DCIT (E), New Delhi V. Anand Education Society, New Delhi

ITA 1633/DEL/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 2939 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 20-03-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAVIKANT GUPTA
• Keywords: Depreciation; Charitable institution; Benefit of exemption; Capital expenditure
• Section: 12A; 148; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: A NEW DELHI BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 1633/DEL/2015 ASSTT. YEAR: 2010-11 DCIT(E), CIRCLE-1(1), E-2 BLOCK, PRATYAKSH KAR BHAWAN, DR. SHYAMA PRASAD MUKHERJEE CIVIC CENTRE, NEW DELHI-110002 VS ANAND EDUCATION SOCIETY, 30, COMMUNITY CENTRE, ASHOK VIHAR PHASE-I, NEW DELHI-110052 (PAN: AAAAA0239L) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI RAVI KANT GUPTA, SR. DR RESPONDENT BY: SHRI VED JAIN, ADV. DATE OF HEARING: 29.05.2018 DATE OF PRONOUNCEMENT: 23.08.2018 ORDER PER SUDHANSHU SRIVASTAVA, J.M. THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAINST THE ORDER DATED 24.09.2014 PASSED BY THE LD . COMMISSIONER OF INCOME TAX (APPEALS)-XXI, NEW DELHI PERTAINING TO ASSESSMENT YEAR 2010-11 WHEREIN, VIDE THE IMPUGNED ORDER, THE LD. COMMISSIONER OF INCOME TAX (A) HAS ALLOWED THE ASSESSEES CLAIM OF EXEMPTION U/S 1 1 OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED 'THE A CT'). ITA NO. 1633/DEL/2015 ASSESSMENT YEAR 2010-11 2 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS REGISTERED UNDER THE SOCIETIES REGISTRATION ACT, 18 60 W.E.F. 4.11.1982. THE ASSESSEE HAS ALSO BEEN GRANT ED REGISTRATION U/S 12A OF THE ACT W.E.F. 4.4.1985. T HE ASSESSEE HAS ALSO GOT APPROVAL U/S 80G5(VI) OF THE ACT FOR ASSESSMENT YEARS 2010-11 TO 2012-13. THE ASSESSEE IS RUNNING A SCHOOL IN THE NAME OF LANCERS CONVENT SCH OOL AT NEW DELHI. THE RETURN OF INCOME WAS FILED FOR T HE YEAR UNDER CONSIDERATION ON 16.07.2010 CLAIMING EXEMPTIO N U/S 11 OF THE ACT. SUBSEQUENTLY, THERE WAS A SURVE Y OPERATION AND ASSESSMENT PROCEEDINGS WERE REOPENED U/S 148 OF THE ACT. DURING THE COURSE OF ASSESSMEN T PROCEEDINGS, THE ASSESSING OFFICER OBSERVED THAT TH E ASSESSEE SOCIETY HAD DISPOSED OF SOME OF HIS ASSETS THROUGH SALE OF WHICH ASSESSEE SOCIETY HAD CLAIMED LOSS OF RS. 92,83,904/-. THE ASSESSING OFFICER PROCEEDE D TO ADD BACK THE LOSS ON SALE OF ASSETS TO THE INCOME O F THE ASSESSEE. FURTHER, THE ASSESSING OFFICER ALSO NOTI CED THAT THE ASSESSEE SOCIETY HAD INCURRED MOBILE EXPEN SES WHICH, IN HIS OPINION, WERE EXCESSIVE. HE PROCEEDE D TO DISALLOW 50% OF THE MOBILE EXPENSES, THUS MAKING A ITA NO. 1633/DEL/2015 ASSESSMENT YEAR 2010-11 3 DISALLOWANCE OF RS. 59,657/-. FURTHER, THE ASSESSI NG OFFICER ALSO MADE A DISALLOWANCE OF RS. 87,11,575/- BEING DEPRECIATION CHARGED ON VARIOUS ASSETS ON THE GROUND THAT DEPRECIATION ON ASSETS PURCHASED ONLY DURING THE YEAR UNDER CONSIDERATION WAS TO BE ALLOW ED AS CAPITAL EXPENDITURE IN THE EARLIER YEARS HAD ALREAD Y BEEN ALLOWED AS APPLICATION OF INCOME. APART FROM THIS, THE ASSESSING OFFICER ALSO REACHED A CONCLUSION THAT TH ERE WAS A VIOLATION OF SECTION 13(3) OF THE ACT AS FUND S MEANT FOR THE SCHOOL WERE ALLEGEDLY BEING UTILISED FOR PE RSONAL USE OF THE OFFICE BEARERS OF THE SOCIETY. THE ASSE SSING OFFICER PROCEEDED TO TREAT THE EXCESS OF INCOME OVE R EXPENDITURE OF RS. 76,49,822/-AS NOT BEING ELIGIBLE FOR EXEMPTION U/S 11 OF THE ACT. THE ASSESSMENT WAS COMPLETED AT A TOTAL INCOME OF RS. 2,13,23,780/-. 2.1 AGGRIEVED, THE ASSESSEE APPROACHED THE LD. COMMISSIONER OF INCOME TAX (A) WHO DELETED ALL THE ADDITIONS AND ALSO DIRECTED THAT THE ASSESSEE SHOUL D BE GIVEN BENEFIT OF EXEMPTION UNDER SECTION 11 OF THE ACT. ITA NO. 1633/DEL/2015 ASSESSMENT YEAR 2010-11 4 2.2 NOW AGGRIEVED, THE DEPARTMENT IS IN APPEAL BEFO RE THE ITAT AND HAS RAISED IN THE FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. A HAS ERRED IN ALLOWING THE CLAIM OF EXEMPTION U/S 11 DISREGARDING THE FACTS THAT THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SECTION U/S 13 OF THE I.T. ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX(A) HAS ERRED IN ALLOWING THE CLAIM OF DEPRECIATION OF RS.87,11,575/- TO THE ASSESSEE IGNORING THE FACT THAT THE ASSESSEE HAD CLAIMED THE AMOUNT INCURRED ON PURCHASE OF ASSETS IN EARLIER YEARS AS APPLICATION OF INCOME, ON WHICH DEPRECIATION IS CLAIMED NOW AND FURTHER ALLOWANCE OF DEPRECIATION WILL BE TANTAMOUNT TO DOUBLE DEDUCTION. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN ALLOWING THE CLAIM OF DEPRECIATION OF RS. 87,11,575/- TO THE ASSESSEE IN VIEW OF THE RECENT DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF DIT(E) VS. CHARANJIV CHARITABLE TRUST DATED 18.03.2014. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN ALLOWING THE LOSS ON SALE OF FIXED ASSETS AMOUNTING TO RS.92,83,904/-. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN ALLOWING THE MOBILE EXPENSES AMOUNTING TO RS.59,657/- INCURRED FOR THE PERSONAL USE OF GOVERNING BODY MEMBERS OF THE SOCIETY. ITA NO. 1633/DEL/2015 ASSESSMENT YEAR 2010-11 5 6. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER OR AMEND ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARING. 3. LD. SR. DR APPEARING ON BEHALF OF THE DEPARTMENT READ OUT RELEVANT PORTIONS FROM THE ASSESSMENT ORDE R AND VEHEMENTLY ARGUED THAT THE LD. COMMISSIONER OF INCOME TAX (A) HAD ERRED IN ALLOWING THE BENEFIT OF EXEMPTION U/S 11 OF THE ACT WHILE COMPLETELY DISREGARDING THE FINDINGS OF THE ASSESSING OFFICER THAT PROVISIONS OF SECTION 13 HAD BEEN VIOLATED BY THE ASSESSEE. IT WAS ALSO SUBMITTED THAT THE CLAIM OF DEPRECIATION OF RS. 87,11,575/- HAD WRONGLY BEEN ALLOWED TO THE ASSESSEE AS THIS DEPRECIATION PERTAI NED TO ASSETS WHICH HAD BEEN PURCHASED IN ASSESSMENT YEARS EARLIER TO THE ASSESSMENT YEAR UNDER CONSIDERATION FOR WHICH THE BENEFIT OF DEDUCTION HAD ALREADY BEEN ALL OWED AS APPLICATION OF INCOME. IT WAS SUBMITTED THAT AL LOWING THE DEPRECIATION WOULD TANTAMOUNT TO GIVING BENEFIT OF DOUBLE DEDUCTION TO THE ASSESSEE. IT WAS ALSO SUBM ITTED THAT THE LD. COMMISSIONER OF INCOME TAX (A) HAD WRO NGLY ALLOWED THE LOSS ON SALE OF FIXED ASSETS AMOUNTING TO RS. 92,83,904/- BECAUSE NO PROPER PROCEDURE WAS FOLLOWE D ITA NO. 1633/DEL/2015 ASSESSMENT YEAR 2010-11 6 BY THE ASSESSEE WITH RESPECT TO THE SALE OF ASSETS. HE DREW OUR ATTENTION TO THE RELEVANT PARAGRAPHS IN TH E ASSESSMENT ORDER WHEREIN THE ASSESSING OFFICER HAD RECORDED A FINDING AS TO WHY THE SALE OF ASSETS WAS NOT PROPER. IT WAS FURTHER SUBMITTED BY THE LD. SR. DR THAT THE LD. COMMISSIONER OF INCOME TAX (A) HAD IGNORED THE FINDINGS OF THE ASSESSING OFFICER AND DELETED THE A DDITION PERTAINING TO THE MOBILE EXPENSES IGNORING THE FACT THAT THE GOVERNING BODY MEMBERS HAD USED THE MOBILE PHON E FOR THEIR PERSONAL USE. 4. IN RESPONSE, THE LD. AR SUBMITTED THAT AS FAR AS THE DISALLOWANCE OF EXEMPTION U/S 11 OF THE ACT WAS CONCERNED, THE ISSUE WAS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2009-10 IN ITA NO. 761/DEL/2013. IT WAS SUBMITTED THAT THIS ORDER OF THE TRIBUNAL HAD BEEN FURTHER AFFIRMED BY THE HONBLE D ELHI HIGH COURT ON 15.2.2017 IN ITA NO. 147/2017. IT WA S ALSO SUBMITTED THAT A SIMILAR DENIAL OF EXEMPTION W AS ADJUDICATED IN FAVOUR OF THE ASSESSEE BY THE ITAT V IDE ORDER DATED 16.10.2017 IN ITA NO. 163/DEL/2015. IT WAS ITA NO. 1633/DEL/2015 ASSESSMENT YEAR 2010-11 7 SUBMITTED THAT IN VIEW OF THERE BEING NO CHANGE IN THE FACTS AND CIRCUMSTANCES AS EXISTING IN ASSESSMENT Y EARS 2008-09 AND 2009-10 AND THE YEAR UNDER CONSIDERATIO N, THE BENEFIT OF EXEMPTION WAS RIGHTLY DIRECTED TO BE GIVEN BY THE LD. COMMISSIONER OF INCOME TAX (A). 4.1 COMING TO THE NEXT ISSUE OF DISALLOWANCE OF RS. 87,11,575/- ON ACCOUNT OF DISALLOWANCE OF DEPRECIAT ION, IT WAS SUBMITTED THAT THIS ISSUE HAD ARISEN EVEN IN ASSESSMENT YEARS 2008-09 AND 2009-10 AND THE TRIBUN AL HAD HELD A SIMILAR DISALLOWANCE TO BE UNSUSTAINABLE IN THESE ASSESSMENT YEARS IN ASSESSEES OWN CASE. REL IANCE WAS ALSO PLACED ON THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF C.I.T. VS RAJASTHAN AND GUJARA TI CHARITABLE FOUNDATION POONA IN CIVIL APPEAL NO. 718 6 OF 2014 WHEREIN VIDE JUDGMENT DATED 13.12.2017, THE HONBLE APEX COURT HAD HELD THAT DEPRECIATION WAS T O BE ALLOWED ON THE ASSETS ACQUIRED BY A TRUST, EVEN IF THE COST OF THE ASSET HAS BEEN ALLOWED TO THE TRUST AS APPLICATION OF INCOME IN THE PAST ASSESSMENT YEARS. 4.2 ARGUING AGAINST THE DEPARTMENTS GROUND CHALLENGING THE DELETION OF DISALLOWANCE OF RS. ITA NO. 1633/DEL/2015 ASSESSMENT YEAR 2010-11 8 92,83,904/- PERTAINING TO LOSS ON SALE OF FIXED ASS ETS, IT WAS SUBMITTED THAT SINCE THE LD. COMMISSIONER OF INCOME TAX (A) HAD ALLOWED THE CLAIM OF EXEMPTION U /S 11 OF THE ACT, THE ALLOWANCE OF CLAIM OF LOSS ON SA LE OF ASSETS WAS A CONSEQUENTIAL BENEFIT. IT WAS ALSO SUBMITTED THAT THE ISSUE IS COVERED BY THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF RAJASTHAN AND GUJARATI CHARITABLE FOUNDATION POONA (SUPRA) WHEREI N IT HAS BEEN HELD THAT SUCH A CLAIM DOES NOT AMOUNT TO DOUBLE DEDUCTION. IT WAS SUBMITTED THAT THE ASSESS ING OFFICER HAD MADE A DISALLOWANCE ON THE GROUND THAT THE CLAIM OF THE ASSESSEE WAS NOT ALLOWABLE AS THE COST OF ASSETS HAD BEEN ALLOWED TO THE ASSESSEE AS APPLICAT ION OF INCOME IN EARLIER YEARS. 4.3 COMING TO THE DISALLOWANCE OF RS. 59,657/- MADE ON ACCOUNT OF MOBILE PHONE EXPENSES, IT WAS SUBMITTED THAT THE ASSESSING OFFICER MADE AD HOC DISALLOWANCE OF 50% OF THE EXPENSES BY ALLEGING THAT THE SAME WAS INCURRED FOR PERSONAL USE WITHOUT POINTING OUT ANY SPECIFIC ERRO R OR DISCREPANCY IN THE DETAILS FURNISHED BY THE ASSESSE E. IT WAS SUBMITTED THAT IT IS A SETTLED LAW THAT IN ABSE NCE OF ITA NO. 1633/DEL/2015 ASSESSMENT YEAR 2010-11 9 ANY SPECIFIC DEFECT HAVING BEEN POINTED OUT IN THE BOOKS OF ACCOUNTS, AD HOC DISALLOWANCE CANNOT BE SUSTAINED. RELIANCE WAS PLACED ON A NUMBER OF JUDICIAL PRECEDE NTS OF THE ITAT DELHI BENCH IN THIS REGARD AND IT WAS SUBMITTED THAT THE DISALLOWANCE HAD BEEN RIGHTLY DE LETED BY THE LD. COMMISSIONER OF INCOME TAX (A). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALS O PERUSED THE MATERIAL ON RECORD. AS FAR AS THE DEPARTMENTS CHALLENGE TO THE ACTION OF THE LD. CIT (A) IN DIRECTING THE AO TO GRANT BENEFIT OF EXEMPTION U/S 11 OF THE ACT IS CONCERNED, IT IS SEEN THAT AN IDENTICAL SITUATION HAD ARISEN IN ASSESSEES OWN CASE IN AY 2 009- 10 WHEREIN THE AO HAD DENIED THE BENEFIT OF EXEMPTI ON U/S 11 OF THE ACT TO THE ASSESSEE ON THE GROUND THA T THERE WAS A VIOLATION OF SECTION 13(3) OF THE ACT O N PART OF THE ASSESSEE. THIS DENIAL WAS UPHELD BY THE LD. CIT (A) AND ON THE ASSESSEE APPROACHING THE ITAT, THE ITAT VIDE ORDER DATED 15/07/2016, HELD THAT THE AO HAD WRONGL Y INVOKED THE PROVISIONS OF SECTION 13(3) OF THE ACT AND FURTHER THAT THE LD. CIT (A) WAS NOT JUSTIFIED IN CONFIRMING THE ACTION OF THE AO. THE ORDER OF THE L D. CIT ITA NO. 1633/DEL/2015 ASSESSMENT YEAR 2010-11 10 (A) WAS SET ASIDE THE AO WAS DIRECTED TO ALLOW EXEM PTION U/S 11 OF THE ACT TO THE ASSESSEE. THE ORDER OF THE TRIBUNAL WAS LATER ON AFFIRMED BY THE HONBLE DELHI HIGH COURT. WE NOTE THAT THE BENEFIT OF EXEMPTION U/S 11 HAS BEEN DENIED ON SIMILAR REASONING IN THE YEAR IN APP EAL BEFORE US AND THE LD. SR. DR COULD NOT BRING OUT AN Y DISTINGUISHING FACT DURING THE COURSE OF PROCEEDING S BEFORE US. ACCORDINGLY, RESPECTFULLY FOLLOWING THE VIEW OF THE CO-ORDINATE BENCH FOR AY 2009-10, WE FIND NO RE ASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT (A) I N THIS REGARD AND WE UPHOLD HIS ORDER. 5.1 COMING TO THE NEXT ISSUE OF DISALLOWANCE OF RS. 87,11,575/- ON ACCOUNT OF DISALLOWANCE OF DEPRECIAT ION, IT IS AGAIN SEEN THAT THIS ISSUE HAD ALSO ARISEN IN ASSESSMENT YEARS 2008-09 AND 2009-10 AND THE TRIBUN AL HAD HELD A SIMILAR DISALLOWANCE TO BE UNSUSTAINABLE IN THESE ASSESSMENT YEARS IN ASSESSEES OWN CASE. THE LD. SR. DR COULD NOT BRING OUT ANY DISTINGUISHING FACT DURING THE COURSE OF PROCEEDINGS BEFORE US. ACCORDINGLY, RESPECTFULLY FOLLOWING THE VIEW OF THE CO-ORDINATE BENCH FOR AY 2009-10, WE FIND NO REASON TO INTERFERE WITH THE ITA NO. 1633/DEL/2015 ASSESSMENT YEAR 2010-11 11 FINDINGS OF THE LD. CIT (A) IN THIS REGARD AND WE U PHOLD HIS ORDER. 5.2 AS FAR AS THE DEPARTMENTS GROUND CHALLENGING T HE DELETION OF DISALLOWANCE OF RS. 92,83,904/- PERTAIN ING TO LOSS ON SALE OF FIXED ASSETS IS CONCERNED, IT IS SE EN THAT THE LD. CIT (A) HAS NOT SPECIFICALLY ADJUDICATED TH E ISSUE IN THE IMPUGNED ORDER. THEREFORE, IN THE INTEREST O F JUSTICE, THE ISSUE NEEDS TO BE RE-EXAMINED BY THE L D. CIT (A). ACCORDINGLY, THIS GROUND IS RESTORED TO THE FI LE OF THE LD. CIT (A) WITH A DIRECTION TO CONSIDER THE ISSUE AFRESH AFTER GIVING PROPER OPPORTUNITY TO THE ASSESSEE AND THEREAFTER ADJUDICATE THE ISSUE BY PASSING A SPEAKI NG ORDER. 5.3 SIMILARLY, THE DISALLOWANCE OF RS. 59,657/- MAD E ON ACCOUNT OF MOBILE PHONE EXPENSES HAS NOT BEEN SPECIFICALLY ADJUDICATED UPON BY THE LD. CIT (A). THEREFORE, IN THE INTEREST OF JUSTICE, THE ISSUE NE EDS TO BE RE-EXAMINED BY THE LD. CIT (A). ACCORDINGLY, THIS G ROUND IS RESTORED TO THE FILE OF THE LD. CIT (A) WITH A D IRECTION TO CONSIDER THE ISSUE AFRESH AFTER GIVING PROPER ITA NO. 1633/DEL/2015 ASSESSMENT YEAR 2010-11 12 OPPORTUNITY TO THE ASSESSEE AND THEREAFTER ADJUDICA TE THE ISSUE BY PASSING A SPEAKING ORDER. 6. IN THE FINAL RESULT, THE APPEAL OF THE DEPARTMEN T STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER IS PRONOUNCED IN THE OPEN COURT ON 23RD AUGUS T, 2018. SD/- SD/- (PRAMOD KUMAR ) (SUDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 23RD AUGUST, 2018 GS COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER ASSISTANT REGI STRAR