ACIT, Kurukshetra V. Market Committee, Kurukshetra

ITA 94/CHANDI/2011

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1352 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 25-01-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: N K SAINI
• Keywords: Capital asset; Business income; Depreciation; Charitable institution; Capital expenditure
• Section: 32; 28; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI D.K.SRIVASTAVA, ACCOUNTANT MEMBER AND MS SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 93/CHD/2011 ASSESSMENT YEAR: 2007-08 THE ACIT, VS. MARKET COMMITTEE, KURUKSHETRA PIPLI, KURUSKHETRA PAN NO. AAHFM 1920A ITA NO. 94/CHD/2011 ASSESSMENT YEAR: 2007-08 THE ACIT, VS. MARKET COMMITTEE, KURUKSHETRA ISMAILABAD, KURUSKHETRA PAN NO. AAALM0316P ITA NO. 95/CHD/2011 ASSESSMENT YEAR: 2007-08 THE ACIT, VS. MARKET COMMITTEE, KURUKSHETRA PEHOWA, KURUSKHETRA PAN NO. AAALM0385L ITA NO. 96/CHD/2011 ASSESSMENT YEAR: 2007-08 THE ACIT, VS. MARKET COMMITTEE, KURUKSHETRA THANESAR, KURUSKHETRA PAN NO. AAIFM4797Q ITA NO. 97/CHD/2011 ASSESSMENT YEAR: 2007-08 THE ACIT, VS. MARKET COMMITTEE, KURUKSHETRA SHAHBAD , KURUSKHETRA PAN NO. AAALM10149C 2 & ITA NO. 98/CHD/2011 ASSESSMENT YEAR: 2007-08 THE ACIT, VS. MARKET COMMITTEE, KURUKSHETRA LADWA, KURUSKHETRA PAN NO. AAIFM4798B (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI N.K.SAINI RESPONDENT BY: NONE ORDER PER SUSHMA CHOWLA, JM THESE APPEALS BY THE DIFFERENT MARKET COMMITTEES AR E AGAINST THE ORDER OF CIT(A), KARNAL DATED 26.11.2010 ALL RELATI NG TO ASSESSMENT YEAR 2007-08 AGAINST THE ORDER PASSED UNDER SECTION 143( 3) OF THE I.T. ACT, 1961. 2. THE COMMON GROUND OF APPEAL RAISED IN MARKET COMMIT TEES OF DIFFERENT AREAS IS AS UNDER:- THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS AN D CIRCUMSTANCES OF THE CASE IN DIRECTING THAT DEPRECIATION IS ALLOWABLE IN PRINCIPLES SUBJECT TO FURNISHING OF REQUITE PARTICULARS IGNORING THE FACT THAT CAPITAL EXPENDITURE RELATING TO THE ACQUISITION OF SUCH ASSETS HAD ALREADY BEEN ALLOWED AS APPLICATION OF INCOME FOR THE PURPOSES OF ALLOWING EXEMPTION U/S 1 1 OF THE I.T. ACT AND FURTHER ALLOWING OF DEPRECIATIO N ON THESE CAPITAL ASSETS WILL AMOUNT TO DOUBLE DEDUCTIO N FOR THE SAME EXPENDITURE. 3 3. ALL THE APPEALS RELATING TO THE DIFFERENT ASSESS EES BUT INVOLVING SIMILAR ISSUE WERE HEARD TOGETHER AND ARE BEING DIS POSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 4. DESPITE SERVICE OF NOTICE, NONE APPEARED ON BEHA LF OF THE ASSESSEE. WE PROCEED TO DISPOSE OF THE APPEAL AFTER HEARING T HE LD. DR FOR THE REVENUE. 5. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E HAD CLAIMED DEPRECIATION ON FIXED ASSETS IN ALL THE DIFFERENT A PPEALS. THE ASSESSING OFFICER SHOW CAUSED THE ASSESSEE AS TO WHY THE DEPR ECIATION BE NOT DISALLOWED AS THE INCOME WAS ASSESSABLE IN ACCORDAN CE TO THE PROVISIONS OF SECTION 11 TO 13 OF THE ACT. THE CONTENTION OF THE ASSESSEE THAT SIMILAR ISSUE WAS DECIDED BY THE TRIBUNAL VIDE ORDER DATED 30.5.2008 AND ALSO RELYING ON THE RATIO LAID DOWN BY THE HON'BLE BOMBA Y HIGH COURT IN CIT VS INSTITUTE OF BANKING [264 ITR 111 (BOM)] WAS REJ ECTED BY ASSESSING OFFICER (A) AS THE ASSESSEE HAD NOT FURNISHED ANY PARTICULARS OF THE ASSETS OWNED BY IT, WHICH HAD NOT BEEN CLAIMED AS APPLICAT ION OF INCOME AND (B) THE DEPARTMENT HAD FILED AN APPEAL BEFORE THE HON'B LE PUNJAB & HARYANA HIGH COURT AGAINST THE AFORESAID ORDER OF THE TRIBU NAL. ACCORDINGLY, THE INCOME WAS RECOMPUTED BY THE ASSESSING OFFICER. 6. THE CIT(A) ON EXAMINATION OF THE CASE, NOTED TH AT THE ISSUE IS COVERED BY THE ORDER IN THE CASE OF MARKET COMMITTE E, SHAHBAD AND OTHERS FOR THE ASSESSMENT YEAR 2005-06 (APPEAL NO. IT /4/K KR/CIT(A)/KNL/10- 11) IN WHICH IT WAS HELD AS UNDER:- 2.03 THE ISSUE IS EXAMINED. IT IS NOTED THAT THE ISSUE IS COVERED BY THE ORDER OF THIS OFFICE IN THE CASE OF MARKET 4 COMMITTEE, SHAHBAD AND OTHERS FOR THE ASSESSMENT YE AR 2005-06 (APPEAL NO. IT/4/KKRCIT/KNL/10-11) IN WHICH , IT IS HELD AS UNDER:- IN VIEW OF THE FACTS DISCUSSED ABOVE, IT IS NOTED THAT THE HON'BLE ITAT WHILE RESTORING THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER CATEGORICAL DIRECTED THE APPE LLANT TO FILE THE NECESSARY DETAILS ABOUT THE ASSETS AND COS T OF ACQUISITION ETC. THE ASSESSING OFFICER ACCORDINGLY DIRECTED THE APPELLANT TO FURNISH THE DETAILS OF ASSETS WITH COST AND DATE OF ACQUISITION ALONG WITH PHOTOCOPY OF BILLS T O ENABLE TO DECIDE THE ISSUE OF ALLOWABILITY OF DEPRECIATION. THE APPELLANT NEITHER FURNISHED THE REQUISITE DETAILS B EFORE THE ASSESSING OFFICER DURING ASSESSMENT PROCEEDINGS NOR DURING APPEAL PROCEEDINGS. IN VIEW OF THE DECISION OF THE HON'BLE ITAT, CHANDIGARH BENCH A RELIED UPON BY THE APPELL ANT IT IS HELD THAT DEPRECIATION IS ALLOWABLE TO THE APPELLAN T IN PRINCIPAL BUT SUBJECT TO FILING OF NECESSARY DETAIL S. THE ASSESSING OFFICER IS ACCORDINGLY DIRECTED TO VERIFY THE DEPRECIATION CLAIM OF THE APPELLANT AS PER THE DIRE CTIONS OF THE ITAT ISSUED PER ORDER DATED 19.12.2008 AND TO A LLOW THE SAME AS PER LAW. 2.04 IN VIEW OF THE FACTS DISCUSSED ABOVE, IT IS HE LD THAT THE DEPRECIATION IS ALLOWABLE TO THE APPELLANT IN PRINC IPAL BUT SUBJECT TO FURNISHING OF REQUISITE DETAILS AND DOCO UEMTNS. DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F ESCORTS INDIA LTD V UNION OF INDIA (199 ITR 43) RELIED UPON BY THE ASSESSING OFFICER, IS OF NO HELP BEING DISTINGUISHA BLE ON FACTS. THE ISSUE HAS ALSO BEEN DEALT WITH BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT KARN AL V MARKET COMMITTEE, PIPLI (ITA NO. 535 OF 2009). TH E HON'BLE HIGH COURT IN ITS