Kongunadu Arts & Science College Council, Coimbatore V. ITO, Coimbatore

MA 11/CHNY/2016

• Counselvise Citation: [2016] 124 COUNSELVISE.COM (IT) 4277 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 9 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 12-05-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 03-02-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R DURAI
• Assessee Lawyers: T BANUSEKAR
• Keywords: Business income; Depreciation; Charitable institution
• Section: 32; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI . . . , . !' , # $ % [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ] M.P.NO.11/MDS/2016 [IN I.T.A.NO.2097/MDS/2014] ASSESSMENT YEAR : 2010-11 M/S KONGUNADU ARTS & SCIENCE COLLEGE COUNCIL GNANAMBIGAI MILLS POST COIMBATORE VS. THE INCOME TAX OFFICER COMPANY WARD I COIMBATORE [PAN AAAAK 1198 E] ( PETITIONER ) ( -./0 /RESPONDENT) PETITIONER BY : SHRI T. BANUSEKAR, CA RESPONDENT BY : SHRI R. DURAIPANDIAN, ADDL. CIT / DATE OF HEARING : 18 - 03 - 201 6 / DATE OF PRONOUNCEMENT : 12 - 0 5 - 2016 / O R D E R PER N.R.S.GANESAN, JUDICIAL MEMBER THE ASSESSEE FILED THE PRESENT MISCELLANEOUS PE TITION ON THE GROUND THAT THERE IS AN ERROR IN THE ORDER OF T HIS TRIBUNAL DATED 26.6.2015 IN REVENUES APPEAL I.T.A.NO.2097/MDS/201 4. 2. SHRI T. BANUSEKAR, LD. COUNSEL FOR THE ASSESSEE SUB MITTED THAT THE ASSESSEE-COLLEGE CLAIMED DEPRECIATION ON THE ASSET USED FOR CARRYING OUT THE CHARITABLE ACTIVITY. HOWEVER, THI S TRIBUNAL DISALLOWED MP NO. 11/16 :- 2 -: THE CLAIM OF THE ASSESSEE. ACCORDING TO THE LD. R EPRESENTATIVE, THIS TRIBUNAL IN THE CASE OF ITO VS THE GRD TRUST AND IN THE ASSESSEES OWN CASE ALLOWED DEPRECIATION AFTER OBSERVING THAT THERE WAS A CONFLICTING VIEW ON THE SUBJECT. PLACING RELIANCE O N THE JUDGMENT OF THE MADRAS HIGH COURT IN THE CASE OF CIT VS L.G. RAMAMU RTHI & ORS, 110 ITR 453, THE LD. REPRESENTATIVE SUBMITTED THAT ON I DENTICAL SET OF FACTS, WHEN ONE BENCH OF THE TRIBUNAL FOUND THAT THE ASSE SSEE IS ELIGIBLE FOR DEPRECIATION U/S 32 ON THE ASSET USED FOR CARRYING OUT THE CHARITABLE OBJECT, ANOTHER BENCH OF THE TRIBUNAL CANNOT TAKE A N ALTOGETHER DIFFERENT VIEW ON THE SAME SET OF FACTS. ACCORDING TO THE LD. REPRESENTATIVE, THERE WAS NO NEW MATERIAL AVAILABLE BEFORE THIS TRIBUNAL FOR TAKING A DIFFERENT VIEW. PLACING RELI ANCE ON THE JUDGMENT OF THE APEX COURT IN THE CASE OF HONDA SIEL POWER PRODUCTS LTD VS CIT, 295 ITR 466, THE LD. REPRESENTATIVE SUBMITTED THAT OMISSION TO CONSIDER THE ORDER OF CO-ORDINATE BENCH WOULD BE AN ERROR U/S 254(2) OF THE ACT. SINCE A CO-ORDINATE BENCH OF THIS TRIBU NAL IN GRD TRUST (SUPRA) FOUND THAT THE ASSESSEE IS ELIGIBLE FOR DE PRECIATION U/S 32, TAKING AN ALTOGETHER DIFFERENT VIEW IS NOT JUSTIFIE D. ON A QUERY FROM THE BENCH WHETHER THE ASSESSEE IS CARRYING ON ANY BUSI NESS OR PROFESSION, THE LD. REPRESENTATIVE CLARIFIED THAT THE ASSESSEE IS NOT DOING ANY BUSINESS OR PROFESSION, IT WAS CARRYING OUT CHARITA BLE ACTIVITY VIZ. EDUCATION. INVITING THE ATTENTION OF THE LD. REPRE SENTATIVE TO THE ORDER MP NO. 11/16 :- 3 -: OF THIS TRIBUNAL, MORE PARTICULARLY AT PAGE 3, THAT THIS TRIBUNAL FOUND THAT SEC. 32 OF THE ACT FALLS UNDER CHAPTER IV OF T HE INCOME-TAX ACT, 1961, HOWEVER, SEC. 11 FALLS IN CHAPTER III, THEREF ORE, SEC. 11 WILL NOT OVERRIDE SEC. 32, THE LD. REPRESENTATIVE SUBMITTED THAT THIS WAS NOT BROUGHT TO THE NOTICE OF THE ASSESSEE WHEN THE AS SESSEE ARGUED THE CASE BEFORE THE TRIBUNAL. THE LD. REPRESENTATIVE F URTHER SUBMITTED THAT IRRESPECTIVE OF THE FACT THAT THE ASSESSEE IS NOT DOING ANY BUSINESS, THE INCOME OF THE ASSESSEE HAS TO BE C OMPUTED ON COMMERCIAL PRINCIPLE. ON A FURTHER QUERY FROM THE BENCH WHETHER SEC. 32 OF THE ACT PROVIDES FOR DEPRECIATION ONLY FOR TH E ASSET USED FOR BUSINESS OR FOR ALL ASSETS, THE LD. REPRESENTATIVE FAIRLY SUBMITTED THAT SEC. 32 PROVIDES FOR DEPRECIATION ONLY FOR THE ASSE T WHICH WAS USED FOR THE BUSINESS OR PROFESSION. HOWEVER, WHILE COMPUTIN G THE INCOME OF THE CHARITABLE INSTITUTION, DEPRECIATION HAS TO BE ALLOWED ON COMMERCIAL PRINCIPLE. ACCORDING TO THE LD. REPRESE NTATIVE, THE INCOME OF THE TRUST HAS TO BE COMPUTED ON COMMERCIAL PRINC IPLE. THE LD. REPRESENTATIVE FURTHER CLARIFIED THAT COMMERCIAL PR INCIPLE IS NOTHING BUT THE CUSTOMARY METHOD OF COMPUTING THE INCOME OF THE TRUST. THEREFORE, ACCORDING TO THE LD. REPRESENTATIVE, WHE N THE INCOME HAS TO BE COMPUTED AS PER CUSTOMARY METHOD, DEPRECIATIO N HAS TO BE ALLOWED. ON A QUERY FROM THE BENCH, THE LD. REPRES ENTATIVE SUBMITTED THAT THE CONFLICT BETWEEN THE CUSTOMARY METHOD OF C OMPUTING TAXABLE MP NO. 11/16 :- 4 -: INCOME OF THE TRUST AND THE PROVISIONS OF SEC. 32 O F THE ACT WAS NOT BROUGHT TO THE ATTENTION OF THE ASSESSEE DURING TH E COURSE OF HEARING, THEREFORE, HE HAS NO OCCASION TO ARGUE THE CASE BEF ORE THIS TRIBUNAL. THE LD. REPRESENTATIVE FURTHER CLARIFIED THAT THE C ONFLICT BETWEEN THE CUSTOMARY METHOD OF COMPUTING THE TAXABLE INCOME AN D THE PROVISIONS OF SEC. 32 WAS NOT CONSIDERED BY ANY OF THE TRIBUNA L OR THE HIGH COURT WHILE ALLOWING DEPRECIATION ON THE ASSET WHICH WAS USED FOR CHARITABLE ACTIVITY. 3. ON THE CONTRARY, SHRI R. DURAIPANDIAN, LD. DEPARTME NTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE CLAIMED DEPRECIATION ON THE ASSET WHICH WAS USED FOR CARRYING OUT THE CHARI TABLE OBJECT. SEC. 32 OF THE ACT PROVIDES FOR DEPRECIATION ON THE ASSE T WHICH WAS USED FOR BUSINESS OR PROFESSION. ADMITTEDLY, THE ASSES SEE IS NOT DOING ANY BUSINESS OR PROFESSION. IF THE ASSESSEE CLAIMS TH AT IT WAS CARRYING OUT ANY BUSINESS OR PROFESSION, THEN THE INCOME OF THE ASSESSEE CANNOT BE ALLOWED AS EXEMPT U/S 11 OF THE ACT. SINCE THE ASSESSEE SPECIFICALLY CLAIMS THAT IT IS CARRYING OUT CHARITA BLE OBJECT, VIZ. EDUCATION, AND THE INCOME IS EXEMPTED U/S 11 OF TH E ACT ON ITS APPLICATION, ACCORDING TO THE LD. DR, THE PROVISION S OF SEC. 32 IS NOT APPLICABLE AT ALL. THIS TRIBUNAL SPECIFICALLY OBSE RVED THAT SEC. 11 WILL NOT OVERRIDE SEC. 32. THIS TRIBUNAL FURTHER FOUND THAT DEPRECIATION MP NO. 11/16 :- 5 -: CLAIMED BY THE ASSESSEE WOULD AMOUNT TO DOUBLE DED UCTION. THEREFORE, THERE IS NO PRIMA FACIE ERROR IN THE ORD ER OF THIS TRIBUNAL. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. TH E CLAIM OF THE ASSESSEE IS THAT THE DECISION OF THE CO-ORDINATE B ENCH OF THIS TRIBUNAL IN THE CASE OF GRD TRUST (SUPRA) AND IN ASSESSEES OWN CASE FOR EARLIER ASSESSMENT YEAR WAS NOT TAKEN INTO CONSIDER ATION WHILE DECIDING THE APPEAL OF THE ASSESSEE FOR THE YEAR U NDER CONSIDERATION. THE CLAIM OF DEPRECIATION IS PROVIDED U/S 32 OF TH E ACT. IT IS AN ADMITTED FACT THAT SEC. 32 PROVIDES FOR DEPRECIATIO N ONLY FOR THE ASSET WHICH WAS USED FOR THE BUSINESS OR PROFESSION. IN THE CASE BEFORE US, ADMITTEDLY, THE ASSESSEE IS NOT CARRYING OUT ANY BU SINESS OR PROFESSION. THE ASSESSEE IS A CHARITABLE INSTITUT ION CARRYING OUT A CHARITABLE OBJECT AND CLAIMING EXEMPTION U/S 11 OF THE ACT. THE QUESTION ARISES FOR CONSIDERATION IS WHEN THE ASSE SSEE ADMITTED CARRYING OUT CHARITABLE ACTIVITY VIZ. EDUCATION, AN D CLAIMING EXEMPTION U/S 11 OF THE ACT, WHETHER THE ASSET USED BY THE A SSESSEE FOR CARRYING OUT THE OBJECT OF THE TRUST IS ELIGIBLE FOR DEPRECI ATION U/S 32 OR NOT? THIS WAS SPECIFICALLY EXAMINED BY THIS TRIBUNAL AND IT WAS OBSERVED AS FOLLOWS: SECTION 32 OF THE ACT FALLS IN CHAPTER IV UNDER C OMPUTATION OF BUSINESS INCOME, HOWEVER, SECTION 11 FALLS IN CHAPT ER III WHICH PROVIDES FOR INCOMES WHICH DO NOT FORM PART OF THE TOTAL INCOME. MP NO. 11/16 :- 6 -: THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPIN ION THAT PROVISIONS OF SECTION 11 OF THE ACT WILL OVERRIDE S ECTION 32. IN OTHER WORDS, IF THE ASSESSEE CLAIMS EXEMPTION U/S 11 UNDER CHAPTER III OF THE ACT, IT CANNOT CLAIM DEPRECIATIO N U/S 32 OF THE ACT. THIS IS THE INTERPRETATION MADE BY THIS TRIBUNAL AF TER UNDERSTANDING THE PROVISIONS OF SEC. 32 OF THE ACT. NOW, THE ASSESS EE CLAIMS THAT DEPRECIATION HAS TO BE ALLOWED ON THE CUSTOMARY MET HOD OF COMPUTING THE INCOME AND NOT U/S 32 OF THE ACT. THIS TRIBU NAL IS OF THE CONSIDERED OPINION THAT THE INCOME HAS TO BE COMPUT ED AS PER THE PROCEDURE LAID DOWN UNDER THE SCHEME OF THE INCOME- TAX ACT, 1961. WHEN SEC. 32 SPECIFICALLY PROVIDES FOR DEPRECIATION ONLY IN RESPECT OF THE ASSET WHICH WAS USED FOR BUSINESS OR PROFESSION , THE CUSTOMARY METHOD OF COMPUTING INCOME CANNOT OVERRIDE THE SPEC IFIC STATUTORY PROVISION IN THE INCOME-TAX ACT. IN OTHER WORDS, W HEN THERE IS A CONFLICT BETWEEN THE CUSTOMARY METHOD OF COMPUTING THE INCOME AND THE PROVISIONS OF SEC. 32, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT SEC. 32 WOULD PREVAIL OVER THE CUSTOMARY METHO D OF COMPUTING THE INCOME. THIS IS THE INTERPRETATION MADE BY THE TRIBUNAL AFTER GOING THROUGH THE LANGUAGE EMPLOYED BY THE PARLIAMENT IN SEC. 32 OF THE ACT. 5. A BARE READING OF SEC. 32 OF THE ACT SHOWS THAT DEP RECIATION HAS TO BE ALLOWED WHILE COMPUTING THE TAXABLE INCOM E ON BUILDING, MACHINERY, PLANT ETC. WHICH IS WHOLLY OR PARTLY OWN ED BY THE ASSESSEE MP NO. 11/16 :- 7 -: AND USED FOR THE PURPOSE OF BUSINESS. THE PARLIAME NT IN ITS WISDOM THOUGHT IT FIT TO ALLOW DEPRECIATION FOR WEAR AND T EAR OF THE BUILDING, MACHINERY ETC. WHICH ARE USED FOR BUSINESS OR PROFE SSION. IN OTHER WORDS, THE DEPRECIATION IS NOTHING BUT AN ALLOWANCE /INCENTIVE ALLOWED ON NOTIONAL BASIS SPREAD OVER DURING THE EFFECTIVE LIFE TIME OF THE MACHINERY OR ASSET USED FOR BUSINESS OR PROFESSION. 