DDIT (E) 1(2), MUMBAI V. ST. FRANCIS INDL TRAINING INSTITUTE, MUMBAI

ITA 8962/MUM/2010

• Counselvise Citation: 896219914 RSA 2010
• Duration Of Justice: 2 year(s) 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 10-09-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 22-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: N JAYENDRAN
• Keywords: Depreciation; Charitable institution; Capital expenditure
• Section: 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO. 8962/MUM/2010 ASSESSMENT YEAR : 2007-08 DY. DIT(E) - I(2) ROOM NO.504, PIRAMAL CHAMBERS, 5 TH FLOOR PAREL MUMBAI-400 012. VS. ST. FRANCIS INDUSTRIAL TRAINING INSTITUTE MOUNT POINSUR BORIVALI (W) MUMBAI-400 103. PAN NO.AABTS 6822 K (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI N. JAYENDRAN REVEN UE BY : SHRI MANOJ KUMAR DATE OF HEARING : 10/09/2013 DATE OF PRONOUNCEMENT : 17 / 0 9 /2013 O R D E R PER BENCH: THIS IS A REVENUE APPEAL AGAINST THE ORDER OF LD.CI T(A)-1, MUMBAI DATED 10.08.2010 ON THE ISSUE OF CLAIM OF DEPRECIAT ION BY A TRUST WHILE AT THE SAME TIME CLAIMING THE PURCHASE OF ASSETS AS A PPLICATION OF INCOME U/S 11. AO WAS OF THE OPINION THAT THIS AMOUNTS TO DOUBLE DEDUCTION. 2. REVENUE RAISED THE TWO GROUNDS ON THE ISSUE: 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN L AW, THE LD.CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW DEPRECIATION ON FIXED ASSETS WITHOUT APPRECIATING T HE FACT THAT THE CAPITAL EXPENDITURE INCURRED ON ACQUIRING THE ASSET S HAS ALREADY BEEN CLAIMED AS APPLICATION OF INCOME U/S 11 OF THE I.T.ACT ,1961 IN THE CURRENT OR PAST YEAR. ITA NO.8962/M/10 A.Y.07-08 2 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, AND IN LAW, THE LD.CIT(A) (APPEALS) ERRED IN NOT APPRECIAT ING THE FACTS THAT ALLOWING OF DEPRECIATION WILL RESULT IN DOUBLE DEDU CTION WHICH IS CONTRARY TO THE RATIO LAID DOWN BY THE HONBLE SUPR EME COURT IN THE CASE OF ESCORTS LTD. VS. UNION OF INDIA (199 ITR 43 ) AND J.K. SYNTHETICS LTD VS. UNION OF INDIA (1992) 65 TAXMAN 420. 3. BRIEFLY STATED, THE AO DID NOT AGREE WITH THE AP PELLANTS CLAIM THAT THE DEPRECIATION IS AN ALLOWABLE EXPENDITURE U/S 11 (1) OF THE I.T. ACT, AS APPLICATION TO THE OBJECT OF THE TRUST AND ACCORDIN GLY AFTER DETAILED DISCUSSION IN PARA 1 OF THE ASSESSMENT ORDER, AO O BSERVED THAT ALLOWING DEPRECIATION WILL AMOUNT TO THE DOUBLE DEDUCTION AS THE INCOME OF THE APPELLANT TRUST HAS BEEN ALLOWED AS APPLICATION TO THE OBJECT OF THE TRUST U/S 11(1) OF THE I.T. ACT, WHILE PURCHASING THE ASS ETS BY THE APPELLANT TRUST. HENCE, HE CONCLUDED THAT IF FURTHER DEPRECIA TION IS ALLOWED THEN IT WILL AMOUNT TO THE DOUBLE DEDUCTION AND THE SAME CA NNOT BE INTENT OF LAW. ACCORDINGLY, RELYING ON THE DECISION OF THE HO NBLE SUPREME COURT IN THE CASE OF ESCORTS LTD VS. UNION OF INDIA (19 ITR 43), THE AO DID NOT ALLOW THE DEPRECIATION AND ACCORDINGLY, MADE AN ADD ITION OF RS.74,10,181/- TO THE INCOME OF THE APPELLANT TRUST . 4. AFTER CONSIDERING ASSESSEES SUBMISSIONS AND THE RELEVANT CASE LAW, LD.CIT(A) ALLOWED THE CLAIM OF ASSESSEE STATIN G AS UNDER:- 5.3 I HAVE CONSIDERED AOS ORDER AS WELL AS APPELLA NT ARS SUBMISSION, DEPICTED ABOVE. CONSIDERING BOTH, I FIN D THAT THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ES CORTS LTD VS. UNION OF INDIA WAS ON DIFFERENT ISSUE. THE ESCORTS LTD CASE WAS NOT IN RELATION TO THE CHARITABLE TRUST BUT IT RELATES TO ALLOWABILITY OF DEPRECIATION ON CAPITAL EXPENDITURE FOR SCIENTIFIC RESEARCH WHICH WAS EARLIER ALLOWED U./S 35 OF THE I.T.ACT, WHEREAS THE TAXABILITY OF THE CHARITABLE TRUST IS COMPLETELY DIFFERENT. THE CHARI TABLE TRUST HAS TO BE ASSESSED AS PER SECTION 11, 12 AND 13 OF THE I.T .ACT, 1961. TAKING NOTE OF THE APPELLANT SUBMISSION, I FIND THA T THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. IN STITUTE OF BANKING PERSONNEL SELECTION REPORTED IN 264 ITR 110 HAS DEC IDED THIS ISSUE STATING THAT THE CAPITAL EXPENDITURE ON ACQUISITION OF ASSETS IS TO BE ALLOWED AS DEDUCTION AS AMOUNT APPLIED TO THE OBJEC T OF THE TRUST. THE HONBLE MUMBAI HIGH COURT HAS FURTHER HELD THAT THE ITA NO.8962/M/10 A.Y.07-08 3 DEPRECIATION ALSO CAN BE CONSIDERED AS LEGITIMATE D EDUCTION IN COMPUTING THE REAL INCOME OF THE ASSESSEE AND ON GE NERAL COMMERCIAL PRINCIPLES ALSO U/S 11(1)(A) OF THE ACT, AS ALLOWABLE. THUS, TAKING NOTE OF THE DECISION OF JURISDICTIONAL HIGH COURT, I CONSIDER IT PROPER AND APPROPRIATE TO ALLOW THE APP ELLANTS APPEAL AND DIRECT THE AO TO ALLOW THE DEPRECIATION AS CLAI MED BY THE APPELLANT TRUST WHILE COMPUTING THE INCOME OF THE T RUST, IN VIEW OF THE DECISION IN THE CASE OF CIT VS. INSTITUTE OF BA NKING PERSONNEL SELECTION REPORTED IN 264 ITR 110(BOM). THUS APPELL ANTS APPEAL IS ALLOWED. 5. LD. DR VEHEMENTLY SUPPORTED THE ORDER OF AO AND RELIED ON THE DECISION OF HONBLE KERALA HIGH COURT IN THE CASE O F LISSIE MEDICAL INSTITUTIONS VS. CIT -KOCHI (348 ITR 344) (KER). 6. LD. COUNSEL HOWEVER, SUPPORTED THE ORDER OF CIT( A) WHO FOLLOWED JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF C IT VS. INSTITUTE OF BANKING (264 ITR 110) (BOM). HE ALSO RELIED ON THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. TINY TOTS EDUCATION SOCIETY (330 ITR 21) (P & H), AND CIT VS. MARKET CO MMITTEE, PIPLI, 330 ITR 16 (P & H), WHICH FOLLOWED HOST OF OTHER DECISI ONS INCLUDING THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE R EFERRED ABOVE. 7. HAVING REGARD TO THE DECISION OF THE JURISDICTIO NAL HIGH COURT IN THE CASE OF CIT VS. INSTITUTING OF BANKING (264 ITR 110) (BOM) WHICH IS BINDING ON US, WE DO NOT SEE ANY REASON TO INTERFER E WITH THE ORDER OF LD.CIT(A) WHO ELABORATELY DISCUSSED AND FOLLOWED TH E JURISDICTIONAL HIGH COURT DECISION. WE DO NOT FIND ANY MERIT IN REVENUE APPEAL. 8. IN THE RESULT, REVENUE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH SEPTEMBER, 2013. SD/- SD/- (SANJAY GARG ) JUDICIAL MEMBER (B. RAMAKOTAIAH ) ACCOUNTANT MEMBER MUMBAI, DATED: 17/09/2013. JV. ITA NO.8962/M/10 A.Y.07-08 4 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.