M/s. R.D. Foundation, Ghaziabad V. JCIT, Ghaziabad

ITA 3229/DEL/2015

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0102 (ITAT-DELHI)
• Duration Of Justice: 1 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 11-04-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 21-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: T VASANTHAN
• Keywords: Depreciation; Charitable institution; Question of law; Capital receipt; Benefit of exemption; Cancellation of registration; Capital expenditure
• Section: 143(3); 133(6); 12A; 12AA; 131; 68; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C NEW DELHI BEFORE SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 3229/DEL/2015 AY: 20 10-11 M/S R.D. FOUNDATION, VS JOINT COMMISSI ONER OF INCOME TAX, 96, NAVYUG MARKET, RANGE-2, GHAZIABAD. GHAZIABAD (U.P.) (APPELLANT) (RESPONDENT) APPELLANT BY : DR. RAKESH GUPTA, S/SHRI SOMIL AGGARWAL, ABHISHE K ANAND,ADV. SHRI VISHAL KALRA, ADV. RESPONDENT BY : SHRI T. VASANTHAN, SR. DR DATE OF HEARING: 11.04.2016 DATE OF PRONOUNCEMENT: 29.06.2016 ORDER PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST T HE ORDER DATED 19.02.2015 PASSED BY THE LD. CIT(A), MUZAFFAR NAGAR FOR 2010-11 WHEREIN THE LD. CIT(A) HAS CONFIRMED THE AC TION OF THE ASSESSING OFFICER IN ASSESSING THE INCOME OF THE AS SESSEE TRUST AS AN AOP AND HAS ALSO CONFIRMED THE ADDITIONS/DISALLO WANCES OF RS. 4,13,73,101/- FINALISING THE ASSESSMENT AT TOTA L TAXABLE INCOME OF RS.3,24,88,011/- AS AGAINST DECLARED LOSS OF RS. 88,85,090/-. THE FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS A CHARITABLE TRUST REGISTERED UNDER INDIAN TRUST ACT ON I.T.A. NO. 3299/DEL/2015 ASSESSMENT YEAR 2010-11 2 23.09.2004 WITH THE MAIN OBJECTS TO ESTABLISH, OPEN , DEVELOP, RUN, SUPPORT, MAINTAIN, SCHOOLS, COLLEGES, HOSTELS, TRAINING & CAREER COUNSELING CENTERS TO PROVIDE EDUCATION OF A LL TYPES ESPECIALLY IN THE FIELD OF MEDICAL, ENGINEERING & M ANAGEMENT COURSES & RELATED ACTIVITIES FOR THE BENEFIT AND US E OF THE GENERAL PUBLIC IN RURAL AND URBAN AREAS. DURING THE YEAR UN DER CONSIDERATION THE APPELLANT TRUST FILED ITS RETURN OF INCOME ON 15.10.2010, DECLARING TOTAL INCOME OF RS. (-) 88,85 ,090/-. THE RETURN FILED BY THE ASSESSEE TRUST WAS SELECTED FOR SCRUTINY ASSESSMENT VIDE NOTICE DATED 16.09.2011, ISSUED UND ER SECTION 143(2) OF THE ACT. THE ASSESSMENT PROCEEDINGS WERE COMPLETED BY THE JOINT COMMISSIONER OF INCOME TAX, RANGE-2, GHAZ IABAD (A.O.), VIDE ORDER DATED 22.03.2013 PASSED UNDER SE CTION 143(3) OF THE INCOME TAX ACT, 1961 ('THE ACT). IN THE SA ID ASSESSMENT ORDER, THE A.O. COMPLETED THE ASSESSMENT AT A TOTAL INCOME OF RS.3,24,88,011/- THEREBY MAKING THE TOTAL ADDITIONS OF RS.4,13,73,101/- TO THE RETURNED INCOME/LOSS OF THE ASSESSEE ON THE FOLLOWING GROUNDS:- - AN ADDITION OF RS.1,63,00,000/- WAS MADE TOWARDS THE AMOUNT OF CORPUS DONATIONS TRANSFERRED FROM UNSECUR ED LOANS RECEIVED DURING EARLIER YEAR. I.T.A. NO. 3299/DEL/2015 ASSESSMENT YEAR 2010-11 3 - AN ADDITION OF RS.22,00,000/- WAS MADE BY ALLEGED LY HOLDING THAT THE ADVANCES GIVEN WERE IN VIOLATION O F PROVISION OF SECTION 11 (5) READ WITH SECTION 13(1 )(D) OF THE ACT. - DISALLOWANCE OF DEPRECIATION OF RS. 33,03,101/- W AS MADE ALLEGEDLY HOLDING THE SAME AS DOUBLE DEDUCTION CLAIMED BY THE ASSESSEE. - AN ADDITION OF RS.1,95,70,000/- WAS MADE IN THE RETURNED INCOME OF THE APPELLANT U/S 68 HOLDING THE AMOUNT OF UNSECURED LOANS AS UNEXPLAINED CASH CREDI TS. 2. AGGRIEVED BY THE ABOVE, THE ASSESSEE FILED AN AP PEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS), GHAZIABAD , WHO VIDE ORDER DATED 19.02.2015 HAS DISMISSED THE APPEAL. N OW THE ASSESSEE HAS APPROACHED THIS TRIBUNAL AND HAS RAISE D THE FOLLOWING GROUNDS OF APPEAL:- 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) (HEREINAFTER REFERRED TO AS LD. CIT (A) ) HAS ERRED IN LAW AS WELL AS ON THE FACTS OF THE CASE BY CONFIRMI NG VARIOUS ADDITIONS MADE BY THE ID. A.O. AND DISMISSING APPEL LANTS APPEAL AND THE ORDER APPEALED AGAINST IS TOTALLY UN JUST, UNLAWFUL AND THE VARIOUS OBSERVATIONS AND FINDINGS MADE BY THE ID. CIT(A) ARE INCORRECT AND UNTENABLE IN LAW A ND THE I.T.A. NO. 3299/DEL/2015 ASSESSMENT YEAR 2010-11 4 FACTS OF THE CASE HAVE NOT BEEN CONSIDERED IN THE R IGHT PERSPECTIVE. 2. THAT THE LD. CIT (A) HAS ERRED IN LAW AS WELL A S ON THE FACTS OF THE CASE BY UPHOLDING THE ACTION OF THE ID . A.O. NOT TO ALLOW THE EXEMPTION U/S 10(23C)(IIIAD) OF THE ACT, WHILE THERE WAS NO DISPUTE THAT ASSESSEE WAS RUNNING EDUCATIONA L INSTITUTION DURING THE YEAR AND THE RECEIPTS THERE FROM WERE LESS THAN THE SPECIFIED LIMIT OF RS.1,00,00,000/-. 3. THAT THE LD. CIT (A) HAS ERRED IN LAW AS WELL A S ON THE FACTS OF THE CASE BY CONFIRMING THE ADDITION OF RS.1,63,00,000/- AS MADE BY THE ID. A.O. TREATING T HE AMOUNT TRANSFERRED FROM UNSECURED LOANS TO CORPUS A S CORPUS DONATIONS, AS THE INCOME OF THE ASSESSEE UND ER SECTION 41(1) OF THE ACT AND THE VARIOUS OBSERVATIO NS AND FINDINGS MADE ARE INCORRECT AND UNJUST AND THE FACT S OF THE CASE HAVE NOT BEEN CONSIDERED IN THE RIGHT PERSPECT IVE. 4. THAT THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON THE FACTS OF THE CASE BY CONFIRMING THE ADDITION OF RS. 22 LACS AS MADE BY THE ID. A.O. HOLDING THAT THE AMOUNT OF ADV ANCES GIVEN TO SHRI DEEPAK DHINGRA (RS.12 LAC) AND SHRI G ULSHAN DHAWAN (RS.10 LAC) WERE IN VIOLATION OF PROVISION O F SECTION 11(5) READ WITH SECTION 13(1 )(D) OF THE ACT AND TH E FINDINGS/OBSERVATIONS OF THE ID. CIT(A) THAT THE AP PELLANT HAS CLAIMED THE SAME TO THE DEBIT OF THE PROFIT & LOSS ACCOUNT AND ALSO THAT THE APPELLANT HAS CLAIMED APPLICATION THE REOF ARE FACTUALLY INCORRECT, ILL FOUNDED AND PERVERSE AS TH E SAME WERE NEVER CLAIMED AS EXPENDITURE BUT APPEARED AS A DVANCE I.T.A. NO. 3299/DEL/2015 ASSESSMENT YEAR 2010-11 5 IN BALANCE SHEET. 5. THAT THE LD. CIT (A) HAS ERRED IN LAW AS WELL A S ON THE FACTS OF THE CASE BY CONFIRMING THE DISALLOWANCE OF DEPRECIATION OF RS.31,03,101/-, WHILE THE CAPITAL E XPENDITURE HAS NEVER BEEN CLAIMED/ALLOWED AS APPLICATION IN EA RLIER YEARS AND/OR CURRENT YEAR AND THE APPELLANT WAS NOT REGISTERED U/S 12A AND EXEMPTION U/S 11 & 12 HAVE N OT BEEN ALLOWED. 6. A). THAT THE ID. CIT(A) HAS ERRED IN LAW AS WELL AS ON THE FACTS OF THE CASE BY CONFIRMING THE ADDITION OF RS.1,95,70,000/- BEING THE AMOUNT OF UNSECURED LOAN S AND THE MATERIAL ON RECORD AND SUBMISSIONS OF THE APPELLANT HAVE NOT BEEN CONSIDERED IN RIGHT PERSPEC TIVE THEREOF. B) THAT WITHOUT PREJUDICE TO ABOVE, THE ID. CIT(A) HAS ERRED ON THE FACTS OF THE CASE BY CONFIRMING THE ADDITION OF RS.34,00,000/- AS SUSPENSE ACCOUNT BALANCE (INC LUDED IN TOTAL ADDITION OF RS.1,95,70,000/- AS ABOVE), W HILE THERE APPEARED NO SUSPENSE ACCOUNT BALANCE IN THE L OAN DETAILS FILED BY APPELLANT DURING ASSESSMENT