2019 (9) TMI 661 - AT - Income Tax

Tribunal upholds CIT(A) decisions in favor of assessee on charitable purpose, depreciation, and space rent income issues.

ADIT (E), Inv. Circle (1), New Delhi., JDIT (E), Range 1, New Delhi. Versus India Trade Promotion Organisation

ADIT (E), Inv. Circle (1), New Delhi., JDIT (E), Range 1, New Delhi. Versus India Trade Promotion Organisation - TMI Issues Involved:1. Charitable Purpose and Exemption under Section 11/122. Depreciation on Assets for which Capital Expenditure Deduction is Allowed3. Addition of Space Rent Income Not Accounted in BooksIssue-wise Detailed Analysis:1. Charitable Purpose and Exemption under Section 11/12:The primary issue was whether the activities of the assessee qualify for charitable purposes under Section 2(15) of the Income Tax Act, 1961, thereby making the income eligible for exemption under Sections 11/12. The Assessing Officer (AO) denied the exemption, arguing that the assessee's activities were in the nature of business. However, the Commissioner of Income Tax (Appeals) [CIT(A)] relied on a decision by the Hon'ble Delhi High Court in the assessee's own case, which held that the expression 'charitable purpose' must be interpreted in the context of Section 10(23C)(iv). The High Court ruled that if an institution's primary objective is not profit-making but rather the advancement of an object of general public utility, it should be considered charitable. Consequently, the CIT(A) allowed the exemption, and the Tribunal upheld this decision, determining the issue against the Revenue.2. Depreciation on Assets for which Capital Expenditure Deduction is Allowed:The AO disallowed depreciation on the ground that allowing both capital expenditure deduction and depreciation would lead to double deduction. The CIT(A) allowed the depreciation based on a decision by the Hon'ble Delhi High Court in the assessee's own case, which supported the view that income derived from property held under trust should be computed as per the principles of the Act. The High Court emphasized consistency and certainty in legal interpretation, upholding that depreciation should be allowed even if capital expenditure had been deducted. The Tribunal found no illegality in the CIT(A)'s order and determined this issue against the Revenue.3. Addition of Space Rent Income Not Accounted in Books:The AO added amounts to the income of the assessee on account of space rent income based on disclosures in the Notes to Accounts. The CIT(A) deleted these additions, noting that the space rent was disputed by two Government Departments, making the income uncertain. The CIT(A) examined documents and discussions between the disputing parties and concluded that no addition could be made until the dispute was resolved. The Tribunal agreed, stating that income not accrued due to a dispute cannot be taxed, and upheld the CIT(A)'s decision, determining this issue against the Revenue.Additional Judgment:In the appeal challenging the order passed under Section 154/143(3), the Tribunal noted that the issues had already been covered in the preceding grounds and dismissed the appeal without separate findings.Conclusion:All four appeals (ITA Nos. 1919/Del./2016, 3359/Del./2016, 2508/Del./2016 & 3135/Del./2016) were dismissed by the Tribunal, upholding the CIT(A)'s decisions in favor of the assessee. The order was pronounced in open court on September 13, 2019.