ACIT(E), Jaipur V. SCHOLARS EDUCATION TRUST OF INDIA, Jaipur

ITA 1087/JPR/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1915 (ITAT-JAIPUR)
• Duration Of Justice: 11 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-11-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 09-12-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VARINDERA MEHTA
• Keywords: Capital asset; Depreciation; Charitable institution; Question of law; Cost of acquisition; Capital receipt; Capital expenditure
• Section: 12A; 12AA; 12; 10; 11

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH HKKXPAN] YS[KK L NL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI BHAGCHAND, A M VK;DJ VIHY LA- @ ITA NO. 1087/JP/2016 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2012-13 THE ACIT(E), CIRCLE, JAIPUR. CUKE VS. M/S SCHOLARS EDUCATION TRUST OF INDIA, A-3-G. SUNDER PATH, BANI PARK, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AADTS1374A VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESP ONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI P.C. PARWAL (C.A.) JKTLO DH VKSJ LS @ REVENUE BY : SHRI VARINDERA MEHTA (CIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 16/10/2017 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 15/11/2017 VKNS'K@ ORDER PER: VIJAY PAL RAO, J.M. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 28.09.2016 OF CIT (A) FOR THE A.Y. 2012-13. 2. THE ASSESSEE IS SOCIETY REGISTERED UNDER DELHI S OCIETIES REGISTRATION ACT XXI, 1860 ON 24.02.1994. AS PER TH E OBJECTS OF THE ASSESSEE SOCIETY IT WAS FORMED TO IMPART EDUCATION UNDER THE NAME AND STYLE OF CENTRAL ACADEMIC & PARENTS PRIDE. THE ASSE SSEE IS RUNNING ITA NO. 1087/JP/2016 ACIT (E) V M/S SCHOLARS EDUCATION TRUST OF INDIA 2 VARIOUS SCHOOLS TO VARIOUS LOCATIONS IN RAJASTHAN A ND UTTAR PRADESH. THE ASSESSEE SOCIETY IS REGISTERED U/S 12AA OF THE INCO ME TAX ACT VIDE ORDER DATED 09.06.2003 AND ALSO NOTIFIED U/S 10 (23 C)(VI) OF THE INCOME TAX ACT VIDE NOTIFICATION DATED 27.12.2010 FOR THE ASSESSMENT YEAR 2011-12 ONWARDS. THE ASSESSEE FILED ITS RETURN OF I NCOME DECLARING NIL INCOME AFTER CLAIMING THE EXEMPTION U/S 11 OF THE A CT. THE ASSESSING OFFICER ON EXAMINATION OF THE RECORD AND PARTICULAR OF THE BALANCE SHEET NOTICED THAT THE ASSESSEE HAS SHOWN DEVELOPMENT FUN D OF RS. 47,90,56,305/- AS ON 31.03.2011 AND RS. 59,23,06,69 4/- ON 31.03.2012 SHOWING AN INCREASE OF RS. 11,32,50,389/- IN THE YE AR UNDER CONSIDERATION. THE AO ASKED TO THE ASSESSEE TO EXPL AIN AS TO WHY THE DEVELOPMENT FUND HAS NOT