Institute of Management Education, Ghaziabad V. JCIT, Ghaziabad

ITA 3422/DEL/2015

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6717 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 8 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 1
• Next Hearing Date: 28-12-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 28-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: F R MEENA
• Assessee Lawyers: DR RAKESH GUPTA
• Keywords: Capital asset; Depreciation; Charitable institution; Rule of consistency
• Section: 143(3); 12AA; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : SMC-1: NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER ITA NO. 3422/DEL/2015 ASSESSMENT YEAR : 2010-11 INSTITUTE OF MANAGEMENT EDUCATION, C/O AKHILESH KUMAR, ADVOCATE, CHAMBER NO. 206-207, ANSAL SATYAM RDC RAJ NAGAR, GHAZIABAD (PAN: AAATI1437R) VS. JCIT, RANGE-2 GHAZIABAD (APPELLANT) (R ESPONDENT) ASSESSEE BY : DR. RAKESH GUPTA, ADV. & SH. AKHILESH KUMAR, ADV. DEPARTMENT BY : SH. F.R. MEENA, SR. DR ORDER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A), MUZAFFARNAGAR ON 16.2.2015 IN RELAT ION TO THE ASSESSMENT YEAR 2010-11 ON THE FOLLOWING GROUNDS:- 1. BECAUSE, THE ORDER OF LEARNED LOWER AUTHORITY IS B AD IN LAW AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE AND HENCE IS UNSUSTAINABLE. 2 2. BECAUSE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) GROSSLY ERRED IN UPHOLDING, THAT THE 'HOSTE L FACILITY' OF THE SCHOOL PROVIDED EXCLUSIVELY TO STUDENTS O F THE SCHOOL IS NOT AN INTEGRAL PART OF 'EDUCATION' U/S 2( 15) - BUT IS A SEPARATE BUSINESS ACTIVITY IN TERMS OF SECTION 11 (4A), BY WRONGLY PLACING RELIANCE ON IRRELEVANT MATER IAL AND FINDINGS ON THE ISSUE ARE PERVERSE AND AGAINST THE SETTLED LAW. 3. BECAUSE, ABOVE FINDING OF THE LEARNED LOWER AUTHORITY IS AGAINST THE PRINCIPLE OF CONSISTENCY IN AS MUCH AS THAT SINCE THE INCEPTION OF SCHOOL THE SAID ACTIVITIES I S CONSIDERED AS PART OF 'EDUCATION' AND BENEFIT U/S 11/12 IS ALLOWED WITH 100% SIMILAR FACTS AND WITHOUT ANY CHANGE IN LAW ABOUT THE FIRST THREE LIMBS OF SECTION 2(15) EVEN AFTER 01.04.09. 4. BECAUSE, WITHOUT PREJUDICE TO ABOVE BUT ONLY AS AN ALTERNATIVE, THE LEARNED LOWER AUTHORITY FAILED TO APPRECIATE THAT ASSESSEE HAD MAINTAINED SUFFICIENT SEPARATE ACCOUNTS FOR ABOVE ACTIVITY AND FURTHER FAILED TO APPRECIATE T HAT EVEN LD. AO HIMSELF CALCULATED SEPARATE SURPLUS IN SAID ACTIVI TY 3 ON THE BASIS OF SAID ACCOUNTS HENCE ORDER UPHOLDING REJECTION OF EXEMPTION U/S 11-12 EVEN AFTER INVOKING 11 (4A) FOR SAID ACTIVITIES IS ILLEGAL. 