Gyan Mandir Society, New Delhi V. ADIT (E), New Delhi

ITA 2914/DEL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74305 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 04-03-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 10-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATPAL SINGH SENIOR
• Keywords: Depreciation; Charitable institution; Rule of consistency; Capital receipt; Revenue expenditure
• Section: 143(3); 12A; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH C : NEW DELHI) BEFORE SHRI B.C. MEENA, ACCOUNTANT MEMBER AND SHRI A.T. VARKEY, JUDICIAL MEMBER ITA NO.2914/DEL./2013 (ASSESSMENT YEAR : 2009-10) GYAN MANDIR SOCIETY, VS. ADIT (E), TRUST CIRCLE II, JOSIP BROZ TITO MARG, NEW DELHI. SADIQ NAGAR, NEW DELHI 110 049. (PAN : AAATG0311N) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI K. SAMPATH, ADVOCATE REVENUE BY : SHRI SATPAL SINGH, SENIOR DR ORDER PER B.C. MEENA, ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE ASSESSEE EMANATES FROM THE ORDER OF THE CIT (APPEALS)-XXI, NEW DELHI DATED 20.03.2013. 2. THE ASSESSEE SOCIETY IS RUNNING SCHOOLS IN THE N AME OF INDIAN SCHOOL AT JOSIP BROZ TITO MARG, NEW DELHI AND IBM ACE CENT RE, KOLKATA FOLLOWING THE CBSE CURRICULUM. DURING THE YEAR, THE ASSESSEE HAS RECEIVED RS.42,60,714/- AS DEVELOPMENT FEE WHICH WAS CREDITE D DIRECTLY IN THE DEVELOPMENT FUND WHICH IS FORMING PART OF THE BALAN CE SHEET OF THE ASSESSEE. THIS AMOUNT WAS NOT TAKEN INTO INCOME AND EXPENDITU RE ACCOUNT OF THE ITA NO.2914/DEL./2013 2 ASSESSEE AS THE SAME WAS NOT TREATED AS INCOME. TH E ASSESSEE HAS CLAIMED THAT IT WAS A CAPITAL RECEIPT AND NOT CHARGEABLE TO INCOME-TAX. THE ASSESSING OFFICER TREATED THESE RECEIPTS AS REVENUE RECEIPTS AND ADDED TO THE INCOME OF THE ASSESSEE. FURTHER THE ASSESSING OFFICER COMPUTE D THE TAXABLE INCOME AT NIL BY TAKING THE REVENUE EXPENDITURE OF ASSESSEE A T RS.7,47,14,852/- AND THE DEFICIT AT RS.28,85,624/-. THE CIT (A) HAS CONFIRM ED THE ACTION OF THE ASSESSING OFFICER BY HOLDING AS UNDER :- 4.3 THE CASE LAWS RELIED UPON BY THE LD. AR OF THE APPELLANT ARE DISTINGUISHABLE ON THE FACTS OF THE CASE. WITH REGARD TO PRINCIPLE OF CONSISTENCY LAID DOWN IN RADHSOAMI SAT SANG VS. CIT( SC) 193 ITR 321 DOES NOT HAVE ANY APPLICATION IN OTHER CASES BECAUSE THE DECISION READS AS UNDER:- 'THE COUNSEL FOR THE REVENUE HAD TOLD US THAT THE F ACTS OF THIS CASE BEING VERY SPECIAL, NOTHING SHOULD BE SAI D IN A MANNER WHICH WOULD HAVE GENERAL APPLICATION. WE ARE INCLINED TO ACCEPT THIS SUBMISSION AND WOULD LIKE T O STATE IN CLEAR TERMS THAT THE DECISION IS CONFINED TO THE FACTS OF CASE AND MAY NOT BE TREATED AS AN AUTHORITY ON ASPE CTS WHICH HAVE BEEN DECIDED FOR GENERAL APPLICATION.' FURTHERMORE, AO HAS VERY SPECIFICALLY MENTIONED FOR GETTING COVERED U/S.11 (1)(D) WHICH IS A VOLUNTARY CONTRIBU TION THERE ARE CERTAIN INGREDIENTS AS UNDER:- A. IT SHOULD BE VOLUNTARY CONTRIBUTION B. IT SHOULD BE SPECIFIC DIRECTION C. AND IT SHOULD BE FOR THE CORPUS OF THE FUND IN THE INSTANT CASE AS HAS BEEN OBSERVED BY THE AO IN THE RELEVANT PARA NO.2.4 THERE IS NO SPECIFIC DIRECTION IN THIS REGARD THAT DEVELOPMENT FEE IS RECEIVED FOR THE CORPUS OF THE TRUST AND IT IS A VOLUNTARY CONTRIBUTION. RATHER ASSESSEE IS CHA RGING DEVELOPMENT FEE FROM STUDENTS WHICH CANNOT BE SAID AS VOLUNTARY CONTRIBUTION. SO APPELLANT SHOULD HAVE EX PLORED THE ITA NO.2914/DEL./2013 3 OPTION U/S.11(2) OF THE IT ACT AFTER TAKING IT INTO INCOME & EXPENDITURE ACCOUNT. I AM THEREFORE IN AGREEMENT WI TH THE FINDINGS OF THE AO THAT DEVELOPMENT FEE RECEIVED FR OM THE STUDENTS DOES NOT FALL UNDER THE PROVISION OF SECTI ON 11(1)(D) AND AO HAS RIGHTLY ADDED DEVELOPMENT FEE TREATING IT AS REVENUE RECEIPT. 3. NOW, THE ASSESSEE IS IN APPEAL BY TAKING THE FOL LOWING GROUNDS OF APPEAL :- 1. THAT THE LD. A.O. HAS ERRED IN HOLDING AS INCOM E A SUM OF RS.42,60,714.00 RECEIVED AS DEVELOPMENT FEE BY THE ASSESSEE. 2. THAT THE LD. A.O. HAS ERRED IN NOT HOLDING THE D EVELOPMENT FEE AMOUNTING TO RS.42,60,714.00 AS A CAPITAL RECEI PTS AND IN THE NATURE OF CORPUS FUND AS PER SECTION 11(L)(D) OF TH E INCOME TAX ACT 1961 AND NOT INCLUDABLE IN THE TOTAL INCOME. 3. THAT THE LD. A.O. AS WELL AS THE LD. CIT (APPEAL S) HAVE ERRED IN NOT APPRECIATING THAT DEVELOPMENT FEE RECE IVED IS AS PER THE PROVISION OF THE DELHI SCHOOL EDUCATION ACT 197 3 WITHIN THE KNOWLEDGE OF PAYEES AND AMOUNTS TO THEIR CONSENT/AC QUIESCENCE AND THUS SATISFIES THAT THERE EXIST SPECIFIC DIRECT ION. 4. THAT THE LD. A.O. AS WELL AS THE LD. CIT (APPEAL S) HAVE ERRED IN HOLDING THAT THERE IS NO SPECIFIC DIRECTIO N IN THIS REGARD THAT DEVELOPMENT FEE RECEIVED IS FOR THE CORPUS OF THE TRUST. 5. THAT THE LD. A.O. HAS ERRED IN DEPARTING FROM TH E CONSISTENT PRACTICE OF TREATING THE DEVELOPMENT FEE AS A CAPIT AL CORPUS RECEIPT YEAR AFTER YEAR WITHOUT POINTING OUT ANY RE ASONS FOR SUCH DEVIATIONS/DEPARTURE. 6. THAT THE ABOVE GROUNDS OF APPEAL ARE WITHOUT PRE JUDICE TO ONE ANOTHER. 7. THAT YOUR APPELLANT PRAYS HE BE ALLOWED TO ADD, WITHDRAW, AMEND OR FORGO ANY OF THE ABOVE GROUNDS O F APPEAL AT THE TIME OF HEARING OF THE APPEAL. ITA NO.2914/DEL./2013 4 4. WHILE PLEADING ON BEHALF OF THE ASSESSEE, THE LD . AR SUBMITTED THAT DEVELOPMENT FEE RECEIVED BY THE ASSESSEE WAS FOR SP ECIFIC PURPOSE. THE PAYMENT RECEIVED FOR SPECIFIC PURPOSE SHOULD NOT BE TREATED AS INCOME OF THE TRUST. IT FORMS THE PART OF THE CORPUS. HE FURTHE R SUBMITTED THAT THE ASSESSMENTS FOR ASSESSMENT YEAR 2002-03, 2003-04 AN D 2008-09 HAVE BEEN MADE U/S 143(3) AND THE ASSESSING OFFICER HAS NOT M ADE SUCH ADDITION TO THE INCOME OF THE ASSESSEE. THEREFORE, IN VIEW OF THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF RADHASOAMI SATSANG VS. CIT REPORTED IN 193 ITR 321, FOR THE PRINCIPLE OF CONSISTENCY, THE ACTI ON OF THE REVENUE AUTHORITIES IS UNJUSTIFIED. HE ALSO RELIED ON THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. STHANAKVASI VARDHMAN VANIK JAIN SANGH - 260 ITR 366 (GUJ.) FOR THE PROPOSITION THAT WHERE THE AMOUNT WA S RECEIVED BY THE TRUST FOR THE PURPOSE OF WADI AND IT WAS THE CASE OF THE ASSE SSEE ALL THROUGH OUT THAT SINCE THE SAID AMOUNT WAS TOWARDS THE CORPUS OF TRU ST FOR A SPECIFIC PURPOSE IT COULD NOT FORM THE PART OF THE INCOME OF THE TRUST AND THE AMOUNT WAS EXEMPTED LOOKING TO THE PROVISIONS OF SECTION 12 OF THE INCOME-TAX ACT, 1961. HE ALSO RELIED ON THE DECISION OF HON'BLE ITAT, BAN GALORE BENCH, BANGALORE IN THE CASE OF ST. ANN_S HOME FOR THE AGED VS. ITO - 13 TTJ 185 (BANG.) FOR THE PROPOSITION THAT WHERE DONATIONS WERE MADE TO A SSESSEE TRUST WITH SPECIFIC STIPULATION THAT THE SAME SHOULD BE UTILIZED FOR CO NSTRUCTING OF BUILDING, ITA NO.2914/DEL./2013 5 MERELY BECAUSE DONEES DID NOT MENTION THAT THE DONA TIONS WERE TOWARDS CORPUS OF TRUST, SUCH RECEIPTS COULD NOT BE TREATED AS INCOME OF THE TRUST. 5. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDE RS OF THE AUTHORITIES BELOW. 6. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. THE ASSESSEE SOCIETY IS REGISTERED AS CHARITABLE INSTITUTION U/S 12A OF THE INCOME-TAX ACT, 1961. THE ASSESSEE IS RUNNING SCHOOL IN THE NAME OF INDIAN S CHOOL AT JOSIP BROZ TITO MARG, SADIQ NAGAR, NEW DELHI AND AN IBM ACE EDUCATI ON CENTRE AT KOLKATA FOR THE LAST MANY YEARS. THE ASSESSEE HAS RECEIVED RS.42,60,714/- AS DEVELOPMENT FEE. THE SCHOOL IS RECOGNIZED AND REGI STERED AS UNAIDED SCHOOL BY THE PROVISIONS OF DELHI SCHOOL EDUCATION ACT, 19 73. FOR THE REGULATION OF QUANTUM OF FEE IN PURSUANCE OF HON'BLE SUPREME COUR T JUDGEMENT, THE GOVERNMENT OF NATIONAL CAPITAL TERRITORY OF DELHI I SSUED ORDER DATED 10.02.2005 WHERE THE MANAGEMENT OF RECOGNIZED UNAID ED SCHOOLS PERMITTED TO CHARGE DEVELOPMENT FEE NOT EXCEEDING 15% OF THE TOTAL ANNUAL TUITION FEE, IF THE SCHOOL MAINTAINS A DEPRECIATION RESERVE FUND AND THE DIRECTION NO.7 IN THE SAID ORDER OF THE DIRECTOR OF EDUCATION, DEL HI WAS FOUND APPROPRIATE. WE ALSO NOTE THAT IN THE ASSESSMENTS U/S 143(3) IN THE EARLIER THREE YEARS, AS MENTIONED ABOVE, THE REVENUE HAS NOT TAKEN SUCH DON ATIONS AS REVENUE RECEIPTS. IN VIEW OF THE DECISION OF HON'BLE GUJAR AT HIGH COURT IN THE CASE OF CIT VS. STHANAKVASI VARDHMAN VANIK JAIN SANGH AS WE LL AS ITAT IN THE CASE ITA NO.2914/DEL./2013 6 OF ST. ANN_S HOME FOR THE AGED, CITED SUPRA, AND AL SO REVENUE'S STAND IN THE EARLIER YEARS WITH REGARD TO SUCH DONATIONS, WE FIN D THAT THE REVENUE AUTHORITIES WERE NOT JUSTIFIED IN MAKING SUCH DONAT ION AND WE DIRECT TO DELETE THE SAME. MOREOVER, WE WOULD ALSO LIKE TO MENTION THAT EVEN AFTER THIS ADDITION THERE IS NO TAXABLE INCOME COMPUTED BY ASS ESSING OFFICER AS APPLICATION OF INCOME MEETS THE REQUIREMENT OF LAW. THE INCOME OF THE ASSESSEE HAS BEEN COMPUTED AT NIL. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 14 TH DAY OF MARCH, 2014. SD/- SD/- (A.T. VARKEY) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 14 TH DAY OF MARCH, 2014 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XXI, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.