M/s. Manjeet Kaur Memorial Premier Institute of Education, Gurgaon V. ITO, Gurgaon

ITA 1824/DEL/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7071 (ITAT-DELHI)
• Duration Of Justice: 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 3
• Next Hearing Date: 09-11-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 07-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VED JAIN ADV SH ASHISH GOEL
• Keywords: Capital asset; Depreciation; Charitable institution
• Section: 143(3); 142(1); 12AA; 27; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC-3, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER I.T.A. NOS. 1824/DEL/2016 & 2025/DEL/2015 A.YRS. 2011-12 & 2010-11 M/S MANJEET KAUR MEMORIAL PREMIER INSTITUTE OF EDUCATION, H.NO. 836, SECTOR-14, GURGAON, HARYANA 122002 (PAN:- AAAAM7411J) VS. ITO, WARD II(2), GURGAON (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. VED JAIN, ADV., SH. ASHISH GOEL, CA DEPARTMENT BY : SH. ANIL KUMAR SHARMA, SR. DR ORDER ASSESSEE HAS FILED THESE APPEALS AGAINST THE SEPARATE O RDERS DATED 25.1.2016 AND 23.1.2015 PASSED BY THE LD. COMMISSIONE R OF INCOME TAX (APPEALS)2, GURGAON PERTAINING TO ASSESSMENT YEAR 201 1-12 & 2010-11. 2. THE GROUNDS RAISED BY THE ASSESSEE IN ITA NO. 1824 /DEL/2016 (AY 2011-12) READ AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A)] IS BAD BOTH IN THE EYE OF LAW AND ON FACTS. 2 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LEARNED C IT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS. 44,54,602/- MADE BY THE LEARNED AO. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LEARNED CI T(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE ACT ION OF A.O. IN DENYING THE EXEMPTION UNDER SECTION 11 OF THE INCOME TAX ACT WHILE COMPUTING ITS INCOME IGNORING THE FACT THAT THE ASSESSEE-SOCIETY IS AN EDUCATIONAL INSTITUTION AND REGISTERED UNDER SECTION 12AA OF THE INCOME TAX ACT AND THE SOCIETY WAS HOLDING THE PROPERTY/ASSETS WHOLLY F OR CHARITABLE PURPOSES. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LEARNED C IT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN NOT APPRECIATING THE PROVISION OF SECTION 11 OF THE ACT WHEREBY EXEMPTION I S TO BE PROVIDED TO THE EXTENT WHICH INCOME OF THE CHARITAB LE TRUST IS APPLIED TO CHARITABLE OR RELIGIOUS PURPOSES IN INDIA. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LEARNE D CIT (A) HAS ERRED BOTH ON FACTS AND IN LAW IN NOT APPRECIAT ING THE FACT THAT THE INCOME U/S 11 (1) REFERS. TO THE INCOM E 3 FROM PROPERTY HELD UNDER THE TRUST AND WHICH HAS TO BE APPLIED FOR CHARITABLE PURPOSES IRRESPECTIVE OF THE HEA D OF INCOME UNDER WHICH THE INCOME IS ASSESSABLE. 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LEARNE D CIT (A) HAS ERRED BOTH ON FACTS AND IN LAW IN IGNORING THE VARIOUS JUDICIAL PRONOUNCEMENTS IN THIS REGARD. 7. THAT THE CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE FINDINGS OF THE LEARNED AO IGNORING TH E EXPLANATION AND EVIDENCES SUBMITTED BY THE ASSESSEE IN SUPPORT OF ITS CONTENTION. 8. THAT THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER ANY OF THE GROUNDS OF APPEAL. 3. THE GROUNDS RAISED BY THE ASSESSEE IN ITA NO. 2025 /DEL/2015 (AY 2010-11) READ AS UNDER:- 1. THAT THE ORDER PASSED BY LD. CIT(A) IS BAD IN LAW AND ON FACTS OF THE CASE. 2. THAT THE LD. CIT(A) ERRED IN SUSTAINING THAT THE A SSESSEE IS NOT CARRYING EDUCATION ACTIVITY IN THIS PREMISES. 4 3. THAT THE LD. CIT(A) ERRED IN SUSTAINING THE RECEIPT OF RS. 97,90,257/- AS INCOME FROM HOUSE PROPERTY AND TAXED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 4. THAT THE LD. CIT(A) ERRED IN SUSTAINING THAT THERE IS NO APPLICATION / UTILIZATION OF EXPENSES AGAINST THE RECEIP T FOR THE PURPOSE OF CHARITABLE ACTIVITY U/S. 2(15) OF THE IN COME TAX ACT, 1961. 