The Dy.Director of Income tax,(Exemption), Ahmedabad V. Lok Jagruti Kendra, Ahmedabad

ITA 1221/AHD/2013

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9520 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 8 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 05-01-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 01-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S N DIVATIA
• Keywords: Depreciation; Charitable institution; Capital expenditure
• Section: 32; 11

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD . . , , BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO.1221/AHD/2013 ( / ASSESSMENT YEAR : 2009-10) DEPUTY. DIRECTOR OF INCOME- TAX, AHMEDABAD / VS. LOK JAGRUTI KENDRA COLLEGE CAMPUS, VASTRAPUR, AHMEDABAD. ./ ./ PAN/GIR NO. : AAATL 0854 D ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI S. N. DIVATIA, A.R. / RESPONDENT BY : SHRI SANJAY AGRAWAL, CIT D.R. / DATE OF HEARING 05/01/2017 / DATE OF PRONOUNCEMENT 11/01/2017 / O R D E R PER SHRI MAHAVIR PRASAD, JUDICIAL MEMBER : THIS APPEAL HAS BEEN FILED BY THE DEPARTMENT AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX(APPEALS)-XXI, AHMEDABAD, DATED 21/02/2013 FOR THE ASSESSMENT YEAR (AY) 2009-10 AND FOLLOWING GROUNDS HAVE BEEN TAKEN: (I) THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN MAKING AN ADDITION OF RS.89,03,940/- MADE BY THE ASSESSING OFFICER, BEING LOANS ADVANCED TO PERSONS SPECIFIED U/S.13 OF THE I.T. ACT. (II) THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF DEPRECIATION OF RS.2,35,79,765/- MADE BY THE ASSESSING OFFICER. ITA NO. 1221/AHD/2013 DY.DIRECTOR OF INCOME-TAX VS. LOK JAGRUTI KENDRA ASST.YEAR 2009-10 - 2 - (III) THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN IGNORING THE STAND OF THE REVENUE THAT ALLOWANCE OF DEPRECIATION ON THE ASSETS, THE COST OF WHICH HAS ALREADY BEEN ALLOWED AS A DEDUCTION ON ACCOUNT OF APPLICATION OF INCOME, WOULD AMOUNT TO DOUBLE DEDUCTION IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ESCORTS LTD., 199 ITR 43. (IV) WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, DEDUCTION OF DEPRECIATION U/S. 32 WHICH FALLS UNDER THE HEAD PROFIT AND GAINS FROM BUSINESS AND PROFESSION OF INCOME-TAX ACT, 1961, WOULD BE AVAILABLE TO A CHARITABLE TRUST WHOSE INCOME IS OTHERWISE NOT ASSESSABLE UNDER THE ABOVE HEAD. (V) THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF CORPUS DONATION OF RS.3,42,46,927/-, MADE BY THE ASSESSING OFFICER. (VI) THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN MAKING AN ADDITION OF RS.88,77,474/- MADE BY THE ASSESSING OFFICER, BEING ADVANCE FEES RECEIVED BY THE ASSESSEE. (VII) THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS THAT IF SECTION 13 IS INVOKED EVEN FOR ONE ISSUE THEN AS PER PROVISIONS OF SECTION 13(1), THE ASSESSEE FORFEITS THE EXEMPTION U/S 11 OF ALL INCOME INCLUDING CORPUS DONATION, ADVANCE FEE, LOANS ETC. (VIII) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. (IX) IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD.CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE, A REGISTERED TRUST U/S.12AA OF THE I.T.ACT FILED ITS RETURN OF INCOME ON 22/02/2009 DECLARING ITS INCOME AT RS.NIL AND MATTER WAS SELECTED FOR SCRUTINY AND STATUTORY NOTICE WERE ISSUED APPLIED WITH THE A.O. WHILE SCRUTINIZING THE CASE, CAME ACROSS A FEW FACTS MENTIONED HEREUNDER. THESE HAVE BEEN SPOKEN OF AT LENGTH IN THE ASSESSMENT ORDER. I. LOANS ADVANCED TO PERSON SPECIFIED U/S.13 OF THE I.T. ACT, RS.89,03,946/- II. ADVANCED FEES AMOUNTING TO RS.88,77,474/- III. DEPRECIATION AMOUNTING TO RS.2,35,79,765/- ITA NO. 1221/AHD/2013 DY.DIRECTOR OF INCOME-TAX VS. LOK JAGRUTI KENDRA ASST.YEAR 2009-10 - 3 - IV. DISALLOWANCE OF CORPUS DONATION RS.3,42,46,927/- U/S.143(3) OF THE I.T.ACT LOANS ADVANCED TO PERSON SPECIFIED U/S.13 OF THE I.T. ACT:- THE ASSESSEE DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER QUESTION HAD ADVANCED LOANS TO MANY A SPECIFIED INDIVIDUALS COVERED U/S.13 OF THE I.T.ACT, 1961. THE OBJECT OF THE TRUST IN ADVANCING THIS LOAN WAS QUESTIONED BY THE AO DURING THAT COURSE OF THE SCRUTINY PROCEEDINGS. IN LIGHT OF THE ABOVE STATED FACTS OF THE CASE AND TAKING COGNIZANCE OF THESE ADVANCEMENTS THE ASSESSING OFFICER IN HIS ORDER HAD CLEARLY MENTIONED THAT THE ASSESSEE LOST ITS CLAIM OF SEEKING EXEMPTION U/S.11 OF THE I.T. ACT. FURTHER TO THIS, THE ASSESSEE HAD FAILED TO FURNISH SUCH DEDUCTION U/S.11 OF THE I.T. ACT, 1961. THEREFORE, THE AMOUNT OF RS.89,03,940/- WAS ADDED BACK TO THE INCOME OF THE TRUST. ADVANCED FEES AMOUNTING TO RS.88,77,474/- DURING THE COURSE OF THE PROCEEDINGS IT WAS NOTICED BY THE AO THAT THE TRUST WAS IN RECEIPT OF ADVANCE FEES AMOUNTING TO RS.88,77,474/- WHICH IT HAD DISCLOSED IN THE BALANCE SHEET OF L.J. INSTITUTE OF ENGINEERING & TECHNOLOGY. THIS, THE ASSESSEE CLAIMED TO HAVE BEEN RECEIVED FROM THE STUDENTS WHO SOUGHT ADMISSION UNDER THE NRI QUOTA AND HAD STATED THAT THE SAME WOULD BE UTILIZED FOR THE BENEFIT OF STUDENTS FROM THE ECONOMICALLY WEAKER SECTION. THIS JUSTIFICATION PUT FORTH BY THE ASSESSEE WAS NOT ACCEPTED TREATING THE SAID AMOUNT HAS REVENUE IN NATURE. AS THE ASSESSEE WAS DENIED THE DEDUCTION U/S.11 THE AMOUNT OF ADVANCE FEES (RS.88,77,474/-) TOO WAS ADDED BACK TO THE INCOME OF THE ASSESSEE. ITA NO. 1221/AHD/2013 DY.DIRECTOR OF INCOME-TAX VS. LOK JAGRUTI KENDRA ASST.YEAR 2009-10 - 4 - DEPRECIATION AMOUNTING TO RS.2,35,79,765/- DURING THE YEAR THE ASSESSEE HAD CLAIMED DEPRECIATION TO THE TUNE OF RS,2,35,79,765/- AS THE CAPITAL EXPENDITURE INCURRED ON FIXED ASSETS HAD BEEN ALLOWED AS EXPENDITURE IN THE EARLIER YEAR AS APPLICATION OF FUND FURTHER ALLOWANCE OF DEPRECIATION AS APPLICATION OF RECEIPTS IN SUBSEQUENT YEAR WOULD APPARENTLY LEAD TO DOUBLE DEDUCTION. THE ASSESSEE BEING ASSESSED AS A BUSINESS ENTITY, THE CLAIM OF DEPRECIATION AMOUNTING TO RS.2,35,79,765/- WAS DISALLOWED AND ADDED BACK TO THE INCOME OF THE TRUST. DISALLOWANCE OF CORPUS DONATION RS.3,42,46,927/- AN AMOUNT OF RS.3,42,46,927/- HAD BEEN ADDED TO ITS CORPUS DONATION ACCOUNT DURING THE PERIOD UNDER QUESTION. THE ASSESSEE BEING DENIED FROM CLAIMING DEDUCTION U/S.11 THE ENTIRE CORPUS DONATION RECEIVED TOO WAS ADDED BACK. ON THE BASIS OF THE ABOVE THE ASSESSEES TOTAL INCOME FOR THE YEAR WAS ASSESSED AT RS.7,56,08,110/- AGGRIEVED BY THE AFORESAID ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD.CIT(A)-XXI, AHMEDABAD WHO PARTLY ALLOWED THE ASSESSEES APPEAL AND FOLLOWING APPEAL IS BEFORE US. (I) WITH REGARD TO THE ISSUE OF DISALLOWANCE OF LOANS PARTED TO SPECIFIED PERSONS OF THE TRUST AMOUNTING TO RS.89,03,946/- THE LD.CIT(A)-XXI, AHMEDABAD HAS ACCEPTED THE CONTENTION OF THE ASSESSEE THAT ALL THE LOANS OR MONEY GIVEN FOR ACQUISITION OF IMMOVABLE ASSETS WERE IN ACCORDANCE WITH THE OBJECT OF THE TRUST. THE REMARKS IN FORM-B STATING AS NO AGAINST THE ITA NO. 1221/AHD/2013 DY.DIRECTOR OF INCOME-TAX VS. LOK JAGRUTI KENDRA ASST.YEAR 2009-10 - 5 - RESPECTIVE COLUMN HAS BEEN ACCEPTED TREATING THESE AS EXPENSES METED OUT TOWARDS THE OBJECT OF THE TRUST AND NOT CONSIDERING THESE AS ONE WHERE IN THE PROVISIONS OF SECTION 13 WOULD GET ATTRACTED AND THAT THE ASSESSING OFFICERS OBSERVATION WERE UNWARRANTED. (II) IN SUPPORT OF THE ASSESSEES CASE LD.A.R. FILED AN ORDER OF CO- ORDINATE BENCH IN ITA NO.1606/AHD/2011 FOR THE ASSESSMENT YEAR 2008-09 AND STATED THAT SAME IS COVERED BY THE HONBLE ITAT ORDER AND CO-ORDINATE BENCH DISMISSED THE APPEAL OF THE REVENUE BY STATED THAT THERE IS OWN INFIRMITY PASSED BY THE LD.CIT(A). (III) WITH REGARD TO THE ISSUE OF ADVANCE FEES THE LD.CIT(A) IN HIS ORDER HAS CONTENDED THAT THE TRUE NATURE OF RECEIPTS IS IMPORTANT TO APPLY FOR THE AMBIT OF TAXATION OF SUCH RECEIPTS. IT HAS BEEN ASSERTED THAT THE NATURE OF RECEIPTS IS NOT REVENUE IN NATURE AND HAS BEEN INCLINED TO AGREE WITH THE ASSESSEES CONTENTIONS FILED DURING THE COURSE OF THE APPELLATE PROCEEDINGS AND HAS ACCORDINGLY DIRECTED TO DELETE THE SAID ADDITION OF RS.88,77,474/-. 3. LD. CIT(A)-XXI, AHMEDABAD HAS STATED AN ORDER OF HONBLE ITAT, AHMEDABAD IN THE CASE OF PARUL AROGYA SEWA MANDAL TRUST ITA NO.1190/AHD/2010 IN DIRECTING TO DELETE THE SAID ADDITION. SO IN OUR CONSIDERED OPINION WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A). SO FAR DEPRECITATION IS CONCERNED LD.CIT(A) HAS NOT ACCEPTED AS ITA NO. 1221/AHD/2013 DY.DIRECTOR OF INCOME-TAX VS. LOK JAGRUTI KENDRA ASST.YEAR 2009-10 - 6 - IN THE CASE OF TRUST THE WHOLE COST OF ASSETS IS TREATED AS APPLICATION OF FUNDS FOR THE PURPOSE OF OBJECTS OF THE TRUST, THIS BASICALLY AMOUNTS TO 100% DEDUCTION FOR DEPRECIATION. 4. HENCE, APPELLANT IS DULY REGISTERED AND IS CARRYING OUT EDUCATIONAL ACTIVITIES WHICH ARE CHARITABLE IN NATURE WITHIN THE DEFINITION OF SECTION 2(15) AND SECTION 13 IS FOUND NOT BE INVOKABLE IN THIS CASE. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A). WITH REGARD TO THE TAXABILITY OF CORPUS DONATION AMOUNTING TO RS.3,42,46,927/- THE LD.CIT(A) HAS HELD IN HIS ORDER THAT THE LD.AO HAS MECHANICALLY ADDED THE DIFFERENCE OF CREDIT AND DEBIT FROM THE LEDGER OF CORPUS DONATION. EXCEPT FOR CASH DONATIONS AMOUNTING TO RS.1,30,000/- THE REST WAS FOUND IN ORDER. ACCORDINGLY, HAS GRANTED RELIEF TO THE EXTENT OF RS.3,41,16,927/-, WE DO NOT FIND ANY INFIRMITY IN THE SAID ORDER AND IN THIS CASE LD.AR HAS CITED A JUDGMENT OF GUJARAT HIGH COURT SUPPORTING THE CONTENTION AND ASSESSEE ON THE OTHER HAND LD.DR HAS STATED A JUDGMENT OF GUJARAT HIGH COURT IN THE MATTER OF CIT(A) VS. SHETH MANILAL RANCHHODDAS VISHRAM BHAVAN TRUST, 198 ITR 598 (GUJ.) AND GIVEN RELIEF TO THE ASSESSEE AND ON THE OTHER HAND LD. DR CITED A JUDGMENT OF KERALA HIGH COURT BY SHOWING THAT THIS JUDGMENT SUPPORT THE CONTENTION OF THE REVENUE, BUT AS PER LEGAL JURISPRUDENCE, WE WILL HAVE TO FOLLOW OUR JURISDICTIONAL HIGH COURT. 5. ON ACCOUNT OF FOREGOING OBSERVATION WE DO NOT FIND ANY INFIRMITY AND ILLEGALITY IN THE ORDER PASSED BY THE LD. CIT (A). THEREFORE, APPEAL OF THE DEPARTMENT IS DISMISSED. ITA NO. 1221/AHD/2013 DY.DIRECTOR OF INCOME-TAX VS. LOK JAGRUTI KENDRA ASST.YEAR 2009-10 - 7 - 6. IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 11/01/2017 SD/- SD/- . . ( ) ( ) ( N.K. BILLAIYA ) ( MAHAVIR PRASAD ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 11/01/2017 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)-XXI, AHMEDABAD. 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD TRUE COPY