1[CASE NUMBER]14 IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 30TH DAY OF AUGUST 2018 PRESENT THE HON'BLE Dr.JUSTICE VINEET KOTHARI AND THE HON'BLE Mrs.JUSTICE S.SUJATHA I.T.A.No.346 OF 2014 BETWEEN: 1. [ENTITY]. 2. The [ENTITY]. Appellants (By Mr.[ENTITY], Adv.) AND: Dr. [ENTITY], Syndicate House, Manipal - 576 104. PAN No:AAATD1327M. Respondent (By Mr.[ENTITY], Adv.) This Income Tax Appeal is filed under [SECTION] of [ACT] 1961, arising out of order dated 21.03.2014 passed in [CASE NUMBER][CASE NUMBER][CASE NUMBER], for the Assessment Year Date of Judgment 30-08-2018 [CASE NUMBER] [ENTITY]. Vs. Dr. [ENTITY] 2[CASE NUMBER]14 2010-2011, praying to decide the foregoing question of law and[CASE NUMBER]or such other questions of law as may be formulated by the Hon'ble Court as deemed fit and set aside the appellate order dated 21.03.2014 passed by the Income Tax Appellate Tribunal, 'B' Bench, Bengaluru, in appeal proceedings [CASE NUMBER][CASE NUMBER][CASE NUMBER] for Assessment Year 2010-2011. This I.T.A. coming on for Admission, this day [ENTITY] J. delivered the following:- JUDGMENT
Mr.[ENTITY], Adv. for Appellants - Revenue. Mr.[ENTITY], Adv. for Respondent - Assessee.
1. Revenue has filed this appeal raising purported substantial questions of law under [SECTION] of the [ACT] arising from the order of learned Tribunal dated 21.03.2014 in [CASE NUMBER][CASE NUMBER][CASE NUMBER] for the Assessment Year 2010-2011 - The [PRECEDENT]
2. The suggested substantial questions of law in the memo of appeal of Revenue are quoted below for ready reference:-
Date of Judgment 30-08-2018 [CASE NUMBER] [ENTITY].
Vs. Dr. [ENTITY] "Depreciation:
1.1 Whether on the facts and in the circumstances of the case, the Tribunal were justified in law in allowing assessee's claim for depreciation on new assets put into use in during the accounting year relevant to this asst. year, even though the entire cost of these assets have been claimed by the assessee as an application of income fro charitable activities?
1.2. Whether on the facts and in the circumstances of the case, the Tribunal were right in law failing to take cognizance of the fact that allowing of total cost of the asset as an application of income and allowing of depreciation on the value of such assets in the same year results in double deduction and is not admissible in the absence of clear statutory indication?
1.3 Whether on the facts and in the circumstances of the case, the Tribunal were justified in law in not appreciating the fact that in the case of CIT vs. Institute of Banking
- 264 ITR 110 (Bom) the decision is regarding Date of Judgment 30-08-2018 [CASE NUMBER] [ENTITY].
Vs. Dr. [ENTITY] allowing of depreciation on assets whose value was allowed in the preceding years as application of income , and not on allowing of depreciation in the same assessment year in which the cost was allowed as an application of income and therefore, is distinguishable? 1.4 Whether on the facts and in the circumstances of the case, the Tribunal were justified in law in not taking cognizance of the judgment of Hon'ble High Court of Delhi in the case of [PRECEDENT] in [CASE NUMBER] wherein it is held that Tribunal was not justified in directing the allowance of depreciation in respect of assets, the cost of which has been allowed as deduction as application of income of the Trust?
Carry forward of Deficit:
2.1 Whether on the facts and in the circumstances of the case, the Tribunal were justified in law in allowing carry forward of deficit of earlier years for set off against the income of current year, when there is no Date of Judgment 30-08-2018 [CASE NUMBER] [ENTITY].
Vs. Dr. [ENTITY] provision in the [ACT] to allow carry forward of such deficit, and the number of years for which such carry forward of deficit for set off can be allowed?
2.2 Whether on the facts and in the circumstances of the case, the Tribunal were justified in law in placing reliance on the decision in the case of [PRECEDENT] for allowing carry forward and set off of deficit of earlier years, even though said decision was not pursued in further appeal in view of nil tax effect involved, and as per [SECTION] the said decision is not binding in respect of this assessee?
2.3 Whether on the facts and in the circumstances of the case, the Tribunal were justified in law in failing to take cognizance of the decision of Hon'ble Apex Court in the case of [PRECEDENT] wherein the Apex Court held that the Hon'ble High Courts can only interpret the law and not legislate, and legislative casus omissus Date of Judgment 30-08-2018 [CASE NUMBER] [ENTITY].
Vs. Dr. [ENTITY] cannot be supplied by judicial interpretative process?"
3. The learned counsel for Revenue submits that the controversy raised in the present appeal is covered by a decision of this Court in [CASE NUMBER] (D.D 14.08.2018), in the case of Pr. Commissioner of Income-
Tax (Exemptions) and Another vs. M[CASE NUMBER]s Green Wood High School. The relevant portion of the said order is extracted hereunder for ready reference:
"3. This Court in the case of '[PRECEDENT] with regard to allowability and Depreciation in the hands of Religious and Charitable Trust held as under:
"5. Learned Counsel at the Bar submitted that so far as the issue regarding claim of Depreciation under [SECTION] of the Act is concerned, the controversy is no longer res integra, having Date of Judgment 30-08-2018 [CASE NUMBER] [ENTITY].
Vs. Dr. [ENTITY] been settled by the Hon'ble Supreme Court in the case of '[PRECEDENT], by which the Hon'ble Supreme Court has affirmed the view taken by the Bombay High Court in 'Commissioner of Income Tax v. Institute of Banking Personnel Selection (IBPS)' [2003] 131 Taxman 386 [Bom.]. The relevant portion of the said Judgment of Bombay High Court as quoted by the Hon'ble Supreme Court and affirmed is quoted below for ready reference.
"In the said judgment, [Bombay High Court] the contention of the Department predicated on double benefit was turned down in the following manner:
3. As stated above, the first question which requires consideration by this court is :
Date of Judgment 30-08-2018 [CASE NUMBER] [ENTITY].
Vs. Dr. [ENTITY] whether depreciation was
allowable on the assets, the cost of which has been fully allowed as application of income under [SECTION] in the past years? In the case of [PRECEDENT] the facts were as follows. The assessee was a Charitable Trust. It was registered as a Public Charitable Trust. It was also registered with the Commissioner, Pune. The assessee derived income from the temple property which was a Trust property. During the course of assessment proceedings for assessment years 1977-78, 1978- 79 and 1979-80, the assessee claimed depreciation on the value of the building at the rate of 2.5 per cent and they also claimed depreciation on furniture at the rate of 5 per cent. The question which arose before the court for Date of Judgment 30-08-2018 [CASE NUMBER] [ENTITY].
Vs. Dr. [ENTITY] determination was: whether depreciation could be denied to the assessee, as expenditure on acquisition 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] of the [ACT] makes provision in respect of computation of income of the Trust from the properly held for charitable or religious purposes and it also provides for application and accumulation of income. On the other hand, [SECTION] of the [ACT] deals with chargeability of income from profits and gains of business and [SECTION] provides that income from profits and gains of business shall be computed in accordance with [SECTION], That, [SECTION] of the Act provides for depreciation in respect of building, Date of Judgment 30-08-2018 [CASE NUMBER] [ENTITY].
Vs. Dr. [ENTITY] plant and machinery owned by the assessee and used for the business purposes. It further provides for deduction subject to [SECTION]. In that matter also, a similar argument, as in the present case, was advanced on behalf of the revenue, namely, that depreciation can be allowed as deduction only under [SECTION] of the [ACT] and not under general principles. The court rejected this argument. It was held that normal depreciation can be considered as a legitimate deduction in computing the real income of the assessee on general principles or under [SECTION] of the [ACT]. The court rejected the argument on behalf of the revenue that [SECTION] of the [ACT] was the only section granting benefit of deduction on account of depreciation. It was held that Date of Judgment 30-08-2018 [CASE NUMBER] [ENTITY].
Vs. Dr. [ENTITY] income of a Charitable Trust derived from building, plant and machinery and furniture was liable to be computed in normal commercial manner although the Trust may not be carrying on any business and the assets in respect whereof depreciation is claimed may not be business assets. In all such cases, [SECTION] of the [ACT] providing for depreciation for computation of income derived from business or profession is not applicable. However, the income of the Trust is required to be computed under [SECTION] on commercial principles after providing for allowance for normal depreciation and deduction thereof from gross income of the Trust. In view of the aforestated Judgment of the Bombay High Court, we answer question No. 1 in the affirmative i.e., in favour of the Date of Judgment 30-08-2018 [CASE NUMBER] [ENTITY].
Vs. Dr. [ENTITY] assessee and against the department." xxxxxxx
4. With regard to carrying forward of the losses for being set off against the income of the charitable trust for the present Assessment Year, the controversy is covered by the judgment in [PRECEDENT] rendered on 17.07.2018 in [CASE NUMBER] and [CASE NUMBER], in which this Court held as under:
xxxxxxx
18. In view of the aforesaid findings of the learned Tribunal, allowing any expenditure of the earlier year which has been brought forward and set off in the year under consideration, is a justified finding of fact based on the correct interpretation of law and the judgment relied upon by it rendered by the cognate Bench. Therefore, the same does not call Date of Judgment 30-08-2018 [CASE NUMBER] [ENTITY].
Vs. Dr. [ENTITY] for interference. A similar view was also taken by the Division Bench of Bombay High Court in [PRECEDENT], wherein the Division Bench of Bombay High Court held that the income derived from the trust property has also got to be computed on commercial principles and if commercial principles are applied, then adjustment of expenses incurred by the trust for charitable and religious purposes in the earlier years against the income earned by the trust in the subsequent year will have to be regarded as application of income of the trust for charitable and religious purposes in the subsequent year.
In view of the controversy covered by the above decisions of this Court, we are of the opinion that the substantial question of law as suggested by the appellants does not now arise for our further consideration in the present appeal."
Date of Judgment 30-08-2018 [CASE NUMBER] [ENTITY].
Vs. Dr. [ENTITY]
4. In view of the aforesaid, we are of the opinion that no substantial question of law arises for our further consideration in the present case also.
5. The appeal filed by the Revenue is accordingly dismissed in terms of the aforesaid judgments of this Court.
No costs.
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