The Commissioner Of Income Tax v. Market Committee, Karnal

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH. I.T.A. No.238 of 2010 & other connected cases beingITA Nos.237 & 239 to 245 of 2010 Date of decision: 28.7.2010 The Commissioner of Income Tax. Vs. Market Committee, Karnal. -----Appellant. -----Respondent CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOELHON'BLE MR. JUSTICE AJAY KUMAR MITTALHON'BLE MR. JUSTICE AJAY KUMAR MITTAL Present:-Mr. Yogesh Putney, Sr.Standing counselfor the Revenue.for the Revenue. --- ADARSH KUMAR GOEL, J. 1. This order will dispose of ITA Nos.237 to 245 of 2010,as common questions of law are involved in all the said appeals. 2. According to learned counsel for the appellant, I.T.A.No.238 of 2010 is the lead appeal. There is no further question inother appeals. In the said appeal following substantial questionsof law have been proposed:- i) “Whether on the facts and in the circumstances of thecase, the Income Tax Appellate Tribunal was justifiedin holding that depreciation was allowable on thecapital assets, when deduction for capital expenditureincurred for acquisition of these capital assets hasalready been allowed as application on income of thetrust?case, the Income Tax Appellate Tribunal was justifiedin holding that depreciation was allowable on thecapital assets, when deduction for capital expenditureincurred for acquisition of these capital assets hasalready been allowed as application on income of thetrust? ii) “Whether the learned ITAT's decision to allow doublededuction on depreciation when capital expenditureon the asset has already been allowed is justified inthe light of the Apex Court's decision in Escorts IndiaLtd. 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 same expenditure?”deduction on depreciation when capital expenditureon the asset has already been allowed is justified inthe light of the Apex Court's decision in Escorts IndiaLtd. 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 same expenditure?” iii) “Whether on the facts and in the circumstances of thecase, the learned ITAT was justified in restoring theissue to the file of the Assessing Officer to allow setoff of brought forward unabsorbed depreciation andlosses of earlier years, despite the fact thatdepreciation per se is not allowable on capital assetswhen deduction for capital expenditure has alreadybeen allowed as application of income in earlier yearsand when the provisions of Sections 70 to 80 of theIncome Tax Act have not specifically provided forcarry forwarded and set off of losses or unabsorbeddepreciation in the case of income assessed ulnderSection 11 to 13 of the Act?”case, the learned ITAT was justified in restoring theissue to the file of the Assessing Officer to allow setoff of brought forward unabsorbed depreciation andlosses of earlier years, despite the fact thatdepreciation per se is not allowable on capital assetswhen deduction for capital expenditure has alreadybeen allowed as application of income in earlier yearsand when the provisions of Sections 70 to 80 of theIncome Tax Act have not specifically provided forcarry forwarded and set off of losses or unabsorbeddepreciation in the case of income assessed ulnderSection 11 to 13 of the Act?” iv) “Whether on the facts and in the circumstances of thecase, the learned ITAT was justified in directing theAO to consider the excess amount of application ofincome of previous year to be adjusted in the currentyear, despite there being no provision in Section 11 to13 of the Act in this regard and despite the fact thatthe ratio of the decision of the Hon'ble Rajasthan HighCourt in Maharazna of Mewar Charitable Foundation(164 ITR 439) is not applicable to this jurisdiction?”case, the learned ITAT was justified in directing theAO to consider the excess amount of application ofincome of previous year to be adjusted in the currentyear, despite there being no provision in Section 11 to13 of the Act in this regard and despite the fact thatthe ratio of the decision of the Hon'ble Rajasthan HighCourt in Maharazna of Mewar Charitable Foundation(164 ITR 439) is not applicable to this jurisdiction?” v)“Whether on the facts and in the circumstances of thecase, the learned ITAT was justified in allowingcase, the learned ITAT was justified in allowing payment of 30% of market fees earned by it paid tothe Haryana Agriculture Marketing Board asapplication of income for charitable purpose, despitethe finding that 30% of the market fee has to be paidto the said Board as a statutory obligation under theAgriculture Marketing Board Act and, therefore, it isnot application of income, but it is sharing of income by an overriding title as per the Act by which the MarketCommittee is governed?” 3. The Assessee is a Market Committee and isregistered under Section 12AA of the Act as a charitableinstitution. It has been created under the Punjab AgriculturalProduce Markets Act, 1961 for regulating marketing of agriculturalproduce. The Assessing Officer rejected the claim of theAssessee with regard to depreciation and for deduction claimedin respect of contribution made by the Assessee to its apex bodyin accordance with statutory requirements. It was also held thatthe Assessee could not claim set off on excess application ofincome in an earlier year. This view was reversed by the Tribunaland claim of the Assessee was upheld. 4. We have heard learned counsel for the Revenue. 5. Learned counsel for the Revenue fairly states thatquestion Nos.(i) to (iii) are covered against the Revenue by earlierjudgment of this Court dated 5.7.2010 in I.T.A. No.535 of 2009The Commissioner of Income Tax, Karnal. v. MarketCommittee, Pipliand question No.(v) is covered against the Revenue by the judgment of this Court in dated 5.7.2010 in I.T.A. No.151 of 2009 The Commissioner of Income Tax, Hisar. v.Market Committee, Narwana. He challenged finding of theTribunal relating to question No. (iv), which is as under:- “.........We hold that deficit arising out of the excess ofexpenditure over income during any earlier year canbe set off against the income of the current year butthe relevant facts regarding quantum of such excessof expenditure over income in the earlier year is notavailable before us and hence, we restore back thisissue to the file of AO to find out as to whether therewas any excess of expenditure over income in anyearlier year and if there is so excess of expenditureover income found in any earlier year, the same canbe set off against the income of the current year asper this judgment of Hon'ble Rajasthan HighCourt......” 6. Learned counsel for the Revenue submitted thatSection 11(1) of the Act only refers to exemption of income ofprevious year and, therefore, there cannot be any question ofadjustment of deficit of excess expenditure of earlier years. Theincome sought to be exempted must have been applied in theyear in question and not earlier. 7. We are unable to accept the submission. 6. Learned counsel for the Revenue submitted thatSection 11(1) of the Act only refers to exemption of income ofprevious year and, therefore, there cannot be any question ofadjustment of deficit of excess expenditure of earlier years. Theincome sought to be exempted must have been applied in theyear in question and not earlier. 7. We are unable to accept the submission. 8. Exclusion of income from total income under Section11 of the Act is to the extent of its application for charitablepurposes. Adjustment against excess expenditure of an earlier11 of the Act is to the extent of its application for charitablepurposes. Adjustment against excess expenditure of an earlier year is also application of income under the said provision. InCITv. Maharana of Mewar Charitable Foundation[1987] 164ITR 439, it was held that it was not necessary that the incomeshould be applied in the year in which it has arisen. Excessexpenditure already incurred could also be adjusted against theincome of the following year. Requirement of Section 11 of theAct was only to apply the income which could also coveradjustment of the income for the expenditure for charitablepurposes. We are in respectful agreement with the viewexpressed in the said judgment. No contrary view has beenshown. 9. In view of above, no substantial question of lawarises. The appeals are dismissed. (ADARSH KUMAR GOEL) JUDGE July 28, 2010ashwani ( AJAY KUMAR MITTAL ) JUDGE