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Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI
Before: SHRI G.S. PANNU & SHRI RAM LAL NEGI
The captioned appeal by the Revenue and Cross-objection by the assessee are directed against the order of CIT(A), Mumbai-1 dated 27.06.2016, pertaining to Assessment Year 2010-11, which in turn has arisen from the order dated 15.03.2013 passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 (in short ‘the Act’).
In its appeal, Revenue has raised the following 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 on fixed assets of Rs. 1,12,03,745/- 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/s.32 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 in the circumstances of the case and in law the ld CIT(A) erred in allowing the depreciation, when the Delhi High Court in the case of Charanjiv Charitable 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).
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3. Whether, on the facts and in the circumstances of the case and in law the Ld CIT(A) erred relying upon the judgement of the Hon'ble Bombay High Court in the case of CIT Vs Institute of Banking Personnel Services without appreciating the fact that Department has not accepted the decision on merit and also without appreciating the fact that the Hon'ble Supreme Court while deciding the above said case has not taken into account the Judgment of Hon'ble Supreme Court in the case of Escort Ltd. which is in the favour of department.
Whether on the facts of the case and in law the ld.CIT(A) erred in allowing the carry forward of deficit of Rs. 1,73,92,905/- 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 of the said deficit, ignoring the fact that there was no express provision in the I T Act, 1961 permitting allowance of such claim.
6. 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 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.
7. The appellant prays that the order of the Commissioner of Income Tax (Appeals)-I, Mumbai be set aside and that of the Assessing Officer be restored.” whereas the assessee has raised the following Ground of appeal in its Cross-objection :-
“1) Your respondents submit that the learned Commissioner of Income-tax (Appeals) erred in not allowing the respondent’s claim of depreciation amounting to Rs.1,12,03,745/-. Your respondents submit that the same is 4 Karamshi Jethabhai Somaiya Trust allowable and the learned Commissioner of Income-tax (Appeals) erred in giving the directions to the Assessing Officer to dispose of the respondent’s application u/s 154 of The Income Tax, Act 1961 expeditiously. Your respondent submits that claim of depreciation is allowable and ought to be allowed in full as claimed.”
Although the Revenue has raised multiple Grounds of appeal, but the dispute involved in this appeal is on two issues. Firstly, as per the Ground of appeal, Revenue is aggrieved by the decision of the CIT(A) in directing the Assessing Officer to allow the benefit of depreciation whereas, in actuality the CIT(A) has directed the Assessing Officer to dispose of assessee’s petition u/s 154 of the Act on the issue that claim of depreciation has been denied without passing a speaking order. Whereas in its Cross-objection, the plea of the assessee is that the claim of depreciation should have been allowed by the CIT(A) instead of sending back the matter to the Assessing Officer for disposing of the application u/s 154 of the Act. Secondly, the grievance of the Revenue is against the action of the CIT(A) in allowing the assessee the benefit of carry forward of the deficit for future set-off.
4. In brief, the relevant facts are that the respondent-assessee is a charitable organisation registered u/s 12A of the Act and is engaged in activities of charitable nature. The assessee had claimed depreciation allowance of Rs.1,12,03,745/- on the cost of fixed assets, whereas such cost of fixed assets has also been taken as an application of income while computing the total income. The Assessing Officer disallowed the assessee’s claim for depreciation without discussion but allowed the cost of fixed asset as an application of income. Notably, similar issue
5 Karamshi Jethabhai Somaiya Trust had come up before the Tribunal in Assessment Year 2008-09 and vide order in dated 06.01.2016, matter was remanded back to CIT(A) in the absence of any specific ground having been raised by the assessee. In any case, there is no dispute that in this year assessee had raised a specific ground before the CIT(A).
Before us, on merit it is not in dispute that the claim of depreciation is fully supported by the decision of the Hon'ble Bombay High Court in the case of Institute of Banking Personnel Selection (supra) but the only plea of the Department is that the aforesaid decision has not been accepted by the Department on merits and on similar issue, a SLP No. 9891 of 2014 has been filed before the Hon'ble Supreme Court in the case of Maharashtra Industrial Development Corporation (MIDC). Further, it is contested that allowing of depreciation would amount to a double deduction, which was impermissible having regard to the judgment of the Hon'ble Supreme Court in the case of Escorts Ltd., 199 ITR 43 (SC).
We find that the decision in the case of Escorts Ltd. (supra) being relied upon by the Revenue before us has been considered by the Hon'ble Delhi High Court in the case of Indraprastha Cancer Society, (2014) 112 DTR 345 dated 18.11.2014, wherein it has been opined that the allowance of depreciation in similar situation would not amount to a double deduction. Further, it is noted that the Hon'ble Delhi High Court in the case of Vishwa Jagriti Mission, dated 29.3.2012 also allowed a similar claim after analysing the judgment of the Hon'ble Supreme Court in the case of Escorts Ltd. (supra), which is 6 Karamshi Jethabhai Somaiya Trust being relied upon by the Revenue. The Hon'ble Supreme Court has also dismissed the SLP filed by the Department against the said decision of the Hon'ble Delhi High Court vide SLP No. 19321 of 2013. We find that the Hon'ble Bombay High Court subsequent to the decision in the case of Institute of Banking Personnel Selection (supra) considered a similar argument of the Revenue in the case of M/s. Mumbai Education Trust, dated 3.5.2016 and allowed the claim of the assessee. In fact, the Grounds of appeal urged by the Revenue before the Hon'ble High Court, which reads as under :-
“(a) Whether on the facts and in the circumstance of the case and in law, the Tribunal was justified in confirming the order of the CIT(A) to allow the claim of depreciation relying on the decision of this Court in the case of CIT v/s. Institute of Banking Personnel Services reported in 264 ITR 110 (Bom) ignoring the ratio of Hon'ble Supreme Court judgment in the case of Escorts Ltd. V/s. Union of India (199 ITR 43) wherein Hon'ble Supreme Court has held that double deduction cannot be presumed if the same is not specifically provided by law, in addition to normal deduction?
(b) Whether on the facts and in the circumstance of the case and in law, the Tribunal was justified in confirming the order of the CIT(A) to allow to carry forward of deficit of earlier years relying on the decision of this Court in the case of CIT v/s. Institute of Banking Personnel Services reported in 264 ITR 110 (Bom) while the revenue did not file SLP against the case of CIT v/s. Institute of Banking Personnel Services reported in 264 ITR110 (Bom) due to low tax effect?”. stand on same footing as are being canvassed in Grounds of appeal no. 1 to 3 and Cross-objection of assessee as well as Grounds of appeal no.
7 Karamshi Jethabhai Somaiya Trust 4 to 6 on the issue of allowability of carry forward of deficit before us in the instant case. The other argument taken by the Revenue that its SLP filed before the Hon'ble Supreme Court is pending on a similar issue is of no consequence inasmuch as the binding judgments of the Hon'ble Bombay High Court in the case of Institute of Banking Personnel Selection (supra) as well as in the case of M/s. Mumbai Education Trust (supra) continue to subsist. Therefore, in this background, we find no merit in the argument raised by the Revenue on the issue of depreciation and the same is accordingly dismissed. So, however, the claim has not been verified by the Assessing Officer as it has been denied by a non-speaking order; and, for that purpose, we direct the Assessing Officer to verify assessee’s claim for depreciation and allow it as per law. Needless to say, the Assessing Officer shall allow the assessee a reasonable opportunity of being heard and only thereafter shall pass an order as per law.
Insofar as the issue relating to allowing the benefit of carry forward of the deficit for future set-off is concerned, it was pointed out by the learned representative for the assessee that in arriving at the decision to allow the benefit of carry forward of deficit for future set- off, the CIT(A) has followed the decision of his predecessor in the assessee’s own case for Assessment Year 2008-09, which had been approved by the Tribunal vide order dated 06.01.2016, and this is also in consonance with the aforesaid judgments of the Hon'ble High Court, as noted by us earlier.
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Resultantly, whereas the appeal of the Revenue is dismissed, the Cross-objection of the assessee is allowed.
Order pronounced in the open court on 30th November, 2017