ITO, Ward (E), Chandigarh V. Sant Baba Sunder Singh, Barnala

ITA 1183/CHANDI/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5178 (ITAT-CHANDIGARH)
• Duration Of Justice: 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 28-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: RAJIT SALDI
• Keywords: Capital asset; Depreciation; Charitable institution; Opportunity of being heard; Revised return; Capital expenditure
• Section: 12A; 68; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES, SMC, CHANDIGARH BEFORE MS. DIVA SINGH, JUDICIAL MEMBER ITA NO 1183/CHD/2017 ASSESSMENT YEAR : 2008-09 THE ITO, VS. SANT BABA SUNDER SINGH WARD (EXEMPTIONS), CHARITABLE TRUST, CHANDIGARH. VPO TALLEWAL, BARNALA. PAN NO. AAETS3552P (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MANJIT SINGH, SR.DR RESPONDENT BY : SHRI RAJIT SALDI DATE OF HEARING : 08.01.2018 DATE OF PRONOUNCEMENT : 01.03.2018 ORDER THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE ASSAILI NG THE CORRECTNESS OF THE ORDER DATED 31/03/2017 OF CIT(A) PA TIALA PERTAINING TO 200809 ASSESSMENT YEAR ON THE FOLLOWING GROUNDS : I. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW IN GRANTING U/S 10(23C)(IIIAD) IN THE CASE EVEN WHEN T HE RECEIPT ADMITTEDLY HAVE BEEN IN EXCESS OF RS. L CRORE AND THEREFORE THE ASSESSEES COVERAGE UNDER THE SECTION WAS PRECLUDED BY THE STATUTORY PROVISIONS ENTAILING APP ROVAL U/S 10(23C)(VI) IN SUCH CASES WHICH THE APPLICANT DID NOT HAVE. II. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE PROVISIONS OF SUB SECTION (IIIAD) AND SUB SECTION (VI) OF THE SECTION 10(23C) ARE SEPARATELY APPLICABLE TO EACH INSTITUTE AND THE RECEIPT OF THE DIFFERENT INSTITUTE OF THE SAME ASSESSEE CANNOT BE CLAIMED WHILE ARRIVI NG AT THE FIGURE OF ANNUAL RECEIPT OF THE INSTITUTE. III. THAT ON THE FACTS AND CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) HAS ERRED IN LAW IN NOT FOLLOWING THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF M/S GOEZTE INDIA LTD VS CIT( 284 ITR 323 SC) WHEREIN THE HON'BLE APE X COURT HAS HELD THAT ANY NEW CLAIM OR ANY CHANGE IN THE ORIGINAL RETURN OF INCOM E CAN ONLY BE MADE BY FILING A REVISED RETURN AND NOT BY MAKING A CLAIM DURING THE ASSESSMENT PROCEEDING BY FILING REVISED COMPUTATION/SIMPLE LETTER. IV. THAT ON THE FACTS AND CIRCUMSTANCES O F THE CASE, THE LD. CIT(A) HAS ERRED IN LAW & FACTS OF THE CASE BY ALLOWING EXEMPTION U/S 11 & 12 A OF THE ACT AS AN ALTERNATE REMEDY WHICH WAS CLAIMED BY THE ASSESSEE DURING THE ASSESS MENT PROCEEDINGS IN LIEU OF EXEMPTION U/S 10(23C)(IIIAD)/ 10(23C)(VI) OF THE ACT CLAIMED IN THE ORIGINAL RETURN OF INCOME. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CI T(A) HAS ERRED IN DELETING THE ADDITION OF RS. 4,16,784/- EVEN WHEN THE ASSESSEE FAILED TO PRO VE THE GENUINENESS OF THE TRANSACTION. ITA 1183/CHD/2017 A.Y. 2008-09 PAGE 2 OF 8 2. THE LD. SENIOR DR RELIES UPON THE ASSESSMENT ORDER. T HE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE ON THE OTHER HAND RELIES UPON THE IMPUGNED ORDER. 