ACIT, Central Circle-1, Hyderabad V. MGR Educational Society, Secunderabad

ITA 1547/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61878 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-05-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2003-2004
• Appeal Filed On: 29-08-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V SRINIVAS SMT NIVEDITA BISWAS
• Assessee Lawyers: RAVI SESHAGIRI RAO; T CHAITANYA KUMAR
• Keywords: Capital asset; Depreciation; Cost of acquisition; Capital receipt
• Section: 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. / C.O. NO. (IN ITA NO.) ASS T. YEAR APPELLANT / CROSS-OBJECTOR RESPONDENT 1 5 7 7 /HYD/2011 1578/HYD/2011 2003 - 04 2004-05 M/S. MGR EDUCATIONAL SOCIETY, HYDERABAD (PAN AAATM 8546 M) ASSTT. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-I, HYDERABAD 1547/HYD/2011 1548/HYD/2011 1549/HYD/2011 1550/HYD/2011 1551/HYD/2011 1552/HYD/2011 1553/HYD/2011 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 ASTT COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE-I, HYDERABAD. M/S. MGR EDUCATIONAL SOCIETY, HYDERABAD (PAN AAATM 8546 M) 1415/HYD/2011 1416/HYD/2011 1417/HYD/2011 2005-06 2006-07 2007-08 ASTT COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE-I, HYDERABAD M/S.MARUTHI EDUCATIONAL SOCIETY, DUNDIGUL, QUTUBULLAPURA MANDAL, R.R.DISTRICT. (PAN AAATM 8546 M) 1537/HYD/2011 1538/HYD/2011 1539/HYD/2011 1540/HYD/2011 1308/HYD/2011 2004-05 2005-06 2006-07 2007-08 2003-04 M/S.MARUTHI EDUCA- TIONAL SOCIETY, DUNDIGUL, QUTUBULLA- PUR MANDAL, R.R.DISTRICT. (PAN AAATM 8546 M) ASTT COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE-I, HYDERABAD 58/HYD/2011 (IN ITA 1308/- HYD/2011) 2003-04 ASTT COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE-I, HYDERABAD M/S.MARUTHI EDUCATIONAL SOCIETY, DUNDIGUL, QUTUBULLAPURA MANDAL, R.R.DISTRICT. (PAN AAATM 8546 M) ITA NO.1577/HYD/2011 & OTHERS M/S.MGR EDUCATIONAL SOCIETY HYD & ANR. 2 ASSESSEE BY : SHRI T.CHAITANYAKUMAR & SHRI RAVI SESHAGIRI RAO DEPARTMENT BY : SHRI V.SRINIVAS/ SMT. NIVEDITA BISWAS DATE OF HEARING 3 . 4 .2012 DATE OF PRONOUNCEMENT O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS A BUNCH OF 17 APPEALS AND A CROSS-OBJECTION CONCERNING TWO EDUCATIONAL INSTITUTIONS. SINCE COM MON ISSUES ARE INVOLVED, ALL THESE APPEALS AND THE ONLY CO ARE BEI NG DISPOSED OFF WITH THIS CONSOLIDATED ORDER FOR THE SAME OF CONVENIENCE . APPEALS CONCERNING M/S. MGR EDUCATIONAL SOCIETY, HYDER ABAD: ASSESSEES APPEALS: ITA NO.1577/HYD/201 1 ASSESSMEN T YEAR 2003-04 ITA NO.1578/HYD/2011 ASSESSMENT YEAR 2004 -05 2. THESE TWO APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST SIMILAR BUT SEPARATE ORDERS OF THE CIT(A)-I HYDERABAD DATE D 24.6.2011 FOR THE ASSESSMENT YEAR 2003-04 AND 2004-05. 3. WE MAY NOTE AT THE OUTSET THAT THERE IS A DELAY OF THREE DAYS IN THE FILING OF THESE APPEALS. ASSESSEE HAS FILED CON DONATION APPLICATIONS SEEKING CONDONATION OF DELAY. WE ARE CONVINCED WITH THE REASONS FOR THE DELAY. WE ACCORDINGLY CONDONE THE SAME AND PROCEED TO DISPOSE OFF THESE APPEALS ON MERITS. 4. THE ONLY COMMON EFFECTIVE GROUNDS OF THE ASSESS EE IN THESE APPEALS READ AS FOLLOWS- ITA NO.1577/HYD/2011 & OTHERS M/S.MGR EDUCATIONAL SOCIETY HYD & ANR. 3 1. THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS ) IS ERRONEOUS TO THE EXTENT IT IS PREJUDICIAL TO THE APPELLANT. 2. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) ERR ED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN TREATING THE CONTRIBUTIONS RECEIVED OF RS.3,22,292 AS THE INCOME OF THE APPELLANT. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) OUGHT TO HAVE C ONSIDERED THE FACT THAT THE SAID AMOUNT WAS UTILIZED FOR THE PURPOSE O F OBJECTS OF THE SOCIETY AND, THEREFORE, THE RECEIPT IS EXEMPT FROM TAX. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE ISSUE INVOLVED IN THIS APPEAL RELATES TO ASSESSEES CLAIM FOR EXEMPTION OF ITS INCOME UNDER S.11 OF THE ACT. WE FIND THAT THIS MAIN ISSUE INVOLVED IN THE ABOVE GROUNDS IS COVERED BY THE ORD ER OF THE HYDERABAD BENCH A OF THE TRIBUNAL DATED 15.4.2009 IN THE CA SES OF VASAVI ACADEMY OF EDUCATION, HYDERABAD IN ITA NO.1133/HYD/2006 FOR TH E ASSESSMENT YEAR 2003-04 AND ORDER DATED 17.4.2009 IN ITA NO.1206/HY D/2007 FOR THE ASSESSMENT YEAR 2004-05, WHEREIN IT WAS HELD THAT I F DONATIONS ARE RECEIVED 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 WOU LD NOT BE ENTITLED FOR EXEMPTION EITHER UNDER S.10(23C) OR UNDER S.11 OF T HE ACT. FURTHER, WE FIND THAT THE CONSTITUTIONAL BENCH OF APEX COURT IN THE CASE OF T.M.A. PAI FOUNDATIONS AND OTHERS VS. STATE OF KARNATAKA & OTH ERS (2002) 8 SCC 481 EXAMINED THE ISSUE OF COLLECTION OF CAPITATION FE ES FOR THE ADMISSION OF STUDENTS OVER AND ABOVE FEES PRESCRIBED BY THE PRIV ATE INSTITUTION AND HELD THAT THE INSTITUTION WHICH ARE COLLECTING CAPITATIO N FEES FOR ADMISSION OF STUDENTS OVER AND ABOVE THE FEES PRESCRIBED CANNOT BE CONSTRUED AS CHARITABLE/EDUCATION INSTITUTION. APEX COURT FURTHE R OBSERVED THAT THE FEES COLLECTED OVER AND ABOVE THE PRESCRIBED FEE FOR ADM ISSION OF THE STUDENT HAS TO BE CONSTRUCTED AS CAPITATION FEE. THE APEX COUR T, FURTHER OBSERVED THAT THE CONCERNED UNIVERSITY AND REGULATED BODY HAS TO TAKE ACTION FOR WITHDRAWAL OF THE RECOGNITION IN CASE IT IS FOUND T HAT THE EDUCATIONAL INSTITUTION RECEIVED ANY MONEY OVER AND ABOVE THE F EES PRESCRIBED FOR THE ITA NO.1577/HYD/2011 & OTHERS M/S.MGR EDUCATIONAL SOCIETY HYD & ANR. 4 COURSES. SAME VIEW WAS TAKEN BY APEX COURT IN THE C ASE OF ISLAMIC ACADEMY OF EDUCATION AND ANOTHER VS. STATE OF KARNATAKA & A NOTHER (2003) 6 SCC 697. IF THE DONATIONS WERE RECEIVED COMPULSORILY F OR ADMISSION OF STUDENTS, THE ASSESSEE IS NOT ENTITLED FOR EXEMPTION EITHER U /S 10(23C) OR U/S 11 OF THE IT ACT. SINCE THE LOWER AUTHORITIES HAVE NOT E XAMINED THE COLLECTION OF CAPITATION FEES IN THIS CASE, IN OUR OPINION, THE M ATTER REQUIRES TO BE EXAMINED BY THE ASSESSING OFFICER WHETHER THE ASSES SEE IS COLLECTING THE CAPITATION FEES FROM STUDENTS OR NOT AND IT IS NECE SSARY FOR BRINGING THE ACTUAL FACTS ON RECORD FOR DECIDING THE ISSUE EFFEC TIVELY. SIMILAR VIEW WAS TAKEN BY US IN THE CASE OF M/S. JAMIA NIZAMIA IN IT A NO.763/HYD/2007 DATED 30.6.2008, IN THE CASE OF INTERNATIONAL EDUCATIONAL ACADEMY, HYDERABAD IN ITA NO.494/HYD/2007 AND 518/HYD/2008 FOR THE ASSESS MENT YEARS 2002- 2003 AND 2004-05 AND SRI SAI SUDHIR EDUCATIONAL SOC IETY, HYDERABAD IN ITA NO.999/HYD/20-06 FOR THE ASSESSMENT YEAR 2003-04. THEREFORE, WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND REMIT BACK THE MATTER TO THE FILE OF ASSESSING OFFICER WITH A DIRECTION TO ASSESSING OFFICER THAT HE SHALL RECONSIDER THE ENTIRE ISSUE IN THE LIGHT OF JUDGMEN T OF SUPREME COURT IN THE CASE OF M/S ISLAMIC ACADEMY OF EDUCATION & ANOTHER VS. STATE OF KARNATAKA AND ANOTHER (SUPRA), AND IN THE CASED OF T.M.A. PAI FOUNDATION AND OTHERS VS. STATE OF KARNATAKA AND OTHERS (SUPRA), AND FIND OUT WHETHER THE ASSESSEE HAS RECEIVED ANY MONEY OVER AND ABOVE THE FEES PRESCRIBED AND THEREAFTER DECIDE THE ISSUE AFRESH IN ACCORDANCE WI TH LAW AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. WE MAKE IT CLEAR THAT THE ASSESSEE IS NOT ENTITLED FOR EXEMPTION U/S 11 I N CASE IT COLLECTED ANY MONEY BY WHATEVER NAME IT IS CALLED I.E., DONATION, BUILDING FUND, AUDITORIUM FUND ETC. ETC., OVER AND ABOVE THE PRESCRIBED FEE F OR ADMISSION OF STUDENTS. 6. BEFORE PARTING WE MAY NOTE THAT THE LEARNED CO UNSEL FOR THE ASSESSEE SUBMITTED BEFORE US THAT ONLY FOR QUANTIFI CATION OF THE EXEMPTION UNDER S.11, THE ISSUE MAY BE SET ASIDE AND NOT OTHE RWISE. ON THIS ISSUE, WE FIND IT APPROPRIATE TO MENTION HEREIN THAT THE HON BLE JURISDICTIONAL HIGH ITA NO.1577/HYD/2011 & OTHERS M/S.MGR EDUCATIONAL SOCIETY HYD & ANR. 5 COURT IN THE CASE OF S.A. RAHIM AND OTHERS V/S. CIT (333 ITR 379), HELD PLACING RELIANCE ON THE EARLIER JUDGMENT OF JURISDI CTIONAL HIGH COURT IN THE CASE OF CIT V/S. KRISHNA MINING CO. (107 ITR 702), THAT THE TRIBUNAL CAN GO INTO THE ONLY ISSUE RAISED BEFORE IT AND NOT ON OTH ER ISSUES. IT WAS OBSERVED BY THE HONBLE HIGH COURT THAT THE EXPRESSION SUCH ORDER AS IT THINKS FIT IN S.254(1) WAS WIDE ENOUGH TO INCLUDE THE POWER OF R EMAND TO THE AUTHORITY, COMPETENT TO MAKE THE REQUISITE ORDER IN ACCORDANCE WITH LAW, EVEN THOUGH THE TRIBUNAL COULD NOT HAVE MADE AN ORDER ENHANCIN G THE ASSESSMENT. HOWEVER, THE TRIBUNAL IS NOT SUPPOSED TO MAKE OUT A THIRD CASE ARBITRARILY. WE HAVE CAREFULLY GONE THROUGH THIS JUDGMENT. THIS JUDGMENT IS DELIVERED IN THE CONTEXT, WHEREIN THE ISSUE IS WHETHER THE SALE TRANSACTIONS WERE GENUINE OR NOT AND NOT RELATING TO THE QUANTUM OF SALE PRIC E. HOWEVER, THE TRIBUNAL ON APPEAL REDUCED THE SALE PRICE TO HALF OF THE AMO UNT CLAIMED BY THE ASSESSEE, INSTEAD OF DECIDING ON THE GENUINENESS OF THE TRANSACTION, WITHOUT ANY DOCUMENTARY EVIDENCE. IN THAT CIRCUMSTANCE, TH E HONBLE HIGH COURT HAS HELD AS ABOVE. IN THE PRESENT CASE, THE ISSUE IS RELATING TO ALLOWABILITY OF EXEMPTION UNDER S.11 OR UNDER S.10(23C), AND WHI LE ADJUDICATING ON THIS ISSUE ONE HAS TO SEE THE ELIGIBILITY OF CLAIMING O F DEDUCTION UNDER S.11. THIS ASPECT HAS NOT BEEN PROPER ADDRESSED BY THE CIT(A) WHILE GRANTING THE ALTERNATIVE CLAIM OF THE ASSESSEE FOR EXEMPTION UND ER S.11. SINCE THE ASSESSING OFFICER HAS NO OCCASION TO EXAMINE THE CL AIM OF THE ASSESSEE UNDER S.11, WE HAVE GIVEN SUITABLE DIRECTIONS, IN T HE PRECEDING PARA, TO THE ASSESSING OFFICER FOR VERIFICATION. THAT BEING SO, THE RATIO LAID DOWN BY THE JURISDICTIONAL HIGH COURT IN THE CASE NOTED ABOVE, HAS NO APPLICATION TO THE FACTS OF THE PRESENT CASE. 7. THESE TWO APPEALS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ITA NO.1577/HYD/2011 & OTHERS M/S.MGR EDUCATIONAL SOCIETY HYD & ANR. 6 REVENUES APPEALS: ITA NOS. 1547 TO 1553/HYD/2011 : A.Y.S 2003-04 TO 2009-10 8. THE ONLY COMMON EFFECTIVE GROUND OF THE REVENUE IN ALL THESE APPEALS, SEPARATE ORDERS OF THE CIT(A) I, HYDERABAD DATED 24.6.2011 FOR ASSESSMENT YEAR 2003-04 AND 2004-05 AND COMMON ORDE R OF THE SAID CIT(A) DATED 24.6.2011 READS AS FOLLOWS- 1. WHETHER THE CIT(A) ERRED IN APPRECIATING THE FA CT THAT THE PURCHASE OF CAPITAL ASSET THAT COULD BE USED TO PROMOTE THE OBJ ECTIVES OF THE SYSTEMS RUN BY THE TRUST IS ALLOWED AS APPLICATION OF MONEY. THEREFORE THE DEPRECIATION IS NOT ALLOWABLE ON THE CAPITAL ASSET WHERE ENTIRE COST OF ACQUISITION IS EITHER WRITTEN OFF IN THE FIRST YEAR ITSELF OR THE COST OF ACQUISITION IS TREATED AS APPLICATION O F INCOME AS HAS BEEN HELD IN RULING OF HBLE SUPREME COURT OF INDIA IN T HE CASE OR ESCORTS LTD. AND ANOTHER VS. UNION OF INDIA (199 ITR 44).: 9. THUS, THE ISSUE INVOLVED IN THESE APPEALS RELA TES TO THE ADDITION MADE ON ACCOUNT OF DEPRECIATION CLAIMED BY THE ASSE SSEE. THE ASSESSING OFFICER HAS OBSERVED THAT THE TRUST HAD CLAIMED EXP ENDITURE ON ACCOUNT OF DEPRECIATION. HE WAS OF THE VIEW THAT SINCE THE PU RCHASE OF CAPITAL ASSET USED TO PROMOTE THE OBJECTIVE OF THE TRUST IS ALLOW ED AS APPLICATION OF INCOME, DEPRECIATION IS NOT ALLOWABLE ON CAPITAL AS SET WHERE THE ENTIRE COST OF ACQUISITION IS EITHER WRITTEN OFF IN THE FIRST Y EAR ITSELF OR THE COST OF ACQUISITION IS TREATED AS APPLICATION OF INCOME. TH E ASSESSING OFFICER HAS DRAWN SUPPORT FROM THE DECISION OF THE APEX COURT I N THE CASE OF ESCORTS LTD. (199 ITR 44). THE CIT(A), ON APPEAL, HAS ALLOWED THE CLAIM OF THE ASSESSEE. AGAINST THE ORDER OF THE CIT(A), REVENUE IS IN APPEAL BEFORE US FOR ALL THE YEARS UNDER CONSIDERATION. 10. WE HEARD BOTH THE PARTIES ON THIS ISSUE. SIMI LAR ISSUE CAME UP FOR CONSIDERATION BEFORE THE JAIPUR BENCH OF THIS T RIBUNAL IN THE CASE OF JAIPUR STOCK EXCHANGE (108 TTJ 393)(JP), WHEREIN IT WAS HELD THAT DEPRECIATION ON FIXED ASSETS IS AN ALLOWABLE DEDUCT ION, WHICH IS NECESSARY TO ARRIVE AT THE INCOME AVAILABLE FOR APPLICATION TO C HARITABLE PURPOSE. FURTHER, ITA NO.1577/HYD/2011 & OTHERS M/S.MGR EDUCATIONAL SOCIETY HYD & ANR. 7 IN THE CASE OF MAHILA SIDH NIRMAN YOJNA V/S. IAC (5 0 ITD 472), IT HAS BEEN HELD BY THE DELHI BENCH OF THE TRIBUNAL THAT MERELY BECAUSE ENTIRE VALUE OF ASSET IS ALLOWABLE AS EXPENDITURE UNDER S.11, IT IS NOT SUFFICIENT TO DENY CLAIM FOR DEPRECIATION UNLESS THE VALUE OF ASSET HA S BEEN ACTUALLY ALLOWED AS EXPENDITURE. IF NOT SO ALLOWED IN THE YEAR OF ACQU ISITION, ASSESSEE WILL BE ENTITLED TO DEPRECIATION. FURTHER, IT WAS HELD BY T HE COCHIN BENCH OF THE TRIBUNAL IN THE CASE OF DY. CIT V/S. ADI SANKARA TR UST (46 SOT 230) THAT WHERE AN ASSESSEE TRUST IS CLAIMING DEPRECIATION ON ASSETS WHERE COST OF THE RELEVANT ASSETS STOOD CLAIMED AS AN APPLICATION OF INCOME FOR A PRECEDING AND/OR THE CURRENT YEAR UNDER S.11(1), ITS CLAIM UN DER S.32(1)IS ELIGIBLE ONLY IN RESPECT OF BUSINESS ASSETS AND WHERE ENTIRE COST OF THE ASSET STANDS ALLOWED BY WAY OF APPLICATION OF INCOME UNDER S.11( 1), THE DEPRECIATION CLAIMED BY THE ASSESSEE UNDER S.32(1) IS NOT ALLOWA BLE AS THE TRUST IS NOT UNDERTAKING ANY BUSINESS ACTIVITY. IN VIEW OF THE ABOVE, THE ASSESSING OFFICER IS DIRECTED TO VERIFY IN RESPECT OF EACH AS SET ON WHICH DEPRECIATION CLAIMED, WHETHER THE VALUE OF SUCH ASSET WAS IN FAC T ALLOWED UNDER S.11, AND IF IT WAS SO ALLOWED, THE DEPRECIATION WOULD NOT BE ALLOWED IN RESPECT 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 ALLOW DE PRECIATION 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 REVE NUE IS SET ASIDE TO THE FILE OF THE ASSESSING OFFICER FOR FRESH CONSIDERATION, I N THE LIGHT OF THE ABOVE OBSERVATIONS. THE ASSESSING OFFICER SHALL ACCORDIN GLY REDECIDE THE ISSUE IN ACCORDANCE WITH LAW AND AFTER GIVING REASONABLE OPP ORTUNITY OF HEARING TO THE ASSESSEE. 11. IN THE RESULT, REVENUES APPEALS ARE ALLOWED F OR STATISTICAL PURPOSES. ITA NO.1577/HYD/2011 & OTHERS M/S.MGR EDUCATIONAL SOCIETY HYD & ANR. 8 APPEALS CONCERNING MARUTI EDUCATIONAL SOCIETY: REVENUES APPEALS: ITA NO.1415 TO 1417/HYD/2011 ASSESSMENT YEAR 20 05-06 TO 2007-08 12. NOW, WE MAY TAKE UP THE REVENUES APPEALS, ITA NO.1415 TO 1417/HYD/2011, CONCERNING MARUTI EDUCATIONAL SOCIET Y, WHICH IS DIRECTED AGAINST THE COMMON ORDER OF THE CIT(A)-I, HYDERABAD DATED 24.5.2011 FOR THE ASSESSMENT YEAR 2005-06 TO 2007-08. 