Order in TC No.192 to 196 of 2013 (C.I.T., -Vs- Tuticorin Port Trust ) dt 13.02.2020 IN HIGH COURT OF JUDICATURE AT MADRAS DATED: 13.02.2020 CORAM HON'BLE DR. JUSTICE VINEET KOTHARI AND HON'BLE MR. JUSTICE R. SURESH KUMAR Tax Case (A) Nos.192, 193, 194, 195 and 196 of 2013 Commissioner of Income Tax Madurai. Appellant in all appeals Vs. Tuticorin Port Trust Harbour Estate, Tuticorin. Respondent in all appeals Tax Cases filed under Section 260A of Income Tax Act against common order dated 22.08.2012 passed in ITA Nos.1055, 1056, 1057, 1058 and 1059/Mds/2012 by Income Tax Appellate Tribunal 'C' Bench, Chennai. For Appellant : Mr. J. Narayaswamy, Senior Standing Counsel For Respondent : Mr. M. Devanathan COMMON JUDGMENT (Judgment of Court was delivered by DR. VINEET KOTHARI, J) Revenue has filed these appeals under Section 260A of Income Tax Act, raising following substantial question of law. Page 1 of 7 http://www.judis.nic.in Order in TC No.192 to 196 of 2013 (C.I.T., -Vs- Tuticorin Port Trust ) dt 13.02.2020 Whether on facts and in circumstances of case, Appellate Tribunal was right in holding that if Assessee treats expenditure on acquisition of assets as application of income for charitable purpose under Section 11(1)(a) then Assessee can claim depreciation on value of such assets? 2. appeal was admitted by Coordinate Bench of this Court on 26.04.2013. learned Tribunal allowed benefit of depreciation to respondent Assessee, Charitable Trust on assets acquired out of its funds which were treated as application of income in terms of 11(1)(a) of Act and learned Tribunal, following some judgments of High Court, held that Assessee was not entitled to depreciation on such assets acquired by respondent Assessee Trust and it did not amount to deductible deduction in hands of Assessee as was sought to be canvassed by Revenue. relevant portion of order of learned Tribunal is quoted below for ready reference. 7. only contention of DR before us is that appeals before Commissioner of Income Tax (Appeals) were in relation to order passed under Section 154 of Act and therefore in such proceeding, issue of deductibility of depreciation in case of charitable institution could not have been decided as issue is debatable. To show that issue was debatable, she placed Page 2 of 7 http://www.judis.nic.in Order in TC No.192 to 196 of 2013 (C.I.T., -Vs- Tuticorin Port Trust ) dt 13.02.2020 reliance on decision of Hon'ble Kerala High Court in case of Lissie Medical Institutions, Kochi Vs.CIT [2012-TIOL-303- HC-Kerala-IT], wherein it was held that when capital expenditure is allowed as deduction then depreciation on same capital expenditure cannot be again allowed. 8. On other hand, AR of assessee supported order of Commissioner of Income Tax (Appeals) and submitted that decision of Mangal Society (2010) 328 ITR 421 (P&H) relied upon by Commissioner of Income Tax (Appeals) has been confirmed by Hon'ble Supreme Court inasmuch as SLP against said decision was dismissed by Hon'ble Supreme Court by passing speaking order, which is reported at 328 ITR (St) 9. 9. We do not find any force in appeals of Revenue. contention of Revenue that proceedings in instant case are arising out of order passed under Section 154 of Act and allowability of depreciation being debtable issue, Commissioner of Income Tax (Appeals) was not justified in deciding same on merits then on very same anology it has to be held that Assessing Officer was not justified in disallowing depreciation in such proceedings. Be that as it may. We find that issue of allowability of depreciation in case of charitable institution is covered by decision of Hon'ble Madras High Court in case of CIT Vs. Rao Bahadur Calavala Cunnan Chetty Charities (1982) 135 ITR 485 in favour of assessee. Therefore, it cannot be held that issue was still debatable after decision of Hon'ble Jurisdictional High Page 3 of 7 http://www.judis.nic.in Order in TC No.192 to 196 of 2013 (C.I.T., -Vs- Tuticorin Port Trust ) dt 13.02.2020 Court. We therefore do not find any error in order of Commissioner of Income Tax (Appeals) and therefore all appeals of Revenue are dismissed. 3. Learned counsel at Bar on both sides submit fairly that issue has now been put to rest and is no longer res integra in view of recent decision of Supreme Court of Commissioner of Income Tax -Vs- Rajasthan and Gujarati Charitable Foundation decided on 13.12.2017 reported in [2018] 402 ITR 441 (SC) where Honourable Supreme Court has noticed that various High Courts has decided said controversy in favour of Assessee and only Kerala High Court had taken contrary view in case of Lissie Medical Institutions -Vs- C.I.T. [2012-TIOL-303-HC-Kerala-IT], whereas Bombay High Court has taken view in favour of Assessee in case of DIT (Exemption) -Vs- Framjee Cawasjee Institute [1993] 109 CTR (Bom) 463. relevant portion of judgment of Honourable Supreme Court affirming view taken by Bombay High Court is quoted below for ready reference. ""Question No. 2 herein is identical to question which was raised before Bombay High Court in case of DIT (Exemption) v. Framjee Cawasjee Institute [1993] 109 CTR (Bom) 463 . In that case, facts were as follows : Page 4 of 7 http://www.judis.nic.in Order in TC No.192 to 196 of 2013 (C.I.T., -Vs- Tuticorin Port Trust) dt 13.02.2020 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." 2. After hearing learned counsel for parties, we are of opinion that aforesaid view taken by Bombay High Court correctly states principles of law and there is no need to interfere with same. 3. It may be mentioned that most of High Courts have taken aforesaid view with only exception thereto by High Court Page 5 of 7 http://www.judis.nic.in Order in TC No.192 to 196 of 2013 (C.I.T., -Vs- Tuticorin Port Trust ) dt 13.02.2020 of Kerala which has taken contrary view in Lissie Medical Institutions v. CIT*. 4. It may also be mentioned at this stage that Legislature, realising that there was no specific provision in this behalf in Income-tax Act, has made amendment in section 11(6) of Act vide Finance (No. 2) Act of 2014 which became effective from assessment year 2015-2016. Delhi High Court has taken view and rightly so, that said amendment is prospective in nature. 5. It also follows that once assessee is allowed depreciation, he shall be entitled to carry forward depreciation as well. 6. For aforesaid reasons, we affirm view taken by High Courts in these cases and dismiss these matters." 4. In view of aforesaid settled legal position, question of law raised in these appeals deserves to be answered in favour of Assessee and against Revenue. We hereby do so. appeals are disposed of accordingly. No costs. (V.K.,J.) (R.S.K.,J.) 13.02.2020 Index :Yes/No Internet : Yes/No KST Page 6 of 7 http://www.judis.nic.in Order in TC No.192 to 196 of 2013 (C.I.T., -Vs- Tuticorin Port Trust ) dt 13.02.2020 DR. VINEET KOTHARI, J. AND R. SURESH KUMAR, J. KST Tax Case (A) Nos.192, 193, 194, 195 and 196 of 2013 13.02.2020 Page 7 of 7 http://www.judis.nic.in Commissioner of Income-tax, Madurai v. Tuticorin Port Trust