Date Of Judgment 30-08-2018 I.t.a v. Mookambika Temple

IN THE HIGH COURT OF KARNATAKA, BENGALURU. DATED THIS THE 30 DAY OF AUGUST 2018. PRESENT THE HON'BLE Dr. JUSTICE VINEET KOTHARI AND THE HON’BLE Mrs.JUSTICE S.SUJATHA| 1.T.A.No.170 OF 2016 BETWEEN: 1.|Commissioner of Income Tax. (Exemptions), Mangaluru. 2 |The Deputy Commissioner of Income Tax, Circle-1. Udupi. .. Appellants| (By Mr.Sanmathi E I, Adv.) AND: Mookambika Temple Kollur Udupi — 976 220. PAN: AABAS42395R. ...Respondent (By Mr.S.Parthasarathi, Adv.) This Income Tax Appeal is filed under Section 260-A ofIncome Tax Act 1961, arising out of order dated:11/09/2015passed in ITA No.637/Bang/2014, for the Assessment Year Date of Judgment 30-08-2018 I.T.A.No.170/2016 Commissioner of Income Tax (Exemptions) & Anr. Vs. Mookambika Temple. 2/13 2011-12, praying to decide the foregoing question of lawand/or such other questions of law as may be formulated bythe Hon’ble Court as deemed fit and set aside the appellateorder dated 11/09/2015 passed by the ITAT, ‘A’ Bench,Bengaluru, in appeal proceedings ITA No.637/BNG/2014 forAssessment Year 2011-12, as sought for in this appeal and toerant such other relief as deemed fit, in the interest of justice. This Income Tax Appeal coming on for Admission, this—dayS.Sujatha J. delivered the following:- JUDGMENT Mr.Sanmathi E.I.,Adv. for Appellants —RevenueMr.S.Parthasarathi, Adv. for Respondent -—Assessee 1.Revenue has filed this appeal raising purportedsubstantial questions of law under|Section 260-Aot theIncome Tax Act, 1961 arising from the order of learned|Tribunal dated.11.09.2015inITA No.637/BNG/2014fortheAssessmentYear2011-2012TheDeputyCommissionerofIncome-taxUS,M/s.MookambikaTemple. Date of Judgment 30-08-2018 I.T.A.No.170/2016 Commissioner of Income Tax (Exemptions) & Anr. Vs. Mookambika Temple. oD The suggested substantial questions of law in thememo of appeal of Revenue are quoted below for readyreference:-. “1.WhetherOrlthefactsandin|thecircumstances of the case the Tribunal ts right|in holding that the assessee is eligible for|carry forward of deficit of the assessee to the|subsequent years when the income of acharitable or religious trust/institution 1s|required to be computed by applying general|commercial principles without referring to the|regular provisions of Income Tax as contained|under Chapter-IV and as such while arriving|at the income of a charitable or religious|trust/ institution, various heads of income ascontemplated under section 14 and specific|provisions of computation of income underrespective heads as envisaged under section|15 to 59 are not pressed into action? | aD WhetherOnthe|factsand|in|the|circumstances of the case, the Tribunal 1isright in law in holding that the assessee 1S| Oo. 4 Date of Judgment 30-08-2018 I.T.A.No.170/2016 Commissioner of Income Tax (Exemptions) & Anr. Vs. Mookambika Temple. entitled to carry forward of excess application|without appreciating that the provisions of|sections 7O to 80 of IT Act are not applicableto trusts as they only deal with carry forward|and set off of loss and not excess expenditure|or deficit? | WhetherOrlthefactsandin|thecircumstances of the case, the Tribunal 1isright in law in holding that assessee 1S|entitled to claim depreciation on _ capitaassets when it qmounts to double deduction|as the income of the assessee is already|exempt and amended provisions of the Act|also denies such claim for depreciation by|Trust?| Whether the Tribunal is directing the CIT tocondone delay in filing Form No.10 and|consider the claim of assessee with regard to|claim under section 11(2) even when the|assessing authority had rightly denied claim|in accordance with law? Date of Judgment 30-08-2018 I.T.A.No.170/2016 Commissioner of Income Tax (Exemptions) & Anr. Vs. Mookambika Temple. 5/13 3.|The learned counsel for Revenue submits thatsubstantial question No.4 raised in the memo of appeal is notpressed. The same is placed on record. Whether the Tribunal is directing the CIT tocondone delay in filing Form No.10 and|consider the claim of assessee with regard to|claim under section 11(2) even when the|assessing authority had rightly denied claim|in accordance with law? Date of Judgment 30-08-2018 I.T.A.No.170/2016 Commissioner of Income Tax (Exemptions) & Anr. Vs. Mookambika Temple. 5/13 3.