BEEN ROUTED THROUGH THE IN COME AND EXPENDITURE ACCOUNT AND ALSO TO EXPLAIN THE NATURE OF RECEIPT WITH DOCUMENTARY EVIDENCE. IN RESPONSE THE ASSESSEE SU BMITTED THAT THE AMOUNT IN QUESTION WERE NOT CREDITED IN THE PROFIT AND LOSS ACCOUNT BUT DIRECTLY CREDITED TO THE BALANCE SHEET AND WAS CLAIMED AS CAPITAL RECEIPT EXEMPT U/S 12 OF THE INCOME TAX ACT. THE A SSESSEE FURTHER EXPLAINED THE CONTRIBUTION AS DEVELOPMENT FUND MADE BY THE STUDENTS WERE IN CONSIDERATION OF SERVICES TO BE RENDERED BY THE SCHOOL TO STUDENT AND THEREFORE, THESE CONTRIBUTIONS WERE IN THE NATURE OF CAPITAL ITA NO. 1087/JP/2016 ACIT (E) V M/S SCHOLARS EDUCATION TRUST OF INDIA 3 RECEIPT AND WAS USED IN CREATING FIXED ASSETS, LIKE PURCHASE OF SCHOOL LAND, CONSTRUCTION OF SCHOOL BUILDING ETC. THUS TH E ASSESSEE CONTENDED BEFORE THE AO THAT THE CONTRIBUTION RECEIVED BY THE ASSESSEE FROM THE PARENTS/STUDENTS WAS NOT CURRENT INCOME BUT CAPITAL RECEIPT EXEMPT U/S 12 OF THE ACT. THEN THE ASSESSEE TRIED TO EXPLAIN T HE DIFFERENT BETWEEN THE TUITION FEE AND DEVELOPMENT FUND AND CLAIMED TH AT THE RECEIPT ON ACCOUNT OF DEVELOPMENT FUND IS CAPITAL IN NATURE AN D EXEMPT U/S 12 OF THE ACT. THE AO DID NOT ACCEPT THE CONTENTION AND E XPLANATION OF THE ASSESSEE AND WAS OF THE VIEW THAT THE DEVELOPMENT F UND RECEIVED AS PART OF THE OTHER FEES AND AS SUCH THERE IS NO CONT RIBUTION AND DIFFERENCE IN THE NATURE OF DEVELOPMENT FUND AND OT HER FEES. THE AO ALSO TAKEN NOTE OF THE FACT THAT THE ASSESSEE ITSEL F HAS CLAIMED THAT THE DEVELOPMENT FUND MADE BY THE STUDENTS WERE IN CONSI DERATION OF SERVICES TO BE RENDERED BY THE SCHOOL TO STUDENT AN D AS SUCH IT IS FEE AGAINST THE SERVICES AND NOT VOLUNTARY OFFERED FRO M ANY PERSON BUT A COMPULSION OF STUDENTS TO PAY DEVELOPMENT FUND. ACC ORDINGLY, THE AO TREATED THE DEVELOPMENT RECEIPT OF RS. 11,32,50,38 9/- AS REVENUE RECEIPT AND AFTER CONSIDERING EXCESS OF RECEIPT OV ER THE APPLICATION OF INCOME AND 15% OF THE RECEIPT ALLOWED AS SET APART U/S 11 ASSESSED THE BALANCE OF RS. 1,44,06,790/- TREATED AS INCOME CHA RGEABLE TO TAX. THE ITA NO. 1087/JP/2016 ACIT (E) V M/S SCHOLARS EDUCATION TRUST OF INDIA 4 ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE LD. CIT(A). THE LD. CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE AND DELETE D THE ADDITION MADE BY THE AO. AGGRIEVED BY THE IMPUGNED ORDER OF THE L D. CIT(A) THE REVENUE HAS FILED THE PRESENT APPEAL AND RAISED THE FOLLOWING GROUNDS AS UNDER:- 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE CIT(A) HAS ERRED IN DELETING THE ADDITION ON AC COUNT OF RECEIPTS PORTION OF FEES, TREATING AS CAPITAL RECEI PTS/CORPUS DONATION, EARMARKED AS DEVELOPMENT FUND BY THE ASSE SSEE HIMSELF WHEREAS THE STUDENTS OR PERSONS DEPOSITING THE FEE PAID IT AS FEE ONLY, AND NOWHERE HAS INDICATED IT TO BE A V OLUNTARY CONTRIBUTION. 