Income Tax Appellate Tribunal - Chennai
Rani Adaikalaraj Educational And ... vs Department Of Income Tax on 19 June, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
'B' BENCH : CHENNAI
[BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND
SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER]
I.T.A.No.799 & 800/Mds/2012
Assessment years : 2005-06 & 2006-07
The ACIT vs Smt. Rani Adaikalaraj Educational
Circle IVTrichy and Charitable Trust
7-B Arockiasamy Pillai Lane
Crawford, Trichy - 12
[PAN AAATR 0494 H]
(Appellant) (Respondent)
Appellant by : Dr.S.Moharana, CIT/DR
Respondent by : None
Date of Hearing : 19-06-2012
Date of Pronouncement : 22-06-2012
ORDER
PER N.S. SAINI, ACCOUNTANT MEMBER
These are the appeals filed by the Revenue against separate orders passed by the CIT(A), Tiruchirapalli, both dated 10.1.2012, for assessment years 2005-06 and 2006-07.
2. The CIT/DR, at the time of hearing, submitted that in both the appeals the facts and issue involved are similar and therefore, he was arguing the same together.
:- 2 -: I.T.A.No.799 & 800/12
3. The CIT/DR submitted that the issue involved in these appeals is that the CIT(A) erred in allowing the claim of depreciation of ` 33,34,360/- in assessment year 2005-06 and the claim of depreciation of ` 33,34,360/- in assessment year 2006-07 since the expenditure incurred on acquisition of capital asset has already been allowed in full as application of income and therefore, further allowance of depreciation on the very same capital asset amounts to grant of double deduction of the same expenditure.
4. He submitted that the assessee is an AOP and registered as Charitable Trust u/s 12AA of the Income-tax Act, 1961 and had filed its returns of income for assessment years 2005-06 and 2006-07 admitting total income at NIL after claiming exemption u/s 11 of the Act. The assessment was made u/s 143(3) on 18.6.2007 accepting the income returned by the assessee. Subsequently, the assessment was reopened u/s 147 by issue of notice u/s 148 and in the reopened assessment completed by the Assessing Officer on 20.12.2010 the Assessing Officer disallowed depreciation claimed of ` 33,34,360/- on the ground that the expenditure incurred on acquisition of capital asset has already been allowed in full as application of income and further allowance of depreciation on the very same capital asset would amount to grant of double deduction of the same expenditure. The Assessing Officer held that the depreciation is available u/s 32 of the :- 3 -: I.T.A.No.799 & 800/12 Act when the income is computed under the head 'income from business and profession' and since the assessee is involved in charitable activities there is provision in the Income-tax Act, 1961 to allow depreciation claimed on the capital asset. The Assessing Officer has relied on the following decisions:
1) Escorts Ltd vs Union of India[1992] 199 ITR 43(SC)
2) CIT vs Hico Products Pvt. Ltd [1999] 247 ITR 797(SC)
3) Berger Paints India Ltd vs CIT 253 ITR 738(Cal)
4) Tube Investment of India vs CIT, 260 ITR 94(Mad)
5. The CIT/DR further submitted that the CIT(A) has held that allowing claim of depreciation for computing income for the purposes of section 11 does not amount to grant of double benefit to the assessee and hence, directed the Assessing Officer to allow the depreciation claimed by the assessee.
6. The assessee-trust has filed an adjournment application on the ground that the counsel was out of country. The Bench was of the view that appeal can be decided in the absence of the respondent- assessee and therefore, the adjournment application was rejected and the appeal was heard ex-parte the respondent-assessee and disposed of after considering the submissions of the CIT/DR.
7. After considering the submissions of the ld. DR, we find that in the instant case, the assessee is an AOP Trust registered u/s 12AA of the Income-tax Act, 1961. The assessee claimed depreciation of ` :- 4 -: I.T.A.No.799 & 800/12 33,34,360/- in each of the assessment years 2005-06 and 2006-07 in the returns of income filed which was disallowed by the Assessing Officer only on the ground that since the acquisition of the capital asset was allowed in full as application of income and therefore, further allowance of depreciation on the same very capital asset amounts to double deduction of the same expenditure. We find that the CIT(A) has decided the issue by observing as under:
"On verifying the submissions made by the Authorized Representative of the appellant and also considering the materials as well as case laws cited the contentions of the Assessing Officer that the appellant cannot claim deduction when the Trust's income was exempt as it will amount to getting double benefit in view of the judgement of the Hon'ble supreme Court in Escorts Ltd and another Vs Union of India & Ors.[199 ITR 43]. With the recent judgment as discussed by the ITAT, Chennai, the matter was finalized in the order dated 05.07.2010 in ITA No. 535/2009 in the case of CIT Kamal Vs Market Committee, Peepli, and also referring to judgement in CIT Vs Seth Manilal Ranchoddas Vishram Baghavan Trust [(1992)198 ITR 598)(Guj.)] and CIT Vs Institute of Banking Personnel Selection (2003)[131 Taxman 386 (Born.), CIT Vs Rao Bahadur Calavala Cunnan Chetti [(1982)135 IITR 485], CIT Vs Society of Sisters' of St. Anne [146 ITR 28 (Kar.)], C.LT. v Raipur Pallottine Society [180 ITR 579], the judgment of the Hon'ble Supreme Court in Escorts Ltd (Supra) was held not be applicable to the situation where depreciation was claimed by a Charitable institution in determining percentage of funds applied for the purpose of Charitable objects. Even in the case Shri Mariamman Educational and Charitable Trust, Trichy Vs ACIT Trichy the Honble ITAT, 'D' Bench Chennai vide its order dated 021.02.2011 had clearly stated that the appellant is not claiming double deduction on account of depreciation as has been claimed by the Assessing Officer in the present case.
The income of the appellant being exempt, the appellant is only claiming that the depreciation should be reduced from the income for determining the percentage of funds which have to be applied for the purpose of the Trust. There is no double deduction claimed by the appellant as stated by the Assessing Officer. It cannot be held that double benefit is given in allowing claim for depreciation for computing income for the purposes of Section 11. This view is held in the recent :- 5 -: I.T.A.No.799 & 800/12 judgement of Hon'ble High Court of Punjab & Haryana in the case of CIT Vs M/s Tiny Tots Educational Society as reported in 2010 - TIOL - 550- High Court P&H - IT vide order dated 28.07.2010 which has decided the identical issue in favour of the appellant. Therefore, the addition made by the Assessing Officer on account of appellant's claim of depreciation amounts to double deduction when the appellant Society's income is exempt. It will not amount to getting double benefit and hence the addition made by the Assessing Officer is deleted."
8. Thus, we find that the CIT(A) has decided this issue by following the decision of the Chennai Bench of the Tribunal as also the decision of the Hon'ble P&H High Court in the case of M/s Tiny Tots Educational Society (supra) wherein it has been held that the income of the assessee being exempt the assessee was only claiming that depreciation should be reduced from income for determining the percentage of funds which have to be applied for the purpose of the Trust and therefore, it cannot be held that double benefit is given in allowing claim of depreciation for computing the income for the purposes of section 11. The CIT/DR could not point out any specific error in the order of the CIT(A). He relied on the decision of the Cochin Bench of the Tribunal in the case of The Dy. CIT(E), Range II, Ernakulam vs Adi Sankara Trust, [2011] 12 Taxmann.com 105(Cochin) and submitted that the issue was decided in favour of the Revenue. We find that in the above quoted order of the CIT(A), the CIT(A) has followed the decision of the Hon'ble P&H High Court in the case of M/s Tiny Tots Educational Society (supra) which was in favour of the :- 6 -: I.T.A.No.799 & 800/12 assessee. Thus, we find that the order of the CIT(A) is supported by the decision of the Hon'ble P&H High Court, hence, we do not find any good and justifiable reason to interfere with the order of the CIT(A). It is confirmed and the grounds of appeal of the Revenue for both the assessment years are dismissed.
9. In the result, both the appeals of the Revenue are dismissed.
Order pronounced on Friday, the 22nd of June, 2012, at Chennai.
Sd/- Sd/-
(CHALLA NAGENDRA PRASAD) (N.S.SAINI)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 22nd June, 2012
RD
Copy to: Appellant/Respondent/CIT(A)/CIT/DR