The Council of Seventh Day Adventists Educational Institutions, CHENNAI V. ITO (OSD), CHENNAI

ITA 929/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61286 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-07-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 03-07-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 24-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G NANTHAKUMAR JT
• Assessee Lawyers: R M NARAYANAN
• Keywords: Capital asset; Depreciation; Charitable institution; Capital expenditure
• Section: 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI [BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER] I.T.A.NO. 927/MDS/2012 ASSESSMENT YEAR : 2007-08 MEDICAL TRUST OF SEVENTH DAY ADVENTISTS AA 148, III AVENUE ANNA NAGAR, CHENNAI 600 040 VS THE INCOME TAX OFFICER (OSD) EXEMPTIONS III CHENNAI [PAN AAATM 5187A] (APPELLANT) (RESPONDENT) I.T.A.NO. 928/MDS/2012 ASSESSMENT YEAR : 2007-08 SERVICES ASSOCIATION OF SEVENTH DAY ADVENTISTS P. LTD AA 148, III AVENUE ANNA NAGAR, CHENNAI 600 040 VS THE INCOME TAX OFFICER (OSD) EXEMPTIONS III CHENNAI [PAN AAACS 9035J] (APPELLANT) (RESPONDENT) I.T.A.NO. 929/MDS/2012 ASSESSMENT YEAR : 2007-08 THE COUNCIL OF SEVENTH DAY ADVENTISTS EDUCATIONAL INSTITUTIONS AA 148, III AVENUE ANNA NAGAR, CHENNAI 600 040 VS THE INCOME TAX OFFICER (OSD) EXEMPTIONS III CHENNAI [PAN AAATC 0175A] (APPELLANT) (RESPONDENT) I.T.A.NO.927 TO 930/12 :- 2 -: I.T.A.NO. 930/MDS/2012 ASSESSMENT YEAR : 2007-08 THE EDUCATIONAL TRUST OF THE SEVENTH DAY ADVENTISTS AA 148, III AVENUE ANNA NAGAR, CHENNAI 600 040 VS THE INCOME TAX OFFICER (OSD) EXEMPTIONS III CHENNAI [PAN AAATE 0547Q] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.M.NARAYANAN, CA RESPONDENT BY : SHRI G. NANTHAKUMAR, JT. CIT DATE OF HEARING : 03-07-2012 DATE OF PRONOUNCEMENT : 06-07-2012 O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER THESE ARE THE APPEALS FILED BY DIF FERENT ASSESSEES AGAINST SEPARATE ORDERS OF THE CIT(A)-XII, CHENNAI, DATED 22.2.2012. 2. THE A.R OF THE ASSESSEE SUBMITTED THAT HE IS ARGU ING THE APPEAL IN THE CASE OF SERVICES ASSOCIATION OF SEVEN TH DAY ADVENTISTS P. LTD IN I.T.A.NO. 928/MDS/2012 WHEREIN THE ISSUE IS DENIAL OF DEDUCTION IN RESPECT OF DEPRECIATION WHILE COMPUTING THE INCO ME OF THE ASSESSEE IN TERMS OF SECTION 11 OF THE INCOME-TAX ACT, 1961. HE SUBMITTED THAT IN ALL OTHER APPEALS ALSO THE SAME ISSUE IS INVOLVE D. THEREFORE, THE ARGUMENTS WHICH ARE MADE IN I.T.A.NO.928/MDS/2012 W ILL HOLD GOOD IN OTHER APPEALS ALSO. I.T.A.NO.927 TO 930/12 :- 3 -: 3. THE A.R OF THE ASSESSEE SUBMITTED THAT IN THE CASE OF SERVICES ASSOCIATION OF SEVENTH DAY ADVENTISTS P. L TD, IN ASSESSMENT YEAR 2006-07, THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL VIDE ITS ORDER DATED 11.5.2012 IN I.T. A.NO. 1853/MDS/2011. HE SUBMITTED THAT FOLLOWING THE SAM E, THE ISSUE SHOULD BE DECIDED IN FAVOUR OF THE ASSESSES IN ALL THE APPEALS UNDER CONSIDERATION. 4. THE DR, ON THE OTHER HAND, RELYING ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF NECTAR BEVERAG ES (P) LTD VS DY. CIT, [2009] 182 TAXMAN 319(S.C), ARGUED THAT THE HO N'BLE SUPREME COURT IN THAT CASE HAS HELD THAT DEPRECIATION IS NE ITHER A LOSS NOR AN EXPENDITURE NOR A TRADING LIABILITY AND HENCE, NO D EDUCTION OF THE SAME WAS ALLOWABLE. HE, THEREFORE, ARGUED THAT IN VIEW OF THE ABOVE CITED DECISION OF HON'BLE SUPREME COURT, ALL THE APPEALS OF THE ASSESSEE DESERVE TO BE DISMISSED. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE ISSUE OF ALLOWABILITY OF DEPRECIATION WHILE COM PUTING THE INCOME OF THE ASSESSEE IN TERMS OF SECTION 11 OF THE INCOME- TAX ACT, 1961, IS SQUARELY COVERED BY THE DECISION OF THIS BENCH OF T HE TRIBUNAL IN THE CASE OF SERVICES ASSOCIATION OF SEVENTH DAY ADVENTI STS P. LTD IN I.T.A.NO.927 TO 930/12 :- 4 -: ASSESSMENT YEAR 2006-07 IN I.T.A.NO. 1853/MDS/2011, DATED 11.5.2012, WHEREIN THE TRIBUNAL HAS HELD AS UNDER: 5. THE A.R OF THE ASSESSEE SUBMITTED THAT THE IS SUE WAS NO LONGER RES INTEGRA AS CHENNAI B BENCH OF T HE TRIBUNAL IN THE CASE OF M/S TAMILNADU CRICKET ASSOC IATION VS THE DY. CIT(EXEMPTIONS) IN I.T.A.NO. 1851/MDS/2011, FOR ASSESSMENT YEAR 2007-08, ORDER DATED 10.4.2012, ON THE SIMILAR FACTS OF THE CASE, HAS ALLOWED THE DEPRECIA TION TO THE ASSESSEE BY OBSERVING AS UNDER: 4. NOW BEFORE US, LEARNED A.R., STRONGLY ASSAILIN G THE ORDERS OF AUTHORITIES BELOW, SUBMITTED THAT CO-ORDI NATE BENCH OF THIS TRIBUNAL IN THE CASE OF SRI MARIAMMAN EDUCATIONAL HEALTH AND CHARITABLE TRUST V. ACIT IN I.T.A. NOS. 142 TO 144/MDS/2010 DATED 2 ND FEBRUARY, 2011 HAD, AFTER CONSIDERING ALL THE DECISIONS RELIE D ON BY THE A.O. AS WELL AS CIT(APPEALS), HELD THAT THE CLA IM OF THE ASSESSEE STOOD CLEARLY COVERED BY THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V. TINY TOTS EDUCATION SOCIETY (330 ITR 21). 5. PER CONTRA, LEARNED D.R. SUPPORTING THE ORDERS O F THE AUTHORITIES BELOW, REITERATED THAT THE DECISION OF HONBLE APEX COURT IN THE CASE OF ESCORTS LTD. (SUPRA) SUPP ORTED THE DISALLOWANCE MADE BY THE A.O. 6. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. IN OUR OPINION, THE QUESTION AS TO WH ETHER DEPRECIATION CAN BE CLAIMED AS AN UTILIZATION FOR T HE PURPOSE OF APPLYING SECTION 11 OF THE ACT STANDS RESOLVED IN FAVOUR OF ASSESSEE BY THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF TINY TOTS EDCUATION SOCIETY (SUPRA). THE CO-ORDINA TE BENCH OF THIS TRIBUNAL IN THE CASE OF SRI MARIAMMAN EDUCATIONAL HEALTH AND CHARITABLE TRUST (SUPRA), AF TER CONSIDERING THE ARGUMENTS OF THE COUNSEL FOR BOTH S IDES, WHICH WERE ON SIMILAR LINES, HAD AT PARAS 5 & 6 OF ITS ORDER DATED 2.2.2011, HELD AS UNDER:- 5. WE HAVE HEARD BOTH THE SIDES AND CONSIDERED THE MATERIAL ON RECORD AS WELL AS PRECEDENTS RELIED UPO N BY THE LD. I.T.A.NO.927 TO 930/12 :- 5 -: COUNSEL FOR THE ASSESSEE AND FIND THAT SIMILAR ISSU E AROSE IN THE APPEALS OF THE DEPARTMENT, WHICH HAS BEEN DISCUSSED , CONSIDERED AND DECIDED BY THE B BENCH OF THE TRIB UNAL (IN WHICH ONE OF US IS PARTY) AND VIDE ORDER DATED 18.10.2010 IN THE CASE OF DDIT (EXEMPTIONS) V. M/S. ST. JOHNS EDUCATIONAL TR UST (SUPRA), THE SAME HAS BEEN CONSIDERED AND DISCUSSED TO DETER MINE FROM PARA 3 ONWARDS TO TAKE DECISION IN FAVOUR OF THE AS SESSEE AND RELEVANT PORTION OF THE ORDER IS REPRODUCED AS UNDE R: 3. BRIEFLY, THE FACTS ARE THAT THE ASSESSEE IS A T RUST RUNNING EDUCATIONAL TRUST AND REGISTERED U/S. 12A(A) OF THE INCOME TAX ACT, 1961. 4. THE GROSS RECEIPTS, AMOUNTS OF DEPRECIATION CLA IMED AND REASONS FOR DISALLOWANCE FOR RESPECTIVE YEARS ARE G IVEN AS UNDER: (A) THE RETURN OF INCOME FILED FOR (I) ASSESSMENT YEAR 2004-05 DECLARES NIL INCOME AND GROSS RECEIPTS OF ` .18,95,45,440/- IN WHICH THE CLAIM OF DEPRECIATION MADE AT ` .2,72,85,356/- WHICH WAS COMPLETED AS NO DEMAND WHILE DISALLOWING THE DEPRECIATION CLAIM OF THE ASSESSEE, THE ASSESSING OFFICER HAS STATED THAT WHEN THE ASSESSEE HAD CLAIMED THE COST OF ADDITION TO ASSETS AS APPLICATION OF FUNDS, CLAI M OF DEPRECIATION ON THE SAME ASSETS COULD NOT BE ALLOWED. (B) THE RETURN OF INCOME FILED FOR (I) ASSESSMENT YEAR 2005-06 DECLARES NIL INCOME AND GROSS RECEIPTS OF ` . 22,17,53,309/- IN WHICH THE CLAIM OF DEPRECIATION MADE AT ` .2,82,17,782/- WHICH WAS COMPLETED AS NO DEMAND WHILE DISALLOWING THE DEPRECIATION CLAIM OF THE ASSESSEE, THE ASSESSING OFFICER HAS STATED THAT WHEN THE ASSESSEE HAD CLAIMED THE COST OF ADDITION TO ASSETS AS APPLICATION OF FUNDS, CLAI M OF DEPRECIATION ON THE SAME ASSETS COULD NOT BE ALLOWED. (C) THE RETURN OF INCOME FILED FOR (I) ASSESSMENT YEAR 2006-07 DECLARES NIL INCOME AND GROSS RECEIPTS OF ` .21,71,47,737/- IN WHICH THE CLAIM OF DEPRECIATION MADE AT ` . 2,64,72,392/- WHICH WAS COMPLETED AS NO DEMAND WHILE DISALLOWING THE DEPRECIATION CLAIM OF THE ASSESSEE, THE ASSESSING OFFICER HAS STATED THAT WHEN THE ASSESSEE HAD CLAIMED THE COST OF ADDITION TO ASSETS AS APPLICATION OF FUNDS, CLAI M OF DEPRECIATION ON THE SAME ASSETS COULD NOT BE ALLOWED. (D) THE RETURN OF INCOME FILED FOR (I) ASSESSMENT YEAR 2007-08 DECLARES NIL INCOME AND GROSS RECEIPTS OF ` .23,53,18,947/- IN WHICH THE CLAIM OF DEPRECIATION MADE AT ` .2,49,35,874/- WHICH WAS COMPLETED AS NO DEMAND WHILE DISALLOWING THE DEPRECIATION CLAIM OF THE ASSESSEE, THE ASSESSING OFFICER HAS STATED THAT WHEN THE ASSESSEE HAD CLAIMED THE COST OF ADDITION TO ASSETS AS APPLICATION OF FUNDS, CLAI M OF DEPRECIATION ON THE SAME ASSETS COULD NOT BE ALLOWED. 6. ASSESSEE TOOK UP THE MATTERS IN APPEAL AND IT WAS C ONTENDED BEFORE THE FIRST APPELLATE AUTHORITY THAT ORDERS OF THE ASSESSING I.T.A.NO.927 TO 930/12 :- 6 -: OFFICER ARE NOT LEGALLY CORRECT BECAUSE HE HAS ERRE D IN HOLDING THAT DEPRECIATION ON ASSETS SHOULD NOT BE TAKEN INTO ACC OUNT FOR DETERMINING THE TOTAL INCOME OF THE ASSESSEE TRUS T, THAT LD. ASSESSING OFFICER OUGHT TO HAVE FOLLOWED BOMBAY HIG H COURT DECISION IN THE CASE OF CIT VS. INSTITUTE OF BANKIN G PERSONAL SOLUTION ( 264 ITR 110), AND PRAYED THAT APPEAL BE ALLOWED. 6. DURING THE APPELLATE PROCEEDINGS, THE LEARNED C OUNSEL FOR THE ASSESSEE SUBMITTED THE DETAILED WRITTEN SUBMISSION WHOSE SALIENT FEATURES WERE REPRODUCED BY THE LD. CIT(A) IN HIS O RDER IN PARA-5 OF HIS ORDER AND WHILE CONSIDERING THE FACTS AND CI RCUMSTANCES OF THE CASE, IMPUGNED ORDER, RIVAL SUBMISSIONS AND C ASE LAWS RELIED UPON BY THE ASSESSEE AS WELL AS BY THE ASSESSING OF FICER, THE ISSUE INVOLVED IN THIS CASE WAS DISCUSSED FROM PARA-7 & 8 IN APPEAL FOR ASSESSMENT YEAR 2004-05 AND CIT(A) HAS CONCLUDED TO DECIDE THE APPEAL IN FAVOUR OF THE ASSESSEE AS PER PARAS 9 TO 11 OF HIS ORDER FOR THE YEAR 2004-05 AS UNDER:- 9. IT COULD BE SEEN FROM THE JUDGEMENT OF THE HON BLE HIGH COURT OF BOMBAY, REPORTED IN 264 ITR 110, WHEREIN T HE ASSESSEE WAS THE TRUST AND IT DERIVED ITS INCOME FROM DEPRECIABL E ASSETS. THE ASSESSEE TOOK INTO ACCOUNT DEPRECIATION ON THOSE ASSETS IN C OMPUTING THE INCOME OF THE TRUST. THE ITO HELD THAT DEPRECIATION COULD NOT BE TAKEN INTO ACCOUNT BECAUSE FULL CAPITAL EXPENDITURE HAD BEEN A LLOWED IN THE YEAR OF ACQUISITION OF THE ASSETS. THE ASSESSEE WENT IN AP PEAL BEFORE THE APPELLATE ASSISTANT COMMISSIONER. THE APPEAL WAS R EJECTED. THE TRIBUNAL, HOWEVER, TOOK THE VIEW THAT WHEN THE ITO STATED THAT FULL EXPENDITURE HAD BEEN ALLOWED IN THE YEAR OF ACQUISI TION OF THE ASSETS, WHAT HE REALLY MEANT WAS THAT THE AMOUNT SPENT ON A CQUIRING THOSE ASSETS HAD BEEN TREATED AS APPLICATION OF INCOME OF THE TRUST IN THE YEAR IN WHICH THE INCOME WAS SPENT IN ACQUIRING THO SE ASSETS. THIS DID NOT MEAN THAT IN COMPUTING INCOME FROM THOSE ASSETS IN SUBSEQUENT YEARS, DEPRECIATION IN RESPECT OF THOSE ASSETS CAN NOT BE TAKEN INTO ACCOUNT. THIS VIEW OF THE TRIBUNAL HAS BEEN CONFIR MED BY THE BOMBAY HIGH COURT IN THE ABOVE JUDGEMENT I.E. DIRECTOR OF INCOME- TAX(EXEMPTION) V. FRAMJEE CAWASJEE INSTITUTE [1993] 109 CTR 463. HENCE, THIS ISSUE WAS COVERED BY THE DECISION OF TH E BOMBAY HIGH COURT IN THE ABOVE JUDGEMENT. CONSEQUENTLY, THIS ISSUE W AS ANSWERED IN THE AFFIRMATIVE I.E. IN FAVOUR OF THE ASSESSEE AND AGAI NST THE DEPARTMENT. 10. THE RATIO OF THE ABOVE MENTIONED DECISION REPO RTED IN 264 ITR 110 (2003) IN THE CASE OF CIT VS. INSTITUTE OF BANKING, WHEREIN THE BOMBAY HIGH COURT HAS HELD THAT THE TRIBUNAL WAS RI GHT IN LAW IN DIRECTING THE ASSESSING OFFICER TO ALLOW DEPRECIATI ON ON THE ASSETS THE COST OF WHICH HAS BEEN FULLY ALLOWED AS APPLICATION OF INCOME U/S.11 IN THE PAST YEARS SQUARELY COVERED IN THE INSTANT CASE . I.T.A.NO.927 TO 930/12 :- 7 -: 11. IN THE ADVENT OF THE ABOVE DISCUSSIONS AND RESP ECTFULLY FOLLOWING THE DECISION OF THE HONBLE BOMBAY HIGH COURT, CITED SU PRA, THE APPELLANT TRUST IS ELIGIBLE FOR CLAIM OF DEPRECIATION ON THE ASSETS THE COST OF WHICH HAD BEEN FULLY ALLOWED AS APPLICATION OF INCOME U/S . 11 IN THE PAST YEARS. THE ASSESSING OFFICER IS THEREFORE, DIRECTED TO DEL ETE THE DISALLOWANCE OF ` .2,49,35,874/- MADE IN THE IMPUGNED ORDER AND REVIS E THE ASSESSMENT ACCORDINGLY. THUS, THE APPELLANT SUCCEEDS IN THE A PPEAL. THE SAID ORDER WAS FOLLOWED IN THE SUBSEQUENT YEARS IN IDENTICAL MANNER WHEREIN CLAIM OF DEPRECIATION WAS DISALLOWED . 7. AGGRIEVED BY THESE ORDERS OF CIT(A), THE DEPART MENT HAS COME UP IN APPEAL FOR ALL THE YEARS AND WHILE RELYING UP ON ANOTHER SUPREME COURT DECISION IN THE CASE OF ESCORT LTD., (199 ITR 43 ), IT WAS CONTENDED THAT DOUBLE TAXATION CAN NOT BE ALLOW ED, UNLESS THERE IS EXPRESS PROVISION FOR THE SAME IN THE STAT UTE AND WHILE REFERRING TO CIT(A)S ORDER IN THE CASE OF M/S.RANG ALETCHURNI EDUCATIONAL TRUST, CHENNAI, WHICH HAS BEEN DECIDED IN FAVOUR OF THE DEPARTMENT, IT WAS PLEADED FOR REVERSAL OF THE ORDER OF LD. CIT(A) FOR ALL THE FOUR YEARS AND TO UPHOLD THE ORD ER OF THE ASSESSING OFFICER IN THIS REGARD. 8. LD. DR WHILE ARGUING THE APPEALS OF THE DEPARTM ENT HAS MAINLY RELIED UPON HONBLE SUPREME COURT IN THE CAS E OF M/S.ESCORT LTD., (SUPRA) TO PLEAD THAT WHEN INCOME OF THE ASSESSEE IS BEING ALLOWED AS APPLICATION OF FUND, SO ALLOWAN CE OF DEPRECIATION ON THE SAME WOULD TANTAMOUNT TO DOUBLE DEDUCTION, WHICH IS NOT PERMISSIBLE, THEREFORE THE ORDER OF TH E LD. CIT(A) FOR ALL THE FOUR YEARS SHOULD BE REVERSED AND THAT OF A SSESSING OFFICER MAY BE RESTORED. 9. LD. COUNSEL FOR THE ASSESSEE WHILE RELYING UPON THE BASIS AND REASONING AS GIVEN BY THE LD.CIT(A) IN ALLOWING TH E FIRST APPEALS OF THE ASSESSEE, HAS PLEADED THAT THE SOLITARY ISSU E IN THESE APPEALS IS FULLY COVERED BY BOMBAY HIGH COURT DECISION AND LD. CIT(A) WHILE CONSIDERING ALL THE ASPECTS OF THE CASE AS WE LL AS CASE LAWS CITED, HAS RIGHTLY FOLLOWED THE VIEW OF THE HONBLE BOMBAY HIGH COURT, WHICH WAS THE ONLY VIEW AVAILABLE AT THE TIM E OF DECIDING THE APPEALS AND NOW ALSO HONBLE PUNJAB & HARYANA H IGH COURT IN THE CASE OF CIT VS. M/S.TINY TOTS EDUCATION SOCI ETY AS REPORTED IN 2010-TIOL-550-HIGH COURT-P&H-IT VIDE ORDER DT.2 8 TH JULY, 2010, UNDER SIMILAR FACTS, HAS DECIDED THE IDENTIC AL ISSUE IN FAVOUR OF THE ASSESSEE AND WHILE ENCLOSING THE COPY OF THE JUDGEMENT OF HONBLE BOMBAY HIGH COURT AS WELL AS HONBLE PUNJAB & HARYANA HIGH COURT, LD. COUNSEL FOR THE ASSESSEE HA S STRONGLY PLEADED THAT SINCE THE ISSUE IS SQUARELY COVERED I N FAVOUR OF THE ASSESSEE, NOT BY ONE HIGH COURT BUT BY SECOND HIGH COURT ALSO IN I.T.A.NO.927 TO 930/12 :- 8 -: WHICH SUPREME COURT DECISIONS CASE OF ESCORT LTD. VS. UOI AND OTHERS HAS BEEN DISCUSSED, HAS CONCLUDED TO HOLD T HE QUESTION PROPOSED IN FAVOUR OF THE ASSESSEE, THEREFORE BEING COVERED THE MATTER, ORDER OF THE CIT(A) FOR ALL THE YEARS ARE L IABLE TO BE UPHELD. IT WAS THUS URGED FOR UPHOLDING THE IMPUGN ED ORDERS AND FOR DISMISSING ALL THE APPEALS OF THE REVENUE. 10. AFTER HEARING BOTH THE SIDES, CONSIDERING THE MATERIAL AS WELL AS CASE LAWS CITED BY THE RIVAL SIDE, WE FIND THAT IN THE RECENT JUDGEMENT OF THE HONBLE HIGH COURT OF PUNJAB & HAR YANA IN THE CASE OF CIT VS. M/S.TINY TOTS EDUCATION SOCIETY (SU PRA) HAS CONCLUDED TO DECIDE THE ISSUE IN FAVOUR OF THE ASSE SSEE AS PER PARAS 4 TO 7 AS UNDER:- 4. LD. COUNSEL FOR THE REVENUE SUBMITS THAT IN VIE W OF JUDGEMENT OF THE HONBLE SUPREME COURT IN ESCORTS LTD. AND ANOTHER V . UNION OF INDIA AND OTHERS [1993] 199 ITR 43, THE ASSESSEE COULD NO T CLAIM DEDUCTION WHEN ITS INCOME WAS EXEMPT, AS IT WILL AMOUNT TO GE TTING DOUBLE BENEFIT. 5. WE ARE UNABLE TO ACCEPT THE SUBMISSION. 6. THE MATTER WAS DISCUSSED IN OUR RECENT JUDGEMEN T DATED 5.7.2010 IN ITA NO.535 OF 2009, THE CIT,KARNAL V. MARKET COMMIT TEE,PIPLI. AFTER REFERRING TO JUDGMENTS IN CIT V. SETH MANILAL RANCH HODDAS VISHRAM BHAWAN TRUST [1992] 198 ITR 598 (GUJ.) AND CIT V. I NSTITUTE OF BANKING PERSONAL SELECTION (IBPS) (2003) 131 TAXMAN 386 (BOM.), CIT V. RAO BAHADUR CALAVALA CUNNAN CHETTY CHARITIES [19 82] 135 ITR 485 (MAD.), CIT V. SOCIETY OF THE SISTERS OF ST. ANNE [ 1984] 146 ITR 28 (KAR) AND CIT V. RAIPUR PALLOTTINE SOCIETY [1989] 180 ITR 579 (M.P.), THE JUDGMENT OF THE HONBLE SUPREME COURT IN ESCORTS LT D., (SUPRA), WAS HELD NOT TO BE APPLICABLE TO THE SITUATION WHERE DE PRECIATION WAS CLAIMED BY A CHARITABLE INSTITUTION IN DETERMINING PERCENTAGE OF FUNDS APPLIED FOR THE PURPOSES OF CHARITABLE OBJECTS. IT WAS OBSERVED:-9. IN THE PRESENT CASE, THE ASSESSEE IS NOT CLAIMING DOUB LE DEDUCTION ON ACCOUNT OF DEPRECIATION AS HAS BEEN SUGGESTED BY LD . COUNSEL FOR THE REVENUE. THE INCOME OF THE ASSESSEE BEING EXEMPT, THE ASSESSEE IS ONLY CLAIMING THAT DEPRECIATION SHOULD BE REDUCED FROM T HE INCOME FOR DETERMINING THE PERCENTAGE OF FUNDS WHICH HAVE TO B E APPLIED FOR THE PURPOSES OF THE TRUST. THERE IS NO DOUBLE DEDUCTIO N CLAIMED BY THE ASSESSEE AS CANVASSED BY THE REVENUE. JUDGMENT OF THE HONBLE SUPREME COURT IN ESCORTS LTD AND ANOTHER (SUPRA) IS DISTINGUISHABLE FOR THE ABOVE REASONS. IT CAN NOT BE HELD THAT DOUBLE BENEFIT IS GIVEN IN ALLOWING CLAIM FOR DEPRECIATION FOR COMPUTING INCOM E FOR PURPOSES OF SEC.11. THE QUESTIONS PROPOSED HAVE, THUS, TO BE A NSWERED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE. 7. IN VIEW OF ABOVE, WE ARE UNABLE TO HOLD THAT T HE QUESTIONS PROPOSED BY THE REVENUE ARE SUBSTANTIAL QUESTIONS OF LAW. I.T.A.NO.927 TO 930/12 :- 9 -: 8. SINCE THE ISSUE IS SQUARELY COVERED IN FAVOUR OF TH E ASSESSEE AND DEPARTMENT HAS NOT BROUGHT ANY CONTRARY MATERIA L OR ANY HIGHER COURTS ORDER IN ITS FAVOUR, THEREFORE, WE DO NOT FIND ANY INFIRMITY OR FLAW IN THE ORDERS OF THE CIT(A) IN TH IS REGARD AS SUCH WHILE CONCURRING WITH THE CONCLUSION AS DRAWN BY TH E CIT(A), WE UPHOLD HIS ORDERS AND DISMISS THE APPEALS OF THE RE VENUE BEING DEVOID OF ANY MERITS. 6. SINCE THE ISSUE IS SQUARELY COVERED IN FAVOUR O F THE ASSESSEE AND DEPARTMENT HAS NOT BROUGHT ANY CONTRARY MATERIA L OR ANY HIGHER COURTS ORDER IN ITS FAVOUR, THEREFORE, WHILE FOLLOWING THE SAID DECISION, WE ACCEPT ALL THE APPEALS OF THE ASS ESSEE AN DIRECT THE ASSESSING OFFICER TO ALLOW THE CLAIM OF THE ASS ESSEE IN THIS REGARD. THE ISSUE THUS STANDS FULLY COVERED IN FAVOUR OF ASSESSEE. NO OTHER ORDERS OF ANY HIGHER AUTHORITIE S WERE BROUGHT BEFORE US BY THE REVENUE TO TAKE A DIFFERENT VIEW. HENCE, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DIRECT THAT ASSESSEES CLAIM WITH REGARD TO DEPRECIATION WHILE COMPUTING ITS EXEMPTIO N UNDER SECTION 11 OF THE ACT, BE ALLOWED. 9. THE FACTS BEING IDENTICAL, RESPECTFULLY FOLLOWIN G THE PRECEDENT, WE SET ASIDE THE ORDER OF THE LOWER AUTH ORITIES AND DIRECT THE ASSESSING OFFICER TO ALLOW THE CLAIM OF DEPRECIATION OF ` 57,09,195/- TO THE ASSESSEE. THUS, THE GROUNDS OF APPEAL OF THE ASSESSEE ARE ALLOWED. 6. WE DO NOT FIND ANY FORCE IN THE ARGUMENT OF THE DR. THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F NECTAR BEVERAGES (P) LTD VS DY. CIT (SUPRA) RELIED UPON BY THE DR, IS ON ALTOGETHER DIFFERENT CONTEXT AND IS NOT APPLICABLE FOR DECIDIN G THE ISSUE UNDER APPEAL. IN THE CITED DECISION, THE HONBLE SUPREME COURT EXPLAINED THE NEED FOR PROVISIONS OF SECTION 41(2) EVEN AFTER THERE BEING I.T.A.NO.927 TO 930/12 :- 10 -: PROVISIONS OF SECTION 41(1) IN THE STATUTE. THE HO NBLE SUPREME COURT EXPLAINING THE NEED OF SECTION 41(2) IN THE STATUTE , OBSERVED AS UNDER: 9. THE ENTIRE CONTROVERSY, THEREFORE, STANDS RESOL VED IF ONE UNDERSTANDS THE MEANING OF BALANCING CHARGE. WHE RE ANY ALLOWANCE OR DEDUCTION HAD EARLIER BEEN MADE IN RES PECT OF ANY LOSS, EXPENDITURE OR TRADING LIABILITY AND SUB SEQUENTLY THE SSESSE HAS OBTAINED OR REALIZED AN AMOUNT TOWARDS SUCH LOSS, EXPENDITURE OR TRADING LIABILITY, SECTION 41 (1) DEEMS SUCH REALIZATION/RECOUPMENT AS ASSESSEES INCOME FOR THE YEAR IN WHICH IT IS REALIZED. SECTION 41(2) AS IT STOOD AT THE MATERIAL TIME STATED THAT IF IN RESPECT OF ANY PLANT AND MA CHINERY, ANY DEPRECIATION HAD BEEN ALLOWED AND SUBSEQUENTLY SUC H PLANT AND MACHINERY WAS SOLD, DISCARDED OR DESTROYED, THE SSESSE MIGHT GET SOME VALUE EITHER AS A RESULT OF SALE OR INSURANCE OR FROM SALVAGE OR COMPENSATION THEREABOUT. THE NECESS ITY TO KEEP SECTION 41 (2) AS A PROVISION IN ADDITION TO SECTION 41 (1) AROSE FROM THE FACT THAT IN ITS VERY NATURE, DEPRE CIATION IS NEITHER A LOSS, NOR AN EXPENDITURE, NOR A TRADING L IABILITY, REFERRED TO IN SECTION 41 (1). THE DEPRECIATION RECOVERED ON SALE OF THE CAPITAL ASSET WAS INCLUDIBLE IN THE TOT AL INCOME AS BALANCING CHARGE ONLY UNDER SECTION 41(2). THAT C ONCEPT WAS FOREIGN TO THE SCHEME OF SECTION 41(1). THE BALANC ING CHARGE UNDER SECTION 41(2) AROSE ONLY WHERE ANY DEPRECIABL E ASSET (BUILDING, MACHINERY, PLANT OR FURNITURE) WAS SOLD IN FACT, WHEN THE CONCEPT OF BLOCK OF ASSETS STOOD INTRODUCED WITH EFFECT FROM 1-4-1988, SECTION 41(2) STOOD DELETED. HOWEVER, EVEN AFTER 1-4-1988, THE PROVISO TO SECTION 31(1)(II) CONTINUE D TILL 1.4.1996 WHEN BY THE FINANCE (NO.2)ACT, 1995 THE BOTTLES AND CRATES EVEN BELOW RS 5,000 CAME WITHIN THE BLOCK OF ASSETS AS DEFINED UNDER SECTION 2(11) OF THE 1961 ACT. AS STATED, THIS JUDGMENT IS CONFINED TO DEPRECIABLE ASSETS COSTING LESS THAN RS 5,000 WHLCH DID NOT ENTER R THE BLOCK OF ASSETS DURING TH E ASSESSMENT YEARS IN QUESTION (WHEN SECTION 41 (2) STOOD DELETED.) 7. WE FIND THAT THE ISSUE DOES NOT RELATE TO RECOVERY OF DEPRECIATION ALLOWED EARLIER. BEFORE US, THE ISSUE IS WHETHER DEPRECIATION IS TO BE ALLOWED TO THE ASSESSEE-TRUS T WHILE COMPUTING ITS INCOME OR NOT. IT IS A WELL SETTLED POSITION T HAT THE INCOME OF THE CHARITABLE TRUST IS TO BE COMPUTED NOT AS PER THE P ROVISIONS OF I.T.A.NO.927 TO 930/12 :- 11 -: CHAPTER IV-D OF THE INCOME-TAX ACT, 1961 BUT AS PER THE NORMAL ACCOUNTING PRINCIPLES. IN THE NORMAL ACCOUNTING PR INCIPLES, DEPRECIATION IS A CHARGE AGAINST PROFIT ON ACCOUNT OF DIMINUTION IN THE VALUE OF ASSET BECAUSE OF WEAR AND TEAR ETC. T HUS, IT CANNOT BE HELD THAT FOR COMPUTING PROFIT UNDER NORMAL ACCOUNT ING PRINCIPLES, DEPRECIATION IS NOT TO BE DEDUCTED. WE FIND THAT T HE ISSUE IS SQUARELY COVERED NOT ONLY BY THE DECISION OF THIS T RIBUNAL IN THE CASE OF THE ASSESSEE SERVICES ASSOCIATION OF SEV ENTH DAY ADVENTISTS P. LTD IN ASSESSMENT YEAR 2006-07 BUT A LSO BY THE DECISION OF THE P&H HIGH COURT IN THE CASE OF CIT VS MARKET COMMITTEE, PIPLI [2011] 330 ITR 16(P&H) AND DECISIO NS OF SEVERAL OTHER HIGH COURTS INCLUDING THE HON'BLE MADRAS HIG H COURT AS QUOTED IN THE ABOVE ORDER OF THE TRIBUNAL. WE, TH EREFORE, SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES ON THIS I SSUE AND ALLOW THE GROUNDS OF APPEAL OF THE ASSESSEE. 8. THE ONLY OTHER ISSUE INVOLVED IN THE CASE OF ALL T HE ASSESSES IS THAT THE CIT(A) ERRED IN NOT FOLLOWING THE BINDI NG DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T VS MATRISEVA TRUST, 242 ITR 20 (MAD) WHICH PERMITS CARRY FORWARD OF EXCESS APPLICATION OF ONE YEAR FOR SET OFF IN LATER YEARS. I.T.A.NO.927 TO 930/12 :- 12 -: 9. THE CIT(A) HAS DECIDED THIS ISSUE IN THE CASE OF AL L THE ASSESSES UNDER APPEAL BY OBSERVING AS UNDER: C) NON QUANTIFICATION OF THE EXCESS APPLICATION OF INCOME OF THE EARLIER YEARS: THE ASSESSEES NEXT GROUND IS REGARDING THE NON QUANTIFICATION OF THE EXCESS APPLICATION OF INCOME OF THE EARLIER YEARS. THE ASSESSEE CLAIMED THAT IN THE EARLIER YEARS THE TRUST HAD SPENT MORE INCOME FOR THE OBJECTS OF THE TRUST OVER AND ABOVE THE INCOME OF THE YEAR AND HENCE SUCH EXCESS SPENDING HAS TO BE QUANTIFIED AND ALLOWED TO BE CARRIED FORWARD FOR CONSIDERATION AS APPLICATION OF INCOME IN THE SUBSEQUENT YEARS. I HAVE PERUSED THE ASSESSEES SUBMISSIONS. EACH ASSESSMENT YEAR IS INDEPENDENT AND HENCE THE EXPENSES OF ONE YEAR CANNOT BE TREATED AS THE EXPENSES OR APPLICATION OF INCOME OF THE OTHER YEA R UNLESS SPECIFICALLY PROVIDED FOR IN THE STATUTES. IN THE CASE OF UNABSORBED LOSSES OF ONE YEAR CAN BE CARRIE D FORWARD TO THE SUBSEQUENT YEARS AS PER THE SPECIFIC PROVISIONS OF SEC.70 TO 80 OF THE I.T ACT. THERE A RE NO SPECIFIC PROVISIONS IN THE IT ACT TO CARRY FORWARD THE EXCESS APPLICATION OF INCOME OF ONE YEAR, TO THE SUBSEQUENT YEARS AND TREAT AS THE APPLICATION OF TH AT (SUBSEQUENT) YEAR. IN THE ABSENCE OF ANY SPECIFIC PROVISIONS, THE GENERAL PRINCIPLE THAT EACH ASSESSMENT YEAR IS INDEPENDENT IS TO BE CONSIDERED AND HENCE IT IS NOT REQUIRED/POSSIBLE FOR THE REVEN UE TO QUANTIFY THE EXCESS APPLICATION OF INCOME OF ANY PARTICULAR ASSESSMENT YEAR AND ALLOW IT TO BE CARRI ED FORWARD TO THE SUBSEQUENT YEARS. THEREFORE, THERE ARE NO MERITS IN THE ASSESSEES CLAIM FOR QUANTIFICATION OF THE EXCESS APPLICATION OF INCOME OF THE EARLIER YEARS AND THEIR CARRY FORWARD POSITION. HENCE THE ASSESSEES CONTENTIONS ARE NO T JUSTIFIED AND REJECTED. I.T.A.NO.927 TO 930/12 :- 13 -: 10. THE A.R SUBMITTED THAT THE ISSUE IS COVERED IN FAV OUR OF THE ASSESSEE BY THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS MATRISEVA TRUST, 242 ITR 20. 11. ON THE OTHER HAND, THE DR SUPPORTED THE ORDERS OF T HE LOWER AUTHORITIES. 12. AFTER HEARING THE RIVAL SUBMISSIONS AND PERUSING TH E MATERIALS ON RECORD, WE FIND THAT THE ASSESSING OFF ICER, WHILE DETERMINING THE INCOME OF THE ASSESSEE HAS NOT QU ANTIFIED THE EXCESS APPLICATION OF INCOME BY THE ASSESSEE-TRUST FOR TH E OBJECTS OF THE TRUST AND ALLOWED IT TO BE CARRIED FORWARD FOR SET OFF AGAINST THE SURPLUS MADE BY IT IN A SUBSEQUENT YEAR. THE CIT(A ) HAS CONFIRMED THE ACTION OF THE ASSESSING OFFICER BY OBSERVING TH AT EACH ASSESSMENT YEAR IS INDEPENDENT AND HENCE, THE EXPENSES OF ONE YEAR CANNOT BE TREATED AS THE EXPENSES OR APPLICATION OF INCOME OF THE OTHER YEAR UNLESS SPECIFICALLY PROVIDED FOR IN THE STATUTE. WE ARE OF THE CONSIDERED OPINION THAT THERE ARE NO SPECIFIC PROVI SIONS FOR CARRY FORWARD OF DEPRECIATION BY A CHARITABLE TRUST. HOW EVER, THE COURTS HAVE ALSO HELD THAT IF A TRUST HAS INCURRED A DEFIC IT DURING A PARTICULAR YEAR, THEN THE SURPLUS MADE BY IT IN A SUBSEQUENT Y EAR TO MAKE UP FOR THE PAST DEFICIT SHOULD BE ALLOWED TO BE SET OFF AG AINST SUCH DEFICIT. SUCH DECISIONS OF THE HIGH COURTS ARE:- I.T.A.NO.927 TO 930/12 :- 14 -: CIT VS MAHARANA OF MEWAR CHARITABLE FOUNDATION 164 ITR 439 (RAJ) CIT VS SHRI PLOT SWETAMBAR MURTI PUJAK JAIN MANDAL 211 ITR 293(GUJ) CIT VS MATRISEAVA TRUST 242 ITR 20 (MAD) GOVINDU NAICKER ESTATE VS ADIT 248 ITR 368(MAD) CIT VS INSTITUTE OF BANKING 264 ITR 114 (BOM) 13. THE COURTS HAVE TAKEN THE VIEW THAT THERE ARE NO WO RDS OF LIMITATION IN SECTION 11 OF THE INCOME-TAX ACT REQU IRING THAT THE INCOME SHOULD HAVE BEEN APPLIED FOR CHARITABLE OR RELIGIOU S PURPOSES ONLY IN THE YEAR IN WHICH THE INCOME HAS ARISEN. IT HAS AL SO BEEN HELD THAT INCOME DERIVED FROM TRUST PROPERTY IS TO BE DETERMI NED ON COMMERCIAL PRINCIPLES AND THE APPLICATION OF SUCH COMMERCIAL P RINCIPLES ALSO WARRANTS THE CONCLUSION THAT THE EXPENDITURE INCURR ED IN AN EARLIER YEAR CAN BE SET OFF AGAINST THE INCOME OF THE SUBSEQUENT YEAR. WE, THEREFORE, SET ASIDE THE ORDERS OF THE LOWER AUTHOR ITIES AND DIRECT THE ASSESSING OFFICER TO QUANTIFY THE EXCESS APPLICATIO N OF INCOME BY THE ASSESSEE-TRUSTS AND ALLOW CARRY FORWARD OF THE SAME FOR SET OFF AGAINST THE SURPLUS MADE BY IT IN A SUBSEQUENT YEAR. THUS , THE GROUND OF APPEAL OF ALL THE ASSESSES IS ALLOWED. I.T.A.NO.927 TO 930/12 :- 15 -: 14. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED ON FRIDAY, THE 06TH OF JULY , 20 12, AT CHENNAI. SD/- SD/- (V. DURGA RAO) JUDICIAL MEMBER (N.S.SAINI) ACCOUNTANT MEMBER DATED: 06 TH JULY, 2012 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR