Case Law Details
ITAT BANGALORE BENCH ‘C’
Assistant Commissioner of Income-tax
Versus
Shri Adichunchanagiri Shikshana Trust
IT Appeal Nos 774 & 775 (Bang.) of 2011
[ASSESSMENT YEARS 2007-08 & 2008-09]
AUGUST 3, 2012
ORDER
1. These are appeals preferred by the Department against the separate orders of the Commissioner of Income-tax (Appeals), Mysore, both dated June 29, 2011. The relevant assessment years are 2007-08 and 2008-09.
2. The grounds raised in these appeals are identical. They read as follows :
(i) The learned Commissioner of Income-tax (Appeals) has erred in allowing the depreciation in the instant case.
(ii) While filing return of income the assessee has claimed benefit under section 11 which include one, in the form of application of funds and second in the form of depreciation. The application of funds is allowed under section 11 already, during the assessment. The assessee’s claim for depreciation amounts to claiming of double deduction. For this reason, depreciation is disallowed. The learned Commissioner of Income-tax (Appeals) has erred in not appreciating this fact brought out in the assessment order on the issue of disallowing depreciation, which has in effect necessitated this appeal.
3. The brief facts of the case are as follows :
The appellant is a registered charitable institution under section 12A of the Act. For the assessment year 2007-08, return of income was filed on February 6, 2008 declaring nil income. The return was selected for scrutiny and the assessment was completed, vide order dated December 29, 2009. It was noted by the Assessing Officer that the assessee had invested in building, which was held for the purposes of its objectives. The investment in building, in the respective years of investment, was taken as application of income and hence, according to the Assessing Officer, the same is not entitled to depreciation.
4. Similarly, for the assessment year 2008-09, nil return of income was filed. The Assessing Officer completed the assessment by allowing the expenditure of Rs. 7.09 crores as against the claim of Rs. 16.78 crores. The Assessing Officer rejected the claim of the assessee to set-off of depreciation as an income applied for the objectives of the trust.
5. Aggrieved by the disallowance of depreciation in computing the commercial profits of the assessee, the assessee carried the matter in appeal before the first appellate authority.
6. It was submitted before the first appellate authority that the Assessing Officer has erred in not permitting the set-off of depreciation claimed on the assets put to use for achieving the objectives of the trust against the gross receipts as permitted under section 11 of the Act. It was further submitted that the Assessing Officer had erred in not following the order of the jurisdictional Bench of the Tribunal in the assessee’s own case for the assessment year 2006-07 in I. T. A. No. 775/Bang/2009 dated January 29, 2010.
7. The Commissioner of Income-tax (Appeals) allowed the appeal of the assessee. The relevant observation of the Commissioner of Income-tax (Appeals) in respect to the assessment year 2007-08 is as follows:
“All the grounds of appeal from ground Nos. 1 and 2 are relating to the claim of depreciation not being allowed by the Assessing Officer in the assessment order dated December 29, 2009 under section 143(3). The appellant has filed copy of the Income-tax Appellate Tribunal’s order in the appellant’s own case for the assessment year 2006-07, vide I.T.A. No. 775(Bang)/2009 dated January 29, 2010 wherein the Income-tax Appellate Tribunal has directed to allow the depreciation. The Income-tax Appellate Tribunal, following the decision of the jurisdictional High Court in the case of CIT v. Society of the Sisters of St. Anne [1984] 146 ITR 28 (Karn), directed that the depreciation should be allowed. In view of the decisions of the hon’ble Income-tax Appellate Tribunal in the case of the appellant’s own case which is binding on me, the appellant’s appeal is allowed.”
8. For similar reason, the Commissioner of Income-tax (Appeals) allowed the appeal of the assessee for the assessment year 2008-09.
9. The Revenue being aggrieved is in appeal before us.
10. The learned Departmental representative submitted that the above issue was decided in favour of the Revenue by the order of the Cochin Bench of the Tribunal in the case of Dy. DIT (Exemptions) v. Lissie Medical Institutions [2010] 8 taxmann.com 82 (Cochin-ITAT). It was submitted that the above order of the Tribunal was affirmed by the hon’ble Kerala High Court in the case of Lissie Medical Institutions v. CIT [2012] 348 ITR 344/209 Taxman 19 vide its judgment dated February 17, 2012 in I.T.A. No. 42/2011. It was submitted that the hon’ble Cochin Bench of the Tribunal has elaborately considered the issue and distinguished the judgment of the hon’ble jurisdictional High Court in the case of CIT v. Society of the Sisters of St. Anne [1984] 146 ITR 28 on which the Bangalore Bench of the Income-tax Appellate Tribunal has placed strong reliance while deciding the issue in favour of the appellant for the assessment year 2006-07.
11. The learned authorised representative submitted that the issue in question is squarely covered by the order of the Tribunal in the assessee’s own case for the immediately preceding assessment year 2006-07 in I.T.A. No. 775/Bang/2009, wherein the Tribunal has categorically held that the appellant is entitled to depreciation on an asset, though the investment on the same was allowed as an application of income to the extent required to fulfil the conditions prescribed under section 11(2) of the Act. The learned authorised representative relied on the judgment of the Punjab and Haryana High Court in the case of CIT v. Tiny Tots Education Society[2011] 330 ITR 21.
12. In the rejoinder, the learned Departmental representative submitted that the judgment of Punjab and Haryana High Court relied on by the assessee in the case of Tiny Tots Education Society (supra) has been considered in the latest order of the Cochin Bench of the Tribunal in the case of Dy. DIT (Exemptions) v. Adi Sankara Trust [2011] 46 SOT 230, wherein it was held that the depreciation claimed by the assessee trust under section 32(1), in respect of an asset, the entire cost of which stands allowed by way of application of income under section 11(1), is not allowable. It was submitted that the order of the Tribunal in the assessee’s own case for the assessment year 2006-07 has not attained finality and the same is pending before the hon’ble jurisdictional High Court under section 260A of the Act.
13. We have heard the rival submissions and perused the materials on record. The Tribunal in the assessee’s own case for the assessment year 2006-07 at paragraph 7 of its order has decided the issue in favour of the assessee. The relevant finding of the Tribunal reads as follows :
“7. We have heard both the parties. We have in the earlier para referred to the findings of the hon’ble Bombay High Court in the case of Institute of Banking [2003] 264 ITR 110 (Bom). We have also gone through the decision of the jurisdictional High Court. The hon’ble jurisdictional High Court held that the amount of depreciation debited to the account of charitable institutions is to be deducted to arrive at an available income from charitable or religious purposes. Following the decision of the jurisdictional High Court, we therefore, hold that the depreciation is to be deducted to arrive at an income available to charitable and religious purposes.”
14. The above order of the Tribunal has not been reversed by the hon’ble jurisdictional High Court. The facts for the assessment year 2007-08 and 2008-09 being identical to the facts considered by the Tribunal for the assessment year 2006-07, (I.T.A. No. 775/Bang/2009 dated January 29, 2010), we follow the co-ordinate Bench order of the Tribunal in the assessee’s own case for the assessment year 2006-07 and hold that the Commissioner of Income-tax (Appeals) is justified in directing the Assessing Officer to grant depreciation in respect of the assessment years 2007-08 and 2008-09.
15. In the result, the appeals filed by the Department are dismissed.
