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Income Tax Appellate Tribunal, DELHI BENCH ‘D’ : NEW DELHI
Before: SHRI N.K. BILLAIYA & SHRI KULDIP SINGH
PER KULDIP SINGH, JUDICIAL MEMBER :
Appellant, DCIT (Exemption), Circle, Ghaziabad (hereinafter referred to as the ‘Revenue’) by filing the present appeal sought to set aside the impugned order dated 17.06.2016 passed by the Commissioner of Income - tax (Appeals), Ghaziabad qua the assessment year 2013-14 on the grounds inter alia that :- “1. The Ld. Commissioner of Income Tax (Appeal) has erred in law and on facts in allowing the appeal of the assessee on the disallowance of depreciation of Rs.2,43,51,815/- ignoring the facts.
2. The order of Ld. CIT (A) be cancelled and the order of the AO be restored.”
Briefly stated the facts necessary for adjudication of the issue at hand are : Assessee Trust is engaged in running educational institution and has been granted registration under section 12A of the Income-tax Act, 1961 (for short ‘the Act’) with approval u/s 80G. Assessing Officer (AO) noticed from the income and expenditure account that the total receipt during the years was at Rs.13,03,03,110/- against which application of income has been shown at Rs.11,64,15,880/- with capital expenditure at Rs.17,69,765/- during the year under assessment. AO disallowed the claimed depreciation by the assessee to the tune of Rs.2,43,51,815/- on account of application of income for charitable purpose and thereby assessed the total income at Rs.1,46,78,000/- against the declared returned income at nil.
Assessee carried the matter by way of appeal before the ld. CIT (A) who has deleted the addition by allowing the appeal. Feeling aggrieved, the assessee has come up before the Tribunal by way of filing the present appeal. 4. Assessee has not preferred to put in appearance despite issuance of the notice and consequently, we proceeded to decide the present appeal with the assistance of the ld. DR as well as on the basis of documents available on the file.
We have heard the ld. Departmental Representative for the revenue to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.
Bare perusal of the impugned order passed by the ld. CIT (A) apparently shows that the addition made by the AO on account of disallowance of depreciation claimed by the assessee has been rightly deleted by thrashing the facts in the light of the law of the land. For ready perusal, operative part of the impugned order is extracted as under :-
“ Having considered facts and circumstance of the case, I find that Hon'ble Delhi High Court in the case of Chiranjiv Charitable Trust (ITA No.322-323/2013 Dated 18.03.2014) after discussing its judgment in the case of DIT vs. Vishwa Jagriti Mission, 262 CTR 558 (Del) had held that claim of depreciation amounts to double deduction. However, in the case of M/s. Indraprastha Cancer Society (Income Tax Appeal No.240/2014 dated 18.11.2014), the Hon’ble Delhi High Court having discussed the decision of Karnataka High Court in Lissie Medical Institute (supra) and Supreme Court decision in case of Escorts Limited (supra) as well as its own decisions in Vishwa Jagriti Mission (supra) overruled its own decision in Chiranji Charitable Mission (supra). Referring to para 30 of Chiranjiv Charitable Mission, it held in case of Indraprastha Cancer Society that:- "10. The aforesaid paragraph refers to the decision in the case of Vishwa Jagriti Mission (supra) but ratio was distinguished on the ground that in the said case the Court was concerned with computation of income of a charitable trust/institution on commercial principles and if so whether depreciation on fixed assets used for charitable purposes should be allowed as a deduction. The consensus of judicial opinion on the said aspect was referred to. It is noticeable that in Charanjiv Charitable Trust (supra) it stands observed that the Tribunal overlooked the fact that the cost of asset had been allowed as a "deduction" and thereafter depreciation was being claimed. The said case, therefore, appears to be a peculiar one wherein deduction as expenditure and depreciation was being claimed simultaneously, while computing the taxable income under the head "profits and gains from business". The said decision dated 18th March, 2014 does not refer to the decision in Indian Trade Promotion Organization (supra) which was decided on 27th November, 2013. The judgment in the case of Indian Trade Promotion Organization (supra) was not cited and referred to. The judgment in the case of Charanjiv Charitable Trust (supra) is authored by the same Judge, who has also authored the decision in the case of Vishwa Jagriti Mission (supra). It is obvious that in Charanjiv Charitable Trust (supra), the Division Bench could not have taken a different view on the legal ratio as interpreted in Vishwa Jagriti Mission (supra). Further, the decisions in the case of Vishwa Jagriti Mission and Indian Trade Promotion Organisation (supra) being prior in point of time would act as binding precedents and could not have been overruled or dissented from by a coordinate Division Bench.
By Finance (No.2) Act of 2014, sub-section (6) to Section II stands inserted with effect from 1st April, 2015 to the effect that where any income is required to be applied, accumulated or set apart for application, then for such purposes the income shall be determined without any deduction or allowance by way of depreciation or otherwise in respect of an asset, the acquisition of which has been claimed as application of income under this Section in the same or any other previous year. The legal position, therefore, would undergo a change in terms of Section 11 (6), which has been inserted and applicable with effect from 1st April, 2015 and not to the assessment years in question. The newly enacted- sub- section relates to application of income.
In these circumstances, we do not find any merit in the appeals in the case of Indraprastha Cancer Society, Abul Kalam Azad Islamic Awakening and in the case of M/s Sanskriti Educational Society (ITA No.348/2014). Similarly, we do not think it is necessary and required that we should issue notice in the application for condonation of delay filed in the case of M/s Sanskriti Educational Society (ITA Nos. 463 and 464/2014) as on merits the Revenue is not entitled to succeed. In these appeals, the applications for condonation of delay shall be treated as dismissed and as a sequitur the appeals will be treated as dismissed." Besides, this issue has also been decided by Hon'ble jurisdictional ITAT Delhi in case of The Bhardwaj Welfare Trust in & 25645/De1l2013 dated 13.02.2015 and SD
College Society dated 11.07.2014 in favour of the appellant In view of these judgments of jurisdictional ITAT and Hon'ble Delhi High Court having decided in Indraprastha Cancer Society (supra) that in Chiranjiv Charitable Trust (supra) divisional bench could not have taken a different view on legal ratio as interpreted in Vishwa Jagriti Mission (supra) and that decision of M/s Vishwa Jagriti Mission (supra) and Indian Trade Promotion Organization ITA No. 7/2013 would act as binding precedent and could not have been overruled or dissented from by coordinate bench, respectfully following these judgments, I am of the considered opinion that the assessee is entitled to claim of deprecation. Disallowance of depreciation of Rs.2,43,51,815/- is therefore, deleted.”
AO disallowed the claim of assessee of depreciation of Rs.2,43,51,815/- on account of application of income for charitable purpose on the ground that the same is not allowable as at the time of acquiring fixed assets, capital expenditure has already been allowed in respective years and it would amount to double deduction. However, by now, it is settled principle of law that when income of the assessee is exempt, the assessee’s claim that depreciation should be reduced from the income for determining the percentage of funds to be applied for the purpose of trust cannot be disallowed on the ground that the same amounts to double benefit in allowing the claim of depreciation for computing income for the purpose of section 11 of the Act.
Since the impugned order passed by the ld. CIT (A) is based upon the decisions of Hon’ble jurisdictional High Court cited as Director of Income-tax vs. Vishwa Jagriti Mission 262 CTR 558 (Del.) wherein decision of Hon’ble Supreme Court in case of Escorts Ltd. vs. UOI 199 ITR 43 (SC) has been distinguished. The assessee’s claim of depreciation in the income and expenditure account is allowable and it cannot be held that the double benefit was given in allowing the claim for depreciation for computing income for the purposes of section 11 of the Act.
Coordinate Bench of the Tribunal in case of ITO (E) vs. S.D.
College Society (Lahore) in vide order dated 11.07.2014 decided the identical issue in favour of the assessee by returning following findings :-
“3. We have considered the submissions of both the parties and have perused the record of the case. We find that this issue is squarely covered in favour of the assessee by various decisions relied upon by the assessee. We find that on this issue, in the case of J.D. Tytler School Society (supra), the ITAT has held as under: “Held, dismissing the appeal, that in accordance with the directions issued by the Directorate of Education, the school was entitled to collect the development fund for the purpose of supplanting the resources for purchase, upgradation and replacement of furniture, fixtures and equipment. The fund collected from the students was utilized for development of amenities for the benefit and welfare of the children. The school had during the previous year provided a swimming pool and other games facilities and computers and testing equipment in the science laboratories. For all those activities the school collected the development fund which was treated as capital fund being earmarked for development of the activities. This system of accounting had been followed by the assessee in earlier assessment years also and it was not disturbed by the Department, Hence when the collection was meant for being spent on activities in the capital field, it could not be treated as revenue receipt. The decision of the Commissioner (Appeals) was justified. The assessee claimed depreciation in the income and expenditure account. The Assessing officer held that since the benefit of application of fund had already been taken when the assets were purchased, the claim of the assessee was not allowable and disallowed the claim of the depreciation. The Commissioner (Appeals) decided in favour of the assessee. On appeal by the Department: Held, dismissing the appeal, that it was not a case of double deduction and depreciation had to be allowed.” 3.1. The order of the CIT(A) being in conformity with the aforementioned decisions, we see no reason to interfere with the same. Accordingly, order of CIT(A) is confirmed.”
In view of what has been discussed above, finding no illegality or perversity in the impugned order passed by the ld. CTI (A), present appeal filed by the Revenue is hereby dismissed. Order pronounced in open court on this 1st day of October, 2019.