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Income Tax Appellate Tribunal, MUMBAI BENCH “G”, MUMBAI
Before: SHRI BR BASKARAN & SHRI RAM LAL NEGI
O R D E R + PER RAM LAL NEGI :
This appeal has been preferred by the Revenue against the order dated 22.01.2016 passed by the Ld. Commissioner of Income Tax (Appeals), Mumbai-1 (for short ‘Ld. CIT(A)’) whereby the Ld. CIT(A) has allowed the appeal filed by the assessee against the assessment order passed by the Additional Director of Income Tax (Exemptions), Range-2, Mumbai passed u/s 143(3) of the Income Tax Act, 1961 (for short ‘the Act’) pertaining to assessment year 2011-12.
2. The brief facts are that the assessee filed its return of income for the relevant assessment year alongwith the Income & Expenditure Account, Balance Sheet and Audit report in Form no. 10B claiming exemption u/s 11, declaring NIL income. Since the case was selected for scrutiny, notice u/s 143(3) of the Act was issued. Subsequently, notice u/s 142(1) of the Act was also issued and served upon the 2M/s. Jaslok Hospital & Research Centre ITA No. 2138/M/2016 assessee. In response thereto, the authorised representative of the assessee submitted details called for by the Assessing Officer and also attended the proceedings from time to time. After hearing the assessee, the Assessing Officer made addition of Rs.17,56,34,896/- on account of depreciation claimed by the assessee holding that the claim of the assessee is not allowable. Similarly, the Assessing Officer made an addition of Rs.3,15,09,867/- on account of surplus of pharmacy business. Aggrieved by the assessment order aforesaid, assessee challenged the same before the Ld. CIT(A). The Ld. CIT(A), after hearing the assessee, allowed the appeal and deleted the aforesaid additions. Against the said order, Revenue is in appeal before the Tribunal.
3. The Revenue has challenged the impugned order by raising 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. 17,59,34,8961- 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 u1s.32 for the same or any other previous year in respect of that asset as it amounts to claiming a double deduction.
Whether, on the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in allowing the appeal, 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 1 T 43).
3M/s. Jaslok Hospital & Research Centre ITA No. 2138/M/2016
That the decision of Hon'ble Bombay High Court in the case of Indian Institute of Banking and Personnel Selection (2003) 264 ITR 110 was not accepted by Revenue, but the appeal was not filed due to the smallness of tax effect. On the issues decided in said order are challenged in Apex Court in other cases hence the issue of double deduction on account of allowing claim of depreciation and carry forward of deficit to adjust as application of income in subsequent years have not reached finality.
Whether on the facts and circumstances of the case and in law, the Ld. CIT(A), Mumbai erred in allowing the Pharma Shop’s income u/s 11(4A) of the Income Tax Act, disallowed by the AO, held that activity of running a pharmacy shop is incidental to the attainment of the objects of the trust as well as running shop is not a planned activity though the turnover of the pharmacy store is around 12.97% of hospital collection and profit in pharmacy store is around 11.68%. 5. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A), Mumbai erred in allowing the pharmacy shop's income u/s. 1 1(4A) of the Income Tax Act, disallowed by the AO even though assessee is not maintaining separate books of account for pharmacy shop which is mandatory as per sec 11(4A). 6. 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. 7. The Appellant craves leave to amend or alter any ground or add a new ground which may be necessary.” 4. Before us, the Ld. Departmental Representative (for short ‘Ld. DR’) relying on the assessment order submitted that the Ld. CIT(A) has wrongly deleted the addition made by the Assessing Officer as the impugned order is contrary to the decision of Hon’ble Supreme Court in Escorts Ltd. vs. UOI, 199 ITR 43, decision of Hon’ble Delhi High Court in Charanjiv Charitable Trust and the law laid down by the Hon'ble High Kerala Court in the case of Lissie Medical Institutions vs CIT 76 DTR (Ker) 372.The Ld. DR further submitted that the Ld.
4M/s. Jaslok Hospital & Research Centre ITA No. 2138/M/2016 CIT(A) has wrongly relied upon the decision rendered by the Hon’ble Delhi High Court ignoring the fact that the department has challenged the issues decided in the said case in the Hon’ble Supreme Court. Accordingly, the Ld. DR submitted that the assessee is not entitled for depreciation on fixed assets. Since the impugned order is not in accordance with the law laid down by the various High Courts and the Hon'ble Supreme Court, same is liable to be set-aside. On the issue as to whether on the facts and circumstances of the case and in law the Ld. CIT(A) is justified in allowing the claim of the assessee for exemption u/s 11 of the Act, the Ld. DR submitted that the Ld. CIT(A) has allowed the exemption ignoring the fact that assessee has not maintained separate books of accounts in respect of pharmacy store. Therefore, the impugned order is liable to set aside.
On the other hand, the Ld. Counsel for the assessee submitted that the issuesraised by the revenue have already been decided by the Tribunal in favour of the assessee in assessee’s own case for the assessment year 2010-11 in ITA No. 6853/Mum/2014. The Ld. Counsel further submitted that the cases relied upon by the Ld. DR are not applicable to the present case as the facts of the said cases are different from the present case. Since, the Tribunal has decided both the issues in favour of the assessee relying on the decisions of Hon’ble Bombay High Court rendered in CIT vs. Institute of Banking Personnel Selection 2003 264 ITR 110 (Bom,) and Baun Foundation Trust vs. CCIT (2013) 33 taxmann.com 677(Bombay), there is no merit in the appeal of the revenue, therefore, the same is liable to be dismissed.
We have heard the rival submissions and perused the orders passed by the authorities below, including the cases referred to by the parties. The revenue has challenged the action ofLd CIT(A) in allowing depreciation on fixed assets vide grounds No 1 to 3 of the appeal.We notice that in the revenue had challenged the identical
5M/s. Jaslok Hospital & Research Centre ITA No. 2138/M/2016 issue in assessee’s own case for assessment year 2010-11 (supra), on identical grounds and the co-ordinate Bench of the Tribunal has decided the issue in favour of the assessee by following the ratio of law laid down by the Hon'ble Bombay High Court in the case of M/s. G.D. Birla Medical Research & Educational Foundation in Income Tax Appeal Nos. 2294 & 2295 of 2013 vide order dated 01.02.2016. The relevant portion of the order reads as under:-
“We find that the question of law framed by the Hon’ble Bombay High Court in the above stated case is identical to the grounds 1 & 2 taken by the Revenue in this appeal. The Hon’ble Jurisdictional High Court while relying upon another decision of the Hon’ble Bombay High Court in the case of “CIT vs. Institute of Banking Personnel”(supra) and in another case of “DIT (E) vs. GKR Charities (32 Taxnman.com 208) and further in the case of “CIT-II Thane vs. M/s Jawaharlal Nehru Port Trust” and ITA No. 1043/2013 vide order dated 08.06.2015 and in the case of D “DIT (E) vs, Watch Tower Bible & Trust Society of India” ITA NO. 1548/12 decided on 10.12.2014 has concluded that there is no question of double deduction in allowing the depreciation in respect of assets acquired and used by the trust. In view of the above decision of the Hon’ble Jurisdictional Bombay High Court, the ground nos. 1 & 2 of the Revenue’s appeal are hereby dismissed.”
Since, the co-ordinate Bench has decided the identical issue in favour of the assessee in the assessee’s own case for the A.Y. 2010-11 and since the findings of the Ld. CIT(A) are in accordance with the decision of the co-ordinate Bench rendered in the assessee’s own case for the assessment year 2010-11,we do not find any infirmity in the order of the Ld. CIT(A) to interfere with the same. We accordingly uphold the findings of the Ld. CIT(A) and dismiss ground No 1 to 3 of theappeal of the revenue.
Vide ground No 4 and 5, the revenue has challenged the action of the Ld. CIT(A) in allowing the income from pharmacy shop u/s 11A
6M/s. Jaslok Hospital & Research Centre ITA No. 2138/M/2016 of the Act. The Assessing Officer assessed the income from pharmacy store as ‘business income’ by invoking the provisions of Sec. 11(4A) of the Act holding that the receipts from pharmacy are separate from charitable activities of the assessee. The Ld. CIT(A) deleted the addition holding that the pharmacy run by hospital was attached to the activities carried out by the trust/hospital and providing medical relief comes within the purview of the definition of ‘charitable purposes’ as defined u/s 2(15) of the Act. As pointed out by the Ld. counsel for the assessee, the co-ordinate Benchhas decided this issue in favour of the assessee, in assessee’s own case for assessment year 2010-11, by following the decision of the Hon'ble Bombay High Court in the case of Baun Foundation Trust vs. Chief Commissioner of Income Tax, (2013) 33 taxmann.com 677 (Bombay)and the decision of the co-ordinate Bench of the Tribunal rendered in Hiranandani Foundation vs. ACIT(E). The Hon’ble Bombay High in Baun Foundation Trust vs. Chief Commissioner of Income Taxhas held that where the running of a chemist shop is not the dominant object or purpose of the trust and where the establishment of a chemist shop in the hospital is incidental or ancillary to the dominant purpose of the trust, under such circumstances, exception on this ground cannot be denied to a charitable trust. In Hiranandani Foundation vs. ACIT(E) the co-ordinate Bench has decided the identical issue in favour of the assessee holding that running of a pharmacy which is necessary to run the hospital is not incidental but an integral part of the object of the assessee trust therefore section 11(4A) is not applicable.
Since, the findings of the Ld. CIT(A) is based on the decision of the co-ordinate Bench rendered in assessee’s own case for the assessment year 2010-11, we uphold the findings of the Ld. CIT(A) and dismiss ground No 4 and 5 of the revenue’s appeal.
7M/s. Jaslok Hospital & Research Centre ITA No. 2138/M/2016
As a result, the appeal filed by the revenue for the assessment year 2011-12 is dismissed.
Order pronounced in the open court on29thNovember, 2017.