5. THAT THE LD. CIT(A) HAS ERRED IN SUSTAINING THE INT EREST CHARGED U/S. 234A, 234B, 234C AND 234D OF THE INCOME TAX ACT. PRAYER:- IT IS THEREFORE, PRAYED THAT THE DISALLOWANCE / ADDIT IONS SUSTAINED AS ABOVE BY LD. CIT(A) BE DELETED AND APPEAL BE ALLOWED. ITA NO. 1824/DEL/2016 (AY 2011-12) 4 . THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE FILED T HE RETURN OF INCOME ON 01.08.2011 DECLARING TOTAL INCOME OF RS. NIL. THE C ASE WAS SELECTED FOR SCRUTINY UNDER THE COMPULSORY CLAUSE OF CENTRAL ACTION PLA N 2012. NOTICE UNDER SECTION 143(2) WAS ISSUED ON 26.9.2012. AFTER CHA NGE OF JURISDICTION, THE NOTICES UNDER SECTION 143(2) AND 142(1) ALONGWITH A QUESTIONNAIRE WAS 5 ISSUED ON 12.8.2013. IN RESPONSE THERETO, ASSESSEES AR A PPEARED AND FILED THE REPLY. AO OBSERVED THAT THE SOCIETY HAS MADE AN AGREEMENT WITH M/S MOTHERS PRIDE PERSONAL LTD. TO ESTABLISH A PRE-SCHOOL LEARNING CENTRE/ NURSERY SCHOOL. AS PER THE AGREEMENT WITH THE ASSESSEE AND THE SAID COMPANY, PREMISE WILL BE MADE AVAILABLE FREE OF CHARG ES DURING THE SUBSISTENCE OF THE AGREEMENT. IN CONSIDERATION OF THE ABO VE ASSESSEE IS ENTITLED TO 20% OF THE ENTIRE COLLECTION WHICH INCLUDES REGISTRATION CHAR GES, ADMISSION CHARGES, ANNUAL CHARGES, QUARTERLY CHARGES, MO NTHLY FEES, HOBBY CLASSES AND CHARGES OF ALL THE ACTIVITIES CONDUCTED IN THE SCHO OL EXCEPT TRANSPORT AND REFUNDABLE SECURITY. AO DURING THE ASSESSM ENT PROCEEDINGS CONSIDERED THE AMOUNT RECEIVED FROM MOTHERS PRIDE PERS ONA LIMITED OF RS. 51,55,453/- AS INCOME UNDER THE HEAD HOUSE PROPERTY AN D ALLOWED STATUTORY DEDUCTION UNDER SECTION 24 OF RS. 15,46,359/- OF THE I NCOME TAX ACT. FURTHER ADDITION OF RS. 12,676/- ON ACCOUNT OF INTERES T INCOME, INCOME FROM IT REFUND INTEREST OF RS. 37,382/- AND MISCELLANEOUS I NCOME OF RS. 7,95,450/-RECEIVED AS VOLUNTARY DONATIONS. TOTAL ADDIT ION OF RS. 44,54,602/- WAS MADE TO THE RETURNED INCOME OF THE ASSESSEE. THEREAFTER, THE AO COMPLETED THE ASSESSMENT AT RS. 44,54,602/- BY MAKING VA RIOUS ADDITIONS VIDE HIS ORDER DATED 29.3.2014 PASSED U/S. 143(3) OF TH E INCOME TAX ACT, 1961. 6 5. AGAINST THE ASSESSMENT ORDER DATED 29.3.2014, ASSESSE E APPEALED BEFORE THE LD. CIT(A), WHO VIDE HIS IMPUGN ED ORDER DATED 25.1.2016 HAS DISMISSED THE APPEAL OF THE ASSESSEE. 6. AGGRIEVED WITH THE AFORESAID ORDER OF THE LD. CI T(A), ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 7. DURING THE HEARING, LD. COUNSEL OF THE ASSESSEE HAS STATED THAT IN THE PRESENT CASE THE ASSESSE PURCHASED AND CONSTRUCTED THE PR OPERTY AFTER TAKING TERM LOAN FROM THE BANK AND MADE THE AGREEME NT WITH THE MOTHER PRIDE EDUCATION PERSONA P LTD. IN RESPECT OF RENTAL INCO ME. THERE IS NO CASE OF ANY TRANSFER OF FUNDS TO THE MEMBERS OF THE SOCIETY. HE FURTHER STATED THAT THE RENTAL INCOME FROM THE PROPERTY IS IN THE CH ARITABLE OBJECTS OF THE TRUST AS MENTIONED IN THE CLAUSE Z AA) OF THE MEMORAND UM OF ASSOCIATION. HE RELIED UPON THE ORDER OF THE CHENNAI BENCH IN THE CASE OF ANJUMAN-E- HIMAYATH-E-ISLAM (2015) 154 ITD 755. HE FURTHER STATED THAT IN RESPECT OF INTEREST EXPENSES OF RS. 24,25,411/- IT HAS BEEN PAID O N TERM LOAN TAKEN TO ACQUIRE/ CONSTRUCTION OF ASSETS OF THE SOCIETY. HE FURTHER ST ATED THAT ASSESSEE HAS ALSO MADE THE REPAYMENT OF LOAN TO THE TUN E OF RS. 29,51,584/- AND DEPRECIATION OF RS. 32,31,728/- ARE THE APPLICATION OF INCOME FOR CHARITABLE PURPOSES. HE RELIED UPON THE ORDER OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF DIT(E) VS. GOVINDUNAIC KER ESTATE (2009) 315 ITR 237 (MADRAS). IT WAS THE FURTHER CONTENTION TH AT EXPENDITURE 7 INCURRED ON BLOOD DONATION CAMPS, FREE BOOKS DISTRIBUTI ON ARE PURELY CHARITABLE IN NATURE AND THEREFORE, TO BE CONSIDERED O F APPLICATION OF INCOME. ADMINISTRATIVE EXPENSES ARE BASICALLY INCLUDES PRINTIN G AND STATIONERY, CONVEYANCE EXPENSES, OFFICE MAINTENANCE EXPENSES WHICH AR E NECESSARY FOR RUNNING OFFICE OF THE TRUST. THEREFORE, HE FINALLY STATED THAT THIS IS NOT THE CASE OF THE AO THAT THE ASSESSEE HAS MADE ANY BUSINESS OF SALE OR PURCHASE OF PROPERTY. THERE IS NO ALLEGATION THAT ACTIVITIES A RE NOT CHARITABLE IN NATURE. IN VIEW OF THE ABOVE, HE REQUESTED THAT ADDITION IN DISPUTE MAY BE DELETED. 8. ON THE CONTRARY, LD. DR OPPOSED THE AFORESAID CONT ENTION OF THE LD. COUNSEL OF THE ASSESSEE AND RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND REQUESTED THAT THE SAME MAY BE UPHELD. 9. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE REL EVANT RECORDS AVAILABLE WITH ME, ESPECIALLY THE ORDERS PASSED BY THE R EVENUE AUTHORITIES AND THE CASE LAWS CITED BY THE LD. COUNSEL OF THE ASSESSEE . IN THIS CASE THE ASSESSEE IS A SOCIETY REGISTERED UNDER SOCIETIES REGISTRATIO N ACT 1860 AND REGISTERED UNDER 12AA OF THE INCOME TAX ACT. ASSESSEE FILED THE INCOME TAX RETURN FOR THE A.Y. 2011-12 ON 01.08.2011 DECLARING TOTAL INCOME OF RS. NIL ALONG WITH COPY OF AUDIT REPORT, BALANCE SHEET AND INCO ME & EXPENDITURE ALC. IT HAS BEEN NOTICED THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD AN AGREEMENT WITH M/S MOTHERS PRIDE EDUCATI ON PERSONA LIMITED TO ESTABLISH A PRE-SCHOOL LEARNING CENTER NURSERY SCHOOL. AS PER THE 8 AGREEMENT WITH THE ASSESSEE AND THE SAID COMPANY, PREM ISES WILL BE MADE AVAILABLE FREE OF CHARGE DURING THE SUBSISTENCE OF THE AGREEMENT. IN CONSIDERATION OF THE ABOVE ASSESSEE IS ENTITLED TO 20% OF THE ENTIRE COLLECTION WHICH INCLUDES REGISTRATION CHARGES, ADMISSION CH ARGES, ANNUAL CHARGES, QUARTERLY CHARGES, MONTHLY FEES, HOBBY CLASSES AND CHARGES OF ALL THE ACTIVITIES CONDUCTED IN THE SCHOOL EXCEPT TRANSPORT AND REFUNDABLE SECURITY. DURING THE ASSESSMENT PROCEEDINGS THE AMOUNT RE CEIVED FROM MOTHERS PRIDE PERSONA LIMITED OF RS. 51,55,453/- AS IN COME UNDER THE HEAD HOUSE PROPERTY AND ALLOWED STATUTORY DEDUCTION UNDER S ECTION 24 OF RS. 15,46,359/- OF THE INCOME TAX ACT. FURTHER ADDITIO N OF RS. 12,676/- ON ACCOUNT OF INTEREST INCOME, INCOME FROM IT REFUND INTERE ST OF RS. 37,382/- AND MISCELLANEOUS INCOME OF RS. 7,95,450/- RECEIVED AS VO LUNTARY DONATIONS. TOTAL ADDITION OF RS. 44,54,602/- WAS MADE TO THE RE TURNED INCOME OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF THE AO ASSESSEE PRE FERRED AN APPEAL BEFORE THE LD.CIT(A) WHO REJECTED THE CONTENTION RAI SED BY THE ASSESSEE THAT THE INTEREST PAID BY THE ASSESSEE FOR RAISING THE LOAN FOR CONSTRUCTION OF THE PROPERTY, REPAYMENT OF LOAN, ARE APPLICATION OF INCOME AND THEREFORE ASSESSEE IN TOTAL HAS APPLIED RS. 69,71,358/- WHICH IS FAR MORE THAN THE RECEIPTS AND CONFIRMED THE ADDITION MADE BY THE AO. I FIND THAT AO HAS PASSED TWO PAGES ORDER AND HAS MADE ONLY ONE ACTION TREA TING THE INCOME RECEIVED FROM THE MOTHERS PRIDE EDUCATION PERSONA P L TD AS INCOME UNDER THE HEAD HOUSE PROPERTY. HOWEVER, WHILE COMPUTING THE TOTAL ASSESSED 9 INCOME ADDED THE INTEREST INCOME OF RS. 12676/-, RS. 373 82/- ON ACCOUNT OF INTEREST ON REFUND AND RS. 7,95,450/- AS MISCELLANEOUS I NCOME WHICH IS THE AMOUNT RECEIVED AS VOLUNTARY DONATION WITHOUT GIVING ANY JUSTIFICATION FOR THE SAME. I FURTHER FIND THAT AO HAS ACCEPTED THE AP PLICATION OF FUNDS MADE BY THE ASSESSEE AND HE DID NOT MAKE ANY ADVERSE COMMENT ON THE ACTIVITIES RENDERED BY THE ASSESSEE. IN THE PRESENT CASE, ASSESSEE PU RCHASED AND CONSTRUCTED THE PROPERTY AFTER TAKING TERM LOAN FROM T HE BANK AND MADE THE AGREEMENT WITH THE MOTHERS PRIDE EDUCATION PERSONA P LTD IN RESPECT OF RENTAL INCOME. THERE IS NO CASE OF ANY TRANSFER OF FUND S TO THE MEMBERS OF THE SOCIETY. FURTHER, RENTAL INCOME FROM THE PROPERTY IS IN THE CHARITABLE OBJECTS OF THE TRUST AS MENTIONED IN THE (CLAUSE Z AA) OF THE MEMORANDUM OF ASSOCIATION. FOR THE SAKE OF READY REFERENCE THE RELEV ANT CLAUSE OF THE MEMORANDUM OF ASSOCIATION READS AS UNDER:- Z AA) WITHOUT PREJUDICE TO THE GENERALITY OF THE A BOVE OBJECTS AND FOR EFFECTIVELY CARRYING OUT THE SAME, THE SOCIETY SHALL HAVE POWER TO RECEIVE, HOLD AND POSSES ANY PROPERTY INCLUDI NG SECURITIES OF ANY KIND AND TO CONSTRUCT AND MAINTAINED AN Y BUILDING AND TO ENTER INTO ANY CONTRACT FOR OR IN CON NECTION WITH THE PURPOSE OF THE SOCIETY TO RAISE FUNDS BY CREATING CH ARGE OVER THE ASSETS OF THE SOCIETY OR OTHERWISE FOR THE BE NEFIT OF THE SOCIETY AND TO ACCEPT THE MANAGEMENT OF ANY TRUST OR ENDOWMENT IN WHICH THE SOCIETY MAY BE INTERESTED. 10 9.1 MY AFORESAID VIEW IS FULLY SUPPORTED BY THE ITAT, CHENNAI BENCH DECISION IN THE CASE OF ANJUMAN-E-HIMAYATH-E-LSLAM[2015] 154 ITO 755 (CHENNAI - TRIB.) WHILE DETERMINING 'INCOME' OF ASSES SEE-TRUST AND ITS 'APPLICATION OF INCOME' FOR PURPOSE OF CLAIMING EXEMPT ION UNDER SECTION 11 (1)(A), PROVISIONS OF CHAPTER-IV I.E. SECTIONS 22 TO 27 APPLICABLE FOR COMPUTING INCOME CHARGEABLE TO TAX UNDER HEAD 'INCOME FROM HOUSE PROPERTY', WILL NOT BE ATTRACTED. FOR THE SAKE OF CON VENIENCE, THE RELEVANT EXTRACT OF THE ORDER IS REPRODUCED HEREUNDER: '6.3 WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY PE RUSED THE MATERIALS AVAILABLE ON RECORD. CHAPTER-III REFERS TO ' INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME'. SECTION-11 O F THE ACT PLACED UNDER CHAPTER-III DEALS WITH 'INCOME FROM PROPE RTY HELD FOR CHARITABLE OR RELIGIOUS PURPOSE'. SECTION- 11 (1 ) (A) PROVIDES THAT INCOME DERIVED FROM THE PROPERTY HELD UNDER TRU ST WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSE, TO