ACIT(E), Jaipur V. COMPUCOM FOUNDATION, Jaipur

ITA 900/JPR/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 5612 (ITAT-JAIPUR)
• Duration Of Justice: 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 14-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: RAJEEV SOGANI C A DHK
• Keywords: Capital asset; Depreciation; Charitable institution; Retrospective amendment; Revenue expenditure; Capital expenditure
• Section: 80G; 12AA; 32; 11

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH HKKXPUN] YS[KK LNL; DS LE{K BEFORE: SHRI BHAGCHAND, ACCOUNTANT MEMBER VK;DJ VIHY LA-@ ITA NO. 900/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2012-13 THE ACIT (EXEMPTION) CIRCLE JAIPUR CUKE VS. M/S. COMPUCOM FOUNDATION 5-A, TILAK BHAWAN, TILAK MARG C-SCHEME, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AAATC 2922 M VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY: SHRI R.A. VERMA, ADDL. CIT- DR FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY: SHRI RAJEEV SOGANI, CA LQUOKBZ DH RKJH[K@ DATE OF HEARING : 19/01/2017 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 31 /01/2017 VKNS'K@ ORDER PER BHAGCHAND, AM THE REVENUE HAS FILED AN APPEAL AGAINST THE ORDE R OF THE LD. CIT(A)-III, JAIPUR DATED 21-07-2016 FOR THE ASSE SSMENT YEAR 2012-13 RAISING FOLLOWING GROUNDS OF APPEAL. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN:- (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) HAS ERRED IN ALLOWING CLAIM O F DEPRECIATION ON FIXED ASSETS IN SPITE OF THE FACT T HAT THE SAME ITA NO.900/JP/2016 THE ACIT (EXEMPTION), CIRCLE- JAIPUR VS. M/S. COMPU COM FOUNDATION, JAIPUR 2 WAS ALLOWED AS APPLICATION OF INCOME U/S 11 AT THE TIME OF PURCHASE. (2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) HAS ERRED IN ALLOWING DEPRECI ATION WITHOUT APPRECIATING THE FACT THAT APPLICATION OF 1 00% EXPENDITURE OF THE CAPITAL ASSET IS ALREADY ALLOWED AS CAPITAL EXPENDITURE HENCE FURTHER ALLOWANCE OF THE DEPRECIA TION ON THE SAME CAPITAL ASSET WOULD AMOUNT TO DOUBLE ALLOW ANCE. (3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) HAS ERRED IN ALLOWING DEPRECI ATION WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS NOT CARRIED OUT THE BUSINESS ACTIVITIES BUT THE RECEIPTS UTILIZ ED FOR CHARITY. AS THERE WAS NO BUSINESS ACTIVITY THE CLAIM OF DEPR ECIATION WAS NOT ALLOWABLE, THE DEPRECIATION IS ALLOWABLE ON LY IN THE CASE OF BUSINESS OR PROFESSION OR IN THE CASE OF I NCOME FROM OTHER SOURCES. 2.1 APROPOS REVENUES GROUNDS OF APPEAL (SUPRA), TH E FACTS AS EMERGES FROM THE ORDER OF THE LD. CIT(A) IS AS UNDER:- GROUND NO. 1 IS REGARDING DISALLOWANCE OF DEPRECIATION ON FIXED ASSETS BY AO AS THE ASSESSEE HAS ALREADY CLAIMED DEDUCTION FOR ENTIRE COST AS APPLICATION OF INCOME U/S 10(23C)(IIIAD). THEREFORE, THE SAME TANTAMOUNTS TO DOUBLE DEDUCTION ACCORDING TO AO. ACCORDING TO THE AR, TH E HON'BLE ITAT JAIPUR GAVE THE FOLLOWING GAVE THE FOLLOWING F INDING IN ASSESSEES OWN CASE FOR A.Y. 2005-06 AS UNDER:- CONTENTION OF REVENUE THAT INCOME U/S 11(1) MUST REPRESENT ACTUAL RECEIPTS MINUS ACTUAL EXPENSES AND SINCE DEPRECIATION IS A NOTIONAL EXPENSES, NO DEDUCTION I N RESPECT THEREOF OUGHT TO BE ALLOWED IS NOT SUSTAINABLE. EX PENDITURE THEREFORE INCLUDES CLAIM OF DEPRECIATION. THE HON'B LE GUJARAT HIGH COURT IN THE CASE OF CIT V/S SETH MANI LAL RANCHOD DAS VISHRAM BHAWAN TRUST (SUPRA) HAS BEEN PLEASED TO HOLD THAT INCOME FOR THE PURPOSES OF S. 11(1)(A) HAS TO BE COMPUTED NOT IN ACCORDANCE WITH THE PROVI SIONS OF ITA NO.900/JP/2016 THE ACIT (EXEMPTION), CIRCLE- JAIPUR VS. M/S. COMPU COM FOUNDATION, JAIPUR 3 THE ACT BIT IN ACCORDANCE WITH NORMAL RULES OF ACCO UNTANCY UNDER WHICH DEPRECIATION ON HOUSE PROPERTY HAS TO B E ALLOWED. THE HON'BLE BOMBAY HIGH COURT AGAIN IN TH E CASE OF DIRECTOR OF INCOME TAX (EXM.) V/S FRAMJEE CAWAJE E INSTITUTE (SUPRA) HAS HELD THAT DEPRECIATION COULD NOT BE DENIED SIMPLY BECAUSE EXPENDITURE ON ACQUISITION OF ASSETS HAD ALREADY BEEN TREATED AS APPLICATION OF INCOME I N THE YEAR OF ACQUISITION OF ASSETS. WE ARE THUS OF THE VIEW THAT DECISION OF LD CIT(A) ON THE ISSUE IS FULLY COVERED BY THESE DECISION, HENCE, WE ARE NOT INCLINEA TO INTERFERE T HEREWITH. THE DECISION OF HON'BLE SUPREME COURT IN THE CASE O F ESCORTS LTD. VS. UNION OF INDIA (SUPRA) RELIED UPON BY THE AO IS IN THE CONTEXT OF THE PROVISIONS LAID DOWN U/ S 32 AND S.35(1) (IV) OF THE I.T. ACT AGAINST DOUBLE DEDUCTI ON IN RESPECT OF THE SAME EXPENDITURE UNDER THOSE SECTION HENCE THE SAME IS NOT HELPFUL IN DECIDING THE ISSUE RAISE D IN THE PRESENT CASE OF CHARITABLE INSTITUTION RELATING TO THE ALLOWABILITY OF DEPRECIATION ON THE ASSETS ACQUIRED OUT OF THE CAPITAL EXPENDITURE, WHICH WAS TREATED AS APPLICATI ON OF INCOME. WE THUS UPHELD THE FIRST APPELLATE ORDER I N THIS REGARD. CONSEQUENTLY GROUND IS REJECTED. IN THE RE SULT THE APPEAL IS DISMISSED. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, FINDINGS OF THE AO AND SUBMISSION OF THE APPELLANT. IT IS SEEN THAT THE RAJASTHAN HIGH COURT IN CASE OF CIT V S. KRISHI UPAJ MANDI SAMITI AND OTHER HIGH COURTS ALSO HELD T HAT DEPRECIATION ON FIXED ASSETS IS SEPARATELY ALLOWABL E EVEN THOUGH ENTIRE FIXED ASSETS WERE ALLOWED AS APPLICAT ION OF INCOME. RESPECTFULLY FOLLOWING THE SAME, AND THE D ECISION IN ASSESSEES OWN CAN BY HON'BLE ITAT, JAIPUR, THE DISALLOWANCE MADE BY AO IS DELETED. 2.2 DURING THE COURSE OF HEARING, THE LD. DR RELIED ON THE ORDER OF THE AO. 2.3 DURING THE COURSE OF HEARING, THE LD. AR OF THE ASSESSEE SUPPORTED THE ORDER OF THE LD. CIT(A) AND ALSO FILED THE WRIT TEN SUBMISSION TO THIS ITA NO.900/JP/2016 THE ACIT (EXEMPTION), CIRCLE- JAIPUR VS. M/S. COMPU COM FOUNDATION, JAIPUR 4 EFFECT WITH FOLLOWING CASE LAWS THAT THE ISSUE IN Q UESTION IS COVERED BY THESE CASE LAWS. 1. THE ASSESSEE'S CASE IS SQUARELY COVERED IN ITS F AVOUR BY THE UNDERNOTED JUDGEMENT OF HON'BLE ITAT IN ASSESS EE'S OWN CASE FOR THE A.Y. 2005-06 , ITO VS. M/S. COMPUC OM FOUNDATION IN ITA NO. 1628/JP/2008) 2. THE ISSUE IS ALSO COVERED BY THE DECISION OF HON 'BLE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T VS. KRISHI UPAJ MANDI SAMITI (2015) 55 TAXMANN.COM 63 ( RAJ.) 3. THE OTHER DECISION OF ITAT JAIPUR BENCH COVERING THE ISSUE IN FAVOUR OF THE ASSESSEE IN THE CASE OF M/S. SHRI S.S. JAIN SUBODH SIKSHA SAMITI VS. ITO (ITA NO. 250/JP/2 007) 4. CIT (EXEMPTIONS) VS. BANGALORE BAPTIST HOSPITAL SOCIETY (2016) 71 TAXMAN 192 (KAR.) IN WHICH IT IS HELD THAT AMENDMENT MADE IN SECTION 11(6) IS PROSPECTIVE IN N ATURE AND IT WOULD OPERATE W.E.F. 1-04-2015. SIMILAR VIEW HAS ADOPTED BY THE HON'BLE KARNATAKA HIGH COURT IN ITS FOLLOWING OTHER DECISIONS. (I) CIT VSD KARNATAKA REDDY JANASANGHA (2016) 72 TAXMANN.COM 48 (KAR.) (II) PCIT VS. SRI SRI ADICHUNCHUNAGIRI SHIKSHANA TRUST (2016) 72 TAXMANN.COM 133 (KAR.) 2.4 I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. BRIEF FACTS OF THE CASE ARE TH AT THE ASSESSEE SAMITI IS REGISTERED U/S 12AA OF THE I.T. ACT, 1961 AND IS AL SO REGISTERED U/S 80G OF THE ACT. THE TRUST IS RUNNING AN EDUCATIONAL AND CH ARITABLE INSTITUTION ITA NO.900/JP/2016 THE ACIT (EXEMPTION), CIRCLE- JAIPUR VS. M/S. COMPU COM FOUNDATION, JAIPUR 5 OFFERING ENGINEERING, INFORMATION TECHNOLOGY COLLEG E & MBA COURSES. IT IS ALSO NOTED THAT RETURN OF INCOME FOR THE ASSE SSMENT YEAR 2012-13 DECLARING TOTAL INCOME OF RS. NIL WAS FILED BY THE ASSESSEE ON 29-09-2012. IT IS NOTED THAT THE ASSESSEE HAD CLAIM ED DEPRECIATION OF RS. 1,25,68,398/- ON VARIOUS FIXED ASSETS WHICH HAS BEEN DISALLOWED BY THE AO FROM THE REVENUE EXPENDITURE WHILE CALCULATI NG THE TAXABLE INCOME THAT THE ASSESSEE HAD ALREADY TAKEN PURCHASE OF ASSETS AS APPLICATION OF INCOME IN EARLIER YEARS WHILE ENJOYI NG THE STATUS OF CHARITABLE TRUST SOCIETY. THEREFORE, THE CLAIM OF D EPRECIATION ON SUCH ASSETS WILL AMOUNT TO DOUBLE BENEFIT AND THUS THE A O DISALLOWED THE CLAIM OF DEPRECIATION ON FIXED ASSETS AMOUNTING TO RS. 1,25,68,398/- WHICH IN FIRST APPEAL HAS BEEN DELETED BY THE LD. C IT(A) BY OBSERVING AS UNDER:- I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE , FINDINGS OF THE AO AND SUBMISSION OF THE APPELLANT. IT IS SEEN THAT THE RAJASTHAN HIGH COURT IN CASE OF CIT V S. KRISHI UPAJ MANDI SAMITI AND OTHER HIGH COURTS ALSO HELD T HAT DEPRECIATION ON FIXED ASSETS IS SEPARATELY