The Deputy Director of Income Tax, CHENNAI V. St.Peters Institute of Higher Education andn Research, CHENNAI

ITA 2264/CHNY/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8244 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2016
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 05-11-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 26-12-2013
• Court: TRIBUNAL
• Department Lawyers: A B KOLI
• Assessee Lawyers: S SRIDHAR
• Keywords: Business income; Depreciation; Charitable institution
• Section: 32; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , . ! ' , # '$ BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER . /ITA NO.2264/MDS/2013 / ASSESSMENT YEAR : 2010-11 THE DEPUTY DIRECTOR OF ST. PETERS INSTITUTE OF HI GHER INCOME-TAX (EXEMPTIONS)-I, V. EDUCATION AND RESEAR CH, NUNGAMBAKKAM, NO.621, 1 ST FLOOR, SIRE MANSION CHENNAI 34. ( /APPELLANT) ANNASALAI, THOUSAND LIGHTS, CHENNAI 600 006. PAN AACTS9438E RESPONDENT) / APPELLANT BY : SHRI A.B.KOLI, JCIT / RESPONDENT BY : SHRI S. SRIDHAR, ADVOCATE ! / DATE OF HEARING : 05.11.2015 '# ! / DATE OF PRONOUNCEMENT : 06.01.2016 % / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) DATED 3. 9.2013 FOR THE ASSESSMENT YEAR 2010-11. - - ITA 2264/13 2 2. THE FIRST GROUND IN THIS APPEAL IS WITH REGARD T O DELETING THE ADDITION MADE BY THE ASSESSING OFFICER TOWARDS CAPITATION FEE TO THE TUNE OF ` 70,54,000/- WHICH WAS NOT REFLECTED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE-TRUST. 3. THE FACTS OF THE CASE ARE THAT THERE WAS A SURVE Y CONDUCTED ON 2.7.2010 IN THE PREMISES OF THE TRUST AND A STATEMENT WAS RECORDED FROM THE ADMINISTRATIVE OFFI CER OF THE TRUST DR. K.S.K.VELUMANI AND AS PER THE STATEMENT R ECORDED, THE TRUST HAD COLLECTED CAPITATION FEE FROM THE STUDENT S AT THE TIME OF ADMISSION TO THE TUNE OF ` 70.54 LAKHS. SIMILARLY UNACCOUNTED CASH TOTALLING TO ` 6,03,822/-, WHICH WAS NOT REFLECTED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE FOUND IN THE THREE ROOMS VIZ. CHAIRMANS ROOM, OFFICE ROOMS AND FINANCIAL CO NTROLLERS ROOM. HENCE, THE ASSESSING OFFICER BROUGHT THIS AM OUNT AS INCOME OF THE ASSESSEE. 4. ON APPEAL, THE CIT(APPEALS) OBSERVED THAT THE ST ATEMENT WAS GIVEN BY DR.K.S.K.VELUMANI ON THE BASIS OF NOTI NG MADE BY HIM IN HIS PERSONAL DIARY. HOWEVER, HE STATED IN H IS ANSWER TO QUESTION NOS.80 & 82 THAT THE COLLEGE DID NOT COLLE CT ANY CAPITATION FEE FROM THE STUDENTS. FURTHER, THE ASS ESSING OFFICER - - ITA 2264/13 3 HAS NOT PROVED BEYOND DOUBT THAT THE ASSESSEE COLLE CTED CAPITATION FEE OF ` 70,54,000/- FROM THE STUDENTS AND OMITTED TO RECORD THE SAME IN ITS BOOKS OF ACCOUNT AND THE AO DID NOT MATCH THE CAPITATION FEE RECEIVED VIS--VIS THE STU DENTS ADMITTED. THERE IS NO FINDING BY THE AO THAT THE ASSESSEE ACT UALLY COLLECTED CAPITATION FEES FROM THE PROSPECTIVE STUD ENTS. EXCEPT ISSUING A QUESTIONNAIRE BASED ON THE SURVEY REPORT, THE AO DID NOT MAKE ANY INDEPENDENT ENQUIRY TO CORROBORATE THE COLLECTION OF CAPITATION FEE BY THE ASSESSEE. SINCE, THE AO H AS NOT EXAMINED THE COLLECTION OF CAPITAL FEE WITH STUDENT S, ACCORDING TO THE CIT(APPEALS), THE ADDITION CANNOT BE SUSTAINED AND DELETED THE ADDITION. AGAINST THIS, THE REVENUE IS IN APPE AL BEFORE US. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. IN THE COURSE OF SURVEY, DR. K.S.K.VELU MANI ADMITTED THAT THE ASSESSEE HAS BEEN COLLECTING CAPITATION FE E AND HE QUANTIFIED IT AT ` 17,54,000/-. AFTER RECORDING THIS STATEMENT, THE AO HAS NOT CO-RELATED THIS AMOUNT WITH THE ADMISSIO N OF STUDENTS. NO STUDENT HAS BEEN EXAMINED AND THE ONL Y BASIS FOR ADDITION IS SWORN STATEMENT RECORDED DURING THE COU RSE OF SURVEY. IN OUR OPINION, UNLESS THE STATEMENT RECOR DED IN THE - - ITA 2264/13 4 COURSE OF SURVEY IS SUPPORTED BY ANY OTHER MATERIAL , IT IS NOT POSSIBLE TO UPHOLD THE ACTION OF THE AO. BEING SO, UNSUBSTANTIATED STATEMENT CANNOT BE RELIED UPON FOR THE PURPOSE OF ADDITION. THE SAME VIEW WAS TAKEN BY THE MADR AS HIGH COURT IN THE CASE OF CIT V. BALAJI EDUCATIONAL & CH ARITABLE PUBLIC TRUST (374 ITR 274), WHEREIN NO INVESTIGATION HAS D ONE TO SHOW THAT PARENT OR STUDENT COMPLAINED THE NATURE OF DON ATION AND IN THE ABSENCE OF ANY EVIDENCE, THE AO FAILED TO ESTAB LISH A CASE OF BREACH OF SEC.11 OR SEC.10(23C)(VI) OF THE ACT AND THE COURT HELD THAT BENEFIT UNDER THIS SECTION TO THE GIVEN. BEIN G SO, IN THE PRESENT CASE, IN THE ABSENCE OF EVIDENCE BROUGHT ON RECORD BY THE AO, THE ADDITION CANNOT BE SUSTAINED TOWARDS CO LLECTION OF CAPITATION FEE. THIS GROUND IS REJECTED. 6. THE NEXT GROUND IN THIS APPEAL IS WITH REGARD TO ADDITION MADE BY THE AO TOWARDS UNACCOUNTED CASH FOUND DURIN G THE SURVEY TO THE TUNE OF ` 6,03,822/-. 7. DURING THE COURSE OF SURVEY, EXCESS CASH WAS FOU ND TO THE TUNE OF ` 6,03,822/- AND THE SAME WAS CONSIDERED AS UNACCOUNTED CASH AND MADE THE ADDITION BY THE AO. ON APPEAL, - - ITA 2264/13 5 THE COMMISSIONER OF INCOME-TAX(APPEALS) DELETED THE ADDITION PLACING RELIANCE ON THE SUBMISSIONS MADE BY THE ASS ESSEE OBSERVING THAT THE AMOUNTS WERE REFLECTED IN THE BO OKS OF ACCOUNT. AGAINST THIS, THE REVENUE IS IN APPEAL BE FORE US. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. THE MAIN CONTENTION OF THE LD. AR IS TH AT THE CASH AMOUNTING TO ` 3,83,342/- BELONGS TO THE STUDENTS WHICH IS COLLECTED FOR SAFE CUSTODY AND REMITTED THE SAME TO INDIAN BANK ON THE NEXT DAY AND THERE IS NO UNACCOUNTED CASH FO UND. IN RESPECT OF AN AMOUNT OF 3,83,343/-, IT WAS STATED T HAT IT IS RELATING TO PETTY CASH-GENERAL, PETTY CASH-CONSTRUCTION, TRA NSPORT FEE COLLECTED FROM THE STUDENTS, HOSTEL FEE COLLECTED F ROM STUDENTS, STUDENTS CASH FOR BEING REMITTED AND SUSPENSE CASH WITH CASHIER. IN OUR OPINION, ALL THESE EXPENSES ARE ON LY PAPER WORK AND AN AFTERTHOUGHT, WHICH CANNOT BE RELIED UPON TO DELETE THE ADDITION. PRACTICALLY, THE METHODOLOGY SUGGESTED B Y THE ASSESSEE IS VERY STRANGE. IN OUR OPINION, THIS UNA CCOUNTED CASH FOUND DURING THE SURVEY IS TO BE TREATED AS INCOME OF THE ASSESSEE AND THE EXPLANATION GIVEN BY THE ASSESSEE THAT THE AMOUNTS BELONG TO THE STUDENTS CANNOT BE ACCEPTED. - - ITA 2264/13 6 ACCORDINGLY, WE REVERSE THE FINDING OF THE COMMISSI ONER OF INCOME-TAX(APPEALS) AND ALLOW THIS GROUND OF APPEAL . 9. THE NEXT GROUND IN THIS APPEAL IS WITH REGARD TO DELETING THE DISALLOWANCE OF DEPRECIATION TO THE TUNE OF ` 2,89,46,454/-. 10. THE FACTS OF THE CASE ARE THAT DURING THE COURS E OF ASSESSMENT, THE AO ASKED THE ASSESSEE TO JUSTIFY TH E CLAIM OF DEPRECIATION AND CLAIM OF BROUGHT FORWARD EXCESS AP PLICATION AND SET OFF AGAINST THE SHORT FALL DURING THE YEAR. DU RING THE YEAR, THE ASSESSEE STATED THAT IN THE CASE OF AN ASSESSEE BEI NG A CHARITABLE ORGANIZATION, DEPRECIATION ON ASSETS IS TO BE ALLOWED AS A DEDUCTION IN DETERMINING THE INCOME EVEN THOUG H SUCH ASSETS ADDED ARE CONSIDERED AS APPLICATION FOR CHAR ITABLE PURPOSE. HOWEVER, THE AO DISALLOWANCE THE CLAIM OF THE ASSESSEE. THE COMMISSIONER OF INCOME-TAX(APPEALS), PLACING RELIANCE ON THE DECISION OF THE TRIBUNAL IN THE CAS E OF M/S. CMS EDUCATIONAL & CHARITABLE TRUST IN ITA NO.2261/MDS/2 012 DATED 17.4.2013 ALLOWED THE CLAIM OF THE ASSESSEE. AGAIN ST THIS, THE REVENUE IS IN APPEAL BEFORE US. 11. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN OUR OPINION, THIS ISSUE WAS CONSIDER ED BY THE - - ITA 2264/13 7 TRIBUNAL IN THE CASE OF IN ITA NO.2097/MDS/14 DAT ED 26.6.2015, WHEREIN IT WAS OBSERVED AS UNDER: 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON REC ORD. WE HAVE ALSO GONE THROUGH THE PROVISIONS OF SECTION 32 OF THE ACT WHICH PROVIDES FOR DEPRECIATION. DEPRECIATION HAS TO BE ALLOWED ON THE COST OF THE ASSET. IN THIS CASE, THE COST OF THE ASSET WAS ALLO WED U/S 11 OF THE ACT AS APPLICATION INCOME SINCE THE ASSESSEE IS A CHARITABLE INSTITUTION ENTITLED FOR EXEMPTION U/S 11. THEREFORE, THE COST OF THE ASSET BECOMES NIL. WHEN THE COST OF THE ASSET BECOMES NIL, THERE IS NO QUESTION OF ALLOWING ANY DEPRECIAT ION. IF THE DEPRECIATION IS ALLOWED THEN IT WOULD AMOUNT TO DOUBLE DEDUCTION. THE INCOME OF THE CHARITABLE INSTITUTION HAS TO BE COMPUTED ON COMMERCIAL PRINCI PLE IN CASE THE ASSESSEE IS NOT CLAIMING EXEMPTION U/S 11 OF THE ACT. THE ASSESSEE CAN ALSO CLAIM DEPRECIATIO N IN CASE THE EXEMPTION U/S 11 WAS DENIED BY THE ASSESSING OFFICER. WHATEVER MAY BE THE REASONS, SINCE THE COST OF THE ASSET IS NIL AS THE COST WAS ALREADY ALLOWED AS APPLICATION OF INCOME, THIS TRIB UNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSEE IS N OT ENTITLED FOR DEPRECIATION. SECTION 32 OF THE ACT FA LLS IN CHAPTER IV UNDER COMPUTATION OF BUSINESS INCOME, HOWEVER, SECTION 11 FALLS IN CHAPTER III WHICH PROV IDES FOR INCOMES WHICH DO NOT FORM PART OF THE TOTAL INC OME. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED PINIO N THAT PROVISIONS OF SECTION 11 OF THE ACT WILL OVERRIDE S ECTION 32. IN OTHER WORDS, IF THE ASSESSEE CLAIMS EXEMPTIO N U/S 11 UNDER CHAPTER III OF THE ACT, IT CANNOT CLAI M DEPRECIATION U/S 32 OF THE ACT. THEREFORE, WE ARE UNABLE TO UPHOLD THE ORDER OF THE CIT(A). ACCORDING LY, THE ORDER OF THE CIT(A) IS SET ASIDE AND THAT OF TH E ASSESSING OFFICER IS RESTORED. IN VIEW OF THE ABOVE, THIS GROUND OF REVENUES APPE AL IS ALLOWED. - - ITA 2264/13 8 12. IN THE RESULT, THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED. ORDER PRONOUNCED ON WEDNESDAY, THE 6 TH OF JAN., 2016 AT CHENNAI. SD/- SD/- ( $% & ) ( ' ( ) $ ) *%+,-,./01,2345,.62,+778,293 : ;< /JUDICIAL MEMBER ! ;<=>>70.?,.?@A1BA2 ': /CHENNAI, C; /DATED, THE 6 TH JAN., 2016. MPO* ;D EFGF /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. H3 /CIT(A) 4. H /CIT 5. FIJ K /DR 6. JLM /GF.