Income Tax Appellate Tribunal - Ahmedabad
U.N. Mehta Institute Of Cardiology & ... vs Department Of Income Tax on 14 March, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
'B' BENCH - AHMEDABAD
(BEFORE SHRI A. MOHAN ALANKAMONY, AM AND SHRI KUL BHARAT, JM)
ITA No. 2649/Ahd/2012
A. Y.: 2009-10
The Assistant Director of Income- Vs U. N. Mehta Institute of
tax (Exemption), 2nd Floor, Nature Cardiology & Research
View Building, Opp. H. K. House, Centre, Civil Hospital
Ashram Road, Ahmedabad 09 Campus, Ahmedabad
P. A. No. AAATU 0329 E
(Appellant) (Respondent)
Appellant by Shri D. S. Kalyan, Sr. DR
Respondent by Shri Tushar P. Hemani, AR
Date of hearing: 14-03-2013
Date of pronouncement: 22-03-2013
ORDER
PER A. MOHAN ALANKAMONY: This appeal is preferred by the revenue aggrieved by the order of the learned CIT(A)- XXI, Ahmedabad dated 13-09-2012, in appeal No. CIT(A)-XXI/406/11-12, passed u/s 250 read with section 143(3) of the IT Act, for the assessment year 2009-10.
2. The revenue has raised five grounds in its appeal whereas the crux of the issue is deleting the disallowance of depreciation by the learned CIT(A) amounting to Rs.1,28,86,250/- being the depreciation claimed on the assets purchased the value of which was claimed as application of funds u/s 11(1) (a) of the Act.
ITA No.2649/Ahd/2012 (AY: 2009-10 2ADIT (Exemption) Vs U. N. Mehta Institute of Cardiology & Research Centre
3. At the outset, the learned AR pointed out that the issue is covered against the revenue by the decision of the ITAT Ahmedabad Bench in the following cases:
(i) ITA No. 2657/Ahd/2012(AY 2009-10) order dated 24-01 2013 - ADIT (Exemption) Vs Blind People Association.
(ii ITA No. 2658/Ahd/2012(AY:2009-12) order dated 31-01- 2013 - ADIT (Exemption) Vs Friends WWB, India.
4. The learned DR could not controvert to the submissions of the learned AR.
5. We have heard the rival submissions and perused the materials on record. At the time of hearing both the parties agreed that the issue is covered against the revenue by the orders of the Tribunal cited supra. Further, in the aforesaid order of the ITAT Ahmedabad "A" Bench ITA No. 2658/Ahd/2012 dated 31-01-2013 cited supra the Tribunal held as under:
"6. Regarding ground No.3 of the revenue's appeal, as per which, the claim of the revenue that deduction u/s 32 is allowable while computing profit and gains from business and since the charitable trust is not engaged in any business, the income is not assessable under this head and hence, depreciation is not allowable for this reason also. In this regard, we would like to observe that it was held by Hon'ble Gujarat High Court and Hon'ble Bombay High Court that although, the income of the assessee trust does not fall under the head income from business but still such income has to be computed on the basis of commercial principles and therefore, depreciation has to be allowed. In the case of CIT Vs Seth Maniklal Ranchoddas Vishram Bhavan Trust (supra), Hon'ble Gujarat High Court has agreed with the view taken by Hon'ble Madras High Court on this issue. Hon'ble Madras High Court has taken this view in the case of CIT Vs Rao Bahadur ITA No.2649/Ahd/2012 (AY: 2009-10 3 ADIT (Exemption) Vs U. N. Mehta Institute of Cardiology & Research Centre Calavala Cunnan Chetty Charities as reported in 135 ITR 485 that the income from the property held under trust would have to be arrived at in the commercial manner and not under the various heads set out in section 14. In our considered opinion, this judgement of Hon'ble Gujarat High Court along with this judgment of Hon'ble Madras High Court agreed to by Hon'ble Gujarat High Court covers this aspect also against the revenue and hence, this ground of the revenue is also liable to be rejected. We order accordingly.
