ACIT(E), JAIPUR vs. COMPUCOM FOUNDATION, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR Jh HkkxpUn] ys[kk lnL; ds le{k BEFORE: SHRI BHAGCHAND, ACCOUNTANT MEMBER vk;dj vihy la-@ITA No. 900/JP/2016 fu/kZkj.k o"kZ@Assessment Year : 2012-13 cuke The ACIT (Exemption) M/s. Compucom Foundation Vs. Circle 5-A, Tilak Bhawan, Tilak Marg Jaipur C-Scheme, Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAATC 2922 M vihykFkhZ@Appellant izR;FkhZ@Respondent jktLo dh vksj ls@ Revenue by: Shri R.A. Verma, Addl. CIT- DR fu/kZkfjrh dh vksj ls@Assessee by: Shri Rajeev Sogani, CA lquokbZ dh rkjh[k@ Date of Hearing : 19/01/2017 ?kks"k.kk dh rkjh[k@ Date of Pronouncement : 31 /01/2017 vkns'k@ ORDER PER BHAGCHAND, AM The Revenue has filed an appeal against the order of the ld. CIT(A)-III, Jaipur dated 21-07-2016 for the assessment year 2012-13 raising following grounds of appeal. ‘’On the facts and circumstances of the case and in law the ld. CIT(A) has erred in:- (1) On the facts and in the circumstances of the case and in law the ld. CIT(A) has erred in allowing claim of depreciation on fixed assets in spite of the fact that the same

2 ITA No.900/JP/2016 The ACIT (Exemption), Circle- Jaipur vs. M/s. Compucom Foundation, Jaipur was allowed as application of income u/s 11 at the time of purchase.

(2) On the facts and in the circumstances of the case and in law the ld. CIT(A) has erred in allowing depreciation without appreciating the fact that application of 100% expenditure of the capital asset is already allowed as capital expenditure hence further allowance of the depreciation on the same capital asset would amount to double allowance.

(3) On the facts and in the circumstances of the case and in law the ld. CIT(A) has erred in allowing depreciation without appreciating the fact that the assessee has not carried out the business activities but the receipts utilized for charity. As there was no business activity the claim of depreciation was not allowable, the depreciation is allowable only in the case of business or profession or in the case of ‘income from other sources.’’

2.1 Apropos Revenue’s grounds of appeal (supra), the facts as emerges

from the order of the ld. CIT(A) is as under:-

‘’Ground No. 1 is regarding disallowance of depreciation on fixed assets by AO as the assessee has already claimed deduction for entire cost as application of income u/s 10(23C)(iiiad). Therefore, the same tantamounts to double deduction according to AO. According to the AR, the Hon'ble ITAT Jaipur gave the following gave the following finding in assessee’s own case for A.Y. 2005-06 as under:- ‘’Contention of Revenue that income u/s 11(1) must represent actual receipts minus actual expenses and since depreciation is a notional expenses, no deduction in respect thereof ought to be allowed is not sustainable. Expenditure therefore includes claim of depreciation. The Hon'ble Gujarat High Court in the case of CIT v/s Seth Manilal Ranchod Das Vishram Bhawan Trust (supra) has been pleased to hold that income for the purposes of S. 11(1)(a) has to be computed not in accordance with the provisions of

3 ITA No.900/JP/2016 The ACIT (Exemption), Circle- Jaipur vs. M/s. Compucom Foundation, Jaipur the Act bit in accordance with normal rules of accountancy under which depreciation on house property has to be allowed. The Hon'ble Bombay High Court again in the case of Director of Income Tax (Exm.) V/s Framjee Cawajee Institute (supra) has held that depreciation could not be denied simply because expenditure on acquisition of assets had already been treated as application of income in the year of acquisition of assets. We are thus of the view that decision of ld CIT(A) on the issue is fully covered by these decision, hence, we are not inclinea to interfere therewith. The decision of Hon'ble Supreme Court in the case of Escorts Ltd. Vs. Union of India (supra) relied upon by the AO is in the context of the provisions laid down u/s 32 and S.35(1) (iv) of the I.T. Act against double deduction in respect of the same expenditure under those section hence the same is not helpful in deciding the issue raised in the present case of charitable institution relating to the allowability of depreciation on the assets acquired out of the capital expenditure, which was treated as application of income. We thus upheld the first appellate order in this regard. Consequently ground is rejected. In the result the appeal is dismissed.” I have carefully considered the facts of the case, findings of the AO and submission of the appellant. It is seen that the Rajasthan High Court in case of CIT Vs. Krishi Upaj Mandi Samiti and other High Courts also held that depreciation on fixed assets is separately allowable even though entire fixed assets were allowed as application of income. Respectfully following the same, and the decision in assessee’s own can by Hon'ble ITAT, Jaipur, the disallowance made by AO is deleted. ‘’

2.2 During the course of hearing, the ld. DR relied on the order of the

AO.

2.3 During the course of hearing, the ld. AR of the assessee supported

the order of the ld. CIT(A) and also filed the written submission to this

4 ITA No.900/JP/2016 The ACIT (Exemption), Circle- Jaipur vs. M/s. Compucom Foundation, Jaipur effect with following case laws that the issue in question is covered by

these case laws.

(i) CIT vsd Karnataka Reddy Janasangha (2016) 72 Taxmann.com 48 (Kar.)

(ii) PCIT vs. Sri Sri Adichunchunagiri Shikshana Trust (2016) 72 Taxmann.com 133 (Kar.)

2.4 I have heard the rival contentions and perused the materials

available on record. Brief facts of the case are that the assessee samiti is

registered u/s 12AA of the I.T. Act, 1961 and is also registered u/s 80G of

the Act. The trust is running an educational and charitable institution

5 ITA No.900/JP/2016 The ACIT (Exemption), Circle- Jaipur vs. M/s. Compucom Foundation, Jaipur offering Engineering, Information Technology College & MBA Courses.

It is also noted that return of income for the assessment year 2012-13

declaring total income of Rs. Nil was filed by the assessee on

29-09-2012. It is noted that the assessee had claimed depreciation of

Rs. 1,25,68,398/- on various fixed assets which has been disallowed by

the AO from the Revenue expenditure while calculating the taxable

income that the assessee had already taken purchase of assets as

application of income in earlier years while enjoying the status of

charitable trust society. Therefore, the claim of depreciation on such

assets will amount to double benefit and thus the AO disallowed the

claim of depreciation on fixed assets amounting to Rs. 1,25,68,398/-

which in first appeal has been deleted by the ld. CIT(A) by observing as

under:-

‘’I have carefully considered the facts of the case, findings of the AO and submission of the appellant. It is seen that the Rajasthan High Court in case of CIT Vs. Krishi Upaj Mandi Samiti and other High Courts also held that depreciation on fixed assets is separately allowable even though entire fixed assets were allowed as application of income. Respectfully following the same, and the decision in assessee’s own can by Hon'ble ITAT, Jaipur, the disallowance made by AO is deleted. ‘’

6 ITA No.900/JP/2016 The ACIT (Exemption), Circle- Jaipur vs. M/s. Compucom Foundation, Jaipur It is further noted that such an issue has been decided in favour of the

assessee by the Hon'ble Karnataka High Court in the case CIT

(Exemptions) vs. Bangalore Baptist Hospital Society (2016) 71 taxman

192 (Kar.) in which it is held that amendment made in Section 11(6) is

prospective in nature and it would operate w.e.f. 1-04-2015. The

conclusive para of the Hon'ble Court order is reproduced as under:-

’25. The Apex Court in the said judgement, while interpreting the proviso, whether to be applied retrospectively or prospectively, has considered the Notes on Clauses appended, the Finance Bill and the understanding of the Central Board of Direct Taxes in this regard. The Apex Court has also taken congnizance of the fact that the legislature is fully aware of 3 concepts insofar as amendment made to a statute:-

(i) Prospective amendment with effect from a fixed date;

(ii) retrospective amendments with effect from a fixed anterior date; and

(iii) clarificatory amendments which are prospective in nature.

Keeping in view, the aforesaid principles enunciated by the Apex Court, in Vatika Townshiip (P) Ltd.’s case (supra), it would be safely held that Section 11(6) of the Act is prospective in nature and operates with effect from 01-04- 2015. This is further clarified when compared with certain other provisions which have been made retrospectively in the same Finance Act.’’

7 ITA No.900/JP/2016 The ACIT (Exemption), Circle- Jaipur vs. M/s. Compucom Foundation, Jaipur In view of the above deliberations and the decision of Hon'ble Karnataka High Court in the case of CIT (Exemptions) vs. Bangalore Baptist Hospital Society (supra), the appeal of the Revenue is dismissed with the observation that there is no infirmity in the order of the ld. CIT(A) which is sustained on this issue. Thus the appeal of Revenue is dismissed. 3.0 In the result, the appeal of the Revenue is dismissed. Order pronounced in the open court on 31 /01/2017.

Sd/- ¼HkkxpUn½ (Bhagchand) ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 31 /01/ 2017 *Mishra आदेश की प्रतिलिपि अग्रेषित@ब्वचल वf जीम वतकमत वितूंतकमक जवरू vihykFkhZ@The Appellant- The ACIT (Exemption), Circle- Jaipur 1. 2. izR;FkhZ@ The Respondent- M/s. Compucom Foundation, Jaipur vk;dj vk;qDr¼vihy½@ CIT(A). 3. 4. vk;dj vk;qDr@ CIT, विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. 6. xkMZ QkbZy@ Guard File (ITA No. 900/JP/2016) vkns'kkuqlkj@ By order,

सहायक पंजीकार@ Aेेपेजंदज. त्महपेजतंत

8 ITA No.900/JP/2016 The ACIT (Exemption), Circle- Jaipur vs. M/s. Compucom Foundation, Jaipur