The Commissioner Of Income Tax-Ii, Thane v. M/S Jawaharlal Nehru Port Trust

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 968 OF 2013 WITHINCOME TAX APPEAL NO. 1043 OF 2013 The Commissioner of Income Tax-II, Thane..Appellant Vs. M/s Jawaharlal Nehru Port Trust ..Respondent .... Mr. Suresh Kumar, Advocate for Appellants.Mr. P.J. Pardiwalla, Sr. Advocate a/w Mr. S.G. Dalal and Mr. S.G.Lakhani, Advocates for Respondents. .... P.C.: CORAM : M.S. SANKLECHA & N.M. JAMDAR, JJ.DATED : 8[th] JUNE 2015 These two appeals filed by the Revenue under Section260A of the Income Tax Act, 1961 (the 'Act') challenges a commonorder dated 21 November 2012 passed by the Income Tax AppellateTribunal (the 'Tribunal'). The common impugned order disposes ofthe respondent-assessee's appeals for the Assessment Year 2006-07and 2007-08. law in the two appeals for our consideration, as under: “(i)Whether, on the facts and in the circumstances ofthe case, and in law the Tribunal in setting aside the orderof the CIT(A) confirming the disallowance made by the AOu/s 14A read with Rule 8D of the I.T. Rules 1962 out ofexpenses relating to investment in tax free bonds. It failedto appreciate that the order of the Bombay High Court inthe case of M/s Godrej & Boyce Mfg. Co. Ltd. Vs. DCIT hasbeen contested by way of SLP before the Supreme Court? (ii)Whether, on the facts and in the circumstances ofthe case, and in law the Tribunal in setting aside the orderof the CIT(A) confirming the order of the AO denyingexclusion of income exempt u/s 10(35) of the I.T. Act fromthe total income of the assessee for the purpose ofcalculating whether 85% of the income had been applied forthe objects of the trust or not as per the provisions of section11(1)(a) of the I.T. Act 1961. It failed to appreciate thatsection 11 of the I.T. Act does not allow any such exclusionfrom the total income of the assessee. (iii)Whether, on the facts and in the circumstances ofthe case, and in law the Tribunal in allowing the assessee toclaim depreciation also on the capital expenditure whichwas already allowed as deduction being application ofincome. In doing so, it has failed to correctly appreciate the decisions in case of (a) Escorts India Ltd. Vs. UOI 199 ITR43 (SC) and (b) Lissie Medical Institutions Vs. CIT 348 ITR344 (Ker)? (iv)Whether, on the facts and in the circumstances ofthe case, and in law the Tribunal in setting aside the orderof the CIT(A) confirming the order of the AO disallowingcarry forward of excess application of income of the earlieryears against the income of the year under consideration. Itfailed to appreciate that application of income in a givenyear cannot exceed the income of that year and that therecannot be “carry forward of excess application of income”under any provisions of the I.T. Act, 1961?” 3.Regarding Question No.(i): The Counsel are agreed that Question No.(i) stands concluded in favour of the respondent-assessee and against theappellant/revenue by the decision of this Court in M/s Godrej &Boyce Mfg. Co. Ltd. Vs. DCIT reported in (2010)328 ITR 81. Weare informed at the bar that the SLP filed by the revenue against thedecision of this Court in the M/s Godrej & Boyce Mfg. Co. Ltd.(supra) has also been dismissed. Accordingly, Question No.(i) doesnot raise any substantial question of law and is thus not entertained. (a)The respondent-assessee had income from bonds which were not forming a part of total income under Section10(35) of the Act. Thus, according to the respondent-assessee, theabove amounts was not to be considered as part of the income forthe purpose of it's application in terms of Section 11 of the Act.However the Assessing Officer did not accept the assessee'scontention and held that such income will form part of the totalincome while examining the application of income under Section 11of the Act. (a)The respondent-assessee had income from bonds which were not forming a part of total income under Section10(35) of the Act. Thus, according to the respondent-assessee, theabove amounts was not to be considered as part of the income forthe purpose of it's application in terms of Section 11 of the Act.However the Assessing Officer did not accept the assessee'scontention and held that such income will form part of the totalincome while examining the application of income under Section 11of the Act. (b)On appeal to the CIT (Appeals), therespondent-assessee placed reliance upon the decision of this Courtin CIT (Appeals) Vs. Silk & Art Silk Mills Association Ltd. reportedin (1990)182 ITR 38 (Bom.) and in His Holiness Silasri KasivasiMuthukumaraswami Thambiran & Ors. Vs. Agricultural ITOreported in (1978)113 ITR 889 (Mad.) in support of its contentionthat income excluded under Section 10 of the Act is not to beconsidered for purpose of Section 11 of the Act. However, the CIT(Appeals) while disposing the appeal disregarded the two decision by merely holding that they are not relevant to the case of theappellant without pointing out in what manner the two cases werenot relevant to the issue under consideration. (c)On further appeal, the Tribunal by theimpugned order set aside the order of CIT (Appeals) and restoredthis issue to the CIT (Appeals) as there was no discussion as of theappellant's submissions to pass a fresh order in accordance withlaw. (d)The grievance of the appellant/revenue is thatthere was no need for the Tribunal by the impugned order to setaside the order of CIT (Appeals) and restore the issue to CIT(Appeals) for fresh decision. This on the ground that order passedby the CIT (Appeals) was an order which upheld the view of theAssessing Officer. (e)We find that the order passed by the CIT(Appeals) has not dealt with the decisions cited by the respondent-assessee at the time of hearing before it and merely stating that thesame are not relevant does not meet the requirement of naturaljustice viz. An order supported by reasons. In the above view of the 5 / 11 matter, the impugned order of the Tribunal setting aside order ofCIT (Appeals) and restoring it to him for fresh consideration cannotbe found fault with. Accordingly, Question No.(ii) does not raiseany substantial question of law and is accordingly not entertained. 5.Regarding Question No.(iii): (a)The respondent-assessee had claimeddepreciation in respect of fixed assets. In the year of purchase ofthe fixed assets, the entire amount attributable to its purchase wasshown as application of income for the objects of the respondent-assessee and thus exempt in terms of Section 11. The AssessingOfficer disallowed the claim for depreciation on the ground that thesame would amount to double deduction in as much as the entireamount attributable to purchase of fixed assets was not subject totax as being applied for the object of the respondent-assessee andon the same amount, the respondent-assessee was claimingdepreciation. (b)On appeal, the CIT (Appeals) upheld thedecision of the Assessing Officer on the ground that allowingdeduction on account of depreciation would amount to doubleS.S.DESHPANDE6 / 11 deduction as the amount on which depreciation is claimed wasalready exempted under Section 11 of the Act. (b)On appeal, the CIT (Appeals) upheld thedecision of the Assessing Officer on the ground that allowingdeduction on account of depreciation would amount to doubleS.S.DESHPANDE6 / 11 deduction as the amount on which depreciation is claimed wasalready exempted under Section 11 of the Act. (c)On further appeal, the Tribunal allowed it byfollowing the decision rendered by it on similar issues in the case ofDirector of Income Tax (Exemptions) Vs. Ville Parle KelavaniMandal in Income Tax Appeal No. 693/2013 for the AssessmentYear 2008-09 rendered on 5 October 2012 and held that there is noquestion of double deduction as the assessee is only claiming thatdepreciation should be reduced while determining the percentage offunds applied for the purpose of Section 11 of the Act. In thedecision of the Punjab and Haryana High Court in the case of CITVs. Market Committee reported in 330 ITR 16 relied upon by theTribunal in Ville Parle Kelavani Mandal (supra) the decisions of theApex Court in Escorts Vs. UOI reported in 100 ITR 43 and of KeralaHigh Court in Lessie Medias Infotech Vs. CIT reported in 348 ITR344 were also considered. (d)The grievance of the revenue is that allowing ofdepreciation in respect of the amount which is already exemptunder Section 11 of the Act as application of income for objects of the institution and thereafter granting depreciation as the samewould amount to grant of double deduction. Mr. Suresh Kumar, thelearned Counsel for the revenue submits that a similar issue arisingin the case of Director of Income Tax (Exemption) Vs.Shanmukhanand Fine Arts and Sangitha Sabha in Income TaxAppeal No. 1413/2012 has been admitted by this issue forconsideration by its order dated 5 March 2014. Thus it iscommended that this issue also be admitted for consideration. (e)We find that the decision of the Tribunal in thecase of Ville Parle Kelavani Mandal (supra) rendered on 5 October2012 had been challenged by the revenue before this Court in theIncome Tax Appeal No. 693/2010. This Court by order dated 23March 2015 dismissed the revenue's appeal on the ground thatclaims the deduction on account of depreciation would not amountto double deduction. In fact, the Tribunal in its order in Ville ParleKelavani Mandal (supra) had followed the decision of this Court inCIT Vs. Institute of Banking Personal Selection reported in (2003)264 ITR 110. Further this Court in the case of Director of IncomeTax (Exemption) Vs. The Watch Tower Bible and Tract Society of India in Income Tax Appeal No. 1548/2012 rendered on 10December 2014 had occasion to also consider the issue in thecontext of identical submission being made by the revenue before usand after considering it's earlier decision including the order dated 5March 2014 in Shanmukhanand Fine Arts and Sangitha Sabha(supra) admitting the appeal, came to the conclusion that there isno question of double deduction. This on the ground that amountspent on acquiring assets are taken as application of income for thepurposes of Section 11 of the Act and the depreciation claimedthereafter on the same amount i.e. the value of fixed assets duringthe subsequent years is being granted on the user of the same.Accordingly, in view of the decision of this Court in Institute ofBanking (supra) and Ville Parle Kelavani Mandal (supra) renderedon 23 March 2015 and an earlier decision in The Watch Tower Bibleand Tract Society of India rendered on 10 December 2014, theQuestion No.(iii) stands concluded in favour of therespondent/assessee and against the revenue. Accordingly,Question No.(iii) does not give rise to any substantial question oflaw and is thus not entertained. (a)The respondent-assessee had positive incomefor subject assessment years. The income in the two assessmentyears was sought to be set off against the excess application ofincome in the earlier years by the respondent-assessee. TheAssessing Officer disallowed the set off/adjustment for earlier yearson the ground that the respondent-assessee had not claimedexemption under Section 11 of the Act i.e. Assessment Year 2003-04, 2004-05 and 2005-06 and the returns filed for earlier yearswere also barred by limitation. Therefore the Assessing Officer heldthat the question of setting off the excess application of earlier yearsfrom the income of subject assessment year would not arise. (b)On appeal, the CIT (Appeals) upheld the orderof Assessing Officer. On further appeal, the Tribunal by theimpugned order held that for the earlier assessment years, theTribunal had in its order dated 30 September 2010 restored theissue to the Assessing Officer to examine the merits of therespondent claim for exemption under Section 11 of the Act. Thiswas on account of the fact that at the time of hearing before the Tribunal, the respondent was in possession of its Registration underSection 12 (1)(A) of the Act. In the light of the above, the Tribunalhad restored the issue for the earlier years to the Assessing Officerto decide the matter afresh and to determine the application ofincome in terms of Section 11 of the Act. Consequently, theTribunal set for the subject assessment year aside the order of CIT(Appeals) and restored the issue to the Assessing Officer to considerthe same afresh in the light of the decision taken by the AssessingOfficer in respect of the orders passed for the earlier assessmentyears. Thus, the question as framed by the revenue does not giverise to any substantial question of law. Accordingly, Question No.(iv) is not entertained. 7.Accordingly, for the above reasons, both the appeals filedby the revenue are dismissed. No order as to costs. [N.M. JAMDAR, J] [M.S. SANKLECHA, J.]