ORDER DATED 5.7.2010 HELD AS UNDER:- IN ALL FAIRNESS TO THE LD. COUNSEL FOR THE REVENUE , REFERENCE IS MADE TO THE JUDGMENT OF THE HON'BLE APEX COURT I N ESCORT LIMITEDS CASE (SUPRA) ON WHICH RELIANCE HAS BEEN P LACED BY THE LD. COUNSEL FOR THE REVENUE. THE HON'BLE SUPRE ME COURT IN THAT CASE WAS DEALING WITH A CASE RELATING TO TW O DEDUCTIONS BOTH UNDER SECTIONS 10(2)(VI) AND 10(2)( XIV) OF THE 1922 ACT OR BOTH UNDER SECTIONS 32(I)(II) AND 3 5(1)(IV) OF THE ACT. THE ASSESSEE THEREIN HAD INCURRED EXPEND ITURE OF A CAPITAL NATURE ON SCIENTIFIC RESEARCH RELATING TO T HE BUSINESS WHICH RESULTED INTO ACQUISITION OF AN ASSET. THE A SSESSEE HAD SOUGHT TO CLAIM A SPECIFIED PERCENTAGE OF THE WRITT EN DOWN VALUE OF THE ASSET AS DEPRECIATION AND AT THE SAME TIME CLAIMED DEDUCTION, IN FIVE CONSECUTIVE YEARS OF THE EXPENDITURE INCURRED ON THE ACQUISITION OF THE ASSE T. THE APEX COURT OBSERVED:- WHERE A CAPITAL ASSET USED FOR SCIENTIFIC RESEARC H RELATED TO THE BUSINESS OF THE ASSESSEE IS ALSO IPS O FACTO AN ASSET USED FOR THE PURPOSE OF THE BUSINESS, IT IS I MPOSSIBLE TO CONCEIVE OF THE LEGISLATURE HAVING ENVISAGED A DOUB LE 5 DEDUCTION IN RESPECT OF THE SAME EXPENDITURE, ONE B Y WAY OF DEPRECIATION UNDER SECTION 32 OF THE INCOME TAX ACT , 1961 AND OTHER BY WAY OF ALLOWANCE UNDER SECTION 35(1)(I V) OF A PART OF THE CAPITAL EXPENDITURE ON SCIENTIFIC RESEA RCH, EVEN THOUGH THE TWO HEADS OF DEDUCTION DO NOT COMPLETELY OVERLAP AND THERE IS SOME DIFFERENCE IN THE RATIONALE OF TH E TWO DEDUCTIONS. IT WAS FURTHER RECORDED THAT :- THERE IS A FUNDAMENTAL THOUGH UNWRITTEN, AXIOM THAT NO LEGISLATURE COULD HAVE AT ALL INTENDED A DOUBLE DED UCTION IN REGARD TO THE SAME BUSINESS OUTGOING; AND, IT IS IN TENDED, IT WILL BE CLEARLY EXPRESSED. IN OTHER WORDS, IN THE ABSENCE OF CLEAR STATUTORY INDICATION TO THE CONTRARY, THE STA TUTE SHOULD NOT BE READ AS TO PERMIT AN ASSESSEE TWO DEDUCTIONS .. IN THE PRESENT CASE, THE ASSESSEE IS NOT CLAIMING D OUBLE TAXATION ON ACCOUNT OF DEPRECIATION AS HAS BEEN SUG GESTED BY LD. COUNSEL FOR THE REVENUE. THE INCOME OF THE ASS ESSEE BEING EXEMPT, THE ASSESSEE IS ONLY CLAIMING THAT DE PRECIATION SHOULD BE REDUCED FROM THE INCOME FOR DETERMINING T HE PERCENTAGE OF FOUNDS WHICH HAVE TO BE APPLIED FOR T HE PURPOSES OF TRUST. THERE IS NO DOUBLE DEDUCTION CL AIMED BY THE ASSESSEE AS CANVASSED BY THE REVENUE. JUDGMENT OF THE HON'BLE SUPREME COURT IN ESCORTS LTD AND ANOTHER (S UPRA) IS DISTINGUISHABLE FOR THE ABOVE REASONS. IT CANNOT B E HELD THAT DOUBLE BENEFIT IS GIVEN IN ALLOWING CLAIM FOR DEPRE CIATION FOR COMPUTING INCOME PURPOSES OF SECTION 11. THE QUEST IONS PROPOSED HAVE, THUS TO BE ANSWERED AGAINST THE REVE NUE AND IN FAVOUR OF THE ASSESSEE. 7. THE CIT(A) HAS REMITTED THE ISSUE BACK TO THE FI LE OF ASSESSING OFFICER TO ALLOW DEPRECIATION SUBJECT TO FURNISHING OF REQUISITE DETAILS AND DOCUMENTS. 