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Income Tax Appellate Tribunal, “B” BENCH, PUNE
Before: SHRI D. KARUNAKARA RAO, AM & SHRI PARTHA SARATHI CHAUDHURY, JM
आदेश / ORDER
PER D. KARUNAKARA RAO, AM :
There are two appeals under consideration. Both the appeals are filed by the Revenue against the common order of CIT(A)-10, Pune dated 18-08- 2017 for the Assessment Years 2008-09 and 2009-10. Since an identical issue is involved in both the appeals, therefore, these were heard together and are being disposed of by this composite order.
In both the appeals, the Revenue raised similar grounds which relate to the correctness of the order of the CIT(A) who directed the Assessing Officer to grant depreciation on the assets already treated as „application of income‟ of the foundation-assessee.
Appeal for A.Y. 2008-09
Briefly stated, relevant facts for A.Y. 2008-09 include that the assessee is an educational institution duly registered under the Bombay Public Trust Act, 1950. Assessee is also registered u/s.12A of the I.T. Act, 1961. Assessee filed the return of income declaring Nil income. The assessee acquired assets with the exempt funds of the assessee. The assessee also claimed depreciation on the said assets relying on the Hon‟ble Bombay High Court judgement in the case of CIT vs. Institute of Banking, Personnel Selection (IBPS) [2013] 264 ITR 110 (Bom.). However, the Assessing Officer denied the benefit of claim of depreciation as per the discussion given in para No.5 and 6 of his order.
During the first appellate proceedings, the assessee filed a written submission which is extracted in para 4 of the order of the CIT(A). In the said written submission, the assessee relied on the series of decisions in respect of allowability of claim of depreciation on the assets procured out of application of income of the assessee-Trust. The CIT(A) after considering the written submissions of the assessee and also the series of judgements of the Jurisdictional High Court as well as other High Court allowed the appeal of the assessee. Against the said order of CIT(A), the Revenue is in appeal before the Tribunal with the following grounds (A.Y. 2008-09) :
“1) The CIT(A) should have appreciated that as per explanation 1 to Sec.147, merely disclosing the depreciation & capital expenditure in the Return of Income & financial statement does not amount to disclosure as required u/s 147.
2) Whether in the facts and in the circumstances of the case and in law the Ld. CIT(A) was right in allowing the appeal of the assessee by ignoring the facts that assessee society like charitable or religious institutions are governed by almost the separate or independent provisions of Section 11,12, 12A, 12AA & 13 and these provisions are independent code in itself in Chapter III of the Income Tax Act, 1961 and claim of depreciation u/s 32 comes under Chapter IV of the Act under the head „D‟- Profit and Gains of Business or Profession and depreciation is allowed when capital assets are used for the purpose of business? 3) Whether in the facts and in the circumstances of the case and in law the Ld. CIT(A) was right in allowing the appeal of the assessee by ignoring the facts that assessee is not eligible for any type of depreciation as the entire expenditure for the purchase of capital assets is allowed as a deduction and the same is treated as application of income u/s 11(1) and claiming depreciation on the same capital assets is a double deduction and is not as per law as these capital assets are not used for the purpose of business or profession as provided u/s 32(1)? “
At the outset the ld. Counsel submitted that this is a case where the issue involved relates to allowability of claim of deduction u/s. 32 of the Act in respect of assets of trust purchased by the assessee out of the funds of trust. Relying on the decision of Hon‟ble Supreme Court judgments and other decisions already extracted by the CIT(A) in para 6, the ld. Counsel mentioned that this is a covered issue. On the other hand, the ld. DR for the Revenue could not controvert the submissions made by the ld. Counsel
On hearing both the sides and the settled nature of the issue on the merits of the core issue, we find it relevant to extract the findings of the CIT(A) given in Para 6 of his order. “6. Ground No. 2 & 3 These grounds relates to challenging the findings of A.O. wherein, the AO has disallowed the depreciation of Rs.2,68,96,785/- by relying on the decision of Kerala High Court in the case of Lissie Medical Institution 348 ITR 349. (i) I have considered the submission of the appellant carefully and gone through the A.O.‟s order. Although, in aforesaid paras, the issue of notice u/s. 148 is held to be bad in Law and accordingly, the impugned grounds have became academic, however, on merit also, these grounds need a proper adjudication. Regarding the claim of double deduction on acquired assets, the impugned issue is settled by several High Courts, wherein, it is unanimously held that in the case of charitable trust double deduction is allowable. These cases are asunder : (a) CIT v. Institute of Banking Personnel Selection (IBPS) (2003) 264 ITR 110 (Bom).
(b) G.K.R. Charities v. Deputy Direcotr of IT (Exemptions)-I (2012) 051 SOT 0538 (Chen Trib). (c) CIT v. Society of The Sisters of St. Anne (1984) 146 ITR 28 (Kar). (d) CIT v. Raipur Pollottine Society (1989) 180 ITR 579 (MP). (e) CIT v. Sheth Manilal Ranchhoddas Vishram Bhavan Trust (1992) 198 ITR 598 (Guj). (f) Director of Income Tax (Exemption) v Framjee Cawasjee Institute (1993) 109 CTR 463 (Bom). (g) CIT v Tiny Tots Education Society (2011) 330 ITR 21 (P&H). (h) CIT v Rao Bahadur Calavala Cunnan Chetty Charities (1982) 135 ITR 485 (Mad.). (i) Commissioner of Income Tax v. Bhorukha Public Welfare Trust (1999) 240 ITR 513 (Cal.).
(ii) Further, by Finance Act, 2014, w.e.f. 1.4.2015, a new sub- section (6) has been inserted in section 11, wherein, it has been provided that once deduction has been claimed on account of application of income at the occasion of purchase of the assets, further deduction will not be allowed in the form of depreciation on the same assets, however, the new inserted clause is operational with prospective effect and the period under consideration is not covered by the said amendment. Therefore, considering the ratio laid down by High Courts in the cases cited (supra) the appellant trust is entitled for the depreciation. Considering the above discussion, grounds No. 2 & 3 are allowed.”
From the above, it is evident that the CIT(A) has rightly granted relief to the assessee considering the binding legal precedents on this very issue. Therefore, on the merits of the core issue, the order of CIT(A) on this issue is fair and reasonable and it does not call for any interference. Accordingly, the relevant grounds stand dismissed.
Another issue raised in ground No. 1 for A.Y. 2008-09 relates to reopening of validity of the assessment. The Revenue is aggrieved with the order of CIT(A) granting relief to the assessee. The CIT(A) held the reopening as bad in law. On hearing the parties, we find that adjudication of this legal issue becomes academic only since the relief granted by the CIT(A) stands approved on merits. Accordingly, the ground No. 1 is dismissed as academic.
In the result, the appeal of the Revenue for A.Y. 2008-09 is dismissed.
Appeal for A.Y. 2009-10
Since the grounds for A.Y. 2009-10 are identical to the ground Nos. 2 and 3 of the appeal for A.Y. 2008-09, our decision for A.Y. 2008-09 stands good for A.Y. 2009-10 as well. Accordingly, the grounds for A.Y. 2009-10 are dismissed.
In the result, both the appeals of the Revenue are dismissed.
Order pronounced on 10th day of June, 2020