7. Before parting, we would like to observe that the written submissions filed by the learned DR as reproduced above does not render any help to the revenue because sitting in Gujarat, we are duty bound to follow the judgment of Hon'ble Gujarat High Court in preference to the Judgment of Hon'ble Kerala High Court cited by learned DR. Moreover, we also find that in the present case, it is not an allegation of the A. O. in the assessment order that any cash of the assessee has gone outside the books of the assessee. Facts are not brought to our notice on the basis of which it is observed by Hon'ble Kerala High Court that cash surplus has gone outside the books. Generally, claiming of depreciation in books or in computation of income does not affect cash position because it only reduces the profit and reduces the WDV of the concerned asset.
Regarding the example given by learned DR in the written submissions, we would like to observe that claiming of depreciation is mainly to build fund to facilitate replacement of asset when it is worn out because of wear & tear or obsolesce and hence, it cannot be alleged that there will be leakage if depreciation is allowed.
Regarding various submissions to say that the judgment of Hon'ble Gujarat High Court is not applicable in the present case, we do not find any in the same because we have already seen that granting of exemption u/s 11 and then depreciation u/s 32 does not amount to granting double deduction because exemption u/s 11 is not a deduction but exemption of an income from the liability of tax on fulfillment of certain conditions. For the same reasons, reliance placed on 211 ITR ITA No.2649/Ahd/2012 (AY: 2009-10 4 ADIT (Exemption) Vs U. N. Mehta Institute of Cardiology & Research Centre 293, 211 ITR 635 and 155 ITR 120 is misplaced because there is no double deduction in the present case."
5.1 Further, ITAT Ahmedabad "A" Bench vide order dated 24-07-2009 in the case of ACIT CC 1 (3) Vs Ahmedabad South Indian Association Charitable Trust in ITA No.2331/Ahd/2004, for the assessment year 2001-02 along with other appeals had decided this issue in favour of the assessee and against the revenue, wherein AT Para 11 to 14, it was held as under:
"11. We have considered the rival submissions of the parties and perused the material available on record. In the case of CIT v. Sheth Manilal Ranchhoddas Vishram Bhavan Trust (198 ITR
598) (Guj), the facts are that the assessee was a trust registered under the Public Trusts' Act. The income of the assessee is mainly from immovable property. In the returns of income filed for the assessment years 1971-72 and 1972-73, the assessee claimed depreciation and calculates its income accordingly. The Income-tax Officer has rejected the claim of the assessee as he was of the view that the income from house property was to be calculated according to sections 22 to 27 of the Act. In appeal, the Appellate Assistant Commissioner held otherwise. The revenue then went to the Tribunal. The Tribunal dismissed the appeal. Same thing happened for the assessment year 1972-73 also. At t he instance of Revenue the following questions were referred to the Hon'ble Court for their decision.
"1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that, while computing income under section 11(1) (a) of the Income tax Act, 1961, depreciation has to be allowed?
2. Whether the Tribunal was right in law in holding that, having regard to the scheme of the Act, 'income' referred to in section 11(1) (a) of the Act is to be computed not in accordance with the provisions of the Act ITA No.2649/Ahd/2012 (AY: 2009-10 5 ADIT (Exemption) Vs U. N. Mehta Institute of Cardiology & Research Centre but in accordance with the normal rules of accountancy under which the depreciation has to be allowed while computing such income under section 11 (1) (a) of the Act?"
Hon'ble High Court answered the questions in the affirmative holding that income from the property held under the Trust should be computed in accordance with the normal rules of accountancy in which depreciation on house property is to be allowed. It has further been held therein that that the expression "income" has to be understood in the popular or general sense and not in the sense in which the income is arrived at for the purpose of assessment to tax by application of some artificial provisions either giving or denying deduction. The provisions of Income-tax Act are to compute income under different heads cannot be introduced to find out the income derived from the property held under the Trust. Similar view was taken by the Hon'ble Bombay High Court in the case of CIT v. Institute of Banking Personnel Selection.
