Vidya Bharati Society for Education & Scientific Advancement, Kolkata V. ACIT(Exemption) Circle - 1(1), Kolkata , Kolkata

ITA 2398/KOL/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 9328 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 1 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 04-11-2019
• Assessment Year: 2014-2015
• Appeal Filed On: 30-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Depreciation; Charitable institution; Capital receipt; Capital expenditure; Set aside
• Section: 12A; 10B; 192; 13; 32; 28

Judgement Text

, A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA ( ) . . , . . ! , ' #$ ) [BEFORE SHRI P.M. JAGTAP, VICE PRESIDENT (KZ) & SHR I A. T. VARKEY, JM] I.T.A. NOS. 2397 & 2398/KOL/2017 ASSESSMENT YEARS: 2010-11 & 2014-15 VIDYA BHARATI SOCIETY FOR EDUCATION & SCIENTIFIC ADVANCEMENT (PAN: AAATV2139H) VS. ASSISTANT COMMISSIONER OF INCOME- TAX(EXEMPTION), CIRCLE-1(1), KOLKATA. APPELLANT RESPONDENT DATE OF HEARING 04.11.2019 DATE OF PRONOUNCEMENT 10.01.2020 FOR THE APPELLANT SHRI ARVIND AGARWAL, ADVOCATE & S HRI RAJAT AGARWAL, CA FOR THE RESPONDENT SMT. RANU BISWAS, ADDL. CIT ORDER PER SHRI A.T.VARKEY, JM BOTH THESE APPEALS PREFERRED BY THE ASSESSEE AGAINS T THE SEPARATE ORDERS OF LD. CIT(A) 25, KOLKATA DATED 21.09.2017 FOR AYS 2010- 11 AND 2014-15. SINCE FACTS ARE IDENTICAL AND GROUNDS ARE MOSTLY COMMON, WE DISPOSE OF BOTH THESE APPEALS TOGETHER BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST OF ALL, WE WILL TAKE UP THE APPEAL FOR AY 2010-11. BY PREFERRING GROUND NO 1 TO 4 OF ASSESSEES APPEAL, WE NOTE THE MAIN GRIEVA NCE OF THE ASSESSEE IS AGAINST THE ACTION OF THE LD. CIT(A) IN CONFIRMING THE ACTION OF AO, WHO TREATED THE RECEIPT OF DEVELOPMENT FEES FOR RS.19,39,000/- AS UNDISCLOSED INCOME OF THE ASS ESSEE AND FURTHER DISALLOWED THE BENEFIT U/S. 11 OF THE INCOME-TAX ACT, 1961 (HEREINAFTER RE FERRED TO AS THE ACT). 3. BRIEF FACTS OF THE CASE, AS DISCUSSED BY THE AO , IS THAT THE ASSESSEE SOCIETY IS FOR EDUCATION AND SCIENTIFIC ADVANCEMENT AND FILED ITS RETURN OF INCOME FOR AY 2010-11 DECLARING NIL INCOME WHICH WAS PROCESSED U/S. 143(1 ) OF THE ACT ON 01.08.2011 RAISING A REFUND OF RS.7,14,660/-. THE CASE WAS SELECTED FOR SCRUTINY VIDE CASS AND THEREAFTER THE AO RECORDS THAT THE LD. AR OF THE ASSESSEE APPEARED FROM TIME TO TIME AND FURNISHED DETAILS 2 ITA NO. 2397-2398/KOL/2017 VIDYA BHARATI SOCIETY FOR EDUCATION & SCIENTIFIC ADVANCEMENT, AYS: 2010-11 & 2014-15 AND DOCUMENTS AS PER REQUISITIONS MADE BY HIM. ACCO RDING TO AO, THE ASSESSEE IS A SOCIETY REGISTERED U/S. 12A OF THE ACT VIDE ORDER DATED 06. 08.1999. THE AO NOTED THAT THE ASSESSEE HAD CLAIMED EXEMPTION U/S. 11 AND HAD FURNISHED AUD IT REPORT IN FORM 10B DATED 19.01.2011 ALONG WITH THE RETURN OF INCOME. ON EXA MINATION OF ACCOUNTS, THE AO OBSERVED THAT THE ASSESSEE HAD RECEIVED DEVELOPMENT FEES F OR RS.19,39,000/- WHICH THE ASSESSEE HAD CAPITALIZED IN THE DEVELOPMENT FUND ACCOUNT. ACCORD ING TO AO, SINCE THE DEVELOPMENT FEE WAS RECEIVED FROM STUDENTS, IT WAS REVENUE IN NATUR E AND THEREFORE FORMED PART OF THE INCOME OF THE ASSESSEE SOCIETY FOR THE RELEVANT PRE VIOUS YEAR. SINCE THE ASSESSEE HAD NOT INCLUDED THE DEVELOPMENT FEES BY WAY OF ITS INCOM E IN THE INCOME & EXPENDITURE ACCOUNT AND/OR IN THE COMPUTATION OF TOTAL INCOME FILED AL ONG WITH THE RETURN, THE AO REQUIRED THE ASSESSEE TO EXPLAIN AS TO WHY SUCH AMOUNT SHALL NOT BE TREATED AS ITS INCOME CHARGEABLE TO TAX FOR THE RELEVANT PREVIOUS YEAR. THE REPLY FURN ISHED BY THE ASSESSEE IS REPRODUCED HEREUNDER: THE DEVELOPMENT FUND IS REQUIRED TO BE USED BY TH E SCHOOL AUTHORITY FOR DEVELOPMENT OF EDUCATIONAL INSTITUTIONS IN THE FORM OF CAPITAL EXP ENDITURE AND LONG TERM BENEFIT. THE NATURE OF RECEIPT IS ALTOGETHER DIFFERENT FROM ANY OTHER F EES OR COLLECTION RECEIVED FROM STUDENTS. IN RESPECT OF OTHER FEES AND COLLECTIONS FROM STUDENTS THE SCHOOL AUTHORITY HAS UNRESTRICTED POWERS TO MAKE USE OF SUCH RECEIPTS. HOWEVER, IN T HE CASE OF USE OF DEVELOPMENT FUND, THE SCHOOL AUTHORITY DID NOT HAVE ANY SUCH UNRESTRICTED POWER TO USE SUCH FUND. THEREFORE, THE NATURE OF RECEIPT OF THE MONEY FROM STUDENTS WAS CA PITAL IN NATURE NOT REVENUE. 4. THE AO HOWEVER HELD THAT THE EXPLANATION FURNISH ED BY THE ASSESSEE IS NOT ACCEPTABLE. ACCORDING TO AO, THE DEVELOPMENT FEES W ERE COLLECTED FROM THE STUDENTS ON A REGULAR BASIS AND EVEN IN ADVANCE AND THEREFORE, TH ERE IS A CERTAINTY IN RECEIVING SUCH PAYMENT OR IT IS AT LEAST EXPECTED TO BE RECEIVED I N DUE COURSE OF TIME. THE AO THUS HELD THAT SUCH RECEIPTS ARE REVENUE IN NATURE AND CANNOT BE REGARDED AS CAPITAL RECEIPT. THE AO FURTHER OBSERVED THAT THE DEVELOPMENT FEES COLLECTE D FROM STUDENTS CANNOT BE EQUATED WITH DONATION. ACCORDING TO HIM, DONATION IS UNCONDITIO NAL TRANSFER OF MONEY OR MONEYS WORTH FROM DONOR TO DONEE UPON OWN WISH, WILLINGNESS AND CHOICE OF THE DONOR, HAVING NO DICTATION FROM THE DONEE. ACCORDING TO AO HOWEVER, THE DEVELOPMENT FEE COLLECTED BY THE EDUCATIONAL INSTITUTION FROM STUDENTS WAS NOT PAID BY THEM ON THEIR OWN VOLITION OR CHOICE OR UNCONDITIONALLY TO THE INSTITUTION. THUS, ACCOR DING TO AO, DEVELOPMENT FEES PAID CANNOT BE REGARDED AS DONATION BY STUDENTS. WITH REGARD T O THE ASSESSEES CLAIM THAT SUCH 3 ITA NO. 2397-2398/KOL/2017 VIDYA BHARATI SOCIETY FOR EDUCATION & SCIENTIFIC ADVANCEMENT, AYS: 2010-11 & 2014-15 DEVELOPMENT FEE WAS IN THE NATURE OF CORPUS DONATI ON, THE AO OBSERVED THAT THE CORPUS DONATION IS NOT DEFINED IN THE ACT. REFERRING TO TH E LANGUAGE OF SECTION 12(1) AND SECTION 11(1)(D) OF THE ACT, THE AO NOTED THAT THESE SECTIO NS SPEAK OF EXCLUSION OF DONATION MADE WITH SPECIFIC DIRECTION THAT SUCH DONATION SHALL FO RM PART OF THE CORPUS OF THE TRUST I.E. IT WILL REMAIN OUTSIDE THE AMBIT OF THE CHARGEABLE INCOME. THE AO OBSERVED THAT CORPUS DENOTES PRINCIPAL OR CAPITAL SUM AND NOT INTEREST OR R ECURRING RECEIPTS OR INCOME. REFERRING TO THE DEFINITION OF CORPUS SET OUT IN BLACKS LAW D ICTIONARY, THE AO OBSERVED THAT CORPUS IS A CAPITAL AMOUNT IN THE FORM OF MONEY, MOVEABLE OR IMMOVABLE PROPERTY OR THE DONATION RECEIVED BY A CHARITABLE TRUST FOR SPECIFIC PURPOSE , WHICH MAY BE SAID TO BE CORPUS AND REMAINS AS CAPITAL IN A FUND IN CONTRAST TO INCOME. ACCORDING TO AO THEREFORE, WHETHER A DONATION WOULD CONSTITUTE CORPUS OR CAPITAL OF THE RECEIVING TRUST OR WOULD FALL WITHIN THE AMBIT OF ITS INCOME DEPENDS UPON GIVEN CIRCUMSTANCE S OF THE CASE, HAVING REGARD TO THE MOTIVE, INTENTION AND NATURE OF THE VOLUNTARY CONTR IBUTION. THE AO OBSERVED THAT THE CHARACTERISTICS OF INCOME ARE THAT, IT IS A PERIODI CAL MONETARY RETURN COMING IN WITH REGULARITY OR AT LEAST EXPECTED REGULARITY. WHEREAS , THE CORPUS DONATION IS A BILATERAL CONTRACT WHERE THE DONOR EXPRESSES THE INTENTION THAT DONATI ON WILL FORM PART OF THE CORPUS OR CAPITAL OF THE TRUST AND THE DONEE ACCEPTS IT SUBJECT TO TH E CONDITION. ACCORDING TO AO, IN THE FACTS OF THE PRESENT CASE, THIS CHARACTERISTIC IS COMPLET ELY ABSENT AS THERE IS NO WRITTEN DIRECTION OF THE STUDENTS THAT THE FEES ARE PAID TOWARDS THE COR PUS OF THE INSTITUTION. THE AO THUS CONCLUDED THAT BOTH THE CONTENTIONS OF THE ASSESSEE I.E. FEES WERE CAPITAL IN NATURE AND MADE WITH A SPECIFIC DIRECTION, FAILED AND, THEREFORE, H E TREATED THE AMOUNT OF RS.19,39,000/- COLLECTED AS DEVELOPMENT FEES BY WAY OF UNDISCLOSED INCOME OF THE ASSESSEE FOR THE PREVIOUS YEAR. THE AO ALSO DID NOT ALLOW THE BENEFI T U/S. 11 WITH REFERENCE TO SUCH INCOME AS ACCORDING TO HIM NO INCOME OR PART THEREOF WAS A PPLIED FOR CHARITABLE PURPOSES, WHICH ACCORDING TO HIM WAS EVIDENT FROM THE FACT THAT THE ASSESSEE DID NOT SHOW SUCH FEES AS ITS INCOME IN THE RETURN AND THUS IT HAD NEVER INTENDED TO APPLY IT. AGGRIEVED BY SUCH ACTION OF THE AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A). 5. ON APPEAL THE LD. CIT(A) CONFIRMED THE ACTION OF THE AO TO THE EXTENT OF TREATING THE RECEIPTS BY WAY OF DEVELOPMENT FEE AS REVENUE IN NA TURE BUT HELD THAT SINCE THE RECEIPTS HAD BEEN DISCLOSED IN THE ANNUAL ACCOUNTS, IT COULD NOT BE TREATED AS UNDISCLOSED RECEIPT. 4 ITA NO. 2397-2398/KOL/2017 VIDYA BHARATI SOCIETY FOR EDUCATION & SCIENTIFIC ADVANCEMENT, AYS: 2010-11 & 2014-15 ACCORDING TO LD. CIT(A), THE DEVELOPMENT FEES WHICH HAS BEEN TAKEN FROM ALL THE STUDENTS ALONG WITH ALL FEES MISSED THE ESSENTIAL CHARACTER OF VOLUNTARY AND DECLARATION OF DIRECTION AND THEREFORE IT COULD NOT BE EQUATED WITH VOLUNTAR Y DONATION. HE FURTHER HELD THAT SUCH FEES HAD BEEN RECEIVED FROM THE STUDENTS COMPULSORILY EV ERY MONTH AT A FIXED RATE AND AS A COMPONENT OF THE OVERALL FEE AND THEREFORE IT CANNO T BE REGARDED AS DONATION TOWARDS CORPUS BY THE STUDENTS. REJECTING THE ASSESSEES CLAIM THA T THE COLLECTION OF DEVELOPMENT FEES WAS TOWARDS SPECIFIC PURPOSE OF SCHOOL BUILDING AND INF RASTRUCTURE PURSUANT TO THE RESOLUTION DATED 03.01.2000 AND THEREFORE IN THE NATURE OF COR PUS DONATION, THE LD. CIT(A) HELD THAT TO CLAIM A DONATION AS CORPUS, A WRITTEN DOCUMENT OF DECLARATION IS NECESSARY FOR CORPUS DONATION FROM THE DONOR AND NOT THE DONEE. ACCORDIN G TO LD. CIT(A), IN THE FACTS OF THE PRESENT CASE, THERE WAS NOTHING ON RECORD TO SHOW T HAT THERE WAS ANY WRITTEN DIRECTION FROM THE STUDENTS THAT THE FEES ARE PAID TOWARDS THE CO RPUS OF THE INSTITUTION BUT THE MATERIAL ON RECORD SHOWED THAT IT IS PRE-DETERMINED DECISION OF THE SCHOOL TO IMPOSE THE DEVELOPMENT FEES UPON THE STUDENTS AND ENSURE A REGULAR SOURCE OF INCOME FOR THE SCHOOL. WITH THESE FINDINGS, THE LD. CIT(A) WAS PLEASED TO DISMISS THE APPEAL OF THE ASSESSEE. BEING AGGRIEVED, THE ASSESSEE IS NOW IN APPEAL BEFORE US. 6 ASSAILING THE ACTION OF THE LD. CIT(A), THE LD. A R SUBMITTED THAT THOUGH THE VOLUNTARY CONTRIBUTION CONSTITUTES INCOME UNDER S ECTION 11(1)(A) BUT SUCH CONTRIBUTION SHALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE TR UST OR INSTITUTIONS WHICH IS TOWARDS THE CORPUS FUND IN TERMS OF SECTION 11(1)(D) R.W.S. 12 OF THE ACT, WHICH STATES THAT THE CONTRIBUTION MADE WITH A SPECIFIC DIRECTION WILL NO T FORM PART OF THE INCOME BUT SHALL FORM CORPUS OF THE TRUST. RELYING ON THE DECISION OF HON BLE RAJASTHAN HIGH COURT IN CASE OF SUKHDEO CHARITY ESTATE V. ITO [1991] 192 ITR 615, H E SUBMITTED THAT WHEN THE AMOUNT WAS CONTRIBUTED TO THE CORPUS OF THE INSTITUTION AND TH E SAME IS KEPT AS CAPITAL BY THE ASSESSEE SOCIETY, THEN IT CANNOT BE TREATED AS INCOME OR REV ENUE RECEIPT FOR THE PURPOSE OF SECTION 11 OF THE ACT. DRAWING OUR ATTENTION TO THE RESOLUTIO N DATED 03.01.2000, THE LD. AR CONTENDED THAT THE AMOUNT COLLECTED FROM THE STUDENTS WERE ON LY FOR THE PURPOSE OF THE DEVELOPMENT OF THE SCHOOL AND THAT SUCH AMOUNT COLLECTED WOULD BE USED ONLY FOR THE CONSTRUCTION OR DEVELOPMENT OF BUILDING, LIBRARY, COMPUTER UP-GRADA TION ETC. AND FOR NO OTHER PURPOSE AND HENCE SUCH CONTRIBUTION BY THE STUDENTS CONSTITUTED CAPITAL RECEIPT. HE EXPLAINED THAT THE 5 ITA NO. 2397-2398/KOL/2017 VIDYA BHARATI SOCIETY FOR EDUCATION & SCIENTIFIC ADVANCEMENT, AYS: 2010-11 & 2014-15 SCHOOL RUN BY THE ASSESSEE SOCIETY REQUIRED AT REGU LAR PERIODIC INTERVALS DEVELOPMENT AND UP-GRADATION FOR WHICH SUBSTANTIAL CORPUS WAS REQUI RED. UPON MUTUAL DISCUSSIONS HELD WITH THE PARENTS, IT WAS AGREED THAT INSTEAD OF DONATING LUMP SUM AMOUNT, THEY WOULD CONTRIBUTE IN YEARLY INSTALMENTS TOWARDS THE DEVELOPMENT FUND SO THAT THE ASSESSEE SOCIETY CAN SYSTEMATICALLY PLAN AND CARRY OUT THE DEVELOPMENT A CTIVITIES WITH THE FUND RAISED IN A PHASED MANNER. ACCORDING TO LD. AR, THE MERE MANNER OF RE CEIVING CONTRIBUTION TOWARDS CORPUS CANNOT CHANGE THE CHARACTER OF THE RECEIPT. HE ARGU ED THAT MUCH EMPHASIS WAS LAID UPON BY THE LOWER AUTHORITIES ON THE FACT THAT THE CONTRIBU TIONS WERE MADE ON MONTHLY BASIS AND THEREFORE IT COULD NOT BE CONSIDERED TO BE TOWARDS CORPUS. THE LD. AR SUBMITTED THAT THE ARGUMENT OF THE LOWER AUTHORITIES IN THIS REGARD WA S FACTUALLY ERRONEOUS AND UNTENABLE ON THE GIVEN FACTS. HE FURTHER POINTED OUT THAT EVEN T HE RECEIPTS ISSUED BY THE ASSESSEE SOCIETY MADE IT ABUNDANTLY CLEAR THAT THE DEVELOPMENT FEE H AD BEEN SEPARATELY CONTRIBUTED BY THE STUDENTS TOWARDS THE SPECIFIC PURPOSE OF DEVELOPMEN T, REPAIRS & MAINTENANCE OF THE SCHOOL BUILDING AND EQUIPMENTS AND THEREFORE THE LOWER AUT HORITIES HAD ERRED IN CONCLUDING THAT THE DEVELOPMENT FEE WAS RECEIVED WITHOUT MENTION OF THE SPECIFIC OBJECT OR PURPOSE. HE THUS SUBMITTED THAT AMOUNT COLLECTED WAS UTILIZED WITH T HE SPECIFIC OBJECT AND SOLELY FOR DEVELOPMENT PURPOSE AND FOR THE DEVELOPMENTAL ACTIV ITIES FOR WHICH IT WAS EAR-MARKED AND IT IS FOR THAT REASON THAT THE AMOUNT COLLECTED WAS ROUTED NOT THROUGH INCOME AND EXPENDITURE ACCOUNT BUT TAKEN DIRECTLY AS BALANCE S HEET ITEM. THE LD. AR THUS URGED THAT THE DEVELOPMENT FEE WAS IN THE NATURE OF CAPITAL RE CEIPT AND THEREFORE NOT LIABLE TO TAX BY WAY OF INCOME OF THE ASSESSEE SOCIETY. 7. PER CONTRA, THE LD. DR APPEARING ON BEHALF OF TH E REVENUE FULLY RELIED ON THE ORDERS OF THE LOWER AUTHORITIES AND REITERATED THE CONTENT IONS PUT FORTH BY THE AO AND THE LD. CIT(A) TO JUSTIFY THE IMPUGNED ADDITION. ACCORDING TO LD. DR, THE DEVELOPMENT FEE RECEIVED BY THE ASSESSEE SOCIETY WAS LIKE AND IN TH E NATURE OF OTHER FEES COLLECTED UNDER THE NOMENCLATURE TUITION, COMPUTER ETC. SHE FURTHER CONTENDED THAT SUCH DEVELOPMENT FEE WAS RECEIVED AGAINST SERVICES RENDERED BY THE ASSES SEE SOCIETY TO ITS STUDENTS AND THEREFORE THERE WAS NO ELEMENT OF VOLUNTARINESS IN THE IMPUGN ED RECEIPT. ACCORDING TO HER, PAYMENT OF DEVELOPMENT FEE WAS A PRE-REQUISITE FOR THE STUD ENT TO GET ADMISSION IN THE SCHOOL AND THEREFORE THIS RECEIPT CANNOT BE TREATED AS THE VOL UNTARY CONTRIBUTION. SHE THUS CONTENDED 6 ITA NO. 2397-2398/KOL/2017 VIDYA BHARATI SOCIETY FOR EDUCATION & SCIENTIFIC ADVANCEMENT, AYS: 2010-11 & 2014-15 THAT THE RECEIPT IN QUESTION CANNOT BE CLASSIFIED A S DONATION OR CONTRIBUTION FOR SPECIFIC PROJECTS AND THEREFORE, WAS RIGHTLY ASSESSED AS REV ENUE RECEIPT BY THE LOWER AUTHORITIES. SHE FURTHER POINTED OUT THAT UPON CONSIDERING THE DEVEL OPMENT FEE AS REVENUE RECEIPT, SINCE THE SURPLUS OF THE ASSESSEE SOCIETY WENT BEYOND THE PRE SCRIBED LIMIT OF 15% CAP PROVIDED UNDER SECTION 11(1)(A) OF THE ACT, THE EXCESS SURPLUS OVE R AND ABOVE THE 15% CAP IS LIABLE TO INCOME-TAX. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. FROM THE MATERIAL PLACED BEFORE US, WE NO TE THAT THE ASSESSEE SOCIETY HAS BEEN COLLECTING THE DEVELOPMENT FUNDS CONTRIBUTION FROM THE STUDENTS IN PURSUANCE OF A RESOLUTION ADOPTED BY THE TRUSTEES IN THEIR MEETING HELD ON 0 3.01.2000, WHICH READ AS FOLLOWS: ABSTRACT OF MINUTES OF MEETING TRUSTEES OF VIDYA B HARATI SOCIETY FOR EDUCATION AND SCIENTIFIC ADVANCEMENT HELD ON 3 RD JANUARY, 2000 AT REGISTERED OFFICE IN KOLKATA. DEVELOPMENT FUND IT WAS UNANIMOUSLY RESOLVED THAT DEVELOPMENT FUND BE COLLECTED FROM EACH STUDENT OF VIDYA BHARATI SCHOOL (MOMINPUR) OF THE TRUST FOR FURTHER DEVELOPMENT OF SCHOOL BUILDING AND PURCHASE OF CAPITAL EQUIPMENTS REQUIRED FOR VARIOUS EDUCATIONAL ACTIVITIES REQUIRED FOR SCHOOL PURPOSE AND AS PER STUDIES CURRICULUM. IT WAS FURTHER RESOLVED THAT DEVELOPMENT FUND SO CO LLECTED WOULD NOT BE USED FOR REVENUE PURPOSE OF THE SCHOOL AND IT WOULD BE USED FOR ONLY DEVELOPMENT ACTIVITIES AS DESIRED HEREIN ABOVE. 9. FROM THE PLAIN READING OF THE SAID RESOLUTION IT WAS APPARENT THAT THE TRUSTEES HAD RESOLVED TO COLLECT FUNDS FOR DEVELOPMENT OF THE SC HOOL BUILDING AND ASSOCIATED INFRASTRUCTURE INTER ALIA INCLUDING PURCHASE OF CAP ITAL EQUIPMENT TO SUPPORT EDUCATIONAL ACTIVITIES. THE TRUSTEES HAD ALSO RESOLVED THAT THE FUNDS TO BE COLLECTED FOR DEVELOPMENT OF THE EDUCATIONAL INFRASTRUCTURE WOULD BE USED ONLY F OR DEFINED OBJECTS AND NOT FOR REVENUE PURPOSES AND TO GIVE EFFECT TO THE SAID RESOLUTION, THE DEVELOPMENT CONTRIBUTIONS WERE RECEIVED FROM THE STUDENTS AND WERE DIRECTLY TAKEN INTO THE BALANCE SHEET UNDER THE HEAD DEVELOPMENT FUND. WE THEREFORE FIND THAT THE ACCO UNTING ENTRIES PASSED BY THE ASSESSEE SOCIETY WERE IN CONFORMITY WITH THE VIEWS EXPRESSLY STATED BY THE TRUSTEES IN THE RESOLUTION PASSED AS FAR AS BACK IN JANUARY 2000. IT IS TRUE T HAT INSTEAD OF RECEIVING THE CONTRIBUTIONS TO DEVELOPMENT FUND IN ONE LUMP-SUM AND FROM THE PUBLI C AT LARGE, THE ASSESSEE SOCIETY RECEIVED THE CONTRIBUTIONS TOWARDS DEVELOPMENT FUND FROM THE STUDENTS. WE ALSO FIND MERIT 7 ITA NO. 2397-2398/KOL/2017 VIDYA BHARATI SOCIETY FOR EDUCATION & SCIENTIFIC ADVANCEMENT, AYS: 2010-11 & 2014-15 IN THE LD. ARS SUBMISSIONS THAT THE AUTHORITIES BE LOW WERE FACTUALLY WRONG IN STATING THAT THE CONTRIBUTION TO DEVELOPMENT FUND WAS COLLECTED BY THE ASSESSEE SOCIETY EVERY MONTH ALONG WITH THE TUITION FEES AND THIS FACT INFLUENCE D THE DECISION OF THE LOWER AUTHORITIES TO HOLD THAT THE PAYMENT BEING REGULAR MONTHLY FEATURE CONSTITUTED REVENUE RECEIPT. ON THE OTHER HAND, THE LD. AR FILED BEFORE US SAMPLE COPIE S OF THE RECEIPTS ISSUED FROM WHICH IT WAS EVIDENT THAT THE CONTRIBUTIONS TO DEVELOPMENT FUND WERE NOT COLLECTED ON MONTHLY BASIS ALONG WITH TUITION FEES FOR THE MONTH BUT THE STUDE NTS PAID CONTRIBUTIONS TO DEVELOPMENT FUND AT THEIR OWN VOLITION AT ANY TIME DURING THE Y EAR. WE THEREFORE FIND THAT THE BASIC PREMISE ON WHICH THE LOWER AUTHORITIES PROCEEDED I. E. THE DEVELOPMENT FUND CONTRIBUTIONS WERE COMPULSORILY COLLECTED BY THE ASSESSEE SOCIETY FROM EACH STUDENT ALONG WITH MONTHLY TUITION FEES ON MONTHLY BASIS BEING FACTUALLY WRONG , THE CONCLUSIONS DRAWN BASED ON ASSUMPTION OF WRONG FACTS IS THEREFORE UNSUSTAINABL E. 10. WE ALSO FIND MERIT IN THE LD. ARS ARGUMENT THA T MERELY BECAUSE THE CONTRIBUTIONS FROM STUDENTS WERE COLLECTED UNDER THE NOMENCLATURE OF DEVELOPMENT FEE CANNOT IPSO FACTO LEAD TO CONCLUSION THAT IT CANNOT BE CONSIDERED TO BE CORPUS CONTRIBUTION. IT IS TRUE THAT IN TERMS OF SECTION 12(1) READ WITH SECTION 11(1)(D) O F THE ACT, WHAT IS NOT INCLUDIBLE IN THE TOTAL INCOME OF A CHARITABLE INSTITUTION IS THE REC EIPT BY WAY OF CORPUS DONATION. HOWEVER THE ACT NOWHERE DEFINES THE EXPRESSION OR TERM COR PUS DONATION. HOWEVER THIS TERM HAS BEEN JUDICIALLY INTERPRETED BY THE COURTS. WE NOTE THAT THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF DIT VS SRI RAMAKRISHNA SEVA ASHRAMA [20 12] 18 TAXMANN.COM 37/205 TAXMAN 26/[2013] 357 ITR 731 WHILE CONSIDERING THE MEANING OF WORD CORPUS HELD THAT THE DONATION FOR SPECIFIC PURPOSE MUST BE IN CAPITAL FI ELD AND THEREFORE CANNOT BE APPLIED FOR CHARITABLE OR RELIGIOUS PURPOSE AND THEREFORE CANNO T BE DEEMED TO BE INCOME DERIVED FROM THE PROPERTY FOR THE PURPOSE OF SECTION 11 OF THE A CT. IN THE PRESENT ASSESSEE/SOCIETYS CASE, IT IS NOTED THAT IN THE RESOLUTION PASSED BY THE TR USTEES ON 03.01.2000 IT WAS SPECIFICALLY RESOLVED THAT THE COLLECTION TOWARDS DEVELOPMENT FU ND WOULD BE USED SOLELY FOR DEVELOPMENT OF SCHOOL BUILDING AND PURCHASE OF CAPI TAL EQUIPMENTS. THE SAID RESOLUTION PARTICULARLY PROHIBITED THE TRUSTEES FROM UTILIZING THE FUND SO COLLECTED FOR REVENUE PURPOSES. IN CONSONANCE WITH THE SAID RESOLUTION, THE DEVELOP MENT FEES COLLECTED WAS DIRECTLY CREDITED TO THE DEVELOPMENT FUND ACCOUNT APPEARING IN THE BALANCE SHEET. THESE MATERIALS 8 ITA NO. 2397-2398/KOL/2017 VIDYA BHARATI SOCIETY FOR EDUCATION & SCIENTIFIC ADVANCEMENT, AYS: 2010-11 & 2014-15 CONSIDERED CUMULATIVELY AND HARMONIOUSLY LEAD ONLY TO CONCLUSION THAT THE DEVELOPMENT FEES CONTRIBUTION RECEIVED FROM THE STUDENTS WERE I NTENDED TO PROVIDE CORPUS OR CAPITAL OF THE ASSESSEE SOCIETY WHICH WAS TO BE SOLELY USED FO R SPECIFIC CAPITAL PURPOSES AND THERE WAS EMBARGO ON THE ASSESSEE SOCIETY TO UTILIZE IT FOR R EVENUE PURPOSE. AS FAR AS THE REVENUES OBJECTION THAT THE DONOR DID NOT GIVE ANY EXPRESS W RITTEN DIRECTION FOR TREATING SUCH CONTRIBUTIONS TO BE FORMING PART OF CORPUS, WE NOTE THAT THERE IS NO SUCH REQUIREMENT PRESCRIBED IN LAW MANDATING A WRITTEN DIRECTION FRO M THE DONOR SO AS TO CONSTITUTE ANY VOLUNTARY PAYMENT TO FORM PART OF THE CORPUS. BY TH E CONDUCT OF THE PARTIES AS ALSO THE ENTRIES IN BOOKS OF ACCOUNTS, ONE CAN REASONABLY IN FER THE INTENTION OF THE DONOR AS WELL AS DONEE AND DETERMINE WHETHER OR NOT THE PARTIES HAD INTENDED TO USE THE DONATION AMOUNTS FOR CAPITAL PURPOSES OR ANY PURPOSE FOR WHICH THE TRUST IS ESTABLISHED. AS NOTED IN THE FOREGOING, THE ASSESSEE SOCIETY IN ITS RESOLUTION PASSED DATED 03.01.2000 HAD SPECIFICALLY RESOLVED TO RAISE THE FUNDS BY WAY OF DEVELOPMENT FEES TO GENER ATE CORPUS TO MEET THE CAPITAL REQUIREMENTS OF THE SOCIETY. FURTHER THE RECEIPTS W HICH THE ASSESSEE SOCIETY ISSUED EXPRESSLY ACKNOWLEDGED THAT THE AMOUNTS WERE RECEIVED FROM TH EM TOWARDS THE DEVELOPMENT FUND AND THIS WAS SUFFICIENT TO SUBSTANTIATE THE INTENTION O F THE PARTIES THAT THE AMOUNT SO CONTRIBUTED FORMED PART OF THE CORPUS. IN THIS REGARD, WE MAY G AINFULLY REFER TO THE DECISION OF THE HONBLE RAJASTHAN HIGH COURT IN CASE OF SUKHDEO CHA RITY ESTATE V. ITO [1991] 192 ITR 615 WHEREIN IT WAS HELD THAT WHEN THE AMOUNT WAS CO NTRIBUTED TO THE CORPUS OF THE INSTITUTION AND IS KEPT AS CAPITAL IN THE BOOKS, TH EN IT CANNOT BE TREATED AS INCOME OR REVENUE RECEIPT FOR THE PURPOSE OF SECTION 11 OF THE ACT. 11. IN THE ORDERS OF THE LOWER AUTHORITIES, MUCH EM PHASIS HAS BEEN PLACED ON THE FACT THAT THE DEVELOPMENT FEES WERE RECEIVED BY THE ASSESSEE SOCIETY ALONG WITH TUITION FEES AND THEREFORE THE NATURE OF RECEIPT WAS AKIN TO FEES CO LLECTED FOR RENDERING OF EDUCATIONAL SERVICES TO STUDENTS. ON THIS PREMISE, THE LOWER AU THORITIES TREATED THE COLLECTIONS MADE BY WAY OF DEVELOPMENT FEES TO BE REVENUE RECEIPT. WE H OWEVER NOTE THAT THE PREMISE ON WHICH THE LOWER AUTHORITIES PROCEEDED WERE FACTUALLY WRON G. WE FIND THAT THE DEVELOPMENT FEES WAS COLLECTED FROM THE STUDENTS ONCE IN A YEAR AND NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE LOWER AUTHORITIES TO ESTABLISH THAT THE AMOU NT WAS RECEIVED IN CONSIDERATION OF ANY SERVICE BEING RENDERED OR PROVIDED TO THE STUDENTS IN LIEU THEREOF. AS SUCH, WE DO NOT FIND 9 ITA NO. 2397-2398/KOL/2017 VIDYA BHARATI SOCIETY FOR EDUCATION & SCIENTIFIC ADVANCEMENT, AYS: 2010-11 & 2014-15 ANY MATERIAL BROUGHT ON RECORD BY THE LOWER AUTHORI TIES OR BEFORE US BY THE LD. DR TO SUBSTANTIATE THAT THE CONTRIBUTION TOWARDS DEVELOPM ENT FUND WAS NOT VOLUNTARY OR THAT IT WAS IN EXCHANGE FOR THE SERVICES PROVIDED BY THE ASSESS EE SOCIETY TO THE PAYERS. IN THIS REGARD WE MAY GAINFULLY REFER TO THE DECISION OF HON'BLE DELH I HIGH COURT IN CASE OF DIT (EXEMPTION) V. NATIONAL ASSOCIATION OF SOFTWARE & SERVICES CO'S . [2012] 345 ITR 362 WHEREIN THE HON'BLE HIGH COURT HAS HELD THAT ONETIME FEE PAID B Y MEMBERS WHO ARE AWARE THAT IT COULD BE SPENT BY ASSESSEE ONLY TOWARDS CAPITAL PURPOSES WAS IN THE NATURE OF CORPUS DONATION AND NOT TAXABLE AS INCOME. THE COURT ALSO TOOK NOTE OF THE FACT THAT APART FROM THE ONE TIME FEES, THE ASSOCIATION WAS COLLECTING FEES SEPARATELY FOR THE SERVICES RENDERED TO THE MEMBERS AND THEREFORE THE ONE-TIME FEE COULD NOT BE LINKED WITH THE SERVICES RENDERED TO THE MEMBERS. 12. FOR THE REASONS SET OUT ABOVE, WE THEREFORE HOL D THAT THE ASSESSEE SOCIETY HAD RECEIVED CONTRIBUTION TOWARDS DEVELOPMENT FUND FRO M THE STUDENTS, APART FROM THE TUITION FEES, WITH THE CLEAR UNDERSTANDING THAT IT SHALL BE SOLELY USED FOR CREATION OF CAPITAL ASSET NECESSARY FOR ACHIEVING THE EDUCATIONAL OBJECTS OF THE ASSESSEE SOCIETY AND THEREFORE FORMED PART OF THE CORPUS AND THEREFORE, NOT IN THE NATURE OF REVENUE RECEIPTS. THE AO IS ACCORDINGLY DIRECTED TO RE-COMPUTE THE INCOME OF TH E ASSESSEE SOCIETY AFTER EXCLUDING THE DEVELOPMENT FEES OF RS.19,39,000/- FROM THE PURVIEW OF SECTION 11 OF THE ACT. GROUND NOS. 1 TO 4 OF THE APPEAL THEREFORE STANDS ALLOWED. 13. NOW WE TAKE UP THE ASSESSEES APPEAL IN ITA NO. 2398/KOL/2017 FOR AY 2014-15. THE REVISED GROUNDS TAKEN IN THE APPEAL ARE AS UNDE R: 1. FOR THAT THE AO AND THE CIT(A) BOTH HAD ERRED I N TREATING THE RECEIPT OF DEVELOPMENT FEES FOR RS.34,12,500/- AS UNDISCLOSED INCOME OF TH E ASSESSEE AND FURTHER ERRED IN DISALLOWING BENEFIT U/S.11 OF THE INCOME TAX ACT, 1 961 UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. FOR THAT THE COLLECTION OF DEVELOPMENT FEES FROM THE STUDENTS WERE IN THE NATURE OF CAPITAL RECEIPT UNDER THE FACTS AND CIRCUMSTANCES OF THE CA SE WHICH WERE BASED ON THE SUBMISSIONS AND EVIDENCES FILED DURING ASSESSMENT PROCEEDINGS B EFORE THE AO AND THEREFORE, NOT INCLUDIBLE IN THE TOTAL INCOME OF THE ASSESSEE SOCI ETY. 3. FOR THAT UNDER THE IDENTICAL FACTS LD. CIT(A) IN THE CASE OF APPELLANT ITSELF FOR THE ASSESSMENT YEAR 2009-10 HAD HELD THAT THE DEVELOPME NT FUNDS WERE CAPITAL IN NATURE AND COULD NOT BE ADDED TO THE INCOME OF THE ASSESSEE SO CIETY AND THE CIT(A) ERRED IN NOT REFERRING TO THE SAME IN THE APPEAL ORDER- DECISION PORTION, ALTHOUGH NOTED IN APPEAL ORDER _. APPELLANT'S SUBMISSION PORTION. 10 ITA NO. 2397-2398/KOL/2017 VIDYA BHARATI SOCIETY FOR EDUCATION & SCIENTIFIC ADVANCEMENT, AYS: 2010-11 & 2014-15 4. FOR THAT THE AO AND CIT(A) BOTH HAD IGNORED ASSE SSEE SOCIETY'S RESOLUTION, ITS EXPLANATION AND COPY OF SAMPLE FEES BOOK UNDER THE FACTS AND CI RCUMSTANCES OF THE CASE. 5. FOR THAT LD. AO & LD. CIT(A) BOTH HAD ERRED IN N OT ALLOWING DEDUCTION FOR DEPRECIATION FOR RS.25,40,795/-. 6. FOR THAT LD. CIT(A) HAD IGNORED THE APPEAL ORDER OF THE JURISDICTIONAL CALCUTTA HIGH COURT ON IDENTICAL FACTS CIT VS. SILIGURI REGULATED MARKET COMMITTEE [2014] 51 TAXMANN.COM 455 AND FOLLOWED THE DECISION OF HON'BL E ITAT CHENNAI, DRAWING REFERENCE TO SECTION 32 OF THE ACT IN THE CASE OF CHARITABLE TRUSTS ARE HIGHLY MISPLACED. 7. FOR THAT YOUR APPELLANT ASSESSEE SOCIETY CRAVES LEAVE TO ADD OR ALTER AND MODIFY THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF APPEAL H EARING. 14. GROUND NOS. 1 TO 4 [SUPRA] RELATE TO THE ACTIO N OF THE LD. CIT(A) IN CONFIRMING THE ACTION OF THE AO IN TREATING THE RECEIPT OF DEVELOP MENT FEES FOR RS.34,12,500/- AS REVENUE RECEIPT AND ASSESSING IT BY WAY OF UNDISCLOSED INCO ME OF THE ASSESSEE SOCIETY. AFTER CONSIDERING THE RIVAL SUBMISSIONS, IT IS OBSERVED T HAT THE ISSUE INVOLVED IN THESE GROUNDS, ARE SIMILAR TO THE GROUND NOS 1 TO 4 OF THE ASSESSEES APPEAL IN A.Y. 2010-11. FOLLOWING OUR CONCLUSION DRAWN IN A.Y. 2010-11, WE ALLOW THESE GR OUNDS RAISED BY THE ASSESSEE. 15. GROUND NO. 5 & 6 OF THE APPEAL ARE AGAINST THE ACTION OF THE LD. CIT(A) IN DISALLOWING THE CLAIM OF DEPRECIATION OF RS.25,40,7 95/- BY WAY OF APPLICATION OF INCOME OF THE ASSESSEE SOCIETY. FACTS OF THE CASE ARE THAT, T HE ASSESSEE HAD DEDUCTED THE CURRENT YEARS DEPRECIATION ON FIXED ASSETS OF RS.25,40,795/- IN T HE COMPUTATION OF INCOME FOR ARRIVING AT THE SURPLUS OF THE ASSESSEE-SOCIETY FOR THE AY 2014 -15. IN THE ASSESSMENT ORDER, THE AO DENIED THE CLAIM OF DEPRECIATION WITHOUT GIVING ANY REASONS WHATSOEVER. ON APPEAL, THE LD. CIT(A) DISMISSED THE ASSESSEES CLAIM FOR DEDUCTION OF DEPRECIATION BY RELYING ON AN ORDER OF THE COORDINATE BENCH OF TRIBUNAL AT CHENNAI IN T HE CASE OF THE MUSIC ACADEMY MADRAS VS. DY. DIT(E) IN ITA NO.1098/MDS/2015 DATED 22.04. 2016. BEING AGGRIEVED, THE ASSESSEE IS NOW IN APPEAL BEFORE US. 16. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUG H THE FACTS AND CIRCUMSTANCES OF THE CASE. WE DO NOT COUNTENANCE THE ACTION OF LD. CIT(A ) ON THE SIMPLE GROUND THAT THE CLAIM MADE BY THE ASSESSEE FOR DEPRECIATION FOR THE YEAR UNDER CONSIDERATION IS NO LONGER RES- INTEGRA SINCE THE HON'BLE SUPREME COURT IN THE DECI SION IN CIT VS. RAJASTHAN & GUJARATI 11 ITA NO. 2397-2398/KOL/2017 VIDYA BHARATI SOCIETY FOR EDUCATION & SCIENTIFIC ADVANCEMENT, AYS: 2010-11 & 2014-15 CHARITABLE FOUNDATION (2018) 402 ITR 441 (SC) UPHEL D THE ACTION OF THE HON'BLE HIGH COURT, WHICH IN TURN UPHELD THE ACTION OF TRIBUNAL, ALLOWING THE DEPRECIATION CLAIMED BY THE ASSESSEE ON THE ASSETS ACQUIRED/EXPENDITURE MADE, W HICH HAS BEEN ALLOWED AS APPLICATION OF INCOME AS WELL. IN THE SAID JUDGMENT, THE HON'BLE S UPREME COURT HAD ALSO TAKEN SPECIFIC NOTE OF THE AMENDMENT BROUGHT IN BY THE LEGISLATURE IN SECTION 11(6) OF THE ACT BY FINANCE ACT (NO. 2) OF 2014 AND HELD THAT THE AMENDMENT IS PROSPECTIVE AND IS THEREFORE EFFECTIVE FROM AY 2015-16 AND ONWARDS. THE RELEVANT FINDINGS OF THE HONBLE SUPREME COURT ARE AS UNDER: 'THESE ARE THE PETITIONS AND APPEALS FILED BY THE I NCOME TAX DEPARTMENT AGAINST THE ORDERS PASSED BY VARIOUS HIGH COURTS GRANTING BENEFIT OF D EPRECIATION ON THE ASSETS ACQUIRED BY THE RESPONDENTS-ASSESSEES. IT IS A MATTER OF RECORD THA T ALL THE ASSESSEES ARE CHARITABLE INSTITUTIONS REGISTERED UNDER SECTION 12A OF THE IN COME TAX ACT (HEREINAFTER REFERRED TO AS 'ACT'). FOR THIS REASON, IN THE PREVIOUS YEAR TO TH E YEAR WITH WHICH WE ARE CONCERNED AND IN WHICH YEAR THE DEPRECIATION WAS CLAIMED, THE ENTIRE EXPENDITURE INCURRED FOR ACQUISITION OF CAPITAL ASSETS WAS TREATED AS APPLICATION OF INCOME FOR CHARITABLE PURUPOSES UNDER SECTION 11(1)(A) OF THE ACT. THE VIEW TAKEN BY THE ASSESSIN G OFFICER IN DISALLOWING THE DEPRECIATION WHICH WAS CLAIMED UNDER SECTION 32 OF THE ACT WAS T HAT ONCE THE CAPITAL EXPENDITURE IS TREATED AS APPLICATION OF INCOME FOR CHARITABLE PUR POSES, THE ASSESSEES HAD VIRTUALLY ENJOYED A 100 PER CENT WRITE OFF OF THE COST OF ASSETS AND, THEREFORE, THE GRANT OF DEPRECIATION WOULD AMOUNT TO GIVING DOUBLE BENEFIT TO THE ASSESSEE. TH OUGH IT APPEARS THAT IN MOST OF THESE CASES, THE CIT (APPEALS) HAD AFFIRMED THE VIEW, BUT THE ITAT REVERSED THE SAME AND THE HIGH COURTS HAVE ACCEPTED THE DECISION OF THE ITAT THERE BY DISMISSING THE APPEALS OF THE INCOME TAX DEPARTMENT. FROM THE JUDGMENTS OF THE HIGH COUR TS, IT CAN BE DISCERNED THAT THE HIGH COURTS HAVE PRIMARILY FOLLOWED THE JUDGMENT OF THE BOMBAY HIGH COURT IN 'COMMISSIONER OF INCOME TAX V. INSTITUTE OF BANKING PERSONNEL SELECT ION (IBPS)' [(2003) 131 TAXMAN 386 (BOMBAY)]. IN THE SAID JUDGMENT, THE CONTENTION OF THE DEPARTMENT PREDICATED ON DOUBLE BENEFIT WAS TURNED DOWN IN THE FOLLOWING MANNER: '3. AS STATED ABOVE, THE FIRST QUESTION WHICH REQUI RES CONSIDERATION BY THIS COURT IS: WHETHER DEPRECIATION WAS ALLOWABLE ON THE ASSETS, THE COST OF WHICH HAS BEEN FULLY ALLOWED AS APPLICATION OF INCOME UNDER SECTION 11 IN THE PAST YEARS? IN THE CASE OF CIT V. MUNISUVRAT JAIN 1994 TAX LAW REPORTER, 1084 THE FACTS WERE AS FOLLOWS. THE ASSESSEE WAS A CHARITABLE TRUST. IT WAS REGISTERED AS A PUBLIC CHARITABLE TRU ST. IT WAS ALSO REGISTERED WITH THE COMMISSIONER OF INCOME TAX, PUNE. THE ASSESSEE DERI VED INCOME FROM THE TEMPLE PROPERTY WHICH WAS A TRUST PROPERTY. DURING THE COURSE OF AS SESSMENT PROCEEDINGS FOR ASSESSMENT YEARS 1977-78, 1978-79 AND 1979-80, THE ASSESSEE CL AIMED DEPRECIATION ON THE VALUE OF THE BUILDING @2% AND THEY ALSO CLAIMED DEPRECIATION ON FURNITURE @ 5%. THE QUESTION WHICH AROSE BEFORE THE COURT FOR DETERMINATION WAS : WHET HER DEPRECIATION COULD BE DENIED TO THE ASSESSEE, AS EXPENDITURE ON ACQUISITION OF THE ASSE TS HAD BEEN TREATED AS APPLICATION OF INCOME IN THE YEAR OF ACQUISITION? IT WAS HELD BY T HE BOMBAY HIGH COURT THAT SECTION 11 OF THE INCOME TAX ACT MAKES PROVISION IN RESPECT OF CO MPUTATION OF INCOME OF THE TRUST FROM THE PROPERTY HELD FOR CHARITABLE OR RELIGIOUS PURPO SES AND IT ALSO PROVIDES FOR APPLICATION AND ACCUMULATION OF INCOME. ON THE OTHER HAND, SECT ION 28 OF THE INCOME TAX ACT DEALS WITH CHARGEABILITY OF INCOME FROM PROFITS AND GAINS OF B USINESS AND SECTION 29 PROVIDES THAT INCOME FROM PROFITS AND GAINS OF BUSINESS AHLL BE C OMPUTED IN ACCORDANCE WITH SECTION 30 TO SECTION 43C. THAT, SECTION 32(1) OF THE ACT P ROVIDES FOR DEPRECIATION IN RESPECT OF 12 ITA NO. 2397-2398/KOL/2017 VIDYA BHARATI SOCIETY FOR EDUCATION & SCIENTIFIC ADVANCEMENT, AYS: 2010-11 & 2014-15 BUILDING, PLANT AND MACHINERY OWNED BY THE ASSESSEE AND USED FOR BUSINESS PURPOSES. IT FURTHER PROVIDES FOR DEDUCTION SUBJECT TO SECTION 3 4. IN THAT MATTER ALSO, A SIMILAR ARGUMENT, AS IN THE PRESENT CASE, WAS ADVANCED ON BEHALF OF T HE REVENUE, NAMELY, THAT DEPRECIATION CAN BE ALLOWED AS DEDUCTION ONLY UNDER SECTION 32 OF TH E INCOME TAX ACT AND NOT UNDER GENERAL PRINCIPLES. THE COURT REJECTED THIS ARGUMENT. IT WA S HELD THAT NORMAL DEPRECIATION CAN BE CONSIDERED AS A LEGITIMATE DEDUCTION IN COMPUTING T HE REAL INCOME OF THE ASSESSEE ON GENERAL PRINCIPLES OR UNDER SECTION 11(1)(A) OF THE INCOME TAX ACT THE COURT REJECTED THE ARGUMENT ON BEHALF OF THE REVENUE THAT SECTION 32 O F THE INCOME TAX ACT WAS THE ONLY SECTION GRANTING BENEFIT OF DEDUCTION ON ACCOUNT OF DEPRECI ATION. IT WAS HELD THAT INCOME OF A CHARITABLE TRUST DERIVED FORM BUILDING, PLANT AND M ACHINERY AND FURNITURE WAS LIABLE TO BE COMPUTED IN NORMAL COMMERCIAL MANNER ALTHOUGH THE T RUST MAY NOT BE CARRYING ON ANY BUSINESS AND THE ASSETS IN RESPECT WHEREOF DEPRECIA TION IS CLAIMED MAY NOT BE BUSINESS ASSETS. IN ALL SUCH CASES, SECTION 32 OF THE INCOME TAX ACT PROVIDING FOR DEPRECIATION FOR COMPUTATION OF INCOME DERIVED FROM BUSINESS OR PROF ESSION IS NOT APPLICABLE. HOWEVER, THE INCOME OF THE TRUST IS REQUIRED TO BE COMPUTED UNDE R SECTION 11 ON COMMERCIAL PRINCIPLES AFTER PROVIDING FOR ALLOWANCE FOR NORMAL DEPRECIATI ON AND DEDUCTION THEREOF FROM GROSS INCOME OF THE TRUST. IN VIEW OF THE AFORESTATED JUD GMENT OF THE BOMBAY HIGH CURT, WE ANSWER QUESTION NO. 1 IN THE AFFIRMATIVE I.E., IN F AVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT. 4. QUESTION NO. 2 HEREIN IS IDENTICAL TO THE QUESTI ON WHICH WAS RAISED BEFORE THE BOMBAY HIGH COURT IN THE CASE OF DIRECTOR OF INCOME-TAX (E XEMPTION) V. FRAMJEE CAWASJEE INSTITUTE [1993] 109 CTR 463. IN THAT CASE, THE FAC TS WERE AS FOLLOWS: THE ASSESSEE WAS THE TRUST. IT DERIVED ITS INCOME FROM DEPRECIABLE ASSET S. THE ASSESSEE TOOK INTO ACCOUNT DEPRECIATION ON THOSE ASSETS IN COMPUTING THE INCOM E OF THE TRUST. THE ITO HELD THAT DEPRECIATION COULD NOT BE TAKEN INTO ACCOUNT BECAUS E, FULL CAPITAL EXPENDITURE HAD BEEN ALLOWED IN THE YEAR OF ACQUISITION OF THE ASSETS. T HE ASSESSEE WENT IN APPEAL BEFORE THE ASSISTANT APPELLATE COMMISSIONER. THE APPEAL WAS RE JECTED. THE TRIBUNAL, HOWEVER, TOOK THE VIEW THAT WHEN THE ITO STATED THAT FULL EXPENDI TURE HAD BEEN ALLOWED IN THE YEAR OF ACQUISITION OF THE ASSETS, WHAT HE REALLY MEANT WAS THAT THE AMOUNT SPENT ON ACQUIRING THOSE ASSETS HAD BEEN TREATED AS 'APPLICATION OF INCOME' OF THE TRUST IN THE YEAR IN WHICH THE INCOME WAS SPENT IN ACQUIRING THOSE ASSETS. THIS DI D NOT MEAN THAT IN COMPUTING INCOME FROM THOSE ASSETS IN SUBSEQUENT YEARS, DEPRECIATION IN RESPECT OF THOSE ASSETS CANNOT BE TAKEN INTO ACCOUNT. THIS VIEW OF THE TRIBUNAL HAS BEEN CO NFIRMED BY THE BOMBAY HIGH COURT IN THE ABOVE JUDGMENT. HENCE, QUESTION NO. 2 IS COVERED BY THE DECISION OF THE BOMBAY HIGH COURT IN THE ABOVE JUDGMENT. CONSEQUENTLY, QUESTION NO. 2 IS ANSWERED IN THE AFFIRMATIVE I.E., IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEP ARTMENT.' 2. AFTER HEARING LEARNED COUNSEL FOR THE PARTIES, W E ARE OF THE OPINION THAT THE AFORESAID VIEW TAKEN BY THE BOMBAY HIGH COURT CORRECTLY STATES THE PRINCIPLES OF LAW AND THERE IS NO NEED TO INTERFERE WITH THE SAME. 3. IT MAY BE MENTIONED THAT MOST OF THE HIGH COURTS HAVE TAKEN THE AFORESAID VIEW WITH ONLY EXCEPTION THERETO BY THE HIGH COURT OF KERALA WHICH HAS TAKEN A CONTRARY VIEW IN 'LISSIE MEDICAL INSTITUTIONS V. COMMISSIONER OF INCOME TAX' . 4. IT MAY ALSO BE MENTIONED 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- 2016. THE DELHI HIGH COURT HAS TAKEN THE VIEW AND RIGHTLY SO, THAT THE SAID AMENDMENT IS PROSPECTIVE IN NATURE. 5. IT ALSO FOLLOWS THAT ONCE ASSESSEE IS ALLOWED DE PRECIATION, HE SHALL BE ENTITLED TO CARRY FORWARD THE DEPRECIATION AS WELL. 13 ITA NO. 2397-2398/KOL/2017 VIDYA BHARATI SOCIETY FOR EDUCATION & SCIENTIFIC ADVANCEMENT, AYS: 2010-11 & 2014-15 6. FOR THE AFORESAID REASONS, WE AFFIRM THE VIEW TA KEN BY THE HIGH COURTS IN THESE CASES AND DISMISS THESE MATTERS.' 17. RESPECTFULLY FOLLOWING THE ABOVE JUDGMENT OF TH E HONBLE APEX COURT (SUPRA), WE HOLD THAT THE RATIO DECIDENDI OF THE DECISION OF TH E CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF THE MUSIC ACADEMY MADRAS (SUPRA) RELIED UPO N BY THE LD. CIT(A) IS NO LONGER GOOD LAW AND THEREFORE THE DECISION OF THE LD. CIT( A) ON THIS ISSUE IS SET ASIDE AND WE DIRECT THE AO TO ALLOW THE DEPRECIATION AS CLAIMED BY THE ASSESSEE SOCIETY. 18. BEFORE PARTING, WE WOULD LIKE TO OBSERVE THAT T HOUGH THE LD. CIT(A) WAS AWARE THAT THE HON'BLE JURISDICTIONAL HIGH COURT AT CALCUTTA H AS PASSED AN ORDER IN A SIMILAR CASE CIT VS. SILIGURI REGULATED MARKET COMMITTEE REPORTED IN (2014) 366 ITR 51 (CAL) AND ALLOWED THE CLAIM OF DEPRECIATION AND THOUGH THE RATIO OF T HE JUDGMENT OF JURISDICTIONAL HIGH COURT IS BINDING ON THE LD. CIT(A), HE HAS PREFERRED TO A PPLY THE RATIO OF THE TRIBUNAL AT CHENNAI, WHICH IS SITUATED OUTSIDE THE TERRITORIAL JURISDICT ION OF STATE OF WEST BENGAL. IN OUR CONSIDERED VIEW, SUCH ACTION OF THE LD. CIT(A) IS N OT IN CONSONANCE WITH THE JUDICIAL DISCIPLINE AND CANNOT BE ACCEPTED AND WE EXPECT THE LOWER AUTHORITIES TO BE CLEAR IN MIND THAT THE LAW LAID BY THE HON'BLE JURISDICTIONAL HIG H COURT IS BINDING ON US AND LD. CIT(A) AND AO AND OTHER AUTHORITIES SITUATED IN STATE OF W EST BENGAL. WE HOPE AND EXPECT THE FIRST APPELLATE AUTHORITY TO FOLLOW THE RATIO-DECIDENDI O F THE HON'BLE JURISDICTIONAL HIGH COURT WITHOUT FAIL IN FUTURE. GROUND NOS. 5 & 6 THEREFORE STANDS ALLOWED. 19. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSE E ARE ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 10TH JAN UARY, 2020 SD/- SD/- (P.M. JAGTAP) (ABY. T. VARKEY) VICE-PRESIDENT JUDICIAL MEMBER DATED : 10TH JANUARY, 2020 JD. (SR. P.S.) 14 ITA NO. 2397-2398/KOL/2017 VIDYA BHARATI SOCIETY FOR EDUCATION & SCIENTIFIC ADVANCEMENT, AYS: 2010-11 & 2014-15 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT M/S. VIDYA BHARATI SOCIETY FOR EDUCA TION & SCIENTIFIC ADVANCEMENT, 44/2, DIAMOND HARBOUR ROAD, KOLKATA-70 0 027. 2 RESPONDENT ACIT (EXEMPTION), CIRCLE-1(1), KOLKA TA. 3. THE CIT(A) - 25, KOLKATA. (THROUGH E-MAIL) 4. 5. CIT KOLKATA DR, ITAT, KOLKATA. (THROUGH E-MAIL) / TRUE COPY, BY ORDER, ASSISTANT REGISTRAR ITAT, KOLKATA