TMI Blog2020 (5) TMI 655X X X X Extracts X X X X X X X X Extracts X X X X ..... duction - HELD THAT:- The assessment year in appeal before us is assessment year 2011 12, which is prior to assessment year 2015 16 where from the amendment has been made denying the double deduction. Therefore, for this year the assessee is entitled to the depreciation allowance. Accordingly, additional ground raised by the assessee is allowed. - ITA No. 4240/Del/2015 - - - Dated:- 27-5-2020 - Ms. Sushma chowla, vice president and shri prashant maharishi, accountant member For the Assessee : None For the Revenue : Shri James Singdon Sr DR ORDER PER PRASHANT MAHARISHI, A. M. 1. This appeal is filed by the appellant, charitable trust [ The Assessee‟, Appellant‟, Trust‟ ] against the order of The Commissioner Of Income Tax (Appeals), Ghaziabad (The learned CIT A) dated 22/05/2015 for Assessment Year - 2011 12. This order was made in appeal filed by the assessee against the order of The Additional Commissioner Of Income Tax, Range 1, Ghaziabad (The Learned AO) passed u/s 147 read with section 143 (3) of The Income Tax Act, 1961 (The Act) dated 28/2/2014, wherein the appeal of the assessee is partly allowed. 2. The assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (4A) of the income tax act. The assessee submitted that running of hostel is not a business activity. Assessee stated that for the educational activities of the assessee, large number of students comes from other cities and states and in the absence of hostel facility; they shall be deprived of the education. Therefore running of hostel is not a business activity and in fact, it is a mandatory requirement of educational Institute. The assessee stated that it is having 2280 number of students during the relevant year, out of which 585 students were availing the hostel facility. Assessee further submitted that the entire surplus generated from the hostel activity is utilized for the charitable purposes as per the requirement of AICTE. 5. The learned assessing officer noted that the assessee has not maintained separate books of account of hostel activity as assessee is running a hostel and every year surplus is generated. The learned assessing officer noted that, undoubtedly, certain condition has been fixed for maintaining the hostel to certain extent by AICTE [All India Council for Technical Education] but nowhere condition of generating surplus has been provided. According t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the depreciation from year to year results into double deduction. Therefore, relying on the decision of The Honourable Supreme Court in case of Escorts Limited and Honourable Kerala High Court in case of lissie medical institutions vs. Commissioner of income tax( 2012) 76 DTR 0377, (2013) 255 CTR 0324, (2012) 348 ITR 0344, he disallowed a sum of ₹ 27410629/ . 7. Consequently the assessment order was passed determining the total income of the assessee from business of ₹ 8591641/ and from charitable activities at rupees Nil by order dated 28/2/2014. 8. The assessee aggrieved with the order of the learned A O , preferred an appeal before the learned CIT A. He confirmed the action of the learned assessing officer holding that hostel activities are business of the assessee. However, he further granted deduction of expenditure of ₹ 25 lakhs from such activities on account of expenses. With respect to the disallowance of the depreciation claim of ₹ 27410629/ , he confirmed the action of the learned assessing officer holding that once the cost of assets has been allowed as deduction by way of application of income that depreciation on the same assets c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his issue against the assessee. Therefore, we admit the additional ground raised by the assessee. 14. Admitting the additional ground raised by the assessee of whether assessee is eligible for depreciation on the assets, cost of which has already been granted as an application of income at the time of acquisition of the asset, amounts to double deduction and therefore, depreciation should not be allowed. This issue has already been decided by the honourable Supreme Court in Commissioner of Income Tax-III, Punev.Rajasthan Gujarati Charitable Foundation Poona*[2018] 89 taxmann.com 127 (SC)/[2018] 253 Taxman 165 (SC)/[2018] 402 ITR 441 (SC)/[2018] 300 CTR 1 (SC) has held as under:- 1. These are the petitions and appeals filed by the Income Tax Department against the orders passed by various High Courts granting benefit of depreciation on the assets acquired by the respondents-assessees. It is a matter of record that all the assessees are charitable institutions registered under Section 12A of the Income Tax Act (hereinafter referred to as 'Act').For this reason, in deduction subject to section 34. In that matter also, a similar argument, as in the present case, was adv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acquiring those assets.This did not mean that in computing income from those assets in subsequent years, depreciation in respect the previous year to the year with which we are concerned and in which year the depreciation was claimed, the entire expenditure incurred for acquisition of capital assets was treated as application of income for charitable purposes under Section 11(1)(a) of the Act.The view taken by the Assessing Officer in disallowing the depreciation which was claimed under Section 32 of the Act was that once the capital expenditure is treated as application of income for charitable purposes, the assessees had virtually enjoyed a 100 per cent write off of the cost of assets and, therefore, the grant of depreciation would amount to giving double benefit to the assessee. Though it appears that in most of these cases, the CIT (Appeals) had affirmed the view, but the ITAT reversed the same and the High Courts have accepted the decision of the ITAT thereby dismissing the appeals of the Income Tax Department. From the judgments of the High Courts, it can be discerned that the High Courts have primarily followed the judgment of the Bombay High Court in 'CIT v. Institute o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectly states the principles of law and there is no need to interfere with the same. 3. It may be mentioned that most of the High Courts have taken the aforesaid view with only exception thereto by the High Court of Kerala which has taken a contrary view in 'Lissie Medical Institutions v. CIT [2012] 24 taxmann.com 9/209 Taxman 19 (Mag.)/348 ITR 344'. 4. It may also be mentioned at this stage that the legislature, realising that there was no specific provision in this behalf in the Income-tax Act, has made amendment in Section 11(6) of the Act vide Finance Act No. 2/2014 which became effective from the Assessment Year 2015-2016. The Delhi High Court has taken the view and rightly so, that the said amendment is prospective in nature. 5. It also follows that once assessee is allowed depreciation, he shall be entitled to carry forward the depreciation as well. The assessment year in appeal before us is assessment year 2011 12, which is prior to assessment year 2015 16 where from the amendment has been made denying the double deduction. Therefore, for this year the assessee is entitled to the depreciation allowance. Accordingly, additional ground raised by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viding education, namely the object of the society. In view of this, we are of the opinion that providing of hostel facilities and transport facilities to the student and staff member of the educational Institute cannot be considered as business activity but is subservient to the object of educational activities performed by the society. We are also supported by our view by the decision of the Hon ble Allahabad High Court in IIT versus state of UP, (1976) 38 STC 428 (All) wherein question arose in Indian Institute of Technology v. State of U.P. (1976) 38 STC 428 (All) with respect to the visitors' hostel maintained by the Indian Institute of Technology where lodging and boarding facilities were provided to persons who would come to the Institute in connection with education and the academic activities of the Institute. It was observed that the statutory obligation of maintenance of the hostel, which involved supply, and sale of food was an integral part of the objects of the Institute nor could the running of the hostel be treated as the principal activity of the Institute. The Institute could not be held to be doing business. Further meals being supplied in a hostel to the sch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s from it, together with some possible donations , expanded the assets of the re- declared trust of 1962 so much, that the schedule attached to the trust deed of 1962 shows their value to be ₹ 2,97,658. After deducting the total liabilities of the trust, shown as ₹ 1,24,086-10-0, the net value of the assets is given as ₹ 1,73,571-14-4. Thus the facts in those case were not at all comparable as assessee is running educational institutes , income from which has been accepted by ld AO himself as falling u/s 2 (15 ) of the act. All other decisions cited by Revenue have already been considered by the coordinate benches in above two decisions cited supra. In view of this, respectfully following the decision of the coordinate benches on identical facts and circumstances, we direct the learned assessing officer to not to treat the excess of ₹ 8591641/ as taxable income on account of hostel receipts under section 11 (4A) of The Income Tax Act. As hostel fee income is subservient to the main object of the education and therefore the learned assessing officer is directed to treat the same as not a business income but income derived from the charitable activities of ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
