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2014 DIGILAW 1546 (RAJ)

Commissioner of Income v. Jawahar Kala Kendra

2014-09-18

AJAY RASTOGI, J.K.RANKA

body2014
JUDGMENT 1. - The instant appeal under section 260A of the Income-tax Act, 1961 (for short, "the IT Act"), is directed against the order of the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur (for short, "the ITAT"), dated January 23, 2014, passed in I.T.A. No. 821/JP/2011 and pertains to the assessment year 2005-06 where the Income-tax Appellate Tribunal had deleted penalty under section 271(1)(c) of the Income-tax Act, 1961. 2. The brief facts, as emerging on the face of record are that the respondent-assessee is a cultural society generating creative artistic activities through programs in the field of performing arts, visual arts, literature, electronic media and film, folklore, indigenous craft, etc. The assessee-society was constituted as an autonomous body by the Government of Rajasthan, vide order dated August 11, 2003, to preserve and promote art and culture in Rajasthan and to contribute to the cultural and social development of the people of the State. Consequent to the order dated August 11, 2003, the assessee-society came to be formed and was registered under the Societies Registration Act, 1958, on September 19, 2003. During the course of hearing before the Assessing Officer (for short, "the AO"), the registration certificate, memorandum of association were also placed on record. It has also been granted registration under section 12A. Prior to the constitution of the assessee-society, Jawahar Kala Kendra, it was managed by the Government of Rajasthan. On its constitution as a society, all the assets and liabilities were transferred and incorporated in the books of the assessee-society. The chairperson of the assessee-society is the Chief Minister of the State of Rajasthan and all other members of the governing body are persons of eminence. On the transfer of assets in its books of account, the assessee-society recorded the value of the land of Jawahar Kala Kendra at Rs. 42.62 crores and building at Rs. 9.05 crores in its books of account as on August 1, 2004. 3. On the transfer of assets in its books of account, the assessee-society recorded the value of the land of Jawahar Kala Kendra at Rs. 42.62 crores and building at Rs. 9.05 crores in its books of account as on August 1, 2004. 3. The short controversy involved in the instant appeal is that the assessee claimed depreciation for the first time during the previous year relevant to the year under appeal stating that the assets were transferred to it by the Government of Rajasthan on August 11, 2003, and since then the assessee-society started functioning independently with effect from August 1, 2004, and, accordingly, the depreciation was claimed on the assets which were transferred to it and it was submitted by the respondent-assessee that at least on and from August 1, 2004, when the assessee-society started functioning independently, then the depreciation is allowable. However, it appears that because the assessee did not provide any evidence in order to prove the change of ownership of the building and assets from the Government of Rajasthan to the assessee-society and on records, the title still continued to be with the State of Rajasthan consequently the Assessing Officer observed that since the assessee-society was not the owner, therefore, the depreciation cannot be allowed. 4. It appears from the order of the penalty passed by the Assessing Officer that the Commissioner of Income-tax (Appeals)-II, Jaipur (for short, the "CIT(A)"), partly allowed the claim of depreciation at Rs. 28,30,694 as against the total claim of Rs. 1,90,31,645 and that it disallowed claim of depreciation to the extent of Rs. 1,62,00,951, it appears that neither the Revenue nor the assessee-society challenged the said disallowance/allowance of the depreciation by the Commissioner of Income-tax (Appeals) in further appeal. It is noticed that the penalty under section 271(1)(c) stands imposed on account of the depreciation which was disallowed by the learned Assessing Officer and upheld in further appeal before the appellate authority on Rs. 1,62,00,951. According to the Assessing Officer the assessee concealed the particulars of income. The Commissioner of Income-tax (Appeals) in appeal sustained the penalty under section 271(1)(c) of the Act by observing that wrong/excessive and prima facie inadmissible claim of depreciation was made and since there was no ownership with the assessee, therefore, depreciation could not have been claimed by the assessee and thus he sustained penalty under section 271(1)(c). 5. The Commissioner of Income-tax (Appeals) in appeal sustained the penalty under section 271(1)(c) of the Act by observing that wrong/excessive and prima facie inadmissible claim of depreciation was made and since there was no ownership with the assessee, therefore, depreciation could not have been claimed by the assessee and thus he sustained penalty under section 271(1)(c). 5. The assessee carried the matter in further appeal before the Tribunal who by the impugned order has deleted the penalty and allowed the relief as aforesaid by observing that admittedly the assets were brought into the books of account and details of all assets were provided and therefore it cannot be said that the depreciation was claimed wrongly by the assessee so as to be subjected with penalty under section 271(1)(c) and, accordingly, deleted the penalty. 6. The learned counsel for the Revenue contended that the Tribunal has gone wrong in deleting the penalty as the assets brought in by the assessee, were never owned by the assessee as the assessee did not possess the title deed and unless and until it possesses the title deed or an assessee becomes owner, depreciation cannot be claimed and admittedly in view of this fact there was a wrong claim or a claim which was patently inadmissible, therefore, the assessee was not at all entitled for depreciation and even the disallowance of depreciation was not challenged further and attained finality and on these findings, the claim of depreciation was held to be inappropriate/inadmissible and, therefore, the Assessing Officer rightly imposed penalty which was sustained by the Commissioner of Income-tax (Appeals) and the Tribunal by deleting the penalty is unjustified, thus he contended that the order of the Tribunal is perverse and substantial question of law arise out of the order of the Tribunal. 7. We have considered the arguments advanced by the counsel for the appellant and have perused the impugned order as well as further order of Commissioner of Income-tax (Appeals). 8. 7. We have considered the arguments advanced by the counsel for the appellant and have perused the impugned order as well as further order of Commissioner of Income-tax (Appeals). 8. In our view, the Tribunal has rightly deleted the penalty for the reason that though the claim was disallowed by the Assessing Officer, thereafter, partly allowed by the Commissioner of Income-tax (Appeals) and further not pressed by the assessee but the fact remains that the assessee-society was constituted as an autonomous body by an order dated August 11, 2003, issued by the Governor of Rajasthan to preserve and promote art and culture of Rajasthan and to contribute to the social and cultural development of the people of the State. It is also an admitted fact that subsequent to the said order of the Governor of Rajasthan, the assessee-society came to be formed and was registered under the Societies Registration Act, 1958, and the Commissioner of Income-tax has also granted registration under section 12A to the assessee-society. 9. It is also an admitted fact and which has not disputed by the Revenue that possession over the property is being enjoyed by the assessee-respondent and no claim of reclaiming the assets have been made by the State Government subsequent to transfer of the assets to the assessee-society. In our view, merely because title has not been transferred or properties not registered in the name of the assessee under the Indian Registration Act, depreciation cannot be disallowed. Admittedly, possession and user is of the assessee. In our view, merely because title has not been transferred or properties not registered in the name of the assessee under the Indian Registration Act, depreciation cannot be disallowed. Admittedly, possession and user is of the assessee. It would be appropriate to mention that this court in CIT v. Jawahar Kala Kendra (the present assessee), vide order dated January 3, 2014 in DB Income Tax Appeal No. 121 of 2012 - since reported in (2014) 362 ITR 515 (Raj) had upheld the finding of the Tribunal for allowing depreciation to the respondent-assessee in the assessment year 2007-08 and in the aforesaid order, this court has relied upon the judgment of the Hon'ble apex court in the case of Mysore Minerals Ltd. v. CIT (1999) 239 ITR 775 (SC) ; the Delhi High Court in the case of CIT v. Oswal Agro Mills Ltd. (2011) 238 CTR 113 : (2012) 341 ITR 467 (Delhi) the Punjab and Haryana High Court, in the case of CIT v. Metalman Auto P. Ltd. (2011) 336 ITR 434 (P&H) and after relying upon the said judgments ultimately observed as under (page 522 of 362 ITR) : "In our view, on the face of record, we are of the clear opinion that the assessee-society had rightly been allowed depreciation by the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal, as the assessee-society became owner of the said assets and was actually using the property in its own right as an owner on and from the date of order of the Governor and formation of society." 10. In view of what we have held in the assessee's own case for the assessment year 2007-08, the claim of depreciation was allowable and as such it cannot be said that the claim made by the assessee was wrong or inadmissible since beginning. 11. Merely because the assessee did not challenge further, is no reason to come to the conclusion that the assessee is to be visited with penalty. In so far as the assessee is concerned when all facts and details of assets were before Assessing Officer then it cannot be said that assessee concealed particulars of income. 12. 11. Merely because the assessee did not challenge further, is no reason to come to the conclusion that the assessee is to be visited with penalty. In so far as the assessee is concerned when all facts and details of assets were before Assessing Officer then it cannot be said that assessee concealed particulars of income. 12. In our view, the Tribunal has decided the issue after appreciation of evidence on record and facts found on record that the assets in question were duly disclosed and the assessee neither concealed income nor furnished inaccurate particulars of income. 13. We do not find any infirmity or perversity in the order of the Income-tax Appellate Tribunal so as to call for any interference of this Court. In our view, no substantial question of law arises or is required to be considered. 14. Consequently, the appeal, being devoid of merit, is hereby dismissed in limine. *******