Subject: Commissioner of Income Tax (Appeals)-XXI,
Referred Sections:
section 11 of the Income Tax Act.
Section (6)
Section 36(i)(vii)
Section 36(2)(i)of the Act.
Section 11(1)(a) of the Act?"
Referred Cases / judgments
DIT(Exemptions) vs. Indraprastha Cancer Society reported in 229 Taxmann
DIT(E) vs. National Association of Software
DIT(E) vs. Indraprastha Cancer Society (supra).
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES: `A', NEW DELHI
BEFORE SHRI G.D.AGRAWAL, HON'BLE PRESIDENT
AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER
ITA No. 2555/Del/2015
A.Y. 2010-11
Indraprastha Cancer ITO (Exemption)
Society and Research vs. Trust Ward IV
Centre New Delhi 110 002
C/o Rajiv Gandhi
Cancer Institute
D-18, Sector 5, Rohini
New Delhi 110 085
PAN: AAAT10440C
(Appellant) (Respondent)
Assessee by Shri Shailender K Bajaj, C.A.
Department by Ms. Ashima Neb, Sr.D.R.
Date of Hearing 27/06/2018
Date of Pronouncement 02.07.2018
ORDER
PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER
This appeal is preferred by the Assessee against the order
dated 20.10.2014 passed by the Ld. Commissioner of Income
Tax (Appeals)-XXI, New Delhi for the Assessment Year (A.Y.)
2010-11 on the following grounds:
ITA No.2555/Del/2015 A.Y.:2010-11
Indraprastha Cancer Society and Research Centre vs. ITO(Exemptions)
"1. That on the facts and circumstances of the case the Ld. CIT (A) -
XXI has erred both in facts and in law while sustaining the
disallowance, made by the assessing officer, of depreciation of Rs.
6,52,45,727/- for the purposes of computing income of the
appellant society under section 11 of the Income Tax Act.
2. That the Ld. CIT (A) has erred both in facts and in law by
sustaining the disallowance made by the assessing officer of
provision for bad debts of Rs.12,74,419/- claimed while
determining the income of the society on commercial principles of
the appellant society under section 11 of the Act.
3. That the Ld. CIT(A) erred both in facts and in law while
sustaining the disallowance , made by the assessing officer , of the
loss on sale of capital assets of Rs. 6,92,232/- while determining
the income of the appellant society under section 11 of the Act.
4. That the order passed by the Ld. CIT(A) - XXI is bad in law and
against the facts of the case.
5. That the appellant craves leave to add , delete or amend any of
the ground of appeal on or before the disposal of the present
appeal."
2. Brief facts of the case are that the assessee is a Charitable
Society registered under the Societies Registration Act, 1860 and
is also registered u/s 12AA(1) of the Income Tax Act, 1961 (`the
Act', for short). The assessee is running a renowned cancer
hospital in Rohini, Delhi in the name of Rajiv Gandhi Cancer
Institute. The assessee is a charitable society and income is
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ITA No.2555/Del/2015 A.Y.:2010-11
Indraprastha Cancer Society and Research Centre vs. ITO(Exemptions)
exempt u/s 11(1) of the Act. The assessee has also got approval
u/s 10(23)(VI)(a) of the Act. During the year the assessee had
claimed depreciation of Rs.6,52,45,727/- which was disallowed
by the A.O. on the ground that this was a double deduction as
the entire capital expenditure on the purchase of capital asset
had already been treated as application of income. Apart from
this the assessee had claimed deduction of Rs.12,74,419/- under
the head `provision for bad debts '. This provision was also
disallowed by the A.O. on the ground that this was only a
provision and that bad debts are allowable only when they are
written off in the books of accounts. Further, the assessee had
also claimed a loss of Rs.6,92,232/- against sale of capital
assets. The A.O. was of the opinion that no capital loss was
allowable under the provisions of Section 11 of the Act.
Aggrieved, the assessee approached the Ld. CIT (A) who upheld
all these three additions/disallowances. Now, the assessee has
approached the ITAT and has challenged the confirmation of
disallowances by the Ld. CIT (A).
3. The Ld. A.R. submitted that the issue of depreciation was
covered in favour of the assessee in assessee's own case by the
order of Hon'ble Delhi High Court in DIT(Exemptions) vs.
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ITA No.2555/Del/2015 A.Y.:2010-11
Indraprastha Cancer Society and Research Centre vs. ITO(Exemptions)
Indraprastha Cancer Society reported in 229 Taxmann 93 (Del).
With respect to the provision for bad and doubtful debts, reliance
was placed on the judgement of Hon'ble Delhi High Court in the
case of DIT(E) vs. National Association of Software and Services
Companies reported in 345 ITR 362 (Del.). With respect to the
third ground pertaining to disallowance of loss with respect to the
assets written off, the Ld.AR submitted that this ground was not
being pressed in view of the huge losses of the assessee Society.
4. In response, the Ld. SR. D.R. placed reliance on the
concurrent findings of both the lower authorities and vehemently
argued that the findings of both the lower authorities had been
given after due consideration of the facts and it was submitted
that no interference was called for.
5. We have heard the rival submissions and also perused
material on record. Although, the Ld. Sr. D.R. has argued
vehemently against the two issues under challenge, she was not
able to negate the fact that the issue of depreciation is squarely
covered in favour of the assessee in assessee's own case by the
judgement of Hon'ble Delhi High Court in case of DIT(E) vs.
Indraprastha Cancer Society (supra). In the said judgement the
Hon'ble Delhi High Court has duly noted that insertion of Sub-
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ITA No.2555/Del/2015 A.Y.:2010-11
Indraprastha Cancer Society and Research Centre vs. ITO(Exemptions)
Section (6) to Section 11 of the Act has been inserted w.e.f. 01st
April, 2015 only and, therefore, the legal position would undergo
a change and will be applicable w.e.f. 1st April, 2015 only and will
not be applicable to earlier Assessment Years. Since the present
appeal before us pertains to the A.Y. 2010-11, the issue stands
covered in favour of the assessee by the judgement of Hon'ble
Delhi High Court in assessee's own case as aforesaid. Thus, we
have no hesitation in allowing ground no.1 of assessee's appeal.
5.1 Coming to ground no.2, we find that this issue is also
covered in favour of assessee by the judgement of Hon'ble Delhi
High Court in the case of DIT(E) vs. National Association of
Software and Services Companies (supra). The relevant portion
of the judgement, as contained in paragraph 40 of the said
judgement, is being reproduced for a ready reference.
"40. As regards the provision for bad and doubtful debts, the
question again is whether in computing the income of the
trust on commercial principles, the provision can be deducted
or where the deduction can be allowed only in accordance
with the provisions of Section 36(i)(vii) read with Section
36(2)(i)of the Act. We have already held that the income of the
trust available for application to charitable purposes in India
should be computed not in accordance with the strict
provisions of the Income Tax Act but should be computed in
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ITA No.2555/Del/2015 A.Y.:2010-11
Indraprastha Cancer Society and Research Centre vs. ITO(Exemptions)
accordance with commercial principles and it is on this
footing that the payment of Income Tax Act under the
VDIS was treated as a deduction and as proper application of
the income of the trust. The same line of reasoning holds good
for the provision for bad and doubtful debts. Even under the
computation provision of the Act such a provision was
considered allowable up to and including the assessment
year 1988-89 and it was only from the assessment year
1989-90 that the Act required that a mere provision would not
be allowable as a deduction and the actual writing off of the
debt was a necessary pre-condition. Be that as it may, under
the commercial principles it has always been recognized that
a provision, reasonably made for a loss or an outgoing, can
be deducted from the income if there is apprehension that the
debt might become bad. There is nothing brought on record to
show that the provision was not made bonafide. In such a
situation, the ratio of the decisions cited by us while dealing
with the deductibility of the taxes paid under the VDIS will
equally apply. We accordingly hold that while computing the
income available to the trust for application to charitable
purposes in India in accordance with Section 11(1)(a) the
provision for doubtful debts must be deducted. Accordingly,
we frame the following substantial question of law and
answer the same in the affirmative in favour of the assessee
and against the Revenue: -
""Whether the Tribunal was right in law in holding that the
provision for doubtful debts must be deducted from the
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ITA No.2555/Del/2015 A.Y.:2010-11
Indraprastha Cancer Society and Research Centre vs. ITO(Exemptions)
income of the trust on commercial principles, for the purposes
of Section 11(1)(a) of the Act?"
5.2 In view of the ratio of judgement of Hon'ble Delhi High Court
as reproduced in the preceding paragraph, it is our considered
opinion that this issue also is decided in favour of the assessee.
Accordingly we allow ground no.2 of assessee's appeal.
5.3 As the Ld.AR has submitted that ground no.3 is not being
pressed in view of huge accumulated losses, the same is
dismissed as `not pressed'.
5.4 Ground nos. 4 and 5 are general in nature and hence the
same are not being adjudicated upon.
6. In the result appeal filed by the Assessee stands partly
allowed.
Order pronounced in the Open Court on 02.07. 2018.
Sd/- Sd/-
(G.D.AGRAWAL) (SUDHANSHU SRIVASTAVA)
PRESIDENT JUDICIAL MEMBER
Dt. 02nd July, 2018
*manga
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ITA No.2555/Del/2015 A.Y.:2010-11
Indraprastha Cancer Society and Research Centre vs. ITO(Exemptions)
Copy forwarded to: -
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR, ITAT
- TRUE COPY -
By Order,
ASSISTANT REGISTRAR
ITAT Delhi Benches
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