Dy.CIT,Circle-1(Exemption), Chandigarh V. M/s S.D.Collage of Educational Socieity (regd.), Barnala

ITA 288/CHANDI/2020

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 7677 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 29-06-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Depreciation; Benefit of exemption; Revenue expenditure; Set aside
• Section: 11; 143(3); 12A; 12AA

Judgement Text

आयकर अपील य अ धकरण,च डीगढ़ यायपीठ “बी” , च डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “B”, CHANDIGARH ी स ु धांश ु ीवा तव, या यक सद य, एवं ी #व$म &संह यादव, लेखा सद य BEFORE: SHRI. SUDHANSHU SRIVASTAVA, JM & SHRI. VIKRAM SINGH YADAV, AM ITA NO. 288/Chd/ 2020 Assessment Year : 2012-13 The Dy. CIT Circle-1, (Exemptions), Chandigarh M/s S.D. College of Educational Society (Regd.), Kacha College Road, Barnala PAN NO: AAFTS8184A Appellant Respondent ! " Assessee by : None (Adjournment Application) # ! " Revenue by : Shri Akashdeep, JCIT, Sr. DR $ % ! & Date of Hearing : 07/09/2022 '()* ! & Date of Pronouncement : 13/09/2022 आदेश/Order PER VIKRAM SINGH YADAV, A.M: This is an appeal filed by the Revenue against the order of Ld. CIT(A), Patiala dt. 26/02/2020 wherein the Revenue has taken the following sole ground of appeal: “1. That on the facts and circumstances of the case, the Ld. CIT(A) has erred in law in allowing the benefit under section 11 of the Income-tax Act, 1961 without appreciating that the assessee was not engaged in charitable activity and had earned above normal profits. 2. That the appellant craves to leave, add or amend the grounds of appeal on or before the appeal heard and disposed off.” 2. The assessee through its AR Mr. Vibhor Garg, CA had moved an adjournment application stating that due to pre occupation in finalization of statutory audits, he is unable to appear before the Bench. In this regard it is noted that the appeal was filed way back in March 2020 and has been adjourned on as many as fifteen occasions in the past for one reason or the another and therefore, it was decided that no useful purpose would be served in adjourning the matter any further and it was decided to hear the Ld. DR and to decide the matter basis material available on the record. 2 3. Further, it is noted that the appeal of the Revenue is barred by 56 days as noted by the Registry. In this regard it was submitted by the ld DR that the order of the Ld. CIT(A) was received on 06.03.2020 in the O/o the Commissioner of Income Tax(E), Chandigarh and the appeal in this case was getting time barred on 04.05.2020 as per section 253(3) of the Income Tax Act, 1961. Subsequently, on 31.03.2020, the Central Government brought out THE TAXATION AND OTHER LAWS (RELAXATION OF CERTAIN PROVISIONS) ORDINANCE, 2020 NO. 2 OF 2020 which provided for extension of various time limits (including filing of appeals) under the Taxation and Benami Acts in view of COVID-19 outbreak. As per the ordinance, the time limit for appeal filing getting time- barred between 20.03.2020 till 29.03.2020 was extended to 30.06.2020. Further, the Central Government issued another Notification on 24.06.2020 vide which all actions, including filing of appeal, which were getting time- barred during the period from 20th March, 2020 till 31st December, 2020 have been extended to 31st March, 2021. In view of the extended time limits by the Central Government, the present appeal filed on 30.06.2020, that was otherwise getting time-barred on 04.05.2020, is actually filed well within the time limit. 3.1 In light of the submission so made by the Ld. DR and the fact that the limitation period was extended on account of COVID-19 Pandemic by the decision of Hon’ble Supreme Court as well as by the decision of the Central Government as so referred by the Ld. DR, the delay so happened in filing the present appeal is hereby condoned and the appeal is admitted for adjudication. 4. Briefly the facts of the case are that the assessee society filed its return of income on 26/09/2012 claiming exemption under section 11, the matter was selected for scrutiny and after issuing of notices and calling for the information, explanation from the assessee, the AO held that the activities of the assessee society are not charitable in nature and the benefit of claim of exemption under section 11 was denied to the assessee society and excess of receipt over expenditure amounting to Rs. 1,35,27,521/- was brought to tax in the hands of the assessee society. Further, depreciation claimed amounting to Rs. 43,91,613/- was also disallowed on account of double deduction and the income was accordingly assessed and determined at Rs. 1,79,19,134/-. 3 4.1 As per the AO, the assessee has earned huge surplus which has not been applied for charitable purpose and the surplus have been applied towards FDR handling charges, house tax etc. and investment in capital assets have been made in order to acquire non-productive assets which are in no way used for charitable purposes. Further the huge surplus generated by the society has been invested in funds on which huge amount of interest has been earned and secured loan have been taken for making investment in different schools and hefty interest has been paid on this loan. As per the AO, the main object enumerated in the bylaws of the assessee society were to impart education and not a fund generating unit and therefore generation of funds and subsequent investment in no way come in the preview of imparting education and therefore it was held that the society has not been engaged in carrying on any charitable activity and claim of exemption under section 11 was denied to assessee society. 