The Dy. CIT, Gandhinagar Circle, Gandhinagar V. Gujarat National Law University, Ahmedabad

ITA 2541/AHD/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4997 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 31-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LALIT P JAIN
• Keywords: Depreciation; Capital expenditure
• Section: 11; 15; 143(3); 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH BEFORE: SHR I RAJPAL YADAV , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER THE DCIT (EXEMPTIONS), CIRCLE - 1, AHMEDABAD (APPELLANT) VS GUJARAT NATIONAL LAW UNIVERSITY, ATTIKA AVEN U E, KNOWLEDGE CORIDOR, KOBA, AHMEDABAD, PAN: AAATG6633R (RESPONDENT) REVENUE BY : S H RI LALIT P. JAIN , SR. D . R . ASSESSEE BY: NONE DATE OF HEARING : 21 - 01 - 2 019 DATE OF PRONOUNCEMENT : 31 - 01 - 2 019 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THIS ASSESSEE S AP PEAL FOR A.Y. 2011 - 12 , ARI SES FROM ORDER OF THE CIT(A) , GANDHINAGAR, AHMEDABAD DATED 20 - 04 - 2 015 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THE BRIEF FACT OF THE CASE IS THAT ASSESSEE HAS FILED RETURN OF INCOM E ON 30 TH SEP, 2011 DECLARING TOTAL INCOME OF RS. NIL. SUBSEQUENTLY , THE CASE WAS I T A NO . 2541 / A HD/20 15 A SS ESSMENT YEAR 2011 - 12 I.T.A NO. 2541 /AHD/20 15 A.Y. 2011 - 12 PAGE NO D CIT VS. GUJARAT NATIONAL LAW UNIVERSITY 2 SELECTED UNDER SCRUTINY B Y ISSUING OF NOTICE U/S. 143(2) OF THE ACT ON 10 TH SEP 2012. THE ASSESSEE HAS BEEN GRANTED REGISTRATION U/S. 1 2 AA W.E.F. 1 ST APRIL, 2004. THE FURT HER FACT S OF THE CASE ARE DISCUSSED UNDER THE TWO GROUNDS OF APPEAL AS UNDER : - GROUND NO . 1 (INTEREST INCOME OF RS. 1 , 85 , 56 , 034/ - ) 3. DURING THE COURSE OF ASSESSMENT, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS CLAIMED EXEMPT ION U/S. 11 OF THE AC T. THE ASSESSEE HAD RECEIVED GRANT OF DEVELOPMENT OF KOBA CAMPUS AND UNUTILIZED AMOUNT WAS KEPT WITH GSFS IN THE FORM OF FIXED DEPOSIT ON WHICH THE ASSESSEE HAS RECEIVED INTEREST. THE ASSESSEE RECEIVED INTEREST INCOME FROM SUCH INVESTMENT TO THE AMOUNT OF RS. 1 , 59 , 15 , 882/ - AND IT HAD ALSO RECEIVED INTEREST FROM SB ACCOUNT AND OTHER FIXED DEPOSIT TO THE AMOUNT OF RS. 2 , 28 , 577/ - AND RS. 24 , 11 , 575/ - RESPECTIVELY. THE ASSESSEE HA D NOT SHOWN THE TOTAL INTEREST INCOME OF RS. 1 , 85 , 56 . 034/ - AS INCOME BUT THE SA ME WAS SHOWN UNDER THE UNIVERSITY GENERAL A CCOUNT. THE ASSESS ING OFFICER HAS T REA T ED THE WHOLE AMOUNT OF INTEREST INCOME OF RS. 1 , 85 , 56 , 034/ - AS I NCOME OF THE ASSESSEE AND ADDED TO THE TOTAL INCOME OF THE ASS E SSEE. 4. AGGRIEVED ASSESSEE HAS FILED APPEAL BEFORE T H E LD. CIT(A). THE LD. CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESSEE. THE RELEVANT PART OF THE DECISION OF LD. CIT(A) IS REPRODUCED AS UNDER: - 4.1 THE APPELLANT'S MAIN CONTENTION AS PER THESE GROUNDS IS THAT THE INTEREST INCOME OF RS.1,85,56,03 4/ - SHOULD NOT BE TAXED AS INCOME OF THE F ASSESSEE AS THE SAME WAS ACCRUED ON GOVERNMENT GRANT RECEIVED FOR SPECIFIC PURPOSE I.E. FOR CAMPUS PROJECT. THE APPELLANT CONTENDED THAT THE INTEREST RECEIVED ON THE SAID GRANT IS NOT INCOME OF THE APPELLANT AT AL L BY OVERRIDING TITLE. APPELLANT HAS ACCORDINGLY CLAIMED EXEMPTION UNDER SECTION 11(L)(D) OF THE ACT FOR THE SAID INTEREST INCOME IN ITS RETURN OF INCOME. I.T.A NO. 2541 /AHD/20 15 A.Y. 2011 - 12 PAGE NO D CIT VS. GUJARAT NATIONAL LAW UNIVERSITY 3 ON THE OTHER HAND, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO CONTENDED THAT THE INTEREST IN COME OF RS.1,85,56,034/ - ON THIS SPECIFIC GRANT IS INCOME DERIVED FROM THE PROPERTY HELD UNDER THE TRUST AND NOT A CORPUS DONATION AND ACCORDINGLY, HE HAS ADDED SUCH INTEREST INCOME IN THE INCOME AND EXPENDITURE ACCOUNT OF THE APPELLANT AND ULTIMATELY ASSE SSED EXCESS OF INCOME OVER EXPENDITURE OF RS.85,96,648/ - IN THE HANDS OF THE APPELLANT. DURING THE COURSE OF APPELLATE PROCEEDINGS, APPELLANT HAS REITERATED ITS ARGUMENTS AND STATED THAT THE INTEREST UNDER CONSIDERATION IS SPENT ONLY ON THE CAMPUS PROJECT F OR WHICH THE GRANT IS RECEIVED AND THEREFORE, THE SAID INTEREST INCOME CANNOT BE CONSIDERED AS INCOME OF THE APPELLANT, AR ALTERNATIVELY SUBMITTED THAT THE APPELLANT UNIVERSITY CAN BE CONSIDERED AS SUBSTANTIALLY FINANCED BY THE GOVERNMENT WITHIN THE MEANIN G OF SECTION 10(23)(C)(IIIAB) R.W. RULE 2BBB AS ISSUED BY CBDT AS APPLICABLE W.E.F 1/04/2015. ON CAREFUL CONSIDERATION OF THE ARGUMENTS OF THE APPELLANT AND OBSERVATIONS OF THE AO, IT IS OBSERVED THAT THAT APPELLANT HAS RECEIVED GOVERNMENT GRANT FOR ITS CA MPUS PROJECT WHICH IS SHOWN AS CORPUS DONATION BY THE APPELLANT AND ACCEPTED BY THE AO IN THE ASSESSMENT PROCEEDINGS. THEREFORE, THE ONLY DISPUTE IS WITH RESPECT TO TAXABILITY OF INTEREST INCOME ON SUCH GRANT AMOUNTING TO RS.1,85,56,034/ - . WHEN IT IS NOT D ISPUTED THAT THE AMOUNT OF GRANT IS FOR SPECIFIC PURPOSE AND BY OVERRIDING TITLE THE SAME CANNOT BE CONSIDERED INCOME OF THE APPELLANT, THE INTEREST ON THE SAID GRANT WHICH IS REQUIRED TO BE SPENT FOR THE SPECIFIC PURPOSE FOR WHICH THE SAID GRANT IS RECEIV ED, THE SAID INTEREST ALSO CANNOT BE CONSIDERED AS THE INCOME OF THE APPELLANT. IT IS PERTINENT TO NOTE THAT THE SIMILAR ISSUE HAD COME UP FOR CONSIDERATION BEFORE THE HON'BLE I.T.A.T., AHMEDABAD, IN THE CASE OF GUJARAT STATE POLICE HOUSING CORP. LTD. VS. AC1T, GNR CIRCLE, GANDHINAGAR, ITA NO.2549/AHD/2013 WHEREIN HON'BLE ITAT, RESPECTFULLY FOLFOWING THE DECISIONS OF THE HON'BLE GUJARAT HIGH COURT DELIVERED IN THE CASE OF GUJARAT MUNICIPAL FINANCE BOARD V. DEPUTY COMMISSIONER OF INCOME - TAX [1996] 221ITR 317 (GUI) AND CIT V/S GUJARAT STATE DISASTER MANAGEMENT AUTHORITY (TAX APPEAL NO, 80 OF 2010) [GUJARAT HIGH COURT], DATED 18TH JULY, 2011 [AGAINST DECISION OF HON'BLE I.T.A.T. AHMEDABAD ITA NO. 949/AHD/2009 FOR A.Y, 2006 - 07] HAS, INTER ALIA, HELD THAT INTERE ST RECEIVED ON GRANT RECEIVED FOR SPECIFIC PURPOSE SHOULD NOT BE TAXED IN THE HANDS OF THE APPELLANT. THE SIMILAR VIEW HAS BEEN TAKEN BY JURISDICTIONAL HIGH COURT IN THE FOLLOWING CASES: (I) CIT V/S GUJARAT SAFAI KAMDAR VIKAS NIGAM [GUJARAT HIGH COURT] JUD GMENT DATED 2 ND MAY 2011 - TAX APPEAL NO. 1934 OF 2009; (II) CIT V/S GUJARAT COUNCIL OF SCIENCE CITY TAX APPEAL NO. 1050 OF 2009 - [GUJARAT HIGH COURT'S JUDGMENT 13 DECEMBER, 2010]. (III) CIT V/S GUJARAT SAFAI KAMDAR VIKAS NIGAM (SC). THE SLP FILED BY THE DEPARTMENT AGAINST THE ORDER OF HON'BLE GUJARAT HIGH COURT DATED 2 ND MAY 2011 - TAX APPEAL NO. 1934 OF 2009 HAS BEEN REJECTED BY THE HON'BLE SUPREME COURT THROUGH ITS ORDER DATED 2 ND JANUARY, 2012. THE RATIO DECIDENDI OF THE ABOVE CASES CAN BE APPLIED IN TH E CASE OF THE APPELLANT AS GRANT UNDER CONSIDERATION IS RECEIVED WITH OVERRIDING TITLE AND FOR SPECIFIC PURPOSE TO CONSTRUCT THE CAMPUS OF THE APPELLANT AND THE INTEREST ON THE SAID GRANT IS ALSO SPENT OR TO BE SPENT FOR THE SAID SPECIFIC PURPOSE ONLY. IN VIEW OF THE SAID FACTUAL AND LEGAL POSITION IT IS HELD THAT THE INTEREST ON SPECIFIC GRANTS EXEMPT UNDER SECTION 11(1)(D) OF THE ACT AND, THEREFORE, THE ADDITION MADE BY ASSESSING OFFICER FOR INTEREST INCOME OF RS. 1,85,56,034/ - DELETED. AS ADDITION MAD E BY AO ARE DELETED, APPELLANT'S ALTERNATE ARGUMENT REGARDING EXEMPTION UNDER SECTION 10(23)(C) REQUIRES NO ADJUDICATION. THESE GROUNDS ARE ALLOWED. GROUND NO. 2 ( DISALLOWANCE OF THE CLAIM OF DEPRECIATION OF RS. 29 , 85 , 467/ - . ) 5. DURING THE COURSE O F ASSE SSMENT, THE ASSESSING OFFICER NOTICED T HAT ASSESSEE HAS CLAIMED DEPRECIATION OF RS. 29 , 85 , 467/ - IN THE RETURN OF INCOME I.T.A NO. 2541 /AHD/20 15 A.Y. 2011 - 12 PAGE NO D CIT VS. GUJARAT NATIONAL LAW UNIVERSITY 4 FOR THE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER WAS O F THE VIEW THAT SIN CE THE ENTIRE CAPITA L EXPEN D I TUR E HAS BEEN ALLOWED U/S . 11 OF THE ACT, THEREFORE, NO SUCH DEPRECIATION CAN BE SEPARATELY CLAIMED. THEREFORE , H E HAS DISALLOWE D SUCH DEPRECIATION AND ADDED T O THE TOTAL INCOME OF THE ASSESSEE. 6. AGGRIEVED ASSESSEE HAS FILED APPEAL BEFORE THE LD. CIT(A). T HE LD. CIT(A) HAS A LLOWED THE APPEAL OF T H E A SSESSEE. RELEVANT PART OF THE DECISION O F THE CIT(A) IS REPRODUCE AS UNDER: - 5.3 I HAVE CAREFULLY CONSIDERED THE MATERIAL AVAILABLE ON RECORDS, ARGUMENTS OF THE AR SUBMITTED THROUGH WRITTEN SUBMISSION. WHEN APPELLANT HAS NOT CLA IMED C AP ITA L EXPENDITURE DISALLOWANCE OF DEPRECIATION IS UNCALLED FOR AND ACCORDINGLY DELETED. MOREOVER, IT IS OBSERVED BY HON'BLE GUJARAT HIGH COURT IN THE CASE COMMISSIONER OF INCOME - TAX V. SHETH MANILAL RANCHHODDAS VISHRAM BHAVAN TRUST [1992] 198 ITR 59 8 (GUJARAT) THAT DEPRECIATION IS ALLOWABLE EVEN IF CAPITAL EXPENDITURE IS CLAIMED. IN ANY CASE THE DISALLOWANCE MADE BY AO FOR DEPRECIATION IS UNCALLED - FOR AND THEREFORE HEREBY DIRECTED TO BE DELETED. RELEVANT GROUND OF APPEAL IS ALLOWED. 7. WE HAVE HEAR D THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD CAREFULLY. IT IS NOTICED THAT GUJARAT NATIONAL LAW UNIVERSITY (GNLU ) IS AN EDUCATIONAL I NSTITUTE AND THERE WAS NO PROFIT MOTIVE FROM THE ACTIVITIES CARRIED OUT BY THE GNLU. THE ASSESSEE HAS BEEN GRANTED REGISTRATION U/S. 12AA OF THE ACT AND IT HAS BEEN CLAIMING EXEMPTION U/S. 11 OF THE I.T. ACT, 1961. THE ASSESSEE RECEIVES GRANT FROM THE GOVERNMENT FOR CARRYING OUT ITS ACTIVITIES FOR SPECIFIC PURPOSES. IT IS OBSERVED THAT INTEREST WAS ALSO UTILI ZED FOR THE PURPOSE OF GRANT GIVEN , THEREFORE , WE OBSERVE THAT SUCH INTEREST IS TO BE CONSIDERED A PART OF THE GRANT TO BE TREATED AS APPLICATION OF THE INCO ME FOR THE PURPOSE OF SECTION 11(1)(D ) OF THE AC T. AFTER CONSIDERING THE AFORESAID FACTS AND FINDI NGS OF THE LD. CIT(A) AND THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. GUJARA T STATE DISASTER MANAGEMENT AUTHORITY (TAX APPEAL NO. 80 OF 2010 DATED 18 TH JULY, 2011 , I.T.A NO. 2541 /AHD/20 15 A.Y. 2011 - 12 PAGE NO D CIT VS. GUJARAT NATIONAL LAW UNIVERSITY 5 W E DO NOT FIND ANY MERIT IN THE APPEAL OF THE REVENUE. AC CORDINGLY, THE APPEAL OF THE REVENUE IS DISMISSED. REGARDING THE CLAIM OF DEPRECIATION, WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF THE LD. CIT(A) AFTER REFERRING THE JUDGMENT OF HON BL E JURISDICTIONAL HIGH COURT IN THE C ASE OF CIT VS. SHETH MA NIL AL RA NCHHODDAS VISHRAM BHA V AN TRUST (1992) 198 ITR 598 (GUJARAT) WHEREIN IT IS HELD THAT THE DEPRECIATION IS ALLOWABLE, EVEN IF CAPITAL EXPENDITURE IS INCURRED. THEREFORE, THE APPEAL OF THE REVENUE IS DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 31 - 01 - 201 9 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 31 /01/2019 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,