Society For The Welfare of Weaker Sections, Gajapati V. DCIT, Berhampur Circle, Berhampur

ITA 345/CTK/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3837 (ITAT-CUTTACK)
• Duration Of Justice: 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 16-05-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 15-09-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Capital asset; Depreciation; Charitable institution; Principle of natural justice; Maximum Marginal Rate; Onus to prove; Capital expenditure
• Section: 69C; 12A; 68; 6; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK SMC BENCH, CUTTACK BEFORE SHRI N.S SAINI, ACCOUNTANT MEMBER ITA NO. 345 /CTK/2016 ASSESSMENT YEAR : 2010 - 2011 SOCIETY FOR THE WELFARE OF WEAKER SECTIONS, NEAR DFO OFFICE, RAMSAGAR ROAD, PARLAKHEMUNDI. VS. DCIT, BERHAMPUR CIRCLE. PAN/GIR NO. AACTS 4037 K (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : NONE REVENUE BY : SHRI D.K.PRADHAN, DR DATE OF HEARING : 16 /05/ 2017 DATE OF PRONOUNCEMENT : 16/05 / 2017 O R D E R THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - 3, BHUBANESWAR , DATED 26.5.2016 , FOR THE ASSESSMENT YEAR 2010 - 2011 . 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. THAT THE FACT AND CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WAS UNJUSTIFIED BY ALLOWING APPEAL PARTLY AND ESTIMATING THE NET PROFIT ON AN A VERAGE BASIS. 2. THAT THE ASSESSEE IS TRUE TO ALLEGE THAT THE ASSESSEE WAS PROD UCED DOCUMENTS AND BOOKS OF ACCOUNTS MAINTAINED AND DULY AUDITED BY A CHARTERED ACCOUNTANT IN SUPPORT OF CLAIM AS IT IS A REGISTERED SOCIETY UNDER SOCIETIES REGISTRATION ACT, 1860AND IS ENGAGED IN IMPLEMENTATION OF CHARITABLE ACTIVITIES 3. THAT THE ORDE R OF ASSESSMENT IS OTHERWISE ILLEGAL AND BAD IN LAW. 2 4. THAT THE ORDER OF ASSESSMENT IS GROSS VIOLATION OF NATURAL JUSTICE AND ERRED IN LAW. 5. THAT WHEN THE APPELLANT HAS MAINTAINED BOOKS OF ACCOUNTS SUPPORTED BY AUTHENTICATED VOUCHERS, NO ADVERSE INF ERENCE SHOULD HAVE BEEN DRAWN. 6. THAT FOR THESE AMONG OTHER GROUNDS WILL BE ARGUED AT THE TIME OF HEARING, THE APPELLANT PRAYS TO YOUR HONOUR FOR ADEQUATE RELIEF IN THE INTEREST OF EQUITY AND JUSTICE. 7. THE ASSESSEE TRUST HAS HAD RECEIVED DONATION AMOUNTING TO RS.60000/ - DURING THE YEAR UNDER REFERENCE AND HAVE HAD BEEN COLLECTED BY THE PROJECT COORDINATORS, OF THE ASSESSEE FORM THE BENEFICIARIES OF THE CONCERNED FIELD AREA WHERE THE DEVELOPMENTAL/CHARITABLE ACTIVITIES WERE CARRIED OUT BY THE ASSESS EE AND ARE PETTY IN NATURE. . WHEN THESE AM OUNTS WHICH A BY EACH PROJECT COORDINATOR HAVE HANDED OVER TO THE ASSESSEE TRUST ALONG WITH THE LIST OF DONORS, A SINGLE RECEIPT/CREDIT VOUCHER WAS ISSUED BY ENCLOSING THE LIST OF DONORS IN SUPPORT OF SAID AMOU NT FOR ACCOUNTING THE SAME IN THE BOOKS OF ACCOUNT AND MORE OVER THE TOTA! AMOUNT OF RS.60000/ - WHICH WAS COLLECTED AS DONATION IS S HOWN AS INCOME OF THE ASSESSEE FOR COMPUTATION OF INCOME TAX. AS SUCH THE LEARNED ASSESSING OFFICER WAS UNJUSTIFIED BY MAKIN G ADDITION OF THE SAME AS INCOME. AND