M/S.sri Devi Karumariammal Educational Trustno v. The Joint Director Of Income-Tax(Exemptions)

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 2-12-2013 CORAM THE HONOURABLE MRS.CHITRA VENKATARAMAN AND THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAM TAX CASE APPEAL No.747 of 2013 M/s.Sri Devi Karumariammal Educational TrustNo.5, Chellammal ComplexArcot Road, Janaki NagarValasaravakkamChennai 600 087. .. Appellant/Appellant vs The Joint Director of Income-tax(Exemptions)108, Nungambakkam High RoadChennai 600 034. .. Respondent/ Respondent Tax case appeal preferred under Section 260A of the IncomeTax Act, 1961, against the order of the Income Tax AppellateTribunal,Bench'D',Chennai,dated17.7.2013,inI.T.A.No.757/MDS/2013 against the order of the commissioner of IncomeTax (Appeals)-XII, 121, Mahatma Gandhi Road, Nungambakkam, Chennai600 034. dated 13.02.2013 and made in ITA No.291/2011-12 andagainst the order of Joint Director of Income Tax (Exemptions)Chennai 600 034 dated 12/12/2011 and made in PAN/GiR.No.AAB7S7096K. For AppellantFor Respondent : Mrs.(Dr.) Anita Sumanth : Mr.J.Narayanasamy https://hcservices.ecourts.gov.in/hcservices/ JUDGMENT (Judgment of the Court was delivered by CHITRA VENKATARAMAN, J.) The assessee has preferred this appeal challenging the orderof the Income Tax Appellate Tribunal, Bench 'D', Chennai, dated17.7.2013, made in I.T.A.No.757/MDS/2013. 2.The assessee is the Public Educational Trust registeredunder Section 12 AA of the Income Tax Act, 1961. As regards theassessment year 2009-2010, the assessee filed its return of incomeadmitting gross receipts of Rs.8,56,05,633/- and NIL income afterclaiming exemption under Section 11 of the Act. After scrutiny, anotice was issued to them. In the course of the assessmentproceedings, the appellant/assessee claimed revised computationclaiming application of income, repayment of loan amount, increase innet current assets and increase in investment. Considering thereturn, the Assessing Officer arrived at the shortfall asRs.93,75,462/- towards income. Aggrieved by this, the assessee wenton appeal before the Commissioner of Income Tax (Appeals)-XII. Thegrievance of the assessee was that the Assessing Officer had notconsidered the depreciation on fixed assets. The first AppellateAuthority pointed out that the claim of the assessee that theapplication of income based on the earlier years, exceeded by 85% ofthe income was held to be not correct and thus, the Commissionerupheld the order of the Assessing Officer. On the basis of the factsavailable, the Commissioner held that there was deficit applicationof income than the total income of the trust of the respective years. 3.As regards the claim of depreciation in computing theapplication of the income for the objects of the trust, theCommissioner rejected the plea of the assessee. The Commissionerviewed that under Section 11 of the Act, only actual expenditureincurred/spent, was considered as application and no notionalexpenditure or allowances were permitted to be counted as applicationof income of the Trust. The Commissioner also referred to thedecisions reported in 199 ITR 43 (ESCORTS LTD. V. UNION OF INDIA) and135 ITR 485 (CIT V. RAO BAHADUR CUNNAN CALAVALA CHARITIES) and heldthat when capital expenditure is allowed in its entirety asdeduction, any further allowance under any other section would amountto double deduction and hence not permissible. In the light of theabove, the Commissioner dismissed the appeal filed by the assessee. 4.Aggrieved by the above, the assessee went on appeal beforethe Income Tax Appellate Tribunal. On consideration of the claim ofthe assessee, the Tribunal held that the Commissioner had calculatedthe total application of income indicating the shortfall ofRs.2,18,31,054/- and at the same time, the order revealed that thecorpus donations had been held as not part of the income and hencethey were mutually contradictory. The Tribunal further held thatwhat was required was a detailed adjudication at the hands of thehttps://hcservices.ecourts.gov.in/hcservices/Assessing Officer. Since there was no discussion on this in theassessment order, the Tribunal restored the issue back to theAssessing Officer and he was directed to pass a fresh assessment order as regards the depreciation also. Since the main issue itselfwas restored to the Assessing Officer, it was left to the AssessingOfficer to consider it, after taking into consideration the case lawsreferred to by the assessee. While holding so, the Tribunal furtherobserved in paragraph No.11 of its order as follows: "11........ It is also made clear to theAssessing Officer that in case it turns out thatthe assessee is carrying on any business, thenonly, while computing business income, it wouldbe entitled for depreciation on assets used inthe business." 5.Aggrieved by the above, the present appeal is preferred bythe assessee. 6.The only grievance projected in this appeal by theassessee, is that while remanding the matter back to the AssessingOfficer, the Tribunal, on the issue of depreciation, ought not tohave made the observation as contained in the above said extractionportion. Thus, the grievance of the appellant is that whileremanding the matter, the Tribunal should have made an open remandfor considering the depreciation on assets that the assessee used inthe business. The direction of the Tribunal, according to theassessee, is contrary to law and stands in the way of the AssessingOfficer to form his view in the light of the case laws relied on bythe assessee. 7.Considering the limited prayer made, we ordered notice tothe learned Standing Counsel for the Revenue and after hearing thelearned Counsel for the parties and going through the contentionstaken by the assessee, we feel that the observation of the Tribunalin paragraph No.11 of its order as extracted above, alone is to beeschewed and accordingly, we hold that without being influenced bythe observation made, the Assessing Officer shall consider the claimof the appellant/assessee as regards the depreciation on the fixedassets, for the purposes of finding out the compliance of Section 11of the Act. It is open to the assessee to place such materialsincluding the decisions relied upon by them, before the AssessingOfficer for passing a fresh order in accordance with law. costs. Sd/Assistant Registrar /True Copy/ Sub Assistant Registrar To: 1.The Joint Director of Income-tax(Exemptions)108, Nungambakkam High RoadChennai 600 034. 2. The Commissioner of Income Tax (Appeal) XII,121 Mahatma Gandhi Road,Nungambakkam, Chennai 600 034. 3. The Assistant Registrar, Income Tax Appellate Tribunal Bench 'D'II Floor, Rajaji Bhavan, Besant Nagar,Madras 600 090. 1cc to M/s.J.Narayanasamy,Advocate, Sr.62748 1cc to M/s.Dr Anita Sumanth,Advocate, Sr.62805 T.C.A.No.747 of 2013ug(CO)GKG/11/12/13