RAJIV GANDHI VIDHYA PITH SHIKSHA, Jaipur V. ITO, Exemption W(1), Jaipur

ITA 234/JPR/2022

AI Insights

The case involves Rajiv Gandhi Vidhya Pith Shiksha Sansthan, an educational trust, which appealed against the order of the National Faceless Appeal Centre (NFAC) and the subsequent orders of the lower tax authorities. The primary contention was regarding the disallowance of depreciation claimed on capital assets and the denial of the alternate claim to treat the entire cost of acquisition of capital assets as application of income. The tribunal noted the failure of the assessee to provide necessary documentation and details during the assessment and appellate proceedings, which led to the dismissal of their claims by the lower authorities. The tribunal, however, provided an opportunity for the matter to be re-examined, emphasizing the importance of submitting required details promptly.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 132331 (ITAT-JAIPUR)
• Duration Of Justice: 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-04-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 10-04-2023
• Assessment Year: 2016-2017
• Appeal Filed On: 02-06-2022
• Other Referred Cases: CIT(E) Vs. Subros Educational Society
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Depreciation; Charitable institution; Opportunity of being heard; Cost of acquisition; Assessment record; Capital expenditure
• Section: 11; 143(3); 142(1); 12A; 10B; 143(2)

Judgement Text

vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”SMC” JAIPUR Mk0 ,l- lhrky{eh] U;kf;d lnL; ,oa Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ ITA. No. 234/JP/2022 fu/kZkj.k o"kZ@Assessment Years : 2016-17 Rajiv Gandhi Vidhya Pith Shiksha Sansthan, 62, Arya Nagar Murlipura, Jaipur cuke Vs. ITO Exemption W(1), Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAAAR 1143 G vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Sh. Mahendra Gargieya (Adv.) & Sh. Devang Gargieya (Adv.) jktLo dh vksj ls@ Revenue by : Smt Monisha Choudhary (Addl. CIT) a lquokbZ dh rkjh[k@ Date of Hearing : 11/04/2023 mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 18/04/2023 vkns'k@ ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM This appeal is filed by assessee and is arising out of the order of the National Faceless Appeal Centre, Delhi dated 30/03/2022 [here in after (NFAC)] for assessment year 2016-17 which in turn arise from the order dated 19.11.2018 passed under section 143(3) of the Income Tax Act, by the ITO (Exemption), Ward-1, Jaipur. ITA No. 234/JP/2022 Rajiv Gandhi Vidhya Pith Shiksha vs. ITO 2 2. The assessee has marched this appeal on the following grounds:- “1. 1. The impugned additions and disallowances made in the order u/s 143(3) dated 19.11.2018 are bad in law and on facts of the case, for want of jurisdiction and various other reasons and hence the same kindly be deleted. 2.1 Rs. 54,63,625/-: The ld. CIT(A) seriously erred in law as well as on the facts in confirming the application of S. 11(6) of the Act without properly appreciating the facts and evidences available on record. 2.2 The ld. CIT(A) seriously erred in law as well as on the facts of the case in completely ignoring the factual assertion made before the AO as also before him that the appellant never claimed the cost of acquisition of the related fixed assets as application of income. Neither in the relevant previous years nor in any the earlier previous years. This fact, neither having been considered nor having been rebutted by the authorities below, it is binding upon the ld. CIT(A) to have allowed the claimed amount of depreciation of Rs. 54,63,625/- for the first time on the acquisition of capital asset, the cost of which has never been claimed. The claim of depreciation of Rs. 54,63,625/-, so denied being contrary to the provisions of law and facts, the same may be allowed in full. 3. Rs. 1,33,01,256/-: Alternatively, and without prejudice to above the ld. CIT(A) seriously erred in law as well as the facts of the case even denying/declining to accept and allow the alternate claim being that the entire cost of the acquisition of capital assets incurred during the year be allowed as application of income without there being any justified reason at all. Simply this being an alternate claim, could not have been denied once, the appellant was legally entitled to raise such claim. There being no other ground for rejecting the claim so made, and the ld. CIT(A) having denied the claim which is completely contrary to the provisions of law and in facts on records, hence alternate claim so made for considering the entire cost of acquisition, may kindly be accepted and directed to be allowed. 