THE EXTENT TO WHICH SUCH INCOME IS APPLIED, SHALL NOT BE INCLUDED IN ITS TOTAL I NCOME. THE ACT ALSO PROVIDES THAT UPTO 15% OF THE GROSS INCOME RECEI VED IS ACCUMULATED AND THEN THE SAME SHALL ALSO BE EXEMPT FR OM THE INCOME OF THE TRUST. FROM THE ABOVE IT IS CLEAR THAT P ROVISION OF THE ACT IN CHAPTER-III DEALS WITH THE MANNER IN WHICH THE INCOME OF THE ASSESSEE TRUST HAS TO BE APPLIED IN ORDER TO EXE MPT SUCH INCOME FROM THE TOTAL INCOME. IT IS NOT A CASE OF COMPU TATION OF 11 INCOME CHARGEABLE TO TAX AS PER THE PROVISIONS CHAPTER I V UNDER THE HEAD 'C-INCOME FROM HOUSE PROPERTY'. THEREFORE WH ILE DETERMINING THE 'INCOME' OF THE ASSESSEE TRUST AND ITS 'APPLICATION OF INCOME' FOR THE PURPOSE OF CLAIMING EX EMPTION U/S. 11(1 )(A) OF THE ACT, THE PROVISIONS OF CHAPTER-I V - SECTIONS 22 TO 27 OF THE ACT WHICH IS APPLICABLE FOR COMPUTING T HE INCOME CHARGEABLE TO TAX UNDER THE HEAD 'INCOME FROM HOUSE P ROPERTY' WILL NOT BE ATTRACTED. HOWEVER, PROVISIONS OF SECTIONS 22 TO 27 OF THE ACT WILL COME INTO PLAY WHEN THE ASSESSEE IS NOT E NTITLED TO THE BENEFIT OF SECTION-11(1)(A) OF THE ACT AND WHEN SU CH INCOME OF THE TRUST IS CHARGEABLE TO TAX UNDER THE HEAD 'INCOM E FROM HOUSE PROPERTY'. IT IS PERTINENT TO MENTION HERE THAT HON'BLE CALCUTTA HIGH COURT SUPRA HAS HELD THAT INCOME CONTEMPLA TED BY THE PROVISIONS OF SECTION 11 IS THE REAL INCOME AND NOT THE INCOME AS ASSESSED OR ASSESSABLE. ACCORDINGLY, WHILE ARRIV ING AT THE RENTAL INCOME OF THE ASSESSEE-TRUST ANY EXPENDITUR E INCURRED WHATSOEVER RELATED TO THE RENTAL INCOME HAS TO BE ALLO WED AS DEDUCTION AND THE NET INCOME WHICH IS THE REAL INCOME, W ILL BE TREATED AS THE INCOME OF THE TRUST. FROM OUR ABOVE DI SCUSSION THE GROUND RAISED BY THE ASSESSEE ON THIS ISSUE WILL NOT SURVIVE AND THEREFORE, THE ORDER OF THE REVENUE IS UPHELD. ' 12 9.2 FURTHER A PERUSAL OF INCOME & EXPENDITURE AND CI T(A) ORDER AT PAGE NO. 6 SHOWS THAT APPLICATION MADE BY THE ASSESSEE IS TOWAR DS THE CHARITABLE ACTIVITIES AND AS PER THE OBJECTS OF THE SOCIETY. THE B REAK UP OF APPLICATION OF RS. 69,71,358 IS AS UNDER: I. ADMINISTRATIVE EXPENSES RS. 3,48,145/- II. INTEREST & BANK CHARGES RS.24,25,411/- III. DEPRECIATION RS. 32,31,728/- IV. MAINTENANCE EXPENSES RS.4,88,307/- V. BLOOD DONATION CAMP EXP. RS. 1,83,770/- VI. EYE CHECK UP CAMP EXP. RS. 1,54,149/- VII. FREE BOOKS DISTRIBUTION EXP. RS. 1,39,848/- RS. 69.71,358/- 9.3 LN RESPECT OF INTEREST EXPENSES OF RS. 24,25,411/- IT HAS BEEN PAID ON TERM LOAN TAKEN TO ACQUIRE/CONSTRUCTION OF ASSETS OF THE SOCIETY. FURTHER, ASSESSEE HAS ALSO MADE THE REPAYMENT OF LOAN TO THE TU NE OF RS. 29,51,584 AND DEPRECIATION OF RS. 32,31,728/- ARE THE APPLICATI ON OF INCOME FOR CHARITABLE PURPOSES. IN THIS REGARD, RELIANCE IS PLACED ON THE JUDGEMENT OF 13 THE MADRAS HIGH COURT IN THE CASE OF DIT(E) VS GOVINDU NAICKER ESTATE[2009] 315 ITR 237 (MADRAS) WHEREIN IT HAS BEEN HELD AS UNDE R: 9. IN THE CASE ON HAND, IT IS AN ADMITTED FACT THAT TH E PROPERTY OF THE ASSESSEE-TRUST WAS IN A DILAPIDATED CONDITION AND WOULD NOT EARN INCOME TO CARRY OUT THE OBJECTS OF THE TRUST. FOR THE PURPOSE OF CARRYING OUT TH E OBJECTS OF THE TRUST, IT HAS BECOME NECESSARY TO DEMOLISH AND RECONSTRUCT THE PROPERTY SO AS TO EARN INCOME BY EXPLOITING THE PROPERTY. IT IS ALSO AN ADMITTED FACT T HAT THE RENTAL INCOME IN THE PROPERTY HELD IN TRUST AMOUNTED TO 90 PER CENT, OF THE TOTAL INCOME OF THE TRUST. FOR THE PU RPOSE OF PUTTING UP THE CONSTRUCTION OF THE PROPERTY HELD IN TRUST, THE TRUST BORROWED FUND FROM THE INDIAN BANK. THUS, THE CAPITAL ASSET SO PUT UP BY THE BORROWED FUND IS ONLY FOR THE PURPOSE OF AUGMENTING INCOME IN ORDER TO CARRY OUT THE OBJECT OF THE TRUST AS ENVISAGED. IT IS CLEAR FROM THE O RDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) THAT NEIT HER THE ASSESSING OFFICER NOR THE ASSESSEE HAS ADVERTED TO THE OBJECT OF THE CHARITABLE TRUST. BUT THE AUTHORITIES PROCEEDED ON THE PREMISE THAT THE COMPLEX HAS BEEN PUT UP BY THE TRUST IN ORDER TO PERFORM ITS CHARITABLE ACTI VITIES, WHICH FACTUM HAS ALSO NOT BEEN DISPUTED BY THE REVENUE . 