Asst. DIT (Exemption)-III, Hyderabad V. Nalanda Educational Society, Nalgonda

ITA 1197/HYD/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2897 (ITAT-HYDERABAD)
• Duration Of Justice: 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-05-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 06-08-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: LAXMAN
• Assessee Lawyers: CHAITANYA KUMAR
• Keywords: Depreciation; Charitable institution; Capital expenditure
• Section: 2; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIA L MEMBER ITA NO.1197/HYD/12 : A SSTT. YEAR 2009-10 ASST. DIRECTOR OF INCOME- TAX(EXEMPTION)-III, HYDERABAD. V/S. NALANDA EDUCATIONAL SOCIETY, NALGAONDA. ( PAN - AADTS 0153 P ) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI LAXMAN DR RESPONDENT BY : SHRI CHAITANYAKUMAR DATE OF HEARING 02.05.2013 DATE OF PRONOUNCEMENT 22.5.2013 O R D E R PER SAKTIJIT DEY, JUDICIAL MEMBER: THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) IV, HYDERABAD, DATED 31.05.2012 FOR THE ASSESSMENT YEAR 2009-10. 2. EFFECTIVE GROUNDS OF THE REVENUE IN THIS APPEAL READ AS FOLLOWS- 1. THE ORDER OF THE LEARNED. CIT(A) IS ERRONEOUS B OTH ON FACTS AND IN LAW. 2. THE LEARNED. CIT(APPEALS) ERRED IN HOLDING THAT THE ASSESSEE IS ELIGIBLE FOR CLAIM OF EXEMPTION UNDER SECTION 11, E VEN IN ABSENCE OF APPROVAL UNDER SUB-CLAUSE (VI) TO THE SECTION 10(23 C) OF THE I.T. ACT, 1961. 3. THE LEARNED CIT(A) FAILED TO SEE THAT SUB-CLAUSE (VI) TO THE SECTION 10(23C)IS DISTINCT FROM REGISTRATION UNDER S.12A OF THE ACT. 4. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED SUB -CLAUSE (VI) TO THE SECTION 10(23C) AS INSERTED BY THE FINANCE ACT, 199 8 W.E.F. 01.04.1999, STATES THAT ANY UNIVERSITY OR OTHER EDU CATIONAL INSTITUTION EXISTING SOLELY FOR EDUCATIONAL PURPOSE , AND WHICH MAY BE APPROVED BY THE PRESCRIBED AUTHORITY. THUS, THE INTENTION OF THE LEGISLATURE IS QUITE CLEAR. 5. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED TH AT OBTAINING APPROVAL OF THE PRESCRIBED AUTHORITY IS MANDATORY A S PER THE PLAIN ITA NO.1197/ HYD/2012 NALANDA EDUCATIONAL SOCIETY, NALGAONDA. 2 MEANING OF SECTION 10(23)(IV) OF THE I.T. ACT, 1961 WHEREVER THE AGGREGATE GROSS RECEIPTS OF EDUCATIONAL INSTITUTION S ARE OVER AND ABOVE RS. 1 CRORE. 6. THE CIT(A) FAILED TO APPRECIATE THAT THE DECISIO N OF THE APEX COURT IN THE CASE OF CIT V/S. BAR COUNCIL OF MAHARASHTRA WAS MADE IN THE YEAR 1981 IE., PRIOR TO INTRODUCTION OF THE SUB-CL AUSE (VI) OF THE SECTION 10(23C) (INSERTED BY THE FINANCE ACT, 1998 W.E.F. 01.04.1999) 7. THE LEARNED CIT(A) BY OBSERVING THAT IT IS HELD THAT THE APPELLANT WOULD BE ELIGIBLE FOR CLAIM OF EXEMPTION U/S. 11 OF THE ACT, SUBJECT TO THE FULFILLMENT OF THE CONDITIONS OF SECTION 11 TO 13 OF THE ACT, IN PRACTICAL, HAS SET ASIDE THE ASSESSMENT , WHEREAS H E HAS NO SUCH POWER UNDER THE PRESENT PROVISIONS OF THE ACT. 8. THE LEARNED CIT(A) ERRED IN NOT SUSTAINING THE D ISALLOWANCE OF DEPRECIATION MADE BY THE ASSESSING OFFICER BASING O N APEX COURT ORDER IN THE CASE OF ESCORTS & OTHERS VS. UNION OF INDIA (199 ITR 44) 9. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT THE ASSESSEE HAS CLAIMED DOUBLE DEDUCTION BY APPLICATIO N OF MONEY TOWARDS CAPITAL EXPENDITURE FOR ACQUIRING THE FIXED ASSETS AND CLAIMED DEPRECIATION ON THE SAME ASSETS. 10. 3. WE HEARD BOTH SIDES AND PERUSED THE ORDERS OF T HE REVENUE AUTHORITIES. THE FIRST ISSUE INVOLVED IN THE ABOV E GROUNDS OF APPEAL RELATES TO DENIAL OF ASSESSEES CLAIM FOR EXEMPTION OF ITS INCOME FROM TAX. THOUGH THE LEARNED A.R. HAS RELIED ON CERTAIN DECIS IONS OF THE TRIBUNAL ON THE POINT AT ISSUE, DULY FILING COPIES OF THE SAME IN THE PAPER-BOOK BEFORE US, WE FIND THAT THE ISSUE IS ALSO COVERED BY THE C ONSISTENT VIEW TAKEN BY THE HYDERABAD BENCHES OF THE TRIBUNAL IN SIMILAR MA TTERS, AS IN ASSTT. DIRECTOR OF INCOME-TAX(EXEMPTION) I, HYDERABAD V.S, MADINA EDUCATION & WELFARE SOCIETY, HYDERABAD (ITA NO.1588/HYD/2012 FO R ASSESSMENT YEAR 2009-10 VIDE ORDER DATED 8.2.2013), WHEREIN THE ISS UE IS DECIDED OBSERVING THAT IT IS COVERED BY THE ORDER OF THE HY DERABAD BENCH A OF THE TRIBUNAL DATED 15.4.2009 IN THE CASES OF VASAVI ACA DEMY OF EDUCATION, HYDERABAD IN ITA NO.1133/HYD/2006 FOR THE ASSESSMEN T YEAR 2003-04 AND ORDER DATED 17.4.2009 IN ITA NO.1206/HYD/2007 F OR THE ASSESSMENT YEAR 2004-05, WHEREIN IT WAS HELD THAT IF DONATIONS ARE RECEIVED ITA NO.1197/ HYD/2012 NALANDA EDUCATIONAL SOCIETY, NALGAONDA. 3 COMPULSORILY FOR THE ADMISSION OF STUDENTS, BY WHAT EVER NAME IT MAY BE CALLED, I.E. DONATION, BUILDING FUND, AUDITORIUM FU ND, ETC. OVER AND ABOVE THE PRESCRIBED FEE, FROM THE STUDENTS, THE ASSESSEE WOULD NOT BE ENTITLED FOR EXEMPTION EITHER UNDER S.10(23C) OR UNDER S.11 OF THE ACT. IT IS ALSO NOTED IN THOSE DECISIONS THAT THAT THE CONSTITUTION AL BENCH OF APEX COURT IN THE CASE OF T.M.A. PAI FOUNDATIONS AND OTHERS VS . STATE OF KARNATAKA & OTHERS (2002) 8 SCC 481 EXAMINED THE ISSUE OF COL LECTION OF CAPITATION FEES FOR THE ADMISSION OF STUDENTS OVER AND ABOVE FEES PRESCRIBED BY THE PRIVATE INSTITUTION AND HELD THAT THE INSTITUTION W HICH ARE COLLECTING CAPITATION FEES FOR ADMISSION OF STUDENTS OVER AND ABOVE THE FEES PRESCRIBED CANNOT BE CONSTRUED AS CHARITABLE/EDUCAT ION INSTITUTION. APEX COURT FURTHER OBSERVED THAT THE FEES COLLECTED OVER AND ABOVE THE PRESCRIBED FEE FOR ADMISSION OF THE STUDENT HAS TO BE CONSTRUCTED AS CAPITATION FEE. THE APEX COURT, FURTHER OBSERVED T HAT THE CONCERNED UNIVERSITY AND REGULATED BODY HAS TO TAKE ACTION FO R WITHDRAWAL OF THE RECOGNITION IN CASE IT IS FOUND THAT THE EDUCATIONA L INSTITUTION RECEIVED ANY MONEY OVER AND ABOVE THE FEES PRESCRIBED FOR THE CO URSES. SAME VIEW WAS TAKEN BY APEX COURT IN THE CASE OF ISLAMIC ACAD EMY OF EDUCATION AND ANOTHER VS. STATE OF KARNATAKA & ANOTHER (2003) 6 S CC 697. IF THE DONATIONS WERE RECEIVED COMPULSORILY FOR ADMISSION OF STUDENTS, THE ASSESSEE IS NOT ENTITLED FOR EXEMPTION EITHER U/S 1 0(23C) OR U/S 11 OF THE IT ACT. SINCE THE REVENUE AUTHORITIES HAVE NOT EXA MINED THE COLLECTION OF CAPITATION FEES IN THIS CASE FOR BOTH THE YEARS, IN OUR OPINION, THE MATTER REQUIRES TO BE EXAMINED BY THE ASSESSING OFFICER TO ASCERTAIN WHETHER THE ASSESSEE IS COLLECTING THE CAPITATION FEES FROM STU DENTS OR NOT AND IT IS NECESSARY FOR BRINGING THE ACTUAL FACTS ON RECORD F OR DECIDING THE ISSUE EFFECTIVELY. FOLLOWING THE CONSISTENT VIEW TAKEN BY THE TRIBUNAL IN SIMILAR MATTERS, THEREFORE, WE SET ASIDE THE ORDERS OF THE REVENUE AUTHORITIES ON THIS ISSUE IN THIS CASE ALSO AND REMIT BACK THE MAT TER TO THE FILE OF ASSESSING OFFICER WITH A DIRECTION THAT HE SHALL RE CONSIDER THE ENTIRE ISSUE IN THE LIGHT OF JUDGMENT OF SUPREME COURT IN THE CASE OF M/S ISLAMIC ITA NO.1197/ HYD/2012 NALANDA EDUCATIONAL SOCIETY, NALGAONDA. 4 ACADEMY OF EDUCATION & ANOTHER VS. STATE OF KARNATA KA AND ANOTHER (SUPRA), AND IN THE CASE OF T.M.A. PAI FOUNDATION A ND OTHERS VS. STATE OF KARNATAKA AND OTHERS (SUPRA), AND FIND OUT WHETHER THE ASSESSEE HAS RECEIVED ANY MONEY OVER AND ABOVE THE FEES PRESCRIB ED AND THEREAFTER DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW AFTE R GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. WE MAKE IT CLEAR THAT THE ASSESSEE IS NOT ENTITLED FOR EXEMPTION EITHER U/S 1 1 OR U/S 10(23C) IN CASE IT COLLECTED ANY MONEY BY WHATEVER NAME IT IS CALLE D I.E., DONATION, BUILDING FUND, AUDITORIUM FUND ETC. ETC., OVER AND ABOVE THE PRESCRIBED FEE FOR ADMISSION OF STUDENTS. WE DIRECT ACCORDINGLY. 4. THE OTHER ISSUE INVOLVED IN THIS APPEAL RELATE S TO ALLOWABILITY OF DEPRECIATION. EVEN THOUGH RELIANCE IS PLACED ON TH E DELHI BENCH C DECISION OF THE TRIBUNAL IN THE CASE OF ASSTT. DIRE CTOR OF INCOME- TAX(EXEMPTION), TC-II, NEW DELHI V/S. INTERNATIONAL GOUDIYA VEDANTA TRUST, NEW DELHI, DATED 21.12.2012 IN ITA NO.2920/D EL/2011 FOR ASSESSMENT YEAR 2008-09 ON THIS ISSUE, DULY FURNIS HING A COPY THEREOF BEFORE US, WE FIND THAT THIS ISSUE IS ALSO COVERED BY THE CONSISTENT VIEW TAKEN BY THE HYDERABAD BENCHES OF THE TRIBUNAL IN S IMILAR MATTERS, AS IN THE CASE OF ADIT V/S. VYJAYANTHI EDUCATIONAL SOCIE TY, MAHABOOBNAGAR IN ITA NO.1417/HYD/- 2010 FOR ASSESSMENT YEAR 2007-08. THE TRIBUNAL IN ITS ORDER DATED 8.6.2012, AND IN ASST. DIRECTOR OF INCO ME-TAX(EXEMPTION) I, HYDERABAD V/S. KAMINENI EDUCATIONAL SOCIETY, HYDERA BAD (ITA NOS.1585 AND 1586/HYD/2012 FOR ASSESSMENT YEARS 2008-09 AND 2009-10, VIDE ORDER DATED 8.2.2013). IN THE CASE OF VYJAYANTHI EDUCATIONAL SOCIETY (SUPRA), THE TRIBUNAL HAS DEALT WITH THIS ISSUE IN THE FOLLOWING MANNER- 6. WE HEARD BOTH THE PARTIES ON THIS ISSUE. SIMI LAR ISSUE CAME UP FOR CONSIDERATION BEFORE THE JAIPUR BENCH O F THIS TRIBUNAL IN THE CASE OF JAIPUR STOCK EXCHANGE (108 TTJ 393)( JP), WHEREIN IT WAS HELD THAT DEPRECIATION ON FIXED ASSETS IS AN AL LOWABLE DEDUCTION, WHICH IS NECESSARY TO ARRIVE AT THE INCO ME AVAILABLE FOR APPLICATION TO CHARITABLE PURPOSE. FURTHER, IN THE CASE OF MAHILA SIDH NIRMAN YOJNA V/S. IAC (50 ITD 472), IT HAS BEE N HELD BY THE ITA NO.1197/ HYD/2012 NALANDA EDUCATIONAL SOCIETY, NALGAONDA. 5 DELHI BENCH OF THE TRIBUNAL THAT MERELY BECAUSE ENT IRE VALUE OF ASSET IS ALLOWABLE AS EXPENDITURE UNDER S.11, IT IS NOT SUFFICIENT TO DENY CLAIM FOR DEPRECIATION UNLESS THE VALUE OF ASS ET HAS BEEN ACTUALLY ALLOWED AS EXPENDITURE. IF NOT SO ALLOWED IN THE YEAR OF ACQUISITION, ASSESSEE WILL BE ENTITLED TO DEPRECIAT ION. FURTHER, IT WAS HELD BY THE COCHIN BENCH OF THE TRIBUNAL IN THE CASE OF DY. CIT V/S. ADI SANKARA TRUST (46 SOT 230) THAT WHERE AN A SSESSEE TRUST IS CLAIMING DEPRECIATION ON ASSETS WHERE COST OF TH E RELEVANT ASSETS STOOD CLAIMED AS AN APPLICATION OF INCOME FOR A PRE CEDING AND/OR THE CURRENT YEAR UNDER S.11(1), ITS CLAIM UNDER S.3 2(1)IS ELIGIBLE ONLY IN RESPECT OF BUSINESS ASSETS AND WHERE ENTIRE COST OF THE ASSET STANDS ALLOWED BY WAY OF APPLICATION OF INCOM E UNDER S.11(1), THE DEPRECIATION CLAIMED BY THE ASSESSEE U NDER S.32(1) IS NOT ALLOWABLE AS THE TRUST IS NOT UNDERTAKING ANY B USINESS ACTIVITY. IN VIEW OF THE ABOVE, THE ASSESSING OFFICER IS DIRE CTED TO VERIFY IN RESPECT OF EACH ASSET ON WHICH DEPRECIATION CLAIMED , WHETHER THE VALUE OF SUCH ASSET WAS IN FACT ALLOWED UNDER S.11, AND IF IT WAS SO ALLOWED, THE DEPRECIATION WOULD NOT BE ALLOWED IN R ESPECT OF SUCH ASSET. ONLY IF THE VALUE OF THE ASSET WAS NOT ALLOW ED AS EXPENDITURE UNDER S.11, THE ASSESSING OFFICER IS REQUIRED TO AL LOW DEPRECIATION THEREON, AS PER THE RATE APPLICABLE TO THOSE ASSETS , AS HELD IN THE CASE OF MAHILA SIDH NIRMAN YOJNA, CITED SUPRA. TH IS ISSUE RAISED BY THE REVENUE IS ALSO SET ASIDE TO THE FILE OF THE AS SESSING OFFICER FOR FRESH CONSIDERATION, IN THE LIGHT OF THE ABOVE OBSE RVATIONS. THE ASSESSING OFFICER SHALL ACCORDINGLY REDECIDE THE IS SUE IN ACCORDANCE WITH LAW AND AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 5. IN CONSONANCE WITH THE CONSISTENT VIEW OF TH E TRIBUNAL IN SIMILAR MATTERS, WE SET ASIDE THE IMPUGNED ORDER OF THE CIT(A) AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR FRESH EXAMINATION OF THE MATTER IN RELATION TO THE ISSUE IN DISPUTE. THE ASS ESSING OFFICER IS ACCORDINGLY DIRECTED TO VERIFY IN RESPECT OF EACH A SSET ON WHICH DEPRECIATION CLAIMED, WHETHER THE VALUE OF SUCH ASS ET WAS IN FACT ALLOWED UNDER S.11, AND IF IT WAS SO ALLOWED, THE DEPRECIAT ION WOULD NOT BE ALLOWED IN RESPECT OF SUCH ASSET. ONLY IF THE VALUE OF THE ASSET WAS NOT ALLOWED AS EXPENDITURE UNDER S.11, THE ASSESSING OFFICER IS RE QUIRED TO ALLOW DEPRECIATION THEREON, AS PER THE RATE APPLICABLE TO THOSE ASSETS, AS HELD IN THE CASE OF MAHILA SIDH NIRMAN YOJNA, CITED SUPRA. THIS ISSUE RAISED BY THE REVENUE IS SET ASIDE TO THE FILE OF THE ASSESSI NG OFFICER FOR FRESH CONSIDERATION, IN THE LIGHT OF THE ABOVE OBSERVATIO NS. THE ASSESSING OFFICER SHALL ACCORDINGLY REDECIDE THE ISSUE IN ACC ORDANCE WITH LAW AND AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO T HE ASSESSEE. ITA NO.1197/ HYD/2012 NALANDA EDUCATIONAL SOCIETY, NALGAONDA. 6 6. IN THE RESULT, REVENUES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 22.5.2013 SD/- SD/- (CHANDRA POOJARI) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DT/- 22 ND MAY, 2013 COPY FORWARDED TO: 1. NALANDA EDUCATIONAL SOCIETY, 6 - 6 - 222, RAVIDHNRA NAGAR, CHERLAPALLY, NALGAONDA DIST. . 2. ASST. DIRECTOR OF INCOME-TAX(EXEMPTION)-III, HYD ERABAD 3. COMMISSIONER OF INCOME - TAX(APPEALS) IV, HYDERABAD 4. COMMISSIONER OF INCOME - TAX III HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S