5. BECAUSE, THE LEARNED LOWER AUTHORITY HAS FURTHER ERRED IN UPHOLDING THE CALCULATION OF SURPLUS OF RS. 39,31,650/- IN THE ABOVE ACTIVITY AGAINST THE DECLARED SURPLUS OF 24,99,000/- (BEFORE DEPRECIATION) WITHOUT RECORDING ANY FINDING ON THIS ISSUE AND WITHOUT APPRECIATING THE FACT THAT LD. AO HAS NOT GIVEN ANY BASIS/MATERIAL IN SUPPORT OF HIS CALCULATION ON ONE HAND AND FURTHER DEPRECATION ON THE HOSTEL BUILDING ETC. IS NOT ALLOWED ON THE OTHER HAND DESPITE CONSIDERING THE ACTIVITY A 'SE PARATE BUSINESS'. 6. BECAUSE, THE LEARNED LOWER AUTHORITY FURTHER ERRED IN NOT APPRECIATING THE FACT THAT IN ANY EVENTUALITY ADM ITTEDLY ASSESSEE HAS ALREADY UTILIZED MORE THAN 85% OF ITS INCOME FOR 'CHARITABLE PURPOSES' AND SO ANY SURPLUS WAS ALSO BE EXEMPT U/S 11-12. 4 7. BECAUSE, LEARNED COMMISSIONER OF INCOME TAX (APPEALS) GROSSLY ERRED IN CONFIRMING THE DISALLOWANCE OF DEPRECIATION RS. 89,38,507/- DEBITED TO P& L A/C WITHO UT PROPERLY APPRECIATING THE LAW ON THE ISSUE AND ARGUME NTS PUT FORWARD BY THE ASSESSEE INCLUDING THE ONE THAT WHERE THERE ARE TWO VIEWS THAN THE ONE WHICH IS FAVOURABLE TO ASSESSEE SHALL PREVAIL. THEREFORE, IT IS PRAYED THAT FINDING OF LOWER AUTHOR ITIES FOR HOLDING HOSTEL FACILITY AS SEPARATE BUSINESS ACTIVITY ETC. MAY KINDLY BE QUASHED AND DISALLOWANCE AND COMPUTATION OF TAXABLE SURPLUS OF RS. 39,31,650/- MAY KINDLY BE H ELD ILLEGAL AND PRAYED TO BE QUASHED BY HOLDING ACTIVITIE S OF ASSESSEE AS CHARITABLE IN TERMS OF S. 2(15) AND DISALLOWANCE OF DEPRECIATION PRAYED TO BE QUASHED. HOWEVER, WITHOUT PREJUDICE TO ABOVE AND ONLY AS AN ALTERNATIVE AND WITHOUT DILUTION TO ABOVE PRAYER, IT IS ALSO PRAYED THAT COMPUTATION OF SURPLUS IS WRONG AND DECLARED SURPLUS MAY KINDLY BE ACCEPTED AND EXEMPTION ON SUCH MAY KINDLY BE ALLOWED. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A REGISTERED SOCIETY AND ALSO ENJOYS REGISTRATION U/S. 12AA OF THE I.T. ACT, 1961. THE ASSESSEE IS RUNNING EDUCATIONAL INSTITUTIONS IN THE NAME OF INSTIT UTE OF MANAGEMENT 5 EDUCATION FOR VARIOUS COURSES VIZ. BBA, B.ED., PGDCA, MC A ETC. THE ASSESEE IS RUNNING HOSTEL FACILITY FOR ITS STUDENTS FOR WHICH SEPA RATE FEE IS CHARGED. THE AO HELD THAT HOSTEL RUNNING IS A SEPARATE BUSINESS A ND IS NOT COVERED IN THE DEFINITION OF CHARITABLE PURPOSES U/S. 2(15) OF THE I.T. ACT. THE AO FURTHER HELD THAT SINCE NO SEPARATE BOOKS OF ACCOUNTS ARE MAINTAINED FOR THIS BUSINESS. THE ASSESSEE IS NOT ENTITLED FOR EXEMPTION U/ S. 11(4A) OF THE I.T. ACT. AO COMPLETED THE ASSESSMENT U/S. 143(3) OF THE I.T. ACT AT AN INCOME OF RS.39,31,650/- VIDE HIS ORDER DATED 7/3/2013. 3. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) WHO CONFIRMED THE ACTION OF THE AO AND DISMI SSED THE APPEAL OF THE ASSESSEE VIDE HIS ORDER DATED 16.2.20 15. 