Commissioner of Income Tax vs Jawahar Kala Kendra

J.K. Ranka, J.—Instant appeal u/s. 260-A of the Income Tax Act, 1961 (for short, "IT Act") is directed against the order of the Income Tax Appellate Tribunal, Jaipur Bench, Jaipur (for short, "itat") dt. 23/01/2014 passed in ITA No. 821/JP/2011 and pertains to assessment year 2005-06 where the itat had deleted penalty u/s. 271(1)(c) of the IT Act.

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 & film, folklore, indigenous craft etc.. The assessee-society was constituted as an autonomous body by the Government of Rajasthan vide order dt. 11/08/2003 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 dt. 11/08/2003, the assessee-society came to be formed and was registered under the Societies Registration Act, 1958 on 19/09/2003. 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 u/s. 12A. Prior to the constitution of the assessee-society, Jawahar Kala Kendra 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 accounts, 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 accounts as on 01/08/2004.

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 11/08/2003 and since then the assessee-society started functioning independently w.e.f. 01/08/2004 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 01/08/2004, 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 AO observed that since the assessee-society was not the owner, therefore, the depreciation cannot be allowed.

It appears from the order of the penalty passed by the AO 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 dis-allowance/allowance of the depreciation by the CIT(a) in further appeal. It is noticed that the penalty u/s. 271(1)(c) stands imposed on account of the depreciation which was disallowed by the ld. AO and upheld in further appeal before the appellate authority on Rs. 1,62,00,951/-. According to the AO the assessee concealed the particulars of income. The CIT(a) in appeal sustained the penalty u/s. 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 u/s. 271(1)(c)

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 accounts 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 u/s. 271(1)(c) and accordingly deleted the penalty.

Ld. 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 AO rightly imposed penalty which was sustained by the CIT(a) 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.

We have considered the arguments advanced by the counsel for the appellant and have perused the impugned order as well as further order of CIT(A).

In our view, the Tribunal has rightly deleted the penalty for the reason that though the claim was disallowed by the AO, thereafter, partly allowed by the CIT(a) and further not pressed by the assessee, but the fact remains that the assessee-society was constituted as an autonomous body by an order dt. 11/08/2003 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 u/s. 12a to the assessee-society.

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. It would be appropriate to mention that this Court in Commissioner of Income Tax Jaipur-II Vs. M/s. Jawahar Kala Kendra, (the present assessee) vide order dt. 03/01/2014 in DB Income Tax Appeal No. 121/2012 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 M/s Mysore Minerals Limited, M.G. Road, Bangalore Vs. The Commissioners of Income Tax, Karnataka, Bangalore, Delhi High Court in the case of Commisioner of Income Tax Vs. Oswal Agro Mills Ltd., Punjab & Haryana High Court, in the case of CIT Vs. Metalman Auto (P.) Ltd., and after relying upon the said judgments ultimately observed as under:-

"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 CIT(A) and the itat, 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."

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.

Merely because the assessee did not challenge further, is no reason to come to the conclusion that assessee is to be visited with penalty. In so far as the assessee is concerned when all facts and details of assets were before AO than it cannot be said that assessee concealed particulars of income.

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.

We do not find any infirmity or perversity in the order of the itat 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.

Consequently, the appeal, being devoid of merit, is hereby dismissed in limine.