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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
अपीलाथी की ओर े / Appellant by : Shri Chaitanya S. Anjaria, DR प्रत्यथी की ओर े / Respondent by : Shri Firoz B. Andhyarujina Shri T.K. Doctor, ARs’ ुनवाई की तारीख / Date of hearing: 17.10.2018 घोषणा की तारीख / Date of pronouncement : 29.10.2018 AadoSa / O R D E R महावीर स िंह, न्याययक दस्य/ PER MAHAVIR SINGH, JM:
This appeal by the Revenue is arising out of the order of Commissioner of Income Tax (Appeals)-1, Mumbai [in short CIT(A)], in appeal No. CIT(A)-I/IT/E2(34)/2015-16 vide order dated 07.02.2017. The Assessment was framed by the Asst. Commissioner of Income Tax (Exemption)-2(1), Mumbai (in short ‘ACIT’/ AO’) for the A.Y. 2012-13 vide order dated 17.03.2015 under section 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).
The first issue in this appeal of Revenue is against the order of CIT(A) deleting the disallowance made by AO in respect of depreciation on fixed assets. For this Revenue has raised the following ground No. 1 to 3: - “GROUNDS OF APPEAL
1. Whether on the facts of the case and in law the ld. CIT(A) erred in allowing the appeal of the assessee on account of disallowing depreciation oil assets of Rs.4,28,36,473/- in contravention of the decision of Escorts Ltd. vs. UOI 199 ITR 43 wherein it was held that since section 11 of the Income Tax Act provides for deduction capital expenditure incurred on assets acquired for the objects of the trust as application and does not specifically & expressly provide for double deduction on account of depreciation on the same very assets acquired from such capital expenditure, no deduction shall be allowed u/s32 for the same or any other previous year in respect of that asset as it amounts to claiming a double deduction.
2. Whether, on the facts and lit circumstances of the case and in law the ld. CITA) erred in allowing the appeal, when the Delhi High Court in the case of Charanjiv Chartiable Trust and Kerala High Court in the case of Lissie Medical Institutions vs. CIT 76 DTR (ker) 372 has decided the issue in the favour of the department after considering the decision of Hon’ble Supreme Court in the case of Escorts Ltd (199 ITR 43).
3. Whether, on the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in allowing the depreciation claim of the assessee by relying upon the judgement of Hon’ble Bombay High Court in the case of Institute of Banking Personnel Selection, ignoring the fact that the Department has not accepted the said decision of the jurisdictional High Court on merit of the case, but due to smallness of tax effect appeal was not filed before Hon’ble Supreme Court. Also, the ld. CIT(A) erred in relying upon the judgement of Hon’ble High Court in the case of CIT vs. Shri Vile Parle Kelvani Mandal, without appreciating the fact that Department has not accepted the decision on merit and filed SLP, but subsequently withdrawn the same as there was no claim of depreciation on exempted assets. Moreover, the Revenue has filed SLPs on this issue in other cases inclusive the case of GD. Birla Medical Research & Educational Foundation (S.L.P (C) No. 24904 of 2016 (C.A. No. 8294 of 2016) and in this case leave has been granted by the Hon’ble Apex Court and in all cases issue is pending for adjudication before the Hon’ble Apex Court.”
Brief facts relating to the above issue are that the assessee trust claim depreciation and capital expenditure i.e. addition to fixes assets in its computation. According to AO, this claim of depreciation and capital expenditure tantamount to double deduction as the assessee has already claimed deduction under section 11 of the Act and again deprecation claimed amounting to double claim in the form of application of income. Accordingly, he disallowed the depreciation. Aggrieved, assessee preferred the appeal before CIT(A). The CIT(A) relying on the decision of Hon’ble Bombay High Court in the case of CIT vs. Institute of Banking Personnel Services (2003) 264 ITR 110 (Bom.) and relying on assessee’s own case for AY 2008-09 allowed the claim by observing as under: - “5.2 I have considered the facts and circumstances of the case, the assessment order of the A.O, the submissions of the assessee and discussed the case with the AR of the appellant. The contentions and submissions of the appellant are being discussed and decided here in under:
i. An identical issue had arisen in the appellant's own case for A.Y. 2008-09 wherein on identical facts my Id. Predecessor vide order dated 15.04.2014 has decided these grounds observing as under:
5.2 I have considered the facts and circumstances of the case, submissions of the appellant and findings given in the assessment order. The appellant has relied and furnished a copy of the appellate order in its own case for A.Y.2007-08 where my learned predecessor has considered this issue and decided in the following manner:
54 I have considered the AO's order as well as the appellant submission as depicted above. Having taken note of the AO's order as well as the submission of the appellant, I am of the considered view that the A.O. has misplaced the findings of the Supreme Court reported in 199 ITR 43. The said decision was on account of different context for making allowance u/s 32 and capital expenditure on scientific research under section 35W(iv) of the IT Act. Having perused the appellant submission, I find that even jurisdictional. High Court in the case of CIT vs Institute of Banking Personnel Selection 264 JTR 110 (Born.) has held that the depreciation should be allowed even on assets, the cost of which had been allowed as exempt u/s 11 in the preceding years. The Hon’ble High Court has also held that depreciation should be al/owed even on assets received on transfer from another charitable trust on which no cost was borne by the assessee trust. In addition to this, the other decisions of the ITAT and Gujarat High Court took the similar view as depicted in the appellant's submission above in para-5.2 of the order. Thus, taking note of the jurisdiction High Court in the case of CIT vs Institute of Banking Personnel Selection 264 ITR 110 (Bom.), I hold that the A.Q. was justified in disallowing the claim of depreciation of P5.16,27,333/- in respect of the assets, the cost of which has been allowed as application of income in the current year and earlier years."
After considering the submissions of the appellant, the decision of my learned predecessor as reproduced for the sake of convenience on this issue and in view of the decision of Hon'ble Jurisdictional High Court in the case of CIT vs. Institute of Banking Personnel 264 ITR, following the said decision, Ground No.1 & 2 of appeal is allowed." ii. From above, it may be noted that my Ld. predecessor has followed the order of CIT(A) in A.Y. 2007-08. This order has been upheld by Hon'ble ITAT and also by Hon'ble High Court. As there is no change in the facts, observations of the A.O in his order and submissions of the appellant, following the above observations of my Id. Predecessor, Ground of appeal No 1 is allowed.”
Aggrieved, now Revenue is in appeal before us.
The learned Counsel for the assessee before us, filed copy of Tribunals order in assessee’s own case for AY 2011-12 in vide order dated 02.05.2018, wherein the issue was decided against Revenue by observing as under: - “2.3 We have heard rival submissions and perused the material before us. We find that in the case of Institute of Banking and Persona Selection (supra) has held as under:
Normal depreciation can be considered as a legitimate deduction in computing the real income of the assessee on general priciples or under section 11(1) (a) of the Income-tax Act, 1961. Income of a charitable trust derived from building, plant and machinery and furniture is liable to be computed in a normal commercial manner although the trust may not be carrying on any business and the assets in respect where of depreciation is claimed may not be business assets. In all such cases, section 32 of the Act providing for depreciation, for computation of income derived from business or profession is not applicable. However, the income of the trust is required to be computed under section 11 on commercial principles after providing for allowance for normal depreciation and deduction thereof from the gross income of the trust.
Income derived from the trust property has also got to be computed on commercial principles and if commercial principles are applied then adjustment of expenses incurred by the trust for charitable and religious purposes in the earlier years against the income earned by the trust in the subsequent year will have to be regarded as application of income of the trust for charitable and religious purposes in the subsequent year in which adjustment had been made having regard to the benevolent provisions contained in section 11 of the Act and such adjustment will have to be excluded from the income of the trust under section 11(1)(a).
The Hon’ble Supreme Court, as argued by the assessee, has upheld the judgement of the Hon’ble Bombay High Court. The Hon’ble Apex Court has further held as under:
It may also be mentioned at this stays that the legislature, realizing that there was no specify provision in this behalf of the Income Tax Act, has made amendment in section 11(6) of the Act vide Finance Act No. 2/2014 which became effective from the Assessment year 2015-16. The Delhi High court has taken the view and rightly so, that the said amendment is prospective in nature.
Considering the above, we decide the first effective ground of appeal against the Assessing Officer.”
5. As the issue is squarely covered by the decision of Hon’ble Bombay High Court in the case of Institute of Banking Personnel Services (supra) and in assessee’s own case by Tribunal’s decision in earlier year, respectfully following the same we confirm the order of CIT(A) deleting the addition. This issue of Revenue’s appeal is dismissed.
The next issue in this appeal of Revenue is against the order of CIT(A) allowing carryforward of deficit and allowing set off against the income of subsequent years. For this Revenue has raised the following grounds: - “4. Whether on the facts of the case and in law the ld. CIT(A) erred in allowing the carry forward of deficit of Rs. 66,33,560/- and allowing set off against the income of the subsequent years.
5. Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing the claim of the assessee for carry forward for the said deficit, ignoring the fact that there was no express provision in the IT Act, 1961 permitting allowance of such claim.
6. Whether, on the facts and in the circumstances of the case and in law, the Ld. CITA) erred in allowing the claim of the assessee for carry forward of the said deficit by relying upon the judgment of Hon'ble Bombay High Court in the case of Institute of Banking Personnel Selection, ignoring the fact that the Department has not accepted the said decision of the jurisdictional High Court on merit of the case, but due to smallness of tax effect appeal was not filed before Hon'ble Supreme Court. however, on this issue the department has filed SLP before the Hon'ble Apex Court inclusive the case of MIDC (SPL (Civil) 9891 of 2014), in which leave has been granted and the issue is pending for adjudication before the Hon'ble Supreme Court.”
Brief facts are that the AO disallowed the claim of carry forward of deficit and allowance of setting off against the income of subsequent years. The CIT(A) relying on the assessee’s own case for AY 2008-09 and allowed the claim of brought forward of loss by observing in Para 6.2 as under: - “'6.2 I have considered the facts and circumstances of the case, the assessment order of the AM, the submissions of the assessee and discussed the case with the AR of the appellant. The contentions and submissions of the appellant are being discussed and decided here in under:
i. An identical issue had arisen in the appellant's own case for A.Y. 2008-09 wherein on identical facts my Id. Predecessor vide order dated 15.04.2014 has decided these grounds observing as under:
7.2 I have carefully considered the submissions of the appellant, assessment order and facts of the case. My ld. Predecessor has adjudicated the issue of excess application of income in Ground No. 1 of that appeal. He has decided the issue in following manner:
4.4 I have considered the A.O's order as well as the appellant submission as depicted above. Having taken note of the A.O's order as well as the submission of the appellant, I am of the considered view that the AO has misplaced the findings of the Supreme Court reported in 199 ITR 43. The said decision was on account of different context for making allowance u/s 32 of the IT Act and capital expenditure on scientific research u/s 35(1)(iv) of the IT Act. Having perused the appellant submission, I find that even jurisdictional High Court in the case of CIT vs Institute of Banking Personnel Selection 264 ITR 110 (Born.) has held that the carry forward of deficit of earlier years by the trust for charitable purposes in the earlier years will be considered as application against the income earned by the trust in subsequent years. In addition to this, the other decisions of the ITAT and Gujarat High Court took the similar view as depicted in the appellant's submission above in para- 4.3 of the order. Thus, taking note of the jurisdiction High Court in the case of CIT vs Institute of Banking Personnel Selection 264 ITR 110 (Bom), I hold that deficit of Rs.2,76,40,494/- will be considered as application against income of the current assessment year of the appellant trust.
4.5 I also find that that the AM. has made addition of Rs. 63,87,142/-, which was already accepted by his predecessor as deemed application as per proviso to section 11 (1)(a) of the IT Act in the preceding assessment year. Thus making subsequent addition is not justified without any reason on the part of the A.O. Accordingly after discussion made above and following the decision of Hon’bIe High Court in the case of CIT vs Institute of Banking Personnel Selection 264 ITR 110 (Bom), the AOs action was not justified and accordingly the addition made by the AO is deleted.
In view of the above facts and circumstances of the case and that the issue is adjudicated in favour of the appellant on this Ground, I find no such evidence and material on this issue requiring any deviance from the appellate order. Accordingly, the Ground of appeal is allowed. ii. As there is no change in the facts, observations of the A.O in his order and submissions of the appellant in the year under consideration as compared to the preceding year, following the above observations of my Id. predecessor, Ground of Appeal No. 2 is allowed.”
Aggrieved Revenue is in appeal before us.
The learned Counsel for the assessee before us, filed copy of Tribunals order in assessee’s own case for AY 2011-12 in vide order dated 02.05.2018, wherein the issue was decided against Revenue by observing as under: - “3.1 During the course of hearing before us, the Departmental Representative again stated that matter was spending before the honourable Apex Court. The AR reiterated the submissions that were advanced for the ground number one. We find that the issue stands decided against the AO and in favour of the assessee by the order of the Hon’ble Bombay High Court for the earlier years. So, following the same, we decide second ground of appeal against the AO.”
9. As the issue is squarely covered by the decision of Hon’ble Bombay High Court in the case of Institute of Banking Personnel Services (supra) and in assessee’s own case by Tribunal’s decision in earlier year, respectfully following the same we confirm the order of CIT(A) disallowing the claim. The issue of Revenue’s appeal is dismissed.
In the result, the appeal of Revenue is dismissed.