The Commissioner Of Income-Tax, Karnal v. Market Committee, Pipli (Kurukshetra

Income-tax Appeal No.669 of 2009 **** IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH Income-tax Appeal No.669of 2009(O&M) Date of decision: 7.2.2011 The Commissioner of Income-Tax, Karnal ...Appellant Versus Market Committee, Pipli (Kurukshetra) ...Respondent CORAM: HON'BLE MR.JUSTICE ADARSH KUMAR GOEL HON'BLE MR.JUSTICE AJAY KUMAR MITTAL Present: Mr. Yogesh Putney, Senior Standing Counsel for the appellant. **** ADARSH KUMAR GOEL, J (Oral). 1.The Registry has not been able to send the file onaccount of fire in the Court premises. Learned counsel for therevenue has furnished two copies of the paper book which are takenon record. We proceed to decide the matter after hearing learnedcounsel for the revenue. 2.This appeal has been preferred by the revenue underSection 260-A of the Income Tax Act, 1961 against the order dated31.3.2009 of the Income Tax Appellate Tribunal, Chandigarh Bench,Chandigarh in I.T.A. No.91/CHD/2009 for the assessment year 2006-07 proposing to raise following substantial question of law:- i)Whether the ITAT was justified in deleting the ii) iii) iv) addition made on interest accruing to the assesseeon advance of Rs.7,33,00,000/- to the HSAMBwithout getting examined the factual positionregarding liability of HSAMB to pay interest to theassessee, although no clear finding has beenrecorded by either the CIT(Appeals) or theAssessing Officer on this point? Whether the failure of the ITAT to get proper inquirymade by lower authorities in a case where the factsand circumstances so demanded does not result ina failure, which lays upon the action of the ITAT tocorrection by a higher authority, in the light of theratio of the judgment of the Hon'ble Bombay HighCourt in Smt. Prabha Wati S. Shah Vs. CIT 231ITR 277 (Bom.)? Whether on the facts and in the circumstances ofthe case, the Income-tax Appellate Tribunal wasjustified in holding that depreciation was allowableon the capital assets, when deduction for capitalexpenditure incurred for acquisition of these capitalassets has already been allowed as application ofincome of the trust? Whether the Ld. ITAT's decision to allow doublededuction on depreciation when capital expenditureon the asset has already been allowed is justified in the light of the Apex Court's decision in Escorts Ltd.Vs. UOI (199 ITR 43) to the effect that in theabsence of clear statutory indication to the contrary,the statute should not be read as to permit anassessee two deductions on the sameexpenditure?” 3.The assessee is a statutory body under the provisions ofPunjab Agriculture Produce Marketing Act, 1961. It advanced someof its funds to the Marketing Board which is its apex body and someof the funds were advanced to other market committees. Theassessing officer held that notional interest on the amount advancedto the Board was liable to be added to the income of the assessee atthe rate at which amount were advanced to other market committees. 4. Income of the assessee is exempted from tax as it isregistered as a charitable institution under Section 12A of the Act.The assessee claimed depreciation on its assets for the purpose ofcalculating its income. The assessing officer held that depreciationwas not permissible as income being exempt as charitable institution,depreciation amount will give it double benefit. 5.The CIT(A) upheld the additions but the Tribunal setaside the same holding:- Issue of notional interest income “7.We have considered the rival submission carefully.Evidently, the provision of Section 145 dealing with themethod of accounting to account for income comes into 4. Income of the assessee is exempted from tax as it isregistered as a charitable institution under Section 12A of the Act.The assessee claimed depreciation on its assets for the purpose ofcalculating its income. The assessing officer held that depreciationwas not permissible as income being exempt as charitable institution,depreciation amount will give it double benefit. 5.The CIT(A) upheld the additions but the Tribunal setaside the same holding:- Issue of notional interest income “7.We have considered the rival submission carefully.Evidently, the provision of Section 145 dealing with themethod of accounting to account for income comes into play only in case where an assessee is eligible for anincome. Whether the income is to be accounted for onaccrual or cash basis, is manifested in the method ofaccounting. So, however, the pre-requisite is that theassessee must be entitled to such income. In the presentcase, the assessee contended that on the advance ofRs.7,33,00,000/- given to HSAMB, the assessee was notentitled to receive any interest. This plea was taken bythe assessee before the Assessing Officer as well asbefore the CIT(Appeals). There is no material on recordto negate the aforesaid position articulated by theassessee before the income tax authorities. TheAssessing Officer merely referred to an arrangement ofthe assessee with another borrower to prove his point thatthe assessee was liable to earn interest on the interest toHSAMB. The approach of the assessing officer isunacceptable. On the basis of the material on record, wefind nothing to support the presumption drawn by theincome tax authorities that certain interest is to be earnedby the assessee on the impugned advance given toHSAMB. The addition, therefore, made by the income taxauthorities is entirely on conjectures and surmises. Thesame is hereby set aside. On this issue the assesseesucceeds.” Issue of depreciation “9.The facts relevant to this ground are that theassessee has claimed depreciation of Rs.24,91,227/- asapplication of income on the basis of the decision of theHon'ble Bombay High Court in the case of Institute ofBanking Personnel Selection (supra). The AssessingOfficer denied the claim of the assessee in view of theorder of the CIT(Appeals) for the assessment year 2005-06 in the case of the assessee. The said decision hassince been set aside by the Tribunal and issue remandedto the file of the Assessing Officer for a decision afresh.Following the aforesaid precedent, which is not opposedby the Revenue, we set aside the order of the CIT(Appeals) and restore the issue to the file of theAssessing Officer who shall verify the claim of theassessee and allow the same in terms of decision of theHon'ble Bombay High Court in the case of Institute ofBanking Personnel Selection (supra). Thus, theassessee succeeds for statistical purpose on thisground.” 6.We have heard learned counsel for the appellant. 7.Learned counsel for the appellant fairly states thatquestions No. (iii) and (iv) have already been considered in anidentical appeal and decided against the revenue vide order of thisCourt dated 5.7.2010 in ITA No.535 of 2009 (The Commissioner of Income, Karnal Vs. Market Committee, Pipli). 6.We have heard learned counsel for the appellant. 7.Learned counsel for the appellant fairly states thatquestions No. (iii) and (iv) have already been considered in anidentical appeal and decided against the revenue vide order of thisCourt dated 5.7.2010 in ITA No.535 of 2009 (The Commissioner of Income, Karnal Vs. Market Committee, Pipli). 8.As regards questions No. (i) and (ii), it has been found bythe Tribunal that neither the assessee received any interest nor therewas any agreement to receive interest. It was not the case of therevenue that there was any obligation on the assessee to chargeinterest nor there is anything to show that interest was actuallycharged. In absence thereof, there could be no question of deemedincome on the basis of notional interest comparing with the depositwith the advances made to other market committees. The othermarket committees do not stand on the same footing as MarketingBoard which was the apex body of the assessee. Finding recordedby the Tribunal is not shown to be perverse. 9. No substantial question of law arises. 10.Accordingly, the appeal is dismissed. (Adarsh Kumar Goel) Judge February 07, 2011Pka (Ajay Kumar Mittal) Judge