ALSO THE RECEIPTS WHICH ARE ISSUED TO INDIVIDUAL DONORS BY THE PROJECT COORDINATION IS MAINTAINED AT THE FIELD LEVEL AND ARE AVAILABLE FOR VERIFICATION AND ADEQUATE OPPORTUNITY WAS NOT GIVEN TO THE ASSESSEE FOR SUBMISS ION OF THE SAME. 8. THE INDIVIDUAL INCOME FORM THE SOURCES AS DETAILED BELOW. INCOME GENERATION 670590 INSTITUTIONAL CHARGES 135585 TRACTOR INCOME 444100 TRAINING HALL RENT & ACCOMMODATION 196640 TOTAL 1446915 J RECEIVED BY THE ASSESSEE ARE DECLARED AND DISCLOSED AS THE INCOME WHILE COMPUTATION OF INCOME TAX PAYABLE BY THE ASSESSEE FOR THE YEAR UNDER REFERENCE. THE L.A.O. IS AGAIN UNJUSTIFIED BY MAKING ADDITION OF THE SAME TO THE RETURNED INCOM E OF THE ASSESSEE WHICH IS COMPLETELY ERRED IN LAW. THE DETAILS OF NATURE OF CROPS AND OTHER ITEMS CULTIVATED, QUANTITY OF CROPS HARVESTED ETC. AND SIMILARLY IN THE CASE OF TRACTOR INCOME, INSTITUTIONAL CHARGES AND TRAINING HALL RENT AND ACCOMMODATION ALSO THE DETAILS OF THE REQUIRED INFORMATION IS MAINTAINED IN THE FIELD AREA OF THE ASSESSEE AND IS AVAILABLE FOR VERIFICATION AND ADEQUATE OPPORTUNITY WAS NOT GIVEN TO THE ASSESSEE FOR SUBMISSION OF THE SAME. 9. FURTHER WHILE COMPUTATION OF TAXABLE INCOME AND INCOME TAX PAYABLE THERE ON THE ASSESSEE HAS HAD COMMUTED THE TAXABLE INCOME AS PER THE PROVISION OF SEC 11 OF THE I.T.ACT 1961 WHICH ARE APPLICABLE TO THE ASSESSEE TRUST AND HAS HAD NOT VIOLATED ANY OF THE PROVISION OF SEC 11 & SEC 13 OF THE I.T.ACT A ND HAS NOT CLAIMED DEPRECIATION AS EXPENDITURE FOR DEDUCTING THE TAXABLE INCOME. 10. ABOVE ALL THE L.A.O. HAS NOT DISPUTED THE EXPENDITURE MADE OUT OF THE INCOME WHICH HE HAS MADE AS ADDITION TO THE RETURNED INCOME. 3. WHEN THE CASE WAS CALLED FOR HEARING, N ONE WAS PRESENT ON BEHALF OF THE ASSESSEE AND NEITHER ANY ADJOURNMENT APPLICATION WAS FILED. IT IS OBSERVED FROM THE RECORD THAT THE APPEAL WAS ADJOURNED AT THE REQUEST OF 3 LD AUTHORISED REPRESENTATIVE OF THE ASSESSEE ON 30.11.2016, 9.1.2017, 23.1.2017, 15.3.2017 AND 4.4.2017. AS SUFFICIENT ADJOURNMENTS WERE GRANTED TO THE ASSESSEE, THE APPEAL WAS HEARD EXPARTE QUA THE ASSESSEE AND DISPOSED OF CONSIDERING THE SUBMISSION OF LD DEPARTMENTAL REPRESENTATIVE AND MATERIALS AVAILABLE ON RECORD. 4 . TH E CIT(A) HAS ADJUDICATED THE ISSUE AS UNDER: 2. THE APPELLANT TRUST IS REGISTERED U/S.12A OF THE I.T.ACT, 1961. RETURN OF INCOME FOR THE A.Y. 2010 - 2011 FILED ON 30.9.2010 DECLARING TOTAL INCOME AT NIL WAS PICKED UP FOR SCRUTINY AND ACCORDINGLY, THE AO IS SUED NOTICE U / S .143(2)/142(1) IN RESPONSE TO WHICH COUNSEL OF THE APPELLANT APPEARED FROM TIME TO TIME AND MADE NECESSARY COMPLIANCE. THE A.O. ASSESSED THE INCOME AT RS. 17,70,740/ - . 