COMMISSIONER OF INCOME TAX PANCHKULA vs. MARKET COMMITTE YAMUNA NAGAR

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ITA/753/2010HC Punjab & HaryanaPHHC01093721201007 January 2011Author: MR. JUSTICE ADARSH KUMAR GOEL,MR. JUSTICE AJAY KUMAR MITTAL3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court, in its decision dated January 7, 2011, disposed of both ITA Nos. 753 and 760 of 2010. For questions (a) and (b) concerning depreciation and double deduction, the Court noted that these were covered by its prior judgment dated July 5, 2010, in ITA No. 535 of 2009 (The Commissioner of Income Tax, Karnal v. Market Committee, Pipli). For question (c) regarding interest income, the Court stated it was covered by its judgment dated July 7, 2010, in ITA No. 138 of 2010 (The Commissioner of Income Tax, Karnal v. Market Committee, Ladwa). Similarly, for question (d) concerning the set off of brought forward losses, the Court decided it in the same terms against the revenue, referencing the order in ITA No. 535 of 2009. Consequently, the appeals filed by the revenue were dismissed. The specific reasoning from the cited judgments was not elaborated in this order, but the outcome was a dismissal of the revenue's appeals based on precedent.

What were the facts?

The Revenue, Commissioner of Income Tax, Panchkula, filed appeals under Section 260A of the Income Tax Act, 1961, against an order of the Income Tax Appellate Tribunal (ITAT), Chandigarh Bench. The appeals, ITA Nos. 753 and 760 of 2010, pertain to the assessment year 2006-07 and involve the respondent, Market Committee, Yamuna Nagar. The ITAT's order under challenge was dated December 31, 2009, in ITA No. 1038/Chdl/2009. The appeals raised substantial questions of law concerning depreciation on capital assets already allowed as application of income, double deduction, addition of interest income, and set off of brought forward losses against exempt income.

What were the issues?

The Tribunal had to decide the following substantial questions of law: 1. Whether the ITAT was justified in allowing depreciation on capital assets when the capital expenditure for their acquisition was already allowed as an application of income under Section 11 of the Income Tax Act, 1961, leading to a double deduction (Section 11, Section 32). 2. Whether the ITAT's decision allowing double deduction on depreciation, when capital expenditure was already allowed, was justified in light of the Apex Court's decision in Escorts Ltd. Vs. UOI, which prohibits double deduction without clear statutory indication (Section 11, Section 32). 3. Whether the ITAT's order deleting the addition of Rs. 31,50,000/- on account of interest income accrued on advances was perverse, given that the assessee was not following a purely cash system of accounting and interest income should be accounted for and taxed on an accrual basis as per the mercantile system (Section 5, Section 11). 4. Whether the ITAT was justified in restoring the issue regarding the set off of brought forward losses for verification and consequential allowance, despite the assessee's income being computed under Sections 11 to 13, where there is no provision to set off brought forward losses against exempt income, as exemption is based on the application of prescribed percentages of receipts for charitable purposes (Section 11, Section 70, Section 71). Assessee's arguments were not recorded. The Revenue argued that allowing depreciation on assets for which capital expenditure was already allowed as application of income amounts to double deduction. They also contended that interest income should be taxed on accrual basis and that brought forward losses cannot be set off against exempt income.

Which sections of the Income-tax Act were involved?

Section 11,Section 32,Section 260A,Section 5,Section 70,Section 71

AI-generated summary — verify with the full judgment below

-1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of Decision: 7.1.2011 Commissioner of Income Tax, Panchkula ....Appellant. Versus Market Committee, Yamuna Nagar ...Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Yogesh Putney, Advocate for the appellant. ADARSH KUMAR GOEL, J.

1.

This order will dispose of ITA Nos. 753 and 760 of 2010 as common questions are involved in both the appeals.

2.

ITA No. 753 of 2010 has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 against order dated 31.12.2009 passed by the Income Tax Appellate Tribunal, Chandigarh Bench “B”, in ITA No. 1038/Chdl/2009 for the assessment year 2006- 07, claiming following substantial questions of law:- “(a) Whether on the facts and in the circumstances of the case, the Hon'ble ITAT is justified in allowing depreciation on the capital assets, when capital expenditure relating to acquisition of such assets had already been allowed as “application of income” for the purpose of allowing exemption under section 11 of the Income Tax Act, 1961 and as such further -2- allowing of depreciation on these capital assets will amount to double deduction for the same expenditure? (b) Whether the Ld. ITAT's decision to allow double deduction on depreciation when capital expenditure on the assets has already been allowed, is justified in the light of the Hon'ble Apex Court's decision in expenditure? (c) Whether on the facts and in the circumstances of the case and in law the order of the Ld. ITAT is perverse in deleting the addition of Rs.31,50,000/- in the case of Market Committee, Yamuna Nagar for A.Y. 2006- 07 on account of interest income accrued on advance ignoring the findings of the CIT(A) on page 6 of his order dated 01.09.2009, that as the assessee is not following purely a cash system of accounting, the interest income of the assessee from such advances accrues regularly as per mercantile system of accounting which has to be accounted for and taxed on accrual basis? (d) Whether on the facts and in the circumstances of the case and in law, the Ld. Income Tax Appellate -3- Tribunal was justified in restoring the issue regarding set off of brought forward losses for verification and consequential allowance despite the fact that the income of the assessee to be computed u/s 11 to 13 of the Income Tax Act, 1961; whereas, there is no provision to set off the brought forward losses against exempt income and exemption in each year is based upon the application of prescribed percentage of receipts for charitable purposes?”

3.

Learned counsel for the revenue very fairly states that questions (a) and (b) are covered by the judgment of this Court dated 5.7.2010 in ITA No. 535 of 2009 (The Commissioner of Income Tax, Karnal v. Market Committee, Pipli) whereas question (c) is covered by the judgment of this Court dated 7.7.2010 in ITA No. 138 of 2010 (The Commissioner of Income Tax, Karnal v. Market Committee, Ladwa). In view of order passed by this Court in ITA No. 535 of 2009, question (d) is decided in the same terms against the revenue.

4.

Accordingly, the appeals are dismissed.

5.

A photo copy of this order be placed on the file of the connected case. (ADARSH KUMAR GOEL) JUDGE January 7, 2011 (AJAY KUMAR MITTAL) gbs JUDGE

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