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2015 (8) TMI 221 - ITAT MUMBAI

2015 (8) TMI 221 - ITAT MUMBAI - [2015] 43 ITR (Trib) 476 (ITAT [Mum]) - Double deduction of depreciation - assessee is a trust engaged in charitable activities and registered u/s.12A - assessee claim of depreciation on fixed assets during the year disallowed citing as double deduction - CIT(A) allowed claim - Held that:- By way of amendment in Finance Act 2014 in Section 11(6) of the Act, depreciation will not be allowed while computing application of income w.e.f.1-4-2015. Thus, the amended pr .....

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Cancer Society [ 2014 (11) TMI 733 - DELHI HIGH COURT ] in respect of assessment years falling prior to 2015-2016. The decision of the Hon’ble jurisdictional High Court in the case of CIT Vs. Institute of Banking Personnel (2003 (7) TMI 52 - BOMBAY High Court ) is squarely applicable in this case. - Decided against revenue

Carry forward of deficit on account of excess expenditure denied - CIT(A) allowed the appeal of assessee - Held that:- The issue of excess application of income of .....

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/2015 - Dated:- 30-7-2015 - SHRI R.C.SHARMA, J. For The Revenue : Shri Jasbir Singh Chouhan For The Assessee : Shri F.B.Andhyarujina ORDER These are the appeals filed by the revenue against the order of CIT(A) for the A.Y.2010-11 & 2011-2012 in the matter of order passed u/s.143(3) of the I.T.Act, 1961. 2. In ITA No.3422/Mum/2015, the Revenue has come forward with the following grounds of appeal :- 1. Whether on the facts and circumstances of the case and in law the Ld. CIT(A) erred in allow .....

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al expenditure, no deduction shall be allowed u/s 32 for the same or any other previous year in respect of that assets as it amounts to claiming a double deduction." 2. "Whether on the facts and circumstances of the case and in law, the Ld. CIT(A), erred in allowing the depreciation, when the Delhi High Court in the case of Charanjiv Charitable Trust and Kerala High Court in the case Lissie medical Institutions Vs CIT 76 DTR (Ker) 372 has decided the issue in the favour of the departme .....

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Id.CIT(A) erred in allowing to carry forward of deficit on account of excess expenditure and directing the Assessing Officer to allow carry forward of deficit on account of excess expenditure without appreciating the fact that this would have the effect of granting double benefit to the assessee, first as 'accumulation' of income u/s II(l)(a) or as corpus donations u/s 11(1)(d) in early years /current year and then as' application of income u/s 11(l)(a) in the subsequently years whic .....

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both the years, therefore, both appeals are being heard together and are now decided by this consolidated order. 4(i) The facts of the case are that the assessee is a trust which is engaged in religious charitable activities for the welfare of Dawaoodi Bohra community and other communities. It filed return of income on 30th September,2011 along with the Income and Expenditure Account, Balance Sheet and Audit Report in Form No.10B declaring total income at deficit of ₹ 2,782,426,641/-. It .....

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sallowed considering the same as double deduction. 4(iii) The Appellant has claimed Deficit of ₹ 201,37,85,581/- of the current year as the same is Arrived at after application of Income as per principles of section 11-13 which the ld. AO has taken as nil. Now we take the appeal groundwise :- 5. Ground Nos. 1 & 2 are related with double deduction of depreciation and is dealt with simultaneously. 5.1 The assessee is a trust engaged in charitable activities and registered u/s.12A of the .....

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Selection as reported in 264 ITR 110 (Bom). However, the Hon'ble Apex Court in 199 ITR 43 Union Bank of India Vs. Escorts Limited has held that double deduction cannot be allowed under any circumstances. It may also be pertinent to mention that the ratio of 264 ITR 110 (Bom) was pronounced by the Hon'ble Jurisdictional High Court without taking into consideration the ratio of Hon'ble Apex Court in 199 ITR 43. It may also be further pertinent to mention that the jurisdiction in the 26 .....

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ppellate order, the ld. CIT(A) mentioned as under :- 5.2 I have considered the facts and circumstances of the case, the assessment order of the A.O and the submissions of the appellant. The decision of the Hon. Jurisdictional High Court on the issue of allowance of depreciation is in favour of the appellant. The AO has not given any other reason for disallowance of depreciation and relied on the decision of the Hon. Apex Court in Escorts Limited case (199 ITR). However, the appellant has further .....

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5.4 Ld. AR submitted that the depreciation claimed is as per established accounting principle and based on various judgment of High Court. The income being exempt, depreciation should be reduced for determining the correct income computation. Depreciation is a charge which ought to be allowed in order to reflect the trusts correct profits. Ld. AR further contended that the Supreme Court in CIT vs. Williamson Financial Services (2008) 297 ITR 17 (SC) has held that in order to arrive at correct i .....

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R 492 (Born). ITO v. Trustees of Mar at hi Mission (1982) 80 ITD 539 (Born) Further the contention of ld. AR was that the ITO has wrongly considered Union of India v/s. Escorts Limited 199 ITR 43(SC) which is totally distinguishable and does not refer to the issue of depreciation at all. Hence the said decision has no applicability to the issue of grant of depreciation. The ld. AR further submitted that in assessee s own case in earlier years, C.I.T.(A)/Tribunal allowed the depreciation, and the .....

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ITR 110 (Bom). The ld. AR also referred to the case of DIT(E) Vs. Najam Baug Trust, judgment dated 14-2-2015, wherein the Hon ble Bombay High Court has opined that no fault can be found in the order of the Tribunal relying on the judgment of the Hon ble High Court in the case of Institute of Banking Personal Selection, 264 ITR 110. Thus, the Hon ble High Court did not even admit the appeal. The ld. AR further pointed out that the amendment in clause 6 to Section 11 of the Income Tax Act, 1961 ha .....

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of St. Anne (1984) 146 ITR 28 (Ker); vii) CIT Vs. St. George Forana Church (1988) 170 62 (Ker); and viii) CIT Vs. Rao Bahadur Calavala Chetty Charities (1982) 135 ITR 485 (Mad) 5.7 The sole contention of the ld. DR is that jurisdiction in the case reported in 264 ITR 110 (Bom) was accepted by the department in view of the low tax involved. He further relied on decision of Kerala High Court in the case of Lissi Medical Institution (supra) and Delhi High Court decision in the case of Charanjiv Ch .....

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016 have to be decided as per the law applicable during that period. Recently Hon ble Delhi High Court in the case of Indraprastha Cancer Society in ITA No.240 of 2014, order dated 18-11-2014 held as under with respect to application of amended provisions of law :- 1. By Finance (No. 2) Act of 2014, sub-section (6) to Section 11 stands inserted with effect from 1st April, 2015 to the effect that where any income is required to be applied, accumulated or set apart for application, then for such p .....

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application of income. In view of the above amended provision, which is applicable w.e.f. Assessment Year 2015-2016, we do not find any infirmity in the order of CIT(A) for allowing assessee s claim for depreciation relying on the decision of jurisdictional High Court in respect of assessment years falling prior to 2015-2016. The decision of the Hon ble jurisdictional High Court in the case of CIT Vs. Institute of Banking Personnel (2003) 185 CTR 492 (Bom) is squarely applicable in this case. 5. .....

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Supreme Court in Escorts Limited Vs. Union of India (supra) has been rightly held to be inapplicable to the present case. There are two reasons as to why the judgment cannot be applied to the present case. Firstly, the Supreme Court was not concerned with the case of a charitable trust/institution involving the question as to whether its income should be computed on commercial principles in order to determine the amount of income available for application to charitable purposes. It was a case w .....

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reme Court was concerned with the case where the assessee had claimed deduction of the cost of the asset under Section 35(1) of the Act, which allowed deduction for capital expenditure incurred on scientific research. The question was whether after claiming deduction in respect of the cost of the asset under Section 35(1), can the assessee again claim deduction on account of depreciation in respect of the same asset. The Supreme Court ruled that, under general principles of taxation, double dedu .....

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nd Indian Trade Promotion Organisation, ITA No. 7/2013, being prior in point of time would act as binding precedents. In view of the above discussions, we do not find any infirmity in the order of CIT(A) for allowing assessee s claim for deduction of interest. Ground Nos. 1 & 2 of the appeal are dismissed. 6. Ground Nos.3, 4 & 5. These grounds are on the same dispute and thus will be dealt in simultaneously. During the year, the assessee has deficit of ₹ 2,78,24,26,641/- which it c .....

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able Institutions are silent about any such provision and do not provide for the carry forward and set off of losses/excess application of a particular year against the income of subsequent years. It is seen that the Assessee is placing the reliance on the ratio of Hon'ble Mumbai High Court in 264 ITR 110 Institute of Banking Personnel Vs CIT. It is further seen that in the aforesaid ratio, no SLP was filed by the department on the ground of low tax effect, not on merits of the issue. Theref .....

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d forward is decided in favour of the appellant in the decision of the higher judicial forums as referred and relied by the appellant. Therefore, respectfully following the decisions relied upon by the appellant and applicable under the facts and circumstances of the case, Ground Nos. 3 and 4 for both the years i.e. A.Yrs. 2010-11 and 2011-12 are allowed. However, the A.O is directed to verify the claim of c/f of earlier year deficits amounting to Rs. ₹ 2,01,37,85,581/upto A.Y. 2010-11 and .....

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f this excess application as deficit/loss to the subsequent years is required to be in compliance with the provisions for the Act. Hence the deficit of the current year is to be allowed to be carry forward to subsequent years. (ii) It is settled law that excess of expenditure in earlier year can be adjusted against income of subsequent year. Such adjustment is to be treated as application of income in such subsequent year for charitable purposes. (iii) This proposition is laid down in CIT v. Shr .....

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inciples and based on judicial pronouncement. The current year deficit and earlier years deficit should be allowed as per computation of Income. (v) The assessee further submitted as below :- "1. The ITO at page 6 of his order has clearly mentioned that there is no specific provision for carry forward of loss and the decision of Institute of Banking was not acceptable to the Department but was not challenged before the Supreme Court. 2. The ITO(E)(l) was of the view that carry forward of lo .....

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