Prabodhan Shikshan Prasarak Sansthan, Ratnagiri V. Income-tax Officer,

ITA 1130/PUN/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1088 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 26-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Keywords: Revenue expenditure; Capital expenditure
• Section: 12; 11

Judgement Text

] IQ.KS ] IQ.KS ] IQ.KS ] IQ.KS IQ.KS IQ.KSIQ.KS IQ.KS IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE . . , , ' # BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.1130/PN/2014 '% % / ASSESSMENT YEAR : 2010-11 PRABODHAN SHIKSHAN PRASARAK, SANSTHAN, AMBAV, SANGAMESHWAR, RATNAGIRI-415 411 PAN NO. AAATP5904E . / APPELLANT V/S ITO, WARD-2, RATNAGIRI . / RESPONDENT / ASSESSEE BY : SHRI M.K. KULKARNI / DEPARTMENT BY : SHRI B.C. MALAKAR / ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 24-03-14 OF THE CIT(A), KOLHAPUR RELATING TO ASSESSMENT YEAR 2010-11. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS AN EDUCATIONAL TRUST REGISTERED UNDER THE PROVISIONS OF B.P.T . ACT AND NOT A SOCIETY. THE TRUST WAS ALSO ENJOYING THE REGIS TRATION U/S.12AA OF THE I.T. ACT. THE ASSESSEE TRUST FILED ITS RET URN OF / DATE OF HEARING :24.09.2015 / DATE OF PRONOUNCEMENT: 24.09.2015 2 ITA NO.1130/PN/2014 INCOME ON 15-10-2010 DECLARING TOTAL DEFICIT OF RS.1,59,48,761/- INCLUDING DEDUCTION @15% AT RS.93,69,701/- OF TOTAL RECEIPT. DURING THE COURSE OF ASSESSMENT PROCEE DINGS THE AO NOTED THAT THE TRUST IS ENGAGED IN EDUCATIONAL A CTIVITIES RUNNING VARIOUS EDUCATIONAL INSTITUTIONS AND HAS SHOWN GR OSS INCOME OF RS.6,24,64,674/- AFTER CLAIMING DEDUCTION @15% OF THE RECEIPTS AT RS.93,69,701/- AND APPLICATION ON OBJECTS AT RS.6,90,43,735/-. IT HAD DECLARED NET DEFICIT OF RS.1,59,48,761/-. HE NOTED THAT THE ASSESSEE HAS RECEIVE D AN AMOUNT OF RS.21,35,430/- ON ACCOUNT OF DEVELOPMENT FEES COLLECTED FROM THE STUDENTS. IN THE REVISED COMPUTATION OF INCOME THE ASSESSEE HAS CLAIMED THIS AMOUNT AS EXEMPT U/S.11(1)(D) OF THE I.T. ACT. ON BEING CONFRONTED BY THE AO THE ASSESSEE RELIED UPON A CIRCULAR NO.2/NGC/1099/5118 DATED 16-12-99 BASED ON GUIDELINES LAID DOWN BY THE MINISTRY OF HUMAN RESOURCE DEVELOPMENT, GOVERNMENT OF INDIA. IT WAS FURTHER SUBMITTED THAT SUCH DONATION WAS RECEIVED BY TH E ASSESSEE WITH A SPECIFIC DIRECTION THAT THE SAME TO BE UTILIZED FOR DEVELOPMENT OF THE INSTITUTE. THE ASSESSEE HAS FILED AN EXPLANATION BEFORE THE AO VIDE LETTER DATED 06-12-2012 W HICH READS AS UNDER : WITH RESPECT TO SUBJECT CITED ABOVE, WE HEREBY REQUE ST YOUR HONOUR TO ADD THE CORPUS DONATION OF RS.21,35,420/- I N OUR GROSS INCOME WHICH HAD NOT BEEN INCLUDED IN THE SCHEDULE D. INCOME FROM OTHER SOURCES ITR 7 AND AS IT IS DONATION WITH A SPECIFIC DIRECTION THAT TO BE UTILIZED FOR DEVELOPMENT OF IN STITUTE. WE ALSO HEREBY REQUEST TO YOUR HONOUR TO ALLOW 15% OF GROSS AMOUNT TO BE ACCUMULATED AS THE BASIS OF REVISED GROSS RECEIPTS, AND ALLOW CLAIM FOR CORPUS DONATION U/S.11(1)(D) WHIC H HAD NOT BEEN CLAIMED AT THE TIME OF FURNISHING OF RETURN OF INCOME. 3 ITA NO.1130/PN/2014 WE HEREBY ALSO REQUEST TO YOUR HONOUR TO ALLOW ADDITI ONAL CAPITAL EXPENDITURE OF RS.4,55,000/- WRONGLY DEDUCTED BY US I N RETURN OF INCOME. REVISED COMPUTATION OF INCOME AS FOLLOWS : INTEREST : 14,26,568/- RENTAL INCOME : 1,63,100/- OTHER INCOME : 6,08,70,006/- VOLUNTARY CONTRIBUTION INCLUDING CORPUS DONATION : 21,40,420/- (5,000 + 21,35,420) --------------- --- GROSS RECEIPTS 6,46,00,094/- ------------------ LESS : AMOUNT APPLIED 3(I) (I) REVENUE EXPENDITURE : 4,84,89,076/- (II) CAPITAL EXPENDITURE : 2,10,09,659/- (III) ACCUMULATION @15% : 96,90,014/- (IV) ________ NIL (V) EXP. U/S.11(1)(D) : 21,35,420/- -------------------- 8,13,24,169/- ----------------- DEFICIT (-) 1,67,24,075/- ----------------- WITH REFERENCE TO THE STATEMENT OF TOTAL INCOME SUBMI TTED BY US, WE WISH TO REVISE THE SAME. THE REASONS ARE AS FOLLOWS : 1. RENT : WE HAD INCLUDED HOSTEL RENT IN THIS AMOUNT (RS.59,59,990). NOW ONLY RENT RECEIVED FROM LEASING OF OUR PREMISES IS SHOWN HEREIN. 2. CORPUS DONATION RS.21,35,420/- WAS SHOWN DIRECTLY IN TH E BALANCE SHEET AS IT WAS TO BE USED FOR CAPITAL/DEVELOPM ENT EXPENDITURE AS PER GUIDELINES OF THE STATE GOVERNMENT . THE SAME IS NOW INCLUDED IN THE COMPUTATION & DEDUCTED SEPARATELY. 3. OTHER INCOME :ALL OTHER INCOME INCLUDING AGRICULTUR E GRANT RS.11,850/- IS NOW SHOWN UNDER THIS ACCOUNT. 4. CAPITAL EXPENDITURE : WE HAD SOLD A VEHICLE DURING T HE YEAR FOR RS.4,55,000/-. THE NET ADDITIONS TO FIXED ASSETS (RS.2,05,54,659/-) WERE CONSIDERED EARLIER. WE HAVE NOW RECTIFIED THIS ERROR & SHOWN THE GROSS ADDITION. 4 ITA NO.1130/PN/2014 3. HOWEVER, THE AO WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE AND HELD THAT THE SAME IS NOT A RECEIPT TOWARDS CORPUS. HE FURTHER NOTED THAT OTHERWISE ALSO T HE PROVISIONS OF SECTION 11 AND 12 ARE NOT APPLICABLE TO THE TRUST AS ITS REGISTATION U/S.12AA OF THE ACT HAS BEEN CANCELLED BY THE CIT-II, PUNE VIDE ORDER PASSED U/S.12AA(3) OF THE I.T. AC T, 1961 DATED 30-03-2012. HE THEREFORE HELD THAT THE DONATIONS STATED TO BE RECEIVED AT RS.21,35,420/- ARE NOT CORPUS OF THE TRUST. HE THEREFORE TREATED THIS AMOUNT AS INCOME U/S.12A OF THE I .T. ACT AND ACCORDINGLY ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 4. BEFORE CIT(A) SINCE NONE APPEARED DESPITE OPPORTUNITIES GRANTED BY HIM HE DECIDED THE ISSUE EXPARTE AND CONFIRM ED THE ADDITION MADE BY THE AO BY OBSERVING AS UNDER : 4. IN GROUND NO. 3 THE APPELLANT HAS OPPOSED ACTION OF THE ASSESSING OFFICER IN NOT ALLOWING FULL EXPENDITURE WHIL E COMPUTING INCOME OF THE TRUST. AS PER THE APPELLANT, IN THE ABSE NCE OF REGISTRATION UNDER SECTION 12AA, ASSESSING OFFICER SHOULD HAVE COMPLETED THE ASSESSMENT ON COMMERCIAL PRINCIPLES OF ACC OUNTING. NOW SINCE REGISTRATION OF THE TRUST HAS BEEN RESTORED, I NCOME OF THE TRUST HAS TO BE COMPUTED IN TERMS OF SECTION 11 OF THE ACT. ONE OF THE ISSUES IN THE ASSESSMENT IS TREATMENT OF EARMARKED F UND OF RS.21,35,420/ -. THIS WAS THE DEVELOPMENT FEES COLLECTE D FROM STUDENTS. IT WAS SUBMITTED BY THE APPELLANT BEFORE THE ASSESSING OFFICER THAT DONATION OF RS.21,35,420/- SHOULD BE ADD ED IN THE GROSS INCOME WHICH HAD NOT BEEN INCLUDED IN THE SCHEDU LE-D INCOME FROM OTHER SOURCES IN ITR-7 AND AS IT IS DONATIO N WITH A SPECIFIC DIRECTION THAT TO BE UTILIZED FOR DEVELOPME NT OF INSTITUTE. THE ASSESSING OFFICER NOTICED THAT AS PER FEE STRUCTURE LAID OUT BY THE MINISTRY OF HUMAN RESOURCE DEVELOPMENT, FEE WILL HAVE TO BE CHARGED IN TWO CATEGORIES VIZ. TUITION FEE AND DEVEL OPMENT FEE. DEVELOPMENT FEE IS ALLOWED TO BE COLLECTED FOR RECO VERY OF CAPITAL COST TO THE MANAGEMENT. THERE IS RESTRICTION ON EXPEND ITURE FROM DEVELOPMENT FEES AND FOR THE FIRST TEN YEARS, ONLY UPT O HALF OF THE PROCEEDS OF DEVELOPMENT FEE CAN BE APPROPRIATED OR T HE ACTUAL CAPITAL COST, WHICHEVER IS LOWER. THE DEVELOPMENT FEE OF THE EDUCATIONAL INSTITUTION ARE EARMARKED FUND AND DO NO T FORM PART OF CORPUS OF THE TRUST. A CORPUS FUND DENOTES A PERMANE NT FUND KEPT FOR THE EXISTENCE AND SUSTENANCE OF THE ORGANIZAT ION. IT IS KEPT 5 ITA NO.1130/PN/2014 FOR BASIC EXPENDITURE NEEDED FOR ADMINISTRATION AND SU RVIVAL OF THE ORGANIZATION. IN CONTRAST TO THIS, A FUND KEPT SEP ARATELY FOR EXPENDITURE OF A SPECIFIC PURPOSE IS AN EARMARKED FUND AND NOT CORPUS FUND. IN RESPECT OF THE APPELLANT'S STATUS BEING THAT OF A TRUST REGISTERED UNDER SECTION 12A, THE ISSUE OF EARMAR KED DONATION REMAINS. APPELLANT COULD HAVE ACCUMULATED T HE EARMARKED FUND AS PER SUB-SECTION 2 OF SECTION 11. HOWE VER, APPELLANT HAS SIMPLY INCLUDED THE AMOUNT IN THE TOTAL RECEIPT AND CLAIMED THAT ITS ENTIRE RECEIPT WAS SPENT DURING THE YEAR. SINCE EARMARKED RECEIPT IS NOT GENERAL RECEIPT, THIS RECEIP T IS INCOME OF TRUST UNDER SECTION 12 AND IS A TAXABLE INCOME IN THE ABSENCE OF BENEFIT UNDER SECTION 11(2). THEREFORE, THE ADDITIO N MADE BY THE ASSESSING OFFICER TO THE EXTENT OF RS.2 1,35,420/- IS HER EBY SUSTAINED. 5. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD.CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITIO N OF RS. 21,35,420/- BEING DEVELOPMENT FEES COLLECTED FROM STU DENTS AND AS PER STRUCTURE OF FEES PROVIDED BY THE SHIKSHAN SHULKA SAMITEE, GOVT OF MAHARASHTRA FOR EVERY ACADEMIC YEAR. THIS IS NOT INCLU DED IN THE INCOME BUT IS EXEMPT AS PROVIDED IN S.12 OF THE ACT. IN A WAY IT IS A CORPUS FUND OF THE TRUST NOT TAXABLE UNDER THE ACT. THE ADDITION BE DELETED. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LA W AND SINCE THE REGISTRATION WITHDRAWN BY CIT-KOLHAPUR HAS BEEN RESTOR ED BY HON'BLE TRIBUNAL VIDE ORDER DT. 30 TH SEPT, 2013 THE ADDITION OF DEVELOPMENT FEES BEING CONTRIBUTIONS TO CORPUS FUND CA NNOT BE SUSTAINED. THE SUSTAINED ADDITION OF RS. 21,35,420/- BE DELETED. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LEVY OF INTEREST U/S.234B AND 234C IS NOT JUSTIFIED. 4. THE APPELLANT CRAVES/LEAVE TO ADD, AMEND OR ALTER ANY OF THE ABOVE GROUNDS OF APPEAL. 6. THE LD. COUNSEL FOR THE ASSESSEE AT THE TIME OF HEAR ING SUBMITTED THAT THE LD.CIT(A) IN THE ORDER HAS MENTIONED T HAT THE APPEALS WERE FIXED FOR HEARING ON 06-09-2013 AND 28 -02- 2013 AND NONE APPEARED ON THOSE DATES FOR WHICH HE PA SSED THE EXPARTE ORDER. HOWEVER, THE FACT REMAINS THAT THE A SSESSEE HAD REQUESTED FOR ADJOURNMENT ON BOTH THE DATES. FOR THE 6 ITA NO.1130/PN/2014 ABOVE PROPOSITION HE REFERRED TO THE COPIES OF THE ADJOU RNMENT LETTERS ADDRESSED TO THE CIT(A) WHICH ARE PLACED IN THE P APER BOOK. HE SUBMITTED THAT IN THE INTEREST OF JUSTICE THE M ATTER MAY BE RESTORED TO THE FILE OF THE CIT(A) WITH A DIRECTION T O GIVE ONE MORE OPPORTUNITY TO THE ASSESSEE TO SUBSTANTIATE ITS CASE. 7. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER H AND WHILE SUPPORTING THE ORDER OF THE CIT(A) SUBMITTED THAT D ESPITE TWO OPPORTUNITIES GIVEN TO THE ASSESSEE TRUST NONE AP PEARED ON BEHALF OF THE ASSESSEE. THEREFORE, THE CIT(A) WAS FULLY JUST IFIED IN PASSING AN EXPARTE ORDER. FURTHER, HE HAS ALSO DECID ED THE ISSUE ON MERIT. THEREFORE, THE ORDER OF THE CIT(A) BE UPHELD AND THE GROUNDS RAISED BY THE ASSESSEE SHOULD BE DISMISSED. 8. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES. WE FIND THE AO IN THE INSTANT CASE MADE ADDITION OF RS.21,35,420/- TO THE TOTAL INCOME OF THE ASSESSEE REJECT ING THE CLAIM OF THE ASSESSEE THAT THE ABOVE AMOUNT IS DEVELOPME NT FEES RECEIVED TOWARDS THE CORPUS. WE FIND THE LD.CIT(A) IN HIS EXPARTE ORDER UPHELD THE SAME FOR THE REASONS MENTION ED IN PARA 4 OF THIS ORDER. IT IS THE SUBMISSION OF THE LD. COUN SEL FOR THE ASSESSEE THAT GIVEN AN OPPORTUNITY HE WILL EXPLAIN THE CASE BEFORE THE LD.CIT(A) FOR PROPER ADJUDICATION OF THE ISSUE. CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE AND IN TH E INTEREST OF JUSTICE, WE DEEM IT PROPER TO RESTORE THE ISS UE TO THE FILE OF THE LD.CIT(A) WITH A DIRECTION TO GIVE ONE MORE OPPORTUNITY TO THE ASSESSEE TO SUBSTANTIATE ITS CASE. THE LD.CIT(A) SHALL DECIDE THE ISSUE IN ACCORDANCE WITH LAW. WE 7 ITA NO.1130/PN/2014 HOLD AND DIRECT ACCORDINGLY. THE GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ITSELF, I.E. ON 24-09-2015. SD/- SD/- ( VIKAS AWASTHY ) ( R.K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER IQ.KS PUNE ; # DATED : 24 TH SEPTEMBER, 2015. LRH'K ( )'+ , / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ( ) S / THE CIT(A), KOLHAPUR 4. ( S / THE CIT, KOLHAPUR 5. 6. + ., ., IQ.KS / DR, ITAT, B PUNE; / GUARD FILE. / BY ORDER , + //TRUE COPY// 2 . / SR. PRIVATE SECRETARY ., IQ.KS / ITAT, PUNE