IN HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.797 OF 2012 Commissioner of Income Tax III, Pune. Appellant Versus Sanjeewan Vidyalaya Trust Respondent Mr.Tejveer Singh, for Appellant. Mr.Satish Mody, for Respondent. CORAM: S.C. DHARMADHIKARI AND A.K. MENON, JJ. DATE : 26th September, 2014 P.C.: 1 In this case Revenue is in Appeal against order of Income Tax Appellate Tribunal dated 27.09.2011 in Income Tax Appeal No.692/PN/2010 for Assessment Year 2005 2006. 2 order of Commissioner of Income Tax (Appeals) dated 26.02.2010 has been confirmed by Tribunal. 3 same ground which has been canvassed before Commissioner of Income Tax (Appeals) and Tribunal unsuccessfully is canvassed before us by Mr.Tejveer Singh, learned counsel appearing for Revenue in support of this Appeal. He submits that Assessing Officer rightly held that claim of depreciation on immovable property to extent of Rs.59,44,712/ could not have been allowed or granted in view of fact that relevant capital expenditure on concerned assets has been claimed in respective years. Mr.Tejveer ::: Uploaded on - 30/09/2014 ::: Downloaded on - 08/04/2020 16:28:01 ::: *2* itxa.797.12.6 Singh submits that substantial question of law arises for determination in this Appeal and particularly in light of argument canvassed before Tribunal and reiterated before us. 4 Mr.Tejveer Singh submits that Tribunal as also Commissioner of Income Tax (Appeals) lost sight of fact that Income Tax Act, 1961 has specific provisions. He submits that income from property held for charitable or religious purpose is dealt with by Section 11. That was always worded in manner appearing today inasmuch as income which is stipulated in clause (a) of sub section (1) of Section 11 shall not be included in total income of previous year of person in receipt of income. That income must be derived from property held under trust wholly for charitable or religious purposes, to extent to which such income is applied to such purposes. Mr.Tejveer Singh submits that so long as stipulations in clause (a) are satisfied then claim of subject Trust for depreciation could not have been allowed. This argument was not canvassed in any of decisions and which have been relied upon by Commissioner of Income Tax (Appeals) and Tribunal. True it is that they are decisions of Division Benches of this Court interpreting similar provisions, but there is no finding in same on this aspect of matter. 5 After hearing both sides we are unable to agree with Mr.Tejveer Singh. Tribunal and Commissioner of Income Tax (Appeals) concurrently concluded that what is being attempted by Revenue is that allowance of depreciation would result in double deduction. In past years capital expenditure on relevant assets has already been allowed as application of income. Therefore, Trust could not have taken any assistance and aid of Section 32 of Income Tax Act, 1961 to claim this deduction. 6 This was very argument which was canvassed in two ::: Uploaded on - 30/09/2014 ::: Downloaded on - 08/04/2020 16:28:01 ::: *3* itxa.797.12.6 decisions which have been rendered by this Court. In decision in case of Director of Income Tax (Exemption) v/s Framjee Cawasjee Institute reported in (1993) 109 CTR 463 (Bom), Revenue urged that though Trust may be deriving income from depreciable assets that was taken into account in computing income of Trust, but in fact full capital income was allowed in year of acquisition of assets. Hence, claim for depreciation now cannot be granted. Tribunal held against Revenue in that case as well by explaining position that full expenditure has been allowed in year of acquisition of assets really means that amount spent on acquiring assets had been treated as application of income of Trust in year in which income was spent in acquiring these assets. This does not mean that in computing of this income from those assets in subsequent years, depreciation in respect of those assets cannot be taken into account. paragraphs 2 to 5 of this decision read as under: 2. assessee is trust. Its income is derived from depreciable assets. assessee took into account depreciation on those assets in computing income of Trust. ITO held that depreciation could not be taken into account because full capital expenditure has been allowed in year of acquisition of assets. assessee went in appeal before AAC who rejected Appeal. Tribunal has, however, allowed Appeal. Tribunal has explained position by stating that when ITO says that full expenditure has been allowed in year of acquisition of assets, what he really means is that amount spent on acquiring these assets had been treated as application of income of trust in year in which income was spent in acquiring these assets. This does not mean that in computing income from those assets in subsequent years, depreciation in respect of those assets cannot be taken into account. 3. respondents have drawn our attention to Circular dt.26th Nov., 1968 issued by CBDT under which it ::: Uploaded on - 30/09/2014 ::: Downloaded on - 08/04/2020 16:28:01 ::: *4* itxa.797.12.6 has clarified that in case of business undertaking held under trust its income will be income as shown in accounts of undertaking and that where trust derives income from house property, interest on securities, capital gains or other sources, income should be understood in its commercial sense. 4. We are also informed that in earlier years when similar question arose in respect of assessee known as Laxmi Charitable Trust, application under s.256(2) was rejected by this High Court. In our view, therefore, answer to question is obvious. 5. We may also point out that question as framed is somewhat misleading and is based on misconception, in so far as it reproduces language used by ITO which we have explained earlier. 7 Tribunal also placed reliance on another decision of Division Bench in case of Commissioner of Income Tax v/s Institute of Banking Personnel Selection reported in (2003) 264 ITR 110 (Bom.). There as well, question No.1 was identically worded as in present case and in case of Framjee Cawasjee Institute (supra). findings in paragraphs 3 and 4 of this decision read as under: 3. As stated above, first question which requires consideration by this court is : whether depreciation was allowable on assets, cost of which has been fully allowed as application of income under section 11 in past years? In case of CIT v. Munisuvrat Jain (1994) Tax LR 1084 (Bom) facts were as follows. assessee was Charitable Trust. It was registered as Public Charitable Trust. It was also registered with Commissioner, Pune. assessee derived income from temple property which was Trust property. During course of assessment proceedings for assessment years 1977 78, 1978 79 and 1979 80, assessee claimed depreciation on value of building at rate of 2.5 per cent and they also claimed depreciation on furniture at rate of 5 per cent. question which arose before court for determination was: whether depreciation could be denied to assessee, as ::: Uploaded on - 30/09/2014 ::: Downloaded on - 08/04/2020 16:28:01 ::: *5* itxa.797.12.6 expenditure on acquisition of assets had been treated as application of income in year of acquisition? It was held by Bombay High Court that section 11 of Income Tax Act makes provision in respect of computation of income of Trust from property held for charitable or religious purposes and it also provides for application and accumulation of income. On other hand, section 28 of Income Tax Act deals with chargeability of income from profits and gains of business and section 29 provides that income from profits and gains of business shall be computed in accordance with section 30 to section 43C. That, section 32(1) of Act provides for depreciation in respect of building, plant and machinery owned by assessee and used for business purposes. It further provides for deduction subject to section 34. In that matter also, similar argument, as in present case, was advanced on behalf of revenue, namely, that depreciation can be allowed as deduction only under section 32 of Income Tax Act and not under general principles. court rejected this argument. It was held that normal depreciation can be considered as legitimate deduction in computing real income of assessee on general principles or under section 11(1)(a) of Income Tax Act. court rejected argument on behalf of revenue that section 32 of Income Tax Act was only section granting benefit of deduction on account of depreciation. It was held that income of Charitable Trust derived from building, plant and machinery and furniture was liable to be computed in normal commercial manner although Trust may not be carrying on any business and assets in respect whereof depreciation is claimed may not be business assets. In all such cases, section 32 of Income Tax Act providing for depreciation for computation of income derived from business or profession is not applicable. However, income of Trust is required to be computed under section 11 on commercial principles after providing for allowance for normal depreciation and deduction thereof from gross income of Trust. In view of aforestated Judgment of Bombay High Court, we answer question No. 1 in affirmative i.e. ::: Uploaded on - 30/09/2014 ::: Downloaded on - 08/04/2020 16:28:01 ::: *6* itxa.797.12.6 in favour of assessee and against department. 4. Question No. 2 herein is identical to question which was raised before Bombay High Court in case of Director of Income Tax (Exemption) v. Framjee Cawasjee Institute (1993) 109 CTR 463 (Bom). In that case, facts were as follows: assessee was Trust. It derived its income from depreciable assets. assessee took into account depreciation on those assets in computing income of Trust. Income Tax Officer held that depreciation could not be taken into account because, full capital expenditure had been allowed in year of acquisition of assets. assessee went in appeal before Assistant Appellate Commissioner. appeal was rejected. Tribunal, however, took view that when Income Tax Officer stated that full expenditure had been allowed in year of acquisition of assets, what he really meant was that amount spent on acquiring those assets had been treated as 'application of income' of Trust in year in which income was spent in acquiring those assets. This did not mean that in computing income from those assets in subsequent years, depreciation in respect of those assets cannot be taken into account. This view of Tribunal has been confirmed by Bombay High Court in above judgment. Hence, Question No. 2 is covered by decision of Bombay High Court in above judgment. Consequently, Question No. 2 is answered in affirmative i.e. in favour of assessee and against department. 8 To our mind argument now canvassed before us by Mr.Tejveer Singh was very much advanced and in different words. Merely because different argument is now canvassed and not in same manner as it was canvassed before Division Bench and not dealt with accordingly, will not enable Revenue to submit that these binding judgments should be brushed aside by us. Accepting argument of ::: Uploaded on - 30/09/2014 ::: Downloaded on - 08/04/2020 16:28:01 itxa.797.12.6 Mr.Tejveer Singh would precisely amount to this act. That we cannot indulge in and perform it, is clear. Even otherwise these judgments dealt with same point and issue. For these reasons we do not find that conclusions of Tribunal rendered in paragraphs 5 to 7 of impugned order confirming that of Commissioner of Income Tax (Appeals) suffer from any error of law apparent on face of record and perversity warranting interference in further appellate jurisdiction. Appeal is devoid of any merits and is dismissed. No order as to costs. (A.K. MENON, J.) (S.C. DHARMADHIKARI, J.) Uploaded on - 30/09/2014 Downloaded on - 08/04/2020 16:28:01 Commissioner of Income-tax-III, Pune v. Sanjeewan Vidyalaya Trust