14 THE ASSESSEE-TRUST IN ORDER TO PERFORM ITS CHARITABLE ACTIVITIES, NECESSARILY HAS TO EXPLOIT THE CAPITAL ASSETS BY FINDING APPROPRIATE AVENUES FOR EARNING REVENUE AND FOR THAT PURPOSE, HAS TO INCUR EXPENDITURE, WHICH IS CAPITAL IN NATURE BY RAISING LOAN. THE CAPITAL ASSET BUILT WITH A BORROWED FUND GENERATES INCOME WHICH ENABLED THE CHARITABLE TRUST TO PERFORM ITS CHARITABLE ACTIVITIES. TH US, THE CAPITAL ASSET BUILT WITH BORROWED FUND, UNDER NO CIRCUMSTANCES, COULD BE REGARDED TO BE OUTSIDE THE SCOPE OF ITS OBJECTS. IF IT IS WITHIN THE OBJECTS OF THE CHARIT ABLE TRUST, THEN THERE IS NO REASON AS TO WHY THE BORROWING MADE FOR THE CONSTRUCTION OF THE BUILDING AND REPAYMEN T OF THE LOAN COULD NOT BE TREATED AS AN APPLICATION OF INCO ME. IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT THE ASSES- SEE BY CONSTRUCTING THE COMMERCIAL COMPLEX CONTRAVENED THE OBJECTS OF THE TRUST. THERE IS NO PROVISION IN THE A CT, WHICH DISENTITLES THE ASSESSEE-TRUST FROM CLAIMING REPAYMENT OF LOAN AS APPLICATION OF INCOME, ESPECIALLY IN VIEW OF THE FACT THAT THE TRUST HAS TO AUGMENT ITS INCOM E AND FOR THAT PURPOSE IT HAS PUT UP A CONSTRUCTION WITH BORROWED FUND. IF RAISING OF LOAN DOES NOT STAND IN TH E WAY OF ITS CHARITABLE ACTIVITIES, THE REPAYMENT THERE AFT ER MUST 15 BE TREATED AS APPLICATION OF ITS INCOME. BY REPAYMENT O F THE LOAN, THE TRUST WIPED ITS LIABILITY AND THE INCOM E EARNED FROM THE PROPERTY WOULD BE AVAILABLE FOR BEING UTIL ISED FOR CHARITABLE PURPOSES. 9.4 FROM THE ABOVE, I NOTICED THAT EXPENDITURE INCU RRED ON BLOOD DONATION CAMPS, FREE BOOKS DISTRIBUTION ARE PURELY CHARITABLE IN NATURE AND THEREFORE THESE ARE TO BE CONSIDERED APPLICATION OF INCOME. ADMIN ISTRATIVE EXPENSES ARE BASICALLY INCLUDES PRINTING & STATIONERY, CONVEYANCE EXPENSES, OFFICE MAINTENANCE EXPENSES WHICH ARE NECESSARY FOR RUNNING OFF ICE OF THE TRUST. IN VIEW OF THE ABOVE, IT IS NOT THE CASE OF THE AO THAT THE ASSESSEE HAS MADE ANY BUSINESS OF SALE OR PURCHASE OF PROPERTY. THERE IS NO ALLEGATION THAT ACTIVITIES ARE NOT CHARITABLE IN NATURE. 9.5 IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND RE SPECTFULLY FOLLOWING THE PRECEDENTS, AS AFORESAID, I DELETE THE ADDITION IN DISPUTE AND ACCORDINGLY DECIDE THE ISSUE IN DISPUTE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. ITA NO. 2025/DEL/2015 (AY 2010-11) 10. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE FILED THE RETURN OF INCOME ON 08.10.2010 DECLARING TOTAL INCOME OF RS. NIL. THE R ETURN OF INCOME WAS PROCESSED U/S. 143(1) OF THE I.T. ACT. THE CASE WAS PICKED UP FOR SCRUTINY. 16 ACCORDINGLY, NOTICE U/S. 143(2) OF THE I.T. ACT WAS ISSUED ON 23.9.2011 AND FURTHER STATUTORY NOTICE U/S. 142(1) ALONGWITH QUESTI ONNAIRE ISSUED ON 15.10.201. IN RESPONSE TO THE NOTICE, ASSESSEES AR AP PEARED AND FILED THE INFORMATION, DETAILS AND WRITTEN SUBMISSIONS. AO OB SERVED THAT THE SOCIETY HAS MADE AN AGREEMENT WITH M/S MOTHERS PRIDE PERSONAL LTD. TO ESTABLISH A PRE-SCHOOL LEARNING CENTRE/ NURSERY SCHOOL. AS PER THE A GREEMENT WITH THE ASSESSEE AND THE SAID COMPANY, PREMISE WILL BE MADE AVAI LABLE FREE OF CHARGES DURING THE SUBSISTENCE OF THE AGREEMENT. IN CONSIDE RATION OF THE ABOVE ASSESSEE IS ENTITLED TO 20% OF THE ENTIRE COLLECT ION WHICH INCLUDES REGISTRATION CHARGES, ADMISSION CHARGES, ANNUAL CHARGES, QUARTERLY CHARGES, MONTHLY FEES, HOBBY CLASSES AND CHARGES OF ALL THE ACTIVI TIES CONDUCTED IN THE SCHOOL EXCEPT TRANSPORT AND REFUNDABLE SECURITY. AO DURING THE ASSESSMENT PROCEEDINGS CONSIDERED THE AMOUNT RECEIVED FROM MOTHERS PRIDE PERSONA LIMITED OF RS. 97,90,257/- AS INCOME UNDER THE HEAD HOUSE PROPERTY AND ALLOWED STATUTORY DEDUCTION (@30%} OF RS. 29,37,077/- AND INTEREST ON BORROWED CAPITAL OF RS. 33,94,280/- UNDER SECTION 24 OF THE INCOME TAX ACT. FURTHER ADDITION OF RS. 17,503/- ON ACCO UNT OF INTEREST INCOME WAS ALSO MADE BY HIM. TOTAL ADDITION OF RS. 34, 54,602/- WAS MADE TO THE RETURNED INCOME OF THE ASSESSEE. THEREAFTER, T HE AO COMPLETED THE ASSESSMENT AT RS. 34,76,403/- BY DENYING THE EXEMPTION U/S. 11 OF THE ACT CLAIMED BY THE ASSESSEE, BY MAKING VARIOUS ADDITIONS VID E HIS ORDER DATED 04.3.2013 PASSED U/S. 143(3) OF THE INCOME TAX ACT, 19 61. 17 11. AGAINST THE ASSESSMENT ORDER DATED 04.3.2013, ASSESSE E APPEALED BEFORE THE LD. CIT(A), WHO VIDE HIS IMPUGN ED ORDER DATED 23.1.2015 HAS DISMISSED THE APPEAL OF THE ASSESSEE. 12. AGGRIEVED WITH THE AFORESAID ORDER OF THE LD. C IT(A), ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 13. DURING THE HEARING, LD. COUNSEL OF THE ASSESSEE HA S STATED THAT IN THE PRESENT CASE THE ASSESSE PURCHASED AND CONSTRUCTED THE PR OPERTY AFTER TAKING TERM LOAN FROM THE BANK AND MADE THE AGREEME NT WITH THE MOTHER PRIDE EDUCATION PERSONA P LTD. IN RESPECT OF RENTAL INCO ME. THERE IS NO CASE OF ANY TRANSFER OF FUNDS TO THE MEMBERS OF THE SOCIETY. HE FURTHER STATED THAT THE RENTAL INCOME FROM THE PROPERTY IS IN THE CH ARITABLE OBJECTS OF THE TRUST AS MENTIONED IN THE CLAUSE Z AA) OF THE MEMORAND UM OF ASSOCIATION. HE RELIED UPON THE ORDER OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF DIRECTOR OF INCOME TAX (EXEMPTION) VS. SPAN FOUNDAT ION (2009) 17 DTR 283 (DEL) AND HONBLE UTTARAKHAND HIGH COURT DECISION IN THE CASE OF CIT VS. JYOTI PRABHA SOCEITY (2009) 310 ITR 162. HE FURTH ER STATED THAT THE SOURCE FROM WHICH THE MONEY IS RECEIVED IS LEASE AND LICE NSE FEE BUT ITS APPLICATION IS FOR THE PURPOSES OF CHARITABLE ACTIVITI ES COVERED U/S. 2(15) OF THE ACT. IN RESPECT OF INTEREST EXPENSES OF RS. 33,94,28 0/- IT HAS BEEN PAID ON TERM LOAN TAKEN TO ACQUIRE/ CONSTRUCTION OF ASSETS O F THE SOCIETY. HE FURTHER STATED THAT ASSESSEE HAS ALSO MADE THE REPAYMENT AND DEPRECIATION 18 OF RS. 33,94,280/- ARE THE APPLICATION OF INCOME FOR CHARITABLE PURPOSES. HE RELIED UPON THE ORDER OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF DIT(E) VS. GOVINDUNAICKER ESTATE (2009) 315 ITR 237 (MADRAS). IT WAS THE FURTHER CONTENTION THAT EXPENDITURE INCURRED ON BLOOD DONATIO N CAMPS, FREE BOOKS DISTRIBUTION AND EYE CHECK UP CAMP ARE PURELY CHARITABL E IN NATURE AND THEREFORE, TO BE CONSIDERED OF APPLICATION OF INCOME. T HEREFORE, HE FINALLY STATED THAT THIS IS NOT THE CASE OF THE AO THAT THE ASSES SEE HAS MADE ANY BUSINESS OF SALE OR PURCHASE OF PROPERTY. THERE IS NO ALL EGATION THAT ACTIVITIES ARE NOT CHARITABLE IN NATURE. IN VIEW OF THE ABOVE, HE REQUESTED THAT ADDITION IN DISPUTE MAY BE DELETED. 14. ON THE CONTRARY, LD. DR OPPOSED THE AFORESAID CON TENTION OF THE LD. COUNSEL OF THE ASSESSEE AND RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND REQUESTED THAT THE SAME MAY BE UPHELD. 15. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE RE LEVANT RECORDS AVAILABLE WITH ME, ESPECIALLY THE ORDERS PASSED BY THE R EVENUE AUTHORITIES AND THE CASE LAWS CITED BY THE LD. COUNSEL OF THE ASSE SSEE. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD AN AGREEMENT WITH M/S MOTHERS PRIDE EDUCATION PERSONA LIMITED TO ESTABLISH A PRE- SCHOOL LEA RNING CENTER/ NURSERY SCHOOL. AS PER THE AGREEMENT WITH THE ASSESSEE AND THE S AID COMPANY, PREMISE WILL BE MADE AVAILABLE FREE OF CHARGE DURING THE SUBSISTENCE OF THE AGREEMENT. IN CONSIDERATION OF THE ABOVE ASSESSEE IS EN TITLED TO 20% OF THE 19 ENTIRE COLLECTION WHICH INCLUDES REGISTRATION CHARGES, ADMISSION CHARGES, ANNUAL CHARGES, QUARTERLY CHARGES, MONTHLY FEES, HOBBY CLASSES AND CHARGES OF ALL THE ACTIVITIES CONDUCTED IN THE SCHOOL EXCEPT TRAN SPORT AND REFUNDABLE SECURITY. AO DURING THE ASSESSMENT PROCEEDINGS CONSIDER THE AMOUNT RECEIVED FROM MOTHERS PRIDE PERSONA LIMITED OF RS. 97, 90,257/- AS INCOME UNDER THE HEAD HOUSE PROPERTY AND ALLOWED STATUTORY D EDUCTION (@ 30%} OF RS. 29,37,077/- AND INTEREST ON BORROWED CAPITAL OF RS. 33,94,280/- UNDER SECTION 24 OF THE INCOME TAX ACT. FURTHER ADDITION OF R S. 17,503/- ON ACCOUNT OF INTEREST INCOME WAS ALSO MADE BY HIM. TOTAL AD DITION OF RS. 34,54,602/- WAS MADE TO THE RETURNED INCOME OF THE ASSE SSEE. THE ASSESSEE IS NOT ENGAGED IN CHARITABLE ACTIVITIES AND THU S INCOME IS ASSESSABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. T HE AO HAS PASSED THE ORDER AND HAS TREATED THE INCOME RECEIVED FROM T HE MOTHERS PRIDE EDUCATION PERSONA P LTD AS INCOME UNDER THE HEAD HOUSE PROPERTY. HOWEVER, WHILE COMPUTING THE TOTAL ASSESSED INCOME ADDED THE INTEREST INCOME OF RS. 17,503/- , WITHOUT GIVING ANY JUSTIFICA TION FOR THE SAME. IN THE PRESENT CASE, ASSESSEE PURCHASED AND CONSTRUCTED THE PROPERTY AFTER TAKING TERM LOAN FROM THE BANK AND MADE THE AGREEME NT WITH THE MOTHERS PRIDE EDUCATION PERSONA P LTD IN RESPECT OF RENTAL INCOM E. THERE IS NO CASE OF ANY TRANSFER OF FUNDS TO THE MEMBERS OF THE SOCIETY. FURTHER, RENTAL INCOME FROM THE PROPERTY IS IN THE CHARITABLE OBJECTS O F THE TRUST AS MENTIONED IN THE CLAUSE (Z AA) OF THE MEMORANDUM OF ASSOCIATION. FURTHER A 20 PERUSAL OF INCOME & EXPENDITURE SHOWS THAT APPLICATION MADE BY THE ASSESSEE IS TOWARDS THE