13. FIRST ISSUE INVOLVED IN THIS APPEAL IS WHETHER RECOGNITION UNDER S.10(23C) (VI) IS MANDATORY WHEN RECEIPTS EXCEED RS .1 CRORE OR WHETHER ALTERNATIVE RELIEF U/S. 11 IS AUTOMATICALLY AVAILAB LE TO ASSESSEE REGISTERED UNDER S.12AA OF THE ACT. WE FIND THAT THIS MAIN IS SUE INVOLVED IN THE ABOVE GROUNDS IS COVERED BY THE ORDER OF THE HYDERABAD BE NCH A OF THE TRIBUNAL DATED 15.4.2009 IN THE CASES OF VASAVI ACADEMY OF E DUCATION, HYDERABAD IN ITA NO.1133/HYD/2006 FOR THE ASSESSMENT YEAR 2003-0 4 AND ORDER DATED 17.4.2009 IN ITA NO.1206/HYD/2007 FOR THE ASSESSMEN T YEAR 2004-05, WHEREIN IT WAS HELD THAT IF DONATIONS ARE RECEIVED COMPULSORILY FOR THE ADMISSION OF STUDENTS, BY WHATEVER NAME IT MAY BE C ALLED, I.E. DONATION, BUILDING FUND, AUDITORIUM FUND, ETC. OVER AND ABOVE THE PRESCRIBED FEE, FROM THE STUDENTS, THE ASSESSEE WOULD NOT BE ENTITLED FO R EXEMPTION EITHER UNDER S.10(23C) OR UNDER S.11 OF THE ACT. FURTHER, WE FI ND THAT THE CONSTITUTIONAL BENCH OF APEX COURT IN THE CASE OF T.M.A. PAI FOUND ATIONS AND OTHERS VS. STATE OF KARNATAKA & OTHERS (2002) 8 SCC 481 EXAMIN ED THE ISSUE OF COLLECTION OF CAPITATION FEES FOR THE ADMISSION O F STUDENTS OVER AND ABOVE FEES PRESCRIBED BY THE PRIVATE INSTITUTION AND HELD THAT THE INSTITUTION WHICH ARE COLLECTING CAPITATION FEES FOR ADMISSION OF STU DENTS OVER AND ABOVE THE FEES PRESCRIBED CANNOT BE CONSTRUED AS CHARITABLE/E DUCATION INSTITUTION. APEX COURT FURTHER OBSERVED THAT THE FEES COLLECTED OVER AND ABOVE THE PRESCRIBED FEE FOR ADMISSION OF THE STUDENT HAS TO BE CONSTRUC TED AS CAPITATION FEE. THE APEX COURT, FURTHER OBSERVED THAT THE CONCERNED UNI VERSITY AND REGULATED ITA NO.1577/HYD/2011 & OTHERS M/S.MGR EDUCATIONAL SOCIETY HYD & ANR. 9 BODY HAS TO TAKE ACTION FOR WITHDRAWAL OF THE RECOG NITION IN CASE IT IS FOUND THAT THE EDUCATIONAL INSTITUTION RECEIVED ANY MONEY OVER AND ABOVE THE FEES PRESCRIBED FOR THE COURSES. SAME VIEW WAS TAKEN BY APEX COURT IN THE CASE OF ISLAMIC ACADEMY OF EDUCATION AND ANOTHER VS. STA TE OF KARNATAKA & ANOTHER (2003) 6 SCC 697. IF THE DONATIONS WERE RE CEIVED COMPULSORILY FOR ADMISSION OF STUDENTS, THE ASSESSEE IS NOT ENTITLED FOR EXEMPTION EITHER U/S 10(23C) OR U/S 11 OF THE IT ACT. SINCE THE LOWER A UTHORITIES HAVE NOT EXAMINED THE COLLECTION OF CAPITATION FEES IN THIS CASE, IN OUR OPINION, THE MATTER REQUIRES TO BE EXAMINED BY THE ASSESSING OFF ICER 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. SIMILAR VIEW WAS TAKEN BY US IN THE C ASE OF M/S. JAMIA NIZAMIA IN ITA NO.763/HYD/2007 DATED 30.6.2008, IN THE CASE OF INTERNATIONAL EDUCATIONAL ACADEMY, HYDERABAD IN ITA NO.494/HYD/20 07 AND 518/HYD/2008 FOR THE ASSESSMENT YEARS 2002- 2003 AN D 2004-05 AND SRI SAI SUDHIR EDUCATIONAL SOCIETY, HYDERABAD IN ITA NO .999/HYD/20-06 FOR THE ASSESSMENT YEAR 2003-04. THEREFORE, WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND REMIT BACK THE MATTER TO THE FILE O F ASSESSING OFFICER WITH A DIRECTION TO ASSESSING OFFICER THAT HE SHALL RECONS IDER THE ENTIRE ISSUE IN THE LIGHT OF JUDGMENT OF SUPREME COURT IN THE CASE OF M /S ISLAMIC ACADEMY OF EDUCATION & ANOTHER VS. STATE OF KARNATAKA AND ANOT HER (SUPRA), AND IN THE CASED OF T.M.A. PAI FOUNDATION AND OTHERS VS. STATE OF KARNATAKA AND OTHERS (SUPRA), AND FIND OUT WHETHER THE ASSESSEE H AS RECEIVED ANY MONEY OVER AND ABOVE THE FEES PRESCRIBED AND THEREAFTER D ECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW AFTER GIVING REASONABLE OPPORTU NITY OF HEARING TO THE ASSESSEE. WE MAKE IT CLEAR THAT THE ASSESSEE IS NO T ENTITLED FOR EXEMPTION U/S 11 IN CASE IT COLLECTED ANY MONEY BY WHATEVER N AME IT IS CALLED I.E., DONATION, BUILDING FUND, AUDITORIUM FUND ETC. ETC., OVER AND ABOVE THE PRESCRIBED FEE FOR ADMISSION OF STUDENTS. ITA NO.1577/HYD/2011 & OTHERS M/S.MGR EDUCATIONAL SOCIETY HYD & ANR. 10 14. BEFORE PARTING WE MAY NOTE THAT THE LEARNED C OUNSEL FOR THE ASSESSEE SUBMITTED BEFORE US THAT ONLY FOR QUANTIFI CATION OF THE EXEMPTION UNDER S.11, THE ISSUE MAY BE SET ASIDE AND NOT OTHE RWISE. ON THIS ISSUE, WE FIND IT APPROPRIATE TO MENTION HEREIN THAT THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF S.A. RAHIM AND OTHERS V/S. CIT (333 ITR 379), HELD PLACING RELIANCE ON THE EARLIER JUDGMENT OF JURISDI CTIONAL HIGH COURT IN THE CASE OF CIT V/S. KRISHNA MINING CO. (107 ITR 702), THAT THE TRIBUNAL CAN GO INTO THE ONLY ISSUE RAISED BEFORE IT AND NOT ON OTH ER ISSUES. IT WAS OBSERVED BY THE HONBLE HIGH COURT THAT THE EXPRESSION SUCH ORDER AS IT THINKS FIT IN S.254(1) WAS WIDE ENOUGH TO INCLUDE THE POWER OF R EMAND TO THE AUTHORITY, COMPETENT TO MAKE THE REQUISITE ORDER IN ACCORDANCE WITH LAW, EVEN THOUGH THE TRIBUNAL COULD NOT HAVE MADE AN ORDER ENHANCIN G THE ASSESSMENT. HOWEVER, THE TRIBUNAL IS NOT SUPPOSED TO MAKE OUT A THIRD CASE ARBITRARILY. WE HAVE CAREFULLY GONE THROUGH THIS JUDGMENT. THIS JUDGMENT IS DELIVERED IN THE CONTEXT, WHEREIN THE ISSUE IS WHETHER THE SALE TRANSACTIONS WERE GENUINE OR NOT AND NOT RELATING TO THE QUANTUM OF SALE PRIC E. HOWEVER, THE TRIBUNAL ON APPEAL REDUCED THE SALE PRICE TO HALF OF THE AMO UNT CLAIMED BY THE ASSESSEE, INSTEAD OF DECIDING ON THE GENUINENESS OF THE TRANSACTION, WITHOUT ANY DOCUMENTARY EVIDENCE. IN THAT CIRCUMSTANCE, TH E HONBLE HIGH COURT HAS HELD AS ABOVE. IN THE PRESENT CASE, THE ISSUE IS RELATING TO ALLOWABILITY OF EXEMPTION UNDER S.11 OR UNDER S.10(23C), AND WHI LE ADJUDICATING ON THIS ISSUE ONE HAS TO SEE THE ELIGIBILITY OF CLAIMING O F DEDUCTION UNDER S.11. THIS ASPECT HAS NOT BEEN PROPERLY ADDRESSED BY THE CIT(A ) WHILE GRANTING THE ALTERNATIVE CLAIM OF THE ASSESSEE FOR EXEMPTION UND ER S.11. SINCE THE ASSESSING OFFICER HAS NO OCCASION TO EXAMINE THE CL AIM OF THE ASSESSEE UNDER S.11, WE HAVE GIVEN SUITABLE DIRECTIONS, IN T HE PRECEDING PARA, TO THE ASSESSING OFFICER FOR VERIFICATION. THAT BEING SO, THE RATIO LAID DOWN BY THE JURISDICTIONAL HIGH COURT IN THE CASE NOTED ABOVE, HAS NO APPLICATION TO THE FACTS OF THE PRESENT CASE. ITA NO.1577/HYD/2011 & OTHERS M/S.MGR EDUCATIONAL SOCIETY HYD & ANR. 11 15. THE NEXT ISSUE INVOLVED IN THIS APPEAL RELATE S TO THE ADDITION MADE ON ACCOUNT OF DEPRECIATION CLAIMED BY THE ASSE SSEE. WE HAVE DEALT WITH THIS ISSUE HEREINABOVE, WHILE DEALING WITH THE CORRESPONDING GROUND OF THE REVENUE IN THE APPEALS ITA NOS.1547 TO 1553/HYD /2011 CONCERNING MGR EDUCATIONAL SOCIETY. FOR THE DETAILED REASONS DISCUSSED IN THAT CONTEXT, IN PARA 10 HEREINABOVE, WE SET ASIDE THE IMPUGNED O RDERS OF THE LOWER AUTHORITIES ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR FRESH CONSIDERATION. THE ASSESSING OFFI CER IS DIRECTED 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 I T WAS SO ALLOWED, THE DEPRECIATION WOULD NOT BE ALLOWED IN RESPECT OF SUC H ASSET. ONLY IF THE VALUE OF THE ASSET WAS NOT ALLOWED AS EXPENDITURE UNDER S .11, THE ASSESSING OFFICER IS REQUIRED TO ALLOW DEPRECIATION THEREON, AS PER THE RATE APPLICABLE TO THOSE ASSETS, AS HELD IN THE CASE OF MAHILA SIDH NI RMAN YOJNA, CITED SUPRA. THIS ISSUE RAISED BY THE REVENUE IS SET ASIDE TO TH E FILE OF THE ASSESSING OFFICER FOR FRESH CONSIDERATION, IN THE LIGHT OF TH E ABOVE OBSERVATIONS. THE ASSESSING OFFICER SHALL ACCORDINGLY REDECIDE THE IS SUE IN ACCORDANCE WITH LAW AND AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 16. IN THE RESULT, APPEALS OF THE REVENUE ARE ALL OWED FOR STATISTICAL PURPOSES. ASSESSEES APPEALS: 1537/HYD/2011 TO 1540/HYD/2011 : A.Y.S 2004-05 TO 2007-08 & ITA NO.1308/HYD/2011 : ASSESSMENT YEAR - 2003-04 AND REVENUES C.O. NO.58/HYD/2011 (IN ITA NO.1308/HYD/201 1 : 17. EFFECTIVE GROUNDS OF THE ASSESSEE COMMON IN IT A NO.1537 TO 1540/HYD/2011, WHICH ARE DIRECTED AGAINST SEPARATE ORDER OF THE CIT(A)-I, HYDERABAD DATED 24.5.2011 FOR ASSESSMENT YEAR 2004 -05 AND COMMON ITA NO.1577/HYD/2011 & OTHERS M/S.MGR EDUCATIONAL SOCIETY HYD & ANR. 12 ORDER OF THAT CIT(A) DATED 24.5.2011 FOR THE ASSESS MENT YEARS 2005-06 TO 2007-08 READ AS FOLLOWS- 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) IS ERRONEOUS BOTH ON FACTS AND IN LAW. 2. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) ERR ED IN HOLDING THAT THE RECEIPTS TOWARDS CONTRIBUTIONS, DONATIONS FOR D EVELOPMENT FUND CONSTITUTE REVENUE RECEIPT AND IS LIABLE FOR TAXATI ON. 3. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) OUG HT TO HAVE SEEN THAT THE CAPITAL RECEIPTS DO NOT FORM PART OF THE I NCOME OF THE APPELLANT HEREIN AND, THEREFORE, OUGHT TO HAVE EXCLUDED THE S AID AMOUNT FROM BEING TAXED. IN THE APPEAL FOR THE ASSESSMENT YEAR 2003-2004, VI Z. ITA NO.1308/HYD/2011, EFFECTIVE GROUNDS OF THE ASSESSEE READ AS FOLLOWS- 1. THE ORDER OF THE LEARNED CIT(A) IS ERRONEOUS BOTH O N FACTS AND IN LAW. 2. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE RECEIP TS OF THE ASSESSEE EXCEEDED RS. ONE CRORE BY CONSIDERING THE FEE RECEI PTS, DONATIONS, FEE AND LAB HIRE CHARGES WITHOUT RAISING ANY QUERY DURING T HE COURSE OF HEARING FAILING TO APPRECIATE THE FACT THAT THE FEE RECEIVE D INCLUDE FEE RECEIVED IN ADVANCE WHICH IS TO BE EXCLUDED BEFORE ARRIVING AT THE AMOUNT OF RS. ONE CRORE. 3. THE LEARNED CIT(A) ERRED IN HOLDING THAT DONATIONS ARE REVENUE RECEIPTS IN SPITE OF FACT THAT THE ASSESSEE IS NOT FALLING UNDE R ANY OF THE PROVISIONS OF SEC.10(23C) OR SEC.11 AND EVEN UNDER PROVISIONS OF SEC.115BBC ANONYMOUS DONATIONS COULD BE TAXED ONLY IN CASE OF ASSESSEE F AILING UNDER SOME OF THE CLAUSES OF THE PROVISIONS OF SEC.10(23C) AND THEREB Y ERRED IN INCLUDING THE SAME FOR ARRIVING AT THE RECEIPTS TO BE ONE CRORES. 4. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE ASSESS EE HAS NOT PRODUCED ANY DOCUMENTARY EVIDENCE IN SUPPORT OF CLAIM THAT THE D ONATIONS ARE TOWARDS CORPUS WHEN THE CIT(A) DURING THE COURSE OF HEARING HAS NOT RAISED ANY QUERY NOR THE AO HAS GIVEN ANY FINDING THAT THEY AR E NOT TOWARDS CORPUS. THE ONLY GROUND RAISED BY THE REVENUE IN ITS CROSS- OBJECTION FOR ASSESSMENT YEAR 2003-04 READS AS FOLLOWS- 1. THE SUPREME COURT, IN THE CASE OF T.M.A.PAI VS. STATE OF KARNATAKA (2002) 8 SCC 481, HAS HELD THAT THE ASSESSEE IS NOT ELIGIBLE FOR EXEMPTION U/S. 11 OR 10(23C) WHEN THE ASSESSEE HAS FAILED TO PROVE THAT CONTRIBUTIONS RECEIVED ARE NOT IN THE NATURE O F CAPITATION FEES. THE ITAT B BENCH, HYDERABAD IN THE CASE OF M/S. C HIREC EDUCATIONAL ITA NO.1577/HYD/2011 & OTHERS M/S.MGR EDUCATIONAL SOCIETY HYD & ANR. 13 SOCIETY HAS PALED RELIANCE ON THE ABOVE JUDGMENT VI DE ITS ORDER IN I.T. NO1728/HYD/208, DDITE-1, VS. M/S. CHIREC EDUCATIONA L SOCIETY. 18. WE HAVE HEARD BOTH THE PARTIES AND PERUSED TH E MATERIAL ON RECORD. AS MAY BE SEEN FROM THE GROUNDS RAISED IN THESE APPEALS OF THE ASSESSEE AND CROSS-OBJECTION OF THE REVENUE, THE ON LY ISSUE INVOLVED IN ALL THESE APPEALS RELATES TO ASSESSEES CLAIM FOR EXEMP TION OF ITS INCOME UNDER S.11 OF THE ACT, AND WHETHER RECOGNITION UNDER S.1 0(23C) (VI) IS MANDATORY WHEN RECEIPTS EXCEED RS.1 CRORE OR WHETHER ALTERNAT IVE RELIEF U/S. 11 IS AUTOMATICALLY AVAILABLE TO ASSESSEE REGISTERED UNDE R S.12AA OF THE ACT. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED BEFORE US THAT THE CONTRIBUTIONS WERE RECEIVED FROM OUTSIDERS AND THIS FACT WAS MADE KNOWN TO THE ASSESSING OFFICER AND THERE IS NO CONTRARY MATERIAL BROUGHT O N RECORD OR FOUND DURING THE COURSE OF SEARCH OPERATIONS. FURTHER, THERE IS NO EVIDENCE TO SHOW THAT DONATIONS WERE COLLECTED EITHER FROM THE STUDENTS O R FROM THEIR PARENTS IN ADDITION TO THE FEE PRESCRIBED BY THE GOVERNMENT OF ANDHRA PRADESH. ACCORDING TO HIM, THE AMOUNT SO COLLECTED WAS DULY RECORDED IN THE BOOKS OF ACCOUNT AND SPENT FOR THE PURPOSE OF OBJECTS OF THE SOCIETY, WHICH IS IN ACCORDANCE WITH THE PROVISIONS OF S.11 OF THE INCOM E-TAX ACT. ACCORDING TO HIM, PROVISION OF S.115BBC REGARDING TAXING THE ANO NYMOUS DONATIONS AT A PARTICULAR RATE, WAS INTRODUCED WITH EFFECT FROM 1. 4.2007 AND THEREFORE, FOR THE ASSESSMENT YEARS UNDER CONSIDERATION, THE SAID PROVISION HAS NO APPLICATION. 19. ON CAREFUL CONSIDERATION OF THE MATTER, WE HA VE DEALT WITH THIS ISSUE HEREINABOVE, WHILE DEALING WITH THE CORRESPON DING GROUNDS OF THE ASSESSEE, IN APPEALS CONCERNING MARUTI EDUCATIONAL SOCIETY, AND IN ASSESSEES OWN CASE WHILE DEALING WITH THE APPEALS OF THE REVENUE BEING ITA NO.1415 TO 1417/HYD/2011 FOR ASSESSMENT YEARS 2005- 06 TO 2007-08. FOR THE DETAILED REASONS GIVEN IN THAT CONTEXT IN PARAS 5 AND 6 AND IN PARA-15 HEREIN ABOVE, WHICH IN TURN IS IN CONSONANCE WITH THE CONSISTENT VIEW TAKEN BY THE TRIBUNAL IN SIMILAR MATTERS, WE SET ASIDE TH E IMPUGNED ORDERS OF THE ITA NO.1577/HYD/2011 & OTHERS M/S.MGR EDUCATIONAL SOCIETY HYD & ANR. 14 LOWER AUTHORITIES IN THIS CASE ALSO FOR ALL THE YEA RS UNDER APPEAL AND REMIT BACK THE MATTER TO THE FILE OF ASSESSING OFFICER WI TH A DIRECTION TO ASSESSING OFFICER THAT HE SHALL RECONSIDER THE ENTIRE ISSUE I N THE LIGHT OF JUDGMENT OF SUPREME COURT IN THE CASE OF M/S ISLAMIC ACADEMY OF EDUCATION & ANOTHER VS. STATE OF KARNATAKA AND ANOTHER (SUPRA), AND IN THE CASED OF T.M.A. PAI FOUNDATION AND OTHERS VS. STATE OF KARNATAKA AND OT HERS (SUPRA), AND FIND OUT WHETHER THE ASSESSEE HAS RECEIVED ANY MONEY OVE R AND ABOVE THE FEES PRESCRIBED AND THEREAFTER DECIDE THE ISSUE AFRESH I N ACCORDANCE WITH LAW AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO T HE ASSESSEE. WE MAKE IT CLEAR THAT THE ASSESSEE IS NOT ENTITLED FOR EXEMPTI ON U/S 11 IN CASE IT COLLECTED ANY MONEY BY WHATEVER NAME IT IS CALLED I .E., DONATION, BUILDING FUND, AUDITORIUM FUND ETC. ETC., OVER AND ABOVE THE PRESCRIBED FEE FOR ADMISSION OF STUDENTS. WHILE GIVING EFFECT TO THI S ORDER, THE ASSESSING OFFICER SHALL ALSO CONSIDER THE SPECIFIC ARGUMENTS OF THE LEARNED COUNSEL FOR THE ASSESSEE BEFORE US, WHICH WE HAVE SUMMARIZED IN THE PRECEDING PARA, AND AFTER DUE CONSIDERATION/VERIFICATION OF THE SAM E, PASS APPROPRIATE ORDER IN ACCORDANCE WITH LAW. 20. IN THE RESULT, APPEALS OF THE ASSESSEE AS WEL L AS THE CROSS- OBJECTION OF THE REVENUE, ARE ALLOWED FOR STATISTIC AL PURPOSES. 21. TO SUM UP, ALL THE APPEALS OF THE ASSESSEE AS WELL AS THE REVENUE, AND THE LONE CROSS OBJECTION OF THE REVENU E ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 4/5/2012 SD/- SD/- (SAKTIJIT DEY) JUDICIAL MEMBER (CHANDRA POOJARI) ACCOUNTANT MEMBER DATED THE 4 TH MAY, 2012 ITA NO.1577/HYD/2011 & OTHERS M/S.MGR EDUCATIONAL SOCIETY HYD & ANR. 15 COPY FORWARDED TO: 1. M/S. MGR EDUCATIONAL SOC IETY, C/O., SHRI S.RAMA RAO, ADVOCATE, 3-65-643, SHRIYAS ELEGANCE, FLAT NO.102, ST. NO.9, HIMAYATNAGAR, HYDERABAD. 2. M/S.MARUTHI EDUCATIONAL SOCIETY, (DUNDIGUL, QUTUBUL LAPURA MANDAL, R.R.DISTRICT) C/O., SHRI S.RAMA RAO, ADVOCA TE, 3-65-643, SHRIYAS ELEGANCE, FLAT NO.102, ST. NO.9, HIMAYATNAGAR, HYDERABAD. 3. ASST. COMMISSIONER OF INCOME - TAX, CENTRAL CIRCLE - 1, HYDERABAD 4. COMMISSIONER OF INCOME - TAX(APPEALS) I, HYDERABAD 5. COMMISSIONER OF INCOME - TAX CENTRAL, HYDERABAD 6. DEPARTMENTAL REPRESE NTATIVE ITAT, HYDERABAD B.V.S.