Income Tax Appellate Tribunal - Chennai
Services Association Of Seventh Day ... vs Assessee on 18 July, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
'A' Bench Chennai
Before Dr. O. K. Narayanan Vice President
and Shri V. Durga Rao, Judicial Member
.....
ITA No.427/Mds/2012
Assessment year : 2005-06
M/s. Services Association The Income Tax Officer
of Seventh Day Adventists v. (OSD), Exemptions,
P. Ltd., AA 148, Chennai.
III Avenue, Anna Nagar,
Chennai-600 040.
(Appellant) (Respondent)
(PAN : AAACS9635J)
Appellant by : Shri R.M.Narayanan,CA
Respondent by : Shri T.N. Betgeri, JCIT
Date of Hearing : 18.07.2012
Date of Pronouncement : 18.07.2012
ORDER
PER V. DURGA RAO, JUDICIAL MEMBER: This appeal by
the assessee for the assessment year 2005-06 is against the order passed by the CIT(Appeals)-XII, Chennai dated 09-01- 2012.
2. The only issue involved in this appeal relates to the disallowance of claim of depreciation of ` 57,90,275/-. The assessee is a trust enjoying the benefit under section 11 of the Income Tax Act, 1961. The AO did not allow the deduction of 2 ITA No.427 /Mds/2012 depreciation of ` 57,90,275/- on the ground that the assessee has claimed full cost of addition to movable assets as application of income. The assessee has also claimed depreciation on the same assets. When the cost of addition to the asset is claimed fully as an application of income towards the object of the trust for charitable purpose, depreciation on the same assets amounts to double deduction. On appeal the CIT(A) confirmed the order passed by the AO.
3. On being aggrieved, the assessee carried the matter before the Tribunal. At the time of hearing the learned counsel for the assessee has submitted that the issue involved in this appeal is covered by the decision in the assessee's own case for the assessment year 2006-07 in ITA No. 1853/Mds/2011 dated 11-05-2012.
4. On the other hand, the learned DR fairly accepted that the issue is covered in favour of the assessee in its own case.
5. We have heard both the sides, perused the records and gone through the orders of the authorities below. The Tribunal in the assessee's own case in ITA No. 1853/Mds/2011 dated 11-05-2012 for the assessment year 2006-07 followed the decision of the Tribunal in the case of M/s. Tamilnadu 3 ITA No.427 /Mds/2012 Cricket Association v. The Dy. CIT (Exemptions) in ITA No. 1851/Mds/2011 for the assessment year 2007-08 dated 10-04- 2012 and the relevant portion of the order of the Tribunal is extracted as under :
"5.The A.R of the assessee submitted that the issue was no longer res integra as Chennai 'B 'Bench of the Tribunal in the case of M/s Tamilnadu Cricket Association vs The Dy. CIT(Exemptions) in I.T.A.No. 1851/Mds/2011, for assessment year 2007-08, order dated 10.4.2012, on the similar facts of the case, has allowed the depreciation to the assessee by observing as under:
"4. Now before us, learned A.R., strongly assailing the orders of authorities below, submitted that co-ordinate Bench of this Tribunal in the case of Sri Mariamman Educational Health and Charitable Trust v. ACIT in I.T.A. Nos. 142 to 144/Mds/2010 dated 2nd February, 2011 had, after considering all the decisions relied on by the A.O. as well as CIT(Appeals), held that the claim of the assessee stood clearly covered by the decision of Hon'ble Punjab & Haryana High Court in the case of CIT v. Tiny Tots Education Society (330 ITR 21).
5. Per contra, learned D.R. supporting the orders of the authorities below, reiterated that the decision of Hon'ble Apex Court in the case of Escorts Ltd. (supra) supported the disallowance made by the A.O.
6. We have perused the orders and heard the rival submissions. In our opinion, the question as to whether depreciation can be 4 ITA No.427 /Mds/2012 claimed as an utilization for the purpose of applying Section 11 of the Act stands resolved in favour of assessee by the decision of Hon'ble Punjab & Haryana High Court in the case of Tiny Tots Edcuation Society (supra). The co-ordinate Bench of this Tribunal in the case of Sri Mariamman Educational Health and Charitable Trust (supra), after considering the arguments of the counsel for both sides, which were on similar lines, had at paras 5 & 6 of its order dated 2.2.2011, held as under:-
"5. We have heard both the sides and considered the material on record as well as precedents relied upon by the ld. Counsel for the assessee and find that similar issue arose in the appeals of the Department, which has been discussed, considered and decided by the 'B' Bench of the Tribunal (in which one of us is party) and vide order dated 18.10.2010 in the case of DDIT (Exemptions) v. M/s. St. John's Educational Trust (supra), the same has been considered and discussed to determine from para 3 onwards to take decision in favour of the assessee and relevant portion of the order is reproduced as under:
3. Briefly, the facts are that the assessee is a trust running educational trust and registered u/s. 12A(a) of the Income Tax Act, 1961.
4. The gross receipts, amounts of depreciation claimed and reasons for disallowance for respective years are given as under:
(a) The return of income filed for (i) Assessment Year 2004-05 declares NIL income and gross receipts of `.18,95,45,440/- in which the claim of depreciation made at `.2,72,85,356/- which was completed as "No Demand" while disallowing the depreciation claim of the assessee, the Assessing Officer has stated that when the assessee had claimed the cost of addition to assets as application of funds, claim of depreciation on the same assets could not be allowed.5 ITA No.427 /Mds/2012
(b) The return of income filed for (i) Assessment Year 2005-06 declares NIL income and gross receipts of `. 22,17,53,309/- in which the claim of depreciation made at `.2,82,17,782/- which was completed as "No Demand" while disallowing the depreciation claim of the assessee, the Assessing Officer has stated that when the assessee had claimed the cost of addition to assets as application of funds, claim of depreciation on the same assets could not be allowed.
(c) The return of income filed for (i) Assessment Year 2006-07 declares NIL income and gross receipts of `.21,71,47,737/- in which the claim of depreciation made at `. 2,64,72,392/- which was completed as "No Demand" while disallowing the depreciation claim of the assessee, the Assessing Officer has stated that when the assessee had claimed the cost of addition to assets as application of funds, claim of depreciation on the same assets could not be allowed.
(d) The return of income filed for (i) Assessment Year 2007-08 declares NIL income and gross receipts of `.23,53,18,947/- in which the claim of depreciation made at `.2,49,35,874/- which was completed as "No Demand" while disallowing the depreciation claim of the assessee, the Assessing Officer has stated that when the assessee had claimed the cost of addition to assets as application of funds, claim of depreciation on the same assets could not be allowed.
6.Assessee took up the matters in appeal and it was contended before the first appellate authority that orders of the Assessing Officer are not legally correct because he has erred in holding that depreciation on assets should not be taken into account for determining the total income of the assessee - trust, that Ld. Assessing Officer ought to have followed Bombay High Court decision in the case of CIT Vs. Institute of Banking Personal Solution ( 264 ITR 110), and prayed that appeal be allowed.
6. During the appellate proceedings, the learned counsel for the assessee submitted the detailed written submission whose salient features were reproduced by the Ld. CIT(A) in his order in para-5 of his order and while considering the facts and circumstances of the case, impugned order, rival submissions and case 6 ITA No.427 /Mds/2012 laws relied upon by the assessee as well as by the Assessing Officer, the issue involved in this case was discussed from para-7 & 8 in appeal for Assessment Year 2004-05 and CIT(A) has concluded to decide the appeal in favour of the assessee as per paras 9 to 11 of his order for the year 2004-05 as under:-
"9. It could be seen from the judgement of the Hon'ble High Court of Bombay, reported in 264 ITR 110, wherein the assessee was the trust and it derived its income from depreciable assets. The assessee took into account depreciation on those assets in computing the income of the trust. The ITO 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 Appellate Assistant Commissioner. The appeal was rejected. The Tribunal, however, took the view that when the ITO 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 spent in acquiring those assets. This did not mean that in computing income from those assets in subsequent years, depreciation in respect of those assets can not be taken into account. This view of the Tribunal has been confirmed by the Bombay High Court in the above judgement i.e. Director of Income- tax(Exemption) v. Framjee Cawasjee Institute [1993] 109 CTR 463. Hence, this issue was covered by the decision of the Bombay High Court in the above judgement. Consequently, this issue was answered in the affirmative i.e. in favour of the assessee and against the Department.
10. The ratio of the above mentioned decision reported in 264 ITR 110 (2003) in the case of CIT vs. Institute of Banking, wherein the Bombay High Court has held that the Tribunal was right in law in directing the Assessing Officer to allow depreciation on the assets the cost of which has been fully allowed as application of income u/s.11 in the past years squarely covered in the instant case.
11. In the advent of the above discussions and respectfully following the decision of the Hon'ble Bombay High Court, cited supra, the appellant trust is eligible for claim of depreciation on the assets the 7 ITA No.427 /Mds/2012 cost of which had been fully allowed as application of income u/s. 11 in the past years. The Assessing Officer is therefore, directed to delete the disallowance of `.2,49,35,874/- made in the impugned order and revise the assessment accordingly. Thus, the appellant succeeds in the appeal."
The said order was followed in the subsequent years in identical manner wherein claim of depreciation was disallowed.
7. Aggrieved by these orders of CIT(A), the department has come up in appeal for all the years and while relying upon another Supreme Court decision in the case of Escort Ltd., (199 ITR 43 ), it was contended that double taxation can not be allowed, unless there is express provision for the same in the statute and while referring to CIT(A)'s order in the case of M/s.Rangaletchurni Educational Trust, Chennai, which has been decided in favour of the Department, it was pleaded for reversal of the order of Ld. CIT(A) for all the four years and to uphold the order of the Assessing Officer in this regard.
8. Ld. DR while arguing the appeals of the Department has mainly relied upon Hon'ble Supreme Court in the case of M/s.Escort Ltd., (supra) to plead that when income of the assessee is being allowed as application of fund, so allowance of depreciation on the same would tantamount to double deduction, which is not permissible, therefore the order of the Ld. CIT(A) for all the four years should be reversed and that of Assessing Officer may be restored.
9. Ld. Counsel for the assessee while relying upon the basis and reasoning as given by the Ld.CIT(A) in allowing the first appeals of the assessee, has pleaded that the solitary issue in these appeals is fully covered by Bombay High Court decision and Ld. CIT(A) while considering all the aspects of the case as well as case laws cited, has rightly followed the view of the Hon'ble Bombay High Court, which was the only view available at the time of deciding the appeals and 8 ITA No.427 /Mds/2012 now also Hon'ble Punjab & Haryana High Court in the case of CIT Vs. M/s.Tiny Tots Education Society as reported in 2010-TIOL-550-High Court-P&H-IT vide order dt.28th July, 2010, under similar facts, has decided the identical issue in favour of the assessee and while enclosing the copy of the judgement of Hon'ble Bombay High Court as well as Hon'ble Punjab & Haryana High Court, Ld. Counsel for the assessee has strongly pleaded that since the issue is squarely covered in favour of the assessee, not by one High Court but by second High Court also in which Supreme Court decision's case of Escort Ltd. Vs. UOI and others has been discussed, has concluded to hold the question proposed in favour of the assessee, therefore being covered the matter, order of the CIT(A) for all the years are liable to be upheld. It was thus urged for upholding the impugned orders and for dismissing all the appeals of the Revenue.
10. After hearing both the sides, considering the material as well as case laws cited by the rival side, we find that in the recent judgement of the Hon'ble High Court of Punjab & Haryana in the case of CIT Vs. M/s.Tiny Tots Education Society (supra) has concluded to decide the issue in favour of the assessee as per paras 4 to 7 as under:-
"4. Ld. Counsel for the Revenue submits that in view of judgement of the Hon'ble Supreme Court in Escorts Ltd. and another v. Union of India and others [1993] 199 ITR 43, the Assessee could not claim deduction when its income was exempt, as it will amount to getting double benefit.
5. We are unable to accept the submission.
7.
6. The matter was discussed in our recent judgement dated 5.7.2010 in ITA No.535 of 2009, the CIT,Karnal v. Market Committee,Pipli. After referring to judgments in CIT V. Seth Manilal Ranchhoddas Vishram Bhawan Trust [1992] 198 ITR 598 (Guj.) and CIT v. Institute of Banking Personal Selection (IBPS) (2003) 131 Taxman 386 (Bom.), CIT v. Rao Bahadur Calavala Cunnan Chetty Charities [1982] 135 ITR 485 (Mad.), CIT v. Society of the Sisters of St. Anne [1984] 146 ITR 28 (Kar) and CIT 9 ITA No.427 /Mds/2012 V. Raipur Pallottine Society [1989] 180 ITR 579 (M.P.), the judgment of the Hon'ble Supreme Court in Escorts Ltd., (supra), was held not to be applicable to the situation where depreciation was claimed by a charitable institution in determining percentage of funds applied for the purposes of charitable objects. It was observed:-"9. In the present case, the assessee is not claiming double deduction on account of depreciation as has been suggested by Ld. Counsel for the Revenue. The income of the assessee being exempt, the assessee is only claiming that depreciation should be reduced from the income for determining the percentage of funds which have to be applied for the purposes of the trust. There is no double deduction claimed by the assessee as canvassed by the Revenue. Judgment of the Hon'ble Supreme Court in Escorts Ltd and another (supra) is distinguishable for the above reasons. It can not be held that double benefit is given in allowing claim for depreciation for computing income for purposes of Sec.11. The questions proposed have, thus, to be answered against the revenue and in favour of the assessee.
7. In view of above, we are unable to hold that the questions proposed by the Revenue are substantial questions of law."
8. Since the issue is squarely covered in favour of the assessee and Department has not brought any contrary material or any higher Courts order in its favour, therefore, we do not find any infirmity or flaw in the orders of the CIT(A) in this regard as such while concurring with the conclusion as drawn by the CIT(A), we uphold his orders and dismiss the appeals of the Revenue being devoid of any merits."
6. Since the issue is squarely covered in favour of the assessee and Department has not brought any contrary material or any higher Courts order in its favour, therefore, while following the said decision, we accept all the appeals of the assessee an direct the Assessing Officer to allow the claim of the assessee in this regard."
The issue thus stands fully covered in favour of assessee. No other orders of 10 ITA No.427 /Mds/2012 any higher authorities were brought before us by the Revenue to take a different view. Hence, we set aside the orders of the authorities below and direct that assessee's claim with regard to depreciation while computing its exemption under Section 11 of the Act, be allowed."
9. The facts being identical, respectfully following the precedent, we set aside the order of the lower authorities and direct the Assessing Officer to allow the claim of depreciation of ` 57,09,195/- to the assessee. Thus, the grounds of appeal of the assessee are allowed."
Respectfully following the decision of the Tribunal in the assessee's own case, this ground of appeal filed by the assessee is allowed.
6. In the result, the appeal is allowed.
Order pronounced in the open court at the time of hearing on Wednesday, the 18th of July, 2012, at Chennai.
Sd/- Sd/-
(Dr. O. K. Narayanan) ( V.Durga Rao )
VICE PRESIDENT JUDICIAL MEMBER
Chennai,
Dated the 18th July, 2012.
H.
Copy to: Assessee/AO/CIT (A)/CIT/D.R./Guard file