ALLOWABL E EVEN THOUGH ENTIRE FIXED ASSETS WERE ALLOWED AS APPLICAT ION OF INCOME. RESPECTFULLY FOLLOWING THE SAME, AND THE D ECISION IN ASSESSEES OWN CAN BY HON'BLE ITAT, JAIPUR, THE DISALLOWANCE MADE BY AO IS DELETED. ITA NO.900/JP/2016 THE ACIT (EXEMPTION), CIRCLE- JAIPUR VS. M/S. COMPU COM FOUNDATION, JAIPUR 6 IT IS FURTHER NOTED THAT SUCH AN ISSUE HAS BEEN DEC IDED IN FAVOUR OF THE ASSESSEE BY THE HON'BLE KARNATAKA HIGH COURT IN T HE CASE CIT (EXEMPTIONS) VS. BANGALORE BAPTIST HOSPITAL SOCIETY (2016) 71 TAXMAN 192 (KAR.) IN WHICH IT IS HELD THAT AMENDMENT MADE IN SECTION 11(6) IS PROSPECTIVE IN NATURE AND IT WOULD OPERATE W.E.F. 1 -04-2015. THE CONCLUSIVE PARA OF THE HON'BLE COURT ORDER IS REPR ODUCED AS UNDER:- 25. THE APEX COURT IN THE SAID JUDGEMENT, WHILE INTERPRETING THE PROVISO, WHETHER TO BE APPLIED RETROSPECTIVELY OR PROSPECTIVELY, HAS CONSIDERED TH E NOTES ON CLAUSES APPENDED, THE FINANCE BILL AND THE UNDERSTA NDING OF THE CENTRAL BOARD OF DIRECT TAXES IN THIS REGARD. T HE APEX COURT HAS ALSO TAKEN CONGNIZANCE OF THE FACT THAT T HE LEGISLATURE IS FULLY AWARE OF 3 CONCEPTS INSOFAR AS AMENDMENT MADE TO A STATUTE:- (I) PROSPECTIVE AMENDMENT WITH EFFECT FROM A FIXED DATE; (II) RETROSPECTIVE AMENDMENTS WITH EFFECT FROM A FIXED ANTERIOR DATE; AND (III) CLARIFICATORY AMENDMENTS WHICH ARE PROSPECTIV E IN NATURE. KEEPING IN VIEW, THE AFORESAID PRINCIPLES ENUNCIATE D BY THE APEX COURT, IN VATIKA TOWNSHIIP (P) LTD.S C ASE (SUPRA), IT WOULD BE SAFELY HELD THAT SECTION 11(6) OF THE ACT IS PROSPECTIVE IN NATURE AND OPERATES WITH EFFECT F ROM 01-04- 2015. THIS IS FURTHER CLARIFIED WHEN COMPARED WITH CERTAIN OTHER PROVISIONS WHICH HAVE BEEN MADE RETROSPECTIVE LY IN THE SAME FINANCE ACT. ITA NO.900/JP/2016 THE ACIT (EXEMPTION), CIRCLE- JAIPUR VS. M/S. COMPU COM FOUNDATION, JAIPUR 7 IN VIEW OF THE ABOVE DELIBERATIONS AND THE DECISION OF HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT (EXEMPTIONS) VS. BA NGALORE BAPTIST HOSPITAL SOCIETY (SUPRA), THE APPEAL OF THE REVENUE IS DISMISSED WITH THE OBSERVATION THAT THERE IS NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) WHICH IS SUSTAINED ON THIS ISSUE. THUS THE APPEAL OF REVE NUE IS DISMISSED. 3.0 IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 /01/ 2017. SD/- HKKXPUN ( BHAGCHAND) YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 31 /01/ 2017 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- THE ACIT (EXEMPTION), CIRCLE- JAIP UR 2. IZR;FKHZ@ THE RESPONDENT- M/S. COMPUCOM FOUNDATION, JAIPUR 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 900/JP/2016) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ @ ASSISTANT. REGISTRAR ITA NO.900/JP/2016 THE ACIT (EXEMPTION), CIRCLE- JAIPUR VS. M/S. COMPU COM FOUNDATION, JAIPUR 8