ITO(E), Jaipur V. MAYURA SHIKSHA SAMITI, Jaipur

ITA 1092/JPR/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1954 (ITAT-JAIPUR)
• Duration Of Justice: 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 04-07-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 09-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: POONAM RAI
• Assessee Lawyers: S S SHEKHAWAT CA DHK
• Keywords: Capital asset; Depreciation; Charitable institution; Benefit of exemption; Capital expenditure
• Section: 143(3); 32; 12; 11

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH HKKXPUN] YS[KK LNL; DS LE{K BEFORE: SHRI BHAGCHAND, ACCOUNTANT MEMBER VK;DJ VIHY LA-@ ITA NO. 1092/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2012-13 THE ITO (E) WARD- 1 JAIPUR CUKE VS. M/S. MAYURA SHIKSHA SAMITI NAILA HOUSE, MOTI DOONGRI ROAD, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AAATM 1725 G VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY :SMT. POONAM RAI, DCIT - DR FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY: SHRI S.S. SHEKHAWAT, CA LQUOKBZ DH RKJH[K@ DATE OF HEARING : 23/10/2017 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 27 /10/2017 VKNS'K@ ORDER PER BHAGCHAND, AM THE REVENUE HAS FILED AN APPEAL AGAINST THE ORDE R OF THE LD. CIT(A)-III, JAIPUR DATED 27-09-2016 FOR THE ASSE SSMENT YEAR 2012-13 RAISING THEREIN FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD. CIT(A) HAS ERRED IN ALLOWING EXCESSIVE SALARY TO THE PERSONS SPECIFIED U/S 13(3) OF THE I.T. ACT AND CONSEQUENTL Y BENEFIT OF SEC 11 AND 12 OF THE I.T. ACT, 1961. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) HAS ERRED IN ALLOWING CLAIM OF D EPRECIATION ON FIXED ITA NO.1092/JP/2016 THE ITO (E), WARD- 1, JAIPUR VS M/S. MAYURA SHIKSHA SA MITI, JAIPUR 2 ASSETS IN SPITE OF THE FACT THAT THE SAME WAS ALLOW ED AS APPLICATION OF INCOME U/S 11 AT THE TIME OF PURCHASE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) HAS ERRED IN ALLOWING DEPRECIATI ON WITHOUT APPRECIATING THE FACT THAT THE APPLICATION OF 100% EXPENDITURE OF THE CAPITAL ASSET IS ALREADY ALLOWED AS CAPITAL EXPENDI TURE HENCE FURTHER ALLOWANCE OF DEPRECIATION ON THE SAME CAPITAL ASSET WOULD AMOUNT TO DOUBLE ALLOWANCE. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) HAS ERRED IN ALLOWING DEPRECIATI ON WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS NOT CAR RIED OUT THE BUSINESS ACTIVITIES BUT THE RECEIPTS UTILIZED FOR CHARITY. A S THERE WAS NO BUSINESS ACTIVITY THE CLAIM OF DEPRECIATION WAS NOT ALLOWABL E, THE DEPRECIATION IS ALLOWABLE ONLY IN THE CASE OF BUSINESS OR PROFESSIO N OR IN THE CASE OF INCOME FROM OTHER SOURCES. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) HAS ERRED IN ALLOWING RS. 17,56, 092/- AS RENT PAID IN SPITE OF THE FACT THAT THE PAYMENT IS MORE THAN REA SONABLE AS WELL AS THE RENT PAID TO THE PERSONS COVERED U/S 13(3) OF THE I .T. ACT, 1961. 2.1 APROPOS GROUND NO. 1 OF THE REVENUE, IT IS NOTE D THAT THE AO HAS DISALLOWED THE SALARY AMOUNT OF RS. 2.00 LACS AND R S. 4.00 LACS GIVEN TO SHRI DUSHYANT SINGH AND SMT.USHA SINGH RESPECTIVELY BY OBSERVING AS UNDER:- THE SUBMISSION OF THE ASSESSEE ON THIS ACCOUNT IS NOT ACCEPTABLE FOR THE REASONS THAT AS PER REPLY OF THE ASSESSEE BOTH THE PERSONS NAMELY SH. DUSHYANT SINGH AND HIS WIFE SMT. USHA SINGH ARE RE NDERING GENERAL SERVICES LIKE CARE TAKER ETC WHICH NEEDS NO EXTRA QUALIFICAT ION OR SKILL. THEY ARE ALSO NOT PROVIDING ANY TEACHING SERVICES IN THE SCHOOL. LIKE WISE, THE SALARY PAYMENTS TO THE OTHER STAFF MEMBERS INCLUDING TEACHING STAFF AND NON .TEACHING STAFF IS ALSO LOWER THAN THE PAYMENTS MADE TO ABOVE TWO PERS ONS COVERED UNDER SEC. ITA NO.1092/JP/2016 THE ITO (E), WARD- 1, JAIPUR VS M/S. MAYURA SHIKSHA SA MITI, JAIPUR 3 13(3) OF THE IT. ACT, 1961. -THE ASSESSEE HAS ALSO NOT JUSTIFIED THE SALARY TO THESE PERSONS WITH ANY CORROBORATIVE AND CONCRETE E VIDENCES TO SUPPORT THEIR CLAIM. IN VIEW OF THESE FACTS THE PAYMENTS OF SALAR Y MADE TO THESE PERSONS ARE TREATED UNREASONABLE WITHIN THE MEANING OF SEC. 13( 2)(C) OF THE IT. ACT AND AS SUCH 50%O OF THE SALARY TO SHRI DUSHYANT SINGH AND L00% OF THE SALARY GIVEN TO SMT. USHA SINGH IS DISALLOWED WHICH WORKS OUT T O RS.2,00,000 & RS.4,00,000/- RESPECTIVELY WHICH IS TAXED AS PER TH E PROVISIONS OF LAW. 2.2 IN FIRST APPEAL, THE LD. CIT(A) HAS DELETED THE DISALLOWANCE OF SALARY PAYMENT IN RESPECT OF SHRI DUSHYANT SINGH A ND SMT. USHA SINGH MADE BY THE AO BY OBSERVING AS UNDER:- 7.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, FINDINGS OF THE AO AND SUBMISSION OF THE APPELLANT. AO HELD THAT SALARY PAID TO DUSHYANT SINGH AT RS. 4 LACS IS EXCE SSIVE AND THEREFORE HE MADE DISALLOWANCE OF 50% OF SALARY. SIMILARLY PA YMENT OF SALARY TO USHA SINGH WHO IS RENDERING GENERAL SERVICE LIKE CA RETAKER AND HAS NO EXTRA QUALIFICATION/SKILL AND THEREFORE HE MADE DIS ALLOWANCE OF ENTIRE SALARY OF RS. 4,00,000/-. CONSIDERING OBSERVATION OF AO & A/R SUBMISSION REGA RDING. I FIND THAT SALARY PAID TO DUSHYANT SINGH AND USHA SINGH ARE REASONABLE CONSIDERING THEIR QUALIFICATION/SERVICES RENDERED A ND DETAILS OF WORK CARRIED OUT BY THEM. PAYMENT OF SALARY TO DUSHYANT SINGH IS RS. 6,00,000/- GIVING MONTHLY SALARY OF RS. 50,000/- AN D SALARY TO USHA SINGH IS RS. 4,00,000/- GIVING MONTHLY SALARY RS. 3 3,333/-. THE AO HAS NOT GIVEN ANY COMPARABLE CASE WHERE SALARY TO P ERSONS DOING SIMILAR WORK IS LESS THAN PAYMENT TO THESE PERSONS. MOREOVER AO IN A.Y. 2014-15 ALSO ACCEPTED THE PAYMENT OF SALARY TO THESE PERSONS AS REASONABLE. THEREFORE DISALLOWANCE MADE BY AO IS DE LETED. 2.3 DURING THE COURSE OF HEARING, THE LD. DR SUPPOR TED THE ORDER OF THE AO. ITA NO.1092/JP/2016 THE ITO (E), WARD- 1, JAIPUR VS M/S. MAYURA SHIKSHA SA MITI, JAIPUR 4 2.4 ON THE OTHER HAND, THE LD.AR OF THE ASSESSEE SU PPORTED THE ORDER OF THE LD. CIT(A) FOR WHICH THE LD.AR OF THE ASSESSEE FILED THE FOLLOWING WRITTEN SUBMISSION. GROUND NO. 1 : HONBLE CIT(A) WAS RIGHT IN DELETING ADDITION MADE RS. 600000 OUT OF SALARY PAID RS. 800000 AS RE ASONABLE SALARY PAID TO PERSONS COVERED U/S 13(3) OF IT ACT, 1961 . THAT LEARNED ASSESSING OFFICER HAS WRONGLY DISALLOWED RS. 6,00,000/- OUT OF SALARY RS. 8,00,000/- TO PERSONS COVERED U/S 13(3):- (I) RS. 2,00,000 BEING 50% OF R S. 4,00,000 OF SALARY PAID TO SHRI DUSHYANT SINGH FULL TIME DIRECTOR OF SCHOOL AND (II) RS. 4,00,000 BEING 100% OUT OF SALARY PAID RS. 4,00,000/- TO SMT. USHA SINGH FULL TIME CONSULTANT AND COORDINATOR OF SCHOOL TREATING EXCESS SALARY PA ID THAN REASONABLE U/S 13(2)(C) TO PERSONS COVERED U/S 13(3) OF INCOME TAX ACT, 1961 BY SIMPLY SAYING THAT THEY ARE CARE TAKER WHILE SECTION 13(2) (C) USES THE WORDS THE AMOUNT SO PAID IS IN EXCESS OF WHAT MAY BE REASONAB LY PAID FOR SUCH SERVICES . AS PER FACTS SHRI DUSHYANT SINGH FULL TIME DIRECTOR FINANCE AND PLANNING AND IS GRADUATE FROM THE YEAR 1972 FROM MA HARAJ SAYAJI RAO UNIVERSITY