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Income Tax Appellate Tribunal, MUMBAI BENCH “J” MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI N.K. PRADHAN
ORDER PER N.K. PRADHAN, A.M. This is an appeal filed by the Revenue. The relevant assessment year is 2011-12. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-1, Mumbai and arises out of the assessment completed u/s 143(3) of the Income Tax Act 1961, (the ‘Act’). 2. The grounds of appeal filed by the Revenue read as under:
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 Gujrat Research Society Rs.27,21,241/- 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 Id.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 ITR 43).
3. Whether, on the facts and in the circumstances of the case and in law the Id. CIT(A) erred in relying upon the judgment of Hon'ble High Court in the case of CIT vs. Institute of Banking personnel selection without appreciating the fact that Department has not accepted the decision on merit and also without appreciating the fact that the Hon'ble High 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.
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.38,84,703/- 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 Gujrat Research Society 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.
We have heard the rival submissions and perused the relevant materials on record. Briefly stated, the issues in the instant case are summarized as under: i. Is depreciation an application of income? ii. Whether excess application in an earlier year may be set off against next year’s income? 3.1 We begin with the 1st question ‘Is depreciation an application of income?’ The existing scheme of section 11 as well as section 10 (23C) provides exemption in respect of income when it is applied to acquire a capital asset. Subsequently, while computing the income for purposes of these sections, normal deduction by way of depreciation is claimed and such amount of notional deduction remains to be applied for charitable purpose. Therefore, double benefit is claimed by the trusts and institutions under the existing law. Depreciation has been held to be an application of income in the following judgments: i. CIT vs. Institute of Banking Personnel Selection (IBPS) (2003) 264 ITR 110 (Bom.) ii. CIT vs. Market Committee, Pipli (2011) 330 ITR 16 (P&H).
Gujrat Research Society iii. CIT vs. Tiny Tots Education Society (2011) 330 ITR 21 (P&H). iv. DIT vs. Vishwa Jagriti Mission (2012) Income Tax Review – Sept – P. 83 (Del). v. Escorts Cardiac Diseases Hospital Society vs. Asst. DIT (2012) 18 Taxmann.com 104 (ITAT-Del). vi. CIT vs. Shri Gujarati Samaj (Regd.) (2011) 64 DTR 76 (MP). vii. DIT (Exemption) vs. Indraprastha Cancer Society (2015) 53 taxmann.com 463 (Del): (2015) 229 Taxman 93 (Del). viii. CIT vs. Sheth Manilal Ranchhoddas Vishram Bhavan Trust (1992) 198 ITR 598 (Guj) ix. CIT vs. Bhoruka Public Welfare Trust (1999) 240 ITR 513 (Cal). 3.2 Now we come to the 2nd issue ‘Whether excess application in an earlier year may be set off against next year’s income?’ When a trust or institution had spent in excess of its income for the current year resulting in a deficit which was carried forward to the next year, it was held that in considering the application of income for the next year, the carried forward deficit was first to set off against the income of the subsequent year. It has been held so in the following judgments: i. CIT vs. Institute of Banking Personnel Selection (IBPS) (2003) 264 ITR 110 (Bom.) ii. CIT vs. The Trustees of Seth Merwarjee Framji Panday Charitable Fund (2003) 177 Taxation 19, 20 (Bom) iii. CIT vs. Shri Plot Swetamber Murti Pujak Jain Mandal (1995) 211 ITR 293 (Guj) iv. Raghuvanshi Charitable Trust and others vs. DIT (2011) 221 Taxation 250 (Del) v. CIT vs. Shri Gujarati Samaj (Regd.) (2011) 64 DTR 76 (MP). vi. CIT vs. Punjab Mandi Board (2014) 98 DTR 267 (P&H)