5. Against the said findings and action of the AO, the assessee went in appeal before the Ld. CIT(A) and after taking into consideration the entirety of facts and circumstances of the case, the Ld. CIT(A) has recorded his findings which read as under: “The facts of the case, basis of denial of benefit u/s 11 and bringing to tax the surplus amount at maximum marginal rate by the AO and arguments of the AR during the course of appellate proceedings have been considered. The AR has argued that the registration of the assessee u/s 12AA is restored by the Hon'ble ITAT vide order dated 19.10.2010 which has also been accepted by the AO in para 2 of the assessment order and assessment for A.Y. 2009-10, 2013-14, 2014-15, 2016-17 have been completed by accepting the claim of the assessee as society registered u/s 12A of the Income Tax Act, 1961. The AR has also argued that the CCIT, Chandigarh has rejected the registration u/s 10(23C)(vi) but the issue has been restored back to the file of the CIT (Exemption) by Hon'ble Punjab & Haryana High Court, Chandigarh vide its order dated 09.04.2015. The AR has filed the copies of the above mentioned orders passed by the Hon'ble ITAT, Hon'ble Punjab & Haryana High Court. The AR also filed copies of assessment orders of various preceding and succeeding years where the assessee was allowed the benefit of Section 11/12A of the Income Tax Act, 1961. The AR further argued that the AO has failed to take into consideration the sum of Rs.2,81,80,941/- spent towards capital assets as is clear from Balance 4 Sheet of the assessee. The AR has submitted that the total receipts during the year were Rs.822.24 Lacs and the total expenditure were Rs.923.85 Lacs (which includes Rs. 642.04 Lacs under Revenue expenditure and Rs.281.81 Lacs under capital assets) and the application is more than 85% of the total receipts. The AR also submitted that expenditure on capital assets were incurred to acquire assets namely computers, electrical equipments, furniture and fixtures, laboratory equipments, building construction, library books, Home science laboratory and all these are related to the objects of the Society. The AR has submitted that similar claims of the assessee have been accepted by the AO in the preceding & succeeding years and filed a chart of receipts & application of funds in the preceding & succeeding years which is reproduced below:- The AR filed copies of the assessment orders dated 22.01.2016 for A. Y 2013-14, order dated 30.11.2016 for A.Y. 2014-15 and order dated 10.12.2018 for AY 2016-17, perusal of which shows that the claim of the assessee for registration u/s 12A has been accepted by the AO for all these years for which the assessments were completed u/s 143(3) and the returned incomes were accepted in all these years without making any disallowance/ addition. Under the facts & circumstances of the case, the claim of the assessee for benefit of exemption u/s 11/12A is to be allowed for the year under consideration also. Regarding the depreciation, the AO is directed to examine whether the assets on which the depreciation is claimed were acquired as application of funds or out of accumulated/set apart funds for such application and then recalculate the addition/disallowance accordingly as per law applicable for the year under consideration. Accordingly, these grounds of appeal are allowed. Before parting further, it is mentioned here that as per the chart filed by the AR during the appellate proceedings, the application of the funds for the Assessment Year 2013-14 was 5 only 70% and the AO is advised to examine this aspect and take necessary action accordingly, if any, as per law. In the result, the appeal is allowed.” 6. Against the said findings and the direction of the Ld. CIT(A), the Revenue is in appeal before us. 7. During the course of hearing, the Ld. DR relied on the findings of the AO and submitted that the assessee is earning huge surplus which has not been used in any charitable activity and therefore the findings of the Ld. CIT(A) are factually incorrect and the same therefore deserves to be set aside. 8. After hearing the Ld. DR and taking into consideration the material available on the record, we do not see any infirmity in the findings of the Ld. CIT(A). It is noted that the Ld. CIT(A) has taken into consideration the fact that the assessee is duly registered u/s 12AA and for the year under consideration, the assessee’s total receipt are to the tune of Rs. 822.24 lacs and total expenditure to the tune of Rs. 923.85 lacs which shows that the assessee actually had no surplus rather there is deficit during the year under consideration. Further the capital expenditure has been incurred to acquire assets namely computer, electrical equipments, furniture and fixtures, laboratory equipments, building construction and related objects of the assessee society. Further the Ld. CIT(A) has taken into consideration the fact that the claim of the assessee has been allowed by the AO for A.Y. 2009-10, 2013-14 and 2014-15 wherein the claim of the assessee has been accepted and exemption u/s 11 has been allowed to the assessee. Further as regards the double deduction on account of depreciation, the AO has been asked to verify the same as per the law applicable for the year under consideration. Therefore we do not see any infirmity in the finings so recorded by the Ld. CIT(A) who has considered the entirety of facts and circumstances of the case and has allowed the exemption so claimed by the assessee u/s 11 of the Act. In the result, the ground taken by the Revenue is hereby dismissed. 6 9. In the result, appeal of the Revenue is dismissed. Sd/- Sd/- स ु धांश ु ीवा तव #व$म &संह यादव (SUDHANSHU SRIVASTAVA) ( VIKRAM SINGH YADAV) या यक सद य / JUDICIAL MEMBER लेखा सद य/ ACCOUNTANT MEMBER AG Date: 13/09/2022 ( + ! , - . - Copy of the order forwarded to : 1. The Appellant 2. The Respondent 3. $ / CIT 4. $ / 0 1 The CIT(A) 5. - 2 ग 4 5 & 4 5 678 ग9 DR, ITAT, CHANDIGARH 6. ग 8 : % Guard File ( + $ By order,