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE CIT(A) HAS ERRED IN ALLOWING CLAIM OF DEPRECIAT ION ON FIXED ASSETS IN SPITE OF THE FACTS THAT THE SAME WAS ALLO WED AS APPLICATION OF INCOME U/S 11 AT THE TIME OF PURCHAS E. 3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE CIT(A) HAS ERRED IN ALLOWING DEPRECIATION WITHO UT APPRECIATING THE FACT THAT THE APPLICATION OF 100% EXPENDITURE O F THE CAPITAL ASSET IS ALREADY ALLOWED AS CAPITAL EXPENDITURE HEN CE FURTHER ALLOWANCE OF THE DEPRECIATION ON THE SAME CAPITAL A SSET WOULD AMOUNT TO DOUBLE ALLOWANCE. 4) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE CIT(A) HAS ERRED IN ALLOWING DEPRECIATION WITHO UT APPRECIATING THE FACT THAT THE ASSESSEE HAS NOT CARRIED OUT THE BUSINESS ACTIVITIES BUT THE RECEIPTS UTILIZED FOR CHARITY. A S THERE WAS NO BUSINESS ACTIVITIES THE CLAIM OF DEPRECIATION WAS N OT ALLOWABLE, THE DEPRECIATION IS ALLOWABLE ONLY IN THE CASE OF B USINESS OR PROFESSION OR IN THE CASE OF INCOME FROM OTHER SOU RCES. ITA NO. 1087/JP/2016 ACIT (E) V M/S SCHOLARS EDUCATION TRUST OF INDIA 5 5) ANY OTHER QUESTION OF LAW AS DEEMED FIT IN THE F ACTS AND CIRCUMSTANCES OF THE CASE MAY ALSO BE FRAMED BEFORE THE HONBLE TRIBUNAL IN THE INTEREST OF JUSTICE. 3. BEFORE US, THE LD. DR HAS SUBMITTED THAT THE DEV ELOPMENT FUND IS RECEIVED FROM THE STUDENTS AS A PART OF OTHER FEES ON ACCOUNT OF TUITION FEES AND TERM FEES, THEREFORE, THERE IS NO DIFFEREN CE IN THE NATURE OF DEVELOPMENT FUND AND OTHER FEES RECEIVED BY THE ASS ESSEE FROM THE STUDENTS. IT IS AN ADMITTED FACT THAT THE DEVELOPME NT FUND IS RECEIVED FROM THE STUDENTS AGAINST THE SERVICES TO BE RENDER ED AS SUCH IT IS A FEES AGAINST SERVICE AND NO VOLUNTARY CONTRIBUTIO N BY THE STUDENTS OR PARENTS BUT IT IS COMPULSION OF STUDENT TO PAY DEVE LOPMENT FUND IF HE OR SHE WANTS TO STUDY IN THE SCHOOL. THE LD. DR HAS T HUS CONTENDED THAT WHEN THERE IS NO OPTION WITH THE STUDENTS OR PARENT S TO PAY OR NOT TO PAY THE DEVELOPMENT FUND BUT IT IS MANDATORY TO PAY THIS FEE ALONG WITH OTHER FEES THEN THIS RECEIPT CANNOT BE TREATED AS T HE VOLUNTARY CONTRIBUTION. FURTHER WHEN THIS FEE RECEIVED AGAINS T THE STUDENT SERVICES THEN IT CANNOT BE TREATED AS CAPITAL IN NA TURE BUT IT IS THE CURRENT RECEIPT OF THE