3. I HAVE HEARD THE SUBMISSIONS AND PERUSED THE RECOR D. IT IS SEEN THAT ON THE FIRST ISSUE AGITATED BY THE ASSESSEE BEFORE THE CIT(A), TH E FACTS HAVE BEEN BROUGHT OUT BY THE CIT(A) IN PARA 2 AND 3 OF THE IMPUGNED ORDER. FOR READY REFERENCE THESE ARE REPRODUCED HEREUNDER : 2. THE FACTS OF THE CASE ARE THAT THE APPELLANT IS A CHARITABLE TRUST CREATED ON 22.03.1996 AND REGISTERED UNDER SOCIETIES REGISTRAT ION ACT, 1860. THE TRUST IS RUNNING A SCHOOL IN THE NAME OF AKAL ACADEMY AND BRAKKAT GIRL S COLLEGE OF EDUCATION AT V. TALLEWAL. DURING THE YEAR UNDER CONSIDERATION THE G ROSS RECEIPTS OF THE INSTITUTIONS WERE AT RS. 1,02,87,582/- FOR THE FIRST TIME AND AN APPLICA TION FOR GRANT OF EXEMPTION WAS REQUIRED TO BE FILED BEFORE THE END OF F.Y. I.E. ON 31.03.2008. BUT THE SAME WAS FILED BY THE APPELLANT BEFORE FILING OF RETURN OF INCOME ON 23.09.2010, BEFORE THE WORTHY CCIT, CHANDIGARH. THE APPLICATION SO FILED WAS REJECTED B Y THE WORTHY CCIT & HON'BLE PUNJAB AND HARYANA HIGH COURT ON THE GROUND THAT IT WAS FI LED AFTER THE CLOSE OF F.Y. ENDING ON 31.03.2008. IN VIEW OF THESE FACTS THE INCOME OF TH E TRUST WAS MADE' TAXABLE BY THE AO. A SEPARATE DISALLOWANCE OF RS. 4,16,784/- WAS A LSO MADE U/S 68 OF S THE I. T. ACT. THE ASSESSMENT WAS COMPLETED ON 08.11.2010 U/S 143( 3) AT AN INCOME OF RS. 36,86,342/- AS AGAINST THE RETURNED INCOME OF RS. N IL/-. THE APPELLANT FILED APPEAL ON 20.12.2010. 03. DURING THE EARLIER APPELLATE PROCEEDINGS, ON TH E FIRST ISSUE OF EXEMPTION CLAIMED U/S 10(23C)(IIIAD)/(VI) THE APPELLANT REITE RATED THAT THE APPELLANT IS A CHARITABLE TRUST AND THAT IN THE SUBSEQUENT YEAR TH E CLAIM HAS BEEN ALLOWED BY HON'BLE HIGH COURT. HOWEVER, THE APPELLANT HAD NOT RAISED THIS GROUND BEFORE THE ID. CIT(A) AND THE SAME GROUND WAS TAKEN FOR THE FIRST TIME BEFORE THE HON'BLE ITAT, DIVISION BENCH, CHANDIGARH. WHILE ADJUDICATING THIS GROUND THE HON'BLE ITAT, DIVISION BENCH, CHANDIGARH RESTORED THE MATTER BACK TO THE FILE OF THE CIT(A) AND OBSERVED AS UNDER: '10. WE FIND THAT THE ASSESSES HAD CLAIMED EXEMPTIO N UNDER SECTION 10(23C)(IIIAD) IN ITS RETURN OF INCOME WHICH WAS DI SALLOWED BY THE AO FOR THE REASON THAT THE RECEIPT OF THE ASSESSEE TRU ST EXCEEDED RS. 1 CRORES. BEFORE THE LD. CIT(A) ASSESSEE HAD NOT RAISED THIS GROUND OF APPEAL AT ALL AND THEREFORE THIS ISSUE BEEN DEALT WITH BY THE LD. CIT(A). IN VIEW OF THE SAME THE ENTIRE FACTS RELATING TO THE ISSUE ARE NOT BEFORE US AND THEREFORE WE CONSIDER IT FIT TO RESTORE THIS ISSUE BACK TO THE FILE OF ID. CIT(A) TO BE ADJUDICATED UPON AFRESH IN ACCORDANCE WITH LAW AND AFTER GIVING DUE OPPORTUNITY OF HEARING TO THE ASSESSEE.' 