OF BARODA IN FACULTY OF FINE ARTS AND PA INTING AND ALSO DID TWO YEARS COURSE IN FINE ARTS AND PAINTING AND HAD AWARDS FRO M LALIT KALA ACADEMY OF RAJASTHAN AND GUJRAT FOR ARTS AND PAINTINGS AND WAS ALSO TEACHER IN VIDHYASHRAM SCHOOL, JAIPUR AND HAS EXPERIENCE OF TE ACHING AND HE HAS BEEN LOOKING FULL TIME SPORTS ACTIVITIES, ADMINISTRATIVE ACTIVITIES, BANK WORK I.E. SIGNING OF ALL CHEQUES, CORRESPONDENCE AND DAY TO D AY WORK OF BANK, AND HE TAKES DRAWING, PAINTING, DESIGNING, ARCHITECTURAL A ND ART CLASSES FOR STUDENTS AND ALSO LOOK AFTER CURRICULAR ACTIVITIES AND ALSO DOING ARCHITECTURAL DESIGNING AND REPAIR WORK OF BUILDING OF SCHOOL. COPY OF HIS DEGREE IN PAINTING AND ART IS ATTACHED. SMT. USHA SINGH IS WORKING AS FULL TIME CONSULTANT AND CO-ORDINATOR OF SCHOOL FOR QUALITY EDUCATION TO STUDENTS. SHE HAS B EEN PRINCIPAL OF SCHOOL RUN BY SOCIETY SINCE 1989 AND GRADUATE AND B.ED. AND HA S EXPERIENCE IN VARIOUS PARTICIPATIONS INTO INTER SCHOOL ACTIVITIES, TOURNA MENTS, SCHOOL MEETS AND ALSO CARRIED CLASSES FOR UNDERPRIVILEGED STUDENTS, WHO H AVE BEEN HANDICAPPED, TO GET THEIR ADMISSIONS INTO SCHOOLS RUN FOR HANDICAPP ED CHILDREN. SHE HAS TAKING TRAINING CLASSES FOR TEACHERS OF SCHOOL RUNNING BY THE ASSESSEE SOCIETY TO MAINTAIN QUALITY OF EDUCATION BY SCHOOL. COPIES OF HER GRADUATION DEGREE, B.ED. DEGREE, CERTIFICATE FOR DIPLOMA IN SPECIAL ED UCATION FOR DISABLED FROM ITA NO.1092/JP/2016 THE ITO (E), WARD- 1, JAIPUR VS M/S. MAYURA SHIKSHA SA MITI, JAIPUR 5 DISHA AND LETTERS FOR HER ACHIEVEMENTS FOR SCHOOL A ND CONTRIBUTIONS TOWARD REHABILITATION AND TEACHING AND HELPING DISABLE CHI LDREN ATTACHED. SHE IS FULL TIME DEVOTEE AT PRESENT AND DURING THE YEAR UNDER A SSESSMENT AND SINCE BEGINNING SCHOOL AND REGARDING REASONABILITY ONE HA S TO SEE PREVAILING RATES OF SALARY/REMUNERATION IN SIMILAR INSTITUTIONS BUT ASS ESSING OFFICER HAS NOT GONE INTO FACTS BECAUSE SALARY COMES @33,333 PER MONTH T O EACH PERSON WHILE SALARY OF STATE GOVERNMENT OR CENTRAL GOVERNMENT TE ACHERS AND OFFICE EMPLOYEES OF THEIR EXPERIENCE AND AGE IS MORE THAN RS. 50,000/RS.60,000 PER MONTH AND EVEN OF PRIVATE EDUCATIONAL INSTITUTION ( SCHOOL) IS MORE THAN RS. 40,000/RS.50,000 AND EVEN SENIOR CLERK IS HAVING SA LARY OF RS. 40,000/RS.50,000 PER MONTH, THEREFORE, ASSESSING OF FICER HAS NOT GONE INTO FACTS AND DISALLOWED RS. 6,00,000 OUT OF SALARY RS. 8,00,000 PAID TO BOTH OF THEM ON BASIS OF ASSUMPTIONS, THEREFORE, HONBLE CI T (A) WAS RIGHT IN DELETING DISALLOWANCE OF RS. 600000 OUT OF SALARY PAID RS.80 0000 TO PERSONS COVERED U/S 13(3) OF IT ACT,1961. AS PER ABOVE FACTS PRODUC ED TO ASSESSING OFFICER AT THE TIME OF SCRUTINY ASSESSMENT U/S 143(3) FOR ASSE SSMENT YEARS 2014-15 AND 2015-16 AND HE HAS ALLOWED 100% OF SALARY PAID TO T HEM I.E. PERSONS COVERED U/S 13(3). 2.5 THE BENCH HAS HEARD THE RIVAL CONTENTIONS AND P ERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS NOTED THAT THE AO DISALLOWED THE SALARY OF RS. 2.00 LACS AND RS. 4.00 LACS IN RESPECT OF SH RI DUSHYANT SINGH AND SMT. USHA SINGH RESPECTIVELY AND MADE THE ADDITION IN THE HANDS OF ASSESSEE. IN FIRST APPEAL, THE LD. CIT(A) HAS DELET ED THE ADDITION MADE BY THE AO WITH FOLLOWING OBSERVATIONS. CONSIDERING OBSERVATION OF AO & A/R SUBMISSION REGA RDING. I FIND THAT SALARY PAID TO DUSHYANT SINGH AND USHA SINGH ARE REASONABLE CONSIDERING THEIR QUALIFICATION/SERVICES RENDERED AND DETAILS O F WORK CARRIED OUT BY THEM. PAYMENT OF SALARY TO DUSHYANT SINGH IS RS. 6,00,000 /- GIVING MONTHLY SALARY OF RS. 50,000/- AND SALARY TO USHA SINGH IS RS. 4,0 0,000/- GIVING MONTHLY SALARY RS. 33,333/-. THE AO HAS NOT GIVEN ANY COMPA RABLE CASE WHERE SALARY TO PERSONS DOING SIMILAR WORK IS LESS THAN PAYMENT TO THESE PERSONS. MOREOVER ITA NO.1092/JP/2016 THE ITO (E), WARD- 1, JAIPUR VS M/S. MAYURA SHIKSHA SA MITI, JAIPUR 6 AO IN A.Y. 2014-15 ALSO ACCEPTED THE PAYMENT OF SAL ARY TO THESE PERSONS AS REASONABLE. THEREFORE DISALLOWANCE MADE BY AO IS DE LETED. IN THIS CASE, IT IS ALSO NOTED THAT THE AO HAS ACC EPTED THAT PAYMENT OF SALARY TO THESE PERSONS AS REASONABLE IN A.Y. 2014- 15. TAKING INTO CONSIDERATION THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE BENCH CONCURS WITH THE VIEWS OF THE LD. CIT(A) ON THE ISSUE IN QU ESTION. HENCE, THE GROUND NO. 1 OF THE REVENUE IS DISMISSED. 3.1 APROPOS GROUND NO. 2,3 AND 4 OF THE REVENUE , I T IS NOTED THAT THE AO DISALLOWED THE DEDUCTION CLAIMED BY THE ASSESSEE TRUST ON ACCOUNT OF DEPRECIATION AMOUNTING TO RS. 3,09,169/-. THE RELEV ANT OBSERVATION OF THE AO AS TO THE ISSUE IN QUESTION IS AS UNDER:- 4. I HAVE CONSIDERED THE REPLY OF THE ASSESSEE TO REACH ANY CONCLUSION, THE PROVISIONS OF SEC. 32 OF THE I.T. ACT ARE RE-PR ODUCED AS UNDER:- 'DEPRECIATION- 32(L) IN RESPECT OF DEPRECIATION OF- (I) BUILDINGS, MACHINERY, PLANT OR FURNITURE, BEI NG TANGIBLE ASSETS, (II) KNOW-HOW, PATENTS, COPYRIGHTS, TRADEMARKS,... OWNED, WHOLLY OR PARTLY, BY THE ASSESSEE AND USED F OR THE PURPOSES OF THE BUSINESS OR PROFESSION, THE FOLLOWING DEDUCTION S SHALL BE ALLOWED......... 5.. 6.. 7 ITA NO.1092/JP/2016 THE ITO (E), WARD- 1, JAIPUR VS M/S. MAYURA SHIKSHA SA MITI, JAIPUR 7 8. THEREFORE, IN THE LIGHT OF THE APEX COURT DECIS ION, THOUGH IN A DIFFERENT CONTEXT, IT CAN BE HELD THAT DEPRECIATION IS NOT ADMISSIBLE ON THOSE ASSETS AGAINST WHICH 100% DEDUCTION HAS ALREA DY BEEN TAKEN E.G. IN THE CASES OF TRUSTS WHERE ASSETS HAS BEEN ACQUIR ED BY WAY OF APPLICATION OF FUNDS. THIS IS ALSO CLEAR BECAUSE WH EREVER ANY INVESTMENT IN OF ASSETS IS ALLOWED AS REVENUE EXPEN DITURE, DEPRECIATION ON THE SAME CANNOT BE AGAIN BE ALLOWED TREATING THE SAME ASSET AS CAPITAL EXPENDITURE. 9. MOREOVER THE 'DEPRECIATION' IS ONLY A NOTIONAL E XPENDITURE AND THERE IS NO OUTGO OF ANY MONEY. THE ACCOUNTS OF THE TRUST ARE REQUIRED TO BE MAINTAINED IN THE RECEIPT AND PAYMENT FORM. D EPRECIATION BEING ONLY NOTIONAL EXPENSES IT CANNOT BE HELD TO BE ANY PAYMENT FOR THE PURPOSE OF RECEIPT AND PAYMENT ACCOUNT. 10. HENCE, KEEPING IN VIEW THE FACTS OF THE CASE AN D PROVISIONS OF THE ACT DEDUCTION CLAIMED BY THE ASSESSEE TRUST ON ACCOUNT OF DEPRECIATION AMOUNTING TO RS. 3,09,169/ IS HEREBY D ISALLOWED' 3.2 IN FIRST APPEAL, THE LD. CIT(A) HAS DELETED THE DISALLOWANCE MADE BY THE AO BY OBSERVING AS UNDER:- 6.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE, FINDINGS OF THE AO AND SUBMISSION OF THE APPELLANT. IT IS SEEN THAT THE RAJASTHAN HIGH COURT IN CASE OF CIT VS KRISHI UPAJ MANDI SAMITI AND OTHER H IGH COURTS ALSO HELD THAT DEPRECIATION ON FIXED ASSETS IS SEPARATELY ALLOWABL E EVEN THOUGH ENTIRE FIXED ASSETS WERE ALLOWED AS APPLICATION OF INCOME. RESPE CTFULLY FOLLOWING THE SAME, THE DISALLOWANCE MADE BY AO IS DELETED. 3.3 DURING THE COURSE OF HEARING, THE LD. DR SUPPOR TED THE ORDER OF THE AO. 3.4 ON THE OTHER HAND, THE LD.AR OF THE ASSESSEE SU PPORTED THE ORDER OF THE LD. CIT(A) FOR WHICH THE LD.AR OF THE ASSESSEE FILED THE FOLLOWING WRITTEN SUBMISSION. ITA NO.1092/JP/2016 THE ITO (E), WARD- 1, JAIPUR VS M/S. MAYURA SHIKSHA SA MITI, JAIPUR 8 GROUND NO. 2, 3 AND 4 ARE RELATED TO EACH OTHER R EGARDING ALLOWABILITY OF DEPRECIATION BY HONBLE CIT (A) AND HONBLE CIT (A) WAS RIGHT IN ALLOWING DEPRECIATION AS APPLICATION O F INCOME U/S 11 AND 12 AND ALLOWING 100% OF CAPITAL EXPENDITURE IN EARL IER YEARS AND ALSO DEPRECIATION AND DEPRECIATION ALLOWABLE EVEN THERE IS NO BUSINESS ACTIVITY:- THAT LEARNED ASSESSING OFFICER HAS NOT GONE INTO FA CTS AND LAW BUT ON BASIS OF ASSUMPTION INCLUDED DEPRECIATION IN TO TAXABLE INCOME AND WHILE HONBLE RAJASTHAN HIGH COURT IN CASE OF C IT-II JODHPUR VS KRISHI UPAJ MANDI SAMITI JAISALMER REPORTED AT 388 ITR 605 (RAJ) AND COPY ENCLOSED ALSO HELD THAT DEPRECIATION ON FIXED ASSETS IS SEPARATELY ALLOWABLE EVEN THOUGH ENTIRE FIXED ASSETS WERE ALLO WED AS APPLICATION OF INCOME. HONBLE RAJASTHAN HIGH COURT DECIDED IN FAVOUR OF A SSESSEE CONSIDERING FOLLOWING ARGUMENTS AND SUBMISSIONS OF LEARNED COUNSEL FOR THE ASSESSEE AND ASSESSEE (RESPONDENT) ALSO SUB MITS AS UNDER BEFORE YOUR HONOUR:- AS SECTION 32 OF THE ACT OF 1961 NOWHERE MAKES ANY DISTINCTION IN THE CHARITABLE TRUST OR ANY OTHER BO DY OR PERSON SO FAR AS THE APPLICATION OF DEPRECIATION IS CONCERNED, THUS, NORMAL DEPRECIATION IS REQUIRED TO BE CONSIDERED AS A LEGITIMATE DEDUCT ION IN COMPUTING THE REAL INCOME OF THE ASSESSEE AS PER PROVISIONS OF SE CTION 11(1)(A) OF THE ACT OF 1961. IT IS ASSERTED THAT DEDUCTION OF DEPRE CIATION IN CASE OF CHARITABLE INSTITUTION IS PERMISSIBLE IN ORDER TO P RESERVE THE CORPUS OF THE TRUST AND, THEREFORE, IT DOES NOT AMOUNT TO DOU BLE BENEFIT OR DOUBLE DEDUCTION. TO SUBSTANTIATE THE CONTENTION RELIANCE IS PLACED UPON THE JUDGMENT OF BOMBAY COURT IN DIRECTOR OF INCOME TAX V. FRAMJEE CAWASJEE INSTITUTE, REPORTED IN (1993) 109 CTR 463 (BOMBAY), CONCLUDING THAT THE DEPRECIATION ON DEPRECIABLE ASS ETS HAD TO BE TAKEN INTO ACCOUNT IN COMPUTING INCOME OF A RELIGIOUS TRU ST ALTHOUGH THE AMOUNT SPENT OF ACQUIRING SUCH ASSETS HAS BEEN TREA TED AS APPLICATION OF INCOME OF THE TRUST IN THE YEAR IN WHICH ASSETS WERE ACQUIRED. IN CIT V. INSTITUTE OF BANKING PERSONNEL, REPORTED IN 200 3 131 TAXMAN 386, THE HIGH COURT OF BOMBAY HELD THAT WHEN THE F ULL EXPENDITURE HAD BEEN ALLOWED TO A CHARITABLE INSTITUTION IN THE YEAR OF ACQUISITION OF ASSESSMENT, THE AMOUNT SPENT ON ACQUIRING THE ASSET S ARE REQUIRED TO BE TREATED AS APPLICATION OF INCOME OF THE TRUST IN THE YEAR IN WHICH THE INCOME WAS SPENT IN ACQUIRING THOSE ASSETS. THIS DI D NOT MEAN THAT IN COMPUTING INCOME FROM THOSE ASSETS IN SUBSEQUENT YE ARS, DEPRECIATION IN RESPECT OF THOSE ASSETS CANNOT BE TAKEN INTO ACC OUNT. ITA NO.1092/JP/2016 THE ITO (E), WARD- 1, JAIPUR VS M/S. MAYURA SHIKSHA SA MITI, JAIPUR 9 HONARABLE RAJASTHAN HIGH COURT AT LAST PARA OF THEI R JUDGMENT IN D.B. INCOME TAX APPEAL NO.32|2010 DECIDED AS UND ER. 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 EXPENDITUR E WAS AVAILED BY IT AGAINST THE ASSET CONCERNED I.E. A BUILDING. SEC TION 32(1) OF THE ACT OF 1961 PROVIDES FOR DEPRECIATION IN RESPECT OF BUI LDING, PLANT AND MACHINERY OWNED BY THE ASSESSEE AND USED FOR BUSINE SS PURPOSES. INCOME OF A CHARITABLE TRUST LIKE THE PRESENT ASSES SEE DERIVED FROM THE DEPRECIABLE HEADS IS ALSO LIABLE TO BE COMPUTED ON COMMERCIAL BASIS, HOWEVER, WHILE DOING SO IT IS TO BE KEPT IN MIND TH AT ULTIMATELY ASSESSEE IS A CHARITABLE INSTITUTION AND ITS INCOME FOR TAX PURPOSES IS REQUIRED TO BE DETERMINED BY TAKING INTO CONSIDERAT ION 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 DEPRECIATION HAS TO BE DEDUCTED TO AR RIVE AT THE INCOME AVAILABLE. IN VIEW OF THE DISCUSSIONS MADE ABOVE, WE FIND OURS ELVES IN AGREEMENT WITH THE VIEW TAKEN BY BOMBAY HIGH COURT IN DIRECTOR OF INCOME TAX V. FRAMJEE CAWASJEE INSTITUTE (SUPRA) A ND IN CIT V. INSTITUTE OF BANKING PERSONNEL (SUPRA). THE SUBSTAN TIAL QUESTION FRAMED IN THE INSTANT MATTER, THUS, IS ANSWERED IN THE TERMS THAT THE INCOME TAX APPELLATE TRIBUNAL RIGHTLY ALLOWED DEPRE CIATION CLAIMED BY THE ASSESSEE ON CAPITAL ASSETS FOR WHICH CAPITAL EXPENDITURE WAS ALREADY GIVEN IN THE YEAR UNDER CONSIDERATION. THE APPEAL STANDS DISMISSED ACCORDINGLY. ALSO EVIDENT THAT FINANCE (NO.2) ACT, 2014 INSERTED SUB SECTION (6) INTO SECTION 11 MADE EFFECTIVE W.E.F. ASSESSMEN T YEAR 2015-16 INSERTING THAT WHERE ANY IN THIS SECTION WHERE ANY INCOME IS REQUIRED TO BE APPLIED OR ACCUMULATED OR SET APART FOR APPLICATION, THEN, FOR SUCH PURPOSES THE INCOME SHALL BE DETERMI NED WITHOUT ANY DEDUCTION OR ALLOWANCE BY WAY OF DEPRECIATION O R OTHERWISE IN RESPECT OF ANY ASSET, ACQUISITION OF WHICH HAS BEEN CLAIMED AS AN APPLICATION OF INCOME UNDER THIS SECTION IN THE SAM E OR ANY OTHER PREVIOUS YEAR . THUS IT IS CLEAR FROM SECTION 11(6) OF IT ACT, 1 961 THAT SUBSECTION (6) OF SECTION 11 NOT APPLICABLE RE TROSPECTIVELY AND NOT ITA NO.1092/JP/2016 THE ITO (E), WARD- 1, JAIPUR VS M/S. MAYURA SHIKSHA SA MITI, JAIPUR 10 APPLICABLE FOR ASSESSMENT YEARS PRIOR TO ASSESSMENT YEAR 2015-16 AND THEREFORE, NOT APPLICABLE FOR ASSESSMENT YEAR 2012- 13 AND PRIOR TO ASSESSMENT YEAR 2015-16 DEPRECIATION ON FIXED ASSET S CAN BE CLAIMED AS APPLICATION OF INCOME EVEN ACQUISITION OF SUCH A SSET CLAIMED AS AN APPLICATION OF INCOME IN THE SAME OR ANY OTHER PREV IOUS YEAR AND HONBLE CIT(A) WAS ALSO RIGHT AND AS PER SECTION 11 (1)(A) 15% OF INCOME RS. 1,32,80,838 I.E. RS. 19,92,125 IS ALLOWE D TO BE ACCUMULATED AND SET APART FOR APPLICATION TO CHARITABLE PURPOSE S AND WITHOUT PREJUDICE TO APPELLANTS CLAIM OF TREATING DEPRECIAT ION AS APPLICATION OF INCOME, EVEN NOT TREATING DEPRECIATION AS APPLICATI ON OF INCOME FOR CHARITABLE PURPOSES, IF DEPRECIATION RS. 3,09,169 + SURPLUS (EXCESS OF INCOME OVER EXPENDITURES) RS. 11,45,269. RS. 8,60 ,390 CAPITAL EXPENDITURE (ADDITION TO FIXED ASSETS) DURING THE Y EAR AND BALANCE COMES RS. 5,94,048 WHICH IS LOWER THAN RS. 19,92,12 5 BEING 15% OF INCOME RS. 1,32,80,838 OF WHICH IS ALLOWED TO BE SE T APART / ACCUMULATED FOR CHARITABLE PURPOSES TO APPELLANT SO CIETY WHICH IS ALLOWED AS EXEMPT U/S 11(1)(A) OF INCOME TAX ACT, 1 961, THEREFORE, THE LEARNED ASSESSING OFFICER HAS WRONGLY TAKEN DEPRECI ATION RS. 3,09,169 AS TAXABLE INCOME AND DESERVE TO BE DELETED HONBLE CIT(A) WAS RIGHT IN DELETING THE ADDITION OF DEPRECIATION RS.3,09,16 9 AS TAXABLE INCOME. 3.5 THE BENCH HAS HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS NOTED THAT THE AO DISALLOWED THE AMOUNT OF RS. 3,09,169/- ON ACCOUNT OF DEPRECIATION CLAIMED BY THE ASSESSEE WHICH IN FIRST APPEAL HAS BEEN DELETED BY THE LD. CIT(A) BY RELYING ON THE DECISION OF HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS KRISHI UPAJ MANDI SAMITI BY OBSERVING AS UND ER:- IT IS SEEN THAT THE RAJASTHAN HIGH COURT IN CASE OF CIT VS KRISHI UPAJ MANDI SAMITI AND OTHER HIGH COURTS ALSO HELD T HAT DEPRECIATION ON FIXED ASSETS IS SEPARATELY ALLOWABLE EVEN THOUGH ENTIRE F IXED ASSETS WERE ALLOWED AS APPLICATION OF INCOME. RESPECTFULLY FOLLOWING THE S AME, THE DISALLOWANCE MADE BY AO IS DELETED. ITA NO.1092/JP/2016 THE ITO (E), WARD- 1, JAIPUR VS M/S. MAYURA SHIKSHA SA MITI, JAIPUR 11 TAKING INTO CONSIDERATION THE FACTS AND CIRCUMSTANC ES OF THE CASE AND ALSO THE DECISION OF HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS KRISHI UPAJ MANDI SAMITI (SUPRA), THE BENCH FINDS NO REASO N TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) ON THE ISSUE IN QUESTIO N. THUS GROUND NO. 2, 3 AND 4 OF THE REVENUE ARE DISMISSED. 4.1 APROPOS GROUND NO. 5 OF THE REVENUE, IT IS NOTE D THAT THE AO DISALLOWED RS. 17,56,092/- ON ACCOUNT OF RENT BY OB SERVING AS UNDER:- 11 (B) RENT. ...FROM THE COPIES OF LEASE DEEDS FI LED IT APPEARS THAT ONLY GROUND FLOOR OF THE BUILDING HAS BEEN GIVEN TO THE ASSESSEE TRUST FOR WHICH HEAVY RENT HAS BEEN CLAIMED. SINCE THE RENT PAYMENT IS TO THE SPECIFIED PERSONS UNDER SEC. 13(3) AND TOTAL AMOUNT OF 23,56,092/- ( RS. 7,57,996/-+ 7,99,048/- +7,99,048/-) APPEARS TO BE UNREASONABLE KEEPING IN VIEW OF THE TOTAL AREA OF THE BUILDING AND OTHER FACTORS. I, THEREFORE TREAT RS. 50,000/- PER MONTH I.E. RS. 6,00,000/- PER ANNUM QUITE ADEQUATE AND REASONABLE AND AS SUCH REMAINING AMOUNT OF RS. 17,56,092/- ( RS. 23,56,092 - 6,00,00 0/-) IS TREATED UNREASONABLE WITHIN THE MEANING OF SC. 13(2) (C) OF THE IT. ACT, 1961. ACCORDINGLY AMOUNT OF RS. 17,56,092/- IS TAXED AS PER THE PROVISIONS O F LAW. 4.2 IN FIRST APPEAL, THE LD. CIT(A) HAS DELETED THE ADDITION OF RS. 17,56,,092/- BY OBSERVING AS UNDER:- 8.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, FINDINGS OF THE AO AND SUBMISSION OF THE APPELLANT. AO MADE DISALLOWANCE OF RS. 17,56,092/- OUT OF RENTAL EXPENSES BY TREATING THE SAME AS EXCESSIVE. ON PERUSAL OF DETAIL, I FIND THAT THE SC HOOL IS LOCATED ON MOTI GOONGRI ROAD. THE AREA OF PROPERTY IS 6000 SQUIRE M ETER AND RENT PAID IS RS. 196341/- PER MONTH WHICH GIVES RATE OF 3.04 PER SQUARE FEET. THIS RENT APPEAR REASONABLE LOOKING TO THE CENTRAL LOCATION AND RENT ITA NO.1092/JP/2016 THE ITO (E), WARD- 1, JAIPUR VS M/S. MAYURA SHIKSHA SA MITI, JAIPUR 12 PREVAILING IN THAT AREA. MOREOVER, AO ALSO IN A.Y. 2014-15, ACCEPTED RENT PAYMENT AS REASONABLE. THEREFORE THE DISALLOWA NCE MADE BY THE AO IS UNCALLED FOR AND IS BEING DELETED. 4.3 DURING THE COURSE OF HEARING, THE LD. DR RELIED ON THE ORDER OF THE AO. 4.4 ON THE OTHER HAND, THE LD.AR OF THE ASSESSEE SU PPORTED THE ORDER OF THE LD. CIT(A) FOR WHICH THE LD.AR OF THE ASSESSEE FILED THE FOLLOWING WRITTEN SUBMISSION. GROUND NO. 5 : HONBLE CIT (A) WAS RIGHT IN DELET ING DISALLOWANCE OF RS. 1756092 OUT OF RENT PAID RS. 23 56092 TO PERSONS COVERED U/S 13(3) TAKING AS RENT PAID IS REASONABLE . THAT LEARNED ASSESSING OFFICER HAS WRONGLY DISALLOWED RS.17,56,0 92 OUT OF RENT PAID RS.23,56,092 P.A. TO (I) DUSHYANT SINGH HUF (II) TR IVIKRAM SINGH AND (III) HAMEER SINGH TO PERSONS COVERED U/S 13(3) BY ASSUMING EXCESS OF REASONABILITY U/S 13(2)(C) OF INCOME TAX ACT, 1961 BUT WHILE GOING BY ASSESSING OFFICER THROUGH REASONABILITY, HE HAS NOT GONE INTO FACTS ABOUT LARGE SIZE OF AREA AND LOCATION OF PREMISES BEING U SED BY SCHOOL RUN BY SOCIETY. PREMISES IS LOCATED ON MAIN MOTIDOONGARI R OAD OF JAIPUR CITY AND NEAR TO AND SURROUNDED BY SANGANERI GATE, RAJAP ARK, GANGWAL PARK, TILAK MARG, JAWAHAR NAGAR AND IS ON COMMERCIA L ROAD AND IN MAIN MARKET AND IS PRIME COMMERCIAL LOCATION OF JAI PUR CITY AND HE HAS NOT ENQUIRED ABOUT RENT IN SAME LOCALITY AND AR EA BEING USED BY SOCIETY IS LARGE I.E. 6000 SQUARE METER (APPROX) I. E. 64560 (APPROX) SQUARE FEETS AND RENT PAID IS RS. 1,96,341/- P.M. A ND WHICH COMES RS. 3.04 PER SQUARE FEET WHILE FACT IS THAT COMMERCIAL RENT OF SHOPS AND OFFICES FOR SIMILAR LOCATION IS RS. 30,000/RS.35,00 0/- P.M. FOR 150 SQUARE FEETS (15*10) WHICH COMES RS. 200 PER SQUARE FEET P.M. AND RENT FOR RESIDENTIAL AREA IS RS. 20 TO 30 PER SFT P .M. BUT SOCIETY IS RUNNING SCHOOL, THEREFORE, RENT CHARGED IS NOMINAL @ 3.04 PER SQUARE FEET AND RENT PAID IS MUCH LOWER THAN REASONABLE A S COMPARED TO MARKET RATES OF RENT IN THE SAME LOCALITY, HENCE, R ENT PAID BY SOCIETY IS ITA NO.1092/JP/2016 THE ITO (E), WARD- 1, JAIPUR VS M/S. MAYURA SHIKSHA SA MITI, JAIPUR 13 LESS THAN REASONABLE AND FULLY ALLOWABLE AND ADDITI ON MADE BY ASSESSING OFFICER IS RIGHTLY DELETED BY HONBLE CIT (A) III JAIPUR. THE ABOVE FACTS WERE PUT BEFORE ASSESSING OFFICER D URING SCRUTINY ASSESSMENT U/S 143(3) OF THE INCOMETAX ACT , 1961 FOR ASSESSMENT YEAR 2014-15 AND 2015-16 AND HE HAS ALLO WED 100% SALARY PAID TO SMT. USHA SINGH AND SHRI DUSHYANT SINGH AND ALSO ALLOWED 100% RENT PAID TO PERSONS COVERED U/S 13(3) AS PAYM ENTS WERE REASONABLE LOOKING INTO FACTS AS ABOVESAID. COPY OF ASSESSMENT ORDER FOR ASSESSMENT YEARS 2014-15 AND 2015-16 ATTACHED. THEREFORE, HONBLE CIT (A) WAS RIGHT IN DELETING ADDITIONS / D ISALLOWANCE MADE BY LEARNED ASSESSING OFFICER FOR ASSESSMENT YEAR 20 12-13 AND IT IS SUBMITTED BEFORE YOUR HONOUR THAT RELIEF ALLOWED BY HONBLE CIT (A) III JAIPUR AND ALLOWED BENEFIT OF EXEMPTION U/S 11 AND 12 OF INCOME TAX ACT,1961 IS CORRECT AND RIGHT AND AS PER FACTS AND AS PER LAW. 4.5 AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIALS AVAILABLE ON RECORD, IT IS NOTED THAT THE AO DISALLOWED THE R ENTAL EXPENSES OF RS. 17,56,092/- BY TREATING THE SAME AS EXCESSIVE WHICH HAS BEEN DELETED BY THE LD. CIT(A) BY OBSERVING AS UNDER:- I FIND THAT THE SCHOOL IS LOCATED ON MOTI GOONGRI R OAD. THE AREA OF PROPERTY IS 6000 SQUIRE METER AND RENT PAID IS RS. 196341/- PER MONTH WHICH GIVES RATE OF 3.04 PER SQUARE FEET. THIS RENT APPEAR REASONABLE LOOKING TO THE CENTRAL LOCATION AND RENT PREVAILING IN THAT AREA. MOREOVER, AO ALSO IN A.Y. 2014-15, ACCEPTED R ENT PAYMENT AS REASONABLE. THEREFORE THE DISALLOWANCE MADE BY THE AO IS UNCALLED FOR AND IS BEING DELETED. FROM THE ABOVE FACTS, IT IS NOTED THAT THE AO HAS A CCEPTED THE RENT PAYMENT AS REASONABLE IN ASSESSMENT YEAR 2014-15. IT IS ALSO NOTED THAT AS PER LOCATION OF THE SCHOOL, THE RENT PREVAILING IN THAT AREA IS REASONABLE. ITA NO.1092/JP/2016 THE ITO (E), WARD- 1, JAIPUR VS M/S. MAYURA SHIKSHA SA MITI, JAIPUR 14 IN THIS VIEW OF THE MATTER, THE BENCH CONCURS WITH THE VIEWS OF THE LD. CIT(A) ON THE ISSUE IN QUESTION. THUS GROUND NO. 5 OF THE REVENUE IS DISMISSED. 5.0 IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 /10/2 017 SD/- HKKXPUN ( BHAGCHAND) YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 27 /10/ 2017 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- THE ITO (E),WARD- 1, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- M/S. MAYURA SHIKSHA SAMITI, JAIPUR 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 1092/JP/2016) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ @ ASSISTANT. REGISTRAR