8. WE FIND THAT SIMILAR ISSUE AROSE BEFORE THE TRIBUNAL IN THE CASE OF MARKET COMMITTEE, KALANVALI & OTHER MARKET COMMITTE ES VS. ITO (ITA NOS. 326 TO 328/CHD/2010) ORDER DATED 26.5.2010 AND THE TRIBUNAL IN TURN RELIED ON THE RATIO LAID DOWN BY THE TRIBUNAL IN MA RKET COMMITTEES, MUSTAFABAD & SAUDHASRA VS. DCIT, YAMUNANAGAR IN ITA NOS. 1037/CHD/2009 & 1067/CHD/2009 (ORDER DATED 18.3.201 0). 6 9. THE TRIBUNAL IN THE CASE OF MARKET COMMITTEE, M USTAFABAD & SAUDHARA VS. DCIT, YAMUNANAGAR (ITA NOS. 1037 & 106 7/CHD/2010) VIDE ORDER DATED 18.3.2010 HELD AS UNDER:-. 8. THE ISSUE IN GROUND NO.3 IS AGAINST THE DISALLO WANCE OF DEPRECIATION ON ASSETS, COST OF WHICH WAS CLAIMED A ND ALLOWED AS APPLICATION OF INCOME TOWARDS CHARITABLE PURPOSES, IN THE YEAR OF ACQUISITION OF THE SAID ASSET. THE TRIBUNAL VIDE ORDER DATED 31.12.2009, ON SIMILAR ISSUE VIDE PARAS 11 & 12 HAS HELD AS UNDER:- 11. WE FIND THAT SIMILAR ISSUE AROSE BEFORE THE TR IBUNAL IN ITA NO. 1055/CHD/2009 RELATING TO ASSESSMENT YEA R 2006-07 WHEREBY VIDE ORDER DATED 30.11.2009, IT WAS HELD AS UNDER:- 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. THE ASSESSEE BEFORE US IS A LOCAL AUTHORITY WHICH IS CLAIMING ITS INCOME TO BE EXEMPT U/S 11 OF THE I.T. ACT. WHILE COMPUTING THE INCOME FOR THE YEAR AS PER INCOME AND EXPENDITURE ACCOUNT, THE ASSESSEE HAD DEBITED DEPRECIATION OF RS. 8,92,957/- ON THE FIXED ASSETS. ADMITTEDLY THE ENTIRE COST OF THE ASSETS WAS CLAIMED AND ALLOWED AS APPLICATION OF INCOME TOWARDS CHARITABLE PURPOSE IN THE YEAR OF ACQUISITION OF THE SAID ASSETS. THE ASSETS WERE EITHER ACQUIRED IN THE EARLIER YEARS OR DURING THE YEAR UNDER CONSIDERATION. THE QUESTION BEFORE US IS LIMITED TO THE CLAIM OF DEDUCTION ON ACCOUNT OF DEPRECIATION WHILE COMPUTING THE INCOME FOR THE PURPOSE OF SECTION 11 OF THE ACT. SIMILAR ISSUE AROSE IN CIT VS RAIPUR PALLOTTINE SOCIETY [180 ITR 579 (M.P.)] WHEREIN WHILE COMPUTING THE INCOME OF A RELIGIOUS AND CHARITABLE INSTITUTION, BEING ASSESSED IN THE STATUS OF AOP, IT WAS HELD THAT DEPRECIATION IS TO BE ALLOWED, WHILE COMPUTING THE BUSINESS INCOME U/S 28 OF THE I.T. ACT. 6. THE HON'BLE BOMBAY HIGH COURT IN CIT VS INSTITUTE OF BANKING [264 ITR 111 (BOM.)], HAD HELD THAT DEPRECIATION IS TO BE ALLOWED ON THE ASSETS, THE COST OF WHICH HAD BEEN FULLY ALLOWED AS APPLICATION OF INCOME UNDER SECTION 11 IN THE PAST YEARS. IT HAD FURTHER HELD THAT DEPRECIATION ON ASSETS RECEIVED ON TRANSFER, WHERE THE ASSESSEE HAD NOT INCURRED THE COST OF ACQUIRING THE ASSET, IS ALSO TO BE ALLOWED. 7. SIMILAR ISSUE AROSE BEFORE THE TRIBUNAL IN VARIOUS CASES OF MARKET COMMITTEES OF HARYANA 7 AND THE CLAIM OF DEPRECIATION HAS BEEN ALLOWED BY THE TRIBUNAL IN VARIOUS APPEALS FILED BY THE ASSESSEE, COPIES OF WHICH HAVE BEEN FILED ON RECORD. 