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2015 (6) TMI 764 - AT - Income TaxDisallowance of excess utilization of income - CIT (Appeals) in allowing credit for 15% of the gross receipts in working the short fall of the amounts spent when the assessee - Held that - CIT (Appeals) on proper appreciation of facts in the light of the provisions of section 11 of the Act and the judgment of the Hon ble Supreme Court in the case of A.L.N. Rao Charitable Trust (1995 (10) TMI 2 - SUPREME Court) rightly decided the issue in favour of the assessee. The learned D.R for the Revenue did not contribute much on this issue and merely relied upon the order of the Assessing Officer without pointing out any infirmity in the order of the learned CIT (Appeals) in allowing the exemption of 15% on the gross receipts. Thus we do not find any justification to interfere in the order of the learned CIT (Appeals). - Decided against revenue. Disallowance of depreciation - claim of depreciation was raised subsequently during the course of assessment proceedings - CIT(A) allowed claim - Held that - CIT (Appeals) followed the decision of I.T.A.T., Chandigarh Bench in the case of Budhewal Cooperative Sugar Mills Ltd. Vs. The A.C.I.T. (OSD) 2013 (5) TMI 802 - ITAT CHANDIGARH in which it was held that the assessee can raise additional ground and make claim during the assessment proceedings. The learned CIT (Appeals) also relied upon Explanation-5 to section 32 of the Act, which provides for the removal of doubts, it is hereby declared that the provisions of this sub-section shall apply whether or not the assessee has claimed the deduction in respect of depreciation in computing his total income . The learned CIT (Appeals), therefore, noted that the depreciation has to be allowed to the assessee whether it is claimed while computing total income or not. He has also relied upon the order of the I.T.A.T., Bangalore Bench in the case of Rakesh Singh Vs. ACIT, 2012 (11) TMI 503 - ITAT BANGALORE in support of his findings. The learned CIT (Appeals), therefore, following the above decisions and Explanation-5 to section 32 of Income Tax Act directed the Assessing Officer to allow the claim of depreciation. In principle, the Revenue did not agitate the allowing of depreciation to the assessee. Therefore, nothing survives in favour of the Revenue. - Decided against revenue.
Issues Involved:
1. Disallowance of the claim of Rs. 2,57,90,420/- made by the trust in respect of excess utilization made in earlier years. 2. Allowing credit for 15% of the gross receipts when the assessee had not given notice under section 11(2)(a) of the Income Tax Act. 3. Allowing claim of depreciation which was subsequently claimed during the course of assessment proceedings. Detailed Analysis: Issue 1: Disallowance of Excess Utilization Claim The assessee challenged the CIT (Appeals) order upholding the disallowance of Rs. 2,57,90,420/- for excess utilization in earlier years. The brief facts reveal that the society was required to apply Rs. 8,37,53,494/- for charitable purposes but applied only Rs. 7,39,11,839/-. After excluding depreciation, the applied amount was Rs. 6,78,97,441/-, resulting in a shortfall of Rs. 1,58,56,053/-. The assessee argued that depreciation should be considered as application of income, citing judgments from Punjab and Haryana High Court. The assessee also claimed that excess utilization from earlier years should offset the current shortfall, relying on several case laws including CIT Vs. Trustee of Seth Merwarjee Framji Pandey Charitable Trust and CIT Vs. Maharana of Mewar Charitable Foundation. The Assessing Officer rejected these claims, referencing the Kerala High Court decision in Lissie Medical Institutions Vs. CIT, which held that depreciation is not considered application of income if the asset cost was already treated as application. The AO also found no actual loss in earlier years to justify carry forward of excess expenditure. The CIT (Appeals) confirmed the AO's decision, noting that except for AYs 2002-03 and 2006-07, there was no actual deficit in other years. The assessee's claim of carry forward was not tenable as per the facts and applicable case laws. The Tribunal upheld the CIT (Appeals) decision, finding no merit in the assessee's claim for carry forward of excess utilization, as there was no actual deficit in the earlier years. Issue 2: Allowing Credit for 15% Gross Receipts The Revenue challenged the CIT (Appeals) order allowing credit for 15% of gross receipts without notice under section 11(2)(a). The assessee argued that 15% of income is exempt as per section 11, supported by the Supreme Court judgment in Addl.CIT Vs. A.L.N. Rao Charitable Trust. The CIT (Appeals) agreed, stating that section 11(1)(a) provides a blanket exemption of 15% without conditions, and section 11(2) applies only to additional accumulation beyond 15%. The Tribunal upheld this, finding the CIT (Appeals) interpretation consistent with the Supreme Court ruling and the provisions of the Income Tax Act. Issue 3: Allowing Depreciation Claim The Revenue contested the CIT (Appeals) decision to allow depreciation claimed during assessment proceedings. The CIT (Appeals) followed precedents allowing such claims, including the ITAT Chandigarh Bench decision in Budhewal Cooperative Sugar Mills Ltd. and the Punjab & Haryana High Court ruling in CIT Vs. Ramco International. The CIT (Appeals) also cited Explanation-5 to section 32, which mandates allowing depreciation whether claimed or not in the return. The Tribunal found no merit in the Revenue's appeal, noting that the CIT (Appeals) decision was supported by relevant case laws and statutory provisions. Conclusion: Both the Departmental appeal and the assessee's Cross Objection were dismissed, with the Tribunal upholding the CIT (Appeals) decisions on all issues. The Tribunal found the CIT (Appeals) orders well-reasoned and consistent with legal precedents and statutory provisions.
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