AS WEL L AS APPEAL PROCEEDINGS AND THE ID. A.O., WITHOUT APPREC IATING THE FACTS CORRECTLY, HAS MADE THE ADDITION OF RS.34,00,000/- MERELY ON THE BASIS OF LIST OF UNSEC URED DEPOSITORS APPEARING IN THE BALANCE SHEET OF THE AP PELLANT, IGNORING THE FACT THAT AMOUNT OF LOANS ADDED U/S 11 5 AT RS.1,95,70,000/- AND ACCEPTED AS EXPLAINED TO THE E XTENT OF RS.29,50,000/- EXCEEDED THE AMOUNT OF TOTAL LOAN S OF I.T.A. NO. 3299/DEL/2015 ASSESSMENT YEAR 2010-11 6 RS.1,91,20,000/- ACTUALLY ACCEPTED DURING THE YEAR BY THAT AMOUNT. C). THAT WITHOUT PREJUDICE TO ABOVE, THE ID. CIT (A ) HAS ERRED BY CONFIRMING THE ADDITION OF RS.9,00,000/- BEING T HE AMOUNT OF UNSECURED LOAN RECEIVED FROM M/S NAV BHAR AT ENTERPRISES, A FIRM OF THE TRUSTEE OF THE APPELLANT , WHO APPEARED IN PERSON FOR HIS STATEMENT BEFORE THE ID. A.O., IGNORING THE EVIDENCES ON RECORD IN SUPPORT OF THE SAME. 7. THE ID. CIT(A) HAS ERRED IN LAW BY NOT DISPOSING O F THE FOLLOWING ADDITIONAL GROUND RAISED DURING APPEAL PROCEEDINGS:- WITHOUT PREJUDICE TO ABOVE, ID. A.0. HAS ERRED IN LAW AS WELL AS ON THE FACTS OF THE CASE BY NOT ALLOWING TH E CAPITAL EXPENDITURE AS APPLICATION OF INCOME AMOUNTING TO RS.3,52,57,513/- RS.4,85,45,614/-) MINUS RS.1,32,88,101/-) AND SAME DESERVES TO BE ALLOWED. 3. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE ASSESSEE IS A TRUST WHICH IS ENGAGED IN RUNNING SC HOOL BUT WHICH WAS ADMITTEDLY NOT REGISTERED U/S 12AA OF THE ACT DURING THE YEAR UNDER CONSIDERATION BUT THIS TRUST WAS GIV EN REGISTRATION U/S 12AA W.E.F. 21.4. 2011. HE DREW OUR ATTENTION T O THE PAPER BOOK PAGES 81-82 WHICH IS THE CERTIFICATE OF REGIST RATION. IT WAS I.T.A. NO. 3299/DEL/2015 ASSESSMENT YEAR 2010-11 7 SUBMITTED THAT THIS WAS THE FIRST YEAR OF ITS OPERA TION. THE LD. AR SUBMITTED THAT GROUND NO. 1 WAS GENERAL. GROUND NO. 2 RELATES TO NOT ALLOWING THE EXEMPTION U/S 10(23C)(I IIAD) OF THE ACT BY THE AO AND FURTHER BY THE LD. CIT(A) IN CONFIRMI NG THE ACTION OF THE AO BY RELYING UPON THE DECISION OF THE HONB LE UTTARAKHAND HIGH COURT IN THE CASE OF QUEENS EDUCAT IONAL SOCIETY 177 TAXMANN 326 . IT WAS SUBMITTED THAT THE ASSESSEE TRUST WAS RUNNING AN EDUCATIONAL INSTITUTI ON WHICH WAS HAVING TOTAL RECEIPTS OF LESS THAN ONE CRORE AS WAS EVIDENT FROM THE INCOME AND EXPENDITURE ACCOUNT OF THE INSTITUTI ON AT PAPER BOOK PAGE 75 ACCORDING TO WHICH AGGREGATE RECEIPTS WERE TO THE TUNE OF RS. 56,77,274/- AND HENCE THE ASSESSEE TRUS T WAS ENTITLED TO CLAIM EXEMPTION QUA THE INCOME OF THE E DUCATIONAL INSTITUTION U/S 10(23C)(IIIAD) OF THE ACT AS HELD B Y HONBLE KARNATAKA HIGH COURT IN THE CASE OF CHILDREN EDUCAT ION SOCIETY 92 DTR 158(KAR). THE LD. AR DREW OUR ATTENT ION TO THE SUBMISSIONS MADE BEFORE THE LD. CIT (A) PLACED AT PAGES 9 TO 12 OF THE PAPER BOOK. IT WAS SUBMITTED THAT TH E LD. CIT (A) HELD THAT THE SOCIETY WAS EARNING SURPLUS AND H ENCE WAS NOT ENTITLED TO THE EXEMPTION U/S 1023C (IIIAD) IN VIEW OF THE JUDGMENT OF THE HONBLE UTTARAKHAND HIGH COURT IN T HE CASE OF I.T.A. NO. 3299/DEL/2015 ASSESSMENT YEAR 2010-11 8 QUEENS EDUCATIONAL SOCIETY (SUPRA). THE LD. AR SUBM ITTED THAT THE SAID DECISION HAS BEEN REVERSED BY THE HONBLE SUPREME COURT AND HENCE THE BASIS ADOPTED BY THE LD. CIT ( A) HAS BEEN ERASED. IT WAS ALSO SUBMITTED THAT MOREOVER, THE AD DITION TO THE FIXED ASSETS WERE TO THE TUNE OF RS. 3,52,57,513/- (PAPER BOOK PAGE 76) HENCE THERE WOULD NOT BE SURPLUS IN THAT S ENSE. THE LD. AR SUBMITTED THAT IN VIEW OF THE ABOVE SUBMISSIONS AND JUDGMENT, ASSESSEE IS ENTITLED TO GET EXEMPTION U/S 10(23C)(IIIAD). 4. THE LD. AR FURTHER SUBMITTED THAT GROUND NO. 3 RELATES TO ADDITIONS OF RS. 1,63,00,000 MADE BY THE AO AND CON FIRMED BY THE LD. CIT(A) ON THE GROUND THAT THESE UNSECURED L OANS RECEIVED IN EARLIER YEARS CEASED TO EXIST AS A RESULT OF CON VERSION OF SUCH LOANS INTO CORPUS DONATION. ACCORDING TO THE AO, SE CTION 41(1) WAS APPLICABLE, HOWEVER, NO ADDITIONS COULD BE MADE U/S 41(1) BECAUSE ONLY THOSE TRADING LIABILITIES IN RESPECT O F WHICH DEDUCTION HAS BEEN CLAIMED AND ALLOWED CAN BE ADDED U/S 41(1) IF SUCH TRADING LIABILITIES CEASE TO EXIST WHEREAS IT IS NOT THE CASE OF THE AO/ LD. CIT (A) THAT ANY DEDUCTION WAS CLAIM ED IN RESPECT OF SUCH UNSECURED LOANS. THE LD. AR DREW OUR ATTENT ION TO PAPER BOOK PAGES 12-23 WHICH WERE FURTHER SUBMISSIONS BEFORE THE I.T.A. NO. 3299/DEL/2015 ASSESSMENT YEAR 2010-11 9 LD. CIT (A) SUBMITTING THAT THE UNSECURED LOANS ACC EPTED IN AY 2009-10 AS GENUINE CANNOT BE ADDED IN AY 2010-11 AN D FURTHER THAT SINCE NO DEDUCTION WAS CLAIMED, THERE WAS NO Q UESTION OF MAKING ADDITIONS U/S 41(1). OUR ATTENTION WAS ALSO DRAWN TO PAPER BOOK PAGE 95 WHICH WAS THE DETAIL OF UNSECURED LOANS SHOWING THAT THE SAME WERE OUT OF THE OPENING BALAN CE. THE LD. AR SUBMITTED THAT ADMITTEDLY, THESE UNSECURED LOANS WERE NOT RECEIVED DURING THE YEAR BUT WERE RECEIVED IN EARLI ER YEARS AND THEREFORE THESE COULD NOT BE ADDED BACK. IT WAS SUB MITTED THAT PAPER BOOK PAGES 3-5 ARE SUBMISSIONS BEFORE THE LD. CIT(A) GIVING DETAILS OF SUCH LOANS AND SUBMITTING THAT TH ESE WERE FROM THE TRUSTEES AND WERE OPENING BALANCES IN THIS YEAR AND THAT IN AY 2009-10 THESE WERE EXAMINED AND THEREFORE THEY C ANNOT BE TAXED. THE LD. AR FURTHER SUBMITTED THAT PAGE 36 OF THE ASSESSMENT ORDER RECORDS THAT THE TRUST IS RUNNING A SCHOOL IN THE BACKWARD AREA AND THE CORPUS FUND HAS BEEN USED FOR THE ATTAINMENT OF THE OBJECTS OF THE TRUST. THAT BEING SO, CORPUS DONATIONS CANNOT BE BROUGHT TO TAX EVEN IN THE CASE OF UNREGISTERED SOCIETY/TRUST IN VIEW OF A PLETHORA OF JUDICIAL RULINGS. THE LD. AR ALSO PLACED RELIANCE ON THE DEC ISION OF THE CO- ORDINATE KOLKATA BENCH OF THE TRIBUNAL IN THE CASE OF SREE SREE I.T.A. NO. 3299/DEL/2015 ASSESSMENT YEAR 2010-11 10 RAMAKRISHNA SAMITY VS DCIT 44ITR (T) 678 FOR THE PR OPOSITION THAT AS LONG AS THE OBJECTS WERE CHARITABLE IN NATU RE IN THE EARLIER YEARS AND IN THE YEAR IN WHICH REGISTRATION U/S 12A A WAS GRANTED, THE EXISTENCE OF TRUST FOR CHARITABLE PURP OSES IN THE EARLIER YEARS CANNOT BE DOUBTED WITH. 5. THE LD. AR SUBMITTED THAT GROUND NO.4 RELATES TO THE ADDITIONS OF RS. 22,00,000/- BEING THE AMOUNT ADVAN CED TO MR. DEEPAK DHINGRA & GULSHAN DHAWAN MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A) ON THE GROUND THAT THOUGH THE ASSESSEE WAS NOT REGISTERED U/S 12AA OR 10(23C) BUT SUCH DEBITS WERE NOT INVESTMENTS IN TERMS OF SECTION 11( 5). IT WAS SUBMITTED THAT SINCE THERE WAS NO REGISTRATION U/S 12AA OR 10(23C), THERE WAS NO QUESTION OF INVESTMENT U/S 11 (5) AND THUS THERE WAS NO QUESTION OF ANY ADDITION. IT WAS SUBMITTED THAT IT HAS BEEN HELD IN NUMEROUS JUDICIAL RULINGS THAT LOAN GIVEN IS NOT AN INVESTMENT AND THEREFORE SECTION 11 (5) CANNOT BE INVOKED. IT WAS SUBMITTED THAT ONCE THE AO ASSES SES THE ASSESSEE AS AN AOP LIKE ANY OTHER ENTITY CARRYING O N BUSINESS, THERE IS NO BASIS FOR THE LOAN GIVEN TO BE TREATED AS INCOME. IT WAS ALSO SUBMITTED THAT EVEN ON FACTS, THESE WERE A DVANCES FOR PURCHASE OF LAND AND SINCE THE DEAL COULD NOT MATUR E, THESE I.T.A. NO. 3299/DEL/2015 ASSESSMENT YEAR 2010-11 11 WERE REFUNDED SUBSEQUENTLY. OUR ATTENTION WAS DRAWN TO PAPER BOOK PAGE 5 WHICH CONTAIN SUBMISSIONS BEFORE THE LD.CIT (A) SUBMITTING THAT RS. 10 LAKHS GIVEN TO SHRI GULSHAN DHAWAN AND RS. 12 LAKHS TO SHRI DEEPAK DHINGRA WAS FOR PURCHASE OF LAND THROUGH ACCOUNT PAYEE CHEQUE BUT T HE AGREEMENT FOR PURCHASE OF LAND WAS CANCELLED AND TH E AMOUNT WAS REFUNDED BY BOTH THE PERSONS TO ASSESSEE TRUST DURING F/Y 2011-12. THE LD. AR SUBMITTED THAT PAPER BOOK PAGES 23-51 WERE FURTHER SUBMISSIONS BEFORE THE LD. CIT (A) SUB MITTING INTER ALIA THAT ADVANCE WAS MADE FOR PURCHASE OF LA ND AND WHEN THE DEAL COULD NOT BE FRUCTIFY THE SAME AMOUNT WAS REFUNDED AND THAT SINCE ASSESSEE WAS NOT REGISTERED U/S 12AA, THERE WAS NO QUESTION OF APPLYING SECTIONS 11(5) AN D 13. THE LD. AR ALSO ARGUED THAT PAPER BOOK PAGES 74-75 IS COPY OF BALANCE SHEET AND PROFIT & LOSS ACCOUNT WHICH SHOWS THAT RS. 22 LAKHS WAS NOT CLAIMED AS EXPENSES AS IS SOUGHT T O BE WRONGLY CONVEYED BY THE AO, PAPER BOOK PAGE 101 IS SUBMISSIONS BEFORE THE AO ON THE ABOVE LINES AND PA PER BOOK PAGES 107-108 ARE CONFIRMATIONS BY MR. DEEPAK DHINGRA AND MR. GULSHAN DHAWAN CONFIRMING THAT THE AMOUNT WAS R ECEIVED FOR PURCHASE OF LAND BUT SINCE THE DEAL COULD NOT M ATERIALIZE, I.T.A. NO. 3299/DEL/2015 ASSESSMENT YEAR 2010-11 12 THE AMOUNTS WERE REFUNDED. IT WAS ALSO SUBMITTED TH AT THE SAME COULD NOT BE ADDED TO THE INCOME OF ASSESSEE A S THE ASSESSEE IS NOT REGISTERED U/S 12AA AND DID NOT CLA IM ANY DEDUCTION U/S 11 OF THE ACT. 6. THE LD. AR SUBMITTED THAT GROUND NO. 5 RELATES TO THE DISALLOWANCE OF DEPRECIATION OF RS. 31,03,1017- THA T THIS IS DOUBLE CLAIM- ONCE TREATING THE FIXED ASSET AS APPL ICATION OF INCOME AND OTHER BY WAY OF CLAIMING DEPRECIATION. I T WAS SUBMITTED THAT WHEN THE ASSESSEE WAS NOT REGISTERED U/S 12AA OR 10(23C), WHERE WAS THE QUESTION OF TREATING FIXE D ASSET AS APPLICATION OF INCOME AND WHERE WAS THE QUESTION OF HOLDING THAT DEPRECIATION IS A DOUBLE CLAIM. IT WAS FURTHER SUBM ITTED THAT WHEN THE AO TREATED THE ASSESSEE AS AN AOP CARRYING ON BUSINESS, THEN DEPRECIATION OBVIOUSLY IS TO BE ALLO WED WITH REFERENCE TO ACTUAL COST/ WDV OF THE FIXED ASSET. T HE LD. AR DREW OUR ATTENTION TO PAPER BOOK PAGES 5-6 WHICH ARE SUBMISSIONS BEFORE LD. CIT (A) SUBMITTING THAT NO C APITAL EXPENDITURE WAS CLAIMED AS APPLICATION OF INCOME SO THERE IS NO DOUBLE EXPENDITURE CLAIMED BY ASSESSEE. OUR ATTENTI ON WAS ALSO INVITED TO PAPER BOOK PAGES 51-57 WHICH ARE SUBMISSIONS BEFORE THE LD. CIT (A) RELYING ON SEVERAL JUDICIAL PRECEDENTS AND I.T.A. NO. 3299/DEL/2015 ASSESSMENT YEAR 2010-11 13 SUBMITTING INTER ALIA THAT SUCH DEPRECIATION IS NOT TREATED AS DOUBLE DEDUCTION EVEN IN CASE FIXED ASSET IS TREATE D AS APPLICATION. IT WAS SUBMITTED THAT PAPER BOOK PAGES 102-103 ARE SUBMISSIONS BEFORE LD. AO SUBMITTING INTER ALIA THAT SINCE ASSESSEE STARTED ITS OPERATION FROM A.Y. 2009-10 ON LY. THERE WAS NO QUESTION OF CLAIMING ANY FIXED ASSET AS APPLICAT ION. ALSO PAPER BOOK PAGES 186-189 IS THE COPY OF WRITTEN SUBMISSIONS BEFORE THE LD. CIT(A) SUBMITTING THAT THE ASSESSEE SOCIETY HAS DEBITED THE DEPRECIATION IN INCOME & EXPENDITURE ACCOUNT AS APPLICATION OF INCOME AND RELIANCE IS PLACED ON CIRCULAR NO. 23 (LXX-5) DATED 15.05.1963. 7. THE LD. AR SUBMITTED THAT GROUND NO . 6 RELATES TO AN AGGREGATE ADDITION OF RS. 1,95,70,000/- MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A) ON GROUND THAT THE ASSE SSEE RAISED AN AGGREGATE UNSECURED LOAN OF ABOVE AMOUNT, THE GE NUINENESS OF WHICH WAS NOT ESTABLISHED. THE LD. AR POINTED OU T THAT PAPER BOOK PAGES 6-8 ARE SUBMISSIONS BEFORE THE LD. CIT ( A) SUBMITTING THAT IN FACT THE TOTAL LOANS RECEIVED WE RE TO THE TUNE OF RS. 1,91,20,000/- AND NOT RS. 1,95,70,000/- AND IN FACT EARLIER A WRONG LIST WAS GIVEN SHOWING SUSPENSE ACC OUNT OF RS. I.T.A. NO. 3299/DEL/2015 ASSESSMENT YEAR 2010-11 14 34,00,000/- AND FURTHER SUBMITTING THAT OVERWHELMIN G DOCUMENTARY EVIDENCES WERE FILED TO PROVE THE GENUI NENESS. FURTHER PAPER BOOK PAGES 57-65 ARE SUBMISSIONS BEFORE THE LD. CIT(A) SUBMITTING THAT THERE WAS NO SUSPENSE AC COUNT AND THE ACTUAL LOANS RECEIVED WERE TO THE TUNE OF RS. 1 ,91,20,000/- AND THE INITIAL LIST GIVEN INADVERTENTLY WAS REVISE D AND THAT THE AO HIMSELF HAS MADE THE ADDITIONS BASED ON SUCH REV ISED LIST AND THAT ONCE THE AO ACCEPTED THE REVISED LIST, IT WAS NOT JUSTIFIED ON HIS PART TO HAVE FALLEN BACK ON THE PR EVIOUS LIST AND FURTHER SUBMITTING THAT COMPREHENSIVE EVIDENCES WER E FILED SUCH AS CONFIRMATIONS, BANK STATEMENTS, INCOME TAX RETUR NS OF THE LENDERS AND CERTAIN JUDICIAL DECISIONS WERE ALSO RE LIED UPON. THE LD. AR DREW OUR ATTENTION TO PAPER BOOK PAGE 95 WHICH CONTAINS THE DETAILS OF UNSECURED LOANS SHOWING INT ER ALIA THAT AN AGGREGATE AMOUNT OF RS. 1,91,20,000/- ALONE WAS RECEIVED DURING THE YEAR. PAPER BOOK PAGE 102 IS SUBMISSIONS BEFORE THE AO SUBMITTING THAT THERE WAS NO SUSPENSE AND ALL TH E LOAN CREDITORS NAMES, ADDRESS, PAN NUMBERS, CONFIRMATIO NS AND BANK STATEMENT WERE SUBMITTED. THE LD. AR ALSO DREW OUR ATTENTION TO PAPER BOOK PAGES 132-160 WHICH CONTAIN COPIES I.T.A. NO. 3299/DEL/2015 ASSESSMENT YEAR 2010-11 15 OF CONFIRMATION LETTERS MENTIONING PAN NOS., LEDGER ACCOUNTS, BANK STATEMENTS OF THE VARIOUS CREDITORS. 8.THE LD. AR SUBMITTED THAT GROUND NO. 7 RELATES TO THE CAPITAL EXPENDITURE FOR A SUM OF RS. 3,52,57,513/-. IT WAS SUBMITTED THAT NO CLAIM FOR CAPITAL EXPENDITURE WAS MADE BY THE ASSESSEE IN VIEW OF THE DEFICIT IN THE INCOME & EXP ENDITURE ACCOUNT TO WHICH ASSESSEE WAS LEGALLY ENTITLED TO. 9. IN RESPONSE, AT THE OUT VERY OUTSET, THE LD. DR OBJECTED TO THE SUBMISSIONS OF THE LD. AR THAT THE ISSUES OUGHT TO BE RESTORED TO THE FILE OF THE LD. CIT (A) FOR FRESH ADJUDICATION. IT WAS SUBMITTED THAT THE ASSESSEE CANNOT BE PERMITTED TO RE-STATE I TS CASE/IMPROVE UPON ITS CASE. ON THE SPECIFIC ISSUE O F THE APPLICABILITY OF THE AMENDMENT TO SECTION 12A RETRO SPECTIVELY, THE LD. DR SUBMITTED THAT THE AMENDMENT WAS NOT MEA NT TO BE APPLIED RETROSPECTIVELY. ARGUING AGAINST THE ASSES SEES RELIANCE ON THE CASE OF SREE SREE RAMKRISHNA SAMITI (SUPRA), THE LD. DR SUBMITTED THAT THE SAME DOES NOT HAVE THE PRECEDENT VALUE AS THE TRIBUNAL CANNOT DECIDE ON A QUESTION OF LAW. T HE LD. DR ALSO SUPPORTED THE A.O.S ACTION AND THE ACTION OF LD. CIT(A) THEREAFTER IN HOLDING THAT THE SURRENDERED AMOUNT H AS TO BE INCLUDED IN THE GROSS RECEIPTS FOR THE PURPOSE OF C ALCULATING THE I.T.A. NO. 3299/DEL/2015 ASSESSMENT YEAR 2010-11 16 THRESH HOLD LIMIT OF ONE CRORE AS ENVISAGED IN SECT ION 1023C(IIIAD). IT WAS ALSO SUBMITTED THAT THE ASSES SEE CANNOT NEGATE THE FACT OF SURRENDER. IT WAS ALSO SUBMITTE D THAT THE ATTEMPT TO DRAW A DISTINCTION BETWEEN THE TRUST AND THE EDUCATIONAL INSTITUTION WAS FARCICAL AND, IN EFFECT , BOTH WERE ONE AND THE SAME AND ACCORDINGLY, THE PLEA OF THE ASSES SEE THAT THE EXEMPTION OF RS. 1 CRORE IS AVAILABLE PER INSTITUTI ON WAS NOT VALID. AS FAR AS THE ISSUE OF CONVERSION OF LOANS INTO CORPUS DONATIONS WAS CONCERNED, IT WAS SUBMITTED THAT SINC E THE NATURE OF TRANSACTIONS HAD CHANGED IN THE YEAR UNDER CONSI DERATION, THE SAME WAS RIGHTLY CONSIDERED AS INCOME IN THIS YEAR. REGARDING GROUND NOS. 4 & 6, THE LD. DR SUBMITTED THAT ONLY P ASSIVE DOCUMENTS WERE SUBMITTED BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS AND NON-SERVICE OF THE SUMMO NS U/S 133(6) PROVES THAT THE PARTIES WERE NON-EXISTENT. HENCE, THE ADDITIONS WERE RIGHTLY MADE. ON THE ISSUE OF SUSPE NSE ACCOUNT, IT WAS THE ARGUMENT OF THE LD. DR THAT ONCE THE BAL ANCE SHEET HAS BEEN FINALIZED AND SUBMITTED BEFORE THE TAX AUT HORITIES, THE SAME CANNOT BE PERMITTED TO BE ALTERED TO SUIT THE REQUIREMENTS OF THE ASSESSEE. I.T.A. NO. 3299/DEL/2015 ASSESSMENT YEAR 2010-11 17 10.IN REJOINDER, THE LD. AR SUBMITTED THAT REFUSAL TO GRANT REGISTRATION AND THE CANCELLATION OF REGISTRATION U /S 12AA CARRY DIFFERENT CONNOTATIONS. IN THE CASE OF THE ASSESSE E, THE REGISTRATION WAS NOT CANCELLED BUT REFUSED INITIALL Y DUE TO JURISDICTIONAL ISSUES, HENCE, THE REFUSAL TO GRANT REGISTRATION CANNOT BE HELD AGAINST THE ASSESSEE. IT WAS ALSO S UBMITTED THAT THE AMOUNT SURRENDERED WAS CAPITAL IN NATURE AND TH E SAME CANNOT BE TREATED AS A REVENUE RECEIPT. IT WAS FUR THER SUBMITTED THAT THE SUMMONS ISSUED U/S 133(6) WERE NOT RECEIVE D BACK AS UN-SERVED AND SO THE PRESUMPTION SHOULD BE THAT TH E SAME WERE DULY SERVED AND THE ASSESSEE CANNOT BE PUT TO A DIS ADVANTAGE BY THE REASON OF THIRD PARTIES NOT RESPONDING TO THE S UMMONS. HE DREW ATTENTION TO THE IMPUGNED ORDER WHEREIN THE LD . CIT (A) HAS HIMSELF OBSERVED THAT NOTICES U/S 133(6) AND 131 RE MAINED UNCOMPLIED. 11. WE HAVE PERUSED THE IMPUGNED ORDER CAREFULLY. I T IS SEEN FROM THE PERUSAL OF THE IMPUGNED ORDER THAT THE DEP ARTMENT HAS HEAVILY RELIED ON THE DECISION RENDERED BY THE HON' BLE HIGH COURT OF UTTRAKAHAND IN THE CASE OF CIT VS. HALDWANI VS. QUEENS EDUCATIONAL SOCIETY 177 TAXMAN (UTTRAKHAND) AND HAS PROCEEDED TO TREAT THE FACT OF EARNING SURPLUS AS A PROOF FOR THE I.T.A. NO. 3299/DEL/2015 ASSESSMENT YEAR 2010-11 18 TRUST EXISTING ONLY FOR THE PURPOSE OF PROFIT. THE LD. CIT (A) HAS FURTHER MISINTERPRETED THE OUTCOME OF THE SLP SUBSE QUENTLY FILED BY THE QUEENS EDUCATIONAL SOCIETY BEFORE THE HONB LE APEX COURT AND HAS OBSERVED THAT THE SLP HAS BEEN DISMIS SED WHEREAS THE FACT OF THE MATTER IS THAT THE JUDGMENT OF THE HONBLE UTTARAKHAND HIGH COURT WAS SET ASIDE IN CIVIL APPEA L NO. 5167 OF 2008 IN ORDER DATED 16/3/2015. THEREFORE, THE DENI AL OF EXEMPTION U/S 1023C (IIIAD) BY THE DEPARTMENT ON TH E GROUND OF ACCRUAL OF SURPLUS CANNOT BE HELD VALID. THE OTHER GROUND CANVASSED BY THE DEPARTMENT FOR THE REFUSAL OF THE GRANT OF EXEMPTION U/S 1023C (IIIAD) IS THE ADDITION OF RS.4 ,13,73,101/- TO THE RECEIPTS OF THE ASSESSEE AS A RESULT OF WHIC H THE THRESH- HOLD LIMIT OF EXEMPTION OF RS.1 CRORE HAS BEEN CROS SED. OUT OF THIS RS.1,95,70,000/- PERTAINS TO ADDITION ON ACCOU NT OF LOANS, RS. 22,00,000/- ON ACCOUNT OF ALLEGED DIVERSION OF FUNDS, RS.1,63,00,000/- ON ACCOUNT OF LOANS CONVERTED TO C ORPUS DONATION AND RS.33,03,101/- ON ACCOUNT OF DEPRECIAT ION HOLDING IT TO BE A DOUBLE DEDUCTION. IT IS THE DEPARTMENT S CONTENTION THAT THE CORPUS DONATION CANNOT BE TREATED AS A CAP ITAL RECEIPT BECAUSE DURING THE YEAR UNDER CONSIDERATION, THE AS SESSEE TRUST WAS NOT REGISTERED U/S 12A OF THE ACT. FURTHER, AD VANCES GIVEN I.T.A. NO. 3299/DEL/2015 ASSESSMENT YEAR 2010-11 19 TO THE TUNE OF RS. 22 LACS TO TWO PERSONS WERE ADDE D BACK AS BEING DIVERSION OF FUNDS IN VIOLATION OF PROVISION OF SECTION 11(5) READ WITH SECTION 13(1) (D) OF THE ACT. THE ADDITI ON OF RS.1,95,70,000/- WAS MADE ON THE FOOTING THAT THE I DENTITY OF THE LENDER, GENUINENESS OF THE TRANSACTION AND CREDITWO RTHINESS OF THE PAYER COULD NOT BE PROVED BY THE ASSESSEE. 12. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD, WE ARE OF THE CONSIDERED OPINION THAT TH E DEPARTMENT HAS MISCONSTRUED THE ENTIRE FACTUAL MATRIX. ON ONE HAND, ITS THE DEPARTMENTS CONTENTION THAT SINCE THE ASSESSEE TRU ST DOES NOT HAVE THE BENEFIT OF REGISTRATION U/S 12AA, THE CORP US DONATION CANNOT BE TREATED AS A CAPITAL RECEIPT AND ON THE O THER HAND, RS. 22 LAKHS ARE ADDED BACK TO THE INCOME AS DIVERSION OF FUNDS IN TERMS OF SECTION 13(1)(D)/11(5) OF THE ACT WHICH IS ATTRACTED ONLY IN CASE THE TRUST IS REGISTERED U/S 12AA. SIMILARL Y, THE DEPARTMENT HAS MISAPPLIED THE JUDGMENT RENDERED BY THE HONBLE APEX COURT IN THE CASE OF QUEENS EDUCATIONA L SOCIETY (SUPRA) AND HAS HELD IT TO BE AGAINST THE ASSESSEE, ALTHOUGH IT FAVOURS THE ASSESSEE. THEN AGAIN, THE DEPRECIATION ALLOWANCE IS ADDED BACK TO THE INCOME OF THE ASSESSEE ON THE PRE MISE THAT A DOUBLE DEDUCTION HAS BEEN CLAIMED AN INFERENCE TH AT COULD I.T.A. NO. 3299/DEL/2015 ASSESSMENT YEAR 2010-11 20 HAVE BEEN DRAWN IF THE ASSESSEE WAS BEING ALLOWED T HE BENEFIT OF EXEMPTION U/S 11 OF THE ACT. THERE ALSO SEEMS TO B E CONTRADICTION IN THE ASSESSMENT ORDER AS WELL AS TH E ORDER OF THE LD. CIT (A) REGARDING THE NATURE AND QUANTUM OF THE SUSPENSE ACCOUNT IN THE BALANCE SHEET AND THE QUANTUM OF LOA NS WHICH HAVE BEEN SURRENDERED BY THE ASSESSEE AND THOSE WHI CH THE ASSESSEE CLAIMS TO HAVE EXPLAINED OR WHERE THE SUMM ONS U/S 133(6) HAVE BEEN RESPONDED TO. IT IS ALSO SEEN THAT SOME OF THE PLEADINGS MADE BY THE ASSESSEE ARE ALSO CONTRADICTO RY AND MUTUALLY EXCLUSIVE. THEREFORE, IN VIEW OF THE OVERA LL CIRCUMSTANCES AND FACTS OF THE CASE, WE DEEM IT PRO PER TO RESTORE ALL THE ISSUES TO THE FILE OF THE A.O FOR FRESH ADJ UDICATION AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE TO PRESENT I TS CASE. WE ALSO DIRECT THE A.O TO ADJUDICATE THE ISSUES AFTER DULY CONSIDERING THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF QUEENS EDUCATIONAL SOCIETY (SUPRA) AND ALSO OF THE ITAT KO LKATA BENCH IN THE CASE OF SREE SREE RAMKRISHNA SAMITY (SUPRA). IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOW ED FOR STATISTICAL PURPOSES. I.T.A. NO. 3299/DEL/2015 ASSESSMENT YEAR 2010-11 21 ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH JUNE, 2016. SD/- SD/- (PRASHANT MAHARISHI) (SUDHANSHU SRIVAST AVA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: THE 29 TH OF JUNE 2016 GS COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GUARD FILE BY ORDER ASSTT. REGISTRAR