ASSESSEE. THE LD. DR HAS THU S CONTENDED THAT THE RECEIVED IN QUESTION CANNOT BE CLASSIFIED AS DONATI ON OR CONTRIBUTION FOR SPECIFIC PROJECTS AND THEREFORE, WILL PART OF REVEN UE RECEIPT FROM THE STUDENTS. SINCE THE SURPLUS IS INCREASED BEYOND THE 15% LIMIT OF ITA NO. 1087/JP/2016 ACIT (E) V M/S SCHOLARS EDUCATION TRUST OF INDIA 6 ALLOWABLE AMOUNT AS PER PROVISION OF SECTION 11(1)( A) OF THE ACT, THEREFORE, THE SAID SURPLUS OVER AND ABOVE THE 15% CAP IS LIABLE TO TAX. HE HAS RELIED UPON THE ORDER OF THE ASSESSING OFFIC ER. 4. ON THE OTHER HAND, LD. AR OF THE ASSESSEE HAS SU BMITTED THAT THE ASSESSEE IS ALSO NOTIFIED U/S 10 (23C)(VI) AND THER EFORE THIS AMOUNT IS OTHERWISE EXEMPT UNDER THE PROVISIONS OF SECTION 10 (23C)(VI). HE HAS REITERATED THE CONTENTION HAS RAISED BEFORE THE AUT HORITIES BELOW AND SUBMITTED THAT THOUGH THE VOLUNTARY CONTRIBUTION IS INCLUDED IN THE TERM INCOME AS PER SECTION 11(1)(A) IN RESPECT OF CHARIT ABLE OR RELIGIOUS TRUST HOWEVER, THE SAID AMOUNT SHALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE TRUST OR INSTITUTIONS BEING THE CORPUS FUND O F THE TRUST AS PER PROVISIONS OF SECTION 11(1)(A) R.W.S. 12 OF THE INC OME TAX ACT WHICH EXCLUDES THE CONTRIBUTION MADE WITH A SPECIFIC DIRE CTION WILL NOT FORM PART OF THE INCOME BUT SHALL FORM CORPUS OF THE TR UST OR INSTITUTION. THE LD. AR HAS RELIED UPON THE DECISION OF HONBLE KARN ATAKA HIGH COURT IN CASE OF DIRECTOR OF IT (EXEMPTION) VS. SRI RAMAKRI SHNA SEVA ASHRAMA 357 ITR 731 AND SUBMITTED THAT THE HONBLE HIGH COU RT WHILE CONSIDERING THE MEANING OF WORD CORPUS HELD THAT T HE DONATION FOR SPECIFIC PURPOSE MUST BE CAPITAL IN NATURE AND CANN OT BE APPLIED FOR CHARITABLE OR RELIGIOUS PURPOSE AND THEREFORE CANNO T BE DEEMED TO BE ITA NO. 1087/JP/2016 ACIT (E) V M/S SCHOLARS EDUCATION TRUST OF INDIA 7 INCOME DERIVED FROM THE PROPERTY FOR THE PURPOSE OF SECTION 11 OF THE INCOME TAX ACT. HE HAS ALSO RELIED UPON THE DECISIO N OF RAJASTHAN HIGH COURT IN CASE OF SUKHDEO CHARITY ESTATE VS. ITO 192 ITR 615 AND SUBMITTED THAT WHEN THE AMOUNT WAS CONTRIBUTED TO T HE CORPUS OF THE INSTITUTION AND ARE KEPT AS CAPITAL THEN IT CANNOT BE TREATED AS INCOME OR REVENUE RECEIPT FOR THE PURPOSE OF SECTION 11 OF THE INCOME TAX ACT. THE LD. AO HAS RELIED UPON THE DECISION OF HONBLE DELHI HIGH COURT IN CASE OF DIT(E) VS. NATIONAL ASSOCIATION OF SOFTWARE & SERVICES 345 ITR 362 AND SUBMITTED THAT THE HONBLE HIGH COURT HAS HELD THAT ONE TIME ADMISSION FEE PAID BY MEMBERS WHO ARE AWARE THAT IT COULD BE SPENT BY ASSESSEE ONLY FOR ACQUIRING CAPITAL ASSET IS CO RPUS DONATION NOT TAXABLE INCOME. THE LD. DR THUS CONTENDED THAT THE ASSESSEE HAS BEEN RECEIVED DEVELOPMENT FUNDS FROM THE STUDENT APART F ROM THE TUITION FEES WITH THE CLEAR UNDERSTANDING THAT IT IS TO BE USED FOR CREATION OF CAPITAL ASSET NECESSARY FOR ACHIEVING THE OBJECT OF THE ASSESSEE SOCIETY. THEREFORE, THE DEVELOPMENT FEES OF RS. 11,32,50,389 /- RECEIVED DURING THE YEAR IS DIRECTLY CREDITED TO THE DEVELOPMENT FU ND ACCOUNT AND NOT ROUTED THROUGH THE INCOME & EXPENDITURE ACCOUNT. T HE LD. AR HAS FURTHER CONTENDED THAT THE DEVELOPMENT FUND FEES RE CEIVED BY THE ASSESSEE IS UTILIZED ONLY FOR ACQUIRING THE FIXED ASSET AND THUS THE FUND ITA NO. 1087/JP/2016 ACIT (E) V M/S SCHOLARS EDUCATION TRUST OF INDIA 8 UTILIZED IN CREATION OF CAPITAL ASSET CANNOT BE TR EATED AS REVENUE RECEIPT. HE HAS ALSO RELIED UPON THE VARIOUS DECISI ON OF THIS TRIBUNAL INCLUDING THE DECISION DATED 01.11.2016 OF COORDINA TE BENCH OF THIS TRIBUNAL IN CASE OF ACIT (EXEMPTIONS) VS. SHYAM LA L PANWAR ANANDI DEVI MEMORIAL CHARITABLE TRUST. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD, THERE IS NOT DISPUTE SO FAR AS THE ASSESSEE IS GRANTED REGISTRATION U/S 12AA OF THE ACT AS WELL AS NOTIFIED U/S 10 (23C)(VI) OF THE ACT. HOWEVER THE MERE REGISTRATION GRANTED U/S 12A AND NOTIFICATION U/S 10(23C) WOULD NOT IPSO FACTO E XEMPT ALL THE RECEIPTS FROM TAX. FOR THE PURPOSE OF AVAILING THE BENEFIT U/S 11 OF THE ACT. THE CONDITIONS AS STIPULATED UNDER THE SAID PR OVISION ALONG WITH THE CONDITION AS PROVIDED U/S 12 AND 13 OF THE ACT ARE TO BE SATISFIED. THE DISPUTE BEFORE US IS ON THE LIMITED POINT WHETHER T HE RECEIPT ON ACCOUNT OF DEVELOPMENT FUND/DEVELOPMENT FEE FROM THE STUDEN TS OF THE ASSESSEE IS IN THE CATEGORY OF CAPITAL RECEIPTS/ C ORPUS FUND TO BE USED BY THE ASSESSEE FOR SPECIFIC PURPOSE OR NOT. SO FAR AS A VOLUNTARY DONATION OR CONTRIBUTION FOR SPECIFIC PURPOSE IS RE CEIVED BY THE TRUST OR INSTITUTION THE SAME WOULD BE CLASSIFIED AS CAPITAL RECEIPT FOR BEING PART OF THE CORPUS FUND FOR SPECIFIC PURPOSE FOR WHICH S UCH DONATION IS GIVEN ITA NO. 1087/JP/2016 ACIT (E) V M/S SCHOLARS EDUCATION TRUST OF INDIA 9 BY THE DONOR. HOWEVER THE QUESTION ARISES IN THE CA SE OF THE ASSESSEE IS WHETHER THE RECEIPT ON ACCOUNT OF DEVELOPMENT FEE C OLLECTED FROM THE STUDENTS IS A VOLUNTARY CONTRIBUTION/DONATION OR IT IS A COMPULSORY PAYMENT BY THE STUDENTS FOR CONTINUING THE STUDYING IN THE EDUCATIONAL INSTITUTIONS OF THE ASSESSEE. WE FIND THAT THE SAID PAYMENT IS RECEIVED BY THE ASSESSEE ALONG WITH THE TUITION FEE, TERM FE E AND OTHER CHARGES IN A SINGLE RECEIPT OF FEES WHICH THE STUDENTS ARE MAKING PERIODICAL PAYMENTS. IT IS IMPERATIVE TO ASCERTAIN WHETHER SUC H PAYMENT RECEIVED FROM THE STUDENTS ALONG WITH THE TUITION FEE, TERM FEE AND OTHER CHARGES IS A VOLUNTARY PAYMENT/ CONTRIBUTION/DONATION FOR S PECIFIC PURPOSE OF DEVELOPMENT OR IT IS A COMPULSORY PAYMENT BY THE S TUDENTS. THE TERM VOLUNTARY REFERS TO AN ACT OF ONCES OWN FREE WILL AND DISCRETION AND NOT A COMPULSION OR AN OBLIGATORY. IN THE CASE OF THE A SSESSEE THE DEVELOPMENT FEE IS PART OF THE TOTAL FEE CHARGED BY THE ASSESSEE FROM THE STUDENTS AND IT IS APPARENT THAT THE QUANTUM OF AMOUNT AND SPECIFIC PURPOSE ON ACCOUNT OF WHICH THIS FEE IS RECEIVED FR OM THE STUDENTS IS DETERMINED AND DECIDED BY THE ASSESEE AND NOT BY TH E STUDENTS OR THEIR PARENTS. THEREFORE, THE DEVELOPMENT FEE IS NOT OPTI ONAL FOR THE STUDENTS BUT IT IS COMPULSORY FOR THE STUDENTS WITHOUT ANY D ISCRETION OR FEE WILL TO DECIDE WHETHER TO PAY OR NOT TO PAY THE DEVELOPMENT FUND FEES. HENCE, ITA NO. 1087/JP/2016 ACIT (E) V M/S SCHOLARS EDUCATION TRUST OF INDIA 10 IT IS A CHARGE BY THE ASSESSEE ON THE STUDENTS WITH OUT HAVING ANY ELEMENT OF ANY DISCRETION ON THE PART OF THE STUDEN TS OR PARENTS EITHER TO THE QUANTUM OF FEE OR THE SPECIFIC PURPOSE AS WE LL AS THE OPTION OF MAKING PAYMENT OR NOT. THEREFORE, WHEN THIS PAYMENT IS NOT OPTIONAL OR VOLUNTARY ON THE PART OF THE STUDENTS BUT IT IS COMPULSORY CHARGE IN THE NATURE OF FEE FOR STUDYING AND CONTINUING THE S TUDY IN THE INSTITUTIONS OF THE ASSESSEE, THEN THIS PAYMENT IN THE NAME OF DEVELOPMENT FEE CANNOT BE REGARDED AS VOLUNTARY CON TRIBUTION OR DONATION. THE QUANTUM, THE TIME OF PAYMENTS ARE DEC IDED AND DETERMINED BY THE ASSESSEE AND THE STUDENTS ARE HAV ING NO SAY OR ROLE IN THE QUANTUM OF FEE OR ANY DISCRETION OF PAYING O R NOT PAYING THE SAME. THUS IN THE FACTS AND CIRCUMSTANCES OF THE CA SE WHEN THE DEVELOPMENT FEE RECEIVED BY THE ASSESSEE IS NOT VOL UNTARY BUT IT IS A COMPULSORY CHARGE ON THE STUDENTS THEN THE SAME CAN NOT BE CLASSIFIED AS CAPITAL IN NATURE FOR SPECIFIC PURPOSE OR PART O F THE CORPUS FUND OF THE ASSESSEE TRUST. THE DECISION RELIED BY THE LD. AR A RE ON THE POINT THAT WHEN A PARTICULAR CONTRIBUTION OR DONATION IS GIV EN BY THE DONOR AS PER HIS FREE WILL AND FOR SPECIFIC PURPOSE THEN THE SA ME CANNOT BE TREATED AS REVENUE RECEIPT. HAVING REGARD TO THE PECULIAR F ACTS AND CIRCUMSTANCES WE ARE OF THE CONSIDERED OPINION THAT THE FEE IN THE ITA NO. 1087/JP/2016 ACIT (E) V M/S SCHOLARS EDUCATION TRUST OF INDIA 11 NAME OF DEVELOPMENT CHARGE RECEIVED BY THE ASSESSEE FROM THE STUDENTS IS PART OF THE CURRENT RECEIPT AND WILL PA RT TAKE A CHARACTER OF THE OTHER FEE CHARGED BY THE ASSESSEE ON ACCOUNT OF TUITION FEE, TERM FEE ETC. HENCE, WE SET ASIDE THE ORDER OF THE LD. C IT(A) QUA THIS ISSUE. 