M/s. Great Lakes Institute of Management, CHENNAI V. DDIT (Exemptions), CHENNAI

ITA 932/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61205 (ITAT-CHENNAI)
• Duration Of Justice: 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 25-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKRAMADITYA JT
• Assessee Lawyers: V P THANGADURAI
• Keywords: Depreciation; Charitable institution; Capital expenditure
• Section: 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI [BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER] I.T.A.NOS.931 & 932/MDS/2012 ASSESSMENT YEARS : 2006-07 AND 2007-08 M/S GREAT LAKES INSTITUTE OF MANAGEMENT C/O SHRI R.VIJAYARAGHAVAN, ADVOCATE NEW NO.75A(OLD NO.105A) DR.RADHAKRISHNAN SALAI MYLAPORE CHENNAI 4 [PAN AACCG 2885 L] VS THE DY. CIT(EXEMPTIONS) CHENNAI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI V.P.THANGADURAI, ADVOCATE RESPONDENT BY : SHRI VIKRAMADITYA, JT. CIT DATE OF HEARING : 21-06-2012 DATE OF PRONOUNCEMENT : 22-06-2012 O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER THESE ARE THE APPEALS FILED BY THE ASSESSEE AGAINST SEPARATE ORDERS OF THE CIT(A)-XII, CHENNAI, DATED 2 3.2.2012. 2. THE A.R OF THE ASSESSEE SUBMITTED THAT IN B OTH THESE APPEALS, THE ASSESSEE HAS TAKEN COMMON GROUNDS OF APPEAL AND AS THE FACTS AND ISSUE INVOLVED ARE SIMILAR, HE IS ARG UING THE APPEALS I.T.A.NOS.931 & 932/12 :- 2 -: TOGETHER. HENCE, WE ARE DISPOSING OF THESE APPEALS BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 3. THE ASSESSEE HAS TAKEN THE FOLLOWING COMMON GROUND S OF APPEAL IN BOTH THE ASSESSMENT YEARS UNDER CONSIDERA TION: 1. THE ORDER OF THE LEARNED CIT (A) IS CONTRARY T O LAW, FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF DEPRECIATION ON VARIOUS ASSETS OF THE APPELLANT. 2.1 THE LEARNED CIT(A) ERRED IN HOLDING THAT CAPITA L EXPENDITURE IS TO BE TREATED AS APPLICATION OF INCO ME OF THE TRUST AS PER SECTION 11 AND ANY FURTHER ALLOWANCE BY WAY OF DEPRECIATION OR OTHERWISE WOULD AMOUNT TO EXTRA DE DUCTION OR DOUBLE DEDUCTION WHICH IS NOT PERMITTED IN THE IT ACT. 2.2 THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED TH AT THE ASSESSEE IS NOT CLAIMING DOUBLE DEDUCTION BUT ONLY CLAIMING THAT ITS INCOME BEING EXEMPT, DEPRECIATION SHOULD B E REDUCED FROM THE INCOME FOR DETERMINING THE QUANTUM OF FUND S WHICH HAVE TO BE APPLIED FOR THE PURPOSES OF THE TRUST. 2.3 THE LEARNED CIT(A) ERRED IN RELYING ON THE DECISION OF THE APEX COURT IN THE CASE OF ESCORTS LTD VS UNION OF I NDIA, [1993] 199 ITR 43 AND HOLDING THAT THERE WAS A DOUBLE DEDUCTION. THE LEARNED CIT(A) SHOULD HAVE FOUND THAT THE FACT S AND CIRCUMSTANCES OF THAT CASE (ESCORTS SUPRA) WERE TOT ALLY DIFFERENT FROM THE ASSESSEE'S CASE AND THAT DECISIO N IS NOT APPLICABLE IN THE INSTANT CASE AS HELD IN. 2.4 THE LEARNED CIT(A) OUGHT TO HAVE CONSIDERED THE DECISION IN CIT VS. M/S. TINY TOTS EDUCATION SOCIETY, 2010- TLOL-550- HIGH COURT-P&:H-IT AS WELL AS CIT VS. MARKET COMMIT TEE, PIPLI 330 ITR 16 (P&:H) WHEREIN THE FACTS ARE SIMILAR TO THAT OF THE ASSESSEE'S CASE AND WHEREIN THE ESCORTS CASE (SUPRA ) WAS SPECIFICALLY DISCUSSED AND DISTINGUISHED. THE COURT HELD THAT THE JUDGMENT OF THE HON'BLE SUPREME COURT IN ESCOR TS LTD. WAS NOT APPLICABLE TO THE SITUATION WHERE DEPRECIA TION WAS CLAIMED BY A CHARITABLE INSTITUTION IN DETERMINING PERCENTAGE OF FUNDS APPLIED FOR THE PURPOSES OF CHARITABLE OBJECT S. I.T.A.NOS.931 & 932/12 :- 3 -: 3. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THA T THE INCOME OF THE TRUST IS REQUIRED TO BE COMPUTED AFT ER PROVIDING FOR NORMAL DEPRECIATION ON COMMERCIAL PRI NCIPLES AND NOT WITH REFERENCE TO SECTION 32. 3.1 THE LEARNED CIT(A) OUGHT TO HAVE FOLLOWED THE D ECISION OF THE BOMBAY HIGH COURT IN CLT VS. INSTITUTE OF BANKING PERSONNEL, 264 ITR 110 AND DIRECTOR OF INCOME TAX (EXEMPTION) VS FRAMJEE CAWASJEE INSTITUTE (1993) 1 09 CTR 463 (BOM) WHERE IT HAS BEEN CLEARLY HELD THAT WHILE COMPUTING REAL INCOME OF THE ASSESSEE ON GENERAL PRINCIPLES OR UNDER SECTION 11 (1 )(A) OF THE ACT, NORMAL DEPRECIATION IS TO BE CONSIDERED A LEGITIMATE DEDU CTION REGARDLESS OF WHETHER THE COSTS OF THE ASSET WAS ALLOWED AS APPLICATION OF INCOME U/S.11 OF THE ACT. 3.2 THE LEARNED CIT(A) OUGHT TO HAVE FOLLOWED THE R ATIO OF THE DECISION OF THE JURISDICTIONAL MADRAS HIGH COUR T IN CIT VS. RAO BAHADUR CALAVALA CUNNAN CHETTY CHARITIES (135 ITR 485 MADRAS) WHEREIN IT WAS HELD THAT INCOME FROM PROPERTIES OF TRUST WOULD HAVE TO BE ARRIVED AT IN THE NORMAL COMMERCIAL MANNER WITHOUT CLASSIFICATION UNDER THE VARIOUS HEADS SET OUT U/S 14 OF THE ACT. 4. THE APPELLANT SUBMITS THAT IDENTICAL ISSUE IS DE CIDED SQUARELY IN FAVOUR OF THE ASSESSEE BY MANY DECISIO NS OF THE CHENNAI TRIBUNAL IN ITO VS. M/S. THE EDUCATIONAL TRUST OF THE SEVENTH DAY ADVENTISTS (ITA NO. 640/MDS/2009 ), DDIT (EXEMPTIONS) VS. M/S ST.JOHN'S EDUCATIONAL TRUST ( ITA NO.987-990/MDS/2010), DCLT VS. COIMBATORE STOCK EXC HANGE (ITA NO. 1086 & 1087/MDS/2010) . 5. THE APPELLANT CRAVES LEAVE TO FILE ADDITIONAL GROUNDS AT THE TIME OF HEARING. 4. THE ONLY ISSUE INVOLVED IN BOTH THE YEARS UNDER CON SIDERATION IS THAT THE CIT(A) ERRED IN HOLDING THAT CAPITAL EX PENDITURE IS TO BE TREATED AS APPLICATION OF INCOME OF THE TRUST AS PE R SECTION 11 AND ANY FURTHER ALLOWANCE BY WAY OF DEPRECIATION OR OTHERWI SE WOULD AMOUNT TO EXTRA DEDUCTION OR DOUBLE DEDUCTION WHICH IS NOT PERMITTED IN THE INCOME-TAX ACT. I.T.A.NOS.931 & 932/12 :- 4 -: 5. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER EXCLUDED THE ASSESSEES CLAIM OF DEPRECIATION WHIL E COMPUTING THE APPLICATION OF 85% OF THE TRUSTS INCOME AS ENTIRE CAPITAL EXPENDITURE ITSELF WAS TREATED AS APPLICATION OF INCOME. ACCOR DING TO THE ASSESSING OFFICER, THE ALLOWANCE OF DEPRECIATION U/S 11(1)(A ) AMOUNTS TO DOUBLE DEDUCTION AS HELD BY THE HON'BLE SUPREME COURT IN T HE CASE OF ESCORTS LTD VS UNION OF INDIA, 199 ITR 43(SC). 6. ON APPEAL, THE CIT(A) CONFIRMED THE ACTION OF THE A SSESSING OFFICER. 7. THE A.R OF THE ASSESSEE FILED COPY OF THE ORDER OF THE HON'BLE P&H HIGH COURT IN THE CASE OF CIT VS MARKET COMMITTEE, PIPLI, [2011] 330 ITR 16 (P&H) AND ALSO COPY OF THE ORDER OF THE P&H HIGH COURT IN THE CASE OF CIT VS TINY TOTS EDUCATION SOC IETY [2011] 330 ITR 21(P&H) AND SUBMITTED THAT IT HAS BEEN HELD BY THE HIGH COURT THAT ALLOWING DEPRECIATION TO THE ASSESSEE TRUST WOULD NOT AMOUNT TO DOUBLE DEDUCTION AS HELD BY THE ASSESSING OFFICER. HE ALSO RELIED ON THE DECISION OF THE CHENNAI D BENCH OF THE TRIBUN AL IN THE CASE OF DY. CIT VS M/S COIMBATORE STOCK EXCHANGE IN I.T.A. NOS.1086 AND 1087/MDS/2010 WHEREIN VIDE CONSOLIDATED ORDER DATED 8.2.2011 THE TRIBUNAL DISMISSED THE APPEALS OF THE REVENUE ON TH E SIMILAR ISSUE FOLLOWING THE DECISION OF THE HON'BLE P&H HIGH COUR T IN THE CASE OF MARKET COMMITTEE, PIPLI (SUPRA). I.T.A.NOS.931 & 932/12 :- 5 -: 8. THE DR SUPPORTED THE ORDERS OF THE LOWER AUTHORITIE S. 9. AFTER HEARING THE RIVAL SUBMISSIONS AND PERUSING TH E MATERIALS AVAILABLE ON RECORD, WE FIND THAT IN THE INSTANT CASE, THE ASSESSEE CLAIMED DEPRECIATION OF ` 46,30,368/- IN ASSESSMENT YEAR 2006-07 AND ` 41,81,550/- IN ASSESSMENT YEAR 2007-08 AND THE SAM E WAS DISALLOWED BY THE ASSESSING OFFICER ON THE GROU ND THAT THE ENTIRE INVESTMENT IN FIXED ASSETS WAS CONSIDERED AS APPLIC ATION OF INCOME AND ALLOWING OF DEPRECIATION TO THE ASSESSEE WOULD AMO UNT TO DOUBLE DEDUCTION. ON APPEAL, THE CIT(A) CONFIRMED THE ACT ION OF THE ASSESSING OFFICER FOR THE VERY SAME REASON. WE FIN D THAT THE HON'BLE P&H HIGH COURT IN THE CASE OF MARKET COMMITTEE, PIP LI(SUPRA) HAS HELD AS UNDER: 10. IN THE PRESENT CASE, THE ASSESSEE IS NOT CLA IMING DOUBLE DEDUCTION ON ACCOUNT OF DEPRECIATION AS HAS BEEN SU GGESTED BY LEARNED COUNSEL FOR THE REVENUE. THE INCOME OF THE ASSESSE BEING EXEMPT, THE ASSESSE IS ONLY CLAIMING THAT DEPRECIATION SHOULD BE REDUCED FROM THE INCOME FOR DETERMINING THE PERCENTAGE OF FUNDS WHICH HAVE TO B E APPLIED FOR THE PURPOSES OF THE TRUST. THERE IS NO DOUBLE D EDUCTION CLAIMED BY THE ASSESSEE AS CANVASSED BY THE REVENU E. THE JUDGMENT OF THE HON'BLE SUPREME COURT IN ESCORTS LTD. CASE [1993]199 ITR 43 IS DISTINGUISHABLE FOR THE ABOVE R EASONS. IT CANNOT BE HELD THAT DOUBLE BENEFIT IS GIVEN IN ALLO WING CLAIM FOR DEPRECIATION FOR COMPUTING INCOME FOR PURPOSES OF SECTION 11. THE QUESTIONS PROPOSED HAVE, THUS, TO BE ANSWE RED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE. 10. FURTHER, THE CHENNAI D BENCH OF THE TRIBUNAL IN T HE CASE OF COIMBATORE STOCK EXCHANGE(SUPRA) HAS HELD AS UNDER: I.T.A.NOS.931 & 932/12 :- 6 -: 5. WE ARE UNABLE TO ACCEPT THE SUBMISSION. 6. THE MATTER WAS DISCUSSED IN OUR RECENT JUDGEM ENT 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 (BO M.), CIT V. RAO BAHADUR CALAVALA CUNNAN CHETTY CHARITIES [1982] 135 ITR 485 (MAD.), CIT V. SOCIETY OF THE SISTERS OF ST. ANNE [1984] 14 6 ITR 28 (KAR) AND CIT V. RAIPUR PALLOTTINE SOCIETY [1989] 180 ITR 579 (M. P.), THE JUDGMENT OF THE HONBLE SUPREME COURT IN ESCORTS LTD., (SUPRA), WAS HELD NOT TO BE APPLICABLE TO THE SITUATION WHERE DEPRECIATION 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 DOUBLE DEDUCTION ON AC COUNT OF DEPRECIATION AS HAS BEEN SUGGESTED BY LD. COUNSEL FOR THE REVENU E. THE INCOME OF THE ASSESSEE BEING EXEMPT, THE ASSESSEE IS ONLY CLAIMIN G THAT DEPRECIATION SHOULD BE REDUCED FROM THE INCOME FOR DETERMINING T HE PERCENTAGE OF FUNDS WHICH HAVE TO BE APPLIED FOR THE PURPOSES OF THE TRUST. THERE IS NO DOUBLE DEDUCTION CLAIMED BY THE ASSESSEE AS CANVASS ED BY THE REVENUE. JUDGMENT OF THE HONBLE SUPREME COURT IN ESCORTS LT D AND ANOTHER (SUPRA) IS DISTINGUISHABLE FOR THE ABOVE REASONS. I T CAN NOT BE HELD THAT DOUBLE BENEFIT IS GIVEN IN ALLOWING CLAIM FOR DEPRE CIATION FOR COMPUTING INCOME FOR PURPOSES OF SEC.11. THE QUESTIONS PROPOS ED HAVE, THUS, TO BE ANSWERED AGAINST THE REVENUE AND IN FAVOUR OF THE A SSESSEE. 7. IN VIEW OF ABOVE, WE ARE UNABLE TO HOLD THAT T HE QUESTIONS PROPOSED BY THE REVENUE ARE SUBSTANTIAL QUESTIONS OF LAW. SINCE THE ISSUE IS SQUARELY COVERED IN FAVOUR OF TH E ASSESSEE AND DEPARTMENT HAS NOT BROUGHT ANY CONTRARY MATERIAL 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 THIS REGARD AS SUCH WHILE CONCURRING WITH THE CONCLUSION AS DRAWN BY THE CIT(A), WE UPHOLD HIS ORDERS AND DISMISS THE APPEALS OF THE REVENUE BEING DEVOID OF ANY MERITS. 5. SINCE THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND DEPARTMENT HAS NOT BROUGHT ANY CONTRARY MATERIAL OR ANY HIGHER COURTS ORDER IN ITS FAVOUR, THEREFORE, WE DO NOT FIND ANY INFIRM ITY OR FLAW IN THE ORDERS OF THE CIT(A) IN THIS REGARD AS SUCH WHILE CONCURRING WITH THE CONCLUSION AS DRAWN BY THE CIT(A), WE UPHOLD HIS ORDERS AND DISMISS THE APPEALS OF THE REVENUE BEING DEVOID OF ANY MERITS. I.T.A.NOS.931 & 932/12 :- 7 -: 11. THUS, THE FACTS BEING IDENTICAL, RESPECTFULLY FOLLO WING THE ABOVE QUOTED DECISIONS OF THE HON'BLE P&H HIGH COUR T AND THE DECISION OF THIS TRIBUNAL, WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND DIRECT THE ASSESSING OFFICER TO ALL OW THE CLAIM OF DEPRECIATION TO THE ASSESSEE FOR BOTH THE ASSESSM ENT YEARS UNDER CONSIDERATION. THUS, THE GROUNDS OF APPEAL OF THE ASSESSEE FOR BOTH THE ASSESSMENT YEARS UNDER CONSIDERATION ARE ALLOWE D. 12. IN THE RESULT, BOTH THE APPEALS OF THE ASSES SEE ARE ALLOWED. ORDER PRONOUNCED ON FRIDAY, THE 22 ND OF JUNE, 2012, AT CHENNAI. SD/- SD/- (CHALLA NAGENDRA PRASAD) JUDICIAL MEMBER (N.S.SAINI) ACCOUNTANT MEMBER DATED: 22 ND JUNE, 2012 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR