Case Law Details
ACIT Vs M/s. Mayo College General Council (ITAT Jodhpur)
The deduction of depreciation for Rs.300.37 Lacs as claimed by the assessee was denied by Ld. AO on the reasoning that cost of fixed asset is an application of income and therefore further deduction of depreciation tantamount to double deduction.
The Ld. CIT(A) allowed depreciation by following the decision of Hon’ble Karnataka High Court in the case of DIT V/s Al-Ameen Charitable Fund Trust (383 ITR 517) wherein it was held that amendment to Section 11(6) was prospective in nature and operative w.e.f. 01/04/2015 only. Aggrieved the revenue is in further appeal before us.
We find that this issue is squarely covered in assessee’s favor by the recent decision of Hon’ble Supreme Court titled as CIT Vs. Rajasthan & Gujarati Charitable Foundation, Poona [89 Taxmann.com 127] which has been rendered after considering the decisions of CIT v. Institute of Banking Personnel Selection (IBPS) [2003] 131 Taxman 386 (Born.) & Lissie Medical Institutions v. CIT [2012] [348 ITR 344 (Ker.)]. The Hon’ble court has concluded the matter in the following manner:-
2. After hearing learned counsel for the parties, we are of the opinion that the aforesaid view taken by the Bombay High Court correctly states the principles of law and them 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 12012) 24 com 9/209 Taxman 19 (Mag.)/348 ITR 344 (Ker.)’.
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.
6. For the aforesaid reasons, we affirm the view taken by the High Courts in these cases and dismiss these matters.
Respectfully following the same, we dismiss the grounds raised by the revenue in this regard.
FULL TEXT OF THE ORDER OF ITAT JODHPUR
1. Aforesaid appeal by revenue for Assessment Year [in short referred to as ‘AY’] 2013-14 contest the order of Ld. Commissioner of Income-Tax(Appeals), Ajmer, [in short referred to as `CIT(A)], Appeal No.66/2016-17 dated 03/10/2017 on following effective grounds:-
1) On the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in deleting the addition of Rs. 102.19 Lakhs without appreciating the facts that the gratuity fund was not approved as defined u/s 2(5) of the Act in accordance with the rules contained in part C of the Fourth Schedule.
2) On the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in allowing of excess application of income of Rs.834.99 lakhs to the subsequent year without appreciating the facts that there is no deficit during the year.
3) On the facts and circumstance of the case in law the Ld.CIT(A) has erred in allowing set off of application of income to the assessee even there is surplus in the case of the assessee. The fact was misled by assessee trust before CIT(A) as such.
4) That the claim of 15% accumulation is not the standard deduction but it is accumulation up to 15% of income.
2. We have carefully heard the rival submissions and perused relevant material on record including written submissions and documents placed in the paper book. The judicial precedents as relied upon during the course of hearing have duly been deliberated upon. Our adjudication to the subject matter would be as given in succeeding paragraphs.
3. The material facts are that the assessee being registered trust was assessed u/s 143(3) on 19/03/2016 wherein certain adjustments and disallowances were made. The Assessee is a registered society under Registration of Societies Act, 1958 w.e.f. 1969. The assessee claim exemption u/s 10(23)(C)(vi) since January 2011. The object of the society is to impart education.
Upon further appeal, the disallowance and adjustments as made by Ld. AO were deleted by Ld. CIT(A), against which the revenue has preferred this appeal. Our issue-wise adjudication to the subject matter of appeal would be as follows:-
4. Disallowance of Gratuity Fund
The assessee debited gratuity fund of Rs.150 Lacs and made payment of Rs.47.81 Lacs. Since the gratuity fund was not an approved gratuity fund, Ld. AO disallowed the differential amount of Rs.103.19 while framing the assessment.
The Ld. CIT(A) allowed the deduction by following the decision of Cochin Bench of Tribunal in the case of Malankara Orthodox Syrian Church vs. DDIT (Exemption) (ITA No.127/Coch/2016 A.Y.2011-12 order dated 17/03/2017). Aggrieved the revenue is in further appeal before us.
It is evident that Ld. CIT(A) has followed the binding decision of Cochin Bench of Tribunal while granting relief to the assessee. The bench, following the decision of Ahmedabad Tribunal in Gujarat Industrial Development Corporation V/s ACIT (129 lTD 23) as well as the decision of Hon’ble High Court of Calcutta in CIT v. Birla Education Trust [1985] 153 ITR 579, held that the provisions of Sec.11(4) would be attracted only if the assessee has a business undertaking. In the present case, the assessee do not have any business undertaking. No contrary decision has been placed before us. This being the case, the impugned order does not require any interference on our part. This ground stand dismissed.
5. Disallowance of Depreciation
The deduction of depreciation for Rs.300.37 Lacs as claimed by the assessee was denied by Ld. AO on the reasoning that cost of fixed asset is an application of income and therefore further deduction of depreciation tantamount to double deduction.
The Ld. CIT(A) allowed depreciation by following the decision of Hon’ble Karnataka High Court in the case of DIT V/s Al-Ameen Charitable Fund Trust (383 ITR 517) wherein it was held that amendment to Section 11(6) was prospective in nature and operative w.e.f. 01/04/2015 only. Aggrieved the revenue is in further appeal before us.
We find that this issue is squarely covered in assessee’s favor by the recent decision of Hon’ble Supreme Court titled as CIT Vs. Rajasthan & Gujarati Charitable Foundation, Poona [89 Taxmann.com 127] which has been rendered after considering the decisions of CIT v. Institute of Banking Personnel Selection (IBPS) [2003] 131 Taxman 386 (Born.) & Lissie Medical Institutions v. CIT [2012] [348 ITR 344 (Ker.)]. The Hon’ble court has concluded the matter in the following manner:-
2. After hearing learned counsel for the parties, we are of the opinion that the aforesaid view taken by the Bombay High Court correctly states the principles of law and them 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 12012) 24 com 9/209 Taxman 19 (Mag.)/348 ITR 344 (Ker.)’.
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.
6. For the aforesaid reasons, we affirm the view taken by the High Courts in these cases and dismiss these matters.
Respectfully following the same, we dismiss the grounds raised by the revenue in this regard.
6. Set off and carry forward of deficit
While framing the assessment, Ld. AO opined that losses / deficit would not be allowed to be carry forward in the, case of trust. The Ld. CIT(A) allowed the same by relying upon the decision of Hon’ble High Court of Rajasthan in CIT V/s Mewar Charitable Institution (164 ITR 439).
We find that this issue is squarely covered in assessee’s favor by the cited decision of jurisdictional High Court. Hence, our interference is uncalled for, on this issue.
Conclusion
7. The appeal stand dismissed.
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