CHARITABLE ACTIVITIES AND AS PER T HE OBJECTS OF THE SOCIETY. THE ISSUE IS SQUARELY COVERED IN FAVOUR OF ASSESS EE BY THE JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF DIRECTOR OF INCOME TAX (EXEMPTION) VERSUS SPAN FOUNDATION [(2009) 17 DTR 283 (DEL), (2009) 178 TAXMAN 436 (DEL)] WHEREIN ASSESSEE TRUST HAVING CONST RUCTED A BUILDING OUT OF BORROWED FUNDS, APPLICATION OF RENT D ERIVED FROM THE SAID BUILDING TO REPAY THE BORROWED FUNDS HAS TO BE TREATE D AS APPLICATION OF INCOME FOR CHARITABLE PURPOSES AND THE ASSESSEE IS ENTITLE D TO BENEFITS OF SS. 11 AND 12. FURTHER HON'BLE UTTARAKHAND HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX VERSUS JYOTI PRABHA SOCIETY [2009] 310 ITR 162 (UTTARAKHAND) HELD AS UNDER; 'IT IS TRUE THAT THE ACTIVITIES OF THE RESPONDENT-SOCIETY INCLUDES LETTING OUT OF THE PROPERTIES TO THE EDUCATI ONAL INSTITUTIONS. HAD THE RENTAL INCOME EARNED BY THE RESPONDENT-SOCIETY NOT UTILIZED FOR THE EDUCATIONAL PURPOSES IT COULD HAVE BEEN SAID THAT THE LETTING OUT OF THE PROPERTY ON THE PART OF THE RESPONDENT-SOCIETY HAS LOST THE CHARITABLE PURPOSE. BUT, IN THE PRESENT CASE, THERE IS A CONCURRENT FINDING OF FACT ON THE PART OF THE COMMISSIO NER 21 OF INCOME-TAX (APPEALS) AND THE INCOME-TAX APPELLATE TRIBUNAL THAT THE RENTAL INCOME EARNED BY THE RESPOND ENT- SOCIETY IS BEING UTILIZED AGAIN FOR THE PURPOSES OF IMPA RTING EDUCATION BY MAINTAINING THE BUILDINGS AND CONSTRUCTING NEW BUILDINGS FOR THE SAME PURPOSE. AS SUCH, WE ARE OF THE VIEW THAT THE CHARITABLE PURPOSE IS NOT LOST AND IT CANN OT BE SAID THAT THE ASSESSEE-RESPONDENT IS NOT ENTITLED TO EXEMPTION CLAIMED BY IT UNDER SECTION 11 OF THE ACT.' 15.1 I FIND THAT IN THE CASE OF ASSESSEE ALTHOUGH T HE SOURCE FROM WHICH THE MONEY IS RECEIVED IS LEASE & LICENSE FEE BUT ITS APPLIC ATION IS FOR THE PURPOSES OF CHARITABLE ACTIVITIES COVERED U/S 2(15). FURT HER, LOAN ADVANCES BY AN EDUCATIONAL TRUST TO STUDENTS FOR HIGHER STUDIES SHO ULD BE TREATED AS APPLICATION OF INCOME FOR THE CHARITABLE PURPOSE. I F URTHER NOTE THAT THE CBDT VIDE ITS CIRCULAR NO. 100 [F.NO. 195/1/72-IT(A- I), DATED 24.1.1973] HAS DECIDED THAT REPAYMENT OF THE LOAN ORIGINALLY TA KEN TO FULFILL ONE OF THE OBJECTS OF THE TRUST WILL AMOUNT TO AN APPLICATION OF T HE INCOME FOR CHARITABLE PURPOSES. AS REGARDS THE LOAN ADVANCED FOR HIGHER STUDIE S. IF THE ONLY OBJECT OF TRUST IS TO GIVE INTEREST BEARING LOANS FOR HIGHE R STUDIES, IT WILL AMOUNT TO CARRYING ON OF MONEY LENDING BUSINESS. HOWEVER, IF THE OBJECT OF THE TRUST IS ADVANCEMENT OF EDUCATION AND GRANTING OF SCHOLARSHIP LO ANS AS ONLY ONE OF THE ACTIVITIES CARRIED ON FOR THE FULFILLMENT OF THE OBJECTIVES OF THE TRUST, GRANTING OF LOAN EVEN INTEREST BEARING WILL AMOUNT TO APPLICATION OF INCOME 22 FOR CHARITABLE PURPOSES. AS AND WHEN THE LOAN IS RETURNE D TO TRUST, IT WILL BE TREATED AS INCOME OF THAT YEAR. I DRAW SUPPORT FROM TH E DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS JANM ABHOOMI PRESS TRUST [2000] 242 ITR 703 (KARN.) WHEREIN IT HAS BEEN HELD THAT REPAYMENT OF LOAN FOR THE CONSTRUCTION OF THE BUILDING BY THE ASSESSEE FOR THE PURPOSE OF AUGMENTING ITS FUND SHALL QUALIFY AS INCOME APPLIED FOR CHARITABLE PURPOSE. THE EXISTING SCHEME OF SECTION 11 AS WELL AS SECTION 10(2 3C) PROVIDES EXEMPTION IN RESPECT OF INCOME WHEN IT IS APPLIED TO A CQUIRE A CAPITAL ASSET. SUBSEQUENTLY, WHILE COMPUTING THE INCOME FOR PURPOSES OF THESE SECTIONS, NOTIONAL DEDUCTION BY WAY OF DEPRECIATION ETC. IS CLAI MED AND SUCH AMOUNT OF NOTIONAL DEDUCTION REMAINS TO BE APPLIED FOR CHARITABL E PURPOSE. BREAK UP OF APPLICATION OF RS. 79,10,968/- IS AS UNDER: I. ADMINISTRATIVE EXPENSES RS. 3,95,692/- II. INTEREST & BANK CHARGES RS. 33,94,2801- III. DEPRECIATION RS. 36,55,891/- IV. BLOOD DONATION CAMP EXPENSES RS. 1,93,6701- V. EYE CHECK UP CAMP EXPENSES RS. 1,16,985/- VI. FREE BOOKS DISTRIBUTION EXPENSES RS. 1,54,450/- RS. 79,10,968/- 23 15.2 LN RESPECT OF INTEREST EXPENSES OF RS. 33,94,2 80/- IT HAS BEEN PAID ON TERM LOAN TAKEN TO ACQUIRE/CONSTRUCTION OF ASSETS OF THE SOCIETY. FURTHER, ASSESSEE HAS ALSO MADE THE REPAYMENT OF LOAN AND DEPRECI ATION OF RS. 36,51,891/- ARE THE APPLICATION OF INCOME FOR CHARI TABLE PURPOSES. IN THIS REGARD, RELIANCE IS PLACED ON THE JUDGEMENT OF THE MAD RAS HIGH COURT IN THE CASE OF DIT{E) VS GOVINDU NAICKER ESTATE [2009] 315 IT R 237 (MADRAS) WHEREIN IT HAS BEEN HELD AS UNDER: 9. IN THE CASE ON HAND, IT IS AN ADMITTED FACT THAT THE PROPERTY OF THE ASSESSEE-TRUST WAS IN A DILAPIDATED CONDITION AND WOULD NOT EARN INCOME TO CARRY OUT THE OBJECTS OF THE TRUST. FOR THE PURPOSE OF CARRYING OUT T HE OBJECTS OF THE TRUST, IT HAS BECOME NECESSARY TO DEMOLISH AND RECONSTRUCT THE PROPERTY SO AS TO EARN INCOME BY EXPLOITING THE PROPERTY. IT IS ALSO AN ADMITTED FACT T HAT THE RENTAL INCOME IN THE PROPERTY HELD IN TRUST AMOUNTED TO 90 PER CENT, OF THE TOTAL INCOME OF THE TRUST. FOR THE PU RPOSE OF PUTTING UP THE CONSTRUCTION OF THE PROPERTY HELD IN TRUST, THE TRUST BORROWED FUND FROM THE INDIAN BANK. THUS, T HE CAPITAL ASSET SO PUT UP BY THE BORROWED FUND IS ONLY FO R THE PURPOSE OF AUGMENTING INCOME IN ORDER TO CARRY OUT TH E OBJECT OF THE TRUST AS ENVISAGED. IT IS CLEAR FROM THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) THAT NEITH ER 24 THE ASSESSING OFFICER NOR THE ASSESSEE HAS ADVERTED TO T HE OBJECT OF THE CHARITABLE TRUST. BUT THE AUTHORITIES PROCEEDED ON THE PREMISE THAT THE COMPLEX HAS BEEN PUT UP BY THE TRUST IN ORDER TO PERFORM ITS CHARITABLE ACT IVITIES, WHICH FACTUM HAS ALSO NOT BEEN DISPUTED BY THE REVENUE. THE ASSESSEE-TRUST IN ORDER TO PERFORM ITS CHARITABLE ACTIVITIES, NECESSARILY HAS TO EXPLOIT THE CAPITAL ASSET S BY FINDING APPROPRIATE AVENUES FOR EARNING REVENUE AND FOR THAT PURPOSE, HAS TO INCUR EXPENDITURE, WHICH IS CAPITAL IN NATURE BY RAISING LOAN. THE CAPITAL ASSET BUILT WIT H A BORROWED FUND GENERATES INCOME WHICH ENABLED THE CHARITABLE TRUST TO PERFORM ITS CHARITABLE ACTIVITIES. THUS, THE CAPITAL ASSET BUILT WITH BORROWED FUND, UNDER NO CIRCUMSTANCES, COULD BE REGARDED TO BE OUTSIDE THE SCOPE OF ITS OBJECTS. IF IT IS WITHIN THE OBJECTS OF THE CHARIT ABLE TRUST, THEN THERE IS NO REASON AS TO WHY THE BORROWIN G MADE FOR THE CONSTRUCTION OF THE BUILDING AND REPAYMEN T OF THE LOAN COULD NOT BE TREATED AS AN APPLICATION OF IN COME. IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT THE ASS ES- SEE BY CONSTRUCTING THE COMMERCIAL COMPLEX CONTRAVENED THE OBJECTS OF THE TRUST. THERE IS NO PROVISION IN THE ACT, WHICH DISENTITLES THE ASSESSEE-TRUST FROM CLAIMING 25 REPAYMENT OF LOAN AS APPLICATION OF INCOME, ESPECIALLY IN VIEW OF THE FACT THAT THE TRUST HAS TO AUGMENT ITS INCOM E AND FOR THAT PURPOSE IT HAS PUT UP A CONSTRUCTION WITH BORROWED FUND. IF RAISING OF LOAN DOES NOT STAND IN TH E WAY OF ITS CHARITABLE ACTIVITIES, THE REPAYMENT THERE AFT ER MUST BE TREATED AS APPLICATION OF ITS INCOME. BY REPAYMENT O F THE LOAN, THE TRUST WIPED ITS LIABILITY AND THE INCOM E' EARNED FROM ME PROPERTY WOULD BE AVAILABLE FOR BEIN G UTILISED FOR CHARITABLE PURPOSES.' 15.3 I FURTHER NOTE THAT DEPRECIATION HAS BEEN HELD TO BE AN APPLICATION OF INCOME IN FOLLOWING JUDGMENTS: I. CIT VS TINY TOTS EDUCATION SOCIETY [2011] 330 ITR 16 (P&H) II. DIT VS VISHWA JAGRITI MISSION [2013] 83 DTR 47 (DEL). III. CIT VS SHETH MANILAL RANCHHODDAS VISHR AM BHAWAN TRUST [1992] 198 ITR 598 (GUJ). IV. CIT VS BHARUKA PUBLIC WELFARE TRUST [1999] 240 ITR 513 (CAL) V. CIT VS INSTITUTE OF BANKING PERSONNEL SELECTION [200 3] 264 ITR 110 (BOM.) 15.4 FURTHER, EXPENDITURE INCURRED ON EYE CHECK UP, BLOOD DONATION CAMPS, FREE BOOKS DISTRIBUTION ARE PURELY CHARITABLE IN NATUR E AND THEREFORE ARE TO BE CONSIDERED APPLICATION OF INCOME. ADMINISTRATIVE EX PENSES ARE 26 BASICALLY INCLUDES PRINTING & STATIONERY, CONVEYANCE EX PENSES, OFFICE MAINTENANCE EXPENSES AND SALARY EXPENSES WHICH ARE NECESSA RY FOR RUNNING OFFICE OF THE TRUST. IN MY VIEW, THIS IS NOT THE CASE O F THE AO THAT THE ASSESSEE HAS MADE ANY BUSINESS OF SALE OR PURCHASE OF PROPE RTY. THERE IS NO ALLEGATION THAT ACTIVITIES ARE NOT CHARITABLE IN NATUR E. IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND RESPECTFULLY FOLLOWING THE P RECEDENTS, AS AFORESAID, I DELETE THE ADDITION IN DISPUTE AND ACCOR DINGLY DECIDE THE ISSUE IN DISPUTE IN FAVOUR OF THE ASSESSEE AND AGAINST THE R EVENUE. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. 16. IN RESULT, BOTH THE APPEALS FILED BY THE ASSESSEE AR E ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 09/01/2017. SD/- [H.S. SIDHU] JUDICIAL MEMBER DATE: 09/01/2017 SRB COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY OR DER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES