Income Tax Appellate Tribunal - Mumbai
Dcit (E) 2(1), Mumbai vs Society Of Congregation Of Franciscan ... on 20 December, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL "G" BENCH, MUMBAI
BEFORE SHRI B. R. BASKARAN, AM AND SHRI AMARJIT SINGH, JM
आयकर अपील सं / I.T.A. No.5089/Mum/2017
(निर्धारण वर्ा / Assessment Year: 2009-10)
Dy. Commissioner of बिधम/ Society of Congregation of
Income Tax (E)-2(1) Vs. Franciscan Brothers,
Room No. 519, 5th Floor, Mount Poinsur, Borivali
Piramal Chambers, Lalbaug, (W), Mumbai-400103.
Lower Parel, Mumbai-
400012.
स्थायी लेखा सं ./जीआइआर सं ./PAN/GIR No. : AAATS1005K
(अपीलाथी /Appellant) .. (प्रत्यथी / Respondent)
Revenue by: Shri Chaudhary Arun Kumar
Singh
Assessee by: Shri Y. K. Ved
सुनवाई की तारीख / Date of Hearing: 04.12.2018
घोषणा की तारीख /Date of Pronouncement: 20.12.2018
आदे श / O R D E R
PER AMARJIT SINGH, JM:
The revenue has filed the present appeal against the order dated 25.05.2017 passed by the Commissioner of Income Tax (Appeals) -1, Mumbai [hereinafter referred to as the "CIT(A)"] relevant to the A.Y.2009-
10.
2. The revenue has raised the following grounds: -
1.1 "Whether on the facts of the case and in law the Ld. CIT(A) erred in allowing the appeal of the assesses on account of disallowing depreciation on fixed assets of Rs.83,43,999/- in ITA No. 5089/M/2017 A.Y.2009-10 contravention of the decision of Escorts Ltd. Vs. UOI 199 ITR 43 wherein it has held that since section 11 of the income Tax Act provides for deduction of capital expenditure incurred on assets acquired far 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."
1.2 "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 m the case of Lissie Medical Institutions v 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}.
1.3. "Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing the depredation claim of the assessee 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, but due to smallness of tax effect appeal was not filed before Hon'ble Supreme Court. Also, the Ld CIT(A) erred in relying upon the judgment of Hon'ble high Court in the case of CIT VS. Shri Vile-
Parle Kelvani Manual, without appreciating the fact that Department has not accepted the decision on merit and filed SLP, but subsequently withdrawn the same as there if as no claim of depreciation on exempted assets. Moreover, the Revenue has filed SLPs on this issue in other cases inclusive the case of G.D. Birla Medical Research & Educational Foundation (S.L.P.(C) No. 24904 of 2016 (C.A.No,8294 of 2016) and in this case has been granted by the Hon'ble Apex Court and in all cases issue is pending for adjudication before the Hon'ble Apex Court.
2.1 "Whether on the facts of the case and in law Ld. CIT(A) erred in allowing the carry forward of deficit of Rs-3,26,98,230/- and allowing set off against the income of the subsequent years. "
2.2 "Whether on the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in allowing the claim of the assesses for carry forward of the said deficit, ignoring the fact that there was no express provision i» the I T Act, 1961 permitting allowance of such 2 ITA No. 5089/M/2017 A.Y.2009-10 2.3 Whether, on the facts and in the circumstances of the case and in law, Id. 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 hits not accepted the said decision of the jurisdictional High Court on merit of the case but due to smallness of tax effect appeal was not filed before Hon'ble Supreme Court. Hoverer, on this issue the department was filed SLPs in other cases before Hon'ble Apex Court inclusive the case of MIDC (SLP (Civil) 9391 of 2014, m which leave has been granted and the issue is pending for adjudication Hon'ble Supreme Court and the case has not reached finality."
The appellant prays that the order of the CIT(A)-1, Mumbai be set aside and that of the AO be restored."