4. On the facts and circumstances of the case the Ld. CIT(A) has grossly erred in confirming the interest u/s 234B, 234C, 234D of the Income Tax Act, 1961. The appellant totally denies it liability of charging of any such interest. The interest, so charged, being contrary to the provisions of law and facts, kindly be deleted in full. ITA No. 234/JP/2022 Rajiv Gandhi Vidhya Pith Shiksha vs. ITO 3 5. That the appellant craves the right to add, delete, amend or abandon any of the grounds of appeal either being before or at the time of hearing of appeal.” 3. The fact as culled out from the records is that the Society/Trust is registered under Rajasthan Societies Registration Act, 1958 vide No. 710/Jaipur/1998-99. The Society is the society/trust is registered u/s 12AA(1)(b) of I.T. Act, 1961 by the Commissioner of Income-tax, Jaipur vide letter No. CIT/Sec. 12A(a)/85/10/99-2000/9771 dated 23/12/1999. The society is engaged in the providing education. 3.1 The case of the assessee AOP/Trust was selected for scrutiny under CASS. Accordingly, notice u/s 143(2) dated 27/06/2017 was issued and served upon the assessee. Consequent to change of incumbent, notice u/s 142(1) was issued and served upon the assessee calling for certain details/information through e-portal. In response to the above-mentioned notices, required details/information were submitted by the assessee in e- assessment portal which have been examined by AO. ITA No. 234/JP/2022 Rajiv Gandhi Vidhya Pith Shiksha vs. ITO 4 3.2 On examination of 1&E account, it is noticed that the society has claimed deduction of Rs 54,63.625/ towards depreciation and claimed the same as application of income out of receipts of the years. During the course of assessment proceedings vide query letter dated 15/09/2018, the society was specifically asked to explain whether the capital expenditure on which depreciation claimed was ever claimed as application of income in the year of acquisition or later. However, assesse society did not reply to the specific query Therefore, a show-cause letter was issued on 12/11/2018 vide No. IBA/AST/F/143(3)/(SCN)/20/18- 19/1013576014(1), the relevant portion of which is as under- "You have claimed depreciation in the I&E account atRs 54,63,625/-, In the absence of documentary evidence to prove that the capital expenditure on fixed assets was not claimed as application of income in the year of acquisition or later, the same is not allowable in view of section 11(6) of I.T. Act, 1961. If you wish to state anything on the above proposed completion of assessment proceedings, the same may please be furnished by 16/11/2018. 3.3. However, nothing has been submitted against the proposed completion of assessment proceedings. This clearly shows that the assesse has no objection in the proposed disallowance of depreciation. Therefore, taking into account the position of law provided in section 11(6) which states that ""(6) In this section ITA No. 234/JP/2022 Rajiv Gandhi Vidhya Pith Shiksha vs. ITO 5 where any income is required to be applied or accumulated or set apart fro application, then, for such purposes the income shall be determined without any deduction or allowance by way of depreciation or otherwise in respect of any asset, acquisition of which has been claimed as an application of income under this section in the same or any other previous year. 3.4 Sub-Section (6) of Section 11 was inserted by the Finance (No.2) Act,2014 w.e.f. 1.4.2015. This has been ratified by the Hon'ble Supreme Court in Civil Appeal No. 7186 of 2014 dated 13th December, 2017 by holding that " It may also be mentioned that at this stage that the legislature, realising that there was no specific provision in this behalf in the Income Tax Act, has made amendment in Section 11(6) of the Act vide Finance Act No.2/2014 which became effective from the Assessment Year 2015-16. The Delhi High Court has taken the view and rightly so, that the said amendment is prospective in nature. 4. Feeling aggrieved the assessee carried the matter in appeal before the ld. CIT(A). Apropos to the grounds so raised by ITA No. 234/JP/2022 Rajiv Gandhi Vidhya Pith Shiksha vs. ITO 6 assessee the relevant finding of the ld. CIT(A) is reiterated here in below : “During the assessment proceedings, the appellant was asked specifically to provide documentary evidence in order to prove that the capital expenditure was not claimed as application of income. The appellant was given notice on proposed completion of assessment proceedings. However, the appellant did not respond. During the appellant proceedings, the appellant claimed that the appellant has never treated expenditure incurred on acquisition of capital assets as application of income for charitable purposes u/s.11(1)(a) of the I.T.Act in the previous year and in all preceding previous years. The appellant merely submitted alternative proposition of treating the entire expenditure amounting to Rs.1,33,01,255/- incurred for acquisition of capital assets as application of income. I am not inclined to accept the alternative proposition of the appellant to treat the entire expenditure of Rs.1,33,01,255/- incurred for acquisition of capital asset as application of income. Just providing mere statement without any documentary evidence which is a proof that appellant has indeed incurred expenditure as mentioned above for acquisition of assets as application of income. In the absence of the same, I am not inclined to accept the contention of the appellant. In result the appeal of the appellant on this ground is dismissed.” 