The Dy. DIT(Exemp.), Ahmedabad V. Shri N.H. Kapadia Education Trust, Ahmedabad

ITA 2387/AHD/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5807 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 08-05-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 25-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N DIVATIA
• Keywords: Depreciation; Charitable institution; Capital expenditure
• Section: 143(3); 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMEDABAD BEFORE, SHRI S. S. GODARA, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ITA NO. 2387/AHD/2014 (ASSESSMENT YEAR : 2010-11) DEPUTY DIRECTOR OF INCOME-TAX (EXEMPTION), AHMEDABAD, 2 ND FLOOR, NATURE VIEW BUILDING, OPP. H.K.HOUSE, ASHRAM ROAD, AHMEDABAD-09 APPELLANT VS. SHRI N. H. KAPADIA EDUCATION TRUST, THE HBK NEW HIGH SCHOOL, GURUKUL ROAD, MEMNAGAR, AHMEDABAD 380052 RESPONDENT PAN: AAATN1417G /BY REVENUE : MR. PRASOON KABRA, SR. D.R. /BY ASSESSEE : MR. S. N. DIVATIA, A.R. /DATE OF HEARING : 08.05.2017 /DATE OF PRONOUNCEMENT : 18.05.2017 ORDER PER S. S. GODARA, JUDICIAL MEMBER THIS REVENUES APPEAL FOR ASSESSMENT YEAR 2010-11 E MANATES AGAINST THE CIT(A)-XXI, AHMEDABADS ORDER DATED 02.06.2014, PASSED IN CASE NO. ITA NO. 2387/AHD/2014 (DC IT VS. SHRI N. H. KAPADI A EDUCATION TRUST) A.Y. 2010-11 - 2 - CIT(A)-XXI/26/13-14, IN PROCEEDINGS U/S. 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. HEARD BOTH SIDES. CASE FILE PERUSED. 2. THE REVENUES FIRST SUBSTANTIVE GROUND PLEADS TH AT THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING DEPRECIATION DISALLOWANCE OF RS.54,38,051/- AS MADE IN THE COURSE OF THE IMPUGNE D REGULAR ASSESSMENT FRAMED ON 25.03.2013. IT IS EVIDENT THAT THE CIT(A )S FINDINGS UNDER CHALLENGE DULY DISCUSSED ASSESSING OFFICERS CONCLU SION AND ASSESSEES SUBMISSIONS CHALLENGING CORRECTNESS THEREOF AS UNDE R: 6. GROUND OF APPEAL NO.2 IS AGAINST DISALLOWANCE OF DEPRECIATION OF RS.54,38,051/- ON THE GROUND THAT THE DEPRECIATION IN THE CASE OF TRUST WOULD AMOUNT TO DOUBLE DEDUCTION. THE ASSESSING OFFICER, IN THE ASSESSMENT ORDER, HAS OBSERVED AS UNDER: 'THE INVESTMENT IN ASSETS IS ALLOWED AS DEDUCTION A S APPLICATION OF FUNDS. THE ALLOWANCE OF DEPRECIATION AS FURTHER APPLICATIO N OF RECEIPTS IN SUBSEQUENT YEAR WOULD APPARENTLY BE DOUBLE DEDUCTIO N WHICH WOULD BE APPARENTLY INCONSISTENT WITH ACCOUNTING PRINCIPLES AND NOT O AS PROVIDED IN LAW AND HENCE UNTENABLE. THE DECISION OF THE SUPREM E COURT IN THE CASE OF ESCORTS LTD. 199 ITR 43 IS APPLICABLE TO THE CASE O F THE ASSESSEE. AS IN THIS CASE, THE SUPREME COURT HELD THAT WHEN DEDUCTION U/ S.35(2)(IV) WAS ALLOWED IN RESPECT OF CAPITAL EXPENDITURE ON SCIENT IFIC RESEARCH, NO DEPRECIATION HAS TO BE ALLOWED U/S.32 ON THE ASSET. FOR THE SAID REASON THE AMOUNT SO CLAIMED AS DEPRECIATION TO THE TUNE OF RS .54,38,057/- IS ADDED BACK TO THE INCOME OF THE TRUST.' 6.1 DURING THE COURSE OF APPELLATE PROCEEDINGS, THE APPELLANT HAS MADE THE FOLLOWING SUBMISSIONS: 'THE APPELLANT BEGS TO SUBMIT THAT URING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED , THAT THE ASSESSEE HA D CLAIMED DEPRECIATION OF RS. 54,38,057/-. HE WAS OF THE VIEW THAT SINCE T HE ASSESSEE HAD CLAIMED CAPITAL EXPENDITURE IN THE STATEMENT OF TOTAL INCOM E UNDER THE HEAD 'ASSET ACQUIRED DURING THE YEAR' AND CLIMED DEPRECIATION O F RS. 54,38,057/- IN THE STATEMENT OF TOTAL INCOME, ASSESSEE WAS NOT ELIGIBL E FOR ITS CLAIM OF DEPRECIATION AS THE CLAIM OF CAPITAL EXPENDITURE AN D DEPRECIATION AMOUNTS TO DOUBLE DEDUCTION. HE ACCORDINGLY DISALLOWED ASSE SSEE'S CLAIM. THE AO AS OF THE VIEW THAT THE APPELLANT WAS NOT ENTITLED TO DEDUCTION OF DEPRECIATION IN VIEW OF THE DECISION IN THE CASE OF ESCORTS LTD. VS. UNION OF INDIA (199 ITR 43) (SC). ITA NO. 2387/AHD/2014 (DC IT VS. SHRI N. H. KAPADI A EDUCATION TRUST) A.Y. 2010-11 - 3 - FIRSTLY, THE AO HAS FAILED TO APPRECIATE THAT THE I DENTICAL ISSUE WAS RAISED BY AO IN THE ASST. FOR A.Y.2009-10 IN CASE OF JANVI KASH TRUST (ITA NO. 2656/AHD/2012 DATED 26.04.2013] BY AHMEDABAD BENCH OF ITAT AND AFTER CONSIDERING THE ENTIRE CASE LAW ON THE SUBJECT INCL UDING DECISIONS OF HON'BLE GUJARAT HIGH COURT AND KERALA HIGH COURT, T HE SAME WAS DECIDED IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, THE AO SHOU LD BE DIRECTED TO ALLOW DEPRECIATION.' 6.2 I HAVE CONSIDERED THE ASSESSMENT ORDER AND THE SUBMISSIONS MADE BY THE APPELLANT. THE ISSUE WHETHER DEPRECIATION IS TO BE ALLOWED ON THE ASSET ON WHICH ASSESSEE HAS ALREADY BEEN ALLOWED 100% DEDUCTION AS APPLICATION TOWARDS OBJECTS OF THE TRUST IN THE PRECEDING YEAR HAS BEEN DECIDED BY JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SHETH RANCHOODDAS 198 ITR 588. THE HON'BLE GUJARAT HIGH COURT IN THE ORDER DATED 09.08.2012 IN THE CASE OF DIT (EXEMPTION) VS. AHMEDABAD SOUTH INDIAN CHARITABLE TRUST HAS CONSIDE RED THE DERISION OF HON'BLE SUPREME COURT IN THE CASE OF ESCORTS LTD. 199 ITR 4 3 RELIED UPON BY THE AO AND HAS CONFIRMED THAT DEPRECIATION WILL BE ALLOWED IN THE CASE OF TRUST. THE HON'BLE ITAT, AHMEDABAD IN THE CASE OF JANVIKAS TRUST FOR A SST. YEAR 2009-10 IN ITA NO. 2656/AHD/2012 DATED 26.04.2013, RELYING ON THE DECI SION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF DIT (E) VS. AHMEDABAD SOUTH IN DIAN CHARITABLE TRUST (TAX APPEAL NO. 439 OF 2012); ADIT (EXEMPTION) VS. FRIEN DS OF WWB INDIA IN ITA NO. 2658/AHD/2012 & C.O. NO. 6/AHD/2012 ORDER DATED 31. 01.2013 AND ALSO IN CASE OF ADIT (EXEMPTION) VS. THE XAVIER KELVANI MANDAL PVT. LTD., DECIDED THE ISSUE IN FAVOUR OF THE APPELLANT. RESPECTFULLY FOLLOWING THE ORDER OF JURISDICTIONAL HIGH COURT, DISALLOWANCE OF DEPRECIATION MADE BY THE ASS ESSING OFFICER IS DELETED . 3. WE HAVE HEARD RIVAL SUBMISSIONS. LEARNED DEPART MENTAL REPRESENTATIVES ONLY ARGUMENT IS THAT THE ASSESSEE HAS ALREADY ALLOWED COST OF THE ASSETS IN QUESTION FOR THE PURPOSE OF SEEKIN G BENEFIT OF APPLICATION OF INCOME TOWARDS ACTIVITIES PERFORMED IN FURTHERANCE TO ITS SUBJECT. HE THEREFORE SUBMITS THAT THE ASSESSEE CANNOT GET DOUB LE DEDUCTION BY CLAIMING THE IMPUGNED DEPRECIATION. HE HOWEVER FAILS TO DIS PUTE THE FACT THAT HONBLE JURISDICTIONAL HIGH COURTS DECISION IN CASE OF AHM EDABAD SOUTH INDIAN CHARITABLE TRUST HAS ALREADY REJECTED REVENUES IDE NTICAL CONTENTION AS FOLLOWED BY A CATINA OF CASE LAW HEREINABOVE. WE T HUS SEE NO REASON TO INTERFERE WITH THE LOWER APPELLATE AUTHORITYS FIND INGS UNDER CHALLENGE. THIS FORMER SUBSTANTIVE GROUND FAILS. ITA NO. 2387/AHD/2014 (DC IT VS. SHRI N. H. KAPADI A EDUCATION TRUST) A.Y. 2010-11 - 4 - 4. THE REVENUES SECOND AND LAST SUBSTANTIVE GROUND AVERS THAT THE LOWER APPELLATE AUTHORITY HAS WRONGLY DELETED ADDITION OF RS. 2,68,20,708/- AFTER IGNORING THE FACT THAT ASSESSEES RECEIPTS COLLECTE D FROM STUDENTS AT THE TIME OF ADMISSION WERE NOT SPECIFICALLY DIRECTED TOWARDS IT S CORPUS BUT MEANT FOR VARIOUS SERVICES RENDERED BY THE SCHOOL. ITS CONTE NTION THEREFORE IS THAT THE ASSESSING OFFICER HAD RIGHTLY TREATED THE SAME AS I TS INCOME. WE NOTICE THAT THE CIT(A) HAS FOLLOWED TRIBUNALS ORDER PASSED IN ASSESSMENT YEAR 2004-05 IN ASSESSEES CASE ITSELF. HIS FINDINGS UNDER CHAL LENGE READ AS UNDER: 7. GROUND OF APPEAL NO. 3 IS AGAINST OF CORPUS DONATION OF RS.2,68,20,708/-. THE ASSESSING OFFICER HAS MADE THE ADDITION ON THE CORP US DONATION AS PER PARA 3.2 AND 3.3 OF THE ASSESSMENT ORDER. THE RELEVANT PORTI ON OF THE ORDER IS REPRODUCED AS UNDER: 'FROM THE VERIFICATION OF SUBMISSION AND ANNEXURE S UBMITTED BY THE ASSESSEE, SHOWS THAT THE ASSESSES TRUST HAD COMPELL ED THE GUARDIANS AND PARENTS OF THOSE STUDENTS WHO SOUGHT ADMISSION IN T HE SCHOOL RUN BY THE TRUST TO ADVANCE DONATIONS. THUS, THE TRUST ACCEPTE D THESE UNDER THE GUISE OF DONATION GIVEN BY THESE PARENTS WHIH THE TRUST F URTHER ROUTED IT UNDER VARIOUS FUNDS SUCH AS BUILDING FUND, EDUCATIONAL RE SEARCH FUND, EDUCATIONAL INFRASTRUCTURE FUND, LITERARY FUND, SPO RTS DEVELOPMENT FUND, STAFF WELFARE FUND, STUDENTS WELFARE FUND, ETC. AND CREDITED IT DIRECTLY TO THE BALANCE SHEET SHOWING IT AS A CORPUS FUND. THIS PROVES THAT THE ASSESSEE TRUST THOUGH IS AN EDUCATIONAL TRUST ESTAB LISHED WITH AN AIM AND OBJECTIVE TO RUN EDUCATIONAL ACTIVITIES HAS AN ULTE RIOR MOTIVE (PROFIT EARNING). FOR THE SAID REASON, THE TRUST IS NOT ENT ITLED TO EXEMPTION U/S.11 OF THE I.T. ACT. DONATIONS RECEIVED FROM THE PARENT S BY THE TRUST AT THE TIME OF SEEKING ADMISSION AND SUBSEQUENTLY ALLOCATING TH E SAID SUM UNDER SEVEN (7) DIFFERENT FUNDS AND PROJECTING IT AS AN EARNMAR KED FUND/ CORPUS FUND IS TREATED AS AN INCOME IN THE HANDS OF THE ASSESSE E TRUST AND BROUGHT TO TAX. THE ADDITION TO THE CORPUS TO THE PROCEEDING Y EAR COMES TO RS.2,68,20,708/-.' 7.1 DURING THE COURSE OF APPELLATE PROCEEDINGS , THE APPELLANT HAS MADE THE FOLLOWING SUBMISSIONS: 'THE NEXT GROUND OF APPEAL RELATES TO THE CORPUS DO NATION OF RS.2,68,20,708/- (NET) TREATED AS REVENUE RECEIPT A ND LIABLE TO TAX. THE BRIEF FACTS RELATING TO THIS GROUND ARE THAT THE APPELLAN T HAD CREDITED RS. 17,97,94,990/- AS EARMARKED FUNDS AND TAKEN TO BALA NCE SHEET. SINCE THE APPELLANT INSTITUTION, WHILE RUNNING THE SCHOOLS, C ARRY ON DIFFERENT ACTIVITIES, IT HAS TO CREATE AN INFRASTRUCTURE SUCH AS BUILDING, LIBRARY, SPORTS, STAFF & STUDENT WELFARE ETC. THE AO HAS OBS ERVED THAT THE APPELLANT HAD COMPELLED THE GUARDIANS/ PARENTS OF THE STUDENT S DESIRING ADMISSION TO ITA NO. 2387/AHD/2014 (DC IT VS. SHRI N. H. KAPADI A EDUCATION TRUST) A.Y. 2010-11 - 5 - GIVE DONATIONS WHICH SHOWS THAT IT WAS ESTABLISHED WITH AN AIM AND OBJECTIVE OF PROFIT EARNING. THE APPELLANT SUBMITS THAT IDENTICAL ISSUE WAS RAIS ED BY AO IN THE ASST FOR A.Y.2004-05,2005-06, 2008-09 AND 2009-10 BUT ON APP EAL, HON'BLE TRIBUNAL HAS HELD IN FAVOUR OF THE ASSESSEE THAT TH E CONTRIBUTIONS TOWARDS DIFFERENT CORPUS FUNDS WAS NOT LIABLE TO TAX. THE C OPY OF APPELLATE ORDERS ARE FILED AT PAGE 54-106 AND 107-116. SINCE THE FAC TS OF THE PRESENT APPEAL ARE IDENTICAL TO THE FACTS OF THE SAID YEARS, THE I MPUGNED ADDITION MAY PLEASE BE DELETED FOLLOWING THE SAID APPELLATE ORDE RS. THE APPELLANT HAS EXPLAINED THE NATURE AND PURPOSE OF RECEIPT IN DETA IL IN REPLY DATED 17.01.2013 AND FILED ON 23.01.2013 WITH AO ALONGWIT H A CHART SHOWING NAME AND ADDRESS, PAN OF THE DONORS AND SAMPLE OF T HE RECEIPTS ISSUED TO THEM (PAGE-40-49). THEREFORE, THE IMPUGNED ADDITION MADE BY AO MAY PLEASE BE DELETED.' 7.2 I HAVE CONSIDERED THE ASSESSMENT ORDER AND THE SUBMISSIONS MADE BY THE APPELLANT. THE HON'BLE ITAT IN APPELLANT'S OWN CAS E FOR ASST. YEARS 2004-05 IN ITA NO. 279, 280 & 281/AHD/2013 ON IDENTICAL FACTS, HAS HELD THAT CONTRIBUTION TOWARDS DIFFERENT CORPUS FUNDS WERE IN THE NATURE O F CORPUS FUND AND AS SUCH EXEMPT U/S. 12 OF THE I.T. ACT. THE RELEVANT OBSERV ATION IS REPRODUCED AS UNDER: 'TAKING INTO ACCOUNT ALL THE FACTS AS DISCUSSED IN THE FOREGOING PARAGRAPHS, WE ARE OF THE CONSIDERED VIEW THAT THE STAND OF THE AO WAS RATHER MISCONCEIVED IN HOLDING THAT THE CONTRIBUTION TOWAR DS DIFFERENT CORPUS FUNDS AGGREGATING TO RS.1.9 CRORES AS CURRENT INCOM E OF THE ASSESSEE LIABLE TO BE TAXED WHEREAS THE CIT(A) WAS JUSTIFIED IN HER FINDING THAT THE SAID CONTRIBUTIONS WERE IN THE NATURE OF CORPUS FUNDS AN D AS SUCH EXEMPT U/S. 12 OF THE ACT. THEREFORE, THE ORDER OF THE ID. CIT(A) IS CONFIRMED WITH RESPECT TO THIS ISSUE.' 7.3 RESPECTFULLY FOLLOWING THE ORDER OF THE HO N'BLE ITAT, THE ADDITION MADE BY THE ASSESSING OFFICER ON THIS ACCOUNT IS DELETED. 5. WE HAVE GIVEN THOUGHTFUL CONSIDERATION TO REVENU ES VEHEMENT CONTENTIONS SEEKING TO RESTORE THE ADDITION IN QUES TION. WE SOUGHT TO KNOW ABOUT ANY EVIDENCE FORMING PART OF THE PAPER BOOK W HICH COULD INDICATE THAT THE RECEIPTS IN QUESTION WERE MEANT FOR THE SO CALL ED OTHER SERVICES INSTEAD OF ASSESSEES CORPUS. LEARNED DEPARTMENTAL REPRESENTA TIVE FAILS TO PINPOINT ANY SUCH EVIDENCE. SHRI DIVATIA SUBMITS IN THE COURSE OF HEARING THAT THE ASSESSEE HAS ALREADY SUCCEEDED ON THE VERY ISSUE BEFORE THIS TRIBUNAL IN ASSESSMENT YEARS 2004-05, 2005-06, 2008-09 & 2009-10 WHEREIN V ARIOUS CO-ORDINATE BENCHES HAVE CONCLUDED THAT SIMILAR CONTRIBUTIONS M ADE TO CORPUS FUNDS ARE ITA NO. 2387/AHD/2014 (DC IT VS. SHRI N. H. KAPADI A EDUCATION TRUST) A.Y. 2010-11 - 6 - NOT TAXABLE AS INCUR. THE SAID ORDERS ALSO FORM PA RT OF THE CASE FILE FROM PAGE 54 ONWARDS. THE REVENUE IS UNABLE TO POINT OUT ANY DISTINCTION ON FACTS INVOLVED THEREIN. WE ACCORDINGLY AFFIRM CIT(A)S F INDINGS QUA THE LATTER ISSUE AS WELL. 6. THIS REVENUES APPEAL IS DISMISSED. [PRONOUNCED IN THE OPEN COURT ON THIS THE 18 TH DAY OF MAY, 2017.] SD/- SD/- ( PRADIP KUMAR KEDIA ) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD: DATED 18/05/2017 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )*+ ,--. . /0 / DR, ITAT, AHMEDABAD 1 +23 45 / GUARD FILE. BY ORDER / . // . /0