3. The brief facts of the case are that the assessee filed its return of income on 04.09.2009 along with the Income & Expenditure Account, Balance-Sheet and Audit Report in Form No10B declaring total income to the tune of Rs. Nil. The assessee is a Registered trust with DIT(E), Mumbai u/s 12A of the Act vide Registration No. INS/11882. The assessee is engaged in carrying out religious and charitable activities which is covered under the provisions of Section 2(15) of the I.T. Act, 1961 as a charitable activity. The case was selected for scrutiny, therefore, notices u/s 143(2) & 142(1) of the Act were issued and served upon the assessee. The assessee claimed the depreciation to the tune of Rs.83,43,999/- which was on the basis of the application of income of the trust property under the provision u/s 11 of the I.T. Act. which was disallowed and carry forward loss has also been disallowed. However, the income of the assessee was assessed at Rs. Nil. Feeling Aggrieved, the assessee filed an appeal before the CIT(A) who allowed the claim of the depreciation as well as carry forward of deficit so the revenue feeling aggrieved, has filed the present appeal before us.
3 ITA No. 5089/M/2017A.Y.2009-10 ISSUE NO. 1.1 TO 1.3
4. The Ld. Representative of the revenue has argued that the claim of the depreciation has wrongly been allowed by the CIT(A) which is in contravention decision of Escorts Ltd. Vs. UOI 199 ITR 43 and Lissie Medical Institutions Vs. CIT 76 DTR (Ker) 372, therefore, in the said circumstances, the finding of the CIT(A) is wrong against law and facts and is liable to be set aside. However, on the other hand, the Ld. Representative of the assessee has strongly relied upon the order passed by the CIT(A) in question. Before going further, we deemed it necessary to advert the finding of the CIT(A) on record.: -
"7.2. I have considered the facts and circumstances of the case, gone through the assessment order of the A.Q and the submissions of the appellant and also discussed the case with the AR of the appellant. The contentions and submissions of the appellant are being discussed and decided here in under:
i. The Assessing Officer has not treated the depreciation as application of income on the ground that it amounts to double deduction. Appellant has submitted that in a number of judgments, depreciation had been allowed as application of income u/s 11, Case laws relied upon by the assessing officer have also been distinguished. In tins regard I find that the issue is directly covered in appellant's favour by the judgment of Hon'ble Bombay High Court in the case of CIT Vs. Institute of Banking Personnel 264 ITR 110 wherein the Hon'ble Court has observed as under; "4. Question no 2 herein is identical to the quest/on which, was before the Bombay High Court in the case of Director of Income (Exemption) v. Framjee Cawasjee Institute (1993) 109 CTR 463 (Bom). In that case, the facts were as follows: The assessee was the Trust. It derived its interne from depreciable assets. The assesses into account depreciation on those assets in computing the income of the Trust the Income Tax Officer held that depreciation could not be taken into account because, full capital expenditure had been allowed in the year of acquisition of the asset. The assessee went in appeal before the Assistant Appellate Commissioner. The appeal has rejected. The Tribunal, however, took the view that 4 ITA No. 5089/M/2017 A.Y.2009-10 when the Income Tax stated {hat fun expenditure had been allowed in the year of the assets, what he really meant was that the amount spent on acquiring those assets had been treated as 'application of income' of the Trust in the year in which the income has spent in acquiring those assets. This did not mean in computing income from those assets to subsequent years, depreciation in respect of those assets cannot be taken, into account. This view of the Tribunal has been confirmed by, the Bombay High Conn in the above judgment. Hence. Question No. 2 is covered by the decision of the Bombay High Court in the above judgment. Consequently, Question No. 2 is answered in the affirmative i.e.. in favour of the assesses and against, the department.
In a recent judgement in case of Director of income-tax (Exemptions), Mumbai v Shri Vile Paris Kelavani Mandal 58 taxmann.com 2SS Hon'ble Bombay High Court held ;
"AS far as Question No.4 is concerned, this Court has repeatedly that there is nothing like double deduction. When the assesses has acquired an asset from the income of the trust and thereafter the amount that is claimed t$ the depreciation on the use of the assets, such depreciation claim does not near? double deduction. The deduction earlier claimed is towards application of funds of the trust for acquiring assets. The fatter 15 depreciations and it is permissible deduction considering use of the assets. This has been clarified repeatedly by this Court. If any reference is required, then the case CIT v. Institution of Banking Personnel Selection (IBPS) (2003) 264 ITR 110/113 Taxman 386 (Bom) is enough."
5. On appraisal of the above said finding, we noticed that the CIT(A) has decided the matter of controversy on the basis of the decision of Bombay High Court in the case titled as CIT Vs. Institute of Banking Personnel 264 ITR 110 and also on the basis of the decision of Bombay High Court in the case of Director of Income tax (Exemptions), Mumbai Vs. Shri Vile Parle Kelavani Mandal (2015) 58 taxmann.com 288. At the time of argument, the Ld. Representative of the assessee has argued that the matter of controversy has been adjudicated by the Hon'ble ITAT in his own cases for the A.Y. 2010-11 and 2011-12 in ITA. No.3311/M/2017, 3312/M/2017 & 3313/M/2017 dated 1.09.2017. The copy of order dated 5 ITA No. 5089/M/2017 A.Y.2009-10 01.09.2017 is on record. The relevant finding has been given in para no. 5 and 5.1 which are reproduced as under.: -
"5. I have heard both the Counsel and perused the records. It transpires that upon AO disallowance on the above said two issues, Ld. CIT(A) has allowed the assessee's appeal by following Hon'ble jurisdictional High Court direct decision on the issues. Both the Counsel fairly agreed that the issues are covered in favour of the assessee by the decision of the Hon'ble jurisdictional High Court relied upon by the learned CIT(A), The Revenue has also agreed to this in the grounds for appeal raised as above as it is mentioned that Department has not accepted the Hon'ble High Court's decision on these issues. Be as it may the jurisdictional High Court decision is binding. In this regard, 1 may gainfully refer to the order of learned CIT(A) on both the issues as under, 5.1 First Issue -
6.2.1 have considered the facts and circumstances of the case, gone through the assessment order of the A.Q and the submissions of the appellant and also discussed the case with the AR of the appellant The contentions and submissions of the appellant are being discussed and decided here In under;
The Assessing Officer has not treated the depreciation as application of income on the ground that it amounts (o double deduction. Appellant has submitted that in a number of judgments, depreciation had been allowed as application of income u/s. 11. Case laws relied upon by the assessing officer we also been distinguished, in this regard I find that the issue is directly covered in appellant's favour by the judgment of Hon'ble Bombay High Court in the case of CIT Vs. Institute of Banking Personnel 264 ITR 110 wherein the Hon'ble Court has observed as under:
"4. Question No. 2 herein is identical to the question which was raised before the Bombay High Court in the case of Director of Income Tax (Exemption) v, Framjee Cawasjee Institute (1993) 109 CTR 483 (Bom). In that case, the facts were as follows: The assesses was the Trust It derived its Income from depreciable assets. The assessee took into account depreciation on those assets in computing the income of the Trust. The Income Tax Officer held that depreciation could not be taken into account because, full capital expenditure had been allowed in the year of acquisition of the assets. The assessee went in appeal before the Assistant Appellate Commissioner. The appeal was rejected, This Tribunal, 6 ITA No. 5089/M/2017 A.Y.2009-10 however, took the view that when the Income Tax Officer stated that full expenditure had been allowed in the year of acquisition of the assets, what he really meant was that the amount spent on acquiring those assets had been treated as 'application of income' of the Trust in the year in which the income was acquiring those assets. This did not mean that in computing income from those assets in subsequent years, depreciation in respect of those assets cannot be taken into account, this view of the Tribunal has been confirmed by, the Bombay High Court in the above judgment. Hence, Question No, 2 is covered by the decision of the Bombay High Court in the above judgment Consequently, Question No. 2 is answered in the affirmative i.e., in favour of the assessee and against, the department ii in a recent judgement in case of Director of Income-tax (Exemptions), Mumbai v. Shri Vile Parle Kelavani Mandal [2015) 58 IaxmaDrj.com 268 Hon'ble Bombay High Court held:
"As far as question No.4 is concerned, this Court has repeatedly held that there is nothing like double deduction. When file assesses has acquired an asset from the income of the trust and (hereafter the amount that is claimed is the depreciation on the use of the assets, such depreciation claim does not mean double deduction. The deduction earlier claimed is towards application of funds of the trust for acquiring assets. The latter is depreciation and it is permissible deduction considering the use of the assets. This has been clarified repeatedly by this Court. If any reference is required then the case of CIT v. Institution of Banking Personnel Selection (IBPS) {2003] 264 ITR 110/131 Taxman 3S6 (Bom.) is enough."
Hi. Respectfully following the above observations of Hon'ble jurisdictional High Court, the Assessing Officer Is directed to allow the claim of depreciation as application of income u/s. 11 of the l.T. Act after due verification of facts."
6. On appraisal of the above said finding, we noticed that the case of the assessee has duly been covered by the Hon'ble ITAT in the assessee's own case for the 2010-11 & 2011-12 (supra), therefore, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage.
7 ITA No. 5089/M/2017A.Y.2009-10 Accordingly, this issue is decided in favour of the assessee against the revenue.
ISSUE NO.2
7. Under this issue the revenue has challenged the allowance of carry forward loss in sum of Rs.3,26,98,230/-. The revenue has contested the finding of the CIT(A) being against law and facts. Before going further, we deemed it necessary to advert the finding of the CIT(A) on record.: -
"8.2 I have considered the facts and circumstances of the case, gone through the assessment order of the A.O and the submissions of the appellant and also discussed the case with the AR of the appellant. The contentions and submissions of the appellant are being discussed and decided here in under:
i. Relying upon several case laws the appellant stated that deficit fs required to be carried forward to the subsequent years. On perusal of the Facts, I find that the case of appellant is squarely covered by the Judgement of Hon'ble Bombay High Court in the case of Institute of Banking Personnel 264 ITR-110 wherein the Hon. Jurisdiction High Court has observed as under-
....... .."5, Now coming to question No. 3, the point which arises far consideration is: whether excess of expenditure in the earlier years can be adjusted against the income of the subsequent year and whether such adjustment should be treated application of income in subsequent year for charitable purposes? It was argued on behalf of the department that expenditure incurred in the earlier years cannot be met out of the income of the subsequent year and that utilization of sufficient income for meeting the expenditure of earlier year? would not amount to application of income for charitable or religious purposes- In the present case, the AO did not allow carry forward of the excess of expenditure to be set1 off against the surplus of the subsequent years on the ground that in the case of a Charitable Trust, their income was assessable under self- contained code mentioned in section 11 to section 13 of the Income Tax Act and that the income of the Charitable Trust was not assessable under the head "profits and gains of business" under section 28 in which the provision for carry 8 ITA No. 5089/M/2017 A.Y.2009-10 forward of fosses was relevant. Trust, in the case of a Charitable Trust, there was no provision for carry forward of the excess of expenditure of earlier years to n& adjusted against income of subsequent years. We do not find any merit in this argument of the department. Income from the trust property has also got to be computed on principles and if commercial principles are applied then of expenses incurred by the Trust for charitable and religious purposes in the earlier years against the income earned by the Trust in the subsequent year will have to be regarded as application of income of the Trust for charitable and religious purposes in the subsequent year in which adjustment has been made having regard to the benevolent provisions contained }n section 11 of the Act and that such adjustment will have to be excluded from the income of the under section 11(1)(a) of the Act. Our view is also supported by the judgment of the Gujarat High Court in the case of CIT v. Shri Plot Swetamber Murti Pujak Jam Mandal (1995) 211 ITR 293 (Guj}. Accordingly, we answer question No. 3 in the affirmative i.e.. in favour of the assesses and against the department."
8. On appraisal of the said finding, we found that the issue has been decided in favour of the assessee on the basis of decision of Bombay High Court in the case of CIT Vs. Institute of Banking Personnel 264 ITR
110. Furthermore, we also find that the present issue of the assessee has also been covered by the assessee's own case in ITA. No. 3311/M/2017 for the A.Y. 2010-11, in ITA. No. 3312/M/2017 for the A.Y.201-12 & in ITA.
