RAMBAGH GOLF CLUB,JAIPUR vs. ITO EXEMPTION, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”SMC” JAIPUR Mk0 ,l- lhrky{eh] U;kf;d lnL; ,oa Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA. Nos. 440 to 444/JP/2023 fu/kZkj.k o"kZ@Assessment Years : 2006-07, 2011-12, 2012-13, 2013-14 & 2014-15 cuke Rambagh Golf Club ITO Exemption, Vs. C/o Rambagh Golf Club, Jaipur Bhawani Singh Road, Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAAAR 0294 A vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Sh. P. C. Parwal (FCA) jktLo dh vksj ls@ Revenue by : Smt. Monisha Chaudhary (Addl. CIT) lquokbZ dh rkjh[k@ Date of Hearing : 11/10/2023 mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 09/11/2023

vkns'k@ ORDER

PER: RATHOD KAMLESH JAYANTBHAI, AM

These five appeals are filed by the assessee aggrieved from the order of the National Faceless Appeal Centre, Delhi [ Here in after referred as ‘NFAC’ ] for the assessment years 2006-07, 2011- 12, 2012-13, 2013-14 & 2014-15 dated 22.05.2023 & 31.05.2023 which in turn arises from the order passed by the AO, Jaipur passed under Section 143(3) of the Income tax Act, 1961 (in short

2 ITA Nos. 440 to 444/JP/2023 Rambagh Golf Club vs. ITO Exemption

'the Act') dated 22.12.2008 & 28.01.2014, 29.03.2015, 29.02.2016

& 29.12.2016.

pertaining to Rambagh Golf Club in ITA no. 440/JP/2023 may be

taken as a lead case for discussions as the issues involved in the

lead case are common and inextricably interlinked or in fact

interwoven and the facts and circumstances of other cases are

identical except the difference in the amount in other assessment

year. The ld. DR did not raise any specific objection against taking

that case as a lead case. Therefore, for the purpose of the present

discussions, the case of ITA No. 440/JP/2023 is taken as a lead

and all these appeals are disposed off by this common order with

the agreement of both parties.

mention that the assessee has assailed the appeal in ITA No.

440/JP/2023 on the following grounds;

“1. That the learned CIT Appeals, NFAC erred in disallowing the claim of depreciation amounting to Rs. 2,36,078/- as discussed in para 6 of order. 2. That the order so passed by the learned CIT, Appeals NFAC is bad in law as well as on facts.

3 ITA Nos. 440 to 444/JP/2023 Rambagh Golf Club vs. ITO Exemption 3. That the petitioner craves to add alter or amend any or all of the grounds of appeal on or before the due date of hearing.”

filed its Return of income on 30.10.2006 along with return of

income declaring the value of fringe benefits at NIL. The case was

selected for scrutiny and a notice u/s 143(2) was issued on

25.10.2007 and served upon the assessee, fixing the date of

hearing on 06.11.2007. The ld. AR of the assessee appeared, filed

the required details from time to time.

details filed it is noticed that society had claimed depreciation on

purchase of assets. The ld. AO further noted that the assessee on

purchase of assets also taken deduction as application of income.

The ld. AO also noted that the purchase of assets in the earlier

years has been taken by the assessee as application of Income.

Moreover the “depreciation” is only a notional expenditure and

there is no out of lay of money. The accounts of the trust are

required to be maintained in the receipt and payment form.

Depreciation being only a notional expense it cannot hold to be

any payment for the purpose of receipt and payment account. The

4 ITA Nos. 440 to 444/JP/2023 Rambagh Golf Club vs. ITO Exemption

ld. AO based on these reasons and relying on the decision in the

case of Escorts Ltd. Vs. Union of India (1993) 199 ITR 43, the

Supreme Court held that when deduction under section 35(2) (iv)

was allowed in respect of capital expenditure on scientific

research, no depreciation was to be allowed under section 32 on

the same assets. There is a fundamental axiom that double

deduction is not intended unless there is a clear statutory

indication on the contrary. The Supreme Court also referred to

para 3.29 of the Choksi Committee Report (December, 1997), in

this context. This para read as follows:

“3.29 Our attention has also been drawn to certain anomalous situations in the matter of allowance of depreciation. In certain cases where as full deduction has been allowed in relation to a capital assets under other section (As for example, section 35 which permits a deduction in respect of capital expenditure for scientific research), the tax payers have contended that such deduction is independent of the allowance by way of depreciation. In our view, the intention of the legislature is not to allow a double deduction (of 200) in respect of the same assels, once under section 35 and, again by way of depreciation under section 32). If and to the extent that there is any anomaly or contrary view possible on a construction of section 35, we recommend that the law should be clarified to provide that no depreciation under section 32 shall be allowable in respect of capital expenditure fin scientific research qualifying for deduction under section 35." (p 59)

Therefore, in the light of the Supreme Court decision, though in a

different context, it can be held that depreciation is not admissible

on those assets against which 100% deduction has already been

taken e.g. in the cases of trusts where Assets has been acquired

5 ITA Nos. 440 to 444/JP/2023 Rambagh Golf Club vs. ITO Exemption

by way of application of fund. This is also clear because wherever

any purpose of assets is allowed as revenue expenditure,

depreciation on the same cannot again be allowed treating the

same asset as capital expenditure. Therefore, the depreciation of

Rs. 2,36,078/-, claimed on assets acquired the application of

income this year and in the precious years, is disallowed and

added to the income of the society.

preferred an appeal before the ld CIT(A). Apropos to the grounds

so raised the finding of the ld. CIT(A) is reproduced here in below:

“6.1 I have carefully considered the facts and circumstances of the case and the submission of the appellant. Relying on judicial pronouncement as highlighted above, I find that AO in assessment order has mentioned the fact that assessee is claiming depreciation on those assets in subsequent years against which 100% deduction has been taken in the year of purchase. It is seen that the assessee is claiming the double benefit of depreciation and therefore AO was justified in denying the same. Hence I find no infirmity in AO’s order and confirm the addition made by AO. 7. In the result, appeal is dismissed.”

on the grounds as reiterated here in above challenging the

disallowance of deprecation claimed in the return of income. To

support the ground so raised the ld. AR appearing on behalf of the

assessee relied upon the contention so raised before the ld.

6 ITA Nos. 440 to 444/JP/2023 Rambagh Golf Club vs. ITO Exemption CIT(A), wherein the assessee contended that Section 11 was

amended and sub-section (6) was inserted via the Finance Act No.

2/2014. This sub-section specifically deals with this issue and

stipulates that where the use of funds for acquisition of an asset

has been accepted as application of income of the charitable trust,

no deduction of depreciation or otherwise in respect of such asset

would be allowed for determining the income of such charitable

organization. This sub-section came into effect from assessment

year (AY 2015-16). As pointed out by CIT(A) in Angoori Devi, this

amendment was held to be prospective by ITAT, Bangalore in the

case of Jyothy Charitable Trust v. DCIT (Exemptions), and the

Supreme Court in Commissioner of Income Tax v. Rajasthan and

Gujarati Charitable Foundation Poona, also agreed that the

amendment is prospective. Therefore, for the AYS prior to 2015-

2016, depreciation can be claimed on the assets, expenditure on

which has already been accounted as application of income. The

ld. AR of the assessee thus relied upon the said amendment and

the judgment in the case of Supreme Court in the case of CIT Vs.

Rajasthan & Gujarati Foundation 402 ITR 441(SC) and Jansava

Trust Vs. ITO (Exemption) in ITA No. 320/Bang/2023 where in the

claim of the deprecation is allowed.

7 ITA Nos. 440 to 444/JP/2023 Rambagh Golf Club vs. ITO Exemption 8. The ld DR is heard who relied on the findings of the lower

authorities and more particularly advanced the similar contentions

as stated in the order of the ld. CIT(A) and that of the assessing

officer. Based on those contentions so recorded the ld. DR prayed

to sustain the addition.

cited before us to drive home to the respective contentions so

raised by the parties. The bench noted that in this appeal the only

grievance of the assessee is disallowance of claim of depreciation

in the scrutiny assessment by the ld. AO for an amount of Rs.

2,36,078/- and the confirmation of the said action by the ld. CIT(A)

without any relief. Thus, the apple of discord in this case is whether

the assessee is eligible to claim the deprecation in addition to the

claim of the capital expenditure already claimed as application of

income for the year under consideration or not. It is not under

dispute that the assessee has claimed application of income as per

section 11 of the Act in respect of the capital expenditure in the

year of purchase. The assessee also claiming the depreciation of

the said capital expenditure which the ld. AO disallowed for the

year under consideration i.e. A. Y. 2006-07. The section 11 has

8 ITA Nos. 440 to 444/JP/2023 Rambagh Golf Club vs. ITO Exemption

been amended w.e.f. 01.04.2015 and the relevant part of the

amended section reads as under :

Section 11(6):

(6) In this section where any income is required to be applied or accumulated or set apart for application, then, for such purposes the income shall be determined without any deduction or allowance by way of depreciation or otherwise in respect of any asset, acquisition of which has been claimed as an application of income under this section in the same or any other previous year.

Thus, the amendment being prospective in nature cannot be

applied in the year under consideration. We get strength of the

view from the decision of the apex court in the case of CIT Vs.

Rajasthan & Gujarati Foundation [ 402 ITR 441 ] where in the court

held that

9 ITA Nos. 440 to 444/JP/2023 Rambagh Golf Club vs. ITO Exemption

Question No. 2 is answered in the Affirmative i.e., in favour of the assessee and against the Department." 2. After hearing learned counsel for the parties, we are of the opinion that the aforesaid view taken by the Bombay High Court correctly states the principles of law and there is no need to interfere with the same. 3. It may be mentioned that most of the High Courts have taken the aforesaid view with only exception thereto by the High Court of Kerala which has taken a contrary view in 'Lissie Medical Institutions v. CIT [2012] 24 taxmann.com 9/209 Taxman 19 (Mag.)/348 ITR 344'. 4. It may also be mentioned at this stage that the legislature, realising that there was no specific provision in this behalf in 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 2015-2016. The Delhi High Court has taken the view and rightly so, that the said amendment is prospective in nature. 5. It also follows that once assessee is allowed depreciation, he shall be entitled to carry forward the depreciation as well. 6. For the aforesaid reasons, we affirm the view taken by the High Courts in these cases and dismiss these matters.

Thus, respectfully following the view of the apex court that the

legislature, realising that there was no specific provision in this

behalf in 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 2015-2016. Based on that

observation we allow ground no. 1 raised by the assessee. The

ground no. 2 & 3 being general in nature does not require our

adjudication.

10 ITA Nos. 440 to 444/JP/2023 Rambagh Golf Club vs. ITO Exemption In the result the appeal of the assessee in ITA No.

440/JP/2023.

to the case in ITA No. 440/JP/2023 and we have heard both the

parties and persuaded the materials available on record. The

bench has noticed that the issues raised by the assessee in this

appeal Nos. 441 to 444/JP/2023 are equally similar on set of facts

and grounds. Therefore, it is not imperative to repeat the facts and

various grounds raised by both the parties. Hence, the bench feels

that the decision taken by us in ITA No. 440/JP/2023 for the

Assessment Year 2006-07 shall apply mutatis mutandis in the

case of Rambagh Golf Club in ITA Nos. 441 to 444/JP/2023 for

the Assessment Year 2011-12 to 2014-15.

In the result, five appeals of the assessee are allowed.

Order pronounced in the open Court on 09/11/2023 Sd/- Sd/- ¼ Mk0 ,l- lhrky{eh ½ ¼ jkBksM deys'k t;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judcial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 09/11/2023

11 ITA Nos. 440 to 444/JP/2023 Rambagh Golf Club vs. ITO Exemption

*Ganesh Kumar, PS आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant-Rambagh Golf Club, Jaipur 2. izR;FkhZ@ The Respondent- ITO Exemption, Jaipur 3. vk;dj vk;qDr@ CIT vk;dj vk;qDr@ CIT(A) 4. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत. 5. xkMZ QkbZy@ Guard File { ITA Nos. 440 to 444/JP/2023} 6. vkns'kkuqlkj@ By order

सहायक पंजीकार@Aेेज. त्महपेजतंत