I.T.A. No. 165/Mds./2015, (Assessment Year: 2006-2007). Case: St. Thomas Orthodox Syrian Cathedral Parish Trust Vs The Joint Commissioner of Income Tax (OSD). ITAT (Income Tax Appellate Tribunal)
| Case Number | I.T.A. No. 165/Mds./2015, (Assessment Year: 2006-2007) |
| Counsel | For Appellant: Pushya Seetharaman, Sr. Advocate and Sreevidhya, Advocate and For Respondents: N. Madhavan, JCIT, D.R. |
| Judges | N.R.S. Ganesan, Member (J) and A. Mohan Alankamony, Member (A) |
| Issue | Income Tax Act, 1961 - Sections 11, 11 (1), 11(1), 11(1)(a), 11(1)(a)(b), 11(1)(d), 11(3), 11(4), 11(5), 12(1), 139(1), 139(5), 143(3), 147, 148, 2(24), 2(45), 250, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 32, 35(2)(iv), 60, 61, 62, 63 |
| Judgement Date | June 12, 2015 |
| Court | ITAT (Income Tax Appellate Tribunal) |
Order:
A. Mohan Alankamony, Member (A), (ITAT Chennai 'D' Bench)
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This appeal is filed by the Assessee, aggrieved by the order of the Learned Commissioner of Income Tax(A)-VII, Chennai dated 09.09.2014 in ITA No. 263/11-12 passed under Sec. 143(3) read with section 147 & 250 of the Act.
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The Assessee has raised three elaborate grounds in its appeal, however the assessee has not pressed ground No. 1 which relates to treating of revised return filed on 19.02.2008 as invalid and hence this ground is dismissed. The other two grounds are extracted herein below for adjudication:--
"i) The Ld. CIT(A) erred in disallowing the depreciation of ` 16,61,341/- in the case of the Trust.
ii) The Ld. CIT(A) erred by not allowing the benefit of carry forward of the excess expenditure of the previous year for setting off the same in the current year's income for the purpose of section-11 of the Act."
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The brief facts of the case is that the assessee is a trust, filed its return of income on 31.10.2007 for the assessment year 2006-07. Since the assessee had claimed depreciation in respect of the asset the cost of which has been already allowed as application of income, the Ld. Assessing Officer was of the belief that income has escaped assessment in the case of the assessee and therefore, notice U/s. 148 was issued on 13.09.2010 and the assessment was completed U/s. 143(3) of the Act wherein the Ld. Assessing Officer disallowed ` 16,61,341/- being the depreciation claimed by the assessee and also denied the excess application of income amounting to ` 5,79,100/- of the earlier year to be taken into account as application of income in the relevant assessment year.
4.1. Ground No. 1 - Disallowing the depreciation of ` 16,61,341/-.
During the relent assessment year, the assessee had claimed depreciation of ` 16,61,341/- in its "income and expenditure account". The Ld. Assessing Officer denied the benefit of depreciation in the case of the assessee trust because the cost of the asset on which depreciation is claimed was already allowed as application of income. While doing so, the Ld. Assessing Officer observed as follows:--
The value of assets on which depreciation has been claimed, has been fully allowed as expenditure/application in the earlier years. Hence the represent claim is only a double deduction over and above the full value of the assets. Unless the Act specifically allows through an enactment, a weighted deduction or double deduction is not permissible. Reliance is placed on the following decisions, where the Tribunal has held that where the capital expenditure has been treated to have been applied for the objects of the Trust allowance for depreciation on the same asset would amount to double deduction.
1. Mahila Sidh Nirman Yojna 50 ITD 472 Delhi A Bench
2. Dy. DIT Ernakulam v. Adi Sankara Trust (ITAT Cochin ITA No. 96/Cochi/2009)
3. DIT(E) v. Lissie Medical Institutions ITA No. 1010/Coch/2008 and C.O No. 6/coch/2009 dated 26.10.10
4. Prakash Education Society in ITA No. 4730 &4731/D/2007 ITAT Delhi bench
In the case of Escorts Ltd. and Another v. UOI and Others in 199 ITR 43(SC) the Apex Court observed that when deduction U/s. 35(2)(iv) was allowed in respect of capital expenditure on scientific research, no depreciation was to be allowed U/s. 32 on the same asset. The fundamental axiom is that double deduction is not intended unless there is a clear statutory indication to the contrary. The same principle holds good in this case also. Following the above decisions, the claim of the assessee of Rs. 16,61,341/- is disallowed on depreciation.
4.2. On appeal the Ld. CIT(A) confirmed the order of the Ld. Assessing Officer by observing as under:--
4.1 Regarding the disallowance of depreciation, there are conflicting decisions for and against the allowance or otherwise. The latest decision on this issue was the decision of Delhi High Court in the case of CIT v. Charanjiv Trust by its order dated March, 2014. It is a fact that the assets when purchased are claimed as application of income by the trusts. Again the depreciation on the same assets is claimed year after year while computing the income. This obviously amounts to double deduction. This vital aspect was not appreciated by some of the Courts/ITATs. These decisions derive substance from the decision of Bombay High Court in the case of CIT v. P K Badlani (1970) 76 ITR 369. The decision was rendered before the introduction of section 11(1)(d) of the Act w.e.f. 01.04.1989. The section 11(1)(d) was not properly appreciated by the Courts/ITATs while passing orders allowing depreciation. The decisions relied on by the Assessing Officer appreciated the issues clearly and decided that allowing depreciation again will amount to double deduction and lead to anomalous situation. Therefore, I am of the opinion that the Assessing Officer is correct in disallowing depreciation. Moreover I rely on the latest decision of Delhi High Court in the case of DIT(E) v. Charanjiv Charitable Trust (Date of order 18.03.2014) in confirming the order of the Assessing Officer. Therefore the claim of depreciation is also not allowed.
Finance (No. 2) Bill 2014 introduced sub-section (6) to Section 11 of the Act to deny depreciation in respect of any asset, acquisition of which has been claimed as an application of income U/s. 11 in the same or any other previous year. Though the amendment is prospective in nature and comes into force from 01.04.2014, it is clarificatory to put the issue at rest to deny double deduction to the assessee.
4.3. At the outset, we find that this issue has been elaborately considered and decided against the assessee in the case of The Anjuman-E-Himayath-E-Islam in I.T.A. No. 2271/Mds./2014 vide order dated 02.06.2015, the relevant portion of the order is reproduced herein below for reference:--
"5.2 We find this issue is elaborately discussed in the case of Lissie Medical Institution v. CIT reported in [2012] 348 ITR 344(Ker.) and held the issue against the assessee. While doing so, the Hon'ble Kerala High Court had considered the Circular No. 5P(LLX-6) dated 19.06.1968 which has not been considered by the other decisions. The Circular No. 5P(LLX-6) is reproduced herein below for reference:--
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Circular No. 5-P (LXX-6) of 1968, dated 19-6-1968.
Subject: Section 11--Charitable trusts--Income required to be applied for charitable purpose--Instructions regarding.
In Board's Circular No. 2-P(LXX-5) of 1963, dated the 15th May, 1963, it was explained that a religious or charitable trust claiming exemption under...
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