Income Tax Appellate Tribunal - Ahmedabad
The Dcit (Exemptions), Circle-2,, ... vs Amreli Jilla Leva Patel Charitable ... on 30 August, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD "C" BENCH
(BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER
& SHRI AMARJIT SINGH, ACCOUNTANT MEMBER)
ITA. No: 423/AHD/2017
(Assessment Year: 2012-13)
Deputy Commissioner of V/S Amreli Jilla Leva Patel
Income-tax (Exemptions), Charitable Trust Pallavi
Circle-2, Ahmedabad Apartment, A.K. Road,
Surat-395008
(Appellant) (Respondent)
PAN: AABTS5025Q
Appellant by : Shri Lalit P. Jain, Sr. DR
Respondent by : None
(आदे श)/ORDER
Date of hearing : 24 -08-2018
Date of Pronouncement : 30 -08-2018
PER MAHAVIR PRASAD, JUDICIAL MEMBER
1. This appeal by the Revenue is directed against the order of the Ld. CIT(A)-9, Ahmedabad dated 05.12.2016 pertaining to A.Y. 2012-13 and following grounds have been taken:
2 ITA No. 423/Ahd/2017. A.Y. 2012-13
1. Whether on the facts and in the circumstances of the case is the Ld. CIT (A) justified in allowing the depreciation of Rs. 1,96,37,498/-which amount to double deduction as 100% deduction was already allowed to the assessee as application of income.
2. On the facts and circumstances of the case, the Id. Commissioner of Income-Tax (Appeal) ought to have upheld the order of the Assessing officer.
2. Briefly stated the facts of the case are that the assessee is a Public Charitable Trust engaged in the educational activity. There are various college and institution are run under the trust. The assessee trust is registered under section 12A of the Act, vide registration SRT/CIT/SIB/ 110-72-S/2000-2001 dated 24/10/2000. The trust is also approved u/s 80 G(5) of the Income tax Act, 1961 vide No. SRT/CIT-III/TECH/80G(5)/(45/7)/2008-09 Dated 26/03/2009.
3. During the course of scrutiny assessment, it was gathered that the assessee has claimed depreciation of Rs.1,96,37,499/- as well as addition in fixed asset as application. The assessee was given show cause as why the claim of depreciation should not be disallowed. The assessee vides its written submission dated 16/02/2015 submitted the following:-
1. The provision of section 11 permits a charitable trust to treat even the capital outlay, as application of its income. This is special provision which is required to be given effect to.
2. Accounts of the trust are required to be audited. As par well recognized accounting principle, depreciation is a necessary charge on the surplus/deficit of any organization.
The said trust follows the same principal. The sais trust debit depreciation & credit to the fund( not reduce the value of asset).
3. For your reference valueremains in fund has been offered as income in computation which is shown as "As per balance sheet". So effect of depreciation is nullified(Nil).
3 ITA No. 423/Ahd/2017. A.Y. 2012-13
4. So, there is "No Double deduction". Any value 'addition to asset is claimed as application of income.
5. The jurisdictional high court in the case of Commissioner of Income Tax v. Sheth Manilal Ranchhoddas Vishram Bhavan trust reported in 198 ITR 598 has decided the issue of depreciation in case of a charitable trust in favour of the assessee income of the trust. For more detail regarding this case please refer copy of the court judgment attached herewith ready reference.
6. In the case of Ahmedabad South Indian Association Charitable Trust (Tax Appeal No 933,934,936 of 2010 and 439 of 2012) the Gujarat high court has again held that even when entire amount of capital asset is allowed as application of income, a trust is entitled to deduction of depreciation and the same does not amount to double deduction.
7. In view of the aforesaid binding precedent, the depreciation is allowable and hence the claim may kindly be allowed.
4. Submissions of the assessee were considered by the ld. A.O. but not found tenable in the eyes of ld. A.O. Hence, he made disallowance of Rs. 1,96,37,498/- holding that the Hon'ble Gujarat High Court as admitted the appeal of the revenue in respect of disallowance of depreciation.
5. Against the said order, assessee preferred first statutory appeal before the ld. CIT(A) who allowed the appeal of the assessee.
6. Now Department is before us. None appeared on behalf of the assessee but written submission have been filed by the assessee.
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7. We have gone through the relevant record and the impugned order. None appeared on behalf of assessee and we have heard the ld. D.R. In our considered opinion, this case is squarely covered by the judgment of Supreme Court in the case of CIT vs. Rajasthan & Gujarati Charitable Foundation Poona (2018) (402 ITR 441) has held matter in favour of the assessee with the following details:
3. As stated above, the first question which requires consideration by this Court is: whether depreciation was allowable on the assets, the cost of which has been fully allowed as application of income under section 11 in the past years? In the case of CIT v. Munisuvrat Jain 1994 Tax Law Reporter, 1084 the facts were as follows. The assessee was a Charitable Trust. It was registered as a Public Charitable Trust. It was also registered with the Commissioner of Income Tax, Pune. The assessee derived income from the temple property which was a Trust property.
During the course of assessment proceedings for assessment years 1977- 78, 1978-79 and 1979-80, the assessee claimed depreciation on the value of the building @2½% and they also claimed depreciation on furniture @ 5%. The question which arose before the Court for determination was :
whether depreciation could be denied to the assessee, as expenditure on acquisition of the assets had been treated as application of income in the year of acquisition? It was held by the Bombay High Court that section 11 of the Income Tax Act makes provision in respect of computation of income of the Trust from the property held for charitable or religious purposes and it also provides for application and accumulation of income. On the other hand, section 28 of the Income Tax Act deals with chargeability of income from profits and gains of business and section 29 provides that income from profits and gains of business ahll be computed in accordance with section 30 to section 43C. That, section 32(1) of the Act provides for depreciation in respect of building, plant and machinery owned by the assessee and used for business purposes. It further provides 5 ITA No. 423/Ahd/2017 . A.Y. 2012-13 for deduction subject to section 34. In that matter also, a similar argument, as in the present case, was advanced on behalf of the revenue, namely, that depreciation can be allowed as deduction only under section 32 of the Income Tax Act and not under general principles. The Court rejected this argument. It was held that normal depreciation can be considered as a legitimate deduction in computing the real income of the assessee on general principles or under section 11(1)(a) of the Income Tax Act The Court rejected the argument on behalf of the revenue that section 32of the Income Tax Act was the only section granting benefit of deduction on account of depreciation. It was held that income of a Charitable Trust derived form building, plant and machinery and furniture was liable to be computed in normal commercial manner although the Trust may not be carrying on any business and the assets in respect whereof depreciation is claimed may not be business assets. In all such cases, section 32 of the Income Tax Act providing for depreciation for computation of income derived from business or profession is not applicable. However, the income of the Trust is required to be computed under section 11 on commercial principles after providing for allowance for normal depreciation and deduction thereof from gross income of the Trust. In view of the aforesatated judgment of the Bombay High Curt, we answer question No. 1 in the affirmative i.e., in favour of the assessee and against the Department.
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 463. In that case, the facts were as follows: The assessee 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 ITO held that depreciation could not be taken into account because, full capital expenditure had been allowed in the year of acquisition of the 6 ITA No. 423/Ahd/2017 . A.Y. 2012-13 assets. The assessee went in appeal before the Assistant Appellate 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 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.
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.
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. Commissioner of Income Tax'.
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.
It also follows that once assessee is allowed depreciation, he shall be entitled to carry forward the depreciation as well.
7 ITA No. 423/Ahd/2017. A.Y. 2012-13 For the aforesaid reasons, we affirm the view taken by the High Courts in these cases and dismiss these matters.
8. Respectfully following the order of the Hon'ble Supreme Court, we dismissed the appeal of the Department and hold the depreciation of assets of a charitable trust assessed u/s. 11 to be allowed.
9. In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in Open Court on 30- 08- 2018
Sd/- Sd/-
(AMARJIT SINGH) (MAHAVIR PRASAD)
ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER
Ahmedabad: Dated 30/08/2018
Rajesh
Copy of the Order forwarded to:-
1. The Appellant.
2. The Respondent.
3. The CIT (Appeals) -
4. The CIT concerned.
5. The DR., ITAT, Ahmedabad.
6. Guard File.
By ORDER
Deputy/Asstt.Registrar
ITAT,Ahmedabad