DCIT, UDUPI vs. M/S MANIPAL HOTEL & RESTAURANT MANAGEMENT COLLEGE TRUST,, MANIPAL

This appeal filed by the revenue is directed against an order of the CIT(A), Mysore dated 05-03-2014 for the assessment year 2011-12.

4. On further appeal before the CIT(A), it was brought to the notice of the CIT(A) that the decision of the Hon’ble Kerala High Court, which was relied on by the learned AO in the case of Lissie Medical Institution Vs CIT Kochi(ITA No.42 of 2011) has been dealt by the Bangalore Bench in the case of ACIT Vs Adichunchunagiri Shikshana Trust (19 ITR (Trib.)

828 which was decided in favour of assessee. . The learned AR also relied on the decision of ITAT, Bangalore Bench in one of the assessee’s group trust’s case Dr. T.M.A.Pai Foundation in to 491(B)/2009 dated 16-02-2010 for the assessment year 2001-02 to 2006-

ITA No.640(B)/2014 07, wherein the Tribunal has allowed depreciation claimed on capital expenditure and the issue is decided against the department.

DEPRECIATION 2.1. The learned CIT (A) erred in allowing assessee's claim for depreciation on assets put into use during the accounting year relevant to this asst year, even though the entire cost of these assets have been claimed by the ITA No.640(B)/2014 assessee as an application of income for charitable activities. 2.2. The learned CIT (A) erred in not following the ratio laid down by the Hon'ble Apex Court in the case of Escorts Ltd and another Vs Union of India - 199 ITR 43 - wherein it is held that a double deduction cannot be presumed in the absence of a clear statutory indication. 2.3. The learned CIT (A) failed to take cognizance of the fact that allowing of total cost of the asset as an application of income and allowing of depreciation on the value of such assets in the same year results in double deduction and is not admissible in the absence of clear statutory indication. 2.4. The learned CIT(A) erred in not following the ratio laid down by the Hon'ble Kerala High Court in the case of Lissie Medical Institution of 2011 dated 17.02.2012 wherein it is held that in order to reflect the true income to be available for application for charitable purposes, the assessee should write back in the accounts the depreciation amount to form part of the income to be accounted for application for charitable purposes. 2.5. The learned CIT(A) failed to consider that the decision in the case of CIT vs. Institute of Banking - 264 ITR 110 (Bom) is regarding allowing of depreciation on assets whose value was allowed in the preceding years as an application of ITA No.640(B)/2014 income, and not on allowing of depreciation in the same assessment year in which the cost was allowed as an application of income and therefore, is distinguishable. 2.6 The order of CIT(A) may be set aside and that of the AO be restored by placing reliance on the recent judgment of Hon’ble High Court of Delhi in the case of DIT (Exempn.) Vs Charanjiv Charitable Trust dated 18-03-2014 in to 323/2013 wherein it is held that Tribunal was not justified in directing the allowance of depreciation in respect of assets, the cost of which has been allowed as deduction as application of income of the Trust.

CARRY FORWARD OF DEFICIT:

3.1 The ld.CIT(A) erred in directing the AO to allow carry forward of deficit of assessment years 2001-02 and onwards for set off against the surplus of asst year 2006-07, when there is no provision in the IT Act to allow carry forward of such deficit, and the number of years for which such carry forward of deficit for set off can be allowed. The ld. CIT(A) erred in not specifying the provisions of the IT Act while directing the AO to allow carry forward of deficit.

3.2 The ld.CIT(A) erred in placing reliance on the decision in the case of CIT Vs Institute of Banking 264 ITR 110 (Bom.) for allowing carry forward and set off of deficit of earlier years,

ITA No.640(B)/2014 even though said decision was not pursued in further appeal in view of nil tax effect involved, and as per sec.268A the said decision is not binding in respect of this assessee. The ld.CIT9A) also erred in the case of Union of India Vs Dharendra Textiles Processors (2008) 306 ITR 277 (SC) wherein the Apex Court held that the Hon’ble High Courts can only interpret the law and not legislate and legislative casus omissus cannot be supplied by judicial interpretative process.

“5.3 We have heard both the parties and perused and carefully considered the material on record, including the judicial decisions cited. We find that the issue of the assessee claim for depreciation was considered by the Co-ordinate Bench of this Tribunal in the assessee’s own case for the AY: 2006-07 in dated 16-02-2010 where the issue was held in favour of the assessee. In coming to this finding, the Tribunal followed its own order of even date in the cases of Academy of General Education in ITA No.485/Bang/2009) holding as under;

ITA No.640(B)/2014

“After considering the rival submissions, respectfully following the decision of the Hon’ble Bombay High Court in the case of Institute of Baking (Supra) we hold that the CIT(A) was justified in allowing the assessee’s claim of depreciation on new asset put into use during the accounting year, even if the entire cost of these assets have been claimed by the assessee and allowed as an application of the income for charitable purposes…” Following the decision of the Hon’ble Bombay High Court in the case of Institute of Banking and of the Co- ordinate Bench of the Tribunal in the assessee’s own case for the AY: 2006-07 in and in ITA No.485/Bang/2009 dated 16-02-2010, we uphold the order of the learned CIT(A) in allowing the assessee’s claim for depreciation on new assets have been claimed by the assessee as an application of its income for charitable purposes. We, accordingly, dismiss the grounds at sl.no2.1 to 2.5 raised by the revenue”.

ITA No.640(B)/2014

“6.3 We have heard the rival submissions and perused and carefully considered the material on record including the judicial decision cited as pointed out by the learned AR, the issue of the assessee’s claim for allowing brought forward deficit of earlier years, was considered by the Co-ordinate Bench of the Tribunal in the assessee’s own case for AY: 2006-07a in dated 16-02-2010 wherein at para-25 thereof the issue was decided in favour of the assessee and against the revenue by holding as under;

ITA No.640(B)/2014

Following the aforesaid decision of the Co-ordinate Bench of this Tribunal in the assessee’s own case for the AY: 2006-07 we uphold the order of the learned CIT(A) in allowing the claim of the assessee in respect of carry forward of deficit of earlier years and accordingly, we dismiss the grounds at Sl.nos.3.1 and 3.2 raised by the revenue”.

For both the issues i.e depreciation and carry forward of deficit the Co- ordinate Bench has passed an order in the earlier year 2010-11 in the assessee’s own case in dated 31-10-2014.

Following the decision in assessee’s own case for the AY: 2010-11, we dismiss the appeal of the revenue for the AY: 2011-12.

Order pronounced in the open court on the 31st August, 2015.