|The learned counsel for Revenue submits thatsubstantial question No.4 raised in the memo of appeal is notpressed. The same is placed on record. 4The learned counsel for Revenue submits that thecontroversy raised in the present appeal is covered by adecisionOT thisCourt1nITANo.231/2018(D.D14.08.2018), In the case ofPr. Commissioner of Income-Tax (Exemptions) and Another vs. M/s Green Wood High|School. The relevant portion of the said order is extracted|hereunder for ready reference: 63This Court in the case of‘Commissioner of Income Tax-III, Pune v. Rajasthan & GujaratiCharitableFoundationPoona’[2018]|8&9taxmann.com 127 [SC)with regard to allowabilityand Depreciation in the hands of Religious andCharitable Trust held as under: 65LearnedCounselattheBarsubmitted that so far as_ the _ issregarding claim of Depreciation under Date of Judgment 30-08-2018 I.T.A.No.170/2016 Commissioner of Income Tax (Exemptions) & Anr. Vs. Mookambika Temple. 6/13 section 32 of the Act is concerned, thecontroversy is no longer res integra, havingbeen settled by the Hon'ble Supreme Courtin the case of‘Commissioner of IncomeTax-III, Pune v. Rajasthan & GujaratiCharitable Foundation Poona’ [2018]89 taxmann.com 127 » by which the|Hon’ble Supreme Court has affirmed the|view taken by the Bombay High Court in“CommissionerofIncomeTaxVU.Instituteof|BankingPersonnelSelection (IBPS)’ [2003] 131 Taxman386 /Bom.|. Ihe relevant portion of thesaid Judgment of Bombay High Court asquoted by the Hon'ble Supreme Court andaffirmed1Squotedbelow|forreadyreference. “In the said Judgment, [Bombay|High Court] the contention of the)Department predicated on doublebenefit was turned down in thefollowing manner: Date of Judgment 30-08-2018 I.T.A.No.170/2016 Commissioner of Income Tax (Exemptions) & Anr. Vs. Mookambika Temple. 7/13 3. As.statedabove,thefirst,questionwhichrequires consideration by this court 1s :) whetherdepreciationLUGSallowable on the assets, the cost ofwhich has been fully allowed as|application of income under section)11 in the past years? In the case of|CIT v. Munisuvrat Jaqin 1994 TaxLaw Reporter, 1084 the facts wereas follows. The assessee was aiCharitable Trust. It was registered|as a Public Charitable Trust. It was:alsoregisteredwiththe|Commussioner, Pune.The assesseederived income from the templeproperty which was a Trustproperty.During the course ofassessmentproceedingsforassessment years 1977-785, 197679 and 1979-80,|the assesseeclaimed|depreciationOoOthevalue of the building at the rateof 2.5 per cent' and they also 8/13 claimed depreciation on furniture at)the rate of 5 per cent. The question|which arose before the court for'determinationLUaASwhetherdepreciation could be denied to the)ASSESSEE, LS|expenditureOrlacquisition of the assets had been)treated as application of income in|the year of acquisition? It was held|by the Bombay High Court that)section 11 of the Income Tax Actmakesprovisionin|respectof|computation of income of the Trust)from the properly held for charitableor religious purposes and it also)providesforapplicationandaccumulation of income. On_ theother hand, section 28 of theIncomeTax|Actdeals.withchargeability of income from profits|and gains of business and section)29 provides that income from profits:and gains of business shall be)computedin|accordancewith 9/13 8/13 claimed depreciation on furniture at)the rate of 5 per cent. The question|which arose before the court for'determinationLUaASwhetherdepreciation could be denied to the)ASSESSEE, LS|expenditureOrlacquisition of the assets had been)treated as application of income in|the year of acquisition? It was held|by the Bombay High Court that)section 11 of the Income Tax Actmakesprovisionin|respectof|computation of income of the Trust)from the properly held for charitableor religious purposes and it also)providesforapplicationandaccumulation of income. On_ theother hand, section 28 of theIncomeTax|Actdeals.withchargeability of income from profits|and gains of business and section)29 provides that income from profits:and gains of business shall be)computedin|accordancewith 9/13 section 30 to section 43C, That,|section 32(1) of the Act provides fordepreciation in respect of building,|plant and machinery owned by theassessee and used for the business|purposes. It further provides fordeduction subject to section 34. In|thatmatteralso,asimularargument, as in the present case,|was advanced on behalf of the|revenue, namely, that depreciation|can be allowed as deduction only|under section 32 of the Income Tax)Actandnot.undergeneralprinciples. The court rejected thisargument. It was held that normal)depreciation can be considered as alegittmate deduction in computing|the real income of the assessee on'general principles or under section11(1})(a) of the Income Tax Act. Thecourt rejected the argument onbehalf of the revenue that section)32 of the Income Tax Act was the Date of Judgment 30-08-2018 I.T.A.No.170/2016 Commissioner of Income Tax (Exemptions) & Anr. Vs. Mookambika Temple. 10/13 only section granting benefit of|deductionOnaccountof|depreciation.It|Was heldthatincome|of|FICharitable|Trust|derived from building, plant and)machinery and furniture was liable|tobe.computedin|normal|commercial manner although theTrust may not be carrying on any|business and the assets in respectwhereof depreciation is_ claimedmay not be business assets. In all|such cases, section 32 of theIncomeTaxActprovidingfordepreciationforcomputationof|income derived from business or)profession1S|not.applicable.However, the income of the Trust is.required to be computed wundersection 11 on commercial principles|after providing for allowance fornormal depreciation and deduction|thereof from gross income of the|Trust. In view of the aforestated| Date of Judgment 30-08-2018 I.T.A.No.170/2016 Commissioner of Income Tax (Exemptions) & Anr. Vs. Mookambika Temple. 11/13 Judgment of the Bombay HighCourt, we answer question No. 1 in)the affirmative t.e., in favour of the|aSsSSCSSCandagainstthedepartment.” 4With regard to carrying forward of thelosses for being set off against the income of thecharitable trust for the present Assessment Year,the controversy is covered by the Judgment inCommissioner of Income Tax (Exemptions) and|another Vs. Ohio University Christ College|rendered on17.07.2018IN|ITA.No.312/2016and ITA No.313/2016, In which this Court held as|under:| 18. In view of the aforesaid findingsof the learned Tribunal, allowing anyexpenditure of the earlier year which hasbeen brought forward and set off in theyear under consideration, is a Justified|finding of fact based on the_ correct Date of Judgment 30-08-2018 I.T.A.No.170/2016 Commissioner of Income Tax (Exemptions) & Anr. Vs. Mookambika Temple. 12/13 4With regard to carrying forward of thelosses for being set off against the income of thecharitable trust for the present Assessment Year,the controversy is covered by the Judgment inCommissioner of Income Tax (Exemptions) and|another Vs. Ohio University Christ College|rendered on17.07.2018IN|ITA.No.312/2016and ITA No.313/2016, In which this Court held as|under:| 18. In view of the aforesaid findingsof the learned Tribunal, allowing anyexpenditure of the earlier year which hasbeen brought forward and set off in theyear under consideration, is a Justified|finding of fact based on the_ correct Date of Judgment 30-08-2018 I.T.A.No.170/2016 Commissioner of Income Tax (Exemptions) & Anr. Vs. Mookambika Temple. 12/13 interpretation of law and the judgmentrelied upon by it rendered by the cognate|Bench. Therefore, the same does not call|for interference. A similar view was also|taken by the Division Bench of Bombay|High Court inCommissioner of Income-tax v. Institute of Banking (2003) 264ITR 110,wherein the Division Bench ofBombay High Court held that the income|derived from the trust property has alsogottobecomputedOrlcommercial principles and if commercial principles are|applied, then adjustment of expensesincurred by the trust for charitable andreligijouS purposes in the earlier yearsagainst the income earned by the trust inthe subsequent year will have to beregarded as application of income of the)trust for charitable and religious purposes|in the subsequent year. In view of the controversy covered by theabove decisions of this Court, we are of the opinion Vs. Mookambika Temple. that the substantial question of law as suggestedby the appellants does not now arise for ourfurtherconsideration in the present appeal.” 5In view of the aforesaid, we are of the opinion thatno substantial question of law arises for our furtherconsideration in the present case also. 6. The appeal filed by the Revenue is accordinglydismissedin terms of the aforesaid judgments of this Court.No costs. dn/- Sd/-.JUDGE Sd/-.JUDGE|