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Income Tax Appellate Tribunal, AHMEDABAD “D” BENCH
Before: SHRI PRADIP KUMAR KEDIA & SHRI MAHAVIR PRASAD
PER MAHAVIR PRASAD, JUDICIAL MEMBER
This appeal filed by the Revenue is directed against the order of the Ld. CIT(A)-9, Ahmedabad dated 07.06.2016 pertaining to A.Y. 2011-12 and following ground has been taken:
2 . A.Y. 2011-12 1) Whether on the facts and in the circumstances of the case is the Ld. CIT(A) justified in deleting the penalty of Rs. 2,58,60,5007- levied u/s. 271(1)(c) of the IT Act by the A.O. 2) On the facts and circumstances of the case, the Ld. Commissioner of Income- Tax (Appeals) ought to have upheld the order of the Assessing Officer. 3) It is, therefore, prayed that the order of the Ld. Commissioner of Income-tax (Appeals) may be set aside and that of the Assessing Officer be restored.
Facts of the case are that assessee is a Trust. During the course of re- assessment proceeding, certain details were not furnished in support of the claim and order giving effect to the ld. CIT(A), Ahmedabad was passed taxing various receipts/accounts/funds received by the assessee trust.
Ample opportunities were granted to the trust to furnish detail in support of the exemption claimed in view of the order passed by the ld.CIT(A), Ahmedabad but assessee has not furnished the details. Then assessing officer finalize the order re-computing the income of the assessee trust as under:
Income as per u/s 143(3) dt, 30.12,2011 Rs. 16,38,060/- Add:-l) As per Income & Expenditure - Central accounts Rs. 41,99,297/-. Add:-2) As per Income & Expediture - TB Risk fund. Rs. 4,47,024/- Add;-3) As per Income & Expenditure- Endowment 35C. Rs. 1,201/- Add:-4) As per Income & Expenditure Hospital account. Rs. 4,55,17,403/- Add;-5) Claim of Depreciation is disallowed. Rs. 8,05,084/- Rs. 5,26,08,069/- Total Income
And imposed penalty of Rs. 17774000/-.
3 . A.Y. 2011-12 4. Against the said penalty appeal, assessee preferred first statutory appeal before the ld. CIT(A) who granted relief to the assessee and directed assessing officer to cancel the penalty.
Now Revenue has come before us by way of second statutory appeal.
At the outset, ld. A.R. Shri Sanjay Kumar stated that in quantum proceeding, relief has been granted by the ITAT, Ahmedabad in wherein appeal of the Revenue was dismissed by the Tribunal.
On the other hand, ld. D.R. has nothing to controvert submission of the ld. A.R.
ITAT, Ahmedabad dismissed the appeal of the Revenue in quantum proceeding on 31.01.2020 with following observations:
We have heard the rival contentions of both the parties and perused and carefully considered the material on record including the judicial pronouncements cited and placed reliance upon. Instant issue before us relates to the amount of depreciation whether it should be treated as application of income for charitable purpose under section 11(1)(a) of the Act. Indeed, there is an amendment under the provision of Section 11(6) of the Act whereby it was provided that the depreciation in respect of fixed assets is not to be treated as application of income. It is important to refer the said section which is extracted as under:
“Income from property held for charitable or religious purposes. 11.(1) Subject to the provisions of section 60 to 63, the following income shall not be included in the total income of the previous year of the person in receipt of the income- (2) … … (3) … … … 4 . A.Y. 2011-12 (4) … … .. (5) [(6) In this section where any income is required to be applied or accumulated or set apart from application, then, for such purposes the income shall be determined without any deduction or allowance by way of depreciation or otherwise in respect of any asset, acquisition of which has been claimed as an application of income under this section in the same or any other previous year.”
13.1 From the above amended provision there remains no ambiguity that the depreciation should not be treated as application of income with respect to the assets, the cost of which has been claimed as an application of income under the provision of Section 11(1)(a) of the Act. It is also undisputed fact that such amendment in Section 11(6) of the Act is prospective in nature and therefore it cannot be applied to the earlier years i.e. the year under consideration.
13.2 Thus the view taken by the Hon'ble jurisdictional High Court in the case of CIT Vs. Sheth Manilal Ranchhoddas Visharam Bhavan trust reported in 198 ITR 598 for the treating the depreciation as application of income is squarely applicable to the present facts of the case. The relevant extract of the judgment is reproduced as under: In the case of CIT v. Rao Bahadur Calavala Cunnan Chetty Charities [1982] 135 ITR 485, the Madras High Court held that the income from the properties held under trust would have to be arrived at in the normal commercial manner without classification under the various heads set out in section 14. It held that the expression 'income' has to be understood in the popular or general sense and not in the sense in which the income is arrived at for the purpose of assessment to tax by application of some artificial provisions either giving or denying deduction. It observed that the computation under the different categories or heads arises only for the purpose of ascertaining the total income for the purposes of charge. Those provisions cannot be introduced to find out what the income derived from the property held under trust to be excluded from the total income is, for the purpose of the exemptions under Chapter III. Following the aforesaid decision in the instant case the Tribunal was justified in holding that having regard to the scheme of the Act, 'income' referred to in section 11 (1)(a) was not to be computed not in accordance with the provisions of the Act but in accordance with the normal rules of the 5 . A.Y. 2011-12 accountancy under which the depreciation has to be allowed while computing such income under section 11(1)(a).
13.3 Relying on the same in this regard, we do not find any reason to interfere in the finding of the learned CIT (A). Accordingly we uphold the same. Hence the ground of appeal of the Revenue is dismissed.
14. The issue raised by the Revenue in ground No. 3 and 4 are general and therefore no separate adjudication is required for the same. Hence, we dismiss the same.
In the result the appeal filed by the Revenue is dismissed.
Since appeal of the Revenue has been dismissed by the ITAT and penalty appeal is consequential to the quantum appeal now nothing remains in support of the Revenue. Therefore, we dismiss the appeal of the Revenue.
In the result, appeal filed by the Revenue is dismissed.
Order pronounced in Open Court on 19 - 02- 2020 Sd/- Sd/- (PRADIP KUMAR KEDIA) (MAHAVIR PRASAD) ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad: Dated 19/02/2020 Rajesh Copy of the Order forwarded to:-