No. 3313/M/2017 for the A.Y. 2011-12 dated 1.09.2017. The relevant para has been given in para no. 5.2 which is hereby reproduced as under.: -
"5,2 Second issue-
"8.2 I have considered the facts and circumstances of the case, gone through the assessment order of the A.O and the submissions of the appellant and also discussed file case with the AR of the appellant. The contentions and submissions of the appellant are being discussed and decided here in under:9 ITA No. 5089/M/2017
A.Y.2009-10 I. Relying upon several case laws the appellant stated that deficit of the preceding and current year is required to be carried forward to the subsequent years, on perusal of the facts, I find that the case of appellant is squarely covered by the judgement of Hon'ble Bombay High Court in the case of Institute of Banking Personnel 264 ITR 110 wherein the Hon, Jurisdictions! High Court has observed as under-
.,.........."5. Now coming to question No. 3, the point which arises for consideration is: whether excess of expenditure in the earlier years can be adjusted against the income of the subsequent year and whether such adjustment should be treated as application of income in subsequent year for charitable purposes? it was argued on behalf of the department that expenditure incurred in the earlier years cannot be met out of the income of the subsequent year and that utilization of such income for meeting the expenditure of earlier years would not amount to application of income for charitable or religious purposes. In the present case, the assessing officer did not allow carry forward of the excess of expenditure to be set off against the surplus of the subsequent years on the ground that in the case of a Charitable Trust, their income was assessable under self-contained code mentioned in section 11 to section 13 of the income Tax Act and that the income of the Charitable Trust was not assessee we under the head "profits and gains of business"
under section 28 In which the provision for carry forward of losses was relevant. That, in the case of a Charitable Trust there was no provision for carry forward of the excess of expend/tare of earlier years to be adjusted against income of subsequent years. We do not find any merit in this argument of the department. Income derived from the trust property has also got to be computed on commercial principles and if commercial principles are appellant then adjustment of expenses Incurred by the Trust for charitable and religious purposes in the earlier years against the income earned by the Trust in the subsequent year will have to be regarded as application of income of the Trust for charitable and religious purposes in the subsequent year in which adjustment has been made having regard to the benevolent provisions contained in section 11 of the Act and that such adjustment will have to be excluded from the income of the Trust under sect/on \\(\)(&) of the Act Our view is also supported by the judgment of the Gujarat High Court in the case of CIT v. Shri Plot Swetamber Muni Pujak Jain Mandal (1995) 211 ITR 293 (Guj), Accordingly, we answer 10 ITA No. 5089/M/2017 A.Y.2009-10 question No. 3 In the affirmative i.e., in favour of the assessee and against the department"
ii. Respectfully following the ratio laid down by the Hen. Jurisdictions High Court as above, the AO is directed to allow the carry forward of deficit in the succeeding years after du& verification of facts.
iii. Ground of appeal No. 5 is, therefore, allowed."
9. On appraisal of the above said finding, we noticed that the CIT(A) has applied the law in the case of CIT Vs. Institute of Banking Personnel 264 ITR 110 and CIT v. Shri Plot Swetamber Murti Pujak Jam Mandai (1995) 211 ITR 293 (Guj). The same has been allowed by the Hon'ble ITAT in the assessee's own case in ITA. No. 3311/M/2017 for the A.Y. 2010-11, in ITA. No. 3312/M/2017 for the A.Y.201-12 & in ITA. No. 3313/M/2017 for the A.Y. 2011-12 dated 1.09.2017. The issue is fully covered by the above mentioned orders. Accordingly, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage. Accordingly, this issue is decided in favour of the assessee against the revenue.
10. In the result, the appeal filed by the revenue is hereby ordered to be dismissed.
Order pronounced in the open court on 20.12 .2018.
Sd/- Sd/-
(B. R. BASKARAN) (AMARJIT SINGH)
ले खध सदस्य / ACCOUNTANT MEMBER न्यधनिक सदस्य/JUDICIAL MEMBER
मुंबई Mumbai; दिनां क Dated : 20.12.2018.
Vijay
11
ITA No. 5089/M/2017
A.Y.2009-10
आदे श की प्रनिनलनि अग्रेनर्ि/Copy of the Order forwarded to :
1. अपीलाथी / The Appellant
2. प्रत्यथी / The Respondent.
3. आयकर आयु क्त(अपील) / The CIT(A)-
4. आयकर आयु क्त / CIT
5. दवभागीय प्रदतदनदि, आयकर अपीलीय अदिकरण, मुंबई / DR, ITAT, Mumbai
6. गार्ड फाईल / Guard file.
आदे शधिुसधर/ BY ORDER, सत्यादपत प्रदत //True Copy// उि/सहधिक िंजीकधर /(Dy./Asstt. Registrar) आिकर अिीलीि अनर्करण, मुंबई / ITAT, Mumbai 12