3.1 PURSUANT TO THE DIRECTION OF THE CO-ORDINATE BENCH, T HE ASSESSEE WAS PROVIDED AN OPPORTUNITY OF BEING HEARD BY THE CIT(A ). CONSIDERING THE SUBMISSIONS ADVANCED IN PARA 3.1 OF THE IMPUGNED ORD ER, RELIEF WAS GRANTED TO THE ASSESSEE IN PARA 3.2. FOR READY REFEREN CE THESE SUBMISSIONS AND THE CONCLUSION WHICH IS UNDER CHALLENGE IN THE PRESENT PROCEEDINGS, ARE REPRODUCED HEREUNDER: 3.1 AFTER THIS THE OPPORTUNITY WAS PROVIDED TO THE APPELLANT AND IN RESPONSE THE APPELLANT SUBMITTED THE FOLLOWI NG ON THE ISSUE: 'THE LD. AO WRONGLY COMBINED THE PROVISIONS OF SECT ION 10(23C)(IIIAD) AND 10(23C)(VI) AND ARRIVED AT THE C ONCLUSION THAT FOR BOTH SECTIONS THE APPROVAL OF CHIEF COMMISSIONE R OF INCOME TAX IS REQUIRED FOR CLAIMING THE EXEMPTION UNDER TH ESE SECTIONS. ITA 1183/CHD/2017 A.Y. 2008-09 PAGE 3 OF 8 HE FAILED TO APPRECIATE THAT THE PROVISIONS OF APPR OVAL BY PRESCRIBED AUTHORITY APPLY TO SECTION 10(23C)(VI) A ND NOT TO SECTION 10(23C)(IIIAD). FURTHER THE LD. AO WRONGLY CONCLUDED THAT THE PROVI SIONS OF SECTION 10(23C)(IIIAD) APPLY ASSESSEE WISE. WHEREAS IN ACTU AL THE PROVISIONS OF 10(23C)(IIIAD) APPLY INSTITUTE WISE AND NOT THE ASS ESSEE WISE THAT MEANS IF AN ASSESSEE IS RUNNING MORE THAN ONE EDUCATIONAL IN STITUTION THEN THE LIMIT OF ONE CRORE IS TO BE CONSIDERED SEPARATELY A ND THE TOTAL RECEIPTS OF ALL THE INSTITUTES CAN'T BE CLUBBED TOGETHER FOR TH E PURPOSE OF SUCH CALCULATION. SECTION 10(23C)(IIIAD) READS AS UNDER : 'IN COMPUTING THE TOTAL INCOME OF A PREVIOUS YEAR O F ANY PERSON, ANY INCOME FALLING WITHIN ANY OF T HE FOLLOWING CLAUSES SHALL NOT BE INCLUDED.... (IIIAD) ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITU TION EXISTING SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR PURPOSE S OF PROFIT IF THE AGGREGATE ANNUAL RECEIPTS OF SUCH UNIVERSITY OR EDUCATIONAL INSTITUTION DO NOT EXCEED THE AMOUNT OF ANNUAL RECE IPTS AS MAY BE PRESCRIBED;' FROM THE ABOVE DEFINITION IT IS CLEAR THAT WHAT IS REFERRED TO IS THE 'EDUCATIONAL INSTITUTION 'AND NOT 'THE PERSON 'FURTHER RELIANCE IS PLACED UPON A) THE KARNATAKA HIGH COURT HAS UPHELD THE DECISION OF INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'B', BANGALO RE IN THE CASE OF CHILDREN EDUCATION SOCIETY, ITA NOS.140 & 1 41/BANG/2010 HELD THAT FOR THE VARIOUS ARGUMENTS ADVANCED ABOVE IT IS ALSO SUBMITTED THAT THE NOTIFICATION U/S. 10(23C)(VI) WOULD BE REQUIRED ONLY IN RESPECT OF SUCH OF THOSE EDUCATIONAL INSTITUTIONS WHOSE AGGREGATE ANNUAL RECEIPTS EXCEED S THE SUM OF RS. ONE CRORE SPECIFIED IN RULE 2'BC. CONSEQUENTLY THE ASSESSEE C LAIM FOR EXEMPTION U/S. 10(23C)(IIIAD) IS VALID, NOTWITHSTANDING THE FACT T HAT THE ASSESSEE IS NOT NOTIFIED U/S. 10(23C)(VI) OF THE ACT. ACCORDINGLY THE SECOND OF T HE REASONS ADDUCED BY THE LEARNED CIT(A) FOR DENIAL OF EXEMPTION IS CLEARLY E RRONEOUS AND THE CLAIM OF THE ASSESSEE REQUIRES TO BE ALLOWED FOR THE ADVANCEMENT OF SUBSTANTIAL CAUSE OF JUSTICE. FURTHER, IN RESPECT OF THE 3 EDUCATIONAL INSTITUTIO NS VIZ., THE OXFORD KANNADA NURSERY, KANNADA PRIMARY ARID KANNADA HIGH SCHOOL, WHICH ARE IN RECEIPT OF GRANT TO MEET THE SALARY OF TEACHERS, THE CIT(A) FAILED T O APPRECIATE THAT THE SUBTLE DISTINCTION BETWEEN THE ASSESSEE SOCIETY AND THE 3 EDUCATIONAL INSTITUTIONS RUN BY THE ASSESSEE SOCIETY IS REINFORCED BY THE FACT THAT EVEN -THE GOVERNMENT HAS GRANTED AID ONLY TO THESE EDUCATIONAL INSTITUTION A ND NOT TO THE 'ASSESSEE SOCIETY'. FURTHER MORE THE SAID GRANT IS WITH REFERENCE TO TH E SALARY EXPENDITURE OF THE SAID EDUCATION INSTITUTION AND NOT WITH REFERENCE TO THE ASSESSEE SOCIETY EXPENDITURE AT ALL. IN ANY CASE THE OBSERVATIONS BY THE LEARNED CI T(A) THAT THE 3 EDUCATIONAL INSTITUTIONS ARE NOT SUBSTANTIALLY AIDED BY THE GOV ERNMENT IS ERRONEOUS. HERE AGAIN THE CTT(A) DID NOT CONSIDER THE FACT THAT THE EXEMPTION FOR BEING SUBSTANTIALLY FINANCED BY THE GOVERNMENT IS CONTAIN ED UNDER A DIFFERENT CLAUSE VIZ., SECTION 10(23C)(IIIAB) WHICH AGAIN GOES TO SH OW THAT LEGISLATURE CONSIDERED FOR EXEMPTION THE INCOME OF THE EDUCATIONAL INSTITU TIONS IN THE HANDS OF THE ASSESSEE ON DIFFERENT PARAMETERS. THEREFORE, THE PA RAMETERS ARE CLEARLY ATTACHED TO THE EDUCATIONAL INSTITUTION ITSELF AND NOT THE ASSE SSEE CLAIMING THE EXEMPTION.' 3.2 I HAVE CONSIDERED THE SUBMISSIONS PUT FORTH BY THE APPELLANT AND THE FACT OF THE CASE. I AM OF THE CONSIDERED OPINION THAT TH E PLAIN READING OF THE PROVISIONS OF SECTION 10(23C)(IIIAD) MAKES IT VERY- MUCH CLEAR THAT THESE ARE APPLICABLE INSTITUTION WISE AND NOT ASSESSEE WISE. THE SAME IS ALSO UPHELD BY THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CHILDRE N EDUCATION SOCIETY. RESPECTFULLY FOLLOWING THIS JUDGEMENT THE APPEAL OF THE APPELLANT ON THE ISSUE OF SEC. 10(23C)(IIIAD) IS ALLOWED. ITA 1183/CHD/2017 A.Y. 2008-09 PAGE 4 OF 8 3.2 CONSIDERING THE FACTS AND THE DECISION RELIED UPON, I FI ND NO INFIRMITY IN THE CONCLUSION ARRIVED AT. IN THE ABSENCE OF A NY REBUTTAL ON FACTS OR LAW, THE ORDER IS UPHELD. 4. ON THE 2 ND ISSUE AGITATED BY THE REVENUE, THE ISSUE ALSO HAD COME UP BEFORE THE CO-ORDINATE BENCH WHO WAS PLEASED TO REM AND THE SAME TO THE CIT(A) WITH THE FOLLOWING OBSERVATIONS : '16. WE FIND THAT IT IS AN UNDISPUTED FACT THAT THE ASSESSEE IS REGISTERED UNDER SECTION 12A OF THE INCOME TAX ACT. IT IS ALSO NOT IN DISPUTE TH AT THE ASSESSEE HAD NOT CLAIMED EXEMPTION UNDER SECTION 11 IN ITS RETURN OF INCOME BUT AT THE SAME TIME IT IS ALSO UNDISPUTED THAT THE CLAIM HAD BEEN MADE BY THE ASSESSEE BEFORE THE AO D URING ASSESSMENT PROCEEDINGS VIDE ITS LETTER DT. 01/11/2010 WHICH IS MENTIONED IN THE ASSESSMENT ORDER AT PARA 1.3 WHEREIN THE AO HAS STATED 'FURTHER DEDUCTION UNDER SECTION 11/12A AS CONTESTED IN THE REPLY DT. 01/11/2010 IS ALSO NOT ADMISSIBLE AS DISCUSSED ABOV E '. IN VIEW OF THE ABOVE THE ISSUE TO BE ADJUDICATED UP ON IS WHETHER THE ASSESSEE WAS ENTITLED TO DEDUCTION UNDER SECTION 11 OF THE ACT, EVEN IF THE SAME HAD NOT CLAIMED IN THE RETURN OF INCOME BUT WAS CLAIMED DURING ASSESSMENT PROCEEDING. WE ARE OF THE CONSIDERED VIEW THAT THE CLAIM OF THE ASSESSEE OUGHT TO HAVE BEEN ENTERTAINED. IN VIEW OF THE FACT THAT THE ASSESSEE HAD BEEN GRANTED REGISTRATION UNDER SECTION 12A OF THE ACT IT CANNOT BE DENIED THAT THE ASSESSEE WAS ENTITLED TO CLAIM EXEMPTION UNDER SECTION 11 & 12 OF THE ACT SUBJECT TO FULFILL MENT OF THE CONDITIONS STATED THEREIN. SINCE THE ASSESSEE WAS OF THE BELIEF THAT ITS INCOM E WAS EXEMPT FROM TAX BY VIRTUE OF THE PROVISION OF SECTION 10(23C)(IIIAD) F WHICH IT CLAIMED IN ITS RETURN OF INCOME, IT LOGIC ALLY DID NOT CLAIM EXEMPTION U/S 11 OF THE ACT. IT WAS O NLY DURING ASSESSMENT PROCEEDINGS WHEN EXEMPTION U/S 10(23C)(IIIAD) WAS PROPOSED TO B E DENIED THAT THE ASSESSEE ALTERNATIVELY CLAIMED EXEMPTION U/S 11 OF THE ACT D ENYING THIS EXEMPTION FOR THE REASON THAT IT WAS NOT CLAIMED IN THE RETURN IS AN ABSURD REASONING SINCE AS STATED ABOVE THERE WAS NO OCCASION FOR THE ASSESSEE TO CLAIM ALTERNATE EXEMPTION UNDER SECTION 11 WHEN IT HAD ALREADY CLAIMED EXEMPTION U/S 10(23C)(IIIAD) OF THE ACT. THEREFORE WE HOLD THAT THE DENIAL OF EXEMPTION U/S 11 OF THE ACT FOR THE REASO N THAT IT WAS NOT/ CLAIMED IN THE RETURN OF INCOME IS CORRECT. THE ASSESSEE WAS LEGAL LY ENTITLED TO CLAIM THE SAME AND HAD RIGHTLY DONE SO WHEN ITS INITIAL CLAIM OF EXEMPTION U/S 10(23C)(IIIAD) HAD BEEN PROPOSED TO BE DENIED. THERE IS NO PROVISION IN THE INCOME TAX ACT WHICH REQUIRES TO ASSESSEE TO COMPULSORY CLAIM BENEFIT UNDER ALL SECT ION OF THE ACT ALTERNATIVELY AVAILABLE. MOREOVER EVEN THE CBDT CIRCULAR NO. 14(XL-35) DT. 1 1/04/1955 MANDATES ASSESSING OFFICER TO ASSIST TAX PAYEES IN EVERY REASONABLE WA Y, PARTICULARLY IN THE MATTER OF CLAIMING AND SECURING RELIEFS AND FURTHER DIRECTS A SSESSING OFFICER TO TAKE THE INITIATIVE IN GUIDING TAX PAYEES IN THIS REGARD. IN VIEW OF THE SAME WE HOLD THAT THE LD. CIT(A) HAD ERRED IN REJECTING THE CLAIM OF THE ASSESSEE FOR GRANT OF EXEMPTION UNDER SECTION 11 MERELY FOR THE REASON THAT THE CLAIM HAD NOT BEEN MADE IN THE RETU RN OF INCOME. WE THEREFORE HOLD THAT IN VIEW OF THE REGISTRATION GRANTED UNDER SECTION 12A THE ASSESSEE WAS ENTITLED TO CLAIM EXEMPTION UNDER SECTION 11 AND SI NCE THE SAME HAS NOT BEEN EXAMINED BY THE LD. C]T(A), THE ISSUE OF CLAIM OF E XEMPTION UNDER SECTION 11 IS BEING RESTORED BACK TO FILE OF LD. CIT(A) TO BE DEA LT WITH IN ACCORDANCE WITH LAW AFTER GIVING DUE OPPORTUNITY OF HEARING TO THE ASSESSEE.' 4.1 THE CIT(A), IT IS SEEN CONSIDERING THE SUBMISSIONS ADVANC ED WHICH HAVE BEEN SET OUT IN PARA 4.3 OF THE IMPUGNED ORDER, GRANTED RELIEF IN PARA 4.4 OF HIS ORDER WHICH IS UNDER CHALLENGE IN THE PRESE NT ITA 1183/CHD/2017 A.Y. 2008-09 PAGE 5 OF 8 PROCEEDINGS. FOR READY REFERENCE PARA 4.3 AND 4.4 OF THE IMPUGNED ORDER ARE REPRODUCED HEREUNDER : 4.3 AS DIRECTED BY THE HONORABLE ITAT THE OPPORTUNI TY WAS PROVIDED TO THE APPELLANT AND IN RESPONSE THE APPELLANT SUBMITTED T HE FOLLOWING ON THE ISSUE : 'A) LD AO HAS SUMMARILY DISMISSED THE CLAIM OF ASSE SSEE U/S 12A BY STATING THAT THE SAME WAS NOT CLAIMED BY THE ASSESSEE. THE LD AO ARE WRONG IN STATING THAT THE EXEMPTION U/S 12A IS NOT CLAIMED BY THE ASSESSEE. E VEN THOUGH THE SAME WAS NOT CLAIMED IN THE RETURN OF INCOME THE SAME WAS DULY A ND PROPERLY CLAIMED BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS. THE LD. AO HAS DISCUSSED THE MERITS OF THE CLAIM OF ASSESSEE U/S 12A IN THE LAST LINES OF PAGE 4 AND IN DETAIL ON PAGE 5 OF THE ASSESSMENT ORDER. B) THE LD. AO ERRED IN CONCLUDING THAT 85% WAS NOT APPLIED DURING THE YEAR AND CALCULATED THE SURPLUS AT RS 32,69,558/- AS AGAINST THE ACTUAL NET DEFICIT OF (RS 11,64,272). THE LD. AO FAILED TO APPLY THE PROVISIO NS OF SECTION 12A IN TRUE SPIRIT AS HE DIDN'T ALLOWED THE BENEFIT OF CAPITAL EXPENDITUR E DURING THE YEAR. DETAILED CHART OF UTILISATION FROM THE ABOVE CHART IT IS CLEAR THAT THE LD. AO FA ILED TO CONSIDER THE EXPENDITURE IN THE CAPITAL ASSETS DESPITE THE FACT THAT THE SAME W AS EVIDENT FROM THE FIXED ASSETS AND DEPRECIATION CHARTS ATTACHED TO THE BALANCE SHE ET ON RECORD AND FURTHER THE DETAILS WERE SUBMITTED TO HIM DURING THE ASSESSMENT PROCEED INGS. INVESTMENT IN CAPITAL ASSETS IS TO BE TREATED AS UTILISATION OF FUNDS, RELIANCE IS PLACED UPON (I) HON'BLE JURISDICTIONAL PUNJAB & HARYANA HIGH CO URT (327 TTR 73) HAS HELD THAT CAPITAL EXPENDITURE IS ENTITL ED TO EXEMPTION AND WOULD NOT CONSTITUTE PART OF THE TOTA L INCOME (PAGE 120 OF 327ITR) (II) IN S.R.M.M. C. T.M. THIRUPPANI TRUST V. C.I . T. (1998) 230ITR 636 (SC) THE SUPREME COURT HELD THAT THE AMOUNT UTI LISED BY THE ASSESSEE IN PURCHASING A BUILDING TO BE USED AS A H OSPITAL WAS NOTHING BUT APPLICATION OF INCOME FOR CHARITABLE PU RPOSES UNDER SECTION LL(L)(A) OF THE ACT. (III) FURTHER THE HON'BLE MADRAS HIGH COURT IN C.I. T. V. RAO BAHADUR CALAVALA CUNNAN CHETTY CHARITIES (1982) 135 ITR 485 (MAD) HELD THAT SO LONG AS THE EXPENDITURE HAS TO B E INCURRED OUT OF THE INCOME EARNED BY THE TRUST, EVEN IF SUCH EXP ENDITURE IS FOR CAPITAL PURPOSES ON THE OBJECTS OF THE TRUST, THE I NCOME WOULD BE EXEMPT. C) FURTHER THE CONTENTION OF LD AO THAT FORM NO. 10 NOT FILED IS WRONG AS THE SAME IS REQUIRED TO BE FILED WHEN THE APPLICATION OF INCOME DURING FALLS SHORT OF 85% WHEREAS IN THE CAS E OF ASSESSEE THE APPLICATION OF INCOME WAS MORE THAN 100% AND AS SUC H IT WAS NOT REQUIRED TO FILE THE FORM NO 10 DURING THE YEAR.' 4.4 THE HONORABLE ITAT ON THIS ISSUE HAS OPINED T HAT IN VIEW OF THE REGISTRATION GRANTED U/S 12A THE APPELLANT WAS ENTI TLED TO CLAIM EXEMPTION U/S 11. GROSS RECEIPTS 1,13,17,682/- GROSS EXPENSES 92,59,436/- AS PER RECEIPT AND PAYMENT ACCOUNT SURPLUS (AS PER RECEIPT & PAYMENT A/C) 20,58,246/- ADD: DEPRECIATION AS PER BOOKS 31,64,909/- 52,23,155/- LESS: DEPRECIATION AS PER INCOME TAX 19,53,597/- SURPLUS (AS PER AO) 32,69,558/- LESS: CAPITAL EXPENSES 44,33,830/- NET SURPLUS /(DEFICIT) (11,64,272/-) ITA 1183/CHD/2017 A.Y. 2008-09 PAGE 6 OF 8 NOW GOING BY THE FACTS OF THE CASE AND IN THE LIGHT OF LEGAL PRONOUNCEMENTS SUPRA, I AM OF THE CONSIDERED OPINION THAT THE CAPI TAL EXPENDITURE IS AN ALLOWABLE EXPENDITURE WHILE ARRIVING AT THE FIGURE OF SURPLUS FOR THE YEAR. AS A RESULT THE APPEAL OF THE APPELLANT THE ISSUE OF SECTION 12(A) IS ALLOWED. 4.2 THE IMPUGNED ORDER HAVING BEEN PASSED IN THE LIGHT OF THE DIRECTIONS OF THE CO-ORDINATE BENCH WHICH ADMITTEDLY HAS BECOME FINAL AND IN THE ABSENCE OF ANY INFIRMITY HAVING BEEN POINTED OUT , THE CONCLUSION ARRIVED AT IS UPHELD. 5. THE 3 RD ISSUE AGITATED BY THE REVENUE IN THE PRESENT APPEAL ALS O CAME UP FOR CONSIDERATION BEFORE THE CO-ORDINATE BENCH. T HE SAID ISSUE WAS ALSO REMANDED BY THE ITAT. THE FACTS RELATABLE TO TH E ISSUE ARE THAT ADDITION BY WAY OF A DISALLOWANCE WAS MADE OF RS. 4,16,784/ - UNDER SECTION 68 BY THE ASSESSING OFFICER. THE ASSESSEE BEFORE T HE CIT(A) IN THE FIRST ROUND REITERATED THAT THE TRUST IS RUNNING TWO EDU CATIONAL INSTITUTIONS VIZ. SANT BABA SUNDER SINGH JI AKAL ACADEMY & BARRAKAT GIRLS COLLEGE OF EDUCATION & IN ADDITION TO HUGE CRE DIT BALANCES IN THESE ACCOUNT AT RS. 59,65,380/- & RS. 9,53,116/- AND FRESH AD VANCES OF RS. 3,37,000/- & RS. 79,784/- RESPECTIVELY WERE RECEIVED IN TH ESE ACCOUNTS. NO SUMMONS WERE ISSUED FOR COMPELLING ATTENDANCE OF WI TNESSES. THE EXPLANATION OFFERED BY THE APPELLANT WAS STRAIGHT AW AY REJECTED BY THE ASSESSING OFFICER. HOWEVER, THE CIT(A) UPHELD THE SAID ACTION. THE ISSUE WAS CHALLENGED BEFORE THE CO-ORDINATE BENCH AN D REMANDED TO THE CIT(A) WITH THE FOLLOWING OBSERVATIONS : '23. WE FIND THAT THE ISSUE ARISING IN THIS GROUND BEING ADDITION MADE U/S 68 OF THE ACT, IS EFFECTED BY THE ELIGIBILITY OF THE ASSE SSES TO EXEMPT/ON UNDER SECTION 11 OF THE ACT SINCE THE ISSUE OF CLAIM OF THE ASSESSEE OF EXEMPTION U/S 11 OF THE ACT HAS BEEN RESTORED BACK TO THE FILE OF THE LD. CIT(A) IN PARA 16 OF OUR ORDER, WE RESTORE THIS ISSUE ALSO BACK TO THE FILE OF THE LD. CIT(A) TO BE ADJUDICATED UPON IN ACCORDANCE WITH LAW AFTER GIVING THE ASSESSEE DUE O PPORTUNITY OF HEARING. THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSE S.' 5.1 IN THE REMAND PROCEEDINGS THE SUBMISSIONS ADVANCED ON BEHALF THE ASSESSEE HAVE BEEN SET OUT IN PARA 5.2 CONSIDERING WHICH THE ADDITION WAS DELETED IN PARA 5.3 WHICH IS CHALLENGED BY THE REVENUE IN THE PRESENT PROCEEDINGS. FOR READY REFERENCE RELEVANT EXTRACT IS REPRODUCED HEREUNDER: 5.2 AS DIRECTED BY THE HONORABLE ITAT THE OPPORT UNITY WAS PROVIDED TO THE APPELLANT AND IN RESPONSE THE APPELLANT SUBMITT ED THE FOLLOWING ON THE ISSUE: ITA 1183/CHD/2017 A.Y. 2008-09 PAGE 7 OF 8 '23. WE FIND THAT THE ISSUE ARISING IN THIS GROUND BEING ADDITION MADE U/S 68 OF THE ACT, IS EFFECTED BY THE ELIGIBILITY OF THE ASSESSES TO EXEMPT/ON UNDER SECTION 11 OF TH E ACT SINCE THE ISSUE OF CLAIM OF THE ASSESSEE OF EXEMPTI ON U/S 11 OF THE ACT HAS BEEN RESTORED BACK TO THE FILE OF THE L D. CIT(A) IN PARA 16 OF OUR ORDER, WE RESTORE THIS ISSUE ALSO BA CK TO THE FILE OF THE LD. CIT(A) TO BE ADJUDICATED UPON IN ACCORDA NCE WITH LAW AFTER GIVING THE ASSESSEE DUE OPPORTUNITY OF HE ARING. THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSE S.' 'A) THE LD AO WRONGLY MADE THE ADDITION U/S 68 OF R S 4,16,784/-. THE AMOUNT WAS RECEIVED FROM ONE OF THE TRUSTEES WHO IS ALSO A MOHANT OF THE GURDWARA SAHIB SANT BABA SUNDER SINGH JI CANADIAN V ILLAGE TALLEWALL. THE CONFIRMED COPY OF ACCOUNT WAS FILLED AT THE TIM E OF ASSESSMENT (PAGE 6, PARA 2, OF ASSTT ORDER) AND IT WAS EXPLAINED TO HIM THAT THE AMOUNTS ARE THE GOLAK RECEIPTS OF THE GURDWARA SAHIB. FURTH ER THERE IS NO REASON WHY THE ASSESSEE WHOSE INCOME IS EXEMPT WILL RECORD CASH IN THE NAME OF AN OUTSIDER. B) WITHOUT CONCEDING EVEN IF THE ADDITION U/S 68 AM OUNTING TO RS 4,16,784/- IS PRESUMED TO BE INCOME EVEN THEN IT WI LL BE EXEMPT BECAUSE THE UTILISATION IS FOR EDUCATIONAL PURPOSE ONLY AND TOTAL UTILISATION EXCEEDED 85% RELIANCE IS PLACED ON KARN ATAKA HIGH COURT IN THE CASE OF 336ITR PAGE 694 IN THE CASE OF SRI BELI MATHA MAHASAMSTHANA SOCIO CULTURAL & EDUCATIONAL TRUST WH ERE CORPUS DONATIONS WERE TREATED AS INCOME BUT RELIEF GRANTED U/S LL(L)(D) WAS HELD TO BE VALID.' 5.3 I HAVE CONSIDERED THE SUBMISSIONS PUT FORTH BY THE APPELLANT AND THE FACTS OF THE CASE. IN MY VIEW, THE ONUS LIES ON THE APPELLANT TO PROVE THE GENUINENESS OF THE TRANSACTIONS. ALL THE LOANS ARE IN CASH AND THE CONTENTION THAT AMOUNTS ARE ADVANCED OUT OF THE GOL AK DOESN'T ABSOLVE THE APPELLANT OF THE ONUS CAST UPON HIM TO PROVE THE GENUINENESS OF THE TRANSACTIONS, THE IDENTITY OF TH E CREDITOR AND THEIR CREDITWORTHINESS. NONE OF THESE CONDITIONS ARE FULF ILLED IN THIS CASE. THUS, THE ADDITION HAS BEEN RIGHTLY MADE. HOWEVER, IT HAS NOT BEEN DISPUTED THAT THIS AMOUNT WOULD STILL BE EXEMPT U/S 11 IN THE HANDS OF THE TRUST SINCE THE UTILIZATION OF FUNDS BY IT I S FOR EDUCATIONAL PURPOSE ONLY AND THE UTILIZATION EXCEEDED 85%. IN T HIS REGARD RELIANCE IS PLACED ON THE DECISION OF HON'BLE KARNATAKA HIGH COURT IN THE CASE OF DIT(E) V. SRI BELIMATHA MAHASAMSTHANA SOCIO CULT URAL AND EDUCATIONAL TRUST [2012] 336 ITR 694 (KARNATAKA). S INCE, THE AMOUNTS, IN QUESTION, HAVE COME FROM THIRD PARTIES THE SAME WOULD HAVE TO BE TREATED AS INCOME. HOWEVER, IF THE SAID AMOUNT IS UTILIZED OR EXPENDED FOR CHARITABLE PURPOSE, THEN SAID AMOUN T WOULD BE ELIGIBLE FOR EXEMPTION U/S LL(L)(D) OF THE ACT. BUT FOR THE STATISTICAL PURPOSES THIS GROUND OF APPEAL IS ALLOWED. 5.2. CONSIDERING THE AFOREMENTIONED PECULIAR FACTS AND CIRCUM STANCES OF THE CASE WHICH HAVE NOT BEEN ASSAILED IN THE PRESENT PROCEEDINGS I FIND NO INFIRMITY IN THE IMPUGNED ORDER ACCORDINGLY IN VIEW OF THE ABOVE THE SPECIFIC FINDINGS OF THE CITA IN THE FACTS AS THEY STAND , THE DEPARTMENTAL GROUND FAILS. ITA 1183/CHD/2017 A.Y. 2008-09 PAGE 8 OF 8 6. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSED S AID ORDER WAS PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ITSELF. 7. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSED ORDER PRONOUNCED IN THE OPEN COURT ON 1 ST MARCH,2018. SD/- (DIVA SINGH) JUDICIAL MEMBER POONAM COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR ASSTT. REGISTRAR ITAT,CHANDIGARH.