ITO(E), New Delhi V. M/s Calorex Foundation, New Delhi

ITA 2876/DEL/2010

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 97839 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 4 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 28-10-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 09-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KESANG Y SHIRPA
• Assessee Lawyers: VED JAIN SHRI ASHISH GOEL CA S; PRANJAL SRI
• Keywords: Capital asset; Depreciation; Charitable institution; Question of law; Capital receipt; Capital expenditure
• Section: 142(1); 133(6); 80G; 12A; 12AA; 32; 131; 68; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B , NEW DELHI) BEFORE SHRI N. K. SAINI, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER I.T.A. NO.2876 /DEL/202010 ASSESSMENT YEAR : 2006-07 ITO, (E), VS. M/S. CALOREX FOUNDATION, TRUST WARD III, LAXMI NAGAR B-7/122A, SAFDARJUNG ENCLAVE, DISTT. CENTRE, DELHI NEW DELHI - 110029 GIR / PAN:AAATC0288L (APPELLANT) (RESPONDENT) APPELLANT BY : MS. KESANG Y SHIRPA, SR. DR RESPONDENT BY : SHRI VED JAIN, SHRI ASHISH GOEL, CA S AND SHRI PRANJAL SRIVASTAVA, ADV. DATE OF HEARING : 28.10.2015 DATE OF PRONOUNCEMENT : 04.11.2015 ORDER PER KULDIP SINGH, JM: THE APPELLANT, ITO (E), TRUST WARD III, NEW DELHI BY FILING THE PRESENT APPEAL UNDER I. T. ACT, 1961 (HEREINAFTER R EFERRED TO AS THE ACT) SOUGHT TO SET ASIDE THE ORDER DATED 24.03.2010 PASS ED BY LD. CIT(A) XXI, NEW DELHI QUA THE ASSESSMENT YEAR 2006-07 ON THE GR OUNDS INTER ALIA THAT:- 1. ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE , THE LD.CIT (A) HAS ERRED IN HOLDING THAT THE ASSESSEE IS ENTITLED TO DEPRECIATION ON ASSETS WHEN, IN THE FIRST PLACE, THE ASSESSEE HAS A LREADY CLAIMED, AS APPLICATION OF INCOME, THE COMPLETE AMOUNT SPENT ON PURCHASE OF THE SAID ASSETS AND, HENCE, TECHNICALLY CLAIMED 100% DE DUCTION IN THE INITIAL STAGES ITSELF. BY ALLOWING THE CLAIM OF DEP RECIATION THE LD. CIT(A) HAS, IN EFFECT, GRANTED DOUBLE BENEFIT TO TH E ASSESSEE AND HENCE THE DECISION IS ERRONEOUS AND CONTRARY TO THE DECISION OF ITA NO.2876/DEL/2010 2 HON'BLE SUPREME COURT IN THE CASE OF ESCORTS LTD. V S. UNION OF INDIA (1993) 199 ITR 43. 2. ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN HOLDING THAT INCOME ON SALE OF CAPITAL ASSETS HAS TO BE TAKEN AT NET VALUE INSTEAD OF GROSS VALUE AMOUNT AT RS.84,0001- AS FULL VALUE OF COST OF CAPITAL ASSETS ALREADY STOOD ALLOW ED TO THE ASSESSEE AS APPLICATION ON INCOME. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) HAS ERRED IN HOLDING THAT NO ADDITION COULD BE MADE U/S 68 OF THE ACT IN RESPECT OF CORPUS DONATIONS AMOUNTING TO RS. 25, 32,000/- DESPITE FAILURE OF THE ASSESSEE TO DISCHARGE THE ONUS CAST REGARDING PROVING THE GENUINENESS OF THE SAID DONATIONS. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) HAS ERRED IN HOLDING THAT CORPUS DONATIONS AT RS. 2 5,32,000/- WERE ALREADY TAKEN AS INCOME BY THE ASSESSEE IGNORING TH E FACT THAT THE SAME WERE NOT CONSIDERED AS REVENUE RECEIPTS BUT AS CAPITAL RECEIPTS BY THE ASSESSEE AND HENCE NOT ACCOUNTED FOR IN THE INCOME & EXPENDITURE ACCOUNT FOR A. Y. 06-07. 