Income Tax Appellate Tribunal - Lucknow
Little Scholars Academy, Amroha vs Acit(Examption) Circle, Lucknow on 8 June, 2023
I.T.A. No.214/Lkw/2022
1
Assessment year:2017-18
IN THE INCOME TAX APPELLATE TRIBUNAL
LUCKNOW BENCH 'SMC', LUCKNOW
BEFORE SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER
AND SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER
I.T.A. No.214/Lkw/2022
Assessment Year: 2017-18
Little Scholars Academy, Vs. A.C.I.T. (Exemption),
Joya Road, Circle-Lucknow.
Amroha.
PAN:AAATL33331R
(Appellant) (Respondent)
Appellant by Shri Pramod Kr. Agarwal, Advocate
Respondent by Shri Amit Nigam, Sr. D.R.
Date of hearing 06/06/2023
Date of pronouncement 08/06/2023
ORDER
PER ANADEE NATH MISSHRA:A.M. (A) The present appeal vide I.T.A. No.214/Lkw/2022 has been filed by the assessee for assessment year 2017-18 against impugned appellate order dated 13/10/2022 (DIN & Order No.ITBA/NFAC/S/250/2022- 23/1046290725(1) of Commissioner of Income Tax (Appeals) ["CIT(A)" for short]. The grounds of appeal are as under:
"1. That the ld. Commissioner of Income tax (Appeals) has erred in law and in the circumstances of the case in confirming the order of Assessing Officer who has disallowed whole depreciation claimed by invoking provisions of section 11(6) of act inserted w.e.f.01/04/2015 while depreciation on cost of assets acquired during A.Y. 2017-18 was not claimed as application of income for charitable purpose.
2. That the ld. Commissioner of Income Tax (Appeals) has erred in law in appreciating the provisions of section 11(6) of act I.T.A. No.214/Lkw/2022 2 Assessment year:2017-18 effective from A.Y. 2015-16 that depreciation is not allowable on those assets only which cost of acqu1sitio is claimed as capital application of income for charitable purpose or not.
3. That the ld. Commissioner of Income tax (Appeals) has erred in law in not appreciating the facts of decision dated 13/10/2017 of the Hon'ble apex court in the case of CIT vs. Rajasthan and Gujarat Charitable Foundation in civil appeal no 7186 of 2014 wherein orders of lower court have been upheld in respect that depreciation & capital application of these assets both were allowable prior to insertion of Section 11(6) of the Income Tax and provisions of section 11(6) are prospective."
(B) In this case, assessment order dated 15/12/2019 was passed u/s 143(3) of the Income Tax Act, 1961 ("IT Act" for short) by the Assessing Officer whereby the assessee's income was determined at Rs.2,32,094/- as against returned income of NIL. The relevant portion of the assessment order is reproduced as under:
"4. As per Income and Expenditure account, the society/trust has claimed depreciation of Rs.58,37,507/-. As per provision of Section 11(6) of the IT Act, depreciation is not provided as the application has been claimed while purchasing the assets. Accordingly, application claimed of Rs.58,37,597/- as depreciation being disallowed. The computation of income is as under:
Excess of income over expenditure Rs.1,35,20,456/- Add:
Depreciati8on Rs. 58,37,507/-
Total Rs.1,93,57,963/-
Less:
Capital Expenditure Rs.1,20,55,783
Total net excess Rs. 73,02,180/-
Less:15% of total receipts allowed to be
carried forward u/s 11(1) of the IT Act Rs. 70,70,086/-
Balance taxable income Rs. 2,32,094/-
I.T.A. No.214/Lkw/2022
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Assessment year:2017-18
In view of the above discussion, the assessment is completed at Rs.2,32,094/-"
(B.1) The assessee filed appeal in the office of the learned CIT(A) against the aforesaid assessment order. Vide impugned appellate order dated 15/10/2022, the learned CIT(A) dismissed the assessee's appeal. The relevant portion of the aforesaid impugned order of learned CIT(A) is reproduced as under:
"6.3.3 I have carefully gone through the written submission and case laws on which reliance has been placed by the appellant. For the sake of clarity provision of section 11(6) which has been inserted in the statute by the Finance (2) Act, 2014 w.e.f. 01.04.2015 is produce as below:
"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".
6.3.4 On perusal of provision of section 11(6) it is clear that where any income is applied or accumulated or set apart for application, then, the income shall be computed 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. It is further observed that year of application of income has no meaning, but if application of income has been made irrespective of year, depreciation will not be allowable from AY-2015-16.
6.3.5 The appellant claim that this amendment is prospectively in nature so depreciation on the assets which has been purchased prior to A.Y. 2015-16 does not require to be added and placed reliance in the decision of Hon'ble Apex Court in the case of CIT Vs Rajasthan and Gujrati Charitable Foundation in Civil Appeal No 7186 of 2014. However the appellant's belief is on wrong footing. The said decision of Hon'ble Apex Court is prospective in the sense that provision of I.T.A. No.214/Lkw/2022 4 Assessment year:2017-18 section 11(6) of the Act is not applicable prior to A.Y. 2015-16 and it does not speak about depreciation on the assets which have been purchased prior to A.Y. 2015-16, therefore the appellant contention is hereby rejected.
6.3.6 Considering the above discussion, it is held that the Assessing Officer has rightly disallowed the depreciation amounting to Rs 58,37,507/- being claimed by the society/trust on application for purchase of assets. Therefore grounds of appeal are hereby dismissed."
(C) The present appeal has been filed by the assessee against the aforesaid impugned appellate order dated 13/10/2022 of learned CIT(A). In the course of appellate proceedings in the Income Tax Appellate Tribunal ("ITAT" for short), a paper book containing the following particulars was submitted from the assessee's side:
Sl.No. Particulars 1. Written submissions
2. Order of the Hon'ble S.C. in the case of CIT - III Pune Vs Rajasthan and Gujarati Charitable foundation, Poona
3. Order of the Hon'ble ITAT Lucknow Bench in the case of ITO (Exemption) Lucknow Vs Surya Bux Pal Charitable Trust Lucknow.
4. Order of the Hon'ble ITAT Jodhpur Bench in the case of ACIT (Exemption), Circle Jodhpur Vs Mayo College General Council, Ajmer
5. Assessment order, Audit Report, Balance Sheet, Profit & Loss A/c and Revised Depreciation Chart A.Y 2015-2016
6. Copy of ITR, Computation of Income, Revised Computation Of Income, Audit Report, Balance Sheet, Profit & Loss A/c and Revised Depreciation Chart A.Y 2016-2017
7. Copy of Computation of Income Audit Report, Balance Sheet, Profit & Loss A/c and Revised Depreciation Chart A.y 2017-2018 (C.1) At the time of hearing before us, the appellant assessee was represented by Shri Pramod Kr. Agarwal, Advocate, learned Counsel for the assessee and Revenue was represented by Shri Amit Nigam, learned Sr. Departmental Representative. We have heard representatives of both sides. The learned Counsel for the assessee submitted that section 11(6) of the IT I.T.A. No.214/Lkw/2022 5 Assessment year:2017-18 Act, inserted by Finance Act, 2014, with effect from 01/04/2015, is prospective in nature and had no application for assessment years prior to assessment year 2015-16, as held by Hon'ble Supreme Court in the case of CIT vs. Rajasthan and Gujarati Charitable Foundation, Poona (89 taxmann.com 127). He further submitted, that the relevant assessment year for the present appeal being assessment year 2017-18, the applicability of section 11(6) is to be considered having regard to whether, depreciation has been claimed in respect of any asset, acquisition of which has been claimed as an application of income u/s 11 of the Act or in any other previous year. He further submitted that in the present case, depreciation has not been claimed in respect of any asset, acquisition of which has been claimed as application of income in this year or any other previous year. He further submitted, that the Assessing Officer as well as learned CIT(A) have misconstrued section 11(6) of the IT Act and have taken adverse view against the assessee despite the fact that the assessee has not claimed depreciation in respect of any asset acquisition of which has been claimed as an application of income u/s 11 of the Act either in this year or in other previous year. Accordingly, the learned Counsel for the assessee submitted that the order of learned CIT(A) should be set aside and the Assessing Officer should be directed to delete the addition of Rs.2,32,094/-.
(C.2) Learned Sr. D.R. submitted that the submissions made by the learned Counsel for the assessee required factual verification and for this purpose the matter should be set aside to the file of the Assessing Officer with the direction to pass fresh assessment order in accordance with law after considering the relevant facts and circumstances and after providing reasonable opportunity to the assessee. Learned Counsel for the assessee expressed no objection to the submissions made by learned Sr. D.R. However, he requested that specific direction should be given to the Assessing Officer to the effect that due consideration be given to whether the assessee has actually claimed I.T.A. No.214/Lkw/2022 6 Assessment year:2017-18 depreciation in respect of any asset acquisition of which has been claimed as an application of income u/s 11 of IT Act either in this year or in any other previous year. Learned Sr. D.R. expressed no objection to specific direction being issued to the Assessing Officer.
(C.2.1) We have heard both the sides. In view of the foregoing and as representatives of both sides are in agreement on this, we set aside the impugned appellate order dated 13/10/2022 of learned CIT(A) and we restore the issue in dispute in the present appeal to the file of the Assessing Officer with the direction to pass de novo assessment order having due regard for the relevant facts and circumstances and after providing reasonable opportunity to the assessee. We further specifically direct the Assessing Officer to give due consideration to whether the assessee has actually claimed depreciation in respect of any asset, acquisition of which has been claimed as an application of income u/s 11 of IT Act either in this year or in any other previous year, while passing consequential de novo assessment order as directed by us earlier, in accordance with section 11(6) of IT Act.
(D) In the result, the appeal of the assessee stands partly allowed.
(Order pronounced in the open court on 08/06/2023) Sd/. Sd/.
(SUDHANSHU SRIVASTAVA) (ANADEE NATH MISSHRA)
Judicial Member Accountant Member
Dated:08/06/2023
*Singh
Copy of the order forwarded to :
1. The Appellant
2. The Respondent.
3. Concerned CIT
4. D.R., I.T.A.T.,
5. CIT(A)
Assistant Registrar