6. AS REGARDS THE BENEFIT OF SECTION 10(23C), WE FI ND THAT THIS ISSUE WAS NOT DECIDED BY THE AO AND FURTHER THE LD. CIT(A ) HAS NOT ADJUDICATED THIS ISSUE AS THE RELIEF WAS GRANTED U/ S 11 AND 12 OF THE ACT. THE RELEVANT PART OF THE LD. CIT(A) FINDING O N THIS ISSUE IN PARA 6.3 IS AS UNDER:- 6.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, FINDINGS OF THE AO AND SUBMISSION OF THE APPELLANT. SINCE I HAV E ALREADY ALLOWED GROUND NO. 1 AND 2 SUPRA, THERE DOES NOT RE MAIN ANY GRIEVANCE OF ASSESSEE. THIS GROUND THEREFORE REQUIR ES NO ADJUDICATION. THEREFORE, THE ISSUE OF BENEFIT U/S 10(23C) HAS NOT BEEN ADJUDICATED BY THE LD. CIT(A) OR BY THE AO AND HENCE THE SAME IS R EQUIRED TO BE CONSIDERED AND ADJUDICATED AT THE LEVEL OF THE AO. IT IS PERTINENT TO NOTE THAT THE BENEFIT OF SECTION 10(23C)(VI) IS ALS O NOT AUTOMATIC BUT CERTAIN CONDITIONS PROVIDED UNDER THE SAID PROVISIO N ARE TO BE SATISFIED FOR AVAILING THE BENEFIT. THERE ARE ALSO CERTAIN LI MITS OF RECEIPT UNDER THE SAID PROVISION AND BREACHING THOSE LIMITS WILL DISE NTITLE THE ASSESSEE FOR ITA NO. 1087/JP/2016 ACIT (E) V M/S SCHOLARS EDUCATION TRUST OF INDIA 12 THE EXEMPTION U/S 10(23C) OF THE ACT. ACCORDINGLY, THIS ISSUE OF BENEFIT U/S 10(23C) IS SET ASIDE TO THE RECORD OF THE ASSES SING OFFICER FOR CONSIDERATION AND ADJUDICATION. NEEDLESS TO SAY THE ASSESSEE BE GIVEN OPPORTUNITY OF HEARING. 7. THE REVENUE HAS RAISED ANOTHER ISSUE IN GROUND N O. 2 AND 3 REGARDING DISALLOWANCE OF DEPRECIATION BY THE AO WH ICH WAS ALLOWED BY THE LD. CIT(A). 8. WE HAVE HEARD THE LD. DR AS WELL AS LD. AR AND C ONSIDERED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET WE NOTE THAT THIS ISSUE OF ALLOWING DEPRECIATION ON FIXED ASSET IS COVERED BY A SERIES OF DECISIONS OF HONBLE HIGH COURTS AS WELL AS TRIBUNAL. THE AO DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT ONCE THE ASSESS EE HAS CLAIMED THE COST OF ACQUISITION OF FIXED ASSET AS APPLICABILIT Y OF INCOME THEN THE DEPRECIATION ON THE SAME ASSET WOULD AMOUNT TO DOUB LE DEDUCTION. THE LD. CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE BY FO LLOWING THE DECISION OF HONBLE JURISDICTION HIGH COURT. WE NOTE THAT TH E HONBLE RAJASTHAN HIGH COURT IN CASE OF CIT VS. KRISHI UPAJ MANDI SAM ITI, JAISALMER 388 ITR 605 HAS CONSIDERED AND DECIDED AN IDENTICAL I SSUE IN PARAS 4 & 5 AS UNDER:- ITA NO. 1087/JP/2016 ACIT (E) V M/S SCHOLARS EDUCATION TRUST OF INDIA 13 4. WE HAVE CONSIDERED THE ARGUMENTS ADVANCED. THE ASSESSEE IS A CHARITABLE INSTITUTION REGISTERED UNDER SECTION 12-A OF THE ACT OF 1961 AND 100% CAPITAL EXPENDITURE WAS AVAILED BY IT AGAINST THE ASSET CONCERNED I.E. A BUILDING. SECTION 32(1) OF THE ACT OF 1961 PROVIDES FOR DEPRECIATION IN RESPECT OF BUILDING, PLANT AND MACHINERY OWNED BY THE ASSESSEE AND USED FOR BUSINESS PURPOSES. INCOME OF A CHARITABLE TRUST LIKE THE PRESENT ASSES SEE DERIVED FROM THE DEPRECIABLE HEADS IS ALSO LIABLE TO BE COMPUTED ON COMMERCIAL B ASIS, HOWEVER, WHILE DOING SO IT IS TO BE KEPT IN MIND THAT ULTIMATELY ASSESSEE IS A CH ARITABLE INSTITUTION AND ITS INCOME FOR TAX PURPOSES IS REQUIRED TO BE DETERMINED BY TAKING INTO CONSIDERATION PROVISIONS OF SECTION 11 OF THE ACT OF 1961 AFTER EXTENDING NORMA L DEPRECIATION AND DEDUCTIONS FROM ITS GROSS INCOME. IN COMPUTING THE INCOME OF A CHARITABLE INSTITUTION/TRUST DEPRECIATION OF ASSETS OWNED BY SUCH INSTITUTION IS A NECESSARY DEDUCTION ON COMMERCIAL PRINCIPLES, HENCE, THE AMOUNT OF DEPRECI ATION HAS TO BE DEDUCTED TO ARRIVE AT THE INCOME AVAILABLE. 5. IN VIEW OF THE DISCUSSIONS MADE ABOVE, WE FIND OUR SELVES IN AGREEMENT WITH THE VIEW TAKEN BY BOMBAY HIGH COURT IN FRAMJEE CAWASJEE INSTITUTE ( SUPRA ) AND IN INSTITUTE OF BANKING PERSONNEL ( SUPRA ). THE SUBSTANTIAL QUESTION FRAMED IN THE INSTANT MATTER, THUS, IS ANSWERED IN THE TERMS THAT THE INCOME TAX APPELLATE TRIBUNAL RIGHTLY ALLOWED DEPRECIATION CLAIMED BY THE ASSESSE E ON CAPITAL ASSETS FOR WHICH CAPITAL EXPENDITURE WAS ALREADY GIVEN IN THE YEAR U NDER CONSIDERATION. THUS IN VIEW OF THE DECISION OF HONBLE JURISDICTIO N HIGH COURT WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF THE LD . CIT(A) QUA THIS ISSUE. IN THE RESULT, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15/11/2017 SD/- SD/- HKKXPAN FOT; IKY JKO (BHAGCHAND) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 15/11/2017. * SANTOSH. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: ITA NO. 1087/JP/2016 ACIT (E) V M/S SCHOLARS EDUCATION TRUST OF INDIA 14 1. VIHYKFKHZ@ THE APPELLANT- THE ACIT(E),CIRCLE, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- M/S SCHOLARS EDUCATION TRUST OF IND IA, A-3-G. SUNDER PATH, BANI PARK, JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 1087/JP/2016} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR