Sri Sai Educational Trust , Chitamani V. The Income Tax Officer(Exemption) Ward-3 , Bangalore

ITA 1654/BANG/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5506 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 09-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJASEKHAR
• Assessee Lawyers: CHANDRASEKHAR R
• Keywords: Capital asset; Depreciation
• Section: 12A; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC - C BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER ITA NO. 1654/BANG/2017 ASSESSMENT YEAR : 2012-13 SRI SAI EDUCATIONAL TRUST, NO.15, VENKATAGIRIKOTE CROSS, M. G. ROAD, CHINTAMANI 563 125. PAN : AAGTS 0877 F VS. THE INCOME TAX OFFICER (EXEMPTIONS), WARD 3, BENGALURU. APPELLANT RESPONDENT ASSESSEE BY : SHRI. CHANDRASEKHAR R, ADVOCATE REVENUE BY : SHRI. RAJASEKHAR, ADDL. CIT DATE OF HEARING : 27.11.2017 DATE OF PRONOUNCEMENT : 26.02.2018 O R D E R THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST T HE ORDER OF THE CIT(A), INTER ALIA, ON FOLLOWING GROUNDS: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) E RRED IN HOLDING THAT THE APPELLANT IS ENGAGED IN ACTIVITIES FOR THE PURPOSES OF PROFIT IN ITS EDUCATIONAL INSTITUTIONS AND AS SUCH NOT ENTITLE TO EXEMPTION O F ITS INCOME U/S 10(23C) (IIIAD) OF THE ACT. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) H AS TOTALLY BASED ON THE PATTERN OF COMPUTATION FILED IN THE RETURN OF INCOM E AND THE FORM L0B SIGNED BY THE AUDITOR AND WITHOUT ANY OTHER MATERIAL ON RECORD. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) H AVING HELD THAT THE ASSESSING AUTHORITY HAS CORRECTLY PROCEEDED WITH THE APPELLAN T'S CLAIM U/S 11 OF THE ACT OUGHT ITA NO.1654/BANG/2017 PAGE 2 OF 4 TO HAVE DIRECTED THE LEARNED ASSESSING AUTHORITY TO CONSIDER THE INVESTMENTS ON CAPITAL ASSETS AND REPAYMENTS OF LOANS AS APPLICATION OF FU NDS TOWARDS OBJECTS OF TRUST. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) H AS FAILED TO ADJUDICATE THE APPELLANT'S GROUND WITH REGARD TO IN VESTMENTS ON CAPITAL ASSETS AND REPAYMENTS OF LOANS AS APPLICATION OF FUNDS TOWARDS OBJECTS OF TRUST. 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) H AS FAILED TO ADJUDICATE THE APPELLANT'S GROUND WITH REGARD TO LEVY OF INTER EST CHARGED U/S 234 A AND 234 B OF THE ACT. 6. THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (A PPEALS) IS NOT SUSTAINABLE EITHER IN LAW OR ON FACTS. THE APPELLANT CRAVES FOR LEAVE OF HON'BLE TRIBUNAL TO ADD OR DELETE GROUND OR GROUNDS AT THE TIME OF HEARING 2. DURING THE COURSE OF HEARING, THE LEARNED COUNSE L FOR THE ASSESSEE INVITED MY ATTENTION TO THE ORDER OF THE AO. THOUGH THE ASSES SEE HAS GOT THE REGISTRATION UNDER SECTION 12A OF THE INCOME TAX ACT, IT CLAIMED EXEMPTION UNDER SECTION 10(23C)(IIIAD) BUT THE AO HAS NOT EXAMINED THE CLAI M IN THE LIGHT OF THE PROVISIONS OF SECTION 10(23C)(IIIAD) OF THE ACT. HE RATHER EX AMINED THE CLAIM OF EXEMPTION UNDER SECTION 11 OF THE ACT AND ADDED BACK THE DEPR ECIATION CLAIMED ON VEHICLES AND OTHER ASSETS AFTER DENYING THE BENEFIT OF EXEMP TION UNDER SECTION 11 OF THE ACT. THE ASSESSEE PREFERRED ANY APPEAL BEFORE THE CIT(A) AND THE CIT(A) DID NOT APPRECIATE THE FACTS AND HAS CONFIRMED THE ORDER OF THE AO HAVING OBSERVED THAT THE EDUCATIONAL OPERATIONS WERE COMMERCIAL IN NATUR E. NOW THE ASSESSEE IS BEFORE US WITH THE SUBMISSION THAT NO DOUBT THE ASSESSEE W AS GRANTED REGISTRATION UNDER SECTION 12A OF THE ACT BUT IN THE IMPUGNED ASSESSME NT YEAR IT CLAIMED EXEMPTION UNDER SECTION 10(23C)(IIIAD) OF THE ACT BUT THIS AS PECT WAS NOT EXAMINED BY THE AO AND HE DISALLOWED THE CLAIM UNDER SECTION 11 OF THE ACT. BESIDES, DEPRECIATION ON ASSETS AND VEHICLES WERE ALSO DISALLOWED. EVEN THE CIT(A) DID NOT APPRECIATE THE FACT THAT ASSESSEE HAS FILED THE RETURN OF INCO ME AND CLAIMED DEDUCTION UNDER SECTION 10(23C)(IIIAD) OF THE ACT AND HE CONFIRMED THE DISALLOWANCE AFTER CONCLUDING THAT THE EDUCATIONAL OPERATIONS WERE COM MERCIAL IN NATURE. ITA NO.1654/BANG/2017 PAGE 3 OF 4 THE LEARNED DR PLACED RELIANCE UPON THE ORDER OF T HE CIT(A). 3. HAVING CAREFULLY EXAMINED THE ORDERS OF LOWER AU THORITIES IN THE LIGHT OF RIVAL SUBMISSIONS, I FIND THAT FROM THE ASSESSMENT ORDER, IT IS NOT BORNE OUT AS TO WHETHER THE ASSESSEE HAS CLAIMED EXEMPTION UNDER SE CTION 10(23C)(IIIAD) OF THE ACT. IN THE ENTIRE ASSESSMENT ORDER, THE AO HAS MA DE DISCUSSION WITH REGARD TO REGISTRATION UNDER SECTION 12A AND CLAIM OF DEDUCTI ON UNDER SECTION 11 OF THE ACT. SINCE CERTAIN CONDITIONS WERE NOT FULFILLED, THE AO DENIED THE DEDUCTIONS AND THE DEPRECIATION ON VEHICLES AND ASSETS FOLLOWING THE J UDGMENT OF THE APEX COURT IN THE CASE OF ESCORTS LTD., VS. UNION OF INDIA (199 I TR 43). 4. BEFORE THE CIT(A), THOUGH THE ASSESSEE HAS RAISE D THE CLAIM, THE DEDUCTIONS WERE CLAIMED UNDER SECTION 10(23C)(IIIAD) OF THE AC T, BUT THE CIT(A) HAS CONFIRMED THE DISALLOWANCE WITHOUT VERIFYING THE FACTS WHETHE R THE DEDUCTION WAS CLAIMED UNDER SECTION 10(23C)(IIIAD) OF THE ACT OR UNDER SE CTION 11 OF THE ACT. HE SUMMARILY CONFIRMED THE DISALLOWANCE HAVING OBSERVE D THAT EDUCATIONAL OPERATIONS WERE COMMERCIAL IN NATURE. DURING THE C OURSE OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE INVITED MY ATTENTION TO TH E BALANCE SHEETS AND THE COMPUTATION OF INCOME. HE HAS ALSO FILED A COPY OF RECEIPTS AND PAYMENTS ACCOUNT AND INCOME AND EXPENDITURE ACCOUNTS FOR THE YEAR EN DED 31.03.2012 IN SUPPORT OF HIS CONTENTIONS THAT THERE WAS NO PROFIT MOTIVE OF THE ASSESSEE IN RUNNING THE EDUCATIONAL INSTITUTIONS AND WHATEVER EXCESS RECEIP T WAS THERE, IT WAS APPLIED FOR THE EDUCATIONAL PURPOSES. 5. HAVING CAREFULLY EXAMINED THE FINANCIAL STATEMEN TS, COPY OF THE RETURNS AND THE WRITTEN SUBMISSIONS, I FIND THAT LOWER AUTHORIT IES HAVE NOT PROPERLY APPRECIATED THE CLAIM AND CONTENTIONS OF THE ASSESS EE. THEREFORE, IT REQUIRES FRESH ADJUDICATION BY THE AO. ACCORDINGLY, I SET ASIDE T HE ORDER OF THE CIT(A) AND RESTORE THE MATTER TO THE AO WITH THE DIRECTION TO RE-EXAMI NE THE CLAIM OF EXEMPTION UNDER SECTION 10(23C)(IIIAD) OF THE ACT. IF THE RE QUISITE CONDITIONS ARE SATISFIED, THE ITA NO.1654/BANG/2017 PAGE 4 OF 4 CLAIM SHOULD BE ALLOWED. 6. IN THE RESULT, APPEAL OF THE ASSESSEE STANDS ALL OWED. PRONOUNCED IN THE OPEN COURT ON 26 TH FEBRUARY, 2018. SD/- SD/- (SUNIL KUMAR YADAV) JUDICIAL MEMBER BANGALORE. DATED: 26 TH FEBRUARY, 2018. /NS/* COPY TO: 1. APPELLANTS 2. RESPONDENT 3. CIT 4. GUARD FILE BY ORDER SR. PRIVATE SECRETARY, ITAT, BANGALORE.