12. However, it is not very clearly laid down in these decisions referred to in the foregoing paragraph as to whether depreciation, in respect of assts in which investment was allowed as application earlier, would be further considered as application in subsequent year for the purpose of treating 85% of receipts as application and 15% of the receipts for being carried forward i.e., whether depreciation would be further treated as application for charitable purposes. Notwithstanding, that the income in the property held by the Trust should be computed in the normal commercial sense and therefore, depreciation is required to be deducted to compute income accordingly, but what is computed for the purposes of taxing u/s. 11 is the deficiency between 85% and actual amount applied for charitable purposes. For example - Where a trust applies only, say 60% of its receipts as application to charitable purposes then 25% of the receipts would be treated as deficiency which should be subjected to tax and 15% is allowed to be carried forward. In our considered view, Hon'ble Bombay and Gujarat High Court in the above referred cases were concerned with the computation of income of the trust in the ITA No.2649/Ahd/2012 (AY: 2009-10 6 ADIT (Exemption) Vs U. N. Mehta Institute of Cardiology & Research Centre normal commercial sense and had not considered whether the amount of depreciation would be considered as application to arrive at 85% of the receipts in addition to investment in the asset already allowed as application in an earlier year. The allowance of depreciation as further application of receipts in subsequent year would apparently be a double application which, in our humble view, would be apparently8 inconsistent as not so provided in the law and hence untenable apparently illogical. Notwithstanding our view, we respectfully follow the decision of Hon'ble High Court in the case of CIT v. Sheth Manilal RAnchhoddas Vishram Bhavan Trust (198 ITR 598), and hold that depreciation would be further allowed to the trust in a subsequent year in respect of the property when we calculate its income in a commercial sense. We, therefore, uphold the impugned order of the learned CIT(A) and dismiss the ground raised by the Revenue in this regard.
13. Grounds No.3 and 4 in each of the appeals filed by the Revenue are general in nature and need no specific adjudication.
14. In the result, all the appeals of the Revenue are dismissed."
5.2 Respectfully following the decisions of our higher judiciary authorities and predecessors, we hold the issue in favour of the assessee. Further, it is explicitly clear that Section 11 (1) (a) of the Act provides a condition for claiming exemption of income in the case of certain assessees from their total income for a particular assessment year under Chapter III of the Act viz. "incomes which do not form part of total income", while as depreciation is a deduction allowable u/s 32 of the Act while computing income under the head "income from business or profession" as provided under Chapter V of the Act viz., computation of total income under various heads. Thus, both the sections 11(1) (a) of the Act and section 32 of the Act are ITA No.2649/Ahd/2012 (AY: 2009-10 7 ADIT (Exemption) Vs U. N. Mehta Institute of Cardiology & Research Centre applicable on different issues and under different circumstances. Accordingly, both these sections will be applicable independently when conditions stipulated therein are fulfilled.
6. In the result, the appeal of the revenue is dismissed.
Order pronounced in the open Court on 22-03-2013 Sd/- Sd/-
(KUL BHARAT) (A. MOHAN ALANKAMONY)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Lakshmikanta Deka/-
Copy of the order forwarded to:
1. The Appellant
2. The Respondent
3. The CIT concerned
4. The CIT(A) concerned
5. The DR, ITAT, Ahmedabad
6. Guard File
BY ORDER
Asst. Registrar, ITAT, Ahmedabad
1. Date of dictation- direct on computer 13-03-13/15-03-13
2 Date on which the typed draft is placed before the 18-03-13
Dictating Member
3 Date on which approved draft comes to the Sr. P. S./
P.S.:
4 Date on which the fair order is placed before the
Dictating Member for pronouncement
5 Date on which the fair order comes back to the Sr.
P.S./P.S.:
6 Date on which the file goes to the Bench Clerk:
7 Date on which the file goes to the Head Clerk
8 The date on which the file goes to the
Assistant Registrar for signature on the order 9 Date of Despatch of the Order: