×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
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12-06-2019, T. A. Pai Management, Section 12A, 10(23C)(vi), Tribunal Bangalore
This appeal by Revenue is directed against the order of CIT(A), Mangaluru, dated18.09.2017 for assessment year 2010-11.
2. Briefly stated, the facts of the case are as under:-
2.1 The assessee, a charitable trust, recognized under section 12A of the Income Tax Act, 1961 (in short ‘the Act’) and granted exemption under section 10(23C)(vi) of the Act, filed its return of income for Assessment Year 2010-11 on 27.09.2010 declaring NIL income; claiming depreciation of Rs.6,64,07,894/- on assets and deduction for capital expenditure of Rs.6,20,28,563/- as application of income. After claiming exemption under section 11(1) of the Act, the assessee claimed current years deficit of Rs.14,16,03,941/- and brought forward deficit of Rs.45,19,11,077/- pertaining to earlier years. The case was taken up for scrutiny for this Assessment Year and the assessment was concluded under section 143(3) of the Act vide order dated 22.03.2013 by making the following disallowances:
(i) Disallowance of claim of depreciation – Rs.6,64,07,894/-
(ii) Denial of carry forward of deficit (excess application over income) to the subsequent years.
2.2 Aggrieved by the order of assessment dated 22 03.2013 for Assessment Year 2010-11, the assessee filed an appeal before the CIT(A) Mangaluru, who allowed the appeal vide order dated 18.09.2017; granting the assessee relief on both the issues raised; i.e., (1) Depreciation and (2) carry forward of deficit (excess of application over income) to subsequent years.
3. Revenue, being aggrieved by the order of CIT(A), Mangaluru dated 18.09.2017 for Assessment Year 2010-11, has filed this appeal before the Tribunal wherein it has raised th following grounds:
1. On Disallowance of depreciation:
1. Whether in the facts and circumstances of the case and in law, the learned CIT(A) erred in allowing depreciation in respect of assets which have already been allowed as application of income in its entirety in earlier years.
2. Whether in the facts and circumstances of the case and in law, the learned CIT(A) is correct in allowing depreciation which amounts to double deduction when already full expenditure has been allowed in earlier years.
3. The CIT(A) has failed to appreciate the fact that the Hon'ble Kerala High Court in the case of Lissie Medical Intuitions Vs. CIT (348 ITR 344) has held that depreciation cannot be allowed on assets, where cost of such assets has already been allowed as application of income in the year of acquisition/ purchase of asset.
4. The CIT(A) has failed to appreciate that the Hon'ble Supreme Court in the case of Escorts Ltd. & another Vs. Union of India (199 ITR 43), while dealing with the issue of allowance of expenditure on scientific research u/s 35(1)(iv) [corresponding to section 10(2) (xiv) of the I.T. Act, 1922] held that any expenditure of a capital nature (or incurred towards purchase of capital assets) on scientific research allowed as deduction u/s 35(1)(iv) cannot be allowed once again as deduction in the form of depreciation on such capital assets. While doing so, it was observed by the Hon'ble Supreme Court that no legislature could have at all intended a double deduction in regard to the same business outgoing and if it is intended, it would be clearly expressed in the statute itself. Accordingly, it was held that even in absence of clear statutory indication to contrary, statute should not be read so as to permit an assessee two deductions i.e. once in the form of expenditure incurred towards purchase of capital assets and secondly, in the form of depreciation on such capital assets. It was also held that even before the amendment of the Act in the form of insertion of clause (iv) of sub section (2) of section 35 by Finance Act, 1980, prohibiting allowance of depreciation, the Act did not permit a deduction for depreciation in respect of cost of capital asset acquired for the purpose of scientific research to the extent such cost had been written off/ claimed as deduction u/s 35(1)(iv) on the ground that the amendment only set out more clearly and categorically what the provision intended even earlier.
2) Carry forward of excess application/deficit of current year & brought forward deficit of earlier years for application in subsequent (future) year:
a) The CIT (A) has erred in directing the assessing officer to allow set-off of excess expenditure/application pertaining to current asst.year and earlier years against the income of the future asst.year without appreciating the fact that as per the scheme of taxation of charitable or religious trust/institution as codified u/s.11,12 and 13, there is no provision for computing loss from property held under trust/institution on account of excess application of income/funds of the trust.
b) The CIT (A) has failed to appreciate the fact that the normal computation of income under respective heads as envisaged u/s 15 to 59 are not applicable to the computation of income in respect of charitable trust/institution for the purpose of claiming exemption under sec.11, 12 and 13 and, therefore, the provisions relating to set-off of loss from one source against the income from another source, set-off of loss from one head against income from another head and carry forward and set-off of loss against the income of subsequent years as envisaged u/s 70 to 79 are also not applicable to the charitable trusts/institutions.