6. THE INCOME OF THE ASSESSEE HAS TO BE CLASSIFIED UN DER DIFFERENT HEADS AS PROVIDED IN SEC. 14 OF THE ACT. SEC. 32 PROVIDES FOR ALLOWANCE OF DEPRECIATION, WHEN THE INCOME OF THE ASSESSEE WAS CLASSIFIED AS INCOME FROM BUSINESS OR PROFESSION. THE SCHEME OF THE INCOME-TAX ACT, 1961 DOES NOT PROVIDE FOR DEPRECIAT ION FOR THE ASSETS WHICH ARE NOT USED FOR BUSINESS OR PROFESSION. IT I S NOT THE CASE OF THE ASSESSEE THAT DEPRECIATION WAS CLAIMED ON THE ASSET /BUILDING USED FOR BUSINESS WHICH WAS HELD AS PROPERTY HELD UNDER THE TRUST. IT IS THE SPECIFIC CASE OF THE ASSESSEE THAT THE DEPRECIATIO N IS CLAIMED ON THE ASSET WHICH IS USED AS TOOL FOR CARRYING OUT THE OB JECT OF THE TRUST. IF THE ASSESSEE CLAIMS THAT THE PRINCIPAL OR PRIMARY OBJECT IS BUSINESS, THEN THE ASSESSEE IS NOT ENTITLED FOR EXEMPTION U /S 11 OF THE ACT. UNDER THE SCHEME OF THE INDIAN CONSTITUTION, THE ED UCATION CANNOT BE COMMERCIALIZED AND IT HAS TO REMAIN WITHIN THE REAC H OF EACH AND EVERY INDIVIDUAL CITIZEN OF OUR COUNTRY. THE MOMEN T THE ASSESSEE CLAIMS DEPRECIATION ON THE PROPERTY/MACHINERY USED FOR CARRYING OUT MP NO. 11/16 :- 8 -: EDUCATION ACTIVITY, IT AMOUNTS TO COMMERCIALIZATION OF EDUCATION WHICH CANNOT BE ALLOWED UNDER ANY CIRCUMSTANCES. MOREOVE R, WHEN THE ASSESSEE CLAIMS DEPRECIATION, THE ELEMENT OF CHARIT Y NO LONGER REMAINS AND THE ASSESSEE CANNOT CONTINUE AS CHARITABLE IN STITUTION. 7. WE HAVE CAREFULLY GONE THROUGH THE JUDGMENT OF THE MADRAS HIGH COURT IN THE CASE OF L.G. RAMAMURTHI & OTHERS (SUPRA). THE MADRAS HIGH COURT FOUND THAT NO TRIBUNAL OF FACT HA S ANY RIGHT OR JURISDICTION TO COME TO A CONCLUSION ENTIRELY CONTR ARY TO THE ONE REACHED BY ANOTHER BENCH OF THE SAME TRIBUNAL ON TH E IDENTICAL SET OF FACTS. IN THE CASE BEFORE US, THE ISSUE WAS NOT DE CIDED ON IDENTICAL SET OF FACTS. THE ISSUE WAS DECIDED BY INTERPRETING TH E PROVISIONS OF SEC. 32 AND ITS APPLICATION TO THE ASSET OTHER THAN THE ONE USED FOR BUSINESS OR PROFESSION. THE EARLIER BENCH OF THIS TRIBUNAL EITHER IN THE CASE OF GRD TRUST OR IN THE ASSESSEES OWN CASE HA S NO OCCASION TO CONSIDER THE APPLICABILITY OF SEC. 32 OF THE ACT. WHEN THIS WAS BROUGHT TO THE NOTICE OF THE LD. REPRESENTATIVE FOR THE AS SESSEE, HE SUBMITTED THAT THE PROVISIONS OF SEC. 32 OR THE CONFLICT BETW EEN THE CUSTOMARY METHOD OF COMPUTING THE INCOME AND THE PROVISIONS O F 32 WAS NOT BROUGHT TO THE NOTICE OF THE ASSESSEE DURING THE C OURSE OF ARGUMENT. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE APPEAL FILED BY THE ASSESSEE HAS TO BE ADJUDICATED AS PER THE PROVISION S OF THE INCOME-TAX ACT, 1961. WHEN THE INCOME-TAX ACT DOES NOT PROVID E DEPRECIATION ON MP NO. 11/16 :- 9 -: THE ASSET OTHER THAN THE ASSET USED FOR BUSINESS OR PROFESSION, THE ASSESSEE CANNOT SAY THAT THE PROVISIONS OF SEC. 32 WAS NOT BROUGHT TO THE NOTICE OF THE ASSESSEE DURING THE COURSE OF HE ARING. IT IS PERTINENT TO POINT OUT THAT THE REPRESENTATIVE APPE ARING BEFORE THIS TRIBUNAL IS A QUALIFIED CHARTERED ACCOUNTANT AND T HEREFORE, THERE IS A PRESUMPTION THAT HE KNOWS THE PROVISIONS OF THE INC OME-TAX ACT INCLUDING SEC. 32 OF THE ACT. WHEN THE ASSESSEE C LAIMS DEPRECIATION, IT IS FOR THE ASSESSEE TO SUBSTANTIATE BEFORE THIS TRIBUNAL HOW SEC. 32 IS APPLICABLE ESPECIALLY WHEN THE ASSESSEE IS ADMI TTEDLY NOT CARRYING OUT ANY BUSINESS OR PROFESSION. IF SOMETHING ELSE OTHER THAN THE PROVISIONS OF INCOME-TAX ACT, 1961 WAS CONSIDERED B Y THIS TRIBUNAL WHILE DECIDING THE MATTER, THEN THERE MAY BE JUSTIF ICATION IN THE CLAIM OF THE REPRESENTATIVE THAT THIS WAS NOT KNOWN TO HI M. IN THIS CASE, WHAT WAS APPLIED BY THE TRIBUNAL IS PROVISIONS OF S EC. 32 OF THE ACT. THEREFORE, THIS TRIBUNAL DO NOT FIND ANY MERIT IN T HE CONTENTION OF THE ASSESSEE THAT SEC. 32 WAS NOT BROUGHT TO THE NOTICE OF THE ASSESSEE DURING THE COURSE OF APPELLATE PROCEEDINGS. SINCE THE CONFLICT BETWEEN THE CUSTOMARY METHOD OF COMPUTING THE INCOME AND TH E PROVISIONS OF SEC. 32 WAS NOT CONSIDERED BY ANY OF THE EARLIER BE NCH OF THIS TRIBUNAL OR THE HIGH COURT, THIS TRIBUNAL DO NOT FIND ANY PR IMA FACIE ERROR IN THE ORDER OF THIS TRIBUNAL. THE SO CALLED MISTAKE POIN TED OUT BY THE LD. REPRESENTATIVE CANNOT BE CONSTRUED AS A PRIMA FACIE ERROR WITHIN THE MP NO. 11/16 :- 10 -: MEANING OF SEC. 254(2) OF THE ACT. IF THE ARGUMENT OF THE LD. REPRESENTATIVE FOR THE ASSESSEE IS ACCEPTED THAT W OULD AMOUNT TO REVIEW OF THE ORDER OF THIS TRIBUNAL. SUCH A POWER TO REVIEW THE EARLIER ORDER OF THE TRIBUNAL IS NOT CONFERRED ON T HE TRIBUNAL UNDER THE SCHEME OF THE INCOME-TAX ACT, 1961. THEREFORE, THI S TRIBUNAL DO NOT FIND ANY MERIT ON THE APPLICATION OF THE ASSESSEE AND ACCORDINGLY, THE SAME IS DISMISSED. 8. IN THE RESULT, THE MISCELLANEOUS PETITION STANDS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH MAY, 2016, AT CHENNAI. SD/- SD/- ( . !' ) (A. MOHAN ALANKAMONY) # / ACCOUNTANT MEMBER ( . . . ) ) (N.R.S. GANESAN) / JUDICIAL MEMBER / CHENNAI / DATED: 12 TH MAY, 2016 RD !' / COPY TO: 1 . PETITIONER 4. # # $ / CIT 2. %#&' / RESPONDENT 5. ()*# +, / DR 3. # # $ (! *) / CIT(A) 6. )./ 0 / GF