXPENDITURE O F THE CAPITAL ITA NO. 895/JP/2016 ACIT(E) VS. M/S S.S. JAIN SUBODH SHIKSHA SAMITI 2 ASSET IS ALREADY ALLOWED AS CAPITAL EXPENDITURE HEN CE FURTHER ALLOWANCE OF THE DEPRECIATION ON THE SAME CAPITAL A SSET WOULD AMOUNT TO DOUBLE ALLOWANCE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE CIT(A) HAS ERRED IN ALLOWING DEPRECIATION WITHO UT APPRECIATING THE FACT THAT THE ASSESSEE HAS NOT CARRIED OUT THE BUSINESS ACTIVITIES BUT THE RECEIPTS UTILIZED FOR CHARITY. A S THERE WAS NO BUSINESS ACTIVITY THE CLAIM OF DEPRECIATION WAS NOT ALLOWABLE, THE DEPRECIATION IS ALLOWABLE ONLY IN THE CASE OF BUSIN ESS OR PROFESSION OR IN THE CASE OF INCOME FROM OTHER SOU RCES. 2. THE ONLY ISSUE ARISES IN THIS APPEAL OF THE REVE NUE IS REGARDING CLAIM OF DEPRECIATION ON FIXED ASSETS. THE AO. DISA LLOWED THE CLAIM ON THE GROUND THAT WHEN THE COST OF ACQUISITION OF THE ASSET WAS ALLOWED AS APPLICATION OF INCOME AS PER THE PROVISIONS OF S ECTION 11 OF THE INCOME TAX ACT THEN, THE CLAIM OF DEPRECIATION WOUL D BE AMOUNT TO DOUBLE DEDUCTION. ON APPEAL, THE LD. CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE BY FOLLOWING THE VARIOUS DECISIONS OF THIS TRIBUNAL AS WELL AS DECISIONS OF THE HONBLE HIGH COURT. 3. WE HAVE HEARD THE LD. DR AS WELL AS LD. AR AND C ONSIDERED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET WE NOTE THAT IN A RECENT DECISION DATED 03.10.2017 THE HONBLE RAJASTHAN HIG H COURT IN CASE OF CIT(E) VS. MAHIMA SHIKSHA SAMITI HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY HOLDING THA T THE AMENDMENT IN SECTION 11(6) OF THE INCOME TAX ACT IS PROSPECTI VE AND NOT ITA NO. 895/JP/2016 ACIT(E) VS. M/S S.S. JAIN SUBODH SHIKSHA SAMITI 3 RETROSPECTIVE EFFECT. FURTHER THE HONBLE HIGH COUR T IN SUBSEQUENT DECISION DATED 14.11.2017 IN CASE OF CIT(E) VS. M/S COMPUCOM FOUNDATION AND ANOTHER AS DEALT WITH THIS ISSUE HAS HELD IN PARAS 4 AND 5 AS UNDER:- 4. NOW THE ISSUE IS SQUARELY COVERED AS STATED BY COUNSEL FOR THE RESPONDENT IN CASE OF COMMISSIONER OF INCOME TAX-II VS. KRISHI UPAJ MINDI SAMITI (DBITA NO. 32/2010) DECIDED ON 16 TH JANUARY, 2015 WHEREIN IT HAS BEEN HELD AS UNDER:- 5. THE ASSESSEE IS A CHARITABLE INSTITUTION REGIST ERED UNDER SECTION 12-A OF THE ACT OF 1961 AND 100% CAPITAL EX PENDITURE WAS AVAILED BY IT AGAINST THE ASSET CONCERNED I.E. A BUILDING. SECTION 32(1) OF THE ACT OF 1961 PROVIDES FOR DEPRE CIATION IN RESPECT OF BUILDING, PLANT AND MACHINERY OWNED BY T HE ASSESSEE AND USED FOR BUSINESS PURPOSES. INCOME OF A CHARITA BLE TRUST LIKE THE PRESENT ASSESSEE DERIVED FROM THE DEPRECIABLE H EADS IS ALSO LIABLE TO BE COMPUTED ON COMMERCIAL BASIS, HOWEVER, WHILE DOING SO IT IS TO BE KEPT IN MIND THAT ULTIMATELY ASSESSE E IS A CHARITABLE INSTITUTION AND ITS INCOME FOR TAX PURPOSES IS REQU IRED TO BE DETERMINED BY TAKING INTO CONSIDERATION PROVISIONS OF SECTION 11 OF THE ACT OF 1961 AFTER EXTENDING NORMAL DEPRECIAT ION AND DEDUCTIONS FOR ITS GROSS INCOME. IN COMPUTING THE I NCOME OF A CHARITABLE INSTUTITION/TRUST DEPRECIATION OF ASSETS OWNED BY SUCH INSTITUTION IS A NECESSARY DEDUCTION ON COMMERCIAL PRINCIPLES, HENCE, THE AMOUNT OF DEPRECIATION HAS TO BE DEDUCTE D TO ARRIVE AT THE INCOME AVAILABLE. 