2. BRIEFLY STATED, THE FACTS OF THIS CASE ARE: DURI NG THE PROCESSING OF RETURN OF INCOME FILED BY THE ASSESSEE QUA THE ASSE SSMENT YEAR 2006-07, THE CASE WAS SUBJECTED TO SCRUTINY AND NOTICES ALONG WI TH QUESTIONNAIRE U/S 143(2) AND 142(1) WERE SERVED UPON THE ASSESSEE WHO PUT APPEARANCE THROUGH SHRI SUNIL GUPTA, CA WHO HAS ATTENDED THE P ROCEEDINGS, FILED DETAILS AND DISCUSSED THE CASE. 3. THE ASSESSEE IS A TRUST REGISTERED U/S 12A (A) O F THE ACT W.E.F. 27.02.1996 TO AVAIL EXEMPTION U/S 80G VALID UP TO 3 1.03.2005. THE TRUST IS RUNNING A SCHOOL IN THE NAME AND STYLE OF DELHI PUB LIC SCHOOL AT AHMEDABAD FOR PROVIDING EDUCATION, RESEARCH, RELIEF TO POOR, MEDICAL RELIEF AND ADVANCEMENT OF ANY OTHER OBJECTS OF GENERAL PUBLIC UTILITY, ALSO TO OPEN, RUN ITA NO.2876/DEL/2010 3 AND CONTINUOUS SCHOOLS FOR THE EDUCATION OF CHILDRE N TO PROMOTE HUMAN WELFARE AND TO SUPPORT INSTITUTION SUCH AS ORPHANAG E, OLD AGE HOME ETC. THE ASSESSEE CLAIMED DEPRECIATION TO THE EXTENT OF RS.2 ,07,88,207/- AND CLAIMED UTILIZATION OF FUNDS,FOR PURCHASE OF FIXED ASSETS T O THE EXTENT OF RS.10,58,55,279/- WHICH WOULD AMOUNT TO DOUBLE DEDU CTION WHILE COMPUTING EXEMPTION U/S 11 OF THE ACT WHEREAS, ON T HE SAME ASSETS, THE ASSESSEE WAS GRANTED APPLICATION OF CAPITAL EXPENDI TURE ON THIS ACCOUNT AND THE ASSESSEE HAS FURTHER CLAIMED APPLICATION OF DEP RECIATION AMOUNTING TO RS.2,07,88,207/- WHICH IS NOT ALLOWABLE. THE ASSES SEE IN RESPONSE TO THE QUERY RAISED BY THE A.O., STATED THAT THE ASSESSEE HAS CHARGED AN AMOUNT OF RS.2,18,48,560/- IN THE BOOKS OF ACCOUNT AS DEPRECI ATION AND WHILE MAKING COMPUTATION OF INCOME FOR THE INCOME TAX PURPOSES, THE SAME HAS BEEN ADDED BACK AND AN AMOUNT OF RS.2,07,88,027/- HAS BE EN CLAIMED AS PER THE ACT, AND FURTHER THE AMOUNT OF RS.15,76,86,796/- IS NOT THE AMOUNT OF UTILIZATION OF FUNDS TOWARDS PURCHASE OF ASSETS, RA THER IT IS THE AMOUNT OF FIXED ASSET AS ON 31.03.2006 AS CAN BE SEEN FROM A CURSORY LOOK AT THE BALANCE SHEET OF THE ASSESSEE ONLY. THE ASSESSEE H AS ALSO CLAIMED AN AMOUNT OF RS.10,47,82,193/- AS UTILIZATION OF ITS FUNDS ON ACCOUNT OF PURCHASE OF FIXED ASSETS. THE A.O. AFTER EXAMINING THE SUBMISSI ONS MADE BY THE ASSESSEE IN THE LIGHT OF LAW LAID DOWN BY HON'BLE SUPREME CO URT AND HON'BLE HIGH COURT, DISALLOWED THE DEPRECIATION OF RS.2,07,88,02 7/- CLAIMED BY THE ASSESSEE. 4. THE ASSESSEE DURING THE YEAR UNDER ASSESSMENT HA D INCOME FROM SALE OF ASSET AND HAS OFFERED AN INCOME OF RS.13,605/-. THE CLAIM OF THE ASSESSEE ON ACCOUNT OF CAPITAL EXPENDITURE WAS BEING ALLOWED AND AS SUCH THE ENTIRE SALE PROCEEDS BE TAKEN AS INCOME OF THE ASSESSEE SI NCE THE SALE PROCEEDS OF ITA NO.2876/DEL/2010 4 THE ASSETS WAS RS.84,000/- AGAINST WHICH A PROFIT O F RS.13,605/- HAS BEEN EARNED THE AMOUNT OF RS.70,395/- (RS.84,000/- RS .13,605/- = RS.70,395/-) IS ADDED TO THE INCOME OF THE ASSESSEE. 5. THE ASSESSEE BEING IN RECEIPT OF CORPUS DONATION OF RS.25,32,000/- DURING THE YEAR UNDER CONSIDERATION HAS FILED CONFI RMATION LETTER IN RESPECT OF CORPUS DONORS WITH THEIR ADDRESSES. IN ORDER TO VE RIFY THE GENUINENESS AND CREDITWORTHINESS OF THE CORPUS DONATIONS, NOTICES W ERE ISSUED TO 20 PERSONS / PARTIES DULY DESCRIBED IN THE ORDER OF THE A.O. AND IN ALL THE CASES, NO REPLY HAS BEEN RECEIVED TILL DATE AND THEREAFTER, ASSESSE E WAS ASKED TO PROVE THE GENUINENESS AND CREDITWORTHINESS OF CORPUS DONORS B UT HE HAS NOT BROUGHT OUT ANY EVIDENCE TO SUPPORT THIS FACT TILL DATE AND AS SUCH AN AMOUNT OF RS.25,32,000/- AMOUNTED TO UNDISCLOSED INCOME AND C ONSEQUENTLY MADE THE ADDITION. 6. THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER BEF ORE LD. CIT(A) BY WAY OF APPEAL WHICH HAS BEEN ALLOWED VIDE IMPUGNED ORDER DATED 24.03.2010. FEELING AGGRIEVED, THE REVENUE HAS COM E UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEAL. 7. THE LD. D.R. CHALLENGING THE APPELLATE ORDER, CO NTENDED THAT THIS IS A CASE OF DOUBLE DEDUCTION CLAIMED BY THE ASSESSEE AN D RELIED UPON THE ORDER PASSED BY A.O. 8. ON THE OTHER HAND, LD. A.R. REPELLED THE ARGUMEN T ADDRESSED BY LD. D.R. AND RELIED UPON THE ORDER PASSED BY LD. CIT(A) BY CONTENDING INTER ALIA THAT THE ASSESSEES CASE IS DULY COVERED BY TH E JUDGEMENT DELIVERED BY HON'BLE JURISDICTIONAL HIGH COURT CITED AS DIRECTOR OF INCOME TAX VS VISHWA JAGRITI MISSION, 73 DTR (DEL.) 195 AND THE J UDGEMENT DELIVERED BY HON'BLE PUNJAB & HARYANA HIGH COURT ENTITLED AS ACIT VS TINY ITA NO.2876/DEL/2010 5 TOTS EDUCATION SOCIETY IN I.T.A.NO. 3182/DEL/2008 AND PRAYED FOR DISMISSAL OF THE APPEAL. 9. GROUNDS NO.1 & 2: GROUNDS NO.1 AND 2 ARE INTERLINKED AND MORE SO, GROUND NO.2 IS AN EXTENSION OF GROUND NO.1. TO DECIDE THE CONTROVERS Y AT HAND, THE FIRST QUESTION ARISES FOR DETERMINATION IN THIS CASE IS A S TO WHETHER LD. CIT(A) HAS ERRED IN HOLDING THE ASSESSEE ENTITLED FOR DEPRECIA TION ON ASSETS WHEN IN THE FIRST CASE, THE ASSESSEE HAS ALREADY CLAIMED AS APP LICATION OF INCOME OR THAT THE COMPLETE AMOUNT SPENT ON PURCHASE OF THE SAID A SSETS AND AS SUCH CORRECTLY CLAIMED 100% DEDUCTION IN THE INITIAL STA GE ITSELF AND BY DOING O, LD. CIT(A) HAS IN FACT GRANTED DOUBLE BENEFIT TO TH E ASSESSEE. 10. UNDISPUTEDLY, THE ASSESSEE IS A TRUST REGISTERE D U/S 12A OF THE ACT AND HAS BEEN GRANTED EXEMPTION U/S80G OF THE ACT MEANIN G THEREBY APPELLANTS INCOME IS EXEMPTED UNDER THE PROVISIONS OF SECTION 11 OF THE ACT. THE ASSESSEE HAD PURCHASED SOME FIXED ASSETS IN THE EAR LIER YEAR AND CLAIMED IT TO BE EXEMPTED U/S 11 AS APPLICATION OF INCOME FOR CHA RITABLE PURPOSES ON THE GROUND THAT THE SAME WAS USED FOR CHARITABLE PURPOS ES. DURING THE YEAR UNDER ASSESSMENT, THE ASSESSEE HAS CLAIMED AN AMOUN T OF RS.2,07,88,207/- AS DEPRECIATION. 11. LD. CIT(A) ALLOWED THE DEPRECIATION BY RETURNIN G THE FOLLOWING OBSERVATIONS: THE APPELLANT HAD PURCHASED CERTAIN FIXED ASSETS IN EARLIER YEARS & SINCE THE SAME WERE USED FOR CHARITABLE PUR POSES, IT CLAIMED THE SAME TO BE EXEMPT U/S 11 AS APPLICATION OF INCO ME FOR CHARITABLE PURPOSES. THE ASSESSEE HAD ALSO BEEN CHARGING I THE DEPRECIATION ON THE SAME FIXED ASSETS IN ITS BOOKS OF ACCOUNTS. DU RING THE YEAR THE ASSESSEE HAS CLAIMED AN AMOUNT OF RS.2,07,88,207/- AS DEPRECIATION AT THE RATES APPLICABLE AS PER INCOME TAX RULES. TH E AO SEEMS TO HAVE GOT CONFUSED BETWEEN THE TWO THINGS, THE INCOM E CHARGEABLE TO ITA NO.2876/DEL/2010 6 TAX, AND THE CONDITIONS, FULFILLMENT OF WHICH MAKE THE SAID INCOME EXEMPT FROM TAX. THE AO HAS FAILED TO APPRECIATE TH E DIFFERENCE BETWEEN THE INCOME CHARGEABLE TO TAX, AND THE APPLI CATION OF INCOME WHICH IS A CONDITION FOR THE PURPOSES OF EXEMPTION UNDER SECTION \ 11. APPLICATION OF INCOME IS NOT COMPUTATION OF INCOME AND THE PROVISION OF APPLICATION OF INCOME WOULD COME INTO PLAY ONLY AFTER THE INCOME CHARGEABLE TO TAX IS DETERMINED. THEREFORE, THE QUE STION WHETHER DEPRECIATION IS TO BE ALLOWED OR NOT HAS NOTHING TO DO WITH THE APPLICATION OF INCOME. THE TOTAL AMOUNT OF INCOME H AS TO BE COMPUTED IN THE MANNER LAID DOWN UNDER THE ACT. INCOME HAS T O BE UNDERSTOOD IN THE GENERAL SENSE AND DEPRECIATION IS ONE OF THE DEDUCTIONS RECOGNIZED UNDER LAW & THERE IS NO REASON FOR NOT A LLOWING THE SAME TO THE APPELLANT. THE CASE OF ESCORTS LTD VS. UNION OF INDIA, RELIED UPON BY THE AO, IS IN RESPECT OF SECTION 35(2)(IV), WHICH SPECIFICALLY DISALLOWS THE DEDUCTION U/S.32, WHEREAS, THERE IS N O SUCH EXPLICIT PROVISION IN RESPECT OF EXEMPTION CLAIMS U/S. 11 AN D 12. 11.1 ON THE OTHER HAND, THE A.O. DECIDED THE MATTER BY RELYING UPON THE JUDGEMENT OF HON'BLE SUPREME COURT CITED AS ESCORTS LIMITED VS UNION OF INDIA 199 ITR 43. 12. HOWEVER, LD. CIT(A) RELIED UPON THE JUDGEMENT C ITED AS ACIT VS TINY TOTS EDUCATION SOCIETY (SUPRA) WHEREIN, IDENTI CAL ISSUE HAS ARISEN BEFORE HON'BLE PUNJAB & HARYANA HIGH COURT AND THE HON'BLE HIGH COURT HAS HELD AS UNDER:- CHARITABLE PURPOSES- APPLICATION OF INCOME TO CHA RITABLE OBJECTS- DEPRECIATION- ASSESSEE CLAIMING DEPRECIATI ON BE REDUCED FROM INCOME FOR DETERMINING PERCENTAGE OF FUNDS TO BE APPLIED FOR PURPOSES OF TRUST PERMISSIBLE NOT A CASE OF DOU BLE BENEFIT I. T. ACT, 1961 SECTION 11. THE ASSESSEE WAS A CHARITABLE INSTITUTION REGISTER ED U/S 12AA OF THE I. T. ACT, 1961. IN ITS ACCOUNTS, THE ASSESSEE CALCULATED DEPRECIATION FOR THE PURPOSE OF SHOWING THE AMOUNT UTILIZED. THE A.O. DISALLOWED THE DEPRECIATION ON THE GROUND THAT THE INCOME OF THE ASSESSEE BEING EXEMPT, CLAIM FOR DEPRECIATION WOULD AMOUNT TO TAKING OF DOUBLE BENEFIT. THE CIT(A) HELD THAT DEDUCTION FOR COMPUTING ITA NO.2876/DEL/2010 7 INCOME TO PRESERVE THE CORPUS OF THE TRUST WAS PERM ISSIBLE AND DID NOT AMOUNT TO DOUBLE BENEFIT. THIS VIEW WAS UPHELD BY THE TRIBUNAL OBSERVING THAT APPLICATION OF INCOME WAS NOT COMPUT ATION OF INCOME OF THE CHARITABLE INSTITUTION. THEREFORE, THE QUES TION WHETHER DEPRECIATION WAS TO BE ALLOWED OR NOT HAD NOTHING T O DO WITH THE APPLICATION OF INCOME. THE INCOME WAS ALWAYS TO BE COMPUTED ON COMMERCIAL PRINCIPLES AND AS PER THE SYSTEM OF ACCO UNTING FOLLOWED BY THE ASSESSEE, SUBJECT ALWAYS TO THE STATUTORY PR OVISIONS. ON APPEAL: HELD, DISMISSING THE APPEAL, THAT THE ASSESSEE WAS NOT CLAIMING DOUBLE DEDUCTION ON ACCOUNT OF DEPRECIATION. THE I NCOME OF THE ASSESSEE BEING EXEMPT, THE ASSESSEE WAS ONLY CLAIMI NG THAT DEPRECIATION SHOULD BE REDUCED FROM THE INCOME FOR DETERMINING THE PERCENTAGE OF FUNDS WHICH HAD TO BE APPLIED FOR THE PURPOSES OF THE TRUST. IT COULD NOT BE HELD THAT DOUBLE BENEFIT WA S GIVEN IN ALLOWING THE CLAIM FOR DEPRECIATION FOR COMPUTING INCOME FOR PURPOSES OF SECTION 11. 13. IDENTICAL ISSUE CAME UP BEFORE THE HON'BLE JURI SDICTIONAL HIGH COURT IN THE CASE CITED AS DIRECTOR OF INCOME TAX VS VSHW A JAGARITI MISSION 73 DTR (DEL.) 195 WHERE, THE HON'BLE HIGH COURT VIDE O RDER DATED 29 TH MARCH 2012 HAS HELD AS UNDER: 11. THE REVENUE IS IN APPEAL AGAINST THE AFORESAID ORDER OF THE TRIBUNAL. WE ARE NOT INCLINED TO ADMIT THE APPEAL A ND FRAME ANY SUBSTANTIAL QUESTION OF LAW SINCE NONE ARISES FROM THE ORDER OF THE TRIBUNAL. THERE IS NO DISPUTE THAT THE ASSESSEE HAS BEEN GRANTED REGISTRATION UNDER SECTION 12AA VIDE ORDER DATED 11 TH SEPTEMBER, 2009 AND, THEREFORE, IT WAS ENTITLED TO EXEMPTION O F ITS INCOME UNDER SECTION 11. THE ONLY QUESTION IS WHETHER THE INCOME OF THE ASSESSEE SHOULD BE COMPUTED ON COMMERCIAL PRINCIPLES AND IN DOING SO WHETHER DEPRECIATION ON FIXED ASSETS UTILIZED FOR T HE CHARITABLE PURPOSES SHOULD BE ALLOWED. ON THIS ISSUE, THERE SE EMS TO BE A CONSENSUS OF JUDICIAL THINKING AS IS SEEN FROM THE AUTHORITIES RELIED UPON BY THE CIT(APPEALS) AS WELL AS THE TRIBUNAL. I N CIT VS. THE SOCIETY OF THE SISTERS OF ST. ANME (SUPRA), AN IDEN TICAL QUESTION AROSE BEFORE THE KARNATAKA HIGH COURT. THERE THE SOCIETY WAS RUNNING A ITA NO.2876/DEL/2010 8 SCHOOL IN BANGALORE AND WAS ALLOWED EXEMPTION UNDER SECTION 11. THE QUESTION AROSE AS TO HOW THE INCOME AVAILABLE F OR APPLICATION TO CHARITABLE AND RELIGIOUS PURPOSES SHOULD BE COMPUTE D. JAGANNATHA SETTY, J. SPEAKING FOR THE DIVISION BENCH OF THE CO URT HELD THAT INCOME DERIVED FROM PROPERTY HELD UNDER TRUST CANNOT BE TH E 'TOTAL INCOME' AS DEFINED IN SECTION 2(45) OF THE ACT AND THAT THE WORD 'INCOME' IS A WIDER TERM THAN THE EXPRESSION 'PROFITS AND GAINS O F BUSINESS OR PROFESSION'. REFERENCE WAS MADE TO THE NATURE OF DE PRECIATION AND IT WAS POINTED OUT THAT DEPRECIATION WAS NOTHING BUT D ECREASE IN THE VALUE OF PROPERTY THROUGH WEAR, DETERIORATION OR OB SOLESCENCE. IT WAS OBSERVED THAT DEPRECIATION, IF NOT ALLOWED AS A NEC ESSARY DEDUCTION FOR COMPUTING THE INCOME OF CHARITABLE INSTITUTIONS , THEN THERE IS NO WAY TO PRESERVE THE CORPUS OF THE TRUST FOR DERIVIN G THE INCOME. THE CIRCULAR NO.5-P (LXX-6) OF 1968, DATED JULY 19, 196 8 WAS REPRODUCED IN THE JUDGMENT IN WHICH THE BOARD HAS TAKEN THE VI EW THAT THE INCOME OF THE TRUST SHOULD BE UNDERSTOOD IN ITS COMMERCIAL SENSE. THE CIRCULAR IS AS UNDER:- 'WHERE THE TRUST DERIVES INCOME FROM HOUSE PROPERTY , INTEREST ON SECURITIES, CAPITAL GAINS, OR OTHER SOURCES, THE WORD 'INCOME' SHOULD BE UNDERSTOOD IN ITS COMMERCIAL SENSE, I.E., BOOK INCOME, AFTER ADDING BACK ANY APPROPRIATIONS OR APP LICATIONS THEREOF TOWARDS THE PURPOSE OF THE TRUST OR OTHERWI SE, AND ALSO AFTER ADDING BACK ANY DEBITS MADE FOR CAPITAL EXPEN DITURE INCURRED FOR THE PURPOSES OF THE TRUST OR OTHERWISE . IT SHOULD BE NOTED, IN THIS CONNECTION, THAT THE AMOUNTS SO ADDE D BACK WILL BECOME CHARGEABLE TO TAX U/S 11 (3) TO THE EXTENT THAT THEY REPRESENT OUTGOINGS FOR PURPOSES OTHER THAN THOSE O F THE TRUST. THE AMOUNTS SPENT OR APPLIED FOR THE PURPOSES OF TH E TRUST FROM OUT OF THE INCOME COMPUTED IN THE AFORESAID MANNER, SHOULD BE NOT LESS THAN 75 PER CENT. OF THE LATTER, IF THE TR UST IS TO GET THE FULL BENEFIT OF THE EXEMPTION U/S. 11(1).' 12. A SIMILAR VIEW WAS EARLIER EXPRESSED BY THE AND HRA PRADESH HIGH COURT IN COMMISSIONER OF INCOME-TAX. V. NIZAM'S SUP PL. RELIGIOUS ENDOWMENT TRUST (1981) 127 ITR 378 AND BY THE MADRA S HIGH COURT IN COMMISSIONER OF INCOME-TAX VS RAO BAHADUR CALAVA LA CUNNAN CHETTY CHARITIES (1982) 135 ITR 485. THE MADHYA PRA DESH HIGH COURT IN CIT VS. RAIPUR PALLOTTINE SOCIETY (SUPRA) HAS HELD, FOLLOWING THE JUDGMENT OF THE KARNATAKA HIGH COURT CITED ABOV E, THAT IN ITA NO.2876/DEL/2010 9 COMPUTING THE INCOME OF A CHARITABLE INSTITUTION/TR UST, DEPRECIATION OF ASSETS OWNED BY THE TRUST/INSTITUTION IS A NECESSAR Y DEDUCTION ON COMMERCIAL PRINCIPLES. THE GUJARAT HIGH COURT, AFTE R REFERRING TO THE JUDGMENTS OF THE KARNATAKA, MAHARASHTRA AND MADHYA PRADESH HIGH COURTS CITED ABOVE, ALSO CAME TO THE SAME CONCLUSIO N AND HELD THAT THE AMOUNT OF DEPRECIATION DEBITED TO THE ACCOUNTS OF THE CHARITABLE INSTITUTION HAS TO BE DEDUCTED TO ARRIVE AT THE INC OME AVAILABLE FOR APPLICATION TO CHARITABLE AND RELIGIOUS PURPOSES. 13. THE JUDGMENT OF THE SUPREME COURT IN ESCORTS LI MITED VS. UNION OF INDIA (SUPRA) HAS BEEN RIGHTLY HELD TO BE INAPPL ICABLE TO THE PRESENT CASE. THERE ARE TWO REASONS AS TO WHY THE JUDGMENT CANNOT BE APPLIED TO THE PRESENT CASE. FIRSTLY, THE SUPREME COURT WAS NOT CONCERNED WITH THE CASE OF A CHARITABLE TRUST / INSTITUTION I NVOLVING THE QUESTION AS TO WHETHER ITS INCOME SHOULD BE COMPUTED ON COMM ERCIAL PRINCIPLES IN ORDER TO DETERMINE THE AMOUNT OF INCO ME AVAILABLE FOR APPLICATION TO CHARITABLE PURPOSES. IT WAS A CASE W HERE THE ASSESSEE WAS CARRYING ON BUSINESS AND THE STATUTORY COMPUTAT ION PROVISIONS OF CHAPTER IV-O OF THE ACT WERE APPLICABLE. IN THE PRE SENT CASE, WE ARE NOT CONCERNED WITH THE APPLICABILITY OF THESE PROVI SIONS. WE ARE CONCERNED ONLY WITH THE CONCEPT OF COMMERCIAL INCOM E AS UNDERSTOOD FROM THE ACCOUNTING POINT OF VIEW. EVEN UNDER NORMA L COMMERCIAL ACCOUNTING PRINCIPLES, THERE IS AUTHORITY FOR THE P ROPOSITION THAT DEPRECIATION IS A NECESSARY CHARGE IN COMPUTING THE NET INCOME. SECONDLY, THE SUPREME COURT WAS CONCERNED WITH THE CASE WHERE THE ASSESSEE HAD CLAIMED DEDUCTION OF THE COST OF THE A SSET UNDER SECTION 35(1) OF THE ACT, WHICH ALLOWED DEDUCTION FOR CAPIT AL EXPENDITURE INCURRED ON SCIENTIFIC RESEARCH. THE QUESTION WAS W HETHER AFTER CLAIMING DEDUCTION IN RESPECT OF THE COST OF THE AS SET UNDER SECTION 35(1), CAN THE ASSESSEE AGAIN CLAIM DEDUCTION ON AC COUNT OF DEPRECIATION IN RESPECT OF THE SAME ASSET. THE SUPR EME COURT RULED THAT, UNDER GENERAL PRINCIPLES OF TAXATION, DOUBLE DEDUCTION IN REGARD TO THE SAME BUSINESS OUTGOING IS NOT INTENDED UNLES S CLEARLY EXPRESSED. THE PRESENT CASE IS NOT ONE OF THIS TYPE , AS RIGHTLY DISTINGUISHED BY THE CIT(APPEALS). 14. HAVING REGARD TO THE CONSENSUS OF JUDICIAL OPIN ION ON THE PRECISE QUESTION THAT HAS ARISEN IN THE PRESENT APPEAL, WE ARE NOT INCLINED TO ADMIT THE APPEAL AND FRAME ANY SUBSTANTIAL QUESTION OF LAW. THERE ITA NO.2876/DEL/2010 10 DOES NOT APPEAR TO BE ANY CONTRARY VIEW PLAUSIBLE O N THE QUESTION RAISED BEFORE US AND AT ANY RATE NO JUDGMENT TAKING A CONTRARY VIEW HAS BEEN BROUGHT TO OUR NOTICE. IN THE CIRCUMSTANCE S, WE DECLINE TO ADMIT THE PRESENT APPEAL AND DISMISS THE SAME WITH NO ORDER AS TO COSTS.' 14. EVEN OTHERWISE, AS PER THE AMENDED PROVISIONS C ONTAINED U/S 10(23C) IT IS SPECIFICALLY PROVIDED THAT INCOME REQUIRED TO BE APPLIED FOR APPLICATION IN THE CASE OF A CHARITABLE TRUST / INSTITUTION, S HALL BE DETERMINED WITHOUT ANY DEDUCTION OF ALLOWANCE BY WAY OF DEPRECIATION IN RE SPECT OF ASSETS AND COST OF WHICH HAS BEEN CLAIMED AS AN APPLICATION OF INCO ME IN THE SAME YEAR OR IN THE EARLIER YEAR. BY APPLYING THE LAW LAID DOWN B Y HON'BLE HIGH COURT DISCUSSED IN THE PRECEDING PARAGRAPHS AS WELL AS AM ENDED PROVISIONS OF SECTION 10(23C) AND SECTION 11 OF THE ACT, LD. CIT( A) HAS RIGHTLY DETERMINED THE ISSUE IN FAVOUR OF THE ASSESSEE BY H OLDING THAT APPLICATION OF INCOME IS NOT COMPUTATION OF INCOME AND THE PROVISI ONS OF APPLICATION OF INCOME WOULD COME INTO PLAY AFTER ONLY THE INCOME C HARGEABLE TO TAX IS DETERMINED AND THE INCOME HAS TO BE IN ITS GENERAL SENSE AND DEPRECIATION IS ONE OF THE DEDUCTIONS AVAILED UNDER LAW AND THERE I S NO REASON FOR DISALLOWING OF THE SAME. EVEN OTHERWISE, THE JUDGE MENT CITED AS ESCORTS LTD. VS UOI (SUPRA) IS QUA SECTION 35(2)(IV) AS REL IED UPON THE A.O. DURING ASSESSMENT PROCEEDINGS, WHICH SPECIFICALLY DISALLOW THE DEDUCTION U/S 32 WHEREAS THERE IS NO SUCH PROVISION IN RESPECT OF EX EMPTION CLAIMED U/S 11 AND 12 OF THE ACT, HENCE, NOT APPLICABLE TO THE FAC TS AND CIRCUMSTANCES OF THE CASE. 15. SIMILARLY, DURING THE PERIOD UNDER ASSESSMENT, THE ASSESSEE HAD OFFERED AN INCOME OF RS.13,605/- AS PROFIT ON THE S ALE OF ASSET AND THE A.O. HAS TAKEN THE ENTIRE SALE PROCEEDS AS INCOME TO BE ASSESSED ON THE GROUND ITA NO.2876/DEL/2010 11 THAT THE CLAIM OF ASSESSEE HAS ALREADY BEEN ALLOWED ON ACCOUNT OF CAPITAL EXPENDITURE, THUS MADE AN ADDITION OF RS.70,395/- I .E. (RS.84,000 RS.13,605 = RS.70,395/-), WHICH IS THE PROFIT ON TH E SALE OF ASSET. 16. KEEPING IN VIEW THE FACT THAT THE INCOME OF THE APPELLANT IS EXEMPT U/S 11 OF THE ACT AND WHEN CERTAIN ASSETS PURCHASED BY THE ASSESSEE WAS CLAIMED TO BE THE PART OF APPLICATION OF INCOME FOR CHARITA BLE PURPOSES, AND THE SAME HAS BEEN SOLD, THE INCOME THEREOF HAS BEEN DISCLOSE D, THE ADDITION CANNOT BE MADE FOR THE REASON THAT THE APPLICATION OF INCOME IS NOT COMPUTATION OF INCOME AND THE PROVISIONS OF CALCULATING THE INCOME APPLIED FOR CHARITABLE PURPOSE IS ATTRACTED ONLY AFTER THE INCOME ELIGIBLE FOR EXEMPTION IS DETERMINED. SINCE THE ENTIRE AMOUNT OF RS.70,395/- USED FOR PURCHASING FIXED ASSETS, IS APPLICATION OF INCOME FOR CHARITAB LE PURPOSE, THE INCOME EARNED ON THE SALE OF SUCH ASSETS IS PART OF INCOME EVEN FOR TAXATION PURPOSES. SO, LD. CIT(A) HAS RIGHTLY DELETED THE A DDITION OF RS.70,395/-. CONSEQUENTLY, GROUNDS NO.1 & 2 ARE DETERMINED AGAIN ST THE APPELLANT. 17. GROUNDS NO.3 & 4: BOTH THE GROUNDS ARE INTERLINKED AND THE QUESTION A RISES FOR DETERMINATION QUA THE AFORESAID GROUNDS IS, AS TO WHETHER LD. CIT(A) HAS ERRED IN HOLDING THAT NO ADDITION CAN BE MADE U/S 6 8 OF THE ACT IN RESPECT OF CORPUS DONATION AMOUNTING TO RS.25,32,000/- DESPITE FAILURE OF ASSESSEE TO DISCHARGE THE ONUS OF PROVING THE GENUINENESS OF TH E SAID DONATION. 18. THE AFORESAID ISSUE IS TO BE DETERMINED IN THE LIGHT OF SETTLED PRINCIPLE OF LAW THAT IN CASE ANY AMOUNT IS CREDITED IN THE A CCOUNT OF THE ASSESSEE, THE ONUS IS ON THE ASSESSEE TO PROVE THE SOURCE, GENUIN ENESS AND CREDITWORTHINESS OF THE SAME U/S 68 OF THE ACT. ITA NO.2876/DEL/2010 12 19. UNDISPUTEDLY, THE ASSESSEE RECEIVED CORPUS DONA TION OF RS.25,32,000/- DURING THE ASSESSMENT YEAR UNDER CONSIDERATION AND FILED THE CONFIRMATION LETTER IN RESPECT OF CORPUS DONORS WITH THEIR ADDRE SSES. THE A.O. IN HIS ORDER DATED 30.12.2008, CATEGORICALLY RECORDED THAT DESPI TE ISSUANCE OF NOTICE U/S 133(6) OF THE ACT TO 20 DONORS CLAIMED BY THE ASSES SEE, NO REPLY / CONFIRMATION HAS BEEN FILED BY THEM. THE ASSESSEE FAILED TO PROVE THE GENUINENESS AND CREDITWORTHINESS OF THE CORPUS DONA TION DESPITE SPECIFIC DIRECTIONS AND AS SUCH, THE AMOUNT OF RS.25,32,000/ - HAS BEEN TREATED AS CONCEALED INCOME. 20. LD. A.R. CONTENDED THAT SINCE DURING THE ASSESS MENT PROCEEDINGS, ASSESSEE HAS FILED COMPLETE EVIDENCE LYING AT PAGES 50-145 IN THE PAPER BOOK, THE ONUS STANDS SHIFTED TO THE A.O. TO VERIFY THE GENUINENESS AND CREDITWORTHINESS OF CORPUS DONORS AND RELIED UPON T HE JUDGEMENT CITED AS CIT VS ORISSA CORPORATION LTD. 159 ITR 78 (S.C. ). THE HON'BLE SUPREME COURT IN THE JUDGEMENT SUPRA HAS HELD AS UN DER: HELD, THAT IN THIS CASE, THE RESPONDENT HAD GIVEN THE NAMES AND ADDRESSES OF THE ALLEGED CREDITORS. IT WAS IN THE KNOWLEDGE OF THE REVENUE THAT THE SAID CREDITORS WERE INCOME TAX ASS ESSEES. THEIR INDEX NUMBERS WERE IN THE FILE OF THE REVENUE. THE REVENUE APART FROM ISSUING NOTICES UNDER SECTION 131 AT THE INSTANCE O F THE RESPONDENT DID NOT PURSUE THE MATTER FURTHER. THE REVENUE DID NOT EXAMINE THE SOURCE OF INCOME OF THE SAID ALLEGED CREDITORS TO F IND OUT WHETHER THEY WERE CREDITWORTHY. THERE WAS NO EFFORT MADE TO PUR SUE THE SO-CALLED ALLEGED CREDITORS. IN THOSE CIRCUMSTANCES, THE RES PONDENT COULD NOT DO ANYTHING FURTHER. IN THE PREMISES, IF THE TRIBU NAL CAME TO THE CONCLUSION THAT THE RESPONDENT HAD DISCHARGED THE B URDEN THAT LAY ON IT, THEN IT COULD NOT BE SAID THAT SUCH A CONCLUSIO N WAS UNREASONABLE OR PERVERSE OR BASED ON NO EVIDENCE. IF THE CONCLU SION WAS BASED ON SAME EVIDENCE ON WHICH A CONCLUSION COULD BE ARRIVE D AT, NO QUESTION OF LAW AS SUCH AROSE. THE HIGH COURT WAS RIGHT IN REFUSING TO STATES A CASE. ITA NO.2876/DEL/2010 13 21. THE ISSUE IN CONTROVERSY IN THE PRESENT APPEAL IS DULY COVERED UNDER THE JUDGEMENT SUPRA BECAUSE WHEN THE ASSESSEE HAS P ROVIDED THE COMPLETE DETAILS OF CORPUS DONORS LYING IN THE PAPER BOOK AT PAGES 50-145 IN THE FORM OF INDIVIDUAL CONFIRMATIONS FROM SUCH DONORS, THEIR NAMES AND ADDRESSES AS WELL AS PAN, IT WAS FOR THE A.O. TO CONFIRM THE SAM E. MERELY ISSUANCE OF NOTICES BY THE A.O. TO THE CORPUS DONORS U/S 133(6) OF THE ACT IS NOT ENOUGH TO DISCHARGE THE ONUS. THE A.O. HAS NOT EVEN DISPU TED THE EXISTENCE, GENUINENESS AND CREDITWORTHINESS OF THE SAID DONORS NOR HE HAS DISPUTED THE INDIVIDUAL CONFIRMATIONS FILED BY THEM. IT APPEARS THAT THE A.O. HAS NOT MADE ANY EFFORT WHATSOEVER TO VERIFY THE GENUINENES S OF THE CORPUS DONORS AS PER LETTERS FILED BY THE ASSESSEE AND ARBITRARIL Y PROCEEDED TO ADD THE CORPUS DONATION AMOUNT OF RS.25,32,000/- TO THE INCOME OF THE ASSESSEE. 22. EVEN OTHERWISE, THE TOTAL EXPENDITURE SHOWN TO HAVE BEEN INCURRED BY THE ASSESSEE DURING THE YEAR UNDER ASSESSMENT, RS.1 8,22,54,692/- (RS.8,49,27,033/- AS EXPENSES +RS.9,73,27,659/- TOW ARDS FIXED ASSETS AS PER P & L ACCOUNT) AND UNDER THESE CIRCUMSTANCES, IF TH E AMOUNT RECEIVED TOWARDS CORPUS DONATION OF RS.25,32,000/- IS ADDED, THE TOTAL INCOME OF THE ASSESSEE COMES TO RS.11,13,87,279/- (RS.10,88,55,27 9/- + RS.25,32,000/-). SO, CONSEQUENTLY, THE AMOUNT SPENT BY THE ASSESSEE TOWARDS CHARITABLE CAUSE, DURING THE YEAR UNDER CONSIDERATION, IS MORE THAN T HE INCOME EARNED IF THE ALLEGATION OF THE A.O. IS TAKEN AS CORRECT. SO, UN DER THESE CIRCUMSTANCES, NO ADDITION CAN BE MADE U/S 11(1A) OF THE ACT. EVEN O THERWISE, WHEN THE AMOUNT OF RS.25,32,000/- HAS BEEN ADDED IN THE INCO ME AGAIN, MAKING ADDITION U/S 68 OF THE ACT WOULD AMOUNT TO DOUBLE A DDITION/TAXATION. WHEN THE CORPUS DONATIONS RECEIVED BY THE ASSESSEE IS SP ECIFICALLY EXEMPTED U/S ITA NO.2876/DEL/2010 14 11(1D) OF THE ACT, LD. CIT(A) HAS RIGHTLY DELETED T HE ADDITION. CONSEQUENTLY, GROUNDS NO.3 & 4 ARE DETERMINED AGAIN ST THE APPELLANT. 23. IN VIEW OF THE FINDINGS RETURNED IN THE PRECEDI NG PARAGRAPHS; WE FIND NO GROUND TO INTERFERE IN THE IMPUGNED ORDER PASSED BY LD. CIT(A), HENCE THE APPEAL OF REVENUE IS HEREBY DISMISSED. 24. ORDER PRONOUNCED IN THE OPEN COURT ON 04 TH NOV., 2015. SD./- SD./- ( N. K. SAINI) (KULDIP SING H) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 04.11.2015 SP COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 29/10 SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR 30/10,2,3/11 SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS 4/11/15 SR. PS/PS 6 KEPT FOR PRONOUNCEMENT 4/11 SR. PS/PS 7 FILE SENT TO BENCH CLERK 4/11 SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER