The ACIT, 1(1), V. M/s Globus Institute Of Engg. Technology,

ITA 26/IND/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 9485 (ITAT-INDORE)
• Duration Of Justice: 3 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 05-01-2010
• Assessment Year: misc
• Appeal Filed On: 05-01-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: APARNA KARAN
• Assessee Lawyers: H P VERMA
• Keywords: Business income; Depreciation; Benefit of exemption
• Section: 12; 11

Judgement Text

PAGE 1 OF 17 I.T.A.NO. 26 & 448/IND/2007 GLOBUS INSTITUTE ENGG. & TECHNOLOGY, BHOPAL IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI V.K. GUPTA, ACCOUNTANT MEMBER PAN NO. : N.A. I.T.A.NO.26 & 448/IND/2007 A.Y. : 2003-04 & 2004-05 ASSISTANT COMMISSIONER OF INCOME-TAX, M/S.GLOBUS INSTITUTE OF ENGG. & TECHNOLOGY, 1(1), VS E-3/178, ARERA COLONY, BHOPAL BHOPAL. APPELLANT RESPONDENT APPELLANT BY : SMT.APARNA KARAN, SR. DR RESPONDENT BY : SHRI H.P.VERMA, ADV. & SHRI ASHISH GOYAL, C.A. DATE OF HEARING : 05/01/2010 & 08/01/2010 O R D E R PER V.K. GUPTA, A.M. THESE APPEALS BELONG TO THE SAME ASSESSEE AND INVOL VE COMMON ISSUES, THOUGH THESE WERE HEARD ON DIFFERENT DATES, HENCE, THESE ARE BEING DISPOSED OF THROUGH THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. WE HAVE HEARD BOTH THE PARTIES AND HAVE ALSO PERUSE D THE MATERIAL AVAILABLE ON RECORD. 3. FIRST, WE SHALL TAKE UP REVENUES APPEAL IN I.T.A.N O. 26/IND/2007. PAGE 2 OF 17 I.T.A.NO. 26 & 448/IND/2007 GLOBUS INSTITUTE ENGG. & TECHNOLOGY, BHOPAL 4. GROUND NO.1 READS AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE ASSESSEE WAS E NTITLED TO BENEFIT OF SECTION 11 & 12 OF THE INCOME-TAX ACT, 1 961, AND HAD NOT VIOLATED THE PROVISIONS OF SECTION 13(20 OF THE INCOME-TAX ACT, 1961, WHILE MAKING PAYMENT TO THE SPECIFIED PERSONS FOR THE SERVICES RENDERED BY THEM TO THE SOCIETY AND ALLOWING RELIEF OF RS. 26,20,415/- WHIC H WAS RIGHTLY DENIED AND ADDITION WAS ACCORDINGLY MADE BY THE ASSESSING OFFICER. 5. THE FACTS, IN BRIEF, ARE THAT THE A.O. TREATED T HE ASSESSEES INCOME CHARGEABLE TO TAX FOR THE REASON THAT THE AS SESSEE VIOLATED PROVISIONS OF SECTION 13(2) OF THE INCOME-TAX ACT, 1961. 6. THIS GROUND IS DEPENDENT UPON THE OUT-COME OF DISAL LOWANCES MADE BY THE ASSESSING OFFICER U/S 13(2), HENCE, DEC ISION ON THIS GROUND SHALL BE GIVEN THEREAFTER. 7. GROUND NO.2 READS AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 4, 65,670/- ON ACCOUNT OF EXCESS PAYMENT OF BUS FACILITIES TO M /S. PAGE 3 OF 17 I.T.A.NO. 26 & 448/IND/2007 GLOBUS INSTITUTE ENGG. & TECHNOLOGY, BHOPAL SUVISHA CHEMICALS P.LTD., WHICH WAS RIGHTLY MADE BY THE ASSESSING OFFICER. 8. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS RUNNI NG AN EDUCATIONAL INSTITUTION AND CLAIMED ITS INCOME AS E XEMPT U/S 10(23C)(IIIAD) OF THE INCOME-TAX ACT, 1961, AND HAD ALSO APPLIED FOR APPROVAL U/S 10(23C)(VI) OF THE ACT. THE A.O. FURTH ER FOUND THAT APPLICATION U/S 10(23C)(VI) HAD BEEN REJECTED AND A SSESSEE WAS RUNNING EDUCATIONAL INSTITUTION ON COMMERCIAL BASIS, HENCE, HE WAS NOT ELIGIBLE FOR EXEMPTION U/S 10(23C)(IIIAD). THEREAFTER, HE EXAMIN ED THE CLAIM OF THE ASSESSEE FOR EXEMPTION UNDER SECTION 11 & 12, AS TH E SOCIETY WAS ALSO REGISTERED U/S 12A. THE A.O. REQUIRED THE ASSESSEE TO GIVE DETAILS OF RECEIPTS AND EXPENDITURE ON ACCOUNT OF BUS ENGAGED FOR TRANSPORTATION OF STUDENTS. THE A.O. FOUND THAT IT HAD RECEIVED A SUM OF RS. 6,27,121/- FROM THE STUDENTS ON THIS ACCOUNT, WHICH WAS ON ACC OUNT OF BUS OWNED BY IT. THE OTHER SUM OF RS. 6,24,250/- HAD BEEN TRANSF ERRED TO M/S. SUVISHA CHEMICALS PRIVATE LIMITED, AS TWO BUSES OWNED BY TH EM WERE HIRED. THE A.O. FURTHER FOUND THAT M/S. SUVISHA CHEMICALS PRIV ATE LIMITED HAD SPENT A SUM OF RS. 1,58,580/- ON ACCOUNT OF RUNNING AND M AINTENANCE OF BUS SERVICES PROVIDED BY THEM. THE A.O. FURTHER FOUND T HAT IN RESPECT OF BUSES OWNED BY THE ASSESSEE SOCIETY EXPENSES WORTH RS. 2,33,901/- HAD BEEN INCURRED. FROM THESE FACTS, HE REACHED TO THE CONCLUSION THAT THE PAGE 4 OF 17 I.T.A.NO. 26 & 448/IND/2007 GLOBUS INSTITUTE ENGG. & TECHNOLOGY, BHOPAL ASSESSEE SOCIETY PROVIDED BUS SERVICES WITH A MOTIV E TO EARN THE PROFIT. IT WAS FURTHER OBSERVED BY THE ASSESSING OFFICER THAT THOUGH THE RECEIPTS HAD BEEN SHEARED EQUALLY BETWEEN THE SOCIETY AND M /S. SUVISH CHEMICALS PVT.LTD. HOWEVER, THEIR EXPENDITURE WAS LESS THAN T HE EXPENDITURE INCURRED BY THE ASSESSEE ON ITS OWN BUSES, HENCE, H E HELD THAT THE ASSESSEE SOCIETY HAD GIVEN UNDUE BENEFIT TO THEM. ACCORDINGL Y, HE HELD THAT PROVISIONS OF SECTION 13(2) AND 13(3) WERE ATTRACTE D AND, THEREFORE, HE DISALLOWED THE EXCESS PAYMENT OF RS. 4,65,670/- I.E . DIFFERENCE BETWEEN THE BUS CHARGES OF RS. 6,24,250/- LESS RS. 1,58,580 /- INCURRED BY THEM. 9. AGGRIEVED BY THIS, THE ASSESSEE CARRIED THE MATTER INTO APPEAL BEFORE THE LD. CIT(A), WHEREIN THE DETAILED SUBMISS IONS WERE MADE JUSTIFYING THE CHARGES PAID BY THE ASSESSEE SOCIETY TO THE SAID CONCERN HAVING REGARD TO THE FACT THAT IT WAS FIRST YEAR OF COLLEGE. IT WAS ALSO CONTENDED THAT PAYMENT MADE TO THEM WAS FAIR AND RE ASONABLE AND NO UNDUE BENEFIT HAD BEEN PASSED ON TO M/S. SUVISHA CH EMICALS PRIVATE LIMITED. THE LD. CIT(A) FOUND THAT THE PAYMENT MADE BY THE ASSESSEE TO M/S. SUVISHA CHEMICALS P.LTD, ON ACCOUNT OF BUS SER VICES WAS COMMENSURATE WITH THE SERVICES RENDERED BY THEM AND IT WAS REASONABLY FAIR AS WELL, HENCE, THE ASSESSEE SOCIETY DID NOT V IOLATE THE PROVISIONS OF SECTION 13(2)(C) OF THE ACT. 10. AGGRIEVED BY THIS, THE REVENUE IS IN APPEAL BEFORE US. PAGE 5 OF 17 I.T.A.NO. 26 & 448/IND/2007 GLOBUS INSTITUTE ENGG. & TECHNOLOGY, BHOPAL 11. THE LD. DR NARRATED THE FACTS AND PLACED RELIANCE ON THE ORDER OF THE AO. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, PLACED STRONG RELIANCE ON THE ORDER OF THE LD. CIT(A). 12. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 13. IT IS NOTED THAT THE CHARGES RECEIVED BY THE ASSESS EE SOCIETY ON ACCOUNT OF BUS SERVICES HAVE BEEN EQUALLY SHARED BE TWEEN THE ASSESSEE SOCIETY AND M/S. S.C.P.L. AS BOTH THE PARTIES OPERA TED TWO BUSES EACH. THE DIFFERENCE BETWEEN THE EXPENSES INCURRED BY TH E ASSESSEE SOCIETY AND SUCH COMPANY IS NOT SIGNIFICANT. EVEN OTHERWISE , THE SAME CANNOT BE PROPER BASIS TO FIND OUT THE ELEMENT OF UNDUE BENEF IT, BECAUSE BOTH ARE SEPARATE LEGAL ENTITIES HAVING THEIR OWN BUSINESS M ODELS/STRUCTURES. FURTHER, IT IS NOT THE CASE OF THE A.O. THAT EXPENS ES INCURRED BY M/S. S.C.P.L. HAVE BEEN DEBITED IN THE BOOKS OF THE ASSE SSEE SOCIETY. THUS, IN OUR VIEW, THE ORDER OF THE LD. CIT(A) IS REASONABLE AND CORRECT IN LAW. HENCE, WE DISMISS THIS GROUND OF THE REVENUE. 14. GROUND NO.3 READS AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 3, 70,600/- AND RS. 2,08,800/- ON ACCOUNT OF EXCESS PAYMENT OF HOSTEL RECEIPTS TO SMT. SHALINI MAHESHWARI AND M/S. SUVISH A PAGE 6 OF 17 I.T.A.NO. 26 & 448/IND/2007 GLOBUS INSTITUTE ENGG. & TECHNOLOGY, BHOPAL CHEMICALS PVT.LTD., RESPECTIVELY, WHICH WAS RIGHTLY MADE BY THE ASSESSING OFFICER. 15. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE SOCIETY TRANSFERRED A SUM OF RS. 2,26,800/- TO M/S. S.C.P.L. FOR PROVIDIN G HOSTEL FACILITIES TO THE STUDENTS OF THE ASSESSEE SOCIETY AND RS. 6,42,6 00/- TO THE ACCOUNT OF ONE SMT. SHALINI MAHESHWARI. THE A.O. ANALYZED THE LOCATION OF THE AREA AVAILABLE FOR STUDENTS AND FACILITIES PROVIDED FOR SUCH PARTIES TO FIND OUT THAT UNDUE BENEFIT, IF ANY, HAD BEEN PASSED ON TO T HESE PARTIES, AS BOTH THE PARTIES WERE OF THE CATEGORY OF SPECIFIED PERSONA A S PER THE PROVISIONS OF SECTION 13 OF THE ACT. AFTER THIS EXERCISE, HE HELD THAT A SUM OF RS. 2,72,000/- WOULD HAVE BEEN A REASONABLE AMOUNT OF R ECEIPTS IN THE CASE OF SMT.SHALINI MAHESHWARI, HENCE, HE HELD THAT EXTRA B ENEFIT TO THE EXTENT OF RS. 3,70,600/- HAD BEEN PASSED ON TO THE SECRETARY OF THE SOCIETY IN THE NAME OF HOSTEL RENT. SIMILARLY, HE WORKED OUT THE E XTRA BENEFIT DIVERTED TO M/S. S.C.P.L. AT RS. 2,08,800/- AND MADE THE DISALL OWANCE BY INVOKING PROVISIONS OF SECTION 13(2) OF THE ACT. AGGRIEVED B Y THIS, THE ASSESSEE CARRIED THE MATTER INTO APPEAL BEFORE THE LD. CIT(A ), WHEREIN THE ASSESSEE SUBMITTED THAT IT WAS FIRST YEAR OF OPERATION AND T HE REQUIRED ACCOMMODATION WAS NOT AVAILABLE WITH THE ASSESSEE S OCIETY, HENCE, THE FACILITIES OWNED BY THESE TWO PERSONS WERE UTILIZED . HOWEVER, THERE WAS NO DIVERSION OF FUNDS BY THE SOCIETY TO THESE PERS ONS, IN ANY MANNER, AS PAGE 7 OF 17 I.T.A.NO. 26 & 448/IND/2007 GLOBUS INSTITUTE ENGG. & TECHNOLOGY, BHOPAL WHATEVER AMOUNTS HAD BEEN CHARGED FROM THE STUDENTS , HAD ONLY BEEN GIVEN TO THESE PERSONS. THE LD. CIT(A) AFTER CONSID ERING THE FACTS AND THE SUBMISSIONS OF THE ASSESSEE, HELD THAT THE CHARGES RECEIVED BY THE ASSESSEE FOR HIS OWN FACILITY AND FOR FACILITIES OF SUCH PERSONS WERE NOT DIFFERENT. HENCE, IT COULD NOT BE SAID THAT ANY UND UE BENEFIT HAD BEEN PASSED ON BY THE ASSESSEE SOCIETY TO SUCH PERSONS. IT WAS ALSO HELD THAT THE BASIS OF CALCULATING SUCH BENEFIT WAS ALSO NOT CORRECT. AGGRIEVED BY THIS, THE REVENUE IS IN APPEAL BEFORE US. 16. THE LD. DR NARRATED THE FACTS AND PLACED RELIANCE O N THE ORDER OF THE AO. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OT HER HAND, PLACED STRONG RELIANCE ON THE ORDER OF THE LD. CIT(A). 17. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 18. IT IS NOTED THAT THERE IS NO DIFFERENCE BETWEEN CH ARGES PAID BY THE STUDENTS TO THE ASSESSEE SOCIETY FOR HOSTEL FA CILITIES AND TO SUCH PARTIES. HENCE, IT CANNOT BE SAID THAT ANY UNDUE BE NEFIT HAS BEEN GIVEN TO SUCH PERSONS BY THE ASSESSEE SOCIETY. WE ALSO FIND THAT BASIS ADOPTED BY THE ASSESSING OFFICER FOR CALCULATING SUCH BENEFIT IS NOT CORRECT. ACCORDINGLY, WE HOLD THAT THE ORDER OF THE LD. CIT( A) IS CORRECT IN LAW. HENCE, WE DISMISS THIS GROUND OF THE REVENUE ALSO. 19. GROUND NO.4 READS PAGE 8 OF 17 I.T.A.NO. 26 & 448/IND/2007 GLOBUS INSTITUTE ENGG. & TECHNOLOGY, BHOPAL ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 42 ,425/- ON ACCOUNT OF PAYMENT MADE BY THE SOCIETY TO M/S. SUV ISHA CHEMICALS PVT.LTD., WHICH WAS NOT RECORDED IN THE P ROFIT AND LOSS ACCOUNT AND WAS RIGHTLY MADE BY THE ASSESSING OFFICER. 20. THE FACTS, IN BRIEF, ARE THAT A SUM OF RS. 42,42 5/- HAD BEEN BORNE BY THE ASSESSEE SOCIETY ON BEHALF OF M/S. SCP L, FOR WHICH NO AGREEMENT WAS FOUND BY THE ASSESSING OFFICER. HENCE , HE HELD THAT THIS WAS UNDUE BENEFIT PASSED ON BY THE ASSESSEE SOCIETY TO THE SAID CONCERN. ACCORDINGLY, HE DISALLOWED THE SAME. 21. ON APPEAL BY THE ASSESSEE, THE LD. CIT(A) DELETED T HIS ADDITION ALSO FOR THE REASONS THAT THIS AMOUNT HAD ALSO BEEN RECOVERED OUT OF THE PAYMENT FOR SERVICES TWO BUSES PROVIDED BY SUCH FRI ENDS TO THE ASSESSEE SOCIETY. HENCE, THERE WAS NO JUSTIFICATION FOR MAKI NG THIS DISALLOWANCE. 22. AGGRIEVED BY THIS, THE REVENUE IS IN APPEAL BEFORE US. 23. THE LD. DR NARRATED THE FACTS AND PLACED RELIANCE O N THE ORDER OF THE AO. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OT HER HAND, PLACED STRONG RELIANCE ON THE ORDER OF THE LD. CIT(A). PAGE 9 OF 17 I.T.A.NO. 26 & 448/IND/2007 GLOBUS INSTITUTE ENGG. & TECHNOLOGY, BHOPAL 24. ON DUE CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE ISSUE INVOLVED, WE DO NOT FIND ANY MERIT IN THIS GROUND OF THE REVENUE. HENCE, THE SAME IS DISMISSED. 25. GROUND NO.5 READS AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 20 ,06,200/- ON ACCOUNT OF FEE RECEIVED IN ADVANCE AND NOT SHOWN IN INCOME AND EXPENDITURE ACCOUNT, WHICH WAS RIGHTLY M ADE BY THE ASSESSING OFFICER. 26. THE FACTS, IN BRIEF, ARE THAT THE A.O. FOUND THA T THE ASSESSEE HAD SHOWN AMOUNT OF RS. 20,06,200/- AD ADVANCE FROM THE FEE ON THE BASIS OF MERCANTILE SYSTEM OF ACCOUNTING, WHICH WAS TREATED BY THE ASSESSING OFFICER AS INCOME OF THE ASSESSEE SOCIETY . ON APPEAL BY THE ASSESSEE, THE LD. CIT(A) FOUND THAT THE FEE FOR THE PERIOD 1.4.2003 AND 30.6.2003, HAD BEEN COLLECTED AND THE ASSESSEE HAD SHOWN THE FEE AS ADVANCE AS ON 31 ST MARCH, 2003, AND HENCE, ADVANCE FEE COULD NOT BE TAXED AS INCOME FOR THIS YEAR, AS IT DID NOT PERTAI N TO THE ACCOUNTING YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION . AGGRIEVED BY THIS, THE REVENUE IS IN APPEAL BEFORE US. PAGE 10 OF 17 I.T.A.NO. 26 & 448/IND/2007 GLOBUS INSTITUTE ENGG. & TECHNOLOGY, BHOPAL 27. THE LD. DR NARRATED THE FACTS AND PLACED RELIANCE O N THE ORDER OF THE AO. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OT HER HAND, PLACED STRONG RELIANCE ON THE ORDER OF THE LD. CIT(A). 28. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 29. IT IS NOTED THAT THE ASSESSEE SOCIETY IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND, THEREFORE, THE FEE RECEIV ED FOR THE PERIOD SUBSEQUENT TO THE CLOSING DATE OF FINANCIAL YEAR HA S BEEN ADDED AS ADVANCE AND WHICH HAS BEEN DULY ACCOUNTED FOR AS IT S INCOME IN THE SUBSEQUENT YEAR. HENCE, WE DO NOT FIND ANY MERIT IN THIS GROUND OF THE REVENUE AS WELL. THE SAME IS, THEREFORE, DISMISSED. 30. SINCE WE HAVE DISMISSED GROUND NOS. 2, 3 & 4 OF THE REVENUES APPEAL, HENCE, THE ISSUE RAISED IN GROUND NO. 1 IS AUTOMATICALLY TO BE DECIDED IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, GRO UND NO.1 OF THE REVENUES APPEAL IS ALSO DISMISSED. 31. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 32. NOW, WE SHALL TAKE UP THE REVENUES APPEAL IN I.T.A .NO. 448/IND/2007/ 33. GROUND NO.1 READS AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 16 ,88,667/- PAGE 11 OF 17 I.T.A.NO. 26 & 448/IND/2007 GLOBUS INSTITUTE ENGG. & TECHNOLOGY, BHOPAL MADE BY THE ASSESSING OFFICER ON ACCOUNT OF EXCESS OF INCOME OVER EXPENDITURE UNDER NORMAL PROVISIONS AND THEREBY ALLOWED THE BENEFIT OF EXEMPTION UNDER SECT IONS 11 & 12 OF THE INCOME-TAX ACT, 1961. 34. THE FACTS, IN BRIEF, ARE THAT THE A.O. TREATED THE ASSESSEES INCOME CHARGEABLE TO TAX FOR THE REASON THAT THE AS SESSEE VIOLATED PROVISIONS OF SECTION 13(2) OF THE INCOME-TAX ACT, 1961. 35. THIS GROUND IS SIMILAR TO GROUND NO.1 OF REVENUES APPEAL IN I.T.A.NO. 26/IND/2007.THIS GROUND IS DEPENDENT UPON THE OUTCOME OF DISALLOWNCES MADE BY THE ASSESSING OFFICER U/S 13(2 ) OF THE ACT, HENCE, DECISION ON THIS GROUND SHALL BE GIVEN THEREAFTER. 36. GROUND NO.2 READS AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 5, 81,217/- ON ACCOUNT OF EXCESS PAYMENT MADE TO M/S. SUVISHA CHEMICALS PRIVATE LIMITED ON ACCOUNT OF UNREASONABL E BUS TRANSACTIONS. 37. THE FACTS, IN BRIEF, ARE THAT IN THIS YEAR ALSO, TH E ASSESSEE SOCIETY MADE THE PAYMENT TO S.C.P.L. FOR PLYING BUSES. THE A.O. FOUND THAT IN THIS YEAR, TOTAL SIX BUSES WERE OPERATED, FOUR OF W HICH WERE OWNED BY THE PAGE 12 OF 17 I.T.A.NO. 26 & 448/IND/2007 GLOBUS INSTITUTE ENGG. & TECHNOLOGY, BHOPAL ASSESSEE SOCIETY AND TWO BELONGED TO M/S. S.C.P.L. THE A.O. FURTHER ANALYZED THE PROFIT AND LOSS ACCOUNT OF M/S. SCPL AND FOUND THAT VERY MEAGER AMOUNT HAD BEEN SPENT ON RUNNING AND MAINTEN ANCE BY THE ASSESSEE, HENCE, HE HELD THAT TRANSPORTATION CHARG ES OF RS. 6,68,600/- PAID BY THE ASSESSEE SOCIETY WERE NET OF EXPENSES I.E. T HE ASSESSEE SOCIETY HAD BORNE EXPENSES FOR BUS PLYING. HE FURTHER SUPPORTED HIS FINDINGS THAT IN THE YEAR UNDER CONSIDERATION THE ASSESSEES SOCIET YS EXPENDITURE WAS RS. 13,58,902/- ON FOUR BUSES AS COMPARED TO EXPENDITUR E OF RS. 2,33,901/- ON TWO BUSES IN ASSESSMENT YEAR 2003-04. HE FURTHER FOUND THAT THIS FIRM WAS COVERED WITHIN THE CATEGORY OF SPECIFIED PERSON S, HENCE, THE PROVISIONS OF SECTION 13(1) READ WITH SECTION 13(2) AND 13(3) WERE APPLICABLE. THEREAFTER, HE ANALYZED THE GROSS INCOM E AND GROSS EXPENSES AND FOUND THAT THERE WAS A SURPLUS OF RS. 2,62,148/ -, WHICH SHOULD HAVE BEEN DIVIDED IN THE RATIO OF NUMBER OF BUSES CONTRI BUTED BY EACH PARTY AND, ACCORDINGLY, ONLY A SUM OF RS. 87,383/- SHOULD HAVE BEEN PAID BY THE ASSESSEE SOCIETY. ACCORDINGLY, HE HELD THAT A S UM OF RS. 5,81,217/- BEING THE DIFFERENCE BETWEEN RS. 6,68,600/- AND RS. 87,383/- HAD BEEN PASSED IN EXCESS OR AS UNDUE BENEFIT AND, THEREFORE , DISALLOWED THE SAME. AGGRIEVED BY THIS, THE ASSESSEE CARRIED THE MATTER INTO APPEAL BEFORE THE LD. CIT(A), WHEREIN IT WAS CONTENDED THAT DURING TH E YEAR UNDER CONSIDERATION, THE ASSESSEE HAD CREDITED THE ACCOUN T OF SCPL FOR BUS PAGE 13 OF 17 I.T.A.NO. 26 & 448/IND/2007 GLOBUS INSTITUTE ENGG. & TECHNOLOGY, BHOPAL CHARGES AT RS. 6,68,600/- AND HAD DEBITED THEIR ACC OUNT WITH RS. 77,100/- TOWARDS EXPENSES ON TWO BUSES. HENCE, NET INCOME, W HICH ACTUALLY ACCRUED TO M/S. SCPL WAS RS. 5,91,500/- AND, ACCORD INGLY CHARGES PAID BY THE ASSESSEE SOCIETY TO THEM AS PER BUS PER MONT H CAME TO RS. 24,646/- ONLY, WHICH WAS QUITE REASONABLE. IT WAS ALSO CONTE NDED THAT MERELY BECAUSE THERE WERE SOME TRANSACTIONS WITH CONNECTED PERSONS, THE INFERENCE OF UNREASONABLENESS COULD NOT BE ASSUMED WITHOUT BRINGING ANY MATERIAL ON RECORD TO SHOW SUCH EXTRA PAYMENT. THE ASSESSEE ALSO RELIED ON VARIOUS DECISIONS IN THIS REGARD. THE LD. CIT(A) AFTER CONSIDERING THE FACTS AND SUBMISSIONS MADE BY THE ASSESSEE HELD TH AT NO EXTRA BENEFIT HAD BEEN GIVEN BY THE ASSESSEE. HENCE, HE DELETED THE I MPUGNED ADDITION. 38. AGGRIEVED BY THIS, THE REVENUE IS IN APPEAL BEFORE US. 39. THE LD. DEPARTMENTAL REPRESENTATIVE NARRATED THE FA CTS, DREW OUR ATTENTION TO RELEVANT PAGES OF THE ASSESSMENT O RDER BESIDES PLACING STRONG RELIANCE ON THE ORDER OF A.O. 40. THE LEARNED COUNSEL FOR THE ASSESSEE BESIDES REITE RATING THE SUBMISSIONS MADE BEFORE THE LD. CIT(A), CONTENDED T HAT EVEN IF THE FUEL AND OIL EXPENSES FOR SIX BUSES CLAIMED BY THE ASSES SEE SOCIETY WERE DIVIDED ON PRO-RATA BASIS, THEN ALSO THE TOTAL AMOU NT ATTRIBUTABLE TO BUSES PLIED BY M/S. SCPL WOULD COME TO RS. 10,68,729/- I. E. RS. 6,68,000/- + PAGE 14 OF 17 I.T.A.NO. 26 & 448/IND/2007 GLOBUS INSTITUTE ENGG. & TECHNOLOGY, BHOPAL RS. 4,00,729/- AND THAT WOULD AMOUNT TO RS. 27,500/ - PER BUS PER MONTH. HENCE, THE SAME COULD NOT BE CONSIDERED AS URNEASOA NBLE. 41. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 42. IT IS NOTED THAT EVEN IF THE EXPENSES CLAIMED BY TH E ASSESSEE SOCIETY ARE DISTRIBUTED TOWARDS BUS OPERATED BY M/S . SCPL, THE AMOUNT PAID BY THE ASSESSEE SOCIETY TO SUCH CONCERN PER BU S PER MONTH. COMES TO RS. 27,500/- APPROXIMATELY, WHICH CANNOT BE CONSIDE RED AS UNREASONABLE OR EXCESSIVE. WE FURTHER CLARIFY THAT IN ANY CASE , THIS AMOUNT WOULD HAVE BEEN ALLOWED TO THE ASSESSEE SOCIETY, WHETHER IT IS SHOWN AS ITS EXPENSES OR BY WAY OF HIRE CHARGES TO THE SAID CONCERN FOR O PERATING BUSES ON BEHALF OF THE ASSESSEE SOCIETY. ACCORDINGLY, WE FIN D NO MERIT IN THIS GROUND OF THE REVENUE. THE SAME IS, THEREFORE, DISM ISSED. 43. GROUND NO.3 READS AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 4, 17,600/- AND RS. 62,124/- FOR CLAIM EXCESS DEPRECIATION ON V EHICLE (BUS) AND ON GENERATOR AND POWER SUBSTATION RESPECT IVELY. 44. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE CLAIMED DEPRECIATION ON BUSES @ 40 % TREATING THE ASSESSEE ENGAGED IN THE B USINESS OF RUNNING SUCH BASIS ON HIRE. SIMILARLY, DEPRECIATION ON GENE RATOR WAS CLAIMED @ PAGE 15 OF 17 I.T.A.NO. 26 & 448/IND/2007 GLOBUS INSTITUTE ENGG. & TECHNOLOGY, BHOPAL 25% TREATING THE GENERATOR AS PLANT AND MACHINERY. THE A.O. HELD THAT THE ASSESSEE WAS NOT ENGAGED IN THE BUSINESS OF RUNNING THE BUSES ON HIRE BASIS, HENCE, THE ASSESSEE WAS ENTITLED FOR DEPRECI ATION THEREON @ 25% ONLY. SIMILARLY, HE TREATED THE GENERATOR AS ELECTR ICAL INSTALLATION AND HELD THAT DEPRECIATION @ 15% WAS ONLY ALLOWABLE THEREON. ACCORDINGLY, HE MADE THE IMPUGNED ADDITIONS. THE ASSESSEE BEFORE TH E LD. CIT(A) SUBMITTED THAT AS PER APPENDIX I OF DEPRECIATION SC HEDULE, THE BUSES BEING COMMERCIAL VEHICLE AND USED FOR TRANSPORTING THE STUDENTS WERE ELIGIBLE FOR DEPRECIATION @ 40% AS IN THE SAID SCHE DULE RATE OF 25% WAS PRESCRIBED FOR MOTOR CARS OTHER THAN THOSE USED IN A BUSINESS FOR RUNNING THEM ON HIRE. SIMILAR CONTENTIONS WERE MADE AS REGA RDS TO THE RATE OF DEPRECIATION ON GENERATOR. IT WAS ALSO CONTENDED TH AT EVEN AFTER DISALLOWING THE DEPRECIATION, THE INCOME OF THE SOC IETY WAS EXEMPT U/S 11 & 12. THE LD. CIT(A) BOTH ON MERITS AS WELL AS TAKI NG INTO CONSIDERATION THE FACT THAT EVEN OTHERWISE THE INCOME OF THE SOCI ETY WAS EXEMPT UNDER SECTION 11/12 OF THE ACT, DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. AGGRIEVED BY THIS, THE REVENUE IS IN APPEA L BEFORE US. 45. THE LD. DR NARRATED THE FACTS AND PLACED RELIANCE O N THE ORDER OF THE AO. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OT HER HAND, PLACED STRONG RELIANCE ON THE ORDER OF THE LD. CIT(A). PAGE 16 OF 17 I.T.A.NO. 26 & 448/IND/2007 GLOBUS INSTITUTE ENGG. & TECHNOLOGY, BHOPAL 46. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 47. IT IS NOTED THAT THE ASSESSEE HAS SHOWN RECEIPTS OF BUS HIRE IN THE INCOME AND EXPENDITURE ACCOUNT AND WHICH HAS BEEN T REATED AS BUSINESS RECEIPTS. IT IS FURTHER NOTED THAT AS PER APPENDIX I, IT IS NOT NECESSARY THAT THE ASSESSEE SHOULD SOLELY BE ENGAGED IN THE BUSINE SS OF RUNNING SUCH BUSINESS ON HIRE I.E. IF IT IS AN INCIDENTAL ACTIVI TY IN ADDITION TO OTHER ACTIVITIES BEING CARRIED ON EVEN THEN THE ASSESSEE WOULD BE ENTITLED FOR DEPRECIATION AT HIGHER RATE. AS REGARDS TO THE RATE OF DEPRECIATION ON GENERATOR, WE ARE OF THE VIEW THAT IT IS A BACK UP FACILITY AND IT IS MAINLY USED FOR PROVIDING ELECTRICITY WITHOUT WHICH THE AC TIVITIES OF THE EDUCATIONAL INSTITUTION CANNOT BE CARRIED ON. HENCE , IT SHOULD BE TREATED AS PLANT AND MACHINERY AND ,CONSEQUENTLY, THE ASSESSEE IS ENTITLED FOR DEPRECIATION THEREON @ 25%. THUS, THIS GROUND OF TH E REVENUE IS ALSO DISMISSED. 48. GROUND NO. 4 READS AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 1, 709/- FOR TRIAL BALANCE DIFFERENCE. 49. WE FIND NO MERIT IN THIS GROUND OF THE REVENUE S APPEAL. IT IS EVIDENT THAT THE ASSESSEE HAS ITSELF ADDED THIS DIF FERENCE AS ITS INCOME. PAGE 17 OF 17 I.T.A.NO. 26 & 448/IND/2007 GLOBUS INSTITUTE ENGG. & TECHNOLOGY, BHOPAL HENCE, THE ADDITION MADE BY THE ASSESSING OFFICER A GAIN AMOUNTS TO DOUBLE ADDITION OF THE SAME AMOUNT. THUS, THIS GROU ND OF THE REVENUE IS ALSO DISMISSED. 50. GROUND NO.1 IS ALSO DISMISSED IN VIEW OF OUR DECISI ON IN RESPECT OF GROUND NO.2 OF THE REVENUES APPEAL. 51. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 52. TO SUM UP, BOTH THE APPEALS OF THE REVENUE ARE DISM ISSED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 20 TH JANUARY, 2010. SD/- SD/- (JOGINDER SINGH) (V. K. GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 20 TH JANUARY, 2010. CPU* 811D12