Income-tax Appeal No.669 of 2009 -1- **** IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Income-tax Appeal No.669 of 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 on account of fire in the Court premises. Learned counsel for the revenue has furnished two copies of the paper book which are taken on record. We proceed to decide the matter after hearing learned counsel for the revenue. 2. This appeal has been preferred by the revenue under Section 260-A of the Income Tax Act, 1961 against the order dated 31.3.2009 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 Income-tax Appeal No.669 of 2009 -2- **** addition made on interest accruing to the assessee on advance of Rs.7,33,00,000/- to the HSAMB without getting examined the factual position regarding liability of HSAMB to pay interest to the assessee, although no clear finding has been recorded by either the CIT(Appeals) or the Assessing Officer on this point? ii) Whether the failure of the ITAT to get proper inquiry made by lower authorities in a case where the facts and circumstances so demanded does not result in a failure, which lays upon the action of the ITAT to correction by a higher authority, in the light of the ratio of the judgment of the Hon'ble Bombay High Court in Smt. Prabha Wati S. Shah Vs. CIT 231 ITR 277 (Bom.)? iii) Whether on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in holding that depreciation was allowable on the capital assets, when deduction for capital expenditure incurred for acquisition of these capital assets has already been allowed as application of income of the trust? iv) Whether the Ld. ITAT's decision to allow double deduction on depreciation when capital expenditure on the asset has already been allowed is justified in Income-tax Appeal No.669 of 2009 -3- **** the light of the Apex Court's decision in Escorts Ltd. Vs. UOI (199 ITR 43) to the effect that in the absence of clear statutory indication to the contrary, the statute should not be read as to permit an assessee two deductions on the same expenditure?” 3. The assessee is a statutory body under the provisions of Punjab Agriculture Produce Marketing Act, 1961. It advanced some of its funds to the Marketing Board which is its apex body and some of the funds were advanced to other market committees. The assessing officer held that notional interest on the amount advanced to the Board was liable to be added to the income of the assessee at the rate at which amount were advanced to other market committees. 4. Income of the assessee is exempted from tax as it is registered as a charitable institution under Section 12A of the Act. The assessee claimed depreciation on its assets for the purpose of calculating its income. The assessing officer held that depreciation was 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 set aside the same holding:- Issue of notional interest income “7. We have considered the rival submission carefully. Evidently, the provision of Section 145 dealing with the method of accounting to account for income comes into Income-tax Appeal No.669 of 2009 -4- **** play only in case where an assessee is eligible for an income. Whether the income is to be accounted for on accrual or cash basis, is manifested in the method of accounting. So, however, the pre-requisite is that the assessee must be entitled to such income. In the present case, the assessee contended that on the advance of Rs.7,33,00,000/- given to HSAMB, the assessee was not entitled to receive any interest. This plea was taken by the assessee before the Assessing Officer as well as before the CIT(Appeals). There is no material on record to negate the aforesaid position articulated by the assessee before the income tax authorities. The Assessing Officer merely referred to an arrangement of the assessee with another borrower to prove his point that the assessee was liable to earn interest on the interest to HSAMB. The approach of the assessing officer is unacceptable. On the basis of the material on record, we find nothing to support the presumption drawn by the income tax authorities that certain interest is to be earned by the assessee on the impugned advance given to HSAMB. The addition, therefore, made by the income tax authorities is entirely on conjectures and surmises. The same is hereby set aside. On this issue the assessee succeeds.” xxx xxxx xxxx Income-tax Appeal No.669 of 2009 -5- **** Issue of depreciation “9. The facts relevant to this ground are that the assessee has claimed depreciation of Rs.24,91,227/- as application of income on the basis of the decision of the Hon'ble Bombay High Court in the case of Institute of Banking Personnel Selection (supra). The Assessing Officer denied the claim of the assessee in view of the order of the CIT(Appeals) for the assessment year 2005- 06 in the case of the assessee. The said decision has since been set aside by the Tribunal and issue remanded to the file of the Assessing Officer for a decision afresh. Following the aforesaid precedent, which is not opposed by the Revenue, we set aside the order of the CIT (Appeals) and restore the issue to the file of the Assessing Officer who shall verify the claim of the assessee and allow the same in terms of decision of the Hon'ble Bombay High Court in the case of Institute of Banking Personnel Selection (supra). Thus, the assessee succeeds for statistical purpose on this ground.” 6. We have heard learned counsel for the appellant. 7. Learned counsel for the appellant fairly states that questions No. (iii) and (iv) have already been considered in an identical appeal and decided against the revenue vide order of this Court dated 5.7.2010 in ITA No.535 of 2009 (The Commissioner of Income-tax Appeal No.669 of 2009 -6- **** Income, Karnal Vs. Market Committee, Pipli). 8. As regards questions No. (i) and (ii), it has been found by the Tribunal that neither the assessee received any interest nor there was any agreement to receive interest. It was not the case of the revenue that there was any obligation on the assessee to charge interest nor there is anything to show that interest was actually charged. In absence thereof, there could be no question of deemed income on the basis of notional interest comparing with the deposit with the advances made to other market committees. The other market committees do not stand on the same footing as Marketing Board which was the apex body of the assessee. Finding recorded by 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, 2011 (Ajay Kumar Mittal) Pka Judge