The Dy.DIT, (Exemp.), Ahmedabad V. Mudra Foundation for Communications, Research & Education, Ahmedabad

ITA 2872/AHD/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8261 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 03-08-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 29-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASSESS MENT YEAR; ASSESSMENT YEAR AN
• Assessee Lawyers: C OMMUNICATIONS RESEARCH
• Keywords: Depreciation; Charitable institution; Competent authority; Capital expenditure
• Section: 12A

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(EXEMPTION), AHMEDABAD (APPELLANT) VS MUDRA FOUNDATION OF COMMUNICATIONS RESEARCH & EDUCATION, MUDRA TOWER, SHANTI SADAN SOCIETY, NR. PARIMAL GARDEN, ELLISBRIDGE, AHMEDABAD - 380006 PAN: AAATM2168D (RESPONDENT) MUDRA FOUNDATION OF COMMUNICATIONS RESEARCH & EDUCATION, MUDRA TOWER, SHANTI SADAN SOCIETY, NR. PARIMAL GARDEN, ELLISBRIDGE, AHMEDABAD - 380006 PAN: AAATM2168D (APP ELLANT) VS THE DY.DIT(EXEMPTION), AHMEDABAD (RESPONDENT) I T A NO S . 2872 & 3090/AHD/2014 A Y 2010 - 11 & 2011 - 12 C O NOS. 317 & 318/AHD/2014 ITA NO S . 2872 & 3090/AHD/2014 A Y 2010 - 11 & 2011 - 12 I.T.A NO S.2872 & 3090 & CO NOS.317 - 318 /AH D/20 14 A.Y.2010 - 11 & 20 11 - 12 PAGE NO DCIT VS. MUDRA FOUNDAT ION FOR C OMMUNICATIONS RESEARCH & EDUCATION 2 REVENUE BY : S H RI PRASOON KABRA , SR. D . R. ASSESSEE BY: S H RI SANJAY R. SHAH , A.R. DATE OF HEARING : 08 - 08 - 2 0 17 DATE OF PRONOUNCEMENT : 12 - 10 - 2 017 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2010 - 11 AND ASSESSMENT YEAR 2011 - 12 AND THE CROSS OBJECTIONS FILED BY THE ASSESSE FOR ASSESSMEN T YEAR 2010 - 11 AND ASSESSMENT YEAR 2011 - 12 ARE DIRECTED AGAINST THE ORDER OF THE LD. CIT(A) - XX, AHMEDABAD DATED 14/08/2014 AND DATED 1 8/09/2014 RESPECTIVELY. SINCE IN THE APPEALS OF BOTH THE ASSESSMENT YEARS IDENTICAL ISSUES ARE INVOLVED, THEREFORE, THES E APPEALS ARE DECIDED BY THIS COMMON ORDER. W E TAKE THE APPEAL FOR ASSESSMENT YEAR 2010 - 11 AS THE LEAD CASE AND ITS FINDINGS WILL ALSO BE APPLIED FOR TH E APPEAL OF ASSESSMENT YEAR 201 1 - 12 2 . THE REVENUE HAS TAKEN FOLLOWING GROUNDS OF APPEAL: - ITA NO. 28 72/AHD/2014 I) THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE ASSESSEE'S ACTIVITIES ARE IN THE NATURE OF 'EDUCATION' AND NOT GENERAL PUBLIC UTILITY ESPECIALLY WHEN MANY OF THE COURSES OFFERED BY THE A SSESSEE WERE NOT APPROVED BY ANY COMPETENT AUTHORITY AND BY NOT CONSIDERING THE DECISION OF HON'BLE HIGH COURT OF GUJARAT IN THE CASE OF SAURASHTRA EDUCATION FOUNDATION (273 ITR 139)(2004). II) THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN LAW AND ON FACTS IN NOT HOLDING THAT THE ACTIVITIES OF THE ASSESSEE ARE IN THE NATURE OF GENERAL PUBLIC UTILITY AND THEREFORE, THE ASSESSEE WAS COVERED BY PROVISO TO SEC.2(15) AND THEREBY FORFEITED THE EXEMPTION IN VIEW OF PROVISION OF SEC. 13(8) OF THE I.T. ACT. III) THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.2,20, 00,000/ - BEING ACCUMULATION OF INCOME U/S.11(2) OF THE I.T. ACT AND RS.2,91,65,414/ - , BEING ACCUMULATION OF INCOME U/S.11( 1)(A) OF THE ACT MADE I.T.A NO S.2872 & 3090 & CO NOS.317 - 318 /AH D/20 14 A.Y.2010 - 11 & 20 11 - 12 PAGE NO DCIT VS. MUDRA FOUNDAT ION FOR C OMMUNICATIONS RESEARCH & EDUCATION 3 BY THE A.O. ON THE GROUND THAT THE ACTIVITY OF THE ASSESSEE WAS NOT FALLING WITHIN THE AMBIT OF DEFINITION GIVEN IN PROVISO TO SEC.2(15) OF THE I.T. ACT READ WITH SECTION 13(8). IV) THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) H AS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.97,25,801/ - MADE BY THE A.O., BEING CAPITAL EXPENDITURE INCURRED BY THE ASSESSEE AND CLAIMED AS APPLICATION OF INCOME WHEN THE ASSESSEE HAS FORFEITED EXEMPTION U/S.L3(8) READ WITH PROVISO TO S ECTION 2(15). V) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. VI) IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME - TAX (AP PEALS) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3 . IN THIS CASE, RETURN OF INCOME DECLARING INCOME OF RS. NIL WAS FILED ON 24 TH SEPTEMBER, 2010. SUBSEQUENTLY, THE CASE WAS SELECTED UNDER SCRUTINY BY ISSUING OF NOTICE U/S. 143(2) OF THE ACT ON 12 TH SEP, 2011. THE ASSESSEE IS A TRUST CARRYING ON ACTIVITY OF PROVIDING EDUCATION AND TRAINING IN COMMUNICATION INCLUDING ADVERTISING AND RELATED SUBJECT S AND AWARD DIPLOMA S CERTIFICATE S AND OTHER DISTINCTIONS. T HE ASSESSING OFFICER HAS N OTICED ON PERUSAL OF THE INCOME AND EXPENDITURE STATEMENT THAT THE ASSESSEE HAS A SURPLUS OF RS. 3 , 36 , 25 , 630/ - DURING THE YEAR. HE ALSO NOTICED THAT THE FEES CHARGED FOR THESE COURSES SHALL RANGE OF RS. 3,45, 000 TO RS. 1,13,000/ - PER STUDENT . THESE SHO RT TERM COURSES WE R E NOT APPROVED BY ANY AUTHORITY. HE HAS ALSO NOTICED THAT ASSESSEE HAS MISCELLANEOUS INCOME TO THE TUNE OF RS. 3 , 22 , 04 , 300/ - FROM VARIOUS HEADS SUCH AS STUDENT ACTIVI TI ES CHARGES, LAB CHAR GES, PLACEMENT CHARGES, INTERNSHIP FEES AND STU DY MATERIAL FEES , LODGING AND BOARDING, APPLICATION FEES ETC. THE ASSESSING OFFICER HAS OBSERVED THAT DURING THE COURSE OF ASSESSMENT FOR ASSESSMENT YEAR 2009 - 10, IT WAS HELD THAT THE ACTIVITY OF THE ASSESSE WAS NOT CHARITABLE IN NATURE. HE FOUND THAT D UR ING THE YEAR UNDER CONSIDERATION , THE ASESSEE HAS CLAIMED THE FOLLOWING EXEMPTION U/S. 11 OF THE ACT. I.T.A NO S.2872 & 3090 & CO NOS.317 - 318 /AH D/20 14 A.Y.2010 - 11 & 20 11 - 12 PAGE NO DCIT VS. MUDRA FOUNDAT ION FOR C OMMUNICATIONS RESEARCH & EDUCATION 4 (I) ACCUMULATION U/S. 11(2) OF THE ACT RS. 2 , 20 , 00000 (II) ACCUMULATION U/S. 11(I )(A) OF THE ACT RS. 2 , 91 , 65414/ - THE ASSESSING OFFICER STATED THAT AS ELABORAT ELY DISCUSSED IN THE ASSESSMENT ORDER OF ASSESSMENT YEAR 2009 - 10, THE OBJECT OF THE ASSESSEE TRUST IS OF COMMERCIAL ACTIVITY . H E FURTHER OBSERVED T HAT MERE IMPARTING OF EDUCATION FOR PRIMARY PURPOSE OF EARNING PROFITS CANNOT BE SAID T O BE CHARITABLE A CT I VITY. THE ASSESSING OFFICER STATED THAT ASSESSEE WAS NOT CARRYING ON ACTIVITIES OF EDUCATION AS ENVISAGED IN THE PROVISION OF SECTION 2(15) OF THE ACT BUT IT WAS ENGAGED IN THE ACTIVITY OF BUSINESS, TRADE, COMMERCE AND WAS THEREFORE COVERED BY PROVISO 1 T O SECTION 2(15) OF THE ACT. HE FURTHER STATED THAT SECTION 2(15) OF THE ACT DEFINES CHARITABLE PURPOSES FIRST PROVISO THERETO WITH EFFECT TO ASSESSMENT YEAR 2009 - 10 LAID DOWN THAT, IF ANY TRUST ETC. (A) IS ENGAGED IN PURSUING OBJECTS OF GENERAL PUBLIC UT ILITY (OTHER OBJECTS) AND (B) CARRIES ON ANY ACTIVITY IN THE NATURE OF TRADE, BUSINESS OR COMMERCE OR PROVIDES ANY SERVICE IN RELATION TO THE TRADE, COMMERCIAL OR BUSINESS AND (C) AGGREGATES RECEIPTS THERE FROM EXCEEDS RS. 25 LACS, IT SHALL BE CONSIDERED T HAT OTHER OBJECTS IS NOT A CHARITABLE PURPOSE. IF SO, SUCH A TRUST IS NOT ELIGIBLE FOR THE EXEMPTION IN AS MUCH AS THE PRIMARY CONDITION OF BEING EXISTING FOR CHARITABLE PURPOSE IS NOT SATISFIED. HE HELD THAT THE ASSESSEE WAS COVERED BY THE PROVISO TO SECTION 2(15) OF THE ACT. HE FURTHER MENTIONED THAT WITH THE INTRODUCTION OF SECTION 13(8) OF THE ACT W.E.F 1 ST APRIL, 2009, IT IS CLEARLY EVIDENT THAT THE ASSESSEE S CASE IS SQUARELY COVERED BY THE PROVISO TO SECTION 2(15) SHALL FORFEIT ALL I.T.A NO S.2872 & 3090 & CO NOS.317 - 318 /AH D/20 14 A.Y.2010 - 11 & 20 11 - 12 PAGE NO DCIT VS. MUDRA FOUNDAT ION FOR C OMMUNICATIONS RESEARCH & EDUCATION 5 EXEMPTIONS TH AT ARE OTHERWISE AVAILABLE U/S. 11 & 12 OF THE ACT. HE FURTHER MENTIONED THAT NEW SUB - SECTION 8 PROVIDES THAT THE EXEMPTION U/S. 11 & 12 WILL NOT BE AVAILABLE TO A TRUST IN A PREVIOUS YEAR IN WHICH THE FIRST PROVISO TO SECTION 2(15) BECOMES APPLICABLE FOR THAT PREVIOUS YEAR. THEREFORE, T HE ASSESSING OFFICER HELD THAT THE ASSESSEE WAS NOT ELIGIBLE TO ANY OF THE EXEMPTION CLAIMED U/S. 11 AND 12 OF THE ACT THEREFORE, ACCUMULATION U/S. 11(2) OF THE ACT OF RS. 2,20,00000/ - AND ACCUMULATION U/S. 11(I)(A) OF THE ACT OF RS. 2,91,65,414/ - ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. THE ASSESSEE HAS ALSO CLAIMED CAPITAL EXPENDITURE OF RS. 9,725 , 801/ - AND CLAIMED DEDUCTION U/S. 11(1) (A) OF THE ACT. THE ASSESSING OFFICER STATED THAT T HE ACTIVITY OF THE A SSESSEE HAS BEEN HELD TO BE ADVANCEMENT OF OTHER OBJECT OF GENERAL PUBLIC UTILITY WITHIN THE SECTION 2(15) R.W. PROVISO 1 , AND 2 THEREFORE, IN VIEW OF THE PROVISION OF SECTION 2(15) R.W.S SECTION 13(8) OF THE ACT, THE BENEFITS OF SECTION 11 & 12 ARE NOT AV AILABLE TO THE ASSESSEE TRUST. 4. AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A) AGAINST THE IMPUGNED DISALLOWANCES MADE BY THE ASSESSING OFFICER. THE LD. CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESSEE ON BOTH THE ISSUES BY OBSERVED AS UNDER: - 5.3 1 HAVE CONSIDERED THE ASSESSMENT ORDER AND THE SUBMISSIONS MADE BY THE APPELLANT. THE APPELLANT IS A CHARITABLE TRUST REGISTERED UNDER SECTION 12A OF THE ACT, WHICH IS ENGAGED IN ADMINISTERING MUDRA INSTITUTE OF COMMUNICATIONS' (MICA). MICA IS ENGAGE D IN PROVIDING HIGHER EDUCATION IN THE FIELD OF COMMUNICATIONS AND 1 ADVERTISING. MICA PROVIDES TRAINING TO STUDENTS IN THE FIELD OF COMMUNICATIONS AND ADVERTISING AND CONDUCTS FLAGSHIP TWO YEAR COURSE CALLED PGPDC AND 15 MONTHS PGPCMX COURSES WHICH ARE APP ROVED BY THE AICTE. THE COURSES ARE CONSIDERED TO BE ONE OF THE BEST MANAGEMENT COURSES IN COMMUNICATIONS AND ADVERTISING IN INDIA. DURING THE YEAR, THE DETAILS OF COURSES CONDUCTED AND FEE RECEIVED BY THE APPELLANT ARE AS UNDER: I.T.A NO S.2872 & 3090 & CO NOS.317 - 318 /AH D/20 14 A.Y.2010 - 11 & 20 11 - 12 PAGE NO DCIT VS. MUDRA FOUNDAT ION FOR C OMMUNICATIONS RESEARCH & EDUCATION 6 NAME OF THE COURSE WHETH ER RECOGNIZED BY ANY AUTHORITY LIKE AICTE TRAINING FEESFORFY 2009 - 10 (RS. IN LAKHS) PERCENTAGE PGPDC RECOGNIZED 557.32 PGPCMX RECOGNIZED 24.09 TOTAL - APPROVED COURSES (A) 581.41 79 .41 GRAFTING CREATIVE ADVTG. NA 54.43 PGPCME NA 42.51 RETAIL COMMUNICATION MANAGEMENT (TRAINING FEE) NA 16.30 VISUAL MERCHANDISING AND CREATIVE COMMUNICATION NA 3.00 EXECUTIVE DEVELOPMENT PROG. IN ADVTG. MANAGEMENT NA 26.16 COMMUNICATION MANAGEMENT PROG. NA 2.13 CASE WRITING NA 0.99 SWASTHAYA SANCHAR (SEWA) NA 0.25 GUJARAT STATE AIDS CONTROL SOCIETY NA 5.00 TOTAL - OTHER SHORT TERM COURSES (B) 150.76 20.59 GRAND TOTAL (A+B) 732.17 100.00 5.3.1 THE ASSESSING OFFICER HAS HELD THAT THE ACTIVITIES OF THE ASSESSEE IS NOT EDUCATION BUT ANY OTHER ACTIVITY OF GENERAL PUBLIC INTEREST ON THE GROUND THAT THE ASSESSEE, APART FROM RUNNING AICTE APPROVED COURSES ALSO RUN SMALL COURSE RANGING FROM 1 WEE K TO 12 MONTHS AND FEE CHARGES IS VERY HEFTY. THE WORD 'EDUCATION' HAS TO BE GIVEN ITS NATURAL MEANING WHICH ENCOMPASSES WITHIN ITSELF SYSTEMATIC TRAINING, SCHOOLING AND INSTRUCTION. AS APPARENT FROM THE FACTS OF THE CASE, THE APPELLANT IS PROVIDING SYSTEM ATIC TRAINING IN THE FIELD OF COMMUNICATION. THE TRAINING IS IN NATURE OF CLASS ROOM TRAINING WITH DEFINED COURSE CONTENTS AND OBJECTIVES AND AT THE END OF EACH COURSE, THE RECOGNITION IS CONFERRED BY THE APPELLANT UPON THE PARTICIPATION OF THE RESPECTIVE COURSE. FURTHER, THE FLAGSHIP COURSE OF THE APPELLANT BEING PGPDC PROGRAMME IS BEING REGULATED BY THE AICTE. CHARGING OF HEFTY FEE FOR SELF FINANCED INSTITUTES DOES NOT MEAN THAT THE PURPOSE OF THE TRUST IS NOT EDUCATION. ACCORDINGLY, THE ACTIVITY CARRIED OUT BY THE APPELLANT IS 'EDUCATION' UNDER SECTION 2(15) OF THE I.T. ACT AND CANNOT BE CONSIDERED TO BE 'ANY OTHER OBJECT OF ADVANCEMENT OF GENERAL PUBLIC UTILITY'. IN THIS REGARD, THE RATIO OF THE DECISION OF I.T.A NO S.2872 & 3090 & CO NOS.317 - 318 /AH D/20 14 A.Y.2010 - 11 & 20 11 - 12 PAGE NO DCIT VS. MUDRA FOUNDAT ION FOR C OMMUNICATIONS RESEARCH & EDUCATION 7 THE HON'BLE GUJARAT HIGH COURT CO - OPERATIVE (SU PRA) AND HON'BLE SUPREME COURT IN LOK SIKSHANA (SUPRA) IS RELEVANT. 5.3.2 FURTHER, IT IS ALSO OBSERVED THAT, THE AHMEDABAD BENCH OF THE HON'BLE ITAT IN THE CASE OF AHMEDABAD MANAGEMENT ASSOCIATION, WHICH CONDUCTS SHORT MANAGEMENT COURSES WHICH ARE NOT EVE N RECOGNIZED BY AICTE, HAS HELD THAT MERE EARNING OF SURPLUS CANNOT BE CONSIDERED AS REASON FOR CONSIDERING EDUCATIONAL ACTIVITY UNDER 'ANY OTHER OBJECT OF ADVANCEMENT OF GENERAL PUBLIC UTILITY' AND APPLY PROVISO TO SECTION 2(15) OF THE I.T. ACT. THE HON'B LE GUJARAT HIGH COURT HAS AFFIRMED THE ORDER OF HON'BLE ITAT, AHMEDABAD HOLDING AS UNDER: '5.6 NOW APPLYING THE RATIO OF THE DECISION OF THE DIVISION BENCH OF THIS COURT IN THE CASE OF GUJARAT STATE CO - OPERATIVE UNION (SUPRA) REPRODUCED HEREINABOVE AND THE ACTIVITIES OF THE ASSESSEE SUCH AS CONTINUING EDUCATION DIPLOMA AND CERTIFICATE PROGRAMME; MANAGEMENTDEVELOPMENT PROGRAMME; PUBLIC TALKS AND SEMINARS AND WORKSHOPS AND CONFERENCES ETC., WE ARE IN COMPLETE AGREEMENT WITH THE VIEW TAKEN BY THE TRIBUNAL THAT THE ACTIVITIES OF THE ASSESSEE IS EDUCATIONAL ACTIVITIES AND/OR IS IN THE FIELD OF EDUCATION. 5.7 NOW IN VIEW OF THE AFORESAID FINDING THAT THE ACTIVITIES OF THE ASSESSEE IS IN THE FIELD OF EDUCATION, WHETHER THE ASSESSEE IS ENTITLED TO EXEMPTION UNDER SE CTION 11 OF THE ACT OR NOT AND WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE ASSESSEE CAN BE DENIED EXEMPTION UNDER SECTION 11 OF THE ACT RELYING UPON AND/OR CONSIDERING THE PROVISO TO SECTION 2(15) OF THE ACT IS CONCERNED SO FAR AS THE AMENDMENT IN SECTION 2(15) OF THE ACT AMENDED VIDE FINANCE ACT, 2008 AND INSERTION OF PROVISO TO SECTION 2(15) OF THE ACT IS CONCERNED, AS SUCH THE SAME HAS BEEN EXPLAINED VIDE CIRCULAR NO.11/2008 DATED 19/12/2008. IT IS CLARIFIED THAT WHERE INDUSTRIES OR TRADE ASSO CIATION CLAIM BOTH TO BE CHARITABLE INSTITUTIONS AS WELL AS MUTUAL ORGANIZATIONS AND THEIR ACTIVITIES ARE RESTRICTED TO CONTRIBUTIONS FROM AND PARTICIPATION OF ONLY THEIR MEMBERS, THESE WOULD NOT FALL UNDER THE PURVIEW OF THE PROVISO TO SECTION 2(15) OF TH E ACT OWING TO THE PRINCIPLES OF MUTUALITY. FROM THE CIRCULAR NO.11/2008 DATED 19/12/2008 IT APPEARS THAT THE THE NEWLY INSERTED PROVISO TO SECTION 2(15) OF THE ACT WILL APPLY TO ENTITIES WHOSE PURPOSE IS ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY I.E. FOURTH LIMB OF ' DEFINITION OF 'CHARITABLE PURPOSE' CONTAINED IN SECTION 2(15) OF THE ACT AND HENCE SUCH ENTITIES WILL NOT BE ELIGIBLE FOR EXEMPTION UNDER SECTION 11 OR UNDER SECTION 10(23CJ OF THE ACT IF THEY CARRY ON COMMERCIAL ACTIVITIES. TH US, ON FAIR READING OF SECTION 2(15) OF THE ACT THE NEWLY INSERTED PROVISION SECTION 2(15) OF THE ACT WILL NOT APPLY IN RESPECT OF THE FIRST THREE LIMBS OF SECTION 2(15) OF THE ACT I.E. RELIEF TO THE POOR; EDUCATION OR MEDICAL RELIEF. THUS, WHERE THE PURPO SE OF A TRUST OR INSTITUTION IS RELIEF OF THE POOR; EDUCATION OR MEDICAL RELIEF, IT WILL CONSTITUTE 'CHARITABLE PURPOSE' EVEN IF IT INCIDENTALLY INVOLVES THE CARRYING ON OF THE COMMERCIAL ACTIVITIES. THUS, ON FAIR READING OF SECTION 2(15) OF THE ACT READ W ITH CIRCULAR NO.11/2008 DATED 19/12/2008 IT APPEARS THAT IF THE CASE OF THE ASSESSEE DOES NOT FALL WITHIN THE FIRST THREE LIMBS OF SECTION 2(15) OF THE ACT I.E. RELIEF TO THE POOR; EDUCATION OR MEDICAL RELIEF AND IF IT FALLS IN THE FOURTH LIMB I.E. ADVANCE MENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY AND IT IS FOUND THAT SUCH ACTIVITY OF ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY INVOLVES CARRYING ON OF (A) ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS; OR (B) ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS; FOR A CESS OR FEE OR ANY OTHER CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION OF' THE INCOME FROM SUCH ACTIVITY, THE SAME SHALL NOT BE CONSIDERED FOR 'CHA RITABLE PURPOSE' AND SHALL NOT BE ENTITLED TO EXEMPTION UNDER SECTION 11 OF THE ACT. 5.7 IN THE PRESENT CASE, AS OBSERVED HEREINABOVE AND RIGHTLY HELD BY THE TRIBUNAL, THE ACTIVITIES OF THE ASSESSEE WOULD FALL WITHIN THE DEFINITION OF 'CHARITABLE PURPOSE' AS PER SECTION 2(15) OF THE ACT AND, THEREFORE, WOULD BE ENTITLED TO EXEMPTION UNDER SECTION 11 OF THE ACT. 6. IN VIEW OF THE ABOVE, WE ARE IN COMPLETE AGREEMENT WITH THE VIEW TAKEN BY THE TRIBUNAL THAT THE ACTIVITIES OF THE ASSESSEE IS RELATED TO EDUCATIO N AND, THEREFORE, IS ENTITLED TO I.T.A NO S.2872 & 3090 & CO NOS.317 - 318 /AH D/20 14 A.Y.2010 - 11 & 20 11 - 12 PAGE NO DCIT VS. MUDRA FOUNDAT ION FOR C OMMUNICATIONS RESEARCH & EDUCATION 8 EXEMPTION UNDER SECTION 11 OF THE ACT. AT THIS STAGE, IT IS REQUIRED TO BE NOTED THAT RIGHT FROM THE ASSESSMENT YEAR 1995 - 96 TILL 2008 - 09 THE ACTIVITIES OF THE ASSESSEE HAS BEEN CONSIDERED BY THE REVENUE AS EDUCATIONAL ACTI VITIES. CONSIDERING VARIOUS ACTIVITIES OF THE ASSESSEE AS NARRATED BY THE ASSESSING OFFICER IN PARAGRAPH NOS. 4 AND 5 OF THE ASSESSMENT ORDER AND CONSIDERING THE DECISION OF THE DIVISION BENCH OF THIS COURT IN THE CASE OF GUJARAT STATE CO - OPERATIVE UNION ( SUPRA) WE CONFIRM THE VIEW TAKEN BY THE TRIBUNAL THAT THE ACTIVITIES OF THE ASSESSEE - AHMEDABAD MANAGEMENT ASSOCIATION IS RELATED TO EDUCATION AND, THEREFORE, IS ENTITLED TO EXEMPTION UNDER SECTION 11 OF THE ACT AS CLAIMED.' 5.3.3 IT IS OBSERVED THAT THE SAME ISSUE CAME UP IN ASST. YEAR 2009 - 10 IN WHICH I HAVE HELD THAT THE ACTIVITY OF THE APPELLANT IS IN THE NATURE OF EDUCATION. 5.3.4 ACCORDINGLY, IT IS HELD THAT, THE ACTIVITY OF THE APPELLANT IS IN NATURE OF EDUCATION WHICH IS INCLUDED IN THE DEFINITION OF 'CHARITABLE PURPOSE' AS PER SECTION 2(15) OF THE I.T. ACT. 5.3.5 THEREFORE, FOLLOWING THE DECISION TAKEN IN EARLIER YEAR BY ME, IN APPELLANT'S OWN CASE, THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE BENEFIT U/S. 11(2) & 11(1)(A) OF THE I.T. ACT. REG ARDING THE DISALLOWANCE OF CAPITAL EXPENDITURE, THE LD. CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESSEE BY OBSERVING AS UNDER: - 6.2 I HAVE CONSIDERED THE ASSESSMENT ORDER AND THE SUBMISSIONS MADE BY THE APPELLANT. THE ASSESSING OFFICER HAS DISALLOWED THE CA PITAL EXPENDITURE WHICH HAS BEEN CLAIMED AS APPLICATION ON THE GROUND THAT BECAUSE OF APPLICATION TO PROVISO TO SECTION 2(15), THE ASSESSEE IS NOT ELIGIBLE FOR BENEFIT OF SECTION 11 & 12. AS IT HAS BEEN HELD THAT THE APPELLANT IS COVERED BY MAIN SECTION OF 2(15) IN GROUND NO.2 AND APPELLANT IS ELIGIBLE FOR BENEFIT OF SECTION 11 & 12. THE APPELLANT GETS BENEFIT OF CAPITAL EXPENDITURE AS APPLICATION OF FUND. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, LD. DEPARTMENT AL REPRESENTATIVE HAS SUPPORTED THE ORDER OF THE ASSESSING OFFICER. ON THE OTHER HAND, THE LD. COUNSEL HAS SUPPORTED THE ORDER OF THE LD. CIT(A) AND SUBMITTED THAT T HE CO - ORDINATE BENCH O F THE ITAT VIDE ITA NO. 1644/AHD/2014 FOR ASSESSMENT YEAR 2009 - 10 HAS DECIDED THE IDENTICAL ISSUES I N FAVOUR OF THE ASSESSSEE. 5. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD CAREFULLY. WE FIND THAT THE CO - ORDINATE BENCH OF THE ITAT AHMEDABAD VIDE AFORESAID ORDER HAS ADJUDICATED THE SIMILAR ISSUES IN I.T.A NO S.2872 & 3090 & CO NOS.317 - 318 /AH D/20 14 A.Y.2010 - 11 & 20 11 - 12 PAGE NO DCIT VS. MUDRA FOUNDAT ION FOR C OMMUNICATIONS RESEARCH & EDUCATION 9 FAVOUR OF THE ASSESSEE. THE RELE VANT PART OF THE DECISION IS R EPRODUCED AS UN D ER: - 11. WE FURTHER OBSERVE THAT HON BLE JURISDICTIONAL HIGH COURT IN THEIR ORDERS DATED 28 - 29/07/2015 VIDE SPECIAL LEAVE APPLICATION NO.6086/2015 HAS HELD THAT THE INSTITUTION RUN BY THE ASSESSEE S TRUST IS E STABLISHED FOR THE SOLE PURPOSE OF IMPARTING EDUCATION IN THE SPECIALIZED FIELD AND THE ACTIVITIES ARE COVERED UNDER THE PROVISIONS OF SECTION 2(15) OF THE ACT AND ACCORDINGLY IS ELIGIBLE FOR EXEMPTION U/S.11(1)(A) OF THE ACT. WE FURTHER FIND THAT REVENUE S SLP FILED BEFORE THE HON BLE APEX COURT AGAINST THE JUDGMENT OF HON BLE JURISDICTIONAL HIGH COURT REFERRED ABOVE ALSO STANDS DISMISSED BY THE ORDER DATED 10/05/2016 IN SUPREME COURT IN CIVIL APPEAL NO.5040 OF 2016. 12. WE THEREFORE RESPECTFULLY FOLLOWING THE JUDGMENT OF JURISDICTIONAL HIGH COURT AND IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE ARE OF THE CONSIDERED VIEW THAT ASSESSEE ACTIVITIES OF IMPARTING EDUCATION ARE CHARITABLE IN NATURE AS PROVIDED IN SECTION 2(15) OF THE ACT. WE THEREFORE FIND N O REASON TO INTERFERE WITH THE FINDINGS OF LD.CIT(A) AND UPHELD THE SAME. ACCORDINGLY GROUND NO.1, 2 AND 3 OF THE REVENUE S APPEAL ARE DISMISSED. REGARDING THE DISALLOWANCE OF CAPITAL EXPEND IT URE, T H E CO - ORDINATE B ENCH OF THE ITAT VIDE AFORESAID ORDER H AS ALSO DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE. THE RELEVANT PART OF THE DECISION IS REPRODUCED AS UNDER: - 15. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US. WE HAVE DISMISSED THE REVENUE S GROUND NO.1,2 AND 3 BY FOLLOWING THE JUDGMENT OF JURISDICTIONAL HIGH COURT IN ASSESSEE S OWN CASE AND ACCEPTED THAT ITS ACTIVITIES OF PROVIDING EDUCATION ARE OF CHARITABLE IN NATURE AND ARE COVERED UNDER THE PROVISION OF SECTION 2(15) OF THE ACT AND THEREFORE THE EXPENDIT URE INCURRED BY THE ASSESSEE TOWARDS ATTAINMENT OF THE OBJECTIVES OF PROVIDING EDUCATION ARE TO BE CONSIDERED TO HAVE BEEN APPLIED FOR CHARITABLE PURPOSE. 16. WE FURTHER OBSERVE THAT PROVISION OF SECTION 11(1)(A) CONTEMPLATES THAT, INCOME DERIVED FROM PR OPERTY (WHICH IN THIS CASE IS FROM RUNNING EDUCATIONAL INSTITUTION) HELD UNDER TRUST WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSE TO THE EXTENT, WHICH SUCH INCOME IS APPLIED TO SUCH PURPOSES IN INDIA AND WHETHER ANY SUCH INCOME IS ACCUMULATED OR SET APART F OR APPLICATION TO SUCH PURPOSES IN INDIA TO THE EXTENT TO WHICH THE INCOME SO ACCUMULATED OR SET APART WOULD NOT IN EXCESS OF THE 15% OF THE INCOME FROM SUCH PROPERTY THAN SUCH INCOME IS NOT TO BE INCLUDED IN THE TOTAL INCOME OF THE PREVIOUS YEAR OF THE PERSON IN RESPECT OF SUCH INCOME. 17. IN LIGHT OF ABOVE PROVISION, LET US EXAMINE THE ISSUE THAT, WHETHER THE CAPITAL EXPENDITURE OF RS.1,34,89,333/ - INCURRED BY THE ASSESSEE IS ELIGIBLE FOR EXEMPTION U/S.11(1)(A) OF THE ACT. WE FIND THAT ASSESEE INCURRED CAPITAL EXPENDITURE OF RS.1,34,89,333/ - AND CLAIMED IT AS AN EXPENDITURE AGAINST THE INCOME. WE FURTHER FIND THAT ASSESSEE HAS ADDED BACK THE DEPRECIATION OF RS.61,07,021/ - DEBITED TO THE PROFIT AND LOSS ACCOUNT TO THE INCOME IN THE COMPUTATION OF INCOME. THERE IS NO DISPUTE TO THE FACTS THAT ASSESSEE IS NOT CARRYING ANY OTHER ACTIVITIES OTHER THAN PROVIDING EDUCATION. IT IS ALSO NOT DISPUTED THAT THE CAPITAL EXPENDITURE OF RS.1,34,89,333/ - HAS BEEN MADE FOR PURCHASING ASSET TO BE USED FOR THE PURPOSE OF PR OVIDING EDUCATION. WE ARE THEREFORE OF THE VIEW THAT THE CAPITAL EXPENDITURE INCURRED AT RS.1,34,89,333/ - SQUARELY FALLS IN THE PROVISION OF SECTION 11(1)(A) OF THE ACT WHICH PROVIDES FOR DEDUCTION AGAINST THE INCOME. OUR VIEW FURTHER FIND SUPPORT FROM T HE JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF SATYA VIJAY PATEL HINDU DHARAMSHALA TRUST VS. CIT 86 ITR 683 WHEREIN HON BLE COURT OBSERVED AS FOLLOWS: I.T.A NO S.2872 & 3090 & CO NOS.317 - 318 /AH D/20 14 A.Y.2010 - 11 & 20 11 - 12 PAGE NO DCIT VS. MUDRA FOUNDAT ION FOR C OMMUNICATIONS RESEARCH & EDUCATION 10 AS REGARDS THE CONTENTION WHETHER THE WHOLE OF THE NET SURPLUS INCOME OF THE TRUST PROPERTIE S APPLIED IN CONSTRUCTING THE NEW DHARAMSHALA OR ONLY EQUIVALENT TO 25 PER CENT OF THE NET INCOME WOULD BE EXEMPT FROM TAX, THE DOMINANT OBJECT OF CREATING THE TRUST BEING TO ESTABLISH DHARAMSHALA FOR THE BENEFIT OF HINDUS, THE UTILISATION OF NET SURPLUS I NCOME OF THE TRUST PROPERTIES IN THE CONSTRUCTION OF THE NEW DHARAMSHALA, EVEN IF IT EXCEEDED TWENTY - FIVE PER CENT OF THE NET INCOME OF THE TRUST PROPERTIES, COULD NOT BE SAID TO BE APPLICATION TO PURPOSES OTHER THAN THE CHARITABLE PURPOSES OF THE TRUST. S O LONG AS THE APPLICATION OF THE NET SURPLUS INCOME OF THE TRUST PROPERTIES TO THE CONSTRUCTION OF THE NEW DHARAMSHALA COULD NOT BE SAID TO BE OUTSIDE THE PURPOSES OF THE TRUST, AND INDEED IT COULD NOT BE, FOR, OTHERWISE IT WOULD AMOUNT TO BREACH OF TRUST WHICH IT WAS CLEARLY NOT, AND WHICH EVEN THE REVENUE DID NOT ALLEGE, IT MUST BE HELD THAT THE APPLICATION WAS TO THE CHARITABLE PURPOSES OF THE TRUST. THE WHOLE OF THE NEW SURPLUS INCOME OF THE TRUST PROPERTIES WAS, THEREFORE, CLEARLY APPLIED TO THE CHARIT ABLE PURPOSES FOR WHICH THE TRUST PROPERTIES WERE HELD BY THE TRUSTEES AND WAS ACCORDINGLY EXEMPT FROM TAX UNDER SECTION 11, SUB - SECTION (1), CLAUSE (A).' 18. WE THEREFORE RESPECTFULLY FOLLOWING THE JUDGMENT OF JURISDICTIONAL HIGH COURT AND IN THE GIVEN F ACTS AND CIRCUMSTANCES OF THE CASE FIND NO REASON TO INTERFERE IN THE FINDINGS OF LD.CIT(A) WHO HAS DELETED DISALLOWANCE BY OBSERVING AS FOLLOWS: 6.2 I HAVE CONSIDERED THE ASSESSMENT ORDER AND THE SUBMISSIONS MADE BY THE APPELLANT. SINCE THE APPELLANT WAS CLAIMING EXEMPTION UNDER SECTION 11 OF THE ACT IN RESPECT OF INCOME APPLIED FOR CHARITABLE PURPOSES, IN THE RETURN OF INCOME, THE APPELLANT HAD CLAIMED THE EXEMPTION IN RESPECT OF CAPITAL EXPENDITURE OF RS.1,34,89,333/ - AS APPLICATION OF INCOME FOR CHARITA BLE PURPOSES. THE AO HAS HELD THAT AS PER NORMAL ACCOUNTING PRINCIPLES THE EXPENSES HAVE TO BE SPREAD OVER THE USEFUL LIFE OF THE FIXED ASSETS OR EXPENSES OF CAPITAL IN NATURE TO ARRIVE AT TRUE AND CORRECT OF ANY INSTITUTION. THE HON'BLE SUPREME COURT IN T HE CASE OF S.RM.M.CT.M. TIRUPPANI TRUST 96 TAXMAN 635 WHEREBY EXPENDITURE INCURRED FOR CONSTRUCTION OF BUILDING WAS CONSIDERED AS HAVING BEEN APPLIED FOR CHARITABLE PURPOSES AND SUCH INCOME APPLIED WAS HELD TO BE EXEMPT. FURTHER, THE HON'BLE GUJARAT HIGH C OURT IN THE CASE OF SATYA VIJAY PATEL HINDU DHARAMSHALA TRUST(SUPRA) HAS ALSO HELD THAT INCOME APPLIED FOR CONSTRUCTION OF NEW DHARMASHALAS WAS APPLICATION OF INCOME FOR CHARITABLE PURPOSES AND ACCORDINGLY, INCOME SO APPLIED WAS EXEMPT UNDER SECTION 11[1] (A) OF THE ACT. ACCORDINGLY, CONSIDERING THE FACT THAT THE APPELLANT IS ELIGIBLE TO EXEMPTION UNDER SECTION 11 TO 13 OF THE ACT AND FOLLOWING THE RATIO LAID DOWN BY HON'BLE SUPREME COURT AND THE GUJARAT HIGH COURT, THE ADDITION OF RS.1,34,89,333/ - BEING C APITAL EXPENDITURE INCURRED BY APPELLANT DURING THE YEAR IS HEREBY DELETED. HOWEVER, SINCE NET ADDITION MADE BY THE AO AFTER GRANTING DEPRECIATION TO THE APPELLANT IS OF THE ORDER OF RS.73,82,312/ - THE SAME IS DIRECTED TO BE DELETED. RESPECTFULLY FOLLOWI NG THE DECISION OF THE CO - ORDINATE BENCH OF THE ITAT, WE UPHOLD THE FINDINGS OF THE LD. CIT(A). THEREFORE, THE APPEAL OF THE REVENUE IS DISMISSED. CO NO. 317/AHD/2014 6 . THE ASSESSEE HAS RAISED FOLLOWING GROUNDS IN CROSS OBJECTION: - 1. THE CROSS - OB JECTOR SUBMITS THAT IN THE EVENT THE ADDITION TO TOTAL INCOME ON ACCOUNT OF CAPITAL EXPENDITURE INCURRED BY THE ASSESSEE IS CONFIRMED, THE AMOUNT OF RS.97,25,801/ - HAS TO BE REDUCED BY THE AMOUNT OF DEPRECIATION OF RS.68,68,177/ - AS THE SAME WAS ADDED B ACK TO THE COMPUTATION OF TOTAL INCOME BY THE ASSESSEE SINCE IT WAS CLAIMING CAPITAL EXPENDITURE ON PURCHASE OF FIXED ASSETS UNDER SECTION 11(1)(A) OF I.T.A NO S.2872 & 3090 & CO NOS.317 - 318 /AH D/20 14 A.Y.2010 - 11 & 20 11 - 12 PAGE NO DCIT VS. MUDRA FOUNDAT ION FOR C OMMUNICATIONS RESEARCH & EDUCATION 11 THE ACT AS APPLICATION OF INCOME. IT IS SUBMITTED THAT IT BE SO HELD NOW AND ONLY NET AMOUNT SHOULD BE CO NSIDERED AS DISALLOWANCE. 2. THE HON'BLE CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.3,43,475/ - I.E. THE SALE CONSIDERATION RECEIVED ON ACCOUNT OF ASSETS SOLD DURING THE YEAR UNDER CONSIDERATION CONSIDERING SUCH AMOUNT AS THE INCOM E OF THE ASSESSEE. IT IS SUBMITTED THAT IT BE SO HELD NOW. 7. IN RESPECT OF CROSS OBJECTION OF THE ASSESSEE PERTAINING TO GROUND NO. 1 FOR THE ASSESSMENT YEAR 2010 - 11 AND ASSESSMENT YEAR 201 1 - 1 2 , WE HAVE NOTICED THAT T H E CO - ORDINATE BENCH OF TH E I TAT HAS ADJUDICATED THE SIMILAR ISSUE AND HELD THAT CROSS OBJECTION BECAME INFRUCTUOUS SINCE THE DEDUCTION OF CAPITAL EXPENDITURE WAS ALLOWED U/S. 11(I)(A) OF THE ACT. THE RELEV ANT PART OF THE DECISION IS REPRODU CED AS UNDER: - 20. NOW WE TAKE UP ASSESSEE S CROS S OBJECTION IN ITA NO.236/AHD/2014 FOR A.Y.2009 - 10. THROUGH GROUND NO.1 ASSESSEE HAS TAKEN ALTERNATE PLEA THAT IN CASE REVENUE GROUND NO.4 IS ALLOWED AND DISALLOWANCE OF RS.1,34,89,333/ - IS CONFIRMED THEN THE ASSESSEE SHOULD BE ALLOWED TO CLAIM DEPRECIATI ON OF RS.6,10,021/ - . WE FIND THAT DURING ADJUDICATION OF REVENUE S GROUND NO.4, WE HAVE GIVEN A FINDING THAT CAPITAL EXPENDITURE OF RS.1,34,89,333/ - IS ELIGIBLE FOR DEDUCTION U/S.11(1)(A) OF THE ACT AGAINST THE INCOME AS THE CAPITAL EXPENDITURE FOR PURCHA SE OF FIXED ASSET HAVE BEEN APPLIED FOR ACHIEVING THE OBJECTIVE OF IMPARTING EDUCATION BEING CHARITABLE IN NATURE. IN THESE CIRCUMSTANCES ASSESSEE S CROSS OBJECTION BECOME INFRUCTUOUS AND DESERVES TO BE DISMISSED. RESPECTFULLY FOLLOWING THE DECISION OF T HE CO - ORDINATE BENCH, THE CROSS OBJECTION OF THE ASSESSEE ON THE SIMILAR ISSUE HAS COME INFRUCTUOUS, THEREFORE , THE APPEAL OF THE ASSESSEE IS DISMISSED ON THIS ISSUE . 8. IN RESPECT OF SECOND CROSS OBJECTION FILED BY THE ASSESSEE PERTAINING TO ASSESSMENT YEAR 2010 - 11, WE FIND THAT THE CO - ORDINATE BENCH HAS DECID ED THE IDENTICAL ISSUE AGAINST T H E ASSESSEE IN THE AFORESAID ORDER BY HOLDING THAT THE ASSESSEE HAS DEBITED IMPUGNED AMOUNT IN THE PROFIT AND LOSS ACCOUNT THEREBY REDUCING NET I.T.A NO S.2872 & 3090 & CO NOS.317 - 318 /AH D/20 14 A.Y.2010 - 11 & 20 11 - 12 PAGE NO DCIT VS. MUDRA FOUNDAT ION FOR C OMMUNICATIONS RESEARCH & EDUCATION 12 SURPLUS/INCOME EARNED FROM CHARITABLE ACT IVITIES. THEREFORE, HELD THAT T H E SA LE OF FIXED ASSET NEEDS TO BE ADDED BACK TO THE INCOME. RESPECTFULLY, FOLLOWING THE DECISION OF THE CO - ORDINATE BENCH ON THE SIMILAR ISSUE, THE CROSS OBJECTION OF THE ASSESSEE IS DISMISSED FOR THE Y EAR UNDER CONSIDERATION. 9. IN THE RESULT, BOTH THE APPEAL S OF THE REVENUE AND BOTH THE CROSS OBJECTION S FILED BY THE ASSESSEE ARE DISMISSED . ORDER PR ONOUNCED IN THE OPEN C OURT ON 12 - 10 - 201 7 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SING H ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 12 /10 /2017 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,