2.1 THE GROUNDS OF APPEAL FILED AGAINST THE IMPUGNED O RDER OF ASSESSMENT ARE BEING ADJUDICATED AS PER THE LINES INDICATED BELOW: - ADDITION ON ACCOUNT OF DONATION: - RS.60,000 - / - THE APPELLANT HAS CLAIMED TO HAVE RECEIVED DONATION OF RS.60,000/ - IN THE YEAR UNDER APPEAL. THE APPELLANT WAS ASKED TO FILE THE DETAILS OF SUCH RECEIPTS AND IN RESPONSE, IT FILED A LIST SHOWING NAME OF THE DONORS ONLY. IT HAS NOT ISSUED ANY RECEIPT TO SUCH DONORS AGAINST DONATIONS. RATHER, IT HAS ISSUED RECEIPTS IN THE NAME OF COLLECTION AGENTS BUT IT HAS NOT FURNISHED THEIR IDENTI TY PROOF EXCEPT CREDIT VOUCHERS ISSUED IN THE NAME OF SUCH AGENTS. EACH OF SUCH AGENTS RECEIVED RS. 12,000/ - FROM DIFFERENT DONORS BUT NONE OF THEM HAVE ISSUED ANY RECEIPT TO INDIVIDUAL DONORS. THE A.O. FOUND THAT THE APPELLANT HAS FAILED TO PRODUCE RECEIP T OF DONATIONS WITH PROPER DOCUMENTARY EVIDENCE AND TREATED THE SAME AS ANONYMOUS DONATION TAXABLE IN THE HANDS OF THE APPELLANT U/S,115BBC OF THE ACT. THE LD. A.R. SUBMITTED THAT THE DONATION HAS BEEN DECLARED AS INCOME AND APPLIED FOR CHARITABLE PURPOSE AS PER PROVISIONS OF SEC.11,12 & 13 OF THE ACT AND THEREFORE, IT CANNOT BE ADDED AGAIN. IN THE PAPER BOOK, THE LD. A.R. RELIED ON VARIOUS CASE LAWS FOR SUPPORT OF HIS CONTENTION NAMELY VANITA ASHRAM VRS. CIT 280 ITR 345, CIT VRS. SH GOWDA TRUST 285 ITR 32 7, PROGRAMME FOR COMMUNITY ORGANIZATION 248 ITR 01 ETC. DECISION: - ANONYMOUS DONATION HAS BEEN DEFINED IN THE NEW SECTION TO MEAN ANY VOLUNTARY CONTRIBUTION REFERRED TO IN SECTION 2(24)(IIA) OF THE ACT, WHERE A PERSON RECEIVING SUCH CONTRIBUTION DOES NOT MAINTAIN A RECORD OF IDENTITY INDICATING THE NAME AND ADDRESS OF THE PERSON MAKING SUCH OTHER PARTICULARS AS MAY BE PRESCRIBED. CONSEQUENTIAL AMENDMENTS HAVE BEEN MADE IN SECTION 10(23C) AND SECTION 13 TO PROVIDE THAT ANY I NCOME BY WAY OF ANY ANONYMOUS DONATION WHICH IS 4 TAXABLE UNDER SECTION 115BBC SHALL BE INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE. SECTION 115BBC IS APPLICABLE FROM A.Y.2007 - 08 ONWARDS. AS PER SUB - SECTION (3) OF SECTION 115BBC, THE APPELLANT IS REQUIRED TO MAINTAIN RECORDS OF IDENTITY INDICATING THE NAMES AND ADDRESS OF THE PERSONS MAKING DONATIONS OR CONTRIBUTIONS. ON PERUSAL OF THE RECORDS, IT IS FOUND THAT THE APPELLANT HAS NOT FURNISHED IDENTITY OF THE DONORS AND THE COMPLETE ADDRESS, SO THAT, A.O. CA N EXERCISE HIS POWER TO ENQUIRE INTO THEM. KEEPING IN VIEW OF THE ABOVE, ADDITION MADE U/S.H5BBC IS FOUND TO BE SUSTAINABLE BY PLACING RELIANCE IN DECISION OF HON'BLE TRIBUNAL, AGRA BENCH, AGRA IN ITA NO.365/AGR./2011 IN CASE OF SHRI GIRRAJ EDUCATIONAL & W ELFARE SOCIETY, MATHURA VRS. ITO - 3(4), MATHURA. CORPUS DONATION ARE EXEMPT IN THE CASE OF THE TRUST AND IN ABSENCE OF ANY EVIDENCE REGARDING THE NATURE OF DONATION AS CORPUS DONATION, IT CAN BE TREATED AS VOLUNTARY CONTRIBUTION WHICH IS TAXABLE BECAUSE OF INCLUSIVE DEFINITION U/S.2(24)(IIA). IN VIEW OF THE ABOVE, IT IS HELD THAT THE A.O. IS JUSTIFIED IN ASSESSING THE SAME AS PER PROVISIONS OF SEC.H5BBC OF THE ACT AND HENCE, ADDITION MADE ON THIS COUNT IS CONFIRMED. ADDITION OF RS.14.46,915/ - TOWARDS INDIRECT INCOME: - THE APPELLANT TRUST HAS SHOWN TO HAVE EARNED INDIRECT INCOME OF RS. 14,46,915/ - , INCOME GENERATION OF RS.6,70,590/ - , INSTITUTIONAL CHARGES OF RS.1,35,585/ - , TRACTOR INCOME OF RS.4,44,100/ - & TRAINING HALL RENT & ACCOMMODATION OF RS. 1,96, 640/ - . WITH REGARD TO THE INCOME GENERATION SOURCE OF RS.6,70,590/ - , THE APPELLANT STAT ED THAT IT HAS ACQUIRED AGRICULTURAL LAND AND THAT IT CULTIVATED PADDY AND OTHER SEASONAL GOODS AND SOLD THE PRODUCE TO GENERATE THE ALLEGED INCOME. BUT IN SUPPORT OF TH E CLAIM, THE APPELLANT COULD PRODUCE ONLY A GENERAL RECEIPT BOOK AND APART FROM THE RECEIPT BOOK, NO OTHER DOCUMENTS SHOWING NATURE OF CROPS AND OTHER ITEMS CULTIVATED, QUANTITY OF CROPS HARVESTED, AMOUNT OF EXPENDITURE INCURRED FOR EARNING THE CROPS/PROD UCE, NAME & ADDRESS OF THE PERSON TO WHOM SOLD, QUANTITY OF PRODUCE SOLD AND THE AMOUNT REALIZED ON SUCH SALE ETC., COULD BE PRODUCED, THE RECEIPT BOOK SHOWS ONLY THE AMOUNT RECEIVED AND NO OTHER DETAILS LIKE NAME & ADDRESS OF THE PURCHASERS. WITH REGARD TO TRACTOR INCOME, INSTITUTIONAL CHARGES AND TRAINING HALL RENT AND ACCOMMODATION, THE APPELLANT ALSO COULD NOT ABLE TO PRODUCE ANY DOCUMENT. THE APPELLANT PRODUCED ONLY THE RECEIPT BOOK WHICH IS GENERAL IN NATURE. IT HAS NOT MAINTAINED THE NAME AND ADDRES S OF THE PARTY FROM WHOM THE TRACTOR INCOME, INSTITUTIONAL CHARGES AND TRAINING HALL RENT & ACCOMMODATION CHARGES WERE RECEIVED. IN ADDITION TO THE ABOVE OBSERVATION, THE A.O. FOUND THAT IT WAS THE DUTY AND RESPONSIBILITY OF THE APPELLANT TO PROVE ITS CLAI M AND TO FURNISH THE DETAILS AND SOURCE OF THE ABOVE MENTIONED EARNINGS WITH PROPER DOCUMENTARY EVIDENCE AND THE APPELLANT HAS FAILED TO DO SO. SINCE THE GENUINENESS AND THE CORRECTNESS OF THE CLAIM COULD NOT BE PROVED BY THE APPELLANT WITH DOCUMENTARY EVI DENCE, THE A.O. TREATED THE SAME AS INCOME FROM UNEXPLAINED SOURCE IN THE NATURE OF ANONYMOUS RECEIPTS AND ADDED IT TO THE TOTAL INCOME FOR PURPOSE OF TAXATION AT MAXIMUM MARGINAL RATE. IN ADDITION TO THE SUBMISSION MADE BY THE LD. A.R. STATED ABOVE WHILE ADJUDICATING THE GROUND OF APPEAL AGAINST ADDITION OF RS. 60,000/ - , THE LD. 5 A.R. SUBMITTED THAT THE DETAILS OF NATURE OF CROPS AND OTHER ITEMS CULTIVATED, QUANTITY OF CROPS HARVESTED ETC. AND OTHER DETAILS REGARDING TRACTOR INCOME, INSTITUTIONAL CHARGES, TRAINING HALL RENT & ACCOMMODATION ARE MAINTAINED IN THE FIELD AREA OF THE APPELLANT TRUST AND ARE AVAILABLE FOR VERIFICATION AND SINCE ADEQUATE OPPORTUNITIES WERE NOT GIVEN FOR SUBMISSION OF THE SAME, THESE WERE NOT PRODUCED AT THE TIME OF ASSESSMENT PROC EEDING. DECISION: - SUBMISSION MADE BY THE LD.A.R. WAS CONSIDERED CAREFULLY AND ON PERUSAL OF MATERIAL AVAILABLE ON RECORD AND THE STATUTORY PROVISIONS, FINDINGS/OBSERVATIONS MADE ARE ENUMERATED HEREUNDER: - (I) IT IS ELEMENTARY THAT PROVISIONS SEC. 11 DO NOT TAKE AUTOMATIC EFFECT. THEY EFFECT SUBJECT TO FULFILLMENT OF CONDITIONS SPECIFIED IN OTHER PROVISIONS SUCH SECTION 12, 12A AND 13 OF THE ACT. FOR CLAIMING EXEMPTION, THE APPELLANT HAD THE BURDEN TO PROVE THAT IT IS ENTITLED TO BENEFIT U/S.11 OF THE ACT. IT WAS SO HELD IN CIT VRS. U.P. FOREST CORPORATION 230 ITR 945 (SC). (II) LIKEWISE, AGRICULTURAL INCOME IS EXEMPT U/S. 10, BUT THE BURDEN LIES WITH THE ASSESSEE TO PROVE THAT IT HAS CARRIED OUT PRIMARY AND SECONDARY AGRICULTURAL ACTIVITIES IN THE AGRICULTURAL LAND OWNED BY IT. IT IS THE BURDEN OF THE ASSESSEE TO PROVE THE AGRICULTURAL OPERATION CARRIED OUT IN THE AGRICULTURAL LAND, EXPENSES ON SUCH AGRICULTURAL OPERATION, CROPS GROWN AND SOLD WITH PROPER EVI DENCE. MERE POSSESSION OF AGRICULTURAL LAND WITHOUT EVIDENCE OF ANY AGRICULTURAL OPERATION CARRIED OUT IN THE AGRICULTURAL LAND IS NOT SUFFICIENT TO CLAIM EXEMPTION. IN ORDER TO CLAIM EXEMPTION U/S. 10(1) AS AGRICULTURAL INCOME, IT IS THE DUTY OF THE ASSES SEE TO SUBSTANTIATE IT AND THE UNSUBSTANTIATED PORTION CAN BE TREATED AS INCOME FROM OTHER SOURCE AS HELD IN NUMBER OF CASES NAMELY GOPI RAM LILA VS CIT 225 ITR 320(RAJ.), RIDHKARANDAS PUNAMCHAND BHURA VS CIT 231 ITR 604(MP). (I II) ON PERUSAL OF MATERIAL AVAILABLE ON RECORD, IT APPEARS THAT THE A.O. GAVE ADEQUATE OPPORTUNITY TO PRODUCE THE EVIDENCE NECESSARY FOR PROVING AGRICULTURAL INCOME AND OTHER INCOME DISCUSSED ABOVE. OPPORTUNITIES GIVEN TO THE APPELLANT COULD NOT BE AVAILED AND THEREFORE, GRIEVANCE O F THE APPELLANT CANNOT RIGHTLY BE MAPPED OR PLOTTED WITHIN THE TERRAIN OF PRINCIPLES OF NATURAL JUSTICE. IT IS NOT ENTITLED TO PLEAD BACK ADEQUATE TIME IN DISCHARGING THE BURDEN OR/AND IT IS NOT ENTITLED TO CONTRAVENTION OF PRINCIPLES OF NATURAL JUSTICE AS HELD IN P.N. BALASUBRAMANIUM VRS. ITO REPORTED IN 112 ITR 512 (AP). MOREOVER, THE UNSUPPORTED WORDS OF THE LD.A.R. THAT EVERYTHING HAS BEEN KEPT IN THE FIELD AREA IS MEANINGLESS SINCE SUCH EVIDENCE COULD HAVE BEEN COLLECTED FROM THE FIELD AREA AND PRODUCE D TO SUBSTANTIATE THE CLAIM IN COURSE OF FRESH OPPORTUNITIES GIVEN IN COURSE OF APPELLATE PROCEEDING. THIS HAS NOT BEEN DONE AND THE LD. A.R. SIMPLY RELIES ON CASE LAWS SUBMITTED IN THE FORM OF PAPER BOOK. (IV) CARRYING OUT OF AGRICULTURAL ACTIVITIES IS N OT THE PREDOMINANT OBJECT OF THE APPELLANT TRUST. IT MAY BE INCIDENTAL SINCE IT OWNS AGRICULTURAL PROPERTIES. HOWEVER, IT HAS NOT BEEN PROVED WITH COGENT EVIDENCE AND THEREFORE, CLAIM OF EXEMPTION OF AGRICULTURAL INCOME IS NOT ACCEPTABLE. SECTION 10(1) EXC LUDES AGRICULTURAL INCOME FROM TOTAL INCOME WHILE SECTION 11(1) EXCLUDES INCOME DERIVED FROM PROPERTY HELD UNDER TRUST TO THE EXTENT SPECIFIED. THE PROVISIONS OF SEC. 10(1) UNIFORMLY APPLIES TO EVERY PERSON INCLUDING CHARITABLE ORGANIZATION WHOSE INCOME IS EXEMPT IN TERMS OF SEC.LL 6 TO 13. IT IS, THEREFORE, NOT NECESSARY AND CORRECT TO INCLUDE AGRICULTURAL INCOME OF A CHARITABLE TRUST WITHIN ITS INCOME SINCE IT IS CATEGORICALLY EXEMPT U/S.L0(L) OF THE ACT. IT IS THEREFORE NOT NECESSARY TO INCLUDE AGRICULTURAL INCOME FOR PURPOSE OF SECTION 11(1) OF THE ACT. BUT, THE ONUS LIES WITH THE TRUST TO PROVE WHAT IS EXTENT OF AGRICULTURAL INCOME TO BE EXCLUDED BY MAINTAINING SEPARATE BOOKS OF ACCOUNT AND SUPPORTING RECORDS FOR AGRICULTURAL INCOME, AS HELD BY HON'BLE HIGH COURT OF MADRAS IN THE CASE OF RAO BAHADUR CALAVALA CUMAN CHETTY CHARITIES 135 ITR 485. THEREFORE, THE CHARITABLE ORGANIZATION SHOULD COMPUTE AGRICULTURAL AND NON - AGRICULTURAL INCOME SEPARATELY AS PROVISIONS OF SECTION 11(1) SHOULD BE APPLICA BLE TO NON - AGRICULTURAL INCOME AS INCOME FROM PROPERTY HELD UNDER TRUST. SEPARATE ACCOUNTS ARE REQUIRED TO BE MAINTAINED FOR AGRICULTURAL AND NON - AGRICULTURAL INCOME TO SATISFY THE A.O. ABOUT GENUINENES S OF CLAIM OF EXEMPTION U/S.10(1 ). IN APPELLANT'S CAS E, THE ALLEGED INCOME HAS BEEN INCLUDED UNDER THE HEAD 'NON - FOREIGN CONTRIBUTION ACCOUNT' OF RS.70,13,825/ - . IT IS IN COURSE OF ASSESSMENT PROCEEDING, THE APPELLANT CLAIMED THAT ALLEGED INCOME OF RS.6,70,590/ - IS AGRICULTURAL INCOME INCLUDED IN TOTAL INCOM E FOR PURPOSE OF SEC. 11(1) OF THE ACT. CLAIM OF EXEMPTION OF THE ALLEGED INCOME U/S.L0(L) IS NOT ESTABLISHED. NO SEPARATE BOOKS OF ACCOUNT ARE KEPT FOR INCOME DERIVED FROM AGRICULTURAL AND NON - AGRICULTURAL PROPERTIES AND DIFFERENT SOURCE OF INCOME ARE MIX ED UP AND THEREFORE, HOW MUCH OF AGRICULTURAL INCOME TO BE EXCLUDED OUT OF TOTAL INCOME FROM AGRICULTURAL AND NON - AGRICULTURAL PROPERTIES APPLIED FOR CHARITABLE PURPOSE IS NOT ASCERTAINABLE. IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE AND WHEN WHEN TH E ALLEGED SUM HAS BEEN INCLUDED AS INCOME AND ALSO CLAIMED TO HAVE BEEN APPLIED FOR CHARITABLE PURPOSE, IT IS HELD THAT THE SUM REPRESENTS INCOME FROM OTHER SOURCE OTHER THAN AGRICULTURAL INCOME AND THE SOURCE BEING NOT DISCLOSED, IT CAN BE ASSESSED AS UND ISCLOSED INCOME, (V) REGARDING TRACTOR INCOME OF RS.4,44,100/ - , IT IS FOUND THAT THE APPELLANT HAD ONE TRACTOR WITH TROLLEY. IT HAS NOT PRODUCED ANY EVIDENCE OF USE OF TRACTOR AND TROLLEY FOR PURPOSE OF EARNING RENTAL INCOME. EVEN CORRESPONDING EXPENSES HA VE NOT BEEN BOOKED AS APPLICATION OF INCOME FOR RUNNING THE TRACTOR AND TRAILER ON RENT. THE FUEL EXPENSES DEBITED TO THE INCOME & EXPENDITURE A/C. ARE NOMINAL WHICH CAN BE ALLOCATED TO USE OF JEEP, TATA SUMO VISTA, MOTOR CYCLE ETC. OWNED BY THE TRUST AND USED FOR CHARITABLE PURPOSE IN DIFFERENT UNITS. THERE IS NO EXPENDITURE WHICH CAN SPECIFICALLY BE ALLOCATED TO EXPENDITURE FUND RUNNING TRACTOR AND TRAILER ON RENT OR NO SEPARATE ACCOUNT HAS BEEN MAINTAINED FOR SUCH BUSINESS ACTIVITIES, THE ACTIVITIES WHIC H ARE NOT INCIDENTAL TO THE MAIN OBJECTS OF THE SOCIETY. IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, IT IS HELD THAT THE APPELLANT HAS FAILED TO DEMONSTRATE THE CORRECTNESS & GENUINENESS OF TRACTOR INCOME WITH EVIDENCE. SIMILARLY, THE APPELLANT HAS F AILED TO DEMONSTRATE THE GENUINENESS AND CORRECTNESS OF THE INCOME FROM INSTITUTIONAL CHARGES OF RS.1,35,585/ - AND TRAINING HALL & ACCOMMODATION OF RS. 1,96,640/ - WITH PROPER EVIDENCE. IN THE CASE OF CHIRANJIV CHARITABLE TRUST, NEW VS DEPARTMENT OF INCOM E TAX I.T.A.NO.3295/ DEL/2011, JUDGEMENT DELIVERED ON 14 AUGUST, 2015 FOR THE ASSESSMENT YEAR 2003 - 04, THE INCOME TAX APPELLATE TRIBUNAL, NEW DELHI 7 GAVE A VERY SIGNIFICANT RULING. IT WAS HELD THAT AFTER ENACTMENT OF SECTION 115BBC WHICH IS APPLICABLE W.E.F . 01.04.2007 ANY UNDISCLOSED INCOME OR CREDIT IN THE BOOKS WHICH OTHERWISE WOULD HAVE BEEN TAXABLE UNDER SECTION 68 WILL FALL WITHIN THE PURVIEW OF SECTION 115BBC. IN THIS CASE THE RELIEF WAS GIVEN TO THE ASSESSEE AS THE LAW WAS NOT APPLICABLE TO THE RELEV ANT AY 2003 - 04. THE RELEVANT EXTRACT IS AS UNDER: '7.4 IN THE LIGHT OF THE ABOVE CASE LAW AND THE LEGAL INTERPRETATIONS MADE THEREIN THE POSSIBILITY OF INVOKING SECTIONS 68, 69, 68 TO 69C DOES NOT SEEM FEASIBLE. HERE IT IS WORTHWHILE TO NOTE THAT THE SELE CT COMMITTEE OF PARLIAMENT HAD REJECTED THE RECOMMENDATION OF WANCHOO COMMITTEE IN 1973 WHICH WANTED TO TAX ANONYMOUS DONATIONS AT THE RATE OF 65%. THE SELECT COMMITTEE WAS OF THE OPINION THAT AS LONG AS THE MONEY WAS SPENT FOR CHARITABLE OR RELIGIOUS PURP OSES IT DID NOT MATTER WHETHER THE SOURCE WAS ANONYMOUS OR DETERMINED. 7.5 THIS, POSITION HAS ONLY BEEN ALTERED W.E.F. 01104/2007 WITH THE INTRODUCTION OF SECTION 115BBC. SINCE THIS PERTAINED TO ASSESSMENT YEAR 2003 - 04 SECTION 115BBC IS NOT APPLICABLE.' IN VIEW OF THE ABOVE, IT IS HELD THAT THE AO IS JUSTIFIED IN ASSESSING THE ALLEGED INCOME OF RS. 14,46,915/ - AS INCOME FROM UNDISCLOSED SOURCE AND HENCE, IT IS CONFIRMED. ADDITION OF RS.2.63.821/ - ON ACCOUNT OF DEORECIATION: - THE A.O. NOTICED THAT CLAIM OF DEPRECIATION OF RS.2,68,275/ - ON FIXED ASSETS INCLUDES CLAIM OF DEPRECIATION OF RS.4,454/ - ON ACCOUNT OF WOODEN TABLE & CHAIRS PURCHASED LAST YEAR. FURTHER, THE A.O. NOTICED THAT THE APPELLANT CLAIMS EXPENDITURE ON CAPITAL ASSETS AS APPLICATION OF FUNDS AN D THEREFORE, HE DENIED FURTHER CLAIM OF DEPRECIATION U/S.32 OF THE ACT AND ADDED RS.2,63,821/ - TO THE TOTAL INCOME. THE LD. A.R. SUBMITTED THAT WHILE COMPUTATION OF TAXABLE INCOME AND INCOME TAX PAYABLE THEREON, THE APPELLANT HAS COMPUTED THE TAXABLE INCOM E BY INCLUDING ALL RECEIPTS SUCH AS GRANTS, DONATIONS, BANK INTEREST, INCOME GENERATION, TRAINING HALL RENT, INSTITUTIONAL CHARGES, TRACTOR INCOME ETC AS GROSS RECEIPTS/INCOME FROM WHICH ALL REVENUE AND CAPITAL EXPENDITURE MADE TO CHARITABLE PURPOSES HAVE BEEN DEDUCTED TOWARDS APPLICATION AS PER THE PROVISIONS OF SEC.11 OF THE I.T.ACT, 1961 WITHOUT DEDUCTING THE DEPRECIATION TO THE TUNE OF RS.2,68,275/ - AS HAS BEEN ALLEGED BY THE LD. A.O. DECISION: - IN THE INCOME & EXPENDITURE A/C, THE APPELLANT HAS DEBITE D DEPRECIATION OF RS.52,740/ - & RS.2,15,535/ - ON ASSETS FROM FOREIGN CONTRIBUTION ACCOUNT AND FROM NON - FOREIGN CONTRIBUTION ACCOUNT AND THUS, SUBMISSION OF THE LD.A.R. THAT THE APPELLANT HAS NOT DEDUCTED DEPRECIATION IS GROSSLY MISPLACED. FINANCE ACT, 2014 LAYS DOWN THAT DEPRECIATION WILL NOT BE CONSIDERED AS APPLICATION OF INCOME IF ASSETS ON WHICH DEPRECIATION IS CHARGED HAS ALREADY BEEN CONSIDERED AS A PART OF APPLICATION OF INCOME. THE AMENDED PROVISION IS APPLICABLE FROM 1 ST APRIL,2015. FOR EARLIER YEA RS, THE ISSUE OF DOUBLE DEDUCTION IS A MATTER OF DEBATE IN THE LIGHT OF VARIOUS CONTRADICTING CASE LAWS. IN THE CASE OF CIT VRS. MARKET COMMITTEE, PIPLI 238 CTR 103, IT WAS HELD THAT SUCH DEDUCTION IS PERMISSIBLE. IN THIS CASE, THE HON'BLE HIGH COURT OF PU NJAB & HARYANA DECLINED TO ACCEPT THE APPLICABILITY OF THE HON'BLE APEX COURT RULING IN ESCORTS LTD. VRS. UNION OF INDIA 199 ITR 43. ON THE OTHER HAND, DE CISION OF HON'BLE KERALA HIGH COURT IN THE CASE OF 8 LISSIE MEDICAL INSTITUTIONS VRS. CIT 76 DTR 372 IS AGAINST ALLOWING DOUBLE DEDUCTION OF DEPRECIATION . IN THIS CASE, IT WAS HELD THAT IF THE ASSESSEE TREATS EXPENDITURE ON ACQUISITION OF ASSETS AS APPLICATION OF INCOME FOR CHARITABLE PURPOSES UNDER SECTION LL(L)(A) AND IF THE ASSESSEE CLAIMS DEPRECIATION ON THE VALUE OF SUCH ASSETS, THEN IN ORDER TO REFLECT THE TRUE INCOME TO BE AVAILABLE FOR APPLICATION FOR CHARITABLE PURPOSES, THE ASSESSEE SHOULD WRITE BACK IN THE ACCOUNTS THE DEPRECIATION AMOUNT TO FORM P ART OF THE INCOME TO BE ACCOUNTED FOR APPLICATION FOR CHARITABLE PURPOSES. THIS IS OBVIOUSLY NOT DONE BY THE ASSESSEE AND, SO MUCH SO, *' THE INCOME WHICH SHOULD BE AVAILABLE FOR APPLICATION FOR CHARITABLE PURPOSES GETS REDUCED BY THE DEPRECIATION AMOUNT, WHICH IS NOT PERMISSIBLE UNDER SECTION 11(L) (A). IN FACT, THE NET EFFECT IS THAT AFTER WRITING OFF FULL VALUE OF THE CAPITAL EXPENDITURE ON ACQUISITION OF ASSETS AS APPLICATION OF INCOME FOR CHARITABLE PURPOSES, WHEN THE ASSESSEE AGAIN CLAIMS THE SAME AMOU NT IN THE FORM OF DEPRECIATION, SUCH NOTIONAL CLAIM BECOMES CASH SURPLUS AVAILABLE WITH THE ASSESSEE, WHICH GOES OUTSIDE THE BOOKS OF ACCOUNT OF THE TRUST, UNLESS IT IS WRITTEN BACK WHICH IS NOT DONE. IT IS NOT PERMISSIBLE FOR A CHARITABLE INSTITUTION TO G ENERATE INCOME OUTSIDE THE BOOKS IN THIS FASHION. WHERE COST OF CAPITAL ASSET IS CLAIMED AS APPLICATION OF INCOME, FURTHER CLAIM OF DEPRECIATION FROM INCOME TO ARRIVE AT THE REAL INCOME WILL BE AN ANOMALY IN THE APPLICATION OF INCOME RESULTING IN A SHORTF ALL. GENERALLY, THE TRUST CLAIMS DEPRECIATION AS AN EXPENDITURE IN INCOME & EXPENDITURE A/C. WHICH IS NOT CORRECT. IT IS NOT AN APPLICATION OF INCOME BUT AN OUTGOING TO EARN INCOME. IN VIEW OF THE ABOVE AND PLACING RELIANCE IN THE CASE OF LISSIE MEDICAL IN STITUTIONS VRS. CIT 76 DTR 372, IT IS HELD THAT THE A.O. IS JUSTIFIED IN ADDING BACK THE NOTIONAL EXPENDITURE WHILE ASSESSING THE INCOME OF THE TRUST AND HENCE, IT IS CONFIRMED. 5. AFTER HEARING LD D.R. AND PERUSING THE ORDER OF THE CIT(A), I DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) , THEREFORE, SAME IS CONFIRMED AND THE GROUNDS OF APPEAL OF THE ASSESSEE ARE DISMISSED. 6 IN THE RESULT, THE APPEAL F ILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16/05/2017 IN THE PRESENCE OF PARTIES. SD/ - ( N.S SAINI) A CCOUNTANT MEMBER CUTTACK; DATED 16 /05/2017 B.K.PARIDA, SPS 9 COPY OF THE OR DER FORWARDED TO : BY ORDER, SR.PRIVATE SECRETARY ITAT, CUTTACK 1. THE APPELLANT : SOCIETY FOR THE WELFARE OF WEAKER SECTIONS, NEAR DFO OFFICE, RAMSAGAR ROAD, PARLAKHEMUNDI. 2. THE RESPONDENT. DCIT, CIRCLE, BERHAMPUR 3. THE CIT(A) - 3, BHUBANESWAR. 4. PR.CIT , BHUBANESWAR. 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//