4. NOW THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED OR DER AND FILE THE PRESENT APPEAL BEFORE THE TRIBUNAL. 5. AT THE TIME OF HEARING, LD. COUNSEL OF THE ASSES SEE STATED THAT THE LOWER AUTHORITIES HAVE WRONGLY OBSERVED T HAT THE HOSTEL FACILITY OF THE SCHOOL PROVIDED EXCLUSIVELY TO STU DENTS OF THE SCHOOL IS NOT AN INTEGRAL PART OF EDUCATION U/S. 2(15) BUT IS A SEPARATE BUSINESS ACTIVITY IN TERMS OF SECTION 11(4 A), BY WRONG PLACING RELIANCE ON IRRELEVANT MATERIAL AND FINDING S ON THE ISSUE ARE PERVERSE AND AGAINST THE SETTLED LAW. HE FURTH ER STATED THAT THE LOWER AUTHORITIES CONFIRMED THE DISALLOWANCE OF DEPRECIATION RS. 89,38,507/- DEBITED TO P&L ACCOUNT WITHOUT PRO PERLY 6 APPRECIATING THE LAW ON THE ISSUE AND ARGUMENTS PU T FORWARD BY THE ASSESSEE INCLUDING THE ONE THAT WHERE THERE ARE TWO VIEWS THAN THE ONE WHICH IS FAVOUR TO ASSESSEE SHALL PREV AIL. HENCE, HE REQUESTED THAT DISALLOWANCE IN DISPUTE MAY BE DELET ED. IN SUPPORT OF HIS CONTENTION, HE RELIED UPON THE DECISION OF T HE HONBLE HIGH COURT IN THE CASE OF DIRECTOR OF INCOME TAX (EXEMPT ION) VS. INDRAPRASTHA CANCER SOCIETY REPORTED IN [2015] 53 T AXMANN.COM 463 (DELHI) AND STATED THAT THE PRESENT ISSUE IN D ISPUTE IS SQUARELY BY THE AFORESAID DECISION OF THE HONBLE D ELHI HIGH COURT. 6. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND STATED THAT THE SAME MAY BE AFFIRMED. 7. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECOR DS ESPECIALLY THE ORDER OF THE LD. CIT(A) AND THE ORDER OF THE HONBLE HIGH COURT OF DELHI IN THE CASE OF DIRECTOR OF INCOME TAX (EXEMPTION) VS. I NDRAPRASTHA CANCER SOCIETY REPORTED IN [2015] 53 TAXMANN.COM 46 3 (DELHI), WHEREIN THE HONBLE DELHI HIGH COURT HAS HELD THAT WHERE A CHARITABLE INSTITUTION, WHICH HAS PURCHASED CAPITAL ASSETS AND TREATED AMOUNT SPENT ON PURCHASE OF CAPITAL ASSET A S APPLICATION OF INCOME, IS ENTITLED TO CLAIM DEPRECIATION ON SAM E CAPITAL ASSET UTILIZED FOR BUSINESS. 7 8. AFTER PERUSING THE AFORESAID DECISION OF THE HONB LE HIGH COURT AS AFORESAID, I AM OF THE CONSIDERED VIEW THAT THE ISSUE I N DISPUTE IS SIMILAR AND SQUARELY COVERED BY THE AFORESAID DECISION, THEREFOR E, RESPECTFULLY FOLLOWING THE ABOVE PRECEDENTS, THE ADDITION IN DISPUT E IS HEREBY DELETED AND ACCORDINGLY, THE ISSUE IN DISPUTE IS ALLOWED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOW ED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 10-2-2017. SD/- [H.S. SIDHU] JUDICIAL MEMBER DATED, 10-2-2017. SRBHATNAGAR COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) DR, ITAT AR, ITAT, NEW DELHI.