6. IN VIEW OF THE DISCUSSIONS MADE ABOVE, WE FIND O VERSELVES IN AGREEMENT WITH THE VIEW TAKEN BY BOMBAY HIGH COURT IN DIRECTOR OF INCOME TAX V. FRAMJEE CAWASJEE INSTITUTE AND IN CIT VS. INSTITUTE OF BANKING PERSONNEL. THE SUBSTANTIAL QUE STION FRAMED IN THE INSTANT MATTER, THUS, IS ANSWERED IN THE TER MS THAT THE ITA NO. 895/JP/2016 ACIT(E) VS. M/S S.S. JAIN SUBODH SHIKSHA SAMITI 4 INCOME TX APPELLATE TRIBUNAL RIGHTLY ALLOWED DEPREC IATION CLAIMED BY THE ASSESSEE ON CAPITAL ASSETS FOR WHICH CAPITAL EXPENDITURE WAS ALREADY GIVEN IN THE YEAR UNDER CONSIDERATION. 4.1. HE HAS RELIED UPON ANOTHER DECISION IN CASE OF COMMISSIONER OF INCOME TAX VS. MAHIMA SHIKSHA SAMITI (DBITA NO. 262/2017) DECIDED ON 3 RD OCTOBER, 2017 WHEREIN IT HAS BEEN HELD AS UNDER:- 17. ON THE OTHER ISSUE, WHETHER THE EXPENSES WHICH ARE GRANTED OR WHICH HAS BEEN CONSIDERED BY JTHE AUTHORITY, HE RELIED UPON THE JUDGMENT OF THIS COURT IN COMMISSIONER OF INCOM E TAX, JAIPUR-II VS. CONSULTING ENGINEERING GROUP LTD. (20 14) 365 ITR 284 WHEREIN IT HAS HELD AS UNDER:- 17. IN VIEW OF WHAT WE HAVE DISCUSSED HEREIN ABOVE, ON ALL THE THREE ISSUES, THE ITAT, AFTER APPRECIATION OF EVIDE NCE, HAS COME TO THE CONCLUSION THAT THE DISALLOWANCE OUT OF JOB WORK CHARGES, SOIL TESTING AND SURVEYING CHARGES AND DIRECTORS' R EMUNERATION IS NOT PROPER AND IT HAD BEEN RIGHTLY DELETED BY THE C IT(A) AND WE DO NOT FIND ANY INFIRMITY OR PERVERSITY IN THE SAID ORDER OF THE ITAT. IT IS PURELY A FINDING OF FACT AND NO QUESTIO N OF LAW MUCH LESS SUBSTANTIAL QUESTION OF LAW CAN BE SAID TO EME RGE OUT OF THE SAID ORDER OF THE ITAT SO AS TO CALL FOR ANY INTERF ERENCE OF THIS COURT. IN OUR VIEW, NO SUBSTANTIAL QUESTION OF LAW ARISES OUT OF THE ORDER PASSED BY THE ITAT. CONSEQUENTLY, THE APP EAL, BEING DEVOID OF MERIT, IS HEREBY DISMISSED IN LIMINE. NO ORDER AS TO COSTS. 18. HE CONTENDED THAT THE VIEW TAKEN BY THE TRIBUN AL IS ON CONSIDERATION OF FACTS AND IT IS NOT A QUESTION OF LAW. 19. HE HAS RELIED UPON THE JUDGMENT OF THIS COURT I N MURARI LAL KHANDELWAL VS. CIT (2003) 263 ITR 642 WHEREIN IT HA S BEEN HELD AS UNDER:- 4. LEARNED COUNSEL FOR THE ASSESSEE MR. JHANWAR SUBMI TS THAT THE AMOUNT OF SALARY CLAIMED ON ACCOUNT OF PAYMENT TO T HE SONS I.E. ANOOP AND ALOK WAS REASONABLE, AS BOTH AR E LOOKING ITA NO. 895/JP/2016 ACIT(E) VS. M/S S.S. JAIN SUBODH SHIKSHA SAMITI 5 AFTER THE BUSINESS AND ASSESSEE HAS GOT PARALYTIC A TTACK IN THE YEAR 1983, THEREFORE, THE PAYMENT OF SALARY TO THES E PERSONS AT THE RATE OF RS. 6,000 AND RS. 5,000 PER MONTH RESPE CTIVELY WAS JUSTIFIED. 5. THE FACTS ON RECORD REVEALS THAT BOTH ARE GRADUATE S AND ANOOP, TO WHOM ASSESSEE HAS PAID RS. 6,000 P.M. IN THE YEAR UNDER CONSIDERATION WAS GETTING ONLY RS. 1,000 P.M. JUST IN THE PRECEDING YEAR. SO FAR PARALYTIC ATTACK TO THE ASSE SSEE IS CONCERNED, IT HAPPENED IN THE YEAR 1983. THE ASSESS EE HAS CARRIED ON THE BUSINESS EVEN AFTER PARALYTIC ATTACK WITHOUT THE HELP OF THESE TWO SONS. 6. WE ALSO NOTICE THAT IN THE PRECEDING YEAR I.E. 199 1 ASSESSEE HAS DISCLOSED INCOME OF RS. 70,000. THIS YEAR HE HA S DISCLOSED ONLY INCOME OF RS. 45,673. ON THESE FACTS, THERE IS NO JUSTIFICATION OF PAYING SUCH HEAVY SALARY TO THE SONS OF THE ASSE SSEE, WHO ARE EMPLOYED BY THE ASSESSEE FOR THE PURPOSE OF HIS BUS INESS. 7. IT IS ALSO PERTINENT TO NOTE THAT WHAT SHOULD BE T HE REASONABLE SALARY IN BASICALLY A QUESTION OF FACT AND TRIBUNAL IS A FACT-FINDING FINAL BODY IN THIS REGARD. FINDING OF THE TRIBUNAL CANNOT BE SAID TO BE PERVERSE ON THESE FACTS. NO INTERFERENCE IS CALL ED FOR IN THE ORDER OF TRIBUNAL. IN THE RESULT, WE ANSWER THE QUE STION IN AFFIRMATIVE I.E. IN FAVOUR OF THE REVENUE AND AGAIN ST THE ASSESSEE. 20. ON THE FIRST ISSUE AS STATED ABOVE, THE SAME I S REQUIRED TO BE ANSWERED IN FAVOUR OF THE ASSESSEE THAT U/S 11 &13, THE EXPENSES WHICH ARE TRANSFERRED TO THE PRIVATE UNIVE RSITY WHILE HOLDING SEC. 13 DEFINITION AND EXPLANATION AND SUBS TANTIAL CONTROLLED OR SUBSTANTIAL TRANSFERRED ARE NOT IN TH EIR NAME. IT MAY BE PRIVATE INSTITUTION WHICH IS A CREATION OF STATU E HAVING CONTROLLED BY THE SAME TRUSTEE AND WILL NOT INDIREC TLY COVERED U/S 13 MERELY BECAUSE THE TRUSTEES OF THE BENEFICIARIES OF THE TRUST OR ANY PERSONS CONTROLLING THE TRUST WHICH IS PART OF ANOTHER INSTITUTION. THE OBJECT IS TO SEE WHERE EVEN TRANSF ER FOR EDUCATIONAL PURPOSE OR NOT THAT HAS BEEN DONE. IN T HAT VIEW OF ITA NO. 895/JP/2016 ACIT(E) VS. M/S S.S. JAIN SUBODH SHIKSHA SAMITI 6 THE MATTER, THE CONTENTION THAT THE UNIVERSITY WILL BE COVERED U/S 13, IN OUR CONSIDERED OPINION MERELY BECAUSE SAME T RUSTEES OR THE DIRECTORS OR THE PERSONS ARE THERE, SEC. 13 EXC EPT WITH THE EXPLANATION IS REQUIRED TO BE CONSIDERED AND THE TR IBUNAL HAS RIGHTLY CONSIDERED THAT THE TRUSTEES WILL NOT BE C OVERED U/S 13. 21. REGARDING DEPRECIATION IN VIEW OF THE AMENDMENT SEC. 11(6) IT WILL BE PROSPECTIVE AND IN VIEW OF JURISDICTIONA L HIGH COURT JUDGMENT BINDING ON US AND WE ARE FOLLOWING THE SAM E. 22. IN THAT VIEW OF THE MATTER, DEPRECIATION IS RIG HTLY ALLOWED. ON THE QUESTION OF FOREIGN TRIP AFTER TAKING INTO CONS IDERATION THE STUDENT EXCHANGE PROGRAMME THE TRIBUNAL HAS COME TO THE CONCLUSION THAT IT IS COVERED UNDER THE PURPOSE OF THE TRUST OBJECT AND ARE DONE FOR THE EDUCATIONAL INSTITUTION AND BE NEFIT OF THE STUDENTS, IN OUR CONSIDERED OPINION, THE EXPENSES O F FOREIGN TRIP ARE ALSO RIGHTLY ALLOWED. 5. IN VIEW OF THE ABOVE, THE ISSUE IS REQUIRED TO B E ANSWERED IN FAVOUR OF THE ASSESSEE AGAINST THE DEPARTMENT. IN VIEW OF THE BIDING PRECEDENT OF HONBLE JURISDIC TION HIGH COURT, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE IMPUGNED ORDER OF THE LD. CIT(A) ALLOWING THE CLAIM OF DEPRECIATION U/S 11 OF THE IN COME TAX ACT. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 20/12/2017 SD/- SD/- FOE FLAG ;KNO FOT; IKY JKO (VIKRAM SINGH YADAV) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR ITA NO. 895/JP/2016 ACIT(E) VS. M/S S.S. JAIN SUBODH SHIKSHA SAMITI 7 FNUKAD@ DATED:- 20/12/2017. * SANTOSH. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- ACIT(E), CIRCLE, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- M/S S.S. JAIN SUBODH SHIKSHA SAMITI , 1 SUBODH COLLEGE CAMPUS, RAMBAGH CIRCLE, JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 895/JP/2016} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR