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2021 (4) TMI 1176
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....x dated 02.07.1975. For the Assessment Year 2008-2009, the appellant filed a return of income on 30.09.2009. In the said return, the appellant had claimed set off of excess application of income of the previous Assessment Year 2008-2009 to the tune of Rs. 1,00,70,474/-. The same was processed under section 143(1) on 06.02.2011. The return of income was taken up for scrutiny and statutory notices were issued. In response to the same, the appellant furnished the details as called for in the notice. (ii) The Assessing Officer, by order dated 14.12.2011, under section 143(3), disallowed the deduction under sections 23 and 24 of the Income Tax Act; restricted the excess application of income of previous Assessment Year 2008-2009 to Rs. 23,96,355/- as against Rs. 1,00,70,474/- claimed by the assessee on the ground that excess applications should be computed with reference to the gross receipts and not with reference to the minimum application of 85%; and disallowed the claim of depreciation on fixed assets to the extent of Rs. 13,71,516/- as the cost of capital assets were already claimed as application of income. The taxable income was computed as Rs. 13,03,861/-. ....
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....rayanasamy, learned Senior Standing Counsel appearing for the respondent. 5. So far as the 1st question of law is concerned, the learned counsel on either side submitted that the same was decided against the revenue and in favour of the assessee in the Judgment dated 02.03.2021 made in T.C.A. No.975 of 2010 [The Commissioner of Income Tax - III v. M/s. SRA Systems Ltd., Chennai], wherein this Court held as follows: "... 4.When the appeal is taken up for hearing, Mr.R.Sivaraman, learned counsel appearing for the respondent submitted that the Question of Law no.1 is covered by the decision of the Hon'ble Supreme Court reported in [2018] 93 taxmann.com 33 (SC) [Commissioner of Income-tax, Central - III Vs. HCL Technologies Ltd.], an un-reported judgment of the Division Bench of this Court dated 10.01.2019 made in T.C.A.Nos.1257 & 1258 of 2009 [Commissioner of Income Tax, Chennai Vs. M/s.Sak Soft Ltd.] and the Question of Law no.2 is covered by the decision of this Bench dated 19.01.2021 made in T.C.A.Nos.1470 to 1472 of 2010 [Commissioner of Income Tax, Chennai Vs. M/s.S.R.A. Systems Ltd., No.100, Valluvar Kottam High Road, Nungambakkam, Chennai] and the Quest....
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....10 [Commissioner of Income Tax, Chennai Vs. M/s.S.R.A. Systems Ltd., No.100, Valluvar Kottam High Road, Nungambakkam, Chennai], this Bench held as follows:- "... 5.As the issue of allowability of deduction under Section 10A is common to all the three Assessment Years, all the three Tax Appeals are taken up together and disposed of by this common judgment. For the Assessment Year 2000-01, the assessee had filed its return of income on 29.11.2000. The assessee claimed that it was eligible for deduction under Section 10B. The return was processed on 28.03.2002. Subsequently, the Assessing Officer had reason to believe that income chargeable to tax had escaped assessment on account of the assessee Company being ineligible for deduction under Section 10A. Subsequently, a notice dated 22.03.2007 was issued under Section 148 and after giving an opportunity of hearing, the scrutiny assessment order was passed on 17.12.2007, disallowing the entire claim of deduction under Section 10B. Further, the expenditure incurred for the renovation and repairs of the rented premises of the assessee Company was disallowed by the Assessing Officer on the ground that such expenses were i....
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....6.05.2008 in I.T.A.No.2255/Mds/06 and the judgment passed by the Hon'ble Division Bench of this Court on 26.10.2018 in Tax Case Appeal No.1916 of 2008, the assessee Company would be entitled to deduction under Section 10A and disallowance made by the Assessing Officer was not correct. Since the order passed under Section 263 itself has been set aside, the cause of action for re-assessment does not survive." (iv)Un-reported judgment of a Division Bench of this Court dated 18.03.2020 made in T.C.A.No.228 of 2011 [M/s.Comstar Automative Technologies Private Ltd., (formerly known as Visteon Powertrain Control Systems India Private Limited, Keelakaranai Village, Malrosapuram Post, Maraimalai Nagar, Chengalpattu District- 603 204 Vs. The Deputy Commissioner of Income Tax, Company Circle - I (3), 121, Nungambakkam High Road, Chennai - 600 034], the Division Bench held as follows: "... 27.Therefore the law has been settled by the said decision of the Hon'ble Apex Court, where in clear terms, it has been held that, the deductions either under Section 10A or 10B would be made while computing the gross total income of the eligible undertaking (like the Asses....
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....-assessee, in support of his contentions, relied upon the following judgments:- (i) (2018) 402 ITR 441 [Commissioner of Income TAx-III, Pune v. Rajasthan & Gujarati Charitable Foundation, Ponna], wherein the Hon'ble Supreme Corut held as follows:- " 1. These are the petitions and appeals filed by the Income Tax Department against the orders passed by various High Courts granting benefit of depreciation on the assets acquired by the respondents-assessees. It is a matter of record that all the assessees are charitable institutions registered under Section 12A of the Income Tax Act (hereinafter referred to as 'Act'). For this reason, in the previous year to the year with which we are concerned and in which year the depreciation was claimed, the entire expenditure incurred for acquisition of capital assets was treated as application of income for charitable puruposes under Section 11(1)(a) of the Act. The view taken by the Assessing Officer in disallowing the depreciation which was claimed under Section 32 of the Act was that once the capital expenditure is treated as application of income for charitable purposes, the assessees had virtually enjoyed a 100 per cent....
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.... and machinery owned by the assessee and used for business purposes. It further provides for deduction subject to section 34. In that matter also, a similar argument, as in the present case, was advanced on behalf of the revenue, namely, that depreciation can be allowed as deduction only under section 32 of the Income Tax Act and not under general principles. The Court rejected this argument. It was held that normal depreciation can be considered as a legitimate deduction in computing the real income of the assessee on general principles or under section 11(1)(a) of the Income Tax Act The Court rejected the argument on behalf of the revenue that section 32 of the Income Tax Act was the only section granting benefit of deduction on account of depreciation. It was held that income of a Charitable Trust derived form building, plant and machinery and furniture was liable to be computed in normal commercial manner although the Trust may not be carrying on any business and the assets in respect whereof depreciation is claimed may not be business assets. In all such cases, section 32 of the Income Tax Act providing for depreciation for computation of income derived from business or profes....
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....e mentioned at this stage that the legislature, realising that there was no specific provision in this behalf in the Income Tax Act, has made amendment in Section 11(6) of the Act vide Finance Act No. 2/2014 which became effective from the Assessment Year 2015-2016. The Delhi High Court has taken the view and rightly so, that the said amendment is prospective in nature. 5. It also follows that once assessee is allowed depreciation, he shall be entitled to carry forward the depreciation as well. For the aforesaid reasons, we affirm the view taken by the High Courts in these cases and dismiss these matters. (ii) (2017) 398 ITR 721 [Director of Income-Tax Exemption III, Chennai v. Medical Trust of the Seventh Day Adventists] wherein the Division Bench of this Court held as follows:- " ..............28. T.C.A.No.949 of 2015 has been filed by the assessee raising the following two substantial questions of law:- 1. Whether on the facts and circumstances of the case, the Tribunal was right in disallowing the claim of depreciation on assets acquired by way of application of funds in the earlier years, contrary to judgments of several High Courts? ....
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.... but did not find any merit therein. The miscellaneous application is dismissed. (iv) (2000) 242 ITR 20 [Commissioner Of Income-Tax v. Matriseva Trust] wherein the Division Bench of this Court held as follows:- 1. At the instance of the Revenue, the following questions have been referred to us for our consideration : "(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that the donation of Rs. 31,050 made by the assessee to another institution, would tantamount to application of income for charitable purposes, thus satisfying the requirements of Section 11 ? and (2) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that the deficiency of funds of this year could be set-off against the earlier year's surplus ?" 2. During the assessment year 1984-85, the assessee-trust had donated a sum of Rs. 31,050 to another charitable trust known as the service trust. The assessee-trust claimed exemption under Section 11 of the Act, which Was rejected by the Income-tax Officer. On appeal, the Commissioner (Appe....
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....its objects. The Income Tax Officer determined the excess application by deducting 100% of its income from the total application of income towards its objects. The Income Tax Officer allowed carry forward and set off of such excess application of income of assessment and disallowed the set off of excess application pertaining to the Assessment Year 2008-2009 and thereby enhanced the income of assessment for the Assessment Year 2009-2010. The appellant computed the rental income as per sections 22 to 27 of the Act. On such computed income, application for charitable purposes was determined. The Income Tax Officer took into consideration the gross rental receipt and did not consider the claim of depreciation. 10.1 As per the Income Tax Act, "income" means "net income", which is taxable. Income from property should be computed as per sections 22 to 27 of the Act and the income from business have to be computed under sections 28 and 44 of the Act. Such computed income is exempted from tax under sections 11 and 13, if 85% of the same is spent on the charitable objects. Once the income is computed and determined 85% of such computed income should be utilized for charitable objects. ....
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....rplus is concerned, categorically decided the same in favour of the assessee and against the Revenue. Though the appellant-assessee relied upon the said Judgment before the Income Tax Appellate Tribunal, the Tribunal did not consider the same. The Commissioner of Income Tax (Appeals), went beyond its jurisdiction and commented on the Judgments of the High Courts. The relevant portion of the order of the Commissioner of Income Tax (Appeals) reads as follows:- "Perusal of the above Judgments of the Hon'ble High Courts reveals that some of the High Courts simply followed the decision of other High Court and allowed the set-off without appreciating the issues of set-off" 14. It is needless to say that the Commissioner of Income Tax (Appeals) is bound by the Judgments/Orders of the High Courts. The Commissioner of Income Tax (Appeals) was not sitting over appeal on the Judgments of the Hon'ble High Courts. If the Judgments/Orders of the High Courts are applicable to the facts and circumstances of the case pending before the Commissioner of Income Tax (Appeals), he must follow the Judgments/Orders of the Hon'ble High Courts without any deviation. The observation m....