IN INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER . ITA.No.344 Ahd 2014 With CO No.203 Ahd 2014 Asstt. Year: 2010-2011 ITO, Ward-5(4) M s.Sigma Institute of Technology Baroda. Vs & Engineering Bakrol, Nr. Madhavnagar Ajwa Nimeta Road Tal-Waghodia,Dist. Baroda Pin : 390 019. PAN : AAJTS 7182 G (Appellant) (Respondent) Revenue by : Shri James Kurian, Sr.DR Assessee by : None Date of Hearing : 30 09 2016 Date of Pronouncement: 10 10 2016 O RDER PER RAJPAL YADAV, JUDICIAL MEMBER Revenue is in appeal against order of ld.CIT(A)-V, Baroda dated 12.11.2013 passed for Astt.Year 2010-11. On receipt of notice in Revenue s appeal, assessee has filed CO bearing no.203 Ahd 2014. 2. In response to notice of hearing none come present on behalf of assessee. Therefore, we heard appeal ex parte qua assessee. ITA No.344 Ahd 2014 with CO 2 3. Revenue has pleaded that ht eld.CIT(A) has erred in not following decision of Hon ble Supreme Court in case of Escort Ltd. Vs. Union of India, 199 ITR 43 while allowing deduction of depreciation to assessee. 4. Brief facts of case are that assessee has filed its return of income on 10.10.2010 declaring total income (deficit) at (-)Rs.1,73,69,268 -. assessee is public Trust registered under Bombay Public Trust Act, 1950. It is engaged in activity of providing education. It has also registered under Income Tax Act under section 12A(a) of Act. It also got approval under clause (23C) of section 10 of Income Tax Act. AO found that assessee has claimed Rs.4,35,86,312 - as depreciation expenses. ld.AO disallowed this expenditure on ground that assessee has claimed exemption of income while applying that income on capital assets. Thus, grant of depreciation on these very capital assets would amount to double taxation. AO made reference to decision of Hon ble Supreme Court in case of Escort Ltd. (supra). 5. On appeal, ld.CIT(A) has allowed deduction to assessee. ld.CIT(A) put reliance on judgment of Hon ble Punjab and Haryana High Court in case of CIT Vs. Desh Bhagat Memorial Education Trust, which has explained distinction between ratio laid down by Hon ble Supreme Court in case of Escort Ltd. (supra) vis- -vis charitable institution whose income being assessed after giving benefit of sections 11 and 12 of Income Tax Act. Relevant submission made by assessee and finding of ld.CIT(A) read as under: . iv. CIT v. Desh Bhagat Memorial Education Trust. (2011) 37 (I) ITCL 131 (P&H-HC) ITA No.344 Ahd 2014 with CO 3 ISSUE BEFORE HON'BLE COURT: "Whether on facts and circumstances of case and: in law, depreciation on capital assets is also to be considered as application of income for charitable purpose when it does not represent any cash expenditure on charity and when entire cost of capital assets have already been considered and is being considered as application of income?" HELD: In present case, assessee is not claiming double deduction on account of depreciation as has been suggested by learned counsel for revenue. income of assessee being exempt, assessee is only claiming that depreciation should be reduced from income for determining percentage of funds which have to be applied for purposes of trust. There is no double deduction claimed by assessee as canvassed by revenue. Judgment of Hon'ble Supreme Court in Escorts Ltd. and another (supra) is distinguishable for above reasons. It cannot be held that double benefit is given in allowing claim for depreciation for computing income for purposes of section 11. questions proposed have, thus, to be answered against revenue and in favor of assessee." 2. Ratio of Supreme court Judgment in case of Escorts Ltd. In Escorts Ltd. v. Union of India [1993] 199 ITR 43, Supreme Court held that when deduction under section 35(2)(iv) was allowed in respect of capital expenditure on scientific research, no depreciation was to be allowed under section 32 on same asset. There is fundamental axiom that double deduction is not intended unless there is clear statutory indication to contrary. Supreme Court alsoreferred to para 3.29 of Choksi Committee Report (December, 1977), in this context. This para read as follows "3.29. Our attention has also been drawn to certain anomalous situations in matter of allowance of depreciation. In certain cases where full deduction has been allowed in relation to capital asset under other sections (as for example, section 35 which permits deduction in respect of capital expenditure for scientific research), taxpayers have contended that such deduction is independent of allowance by way of depreciation. In our view, intention of Legislature is not to allow double deduction (of 200%) in respect of ITA No.344 Ahd 2014 with CO 4 same asset, once under section 35 and, again by way of depreciation under section 32. If and to extent that there is any anomaly or contrary view possible on construction of section 35, we recommend that law should be clarified to provide that no depreciation under section 32 shall be allowable in respect of capital expenditure for scientific research qualifying for deduction under section 35." Supreme Court ruling may apply (subject to specific facts) to charitable organization as it pertains to claim of depreciation under another section of act when 100 per cent (or more) depreciation has already been provided u s. 35. It may be noted that for commercial entities, taxable income is determined, which may not be real income. permissible expenditures also may not be necessarily real. In case of charitable organizations exempted income and its application for charitable .purposes is determined. If one looks carefully at scheme of determining 'income' and 'application' of charitable organizations, it can be seen that both capital nature receipts and applications are included. When capital receipts are treated as part of income, then there is strong case for double deduction of depreciation for those assets which are purchased out of such capital receipts. Copy of judgments and rulings enclosed herewith for your ready reference. assessee hopes that above details explanations shall meet with your Honor's requirement. If your Honor requires any further information assessee will be pleased to submit same. assessee has full faith in your Honor that these submissions will be kept in preview by your Honor while disposing of case and we will feel that Equity and Justice prevails. 4.2 I have considered submission of appellant and reasons recorded by AO. ratio of following decisions is that depreciation on fixed assets is to be allowed while determining real income of Trust for purpose of Sect ion 11 (1) (a): CIT Vs Market Committee, Pipli [2011] 330 ITR 16 (P&H) CIT Vs Institute of Banking [2003] 264 ITR 110 (Bom) DIT (E) Vs Framjee Cawasjee Institute [1993] 109 CTR 463 (Bom) CIT Vs Sheth Manila! Ranchhoddas Vishram Bhavan Trust [1992] 198 ITR 598 (Guj) ITA No.344 Ahd 2014 with CO 5 CIT Vs Tiny Tots Education Society [2011] 330 ITR 21 (P&H) CIT Vs Rao Bahadur Calavala Cunnan Chetty Charities [1982] 135 ITR 485 (Mad) CTT Vs Raipur Pallottine Society [1989] 180 ITR 579 (MP) CIT Vs Society of Sisters of St. Anne [1984] 146 ITR 28 (Karn) IT AT Mumbai, A.D.I.T vs Shri Vile Parle Kelvani Mandal ITA No. 7106 Mum 2011. Therefore, respectfully following same depreciation of Rs.2,17,93,156 - is directed to be allowed to appellant in computation of real income of Trust for purpose of Section 11(1)(a). AO shall work out application income on basis of real income so determined. 6. With assistance of ld.DR, we have gone through record carefully. We find that issue in dispute is squarely covered by decision of Hon ble Gujarat High Court in case of CIT Vs. Sheth Manilal Ranchhoddas Vishram Bhavan Trust, 198 ITR 598. Hon ble Gujarat High Court has formulated following questions for its consideration: "1. Whether, on facts and in circumstances of case, Tribunal was right in law in holding that, while computing income under section 11(1)(a) of Income-tax Act, 1961, depreciation has to be allowed ? 2. Whether Tribunal was right in law in holding that, having regard to Scheme of Act, 'income' referred to in section 11(1)(a) of Act is to be computed not in accordance with provisions of Act but in accordance with normal rules of accountancy under which depreciation has to be allowed while computing such income under section 11(1)(a) of Act ?" 7. Hon ble High Court has answered both questions in affirmative and against Revenue. Hon ble High Court has observed that income from properties held under Trust have to be arrived at in normal commercial manner without classifying under various heads. Therefore, respectfully ITA No.344 Ahd 2014 with CO 6 following decision of Hon ble jurisdictional High Court, cited supra, we are of view that ld.CIT(A) has not committed any error while allowing depreciation to assessee. We do not find any merit in this appeal. It is rejected. 8. We take up assessee s Cross Objection. 9. Registry has pointed out that CO filed by assessee is time barred by 10 days. assessee has filed delay condonation application along with affidavit of Shri Shailesh Ramanlal Shah, which we have gone through. We have also gone through memorandum of CO. Sub-section 4 of section 253 authorises respondent to file cross-objection on receipt of notice in appeal. CO is required to be filed within 30 days of receipt of notice and it is to be verified in manner akin to appeal, but, CO is to be filed against any part of order impugned in appeal. In CO filed by assessee, it he has nowhere demonstrated its grievances against any part of order of CIT(A), as such, CO is not maintainable in present form. Since CO is not maintainable at threshold, we are not considering application of assessee for condonation of delay. Both are accordingly dismissed. 10. In result, appeal of Revenue and CO of assessee, both are dismissed. Order pronounced in Court on 10th October, 2016 at Ahmedabad. Sd - Sd - (MANISH BORAD) (RAJPAL YADAV) ACCOUNTANTN MEMBER JUDICIAL MEMBER Ahmedabad; Dated 10 10 2016 ITO, Ward-5(4) Baroda v. M/s. Sigma Institute of Technology & Engineering