The ITO (E) 1 (1), Piramal Chambers, Parel, Mumbai-400 012 Vs. The Bhatia General Hospital, Tardeo Road, Nana Chowk, Mumbai
October, 27th 2014
IN THE INCOME TAX APPELLATE TRIBUNAL "B" BENCH, MUMBAI
BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND
SHRI VIVEK VARMA, JUDICIAL MEMBER
./I.T.A. No. 5674/Mum/2011
( [ [ / Assessment
Year : 2007-08
The ITO (E) 1 (1), The Bhatia General
Piramal Chambers, Hospital,
Parel, Tardeo Road,
Mumbai-400 012 Nana Chowk,
. / . / PAN/GIR No. :AAATT 3440K
( /Appellant) .. (× / Respondent)
/ Appellant by: Shri Vivek Batra
× /Respondent by: Shri Ajay Singh
Shri R.V. Shah
/ Date of Hearing :14.10.2014
/Date of Pronouncement :20.10.2014
/ O R D E R
PER N.K. BILLAIYA, AM:
This appeal by the Revenue is directed against the order of the Ld.
CIT(A)-1, Mumbai dt.15.3.2011 pertaining to A.Y.2007-08.
2. The grievances of the Revenue read as under:
2 ITA No. 5674/M/2011
"1. Whether on the facts of the case and in law the Ld.
CIT(A) erred in allowing the appeal of the assessee on
account of disallowing depreciation on fixed assets of Rs.
83,15,210/- in contravention of the decision of Escorts Ltd.
Vs UOI 199 ITR 43 wherein it was held that since Sec. 11 of
the I.T. Act provides for deduction capital expenditure
incurred on an asset acquired for the objects of the Trust as
application and does not specifically & expressly provide for
double deduction on account of depreciation on the same
very assets acquired from such capital expenditure, no
deduction shall be allowed u/s. 32 for the same or any other
previous year in respect of that asset as it amounts to
claiming a double deduction.
2. Whether on the facts of the case and in law the Ld.
CIT(A) erred in allowing the carry forward of deficit and
allowing set off against the income of the subsequent years,
as allowing the deficit will tantamount to double deduction
on account of expenditure out of exempt income"
3. The assessee is a charitable trust running a hospital. During the
course of the scrutiny assessment proceedings, the Assessing Officer
observed that the assessee has claimed the additional depreciation of Rs.
83,15,310/- in addition to the normal depreciation of Rs. 2,14,29,366/-.
The assessee was asked to justify its claim. It was explained that during
the year, the assessee has claimed additional depreciation of Rs.
83,15,310/- on hospital equipment , furniture & fixture which has
completed 10 years of useful life and computer which has completed 3
years of useful life. The additional depreciation has been claimed on
asset which has outlived its useful life. To substantiate, the assessee
relied upon certain judicial decisions.
3.1. After examining the facts in the light of the Judicial decisions, the
AO was of the opinion that various High Courts have deliberated the
issue and have came to the conclusion that the trust too can claim the
3 ITA No. 5674/M/2011
depreciation on the assets acquired by them. According to the AO, the
assessee was entitled for the depreciation which it has claimed as per the
rates specified under the I.T. Rules but in so far as the claim of additional
depreciation is concerned, the contention of the assessee cannot be
accepted as the assessee has deviated from the provision of depreciation
provided in the statute. The AO was of the opinion that if the assets have
outlived their useful life, the assessee should have sold them as scrap.
No evidence in support of this has been filed, the AO accordingly
disallowed the claim of depreciation of Rs. 83,15,310/-.
3.2. Proceeding further, the AO noticed that there was a deficit of Rs.
2,04,79,427/- appearing in the computation of income furnished by the
assessee. The deficit was on account of excess expenditure claimed over
the revenue. Drawing support from the decision of the Hon'ble Supreme
Court in the case of Escorts Ltd. Vs UOI 199 ITR 43, the AO declined to
allow the claim of the assessee to treat the deficit of Rs. 2,04,79,427/- as
application of income for enjoying exemption in the successive year.
4. Aggrieved by these two findings, the assessee carried the matter
before the Ld. CIT(A)
4.1. After considering the facts and the submissions, the Ld. CIT(A)
transmitted the additional evidences to the AO calling for a remand
report. The AO filed the report dt. 4.1.2011 which is placed at page-87 to
89 of the paper book. The additional evidences were in the form of
certificates certifying that the assets have outlived their useful life. These
certificates are at page-21, 35 and 42 of the paper book. In his remand
report, the AO instead of verifying the veracity of the certificates
questioned the admission of additional evidences by the Ld. CIT(A). The
4 ITA No. 5674/M/2011
Ld. CIT(A) while deciding the issue drew support from the decision of
the Hon'ble Bombay High Court in the case of Institute of Banking
Personnel Selection 264 ITR 110 and concluded by observing that the
income of the Trust is required to be computed u/s. 11 on commercial
principles after providing for allowance for normal depreciation and
deduction thereof from gross income of the trust. The Ld. CIT(A) went
on to delete the disallowance of depreciation and for similar reasons
allowed the assessee to carry forward of deficit in accordance to the
decision of the Hon'ble Bombay High Court in the case of Institute of
Banking Personnel Selection (supra).
5. Aggrieved by this, the Revenue is before us.
6. The Ld. Departmental Representative strongly supported the
findings of the AO.
7. The Ld. Counsel for the assessee reiterated what has been stated
before the lower authorities.
8. In so far as the claim of additional depreciation of Rs. 83,15,310/-
is concerned, we find that the assessee has given sufficient reasons for
claiming the same, in support, certificates were filed which were also
before the lower authorities. The assessee is running a hospital. The
assets which have outlived their lives cannot be sold as scrap as per the
rules governing the hospital, the assessee was left with no choice but to
claim the same as additional depreciation. The Hon'ble High Court of
Bombay in the case of Institute of Banking Personnel Selection (supra)
has laid down the ratio that the income of the Trust is required to be
computed u/s. 11 on commercial principles. As the Ld. CIT(A) has
5 ITA No. 5674/M/2011
allowed the claim drawing support from this decision of the Hon'ble
Bombay High Court, no interference is called for. Ground No. 1 is
9. Ground No. 2 relates to the claim of carry forward of deficit to be
set off against the income of the subsequent years.
10. As we have mentioned elsewhere that the income has to be
computed on commercial principles like business loss which is allowed to
be carried forward and set off with the profit of subsequent years.
Similarly, the deficit in the case of a trust is allowed to be carried forward
to be set off in subsequent years. That being so, findings of the Ld.
CIT(A) need no interference.
11. In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in the open court on 20.10.2014
(VIVEK VARMA ) (N.K. BILLAIYA)
Û / JUDICIAL MEMBER / ACCOUNTANT MEMBER
Mumbai; Dated : 20.10.2014
.../ RJ , Sr. PS
6 ITA No. 5674/M/2011
/Copy of the Order forwarded to :
1. / The Appellant
2. × / The Respondent.
3. () / The CIT(A)-
4. / CIT
5. , ,
/ DR, ITAT, Mumbai
6. [ / Guard file.
/ BY ORDER,
× //True Copy//
, / ITAT, Mumbai