5. As the appeal of the assessee was dismissed and alternative plea taken before the ld. CIT(A) has not been considered, the assessee carried this matter before this tribunal on the grounds raised here in above para 2. To support the various grounds so raised by the assessee, ld. AR appearing on behalf of the assessee has placed their written submission which is extracted in below; “The Assesse is an AOP/ Trust (Society) under Income Tax Act,1961 and e-filed his Return of Income declaring NIL income for the A.Y. 2016- 17 on 13.10.2016. The case of the assessee Society was selected for scrutiny under CASS. Accordingly, notice u/s 143(2) dated 27/06/2017 was issued and served upon the assessee. Consequent to change of ITA No. 234/JP/2022 Rajiv Gandhi Vidhya Pith Shiksha vs. ITO 7 incumbent, notice u/s 142(1) was issued and served upon the assessee calling for certain details/information through e-portal. In response to the above mentioned notices, required details/information were submitted by the assessee in e-assessment portal which have been examined. The Society is engaged in providing education and registered under Rajasthan Societies Registration Act, 1958 vide No. 710/ Jaipur/1998-99 (PB1). The Society is also registered u/s 12AA(1)(b) of I.T. Act 1961 by the Commissioner of Income tax, Jaipur vide letter No. CIT/Sec 12A(a) /85/10/99-2000/9771 dated 23/12/1999 (PB 2). During the assessment proceedings u/s 143(3) the Ld. AO made certain disallowances of depreciation, interest on income tax refund, interest on FDR and completed the assessment u/s 143(3) on 19.11.2018 assessing the total income at Rs.10,45,390/-. In the first appeal the ld. CIT(A) confirmed the disallowance made by the AO and the appeal of the appellant was partially allowed. Hence this appeal. GOA-1 & 5: Is a general ground and shall be considered while deciding other grounds of appeal. GOA-2 & 3 Disallowance of Depreciation amounting Rs.54,63,652/ or Alternatively the entire cost of acquisition of capital assets amounting to Rs.1,33,01,256/- should be allowed. [AO pg. 2 & 3 para 4, CIT pg. 5 & 6 para 4] Facts: The Ld. AO stated that on examination of I&E account (PB 6-7), it is noticed that the Society has claimed deduction of Rs.54,63,625/- towards depreciation and claimed the same as application of income out of receipts of the assessment year. Therefore, depreciation claimed is not allowable to the Society as application of income during the year and accordingly, an amount of Rs.54,63,625/- was disallowed. The CIT(A) also confirmed the same. Hence this Ground. Submission: 1. As regards the claim of depreciation, the AO referred to the amended law u/s 11(6) inserted vide Finance Act, 2014 w.e.f. 01.04.2015 which was made effective from A.Y. 2015-16 and is reproduced hereunder: “(6) In this section where any income is required to be applied or accumulated or set apart for application, then, for such purposes the income shall be determined without any deduction or allowance by way of depreciation or otherwise in respect of any asset, acquisition of which has been claimed as an application of income under this section in the same or any other previous year.” ITA No. 234/JP/2022 Rajiv Gandhi Vidhya Pith Shiksha vs. ITO 8 The case of the AO was that the appellant having already claimed the capital expenditure in the preceding years/current year as application of income, the depreciation w.r.t. cost of such asset, if permitted, will amount to double deduction which was not permissible as per the amended law. The ld. CIT(A) also simply swayed away by the amended position of law but authorities below proceeded on a wrong premise that the subjected claim of depreciation Rs.54,63,625/- was not allowable being w.r.t cost of acquisition of capital assets, which were claimed as application of income in the preceding years/current year. 2.1 Disallowance of depreciation bad in law: At the outset it is submitted that the subjected amount of depreciation of Rs.54,63,625/- has been claimed with reference to the opening balances of various assets and also on those, which were purchased, during the year totaling to Rs.1.33 crore as shown in the depreciation chart (PB 8- 9), which was submitted to the AO also along with the ROI. Thus, the subjected depreciation has been computed with reference to the various assets which were acquired by the assessee in previous years. Notably however, the expenditure incurred for acquisition of such capital assets, in the earlier years was never treated as application income for charitable purposes u/s 11(1)(a) of the Income Tax Act, 1961. Neither the opening balance of the cost of earlier assets were claimed as an application of income in the past nor the cost of acquisition of the new assets during the year at Rs.1.33 crores was treated as application of income, which fact is evident from the computation of total income and the ROI (PB 3-5). In support of contention of this fact, a reference may be made to the computation of total income and depreciation chart of various previous years starting from A.Y. 2009-10 to 2015-16 (PB 12- 48). Thus, on one hand the appellant has fully established this contention but at the same time, the AO also in the impugned assessment order has nowhere disputed this fact nor he made a claim that the opening balances of all those assets, subjected to depreciation this year, were claimed as application of income. The entire record was made available before the AO and otherwise also, he was having the copies of the past assessment record. There is nothing new or additional in the paper filed before the Hon’ble bench. 2.2 The assessee society is registered u/s 12A of the Act and it is settled that the claim of depreciation is a claim of valid depreciation of income u/s 11(1)(e) of the act and hence the assessee cannot be denied such benefit, more particularly, when the cost of the assets with reference to which, such claim of depreciation has been made, were never claimed as application of income as stated above. 2.3. Even the provision made u/s 11(6) inserted by the Finance no. 2 Act, 2014 will not disentitle the assessee from making such a claim. The plain and unambiguous language of the amendment made, established that the intent of the legislature in denying the claim of depreciation is only to prohibit double claim of application of income viz (a) one, the cost ITA No. 234/JP/2022 Rajiv Gandhi Vidhya Pith Shiksha vs. ITO 9 of acquisition being claimed as application of income and, (b) second, while claiming depreciation on the same very asset once again. In the past, when such dispute arose, the matter reached to the Hon’ble Rajasthan High court and even upto the stage of Hon’ble SC where however, such issue was answered against the revenue in the case of CIT(E) Vs. Subros Educational Society (2018) 303 CTR (SC) 1. However, to undone the effect of the said judgement and the judicial precedents, above amendment is made. 3. It is submitted that a bare reading of the amended law makes it clear that the disallowance of claim of depreciation has to be only in respect of such asset, the cost of which has already been claimed and allowed as application of income but not otherwise. In the present case, however, as per the relevant documents enclosed in the paper book filed dated 25.01.2023, computation of total income for AY 2016-17 (PB 4-5) along with audited Balance Sheet and Income & Expenditure A/c for A.Y. 2016-17 (PB 6-9), the Audit Report in Form 10B (PB 10-11), and from the preceding years computation of total income from AY’s 2009-10 to 2015-16, it is evident that the cost of such assets, were not (always) claimed as application of income in the earlier year/s to reach the benchmark of 85% in as much as the revenue expenditure including depreciation itself used to be more than 85% the assessee never required the help of capital expenditure. (This is except A.Y. 12-13 wherein a small amount of cost of fixed assets of Rs.3,34,043/- was claimed as application by our side due to clerical mistake to bring the figure of the application up to 85% (PB 25). At the same time however, huge amount of depreciation of Rs.25,47,076/- was not claimed as per the practice in the past and in the later years. Whereas, in the depreciation chart such amount of depreciation was deducted and the resultant closing WDV was taken in the later years meaning thereby, on one hand no depreciation was claimed but at the same time the WDV was reduced hence benefit of deferred claimed was also not availed by the assessee. For this minor amount of Rs.3,34,043/- , need not be disallowed). The ld. CIT(A) however, didn’t apply its mind on these submissions and all the evidences submitted before him and merely alleged the assessee of non-filling of these evidences, ignoring the pertinent fact that the AO was already having the copy of the past assessment record with him which he couldn’t have ignored. 4. Alternative claimed: We may further submit that alternatively the entire expenditure amounting to Rs.1,33,01,255.80/- incurred for acquisition of capital assets during the year under consideration may be treated application of income for charitable purposes u/s 11(1)(a) of the Income Tax Act, 1961 and relief may be granted. In view of above, the disallowance made by the AO is uncalled for and be deleted. ITA No. 234/JP/2022 Rajiv Gandhi Vidhya Pith Shiksha vs. ITO 10 GOA-4 Charging of Interest u/s 234B, 234C & 234D: is consequential and kindly be decided accordingly. The above submissions have been made based on the instructions and the information provided of/by the client.” 6. In addition to the written submission filed, the ld. AR of the assessee submitted that the reply was filed on 16.11.2018 on efilling portal by the assessee. The finding recorded by the ld. AO is without giving the assessee the opportunity of being heard in the matter and the substantial amount has been disallowed. Even before the ld. CIT(A) the alternative claimed made by the assessee was not considered so as to allow the fresh capital expenditure against the disallowance of claim of depreciation. 7. The ld. DR is heard who has relied on the findings of the lower authorities and submitted that the assessee was given specific show cause notices against which the assessee remain silent and no information was submitted that has been called for by the ld. AO. Even to claim the capital expenditure against disallowance of depreciation no details of the capital expenditure so as to consider the claim of the assessee were filed before the ld. CIT(A). Therefore, the ld. CIT(A) has rightly denied the claim in the ITA No. 234/JP/2022 Rajiv Gandhi Vidhya Pith Shiksha vs. ITO 11 absence of the information from the side of the assessee. Based on this submission she supported the orders of the lower authorities and prayed to confirm the finding of the lower authroties. 8. We have heard the rival contentions and perused the material placed on record. The bench noted that the assessee is an educational institution. The only disputed that the ld. AO made in the assessment proceeding that since the assessee has claimed the deprecation in the year under consideration. The ld. AO has by issue of specific show cause notice called for the information from the assessee so as to prove that whether the assessee has in earlier claimed the capital expenditure on which the depreciation is claimed. Since, the assessee has not filed any details the same was denied. Even the ld. AR was not sure whether the reply of the said information was filed or not. As regards the alternate claim of the assessee so as to allow the claim of capital expenditure incurred in the current year as application of income, we concur with the arguments of the ld. DR that even the ld. CIT(A) cannot allow the alternative plea without submitting any details before him. Here also ld. AR failed to demonstrate as to whether this pleas was supported with any other details / information before the ld. CIT(A) ITA No. 234/JP/2022 Rajiv Gandhi Vidhya Pith Shiksha vs. ITO 12 or not. In absence of these information, we do not find any faults in the finding of the lower authorities. However, we have acceded the request of the ld. AR of the assessee to allow one more opportunity to the assessee so as deal the case of the assessee on its merits and therefore, in the interest of justice we consider the request of the assessee and restore the matter to the file of the assessing officer to decide the issue in accordance with law. But while doing so we warn the assessee that the time of the lower authorities are also equally important assessee cannot remain silent and not submit the details in the proceedings. To realise that the approach of the assessee was not appreciable and therefore, we direct the assessee to pay a cost of Rs. 1,000/- in the prime minister relief fund and show the receipt to the ld. AO for this causal approach of the assessee. With this remark the appeal of the assessee is allowed for statistical purpose. In the result, appeal of the assessee is allowed for statistical purpose. Order pronounced in the open Court on 18/04/2023 Sd/- Sd/- ¼ Mk0 ,l- lhrky{eh ½ ¼ jkBksM deys'k t;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judcial Member ys[kk lnL;@Accountant Member ITA No. 234/JP/2022 Rajiv Gandhi Vidhya Pith Shiksha vs. ITO 13 Tk;iqj@Jaipur fnukad@Dated:- 18/04/2023 *Ganesh Kr. vkns'k dh izfrfyfi vxzsf’kr@Copy of the order forwarded to: 1. vihykFkhZ@The Appellant- Rajiv Gandhi Vidhya Pith Shiksha, Jaipur 2. izR;FkhZ@ The Respondent- ITO, Exemption W(1), Jaipur 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur. 6. xkMZ QkbZy@ Guard File { ITA No. 234/JP/2022} vkns'kkuqlkj@ By order lgk;d iathdkj@Asst. Registrar