TMI Blog2016 (6) TMI 256X X X X Extracts X X X X X X X X Extracts X X X X ..... g percentage of funds applied for the purpose of charitable objects. Claim for depreciation will not amount to double benefit. In view of the aforesaid decisions on the issue, we are of the view that the order of the respondent cannot be sustained. The amendment by the Finance Act (No.2), 2014 by insertion of Sec.11(6) of the Act specifically providing for not allowing 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 was admittedly effective only from 1.4.2014 and did not apply to AY 12-13. In the given facts and circumstances of the case exercise of jurisdiction u/s.263 of the Act would not be proper. We therefore quash the order u/s.263 of the Act and allow the appeal of the Assessee. - Decided in favour of assessee. - S. A. No. 19/Kol/2016, ITA No.620/Kol/2016, ITA No.620/Kol/2016 - - - Dated:- 1-6-2016 - Shri N. V. Vasudevan, Judicial Member And Shri M. Balaganesh, Accountant Member For the Assessee : Mr. S. M. Surana, Advocate For the Revenue : Mr. Snehotpal Datta, JCIT ORDER Per N.V. Vasude ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowable u/s 32 on the same asset. The respondent accordingly issued a show cause notice dated 28.10.2015 proposing to revise the order of the AO passed u/s.143(3) of the Act dated 30.6.2014. 4. In reply to the show cause notice u/s.263 of the Act, the assessee pointed out that in several decisions rendered by various High Courts, it has been held that depreciation can be claimed even on assets whose cost of acquisition in the previous year in which it was acquired had been claimed by the assessee as capital expenditure and as application of funds towards the objects of the trust and allowed as such in such assessments. The following are some of the judicial pronouncements referred to by the Assessee in its reply to the show cause notice u/s.263 of the Act. (i) CIT Vs. Institute of Banking Personnel Selection (IBPS) (2003) 264 ITR 110(Bom). (ii) Society of Sisters of St. Ann, 146 ITR 28 (Kar) (iii) CIT Vs. Desh Bhagat Memorial Education Trust (2011) 37(1) ITCL 131 (P H) (iv) CIT Vs. Sheth Manilal Ranchhoddas Vishram Bhavan Trust 198 ITR 598(Guj.) (v) CIT Vs. Rajpur Pallottine Socieity 180 ITR 579 (MP) (vi) Jyotirmai Club ITA No.647 of 2004 da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not in accordance with Chapter IV of the Act. is not entitled to claim of depreciation. In this case the Hon' ble Bombay High Court restricted its decision on this issue and decided that depreciation is allowoble although the assessee is not covered under Chapter IV of the Act. The Hon'ble Bombay High Court. in this case did not pass any comment on the issue of double deduction. However while Hon'ble Bombay High Court decided the rnatter in the case Institute of Banking Personnel Selection (supra) following this judgment on the issue of depreciation, allowed the claim even when the cost of the asset is taken as application in the year of its procurement. In both the cases i.e. Framjee Cawasjee Institute (supra) and Institute of Banking Personnel Selection (supra) the Hon ble Mumbai High Court decided against the revenue on this issue but the relevant judgment of apex court in Escorts Ltd. (supra) were not brought to the notice of the Hon ble Mumbai High Court. So these judgment was made per incurium, But as no Special leave Petition was filed by department before the Hon'ble Supreme Court of India, it gave rise to the notion (all over Tax India) that deportment ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dance with this case law. The Honble Court observed that if claim of depreciation is allowed as expenses no double deduction would take place. In this judgment case of Escorts Ltd. (supra) was discussed. But one very important fact was not brought to the attention of the Hon'ble Court. Allowing claim of depreciation as allowable expenses mean the assessee is getting a benefit of 85% of such claim. While allowing the claim of depreciation as application the assessee gets 100% benefit of such claim. Thereby in essence if remains a case of double deduction on one outgoing. In one case it's a case of 100% double deduction in another 85% of double deduction. But tin both the cases allowance of claim of depreciation (either as expenses or as application), when the cost of the assets have been treated as application leads to double deduction 6. The respondent also referred to the amendment by the Finance (No.2) Act, 2014 w.e.f. 1.4.2015 by insertion of sub-section (6) to section 11 of the Act, which reads as under:- (6) 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 dete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viz., both under sections 32(1)(ii) and 35(2)(iv) of Act, qua same expenditure. The respondent therefore held that the legislature would never have intended to give double deduction for the same outgoing and that there was the amendment by insertion of Sec.11(6) of the Act was merely clarificatory. The CIT accordingly revised the order of the AO by observing as follows: 3.20. In view of the all above, assessment order passed by assessment order passed by assessing office in this case for assessment year 2012-13 by allowing claim of depreciation of ₹ 68,43,455/- is erroneous in so far as it is prejudicial to the interest of revenue. Hence the same is disallowed. The depreciation in this year was claimed to justify or to make up the application of income. No such claim was made in preceding and succeeding years as sufficient assets purchased were available for application. 3.21 Hence, the income of the assessee is computed as below : Total Receipts as per Income Expenditure A/C. Rs.3,8435,539 Less : Revenue Capital Expenditure Rs.2,68,03,157 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the books is deductible while computing such income. It was so held by the Hon ble Karnataka High Court in the case of CIT Vs. Society of Sisters of St. Anne 146 ITR 28 (Kar). It was held in CIT Vs. Tiny Tots Education Socieity (2011) 330 ITR 21 (P H) , following CIT Vs. Market Committee, Pipli (2011) 330 ITR 16 (P H) : (2011) 238 CTR (P H) 103 that depreciation can be claimed by a charitable institution in determining percentage of funds applied for the purpose of charitable objects. Claim for depreciation will not amount to double benefit. The decision of the Hon ble Supreme Court in the case of Escorts Ltd. 199 ITR 43 (SC) has been referred to and distinguished by the Hon ble Court in the aforesaid decisions. The issue raised by the respondent in the impugned order is no longer res integra and has been decided by the Hon ble Punjab Haryana High Court in the case of CIT v. Market Committee, Pipli, 330 ITR 16 (P H). The Hon ble Punjab Haryana High Court after considering several decisions on that issue and also the decision of the Hon ble Supreme Court in the case of Escorts Ltd. (supra), came to the conclusion that depreciation is allowable on capital assets on the income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e can then exercise his powers in revision, if he is satisfied that any order passed by the AO is erroneous and prejudicial to the interest of the Revenue. The Supreme Court has held that both these elements erroneous and prejudicial to the interests of the Revenue must be satisfied for having recourse to S.263 (Malabar Industrial Co. 243 ITR 83). Every loss of tax to the Revenue cannot be treated as being prejudicial to the interest of the Revenue . For example, when the Assessing Officer takes recourse to one of the two courses possible in law or where there are two views possible and the Commissioner does not agree with the view taken by the Assessing Officer which has resulted in a loss as held by the Hon ble Supreme Court in the case of CIT v Max India Ltd. (2007) 295 ITR 282 (SC). Assuming all that is stated by the respondent in the impugned order is to be accepted as correct, even then no revision could be made u/s.263 of the Act for the reason that two views are possible on the issue raised by the respondent in the impugned order. It is clear from the order of the respondent that two divergent views have been expressed by Hon ble High Courts in the matter. The deci ..... X X X X Extracts X X X X X X X X Extracts X X X X
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