12. RESPECTFULLY, FOLLOWING THE RATIO LAID DOWN BY THE M.P. HIGH COURT (SUPRA) AND BOMBAY HIGH COURT (SUPR A) IN THE ABOVE MENTIONED CASES AND FOLLOWING THE DECI SION OF THE COORDINATE BENCHES OF TRIBUNAL IN THE CASE O F MARKET COMMITTEE OF HARYANA, WE HOLD THAT THE CLAIM OF DEDUCTION ON ACCOUNT OF DEPRECIATION IS TO BE ALLOW ED, WHILE COMPUTING THE INCOME U/S 11 OF THE ACT. HOWE VER, WE FIND THAT FACTUAL ASPECTS OF THE ISSUE OF ADDIT ION TO THE FIXED ASSETS AND THE DEPRECIATION ALLOWABLE ON THE SAME IS NOT CLEAR FROM THE PERUSAL OF RECORDS. WE, THEREFO RE, RESTORE THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER FOR THE LIMITED PURPOSE OF VERIFYING THE ADDITIONS MADE TO THE FIXED ASSETS FROM YEAR TO YEAR AND THE RATE OF DEPRECIATION TO BE ALLOWED ON THE SAME AND CONSEQUE NTLY WORK OUT THE DEPRECIATION ALLOWABLE TO THE ASSESSEE DURING THE YEAR UNDER APPEAL. THE ASSESSING OFFICER SHALL AFFORD A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE . THUS, GROUND NO.3 RAISED BY THE ASSESSEE IN BOTH TH E APPEALS IS ALLOWED FOR STATISTICAL PURPOSES. 9. RESPECTFULLY FOLLOWING THE RATIO LAID DOWN IN T HE CASE OF MARKET COMMITTEES (SUPRA) VIDE ORDER DATED 31.12.20 09 WE ALLOW THE CLAIM OF THE ASSESSEE. HOWEVER, THE ISSUE IS RESTORE BACK TO THE FILE OF ASSESSING OFFICER FOR LIMITED PURPOSES OF VERIFYING THE ADDITIONS MADE TO THE FIXED ASSETS FROM YEAR TO YEA R AND THE RATE OF DEPRECIATION TO BE ALLOWED ON THE SAME AND CONSE QUENTLY WORK OUT THE DEPRECIATION ALLOWABLE TO THE ASSESSEE DURI NG THE YEAR UNDER APPEAL. THE ASSESSING OFFICER SHALL AFFORD A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. THUS, GROU ND NO.3 RAISED BY THE ASSESSEE IN BOTH THE APPEALS IS ALLOWED FOR STATISTICAL PURPOSES. 9. FOLLOWING THE RATIO LAID DOWN BY THE TRIBUNAL IN THE CASE OF MARKET COMMITTEES (ORDERS DATED 18.3.2010 AND 26.5.2010), WE ALLOW THE CLAIM OF THE ASSESSEE. HOWEVER, WE ARE IN CONFORMITY WITH THE ORDER OF CIT(A) IN RESTORING THE ISSUE BACK TO THE FILE OF THE ASSE SSING OFFICER. THE ASSESSING OFFICER IS DIRECTED TO VERIFY THE ADDITIO NS MADE TO THE FIXED ASSETS FROM YEAR TO YEAR AND THE RATE OF DEPRECIATI ON TO BE ALLOWED ON THE SAME AND CONSEQUENTLY WORK OUT THE DEPRECIATION ALL OWABLE TO THE 8 ASSESSEE DURING THE YEAR UNDER CONSIDERATION. A R EASONABLE OPPORTUNITY OF HEARING SHALL BE AFFORDED TO THE ASSESSEE. THU S THE GROUND OF APPEAL RAISED BY THE REVENUE IN ALL THE APPEALS IS ALLOWED FOR STATISTICAL PURPOSES. 10. IN THE RESULT ALL THE APPEALS FILED BY THE ASSE SSEES ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 11 TH DAY OF MARCH, 2011. SD/- SD/- (D.K.SRIVASTAVA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 11 TH MARCH, 2011 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR 9