DCIT, Kanpur V. M/S Seth Anand Ram Jaipuria Educaion Society, Lucknow

ITA 373/LKW/2011

• Counselvise Citation: 37323714 RSA 2011
• Duration Of Justice: 3 year(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-07-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 09-06-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 24-06-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ALOK MITRA
• Assessee Lawyers: S K JAIN FCA SHRI SAWARN SINGH
• Keywords: Capital asset; Depreciation; Income from undisclosed sources; Charitable institution; Maximum Marginal Rate; Non compliance; Procedural lapse; Revenue expenditure; Capital expenditure
• Section: 133(6); 12A; 148

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NOS.373 TO 375/LKW/2011 A.YRS.:2004 - 05, 2006 - 07 & 2007 - 08 DY.C.I.T. - 1, KANPUR. VS. M/S SETH ANAND RAM JAIPURIA EDUCATION SOCIETY, 70, CANTT, KANPUR. PAN:AAAAOS0860F (APPELLANT) (RESPONDENT) APPELLANT BY SHRI ALOK MITRA, D.R. RESPONDENT BY SHRI S. K. JAIN, FCA SHRI SAWARN SINGH, FCA DATE OF HEARING 09/06/2014 DATE OF PRONOUNCEMENT 0 4 /0 7 /2014 O R D E R PER A. K. GARODIA, A.M. ALL THESE APPEALS ARE FILED BY THE REVENUE WHICH ARE DIRECTED AGAINST SEPARATE ORDERS OF CIT(A) - II, KANPUR ALL DATED 30/03/2011 FOR THE ASSESSMENT YEARS 2004 - 2005, 2006 - 2007 AND 2007 - 08. ALL THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY W AY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST WE TAKE UP THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2004 - 05 I.E. I.T.A. NO.273/LKW/2011. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: 1. THAT THE LD. COMMISSIONER OF IN COME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.14,20,640/ - MADE BY THE ASSESSING OFFICER 2 ON ACCOUNT OF EXPENDITURE INCURRED ON ACCOUNT OF SCHOLARSHIP PAID TO ONE MR. ADHEESH BHAGAT, AS IT CANNOT BE SAID TO HAVE B EEN PAID FOR CHARITABLE PURPOSES. 2. THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR DATED 30.03.2011 NEEDS TO BE QUASHED AND THE ORDER PASSED BY THE ASSESSING OFFICER DATED 24.10.2008 BE RESTORED. 3. THAT THE APPELLANT CRAVES LEAVE TO MODIFY ANY OF THE GROUNDS OF APPEAL MENTIONED ABOVE AND/OR TO ADD ANY FRESH GROUNDS AS AND WHEN IT IS REQUIRED TO DO SO. 3. LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER. HE ALSO SUBMITTED THAT CIT(A) HAS NOT ADDRESSED ALL THE OBJE CTIONS OF THE ASSESSING OFFICER AND THEREFORE, THE ORDER OF CIT(A) SHOULD BE REVERSED AND THAT OF THE ASSESSING OFFICER SHOULD BE RESTORED. 4. AS AGAINST THIS, LEARNED A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF CIT(A). HE ALSO SUBMITTED THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL DECISION IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2005 - 06 IN I.T.A. NO.423/LKW/2009 DATED 30/10/2009, COPY OF WHICH IS AVAILABLE ON PAGE NO. 31 TO 48 OF THE PAPER BOOK. IN PARTICULAR , HE DRAW N OUR ATTENTION TO PARA 12 OF THE TRIBUNAL ORDER AS APPEARING ON PAGE NO. 48 OF THE PAPER BOOK. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND THE TRIBUNAL DEC ISION CITED BY LEARNED A.R. OF THE ASSESSEE. FIRST OF ALL , WE WOULD LIKE TO REPRODUCE THE RELEVANT PARA NO. 12 OF THE TRIBUNAL DECISION, AVAILABLE ON PAGE NO. 48 OF THE PAPER BOOK, WHICH IS AS UNDER: 12. IN THE INSTANT CASE ALSO THE FACTS AND SITUATIONS IN THE EARLIER AND THE YEAR UNDER CONSIDERATION IS THE SAME AND THE DEPARTMENT HAD ACCEPTED THE CLAIM IN THE EARLIER YEAR, SO NO 3 DISALLOWANCE WAS CALLED FOR, IN THE YEAR UNDER CONSIDERATION. WE, THEREFORE, DO NOT SEE ANY VALID GROUND TO INTERFERE WITH THE FINDINGS OF THE LEARNED CIT(A) ON THIS ISSUE. 5.1 FROM THE ABOVE PARA OF THE TRIBUNAL ORDER, WE FIND THAT THE TRIBUNAL DECISION IS ON THE BASIS THAT THE DEPARTMENT HAS ACCEPTED THE CLAIM IN EARLIER YEAR AND THEREFORE, NO DISALLOWANCE IS CALLED FOR IN THE PRESENT YEAR I.E. ASSESSMENT YEAR 2005 - 06. ON QUERY FROM THE BENCH, I T WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE IN COURSE OF HEARING BEFORE US THAT THIS SCHOLARSHIP WAS GRANTED TO MR. ADHEESH BHAGAT FOR THE FIRST TIME IN FINANCIAL YEAR 2003 - 04 RELEVANT TO ASSESSMENT YEAR 2004 - 05. IN ASSESSMENT YEAR 2004 - 05 ALSO, THE C LAIM OF THE ASSESSEE WAS REJECTED BY THE ASSESSING OFFICER AND ALTHOUGH THE ADDITION WAS DELETED BY CIT(A) BUT THE REVENUE IS IN APPEAL BEFORE US IN THAT YEAR AND THE SAME IS BEING DECIDED BY US NOW AS PER THIS VERY ORDER . HENCE, IT IS SEEN THAT THIS TRIB UNAL ORDER HAS BEEN OBTAINED BY THE ASSESSEE BY MISREPRESENTING THE FACTS BEFORE THE TRIBUNAL THAT THE DEPARTMENT HAD ACCEPTED THE CLAIM OF THE ASSESSEE IN EARLIER YEAR BECAUSE IN EARLIER YEAR I.E. ASSESSMENT YEAR 2004 - 05, ASSESSMENT WAS REOPENED BY THE AS SESSING OFFICER BY ISSUING NOTICE U/S 148 ON 27/06/2008 AND THE ASSESSMENT ORDER WAS PASSED BY HIM IN ASSESSMENT YEAR 2004 - 05 U/S 147/143 ON 24/10/2008 WHEREAS THE TRIBUNAL ORDER FOR ASSESSMENT YEAR 2005 - 06 IS DATED 30 TH OCTOBER, 2009. HENCE, WHEN THE HEA RING TOOK PLACE BEFORE THE TRIBUNAL FOR A.Y. 2005 06, THE FACTUAL POSITION WAS THAT IN THE PRECEDING YEAR ALSO, ADDITION WAS MADE BY THE A.O. AS PER HIS ORDER U/S 147/143 DATED 24/10/2008. THEREFORE, THIS IS NOT THE FACT THAT AT THE TIME WHEN THE MATTER WAS DECIDED BY THE TRIBUNAL ON 30/10/2009, THE DEPARTMENT HAD ACCEPTED THE CLAIM OF THE ASSESSEE IN ANY EARLIER YEAR. SINCE THIS TRIBUNAL ORDER IS OBTAINED BY THE ASSESSEE BY MISREPRESENTING THE FACTS BEFORE THE TRIBUNAL, THIS TRIBUNAL ORDER CANNOT BE A B INDING PRECEDENCE FOR US TO DECIDE THE PRESENT ISSUE IN ASSESSMENT YEAR 2004 - 05, 2006 - 07 AND 2007 - 08 . 4 5.2 NOW WE PROCEED TO DECIDE THE ISSUE ON MERIT I NDEPENDENTLY OF THE TRIBUNAL DECISION FOR ASSESSMENT YEAR 2005 - 06 BECAUSE WE HAVE SEEN THAT THE TRIBUNAL ORDER FOR ASSESSMENT YEAR 2005 - 06 CANNOT BE CONSIDERED AS A BINDING PRECEDENCE BECAUSE THE SAME WAS OBTAINED BY THE ASSESSEE BY MISREPRESENTING THE FACTS BEFORE THE TRIBUNAL. WE FIND THAT THE ADDITION WAS MADE BY THE ASSESSING OFFICER BY MAKING VARIOUS O BJECTIONS AS PER PARA 7 OF THE ASSESSMENT ORDER IN ASSESSMENT YEAR 2004 - 05 AND FOR THE SAKE OF READY REFERENCE, THIS PARA NO. 7 OF THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2004 - 05 IS REPRODUCED BELOW: 7. ON PERUSAL OF SUBMISSIONS MADE BY THE ASSESSEE, IT IS NOTICED THAT : - (I) THAT THE PRESIDENT OR VICE PRESIDEN T HAS NOT PRODUCED AS DESIRED. (II) THE ASSE S SEE HAS NOT GIVEN CRITERIA FIXED FOR SELECTION OF CANDIDATES FOR GRANT OF SCHOLARSHIP FOR STUDYING IN FOREIGN COUNTRY. (III) THE ASSESSEE HAS NOT PRODUCED ORIGINAL RECORDS IN SUPPORT OF RECEIPT OF APPLICATION AND ITS PROCESSING DONE BY THE SOCIETY. (IV) THE COPY OF APPLICATION OF 4 CANDIDATES SUBMITTED BY THE ASSESSEE HAS NOT BEEN INITIALED AND MARKED TO ANY PERSONS FOR PROCESSING. (V) THE APPLICA TION OF 3 CANDIDATES OTHER THAN THE APPLICATION OF SHRI ADHEESH BHAGAT WERE SENT BY HIS FATHER AND NO DOCUMENTS WHATSOEVER ENCLOSED WITH THESE APPLICATIONS. (VI) THERE IS NO EVIDENCE WHATSOEVER INTERVIEW LETTERS WERE ISSUED TO THE 4 CANDIDATES WHO RESIDE AT DISTANT PLACES SUCH AS KOLKOTA, NEW DELHI, KANPUR. (VII) THE APPLICATION OF SHRI ADHEESH BHAGAT WAS DATED 16.5.2003 AND THIS APPLICATION WAS ADDRESSED TO THE SOCIETY AT ITS KANPUR OFFICE. IT IS NOT UNDERSTOOD AS TO HOW THE APPLICATION DATED 16.5.2003 FROM KOLK A TA HAS BEEN RECEIVED BY THE SOCIETY AT ITS KANPUR OFFICE AND AS TO HOW THIS APPLICATION WAS TAKEN INTO CONSIDERATION IN THE MEETING OF MANAGEMENT COMMITTEE HELD ON 17.5.2003 ( I.E. ON THE NEXT 5 DATE OF APPLICATION ) AND AS TO HOW THE NOTICE FOR INTERVIEW WAS SENT TO SHRI ADHEESH BHAGAT AND HOW AL L THE 4 CANDIDATES ATTENDED BEFORE THE INTERVIEW BOARD ON 18.5.2003 AND AS TO HOW AFTER INTERVIEWING ALL FOUR CANDIDATES THE COMMITTEE ON 18.5.2003 AT 11.30 A.M. D ECIDED TO SELECT MR. ADHEESH BHAGAT FOR SUCH SCHOLARSHIP. THESE FACTS CLEARLY REVEAL THAT THERE WAS NO GENUINE PROCESS OF SELECTION/INTERVIEW WAS HELD AND IT WAS ALL MANIPULATION MADE BY THE SOCIETY AND THE SCHOLARSHIP WAS GRANTED TO MR. ADHEESH BHAGAT HAD THE SOLE DISCRETION OF ITS PRESIDENT/ VICE PRESIDENT WHO INTENTIONALLY AVOIDED TO APPEAR FOR FEAR OF INTERROGATION. (VIII) IT HAS ALSO BEEN NOTICED THAT THE SOCIETY NEVER BEFORE OR AFTER HAS GIVEN SUCH SCHOLARSHIP TO ANY OTHER PERSON EXCEPT SHRI ADHESSH BHAGAT. (IX) THE SCHOLARSHIP TO SHRI ADHEESH BHAGAT WAS GIVEN TO PURSUE 4 YEARS B.SC. COURSES IN COMPUTER SCIENCE FROM U.S.A WHICH IS A BASIC COURSE AND SUCH COURSE IS AVAILABLE IN MANY INDIAN UNIVERSITY /COLLEGE AND THE MONEY WAS PAID BY T HE SOCIETY COULD NO WAY BE CONSIDERED TO FULFILL ITS CHARITABLE OBJECTS. (X) IT HAS BEEN SUBMITTED THAT THE FINANCIAL STATUS OF SHRI ADHEESH BHAGAT HAS NOT BEEN TAKEN INTO CONSIDERATION WHILE GRANTING SUCH SCHOLARSHIP . SUCH A SUBMISSION GOES TO THE ROUT E OF DETERMINATION OF PURPOSE AND OBJECTS OF GRANT OF SCHOLARSHIP, HAD IT BEEN WITH THE OBJECT OF CHARITABLE PURPOSE. T HE SOCIETY SHOULD HAVE TAKEN INTO CONSIDERATION THE FINANCIAL CONDITION OF THE STUDENTS BEFORE GRANT OF SUCH SCHOLARSHIP WH ICH HAS INTENTIONALLY NOT BEEN LOOKED INTO. IT IS PERTINENT TO MENTION THAT EVEN THE CLAUSE (G) OF THE OBJECT OF THE SOCIETY PROVIDES TO AWARD SCHOLARSHIP TO DESERVING STUDENT FOR EDUCATION IN FOREIGN COUNTRY. THE SOCIETY SHOULD HAVE WELL DEFINED CRITERI A FOR SELECTING DESERVING CANDIDATES WHICH CAN ONLY BE BASED ON THE BASIS OF FINANCIAL STATUS AND MERITS OF THE CANDIDATES. HERE NEITHER THE .FINANCIAL STATUS NOR THE MERITS OF THE CANDIDATES WAS CONSIDERED NOR THE TRANSPARENCY IN SELECTING AND EXPENDING F UNDS OF THE SOCIETY TO THE EXTENT OF OVER RS. 66 LAKHS ON ONE CANDIDATE HAS BEEN CONSIDERED. (XI) IN ORDER TO EXAMINE THE FINANCIAL STATUS OF MR . ADHEESH BHAGAT AND HIS PARENTS, A NOTICE U/S 133(6) DATED 6 27.11.2007 WAS ISSUED TO HIS FATHER SHRI ASHOK V. BHAGAT AS UNDER : - 'TO SHRI A S HOK V. BHAGAT, 20, PAUL MANSION, 6,BISHOP LEFROY ROAD, KOLKOTTA - 700020 SUB: FURNISHING OF INFORMATION U/S 133(6) OF THE I.T.ACT, 1961 - REG. DURING THE COURSE OF SCRUTINY OF THE CASE OF SETH ANANDRAM JAIPURIA EDUCATION SOCIETY, SETH ANANDRAM JAIPURIA SCHOOL, 7 - CANTONMENT, KANPUR FOR THE ASSESSMENT YEAR 2005 - 06, IT HAS COME TO MY NOTICE THAT THE SOCIETY HAS GIVEN THE SCHOLARSHIP TO YOUR SON MR. ADHEESH BHAGAT WHO HAS BEEN ATTENDING THE COURSE - COMPUTER SCIENCE & ENGINEERING 4 YEARS UNDER GRADUATE IN THE UNIVERSITY OF CALIFORNIA AT LOS ANGELES AS UNDER: - YEAR AMOUNT 2003 - 04 14,20,643 / - 2004 - 05 17,60,489 / - 2005 - 06 17,66,435 / - IN THIS REGARD, YOU ARE REQUIRED TO FURNISH THE FOLLOWING INFORMATION: - (1) YOUR PERMANENT ACCOUNT NUMBER INCLUDING YOUR FAMILY MEMBER S . (2) COPY OF YOUR RETURN OF INCOME FOR THE LAST 3 YEARS INCLUDING YOUR FAMILY MEMBERS ALONG WITH COMPUTATION OF INCOME. (3) HAVE YOU GOT ANY RELATION TO THE MEMBERS/OFFICER BEARERS OF THE ABOVE SOCIETY NAMED SETH ANANDRAM JAIPURIA EDUCATION SOCIETY, KANPUR . (4) ANY OF YOUR IMMOVABLE PROPERTY IS MORTGAGED OR PLEDGED ON PAYMENT MADE FOR THE CONSIDERATION OF AFORESAID SCHOLARSHIP TO ABOVE NAMED SOCIETY. (5) ANY OTHER TRANSACTION WITH THE ABOVE NAMED SOCIETY FOR T HE CONSIDERATION OF SCHOLARSHIP. 7 (6) COPY OF YOUR BANK STATEMENT INCLUDING ALL FAMILY MEMBERS FOR THE LAST 3 YEARS . PLEASE SUBMIT THE ABOVE INFORMATION TO THE UNDERSIGNED BY 12 TH DECEMBER, 2007 POSITIVELY. NON COMPLIANCE OF THIS NOTICE SHALL INVITE IMPOSITION OF PENALTY U/S 271 OF THE I.T.ACT, 1961.' IN RESPONSE TO ABOVE NOTICE, SAID SHRI ASHOK V. BHAGAT HAS SUBMITTED INFORMATION AND DOCUMENTS VIDE HIS LETTER DATED 7.12,2007 WHICH IS ENCLOSED AS PER ANNEXURE - A AND FORMED PART OF THIS ORDER. ON PERUSAL OF LETTER DATED 7.12.2007 AND ITS ENCLOSURES IT HAS BEEN NOTICED THAT : - ( A ) THE PARENTS OF THE STUDENTS SHRI ASHOK BHAGAT AND RACHNA BHAGAT WERE ASSESSED TO TAX IN CENTRAL CIRCLE - 17, KOLKOTTA. EVEN THE STUDENT SHRI ADHEESH BHAGAL IS ALSO ASSESSED TO TAX WITH ITO - 34, KOLKOTTA. ALL THESE THREE PERSONS HAVE SUBMITTED COPY OF THEIR RETURN OF INCOME FOR A.YRS. 2004 - 05 TO 2006 - 07. ( B ) THE STUDENT SHRI ADHEESH BHAGAT AT THE AGE OF EIGHTEENS HAS CAPITAL BALANCE OF RS.13.32 LAKHS AS ON 31.03.2004 AND H IS CAPITA L INTER - ALIA, CONSISTS OF BOOK VALUE OF JEWELLERY AT RS.1.45 LAKHS, SHARES RS . 3.88 LAKHS AND LAND OF RS.7.77 LACS . THE FATHER ASHOK V. BHAGAT IS DIRECTOR AND EARNED SALARY FROM BANSHIDHAR BAIJ NATH PROJECTS PVT . LTD. AND VISHRANTI HOUSING AND LEASING LTD. AND REETIKA CONTRACTORS PVT. LTD. THE MOTHER SMT. RACHNA BHAGAT IS PROPRIETOR OF SOME CONCERN AND DECLARED INCOME OF RS.1,85,455/ - FROM PROPRIETORSHIP CONCERN AND LONG TERM PROFIT OF RS. 2,79,399/ - FROM SALE OF SHARES IN A.Y. 2006 - 07. FROM PERUSAL OF BANK ACCOUNTS OF THESE PERSONS IT APPEARS THAT THEY ARE THE PERSONS HAVING A VERY HIGH FINANCIAL STATUS. IN F.Y. 2003 - 04, THE BANK ACCOUNT OF SHRI ASHOK V. BHAGAT WITH I.N.G VYAS BANK LTD. (A/ C NO.50401004749) SHOWS DEPOSITS OF OVER RS.51.58 LAKHS. THERE ARE OTHER BANK ACCOUNTS ALSO. THUS, ON PERUSAL OF THE ABOVE DETAILS IT IS VERY MUCH EVIDENT THAT MR. ADHEESH BHAGAT AND HIS PARENTS BELONGED TO A VERY HIGH STATUS OF SOCIETY AND THEREFORE, GRANT OF SCHOLARSHIP 8 TO ADHEESH BHAGAT CANNOT BE SAID TO BE MADE FOR CHARITABLE PURPOSES. IT HAS CERTAINLY BEEN MADE FOR SOME OTHER CONSIDERATION BUT SINCE THE P RESIDENT AVOIDED TO APPEAR IN PERSON, FURTHER PROBE COULD NOT BE CARRIED OUT. (XII) EVEN THOUGH THE SOCIETY INTENDS TO MAKE PAYMENT OF SCHOLARSHIP OF OVER RS.66 LAKHS, NO ADVERTISEMENT OR PUBLIC NOTICE WERE MADE AND THE 4 APPLICATIONS WERE RECEIVED ON THE BASIS OF THEIR PERSONAL KNOWLEDGE WHICH SHOWS THAT THE WHOLE AFFAIRS WAS MANIPULATED BY THE MANAGEMENT COMMITTEE. 7. IN VIEW OF THIS, IT IS HELD THAT THE PAYMENT OF SCHOLARSHIP TO SHRI ADHEESH BHAGAT IS NOT CONSIDERED TO HAVE BEEN MADE FOR CHARITABLE PURPOSES AND THEREFORE, THE AMOUNT PAID FOR SUCH SCHOLARSHIP IS CONSIDERED TO HAVE BEEN MADE AT THE DISCRETION OF THE MANAGEMENT COMMITTEE OF THE SOCIETY FOR THEIR OWN BENEFIT. THEREFORE, THE PAYMENTS MADE TO SUCH SOCIETY IS DISALL OWED AND IT IS CONSIDERED TO BE THE INCOME OF THE SOCIETY FOR THE PERSONAL BENEFIT OF ITS MEMBERS AND SUCH AMOUNT IS CHARGEABLE TO TAX AT MAXIMUM MARGINAL RATE.' 5.3 THE DECISION OF CIT(A) ON THIS ISSUE IS AS PER PARA 4 OF HIS ORDER, WHICH IS REPRODUCED AS UNDER: 4. DECISION I HAVE CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE ISSUE OF GRANT OF SCHOLARSHIP TO MR. ADHEESH BHAGAT. SINCE THE FACTS OF THE INSTANT CASE ARE IDENTICAL AS THAT OF THE ASSESSMENT YEAR 2005 - 06, RESPECTFULLY FOLLOWING THE ORDER OF MY PREDECESSOR FOR ASSESSMENT YEAR 2005 - 06 AND THE ORDER OF THE HON'BLE I.T.A.T. REFERRED TO ABOVE, I DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION. THE GROUND OF APPEAL NO. (II) IS ALLOWED. 5.4 FROM THE ABOVE PARA OF CIT(A ), IT IS SEEN THAT HE HAS SIMPLY FOLLOWED THE ORDER OF HIS PREDECESSOR FOR ASSESSMENT YEAR 2005 - 06. IN THE PAPER BOOK, THE ASSESSEE HAS ENCLOSED THE ORDER OF CIT(A) FOR ASSESSMENT YEAR 2005 - 06 ALSO, WHICH IS AVAILABLE ON PAGE NO. 24 TO 30 OF THE PAPER BOO K. IN THAT ORDER , THE CIT(A) HAS DECIDED THIS ISSUE AS PER PARA 11 OF HIS ORDER AND FOR 9 THE SAKE OF READY REFERENCE, PARA 11 OF THE ORDER OF CIT(A) FOR ASSESSMENT YEAR 2005 - 06 IS ALSO REPRODUCED BELOW: 11. I HAVE CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE ISSUE OF GRANT OF SCHOLARSHIP TO SHRI ADHEESH BHAGAT WITH REFERENCE TO 'APPLICATION OF FUNDS FOR CHARITABLE PURPOSE'. THE SUBMISSIONS OF THE APPELLANT AS NOTED IN PARA - 10 ABOVE SHOW THAT GRANT OF SCHOLARSHIP TO 'DESERVING CANDIDATE' IS PART OF MEMORANDUM / OBJECT OF THE SOCIETY. THE APPELLANT SOCIETY IS HOLDING VALID REGISTRATION U/S 12A FOR THIS PERIOD. IT SEEMS THAT THE CRITERIA OF 'DESERVING CANDIDATE' HAS BEEN CONSIDERED BY THE AO IN A NARROW MANNER, CONFINING IT TO POOR STATUS ONLY. IN SUCH A SITUATION, THE INTERPRETATION TAKEN BY AO IS NOT CORRECT AND I AM OF THE VIEW THAT MERIT IN STUDIES IS ALSO A GOOD CRITERIA FOR DESERVING GRANT AND SCHOLARSHIP. TO THIS EXTENT, THE REASONS AND DISCUSSION OF THE FINANCIAL STATUS OF SHRI ADHEESH B HAGAT ARE IRRELEVANT BECAUSE OBJECT OF THE SOCIETY INCLUDES WIDER AREAS OF ELIGIBILITY FOR GRANT OF SCHOLARSHIP. SAME HAS BEEN ACKNOWLEDGED AND RECOGNIZED BY THE DEPARTMENT AS CHARITABLE BY VIRTUE OF REGISTRATION OF SOCIETY U/S 12A WHICH IS CONTINUING DURI NG THE YEAR. THE OTHER DISCUSSIONS MADE BY AO ON THE PROCESS OF SELECTION OF SHRI ADHEESH BHAGAT DO NOT LEAD TO ANY SITUATION / CONCLUSION WHERE PROVISIONS OF SECTION 13 OF THE I.T. ACT COULD BE APPLIED. ADMITTEDLY, AS SUBMITTED BEFORE ME ALSO AND NOTED IN PARA - 10(G) ABOVE, SHRI ADHEESH BHAGAT IS NOT RELATED TO SOCIETY OR ITS MEMBERS IN ANY MANNER, MAKING HIM 'SPECIFIED PERSON'. THERE IS NO SUSPICION ON THE TRANSACTIONS OF THE SOCIETY ALSO THAT IS TO SAY THE FEES HAS BEEN DULY PAID TOWARDS THE SAME PERSON A ND DIRECTLY TO THE 'EDUCATIONAL INSTITUTION' IN USA. THERE IS NO COLOR IN THE TRAIL OF TRANSACTION. THEREFORE, NOTHING FURTHER CAN BE INTERPRETED TO DISALLOW THE SAME UNDER COMPUTATION PROVISION OF CHAPTER - III (SECTION 11, 12 & 13 OF THE I.T. ACT). THE FAC TS OF THE CASE SHOW THAT AMOUNTS PAID AS SCHOLARSHIP HAVE BEEN UTILISED TOWARDS EDUCATION OF 'DESERVING CANDIDATE' AND SAME IS WELL COVERED UNDER THE OBJECTIVE CLAUSES OF THE SOCIETY. IF THERE IS ANY SHORTCOMING IN THE PROCESS OF SELECTION OF 'DESERVING CA NDIDATE' BY WAY OF TRIVIAL PROCEDURAL LAPSES, THIS IN ITSELF DOES NOT CHANGE THE NATURE OF APPLICATION OF INCOME TOWARDS CHARITABLE PURPOSE WHICH IS FACTUALLY VERIFIED AND ACCEPTED BY AO AS SUCH. UNDER THE CIRCUMSTANCES, THE ADDITION MADE BY AO IS DIRECTED TO BE DELETED AND GROUND NO. 2 OF APPEAL IS ALLOWED. 10 5.5 FROM THE ABOVE PARA OF THE ORDER OF CIT(A), IT IS SEEN THAT HE HAS BRUSHED ASIDE ALL THE OBJECTIONS OF THE ASSESSING OFFICER BY STATING THAT BY WAY OF TRIVIAL PROCEDURAL LAPSES, THIS IN ITSELF DOE S NOT CHANGE THE NATURE OF APPOLICATION OF INCOME TOWARDS CHARITABLE PURPOSES WHICH IS FACTUALLY VERIFIED AND ACCEPTED BY THE ASSESSING OFFICER AS SUCH. WE FAIL TO UNDERSTAND AS TO HOW CIT(A) IS STATING THAT THE ASSESSING OFFICER HAS FACTUALLY VERIFIED AN D ACCEPTED THE APPLICATION OF INCOME TOWARDS CHARITABLE PURPOSES WHEN THE ASSESSING OFFICER IS RAISING SO MANY OBJECTIONS IN THE ASSESSMENT ORDER. ALL THE OBJECTIONS OF THE ASSESSING OFFICER ARE ALREADY REPRODUCED BY US ABOVE. MOST IMPORTANT OBJECTION O F THE ASSESSING OFFICER IS THAT THE APPLICATION OF MR. ADHEESH BHAGAT WAS DATED 16 TH MAY, 2003 AND THE COPY OF THIS APPLICATION IS AVAILABLE ON PAGE 15 OF THE PAPER BOOK AND FROM THE SAME, WE FIND THAT THE ADDRESS OF THE APPLICANT IS OF CALCUTTA. THE APPL ICATION IS ADDRESSED TO THE PRESIDENT OF THE ASSESSEE SOCIETY AT KANPUR. IT IS STATED THAT THIS APPLICATION DATED 16 TH MAY, 2003 WAS CONSIDERED BY THE SCHOLARSHIP COMMITTEE OF THE ASSESSEE SOCIETY. THE MINUTES OF MEETING OF SCHOLARSHIP COMMITTEE OF THE A SSESSEE SOCIETY HELD ON 18 TH MAY, 2003 IS AVAILABLE ON PAGE NO. 23 OF THE PAPER BOOK. THIS MINUTES HAS BEEN SIGNED AT 11.30 A.M. IT IS ALSO OBSERVED IN THE SAID MINUTES THAT AFTER PROLONGED INTERVIEW PROCESS AND CONSIDERING THE ACADEMIC BACKGROUND OF VAR IOUS CANDIDATES, THE SAID SELECTION COMMITTEE HAS RECOMMENDED THAT THE SCHOLARSHIP BY GRANTED TO MR. ADHEESH BHAGAT. WE FAIL TO UNDERSTAND THAT HOW AN APPLICATION DATED 16 TH MAY, 2003, BY A PERSON RESIDING IN CALCUTTA, HAD REACHED TO THE PRESIDENT OF THE ASSESSEE SOCIETY ON 17 TH MAY, 2003 AND THEREAFTER , THE MANAGING COMMITTEE OF THE ASSESSEE SOCIETY HAD FORMED A SCHOLARSHIP COMMITTEE WHO HAS CALLED THIS PERSON FROM CALCUTTA FOR INTERVIEW AND THIS PERSON APPEARED BEFORE THE SCHOLARSHIP COMMITTEE FOR PROLON GED INTERVIEW ON 17 TH MAY, 2003 AND THEREAFTER , THE SAID SCHOLARSHIP COMMITTEE HAD REACHED TO THE CONCLUSION TO RECOMMEND GRANTING OF SCHOLARSHIP TO MR. ADHEESH BHAGAT AS PER THE MINUTES SIGNED ON 18 TH MAY, 11 2003 AT 11.30 A.M. THE CHRONOLOGY AND TIMING OF THESE EVENTS SUPPORT THE CASE OF THE ASSESSING OFFICER THAT THERE WAS NO GENUINE PROCESS OF SELECTION/INTERVIEW AND IT WAS ALL MANIPULATION MADE BY THE ASSESSEE SOCIETY AND THE SCHOLARSHIP WAS GRANTED TO MR. ADHEESH BHAGAT AT THE SOLE DISCRETION OF THE VICE PRESIDENT / PRESIDENT WHO INTENTIONALLY AVOIDED TO APPEAR BEFORE THE ASSESSING OFFICER FOR FEAR OF INTERROGATION . THIS VITAL OBJECTION OF THE ASSESSING OFFICER IS AS PER CLAUSE (VII) OF PARA 7 OF THE ASSE SSMENT ORDER REPRODUCED ABOVE. WE HAVE ALSO SEEN THAT EVEN THIS VITAL OBJECTION OF THE ASSESSING OFFICER HAS NOT BEEN CONTROVERTED BY CIT(A) IN HIS ORDER IN THE PRESENT YEAR OR IN ASSESSMENT YEAR 2005 - 06. CONSIDERING ALL THESE FACTS, WE ARE OF THE CONSID ERED OPINION THAT IN THE FACTS OF THE PRESENT CASE, IT CANNOT BE SAID THAT GRANTING OF SCHOLARSHIP TO MR. ADHEESH BHAGAT WAS AFTER CARRYING OUT GENUINE PROCESS OF SELECTION/INTERVIEW. APART FROM THIS, WE ALSO FIND THAT NO MATERIAL HAS BEEN BROUGHT ON RECO RD TO SHOW THAT ANY ADVERTISEMENT WAS MADE BY THE ASSESSEE SOCIETY FOR INVITING APPLICATION S FOR SUCH SCHOLARSHIP. IN THE APPLICATION OF MR. ADHEESH BHAGAT APPEARING ON PAGE NO. 15 OF THE PAPER BOOK ALSO, THERE IS NO MENTION AS TO HOW HE CAME TO KNOW ABOU T THE ASSESSEE SOCIETY AND ITS PROGRAMME FOR GRANTING SCHOLARSHIP FOR STUDYING ABROAD. WE ALSO FIND THAT IN THE SAID APPLICATION, IT IS STATED BY MR. ADHEESH BHAGAT THAT HE HAS APPEARED IN ICSE EXAMINATION AND THE RESULT WAS AWAITED. HE HAS ALSO UNDERTAK EN TO FORWARD THE COPY OF MARK SHEET AFTER HE RECEIVED THE SAME. WE FAIL TO UNDERSTAND THAT WHEN THE MARK SHEET WAS STILL AWAITED THEN WHAT WAS THE BASIS FOR DECISION THAT HE IS A FIT CANDIDATE FOR SCHOLARSHIP. IN THIS REGARD, IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT AS PER PAGE NO. 21 & 22 OF THE PAPER BOOK, BEING LETTER FROM THE UNIVERSITY, IN WHICH IT IS STATED THAT MR. ADHEESH BHAGAT HAS BEEN GRANTED ADMISSION BEING ONE OF TOTAL 4390 STUDENTS SELECTED FOR ADMISSION OUT OF AROUND 45,000 HI GH ACHIEVING APPLICANTS. IT MAY BE CONSIDERED TO BE A GOOD BASIS FOR CONSIDERING THE ELIGIBILITY OF A PPLICANT BUT WHEN THE APPLICATION ALONG WITH THESE 12 ENCLOSURES CANNOT REACH TO THE MANAGING COMMITTEE OF THE ASSESSEE SOCIETY AND THE SCHOLARSHIP COMMITTEE IN TIME I.E. BY 17 TH MAY, 2003 AND IT IS NOT SHOWN AS TO HOW MR. ADHEESH BHAGAT WAS CONTACTED FOR ATTENDING THE INTERVIEW AND HOW HE REACHED KANPUR FOR ATTENDING INTERVIEW, ALL THESE MATERIAL CANNOT JUSTIFY H IS SELECTION BECAUSE THESE MATERIAL CANNOT BE A VAILABLE BEFORE THE SELECTION COMMITTEE ALONG WITH THIS FACT THAT THE CANDIDATE MR. ADHEESH BHAGAT CANNOT BE AVAILABLE FOR INTERVIEW ON 17 TH MAY 2003 IN THE CHRONOLOGY OF EVENTS DISCUSSED ABOVE. HENCE, CONSIDERING THE IMPOSSIBILITY OF INTERVIEW OF MR. ADH EESH BHAGAT BY THE SELECTION COMMITTEE, AS CLAIMED IN THE ABSENCE OF ANY POSITIVE MATERIAL HAVING BEEN BROUGHT ON RECORD BY THE ASSESSEE BEFORE ANY OF THE AUTHORITIES BELOW OR BEFORE US, WE ARE OF THE CONSIDERED OPINION THAT THE ORDER OF CIT(A) ON THIS ISS UE IS NOT SUSTAINABLE. WE, THEREFORE, REVERSE THE SAME AND RESTORE THAT OF THE ASSESSING OFFICER. 6. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS ALLOWED. 7. NOW WE TAKE UP THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2006 - 07 I.E. I.T.A. NO.374/LKW/2011. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER: 1. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - II , KANPUR HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE ASSESSING OFFICER TO ALLOW DEPRECIATION OF RS. 1 ,66,49,749 / - ON CAPITAL EXPENDITURE WITHOUT APPRECIATING THE FACT THAT ENTIRE COST OF CAPITAL EXPENDITURE HAS ALREADY BEEN ALLOWED AS DEDUCTION U/S 11 OF THE INCOME TAX ACT, 1961, AGAINST THE INCOME OF TRUST IN RESPECTIVE YEARS AND THEREFORE, ALLOWANCE OF REVENUE EXPEN DITURE U/S 11 OF THE ACT, ON ASSETS WHICH HAD ALREADY BEEN CLAIMED AND ALLOWED AS DEDUCTION ON ACCOUNT OF CAPITAL EXPENDITURE, TANTAMOUNT DOUBLE DEDUCTION. 13 2. T HAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - II , KANPUR HAS ERRED IN SAW AND ON FACTS IN DE LETING THE ADDITION OF RS.17,66,435 / - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF EXPENDITURE INCURRED ON ACCOUNT OF SCHOLARSHIP PAID TO ONE MR. AD H EESH BHAGAT, AS IT CANNOT BE SAID TO HAVE BEEN PAID FOR CHARITABLE PURPOSES. 3. THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - II , KANPUR DATED 30 .03.2011 NEEDS TO BE QUASHED AND THE ORDER PASSED BY THE ASSESSING OFFICER DATED 2 4.10.2008 BE RESTORED. 4. THAT THE APPELLANT CRAVES LEAVE TO MODIFY ANY OF THE GROUNDS OF APPEAL MENTIONED ABOVE AND/ OR TO ADD ANY FRESH GROUNDS AS AND WHE N IT IS REQUIRED TO DO SO. 8. IT WAS AGREED BY BOTH THE SIDES THAT THE ISSUE RAISED BY THE REVENUE AS PER GROUND NO. 2 IS IDENTICAL TO THE ISSUE RAISED BY REVENUE IN ASSESSMENT YEAR 200405 AND HENCE, THIS ISSUE CAN BE DECIDED ON SIMILAR LINES. IN ASSESSMENT YEAR 2004 - 05, WE HAVE DECIDED THIS ISSUE IN FAVOUR OF THE REVENUE AND ACCORDINGLY , IN THIS YEAR ALSO , GROUND NO. 2 OF THE REVENUE IS ALLOWED. 9. REGARDING GROUND NO. 1, LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER. HE PLACED RELIANCE ON A JUDGMENT OF HON'BLE KERALA HIGH COURT RENDERED IN THE CASE OF LISSIE MEDICAL INSTITUTIONS VS COMMISSIONER OF INCOME - TAX AS REPORTED IN [2012] 348 ITR 344 (KER) . 10. AS AGAINST THIS, LEARNED A.R. OF THE ASSESSEE S UPPORTED THE ORDER OF CIT(A). HE ALSO SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL DECISION RENDERED IN THE CASE OF ACIT VS. SARASWATI GYAN MANDIR SHIKSHA SANSTHAN IN I.T.A. NO.117/LKW/2014 DATED 13/05/2014. HE FURTHER S UBMITTED THAT THE COPY OF THIS ORDER IS AVAILABLE ON PAGE NO. 50 TO 53 OF THE PAPER BOOK. REGARDING THE RELIANCE PLACED BY LEARNED D.R. OF THE REVENUE ON THE JUDGMENT OF HON'BLE KERALA HIGH COURT, IT WAS SUBMITTED THAT 14 IN THIS TRIBUNAL DECISION, THE I.T.A .T. HAS CONSIDERED VARIOUS OTHER JUDGMENTS OF VARIOUS OTHER HIGH COURTS, WHICH AR E IN FAVOUR OF THE ASSESSEE AND THEREFORE, THOSE JUDGMENTS SHOULD BE FOLLOWED IN PREFERENCE TO THIS JUDGMENT OF HON'BLE KERLA HIGH COURT. 11. WE HAVE CONSIDERED THE RIVAL S UBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND THE JUDGMENTS CITED BY BOTH THE SIDES. WE FIND THAT IN THE CASE OF ACIT VS. SARASWATI GYAN MANDIR SHIKSHA SANSTHAN (SUPRA), SIMILAR ISSUE WAS DEC IDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE IN PARA 4 & 5 AND FOR THE SAKE OF READY REFERENCE, THE SAME ARE REPRODUCED AS UNDER: 4. AS AGAINST THIS, LEARNED A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF CIT(A). HE ALSO PLACED RELIANCE ON VARIOUS JUDICIAL PRONOUNCEMENTS AS NOTED UNDER: ( I ) CIT VS. INSTITUTE OF BANKING PERSONNEL SELECTION (IBPS) [2003] 131 TAXMAN 386 (BOM) ( II ) CIT VS. SOCIETY OF SISTERS OF ST. ANNE [1984] 146 ITR 28 (KAR.) ( III ) CIT VS. RAIPUR PALLORINA SOCIETY [1989] 180 ITR 579 (MP) ( IV ) CIT VS. SHETH MANILAAL RANCHHODDAS VISHRAM BHAVAN TRUST [1992] 198 ITR 598 (GUJ) ( V ) CIT VS. MANAV MANGAL SOCIETY [2010] 328 ITR 421 (P&H) ( VI ) CIT VS. MARKET COMMITTEE PIPLI [2011] 330 ITR 16 (P&H) ( VII ) CIT VS. TINY TOTS EDUCATION SOCIETY [2011] 330 ITR 21 (P&H) ( VIII ) SAHARA ARTS MA NAGEMENT ACADEMY VS INCOME TAX OFFICER [I.T.A. NO.16/LKW/2012] ( IX ) ACIT - 1, KANPUR VS. SETH ANANDRAM JAIPURIA EDUCATION SOCIETY [I.T.A. NO.423/LKW/2009] ( X ) THE DIRECTOR OF INCOME TAX, NEW DELHI VS. ALL INDIA MANAGEMENT ASSOCIATION, NEW DELHI, INCOME TAX REFERENCE NO. 36 OF 1994 ( XI ) CIT VS. BHERUKA PUBLIC WELFARE TRUST [1999] 240 ITR 513 ( XII ) DY.DIRECTOR OF INCOME TAX (EXEMPTION) VS. M/S G.K.R. CHARITIES [2013] 32 TAXMAN 208 (BOMBAY) ( XIII ) DY. DIRECTOR OF INCOME - TAX - 11(1), MUMBAI VS. G.K.R. CHARITIES [I.T.A. NO.8210?MUM/2010] 15 ( XIV ) ITO (EXEMPTION) VS. SARDAR PUBLIC CHARITABLE TRUST [I.T.A. NO.285 & 286/AHD/2913] ( XV ) DIRECTOR OF INCOME - TAX (EXEMPTION) VS. FRAMJEE CAWASJEE INSTITUTE [1993] 109 CTR (BOM) 463 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THE CASE OF THE REVENUE IS THAT AS PER THE JUDGMENT OF HON'BLE APEX COURT RENDERED IN THE CASE OF ESCORTS LTD. VS UNION OF INDIA (SUPRA), DOUBLE DEDUCTION IS NOT ALLOWABLE AND AS PER REVENUE, SINCE EXEMPTION IS ALLOWED TO THE ASSESSEE IN RESPECT OF INVESTMENT IN CAPITAL ASSETS U/S 1 1 BY HOLDING THAT THE SAME IS APPLICATION OF INCOME FOR CHARITABLE PURPOSES, ALLOWING DEPRECIATION ON THOSE ASSETS AMOUNTS TO DOUBLE DEDUCTION. IN OUR CONSIDERED OPINION, THE STAND OF THE REVENUE IS NOT CORRECT BECAUSE ALLOWING EXEMPTION U/S 11 IS NOT EQU AL TO ALLOWING DEDUCTION. ALLOWING EXEMPTION MEANS THAT THE INCOME IS NOT LIABLE TO TAX BUT THE INCOME REMAINS THE SAME AND IT DOES NOT GET REDUCED, ALTHOUGH SUCH INCOME IS NOT TAXABLE BECAUSE OF THE OPERATION OF SECTION 11(1) OF THE ACT. SINCE IN THE P RESENT CASE, EXEMPTION IS ALLOWED AT THE TIME OF ACQUISITION OF ASSETS AND DEPRECIATION IS ALLOWED AT THE TIME OF USER OF ASSETS, IT DOES NOT AMOUNT TO DOUBLE DEDUCTION. VARIOUS JUDGMENTS CITED BY LEARNED A.R. OF THE ASSESSEE ARE SUPPORTING THE CASE OF TH E ASSESSEE BECAUSE IT WAS HELD IN THESE JUDGMENTS THAT INCOME OF THE ASSESSEE TRUST HAS TO BE COMPUTED ON COMMERCIAL PRINCIPLE AFTER ALLOWING ALL DEDUCTIONS INCLUDING DEPRECIATION. WE, THEREFORE, DECLINE TO INTERFERE IN THE ORDER OF CIT(A). 11.1 FROM THE ABOVE PARA S OF THE TRIBUNAL ORDER, WE FIND THAT THE TRIBUNAL HAS CONSIDERED THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT, KARNATAKA HIGH COURT, M.P. HIGH COURT, GUJARAT HIGH COURT AND PUNJAB & HARYANA HIGH COURT , WHICH ARE IN FAVOUR OF THE ASSESSEE O N THIS ISSUE. WE ALSO FIND THAT THIS FINDING IS GIVEN BY THE TRIBUNAL THAT ALLOWING EXEMPTION U/S 11 IS NOT EQUAL TO ALLOWING DEDUCTION. IT WAS ALSO HELD THAT ON ALLOWING EXEMPTION , THE INCOME IS NOT LIABLE TO TAX BUT THE INCOME REMAINS THE SAME AND IT D OES NOT GET REDUCED, ALTHOUGH SUCH INCOME IS NOT TAXABLE BECAUSE OF THE OPERATION OF SECTION 11(1) OF THE ACT. IT IS ALSO HELD BY THE TRIBUNAL THAT EXEMPTION IS 16 ALLOWED AT THE TIME OF ACQUISITION OF ASSETS AND DEPRECIATION IS ALLOWED AT THE TIME OF USER O F ASSETS AND IT DOES NOT AMOUNT TO DOUBLE DEDUCTION. 11.2 NOW WE DISCUSS THE APPLICABILITY OF THE JUDGMENT OF HON'BLE KERALA HIGH COURT CITED BY LEARNED D.R. OF THE REVENUE. FIRST OF ALL , WE FIND THAT IN THIS CASE , HON'BLE KERALA HIGH COURT H AS APPLIED T HE JUDGMENT OF HON'BLE APEX COURT RENDERED IN THE CASE OF ESCORTS LTD. V. UNION OF INDIA AS REPORTED IN [1993] 199 ITR 43 (SC) . WE ARE OF THE CONSIDERED OPINION THAT THIS JUDGMENT OF HON'BLE APEX COURT IS NOT APPLICABLE IN THE PRESENT CASE BECAUSE THE FACTS ARE DIFFERENT. IN THE CASE OF ESCORTS LTD. (SUPRA), THE ASSESSEE WAS CLAIMING DOUBLE DEDUCTION IN RESPECT OF THE SAME ASSE T BY WAY OF DEPRECIATION U/S 32 AND BY WAY OF ALLOWANCE U/S 35(1)(IV) AS CAPITAL EXPENDITURE ON SCIENTIFIC RESEARCH. UNDER THESE FACTS, IT WAS HELD THAT DOUBLE DEDUCTION IS NOT ALLOWABLE. IN THE PRESENT CASE, WE HAVE ALREADY DISCUSSED THAT GRANTING OF EX EMPTION U/S 11(1) AND GRANTING OF DEPRECIATION U/S 32 IS NOT AMOUNTING TO DOUBLE DEDUCTION BECAUSE IT IS HELD THAT BY WAY OF GRANTING EXEMPTION U/S 11(1) , NO DEDUCTION IS GRANTED BECAUSE THE INCOME IS NOT REDUCED AND ONLY THE INCOME IS HELD TO BE EXEMPT AN D THE DEDUCTION IS ONLY GRANTED BY WAY OF DEPRECIATION WHEN ASSETS ARE USED. 11.3 FOR ONE MORE REASON, THIS JUDGMENT OF HON'BLE KERALA HIGH COURT IS NOT A PPLICABLE IN THE PRESENT CASE . I T IS OBSERVED BY HON'BLE KERALA HIGH COURT THAT ALL THE CHARITABLE IN STITUTIONS WILL BE GENERATING UNACCOUNTED INCOME EQUAL TO THE DEPRECIATION AMOUNT CLAIMED ON YEAR TO YEAR BASIS WHICH IS NOTHING BUT BLACK MONEY. WE FAIL TO UNDERSTAND AS TO HOW GRANTING OF DEPRECIATION WILL GENERATE UNACCOUNTED INCOME BECAUSE BY WAY OF GRANTING DEPRECIATION, NO INCOME IS RESULTING AND THERE IS NO INCREASE IN CASH FLOW. THE INCOME IS REDUCED TO ONE SIDE OF THE BALANCE SHEET AND THE ASSET IS REDUCED ON THE OTHER SIDE AND THIS CANNOT RESULT INTO GENERATION OF ANY 17 INCOME OUTSIDE THE BOOKS OF ACCOUNT. HENCE, FOR THIS REASON ALSO, THIS JUDGMENT OF HON'BLE KERALA HIGH COURT IS NOT APPLICABLE PARTICULARLY WHEN THERE ARE SO MANY JUDGMENTS OF VARIOUS HIGH COURT S , WHICH ARE IN FAVOUR OF THE ASSESSEE. WE, THEREFORE, DO NOT FIND ANY REASON TO TAKE A CONTRARY VIEW. HENCE, FOLLOWING THE I.T.A.T. DECISION IN THE CASE OF ACIT VS. SARASWATI GYAN MANDIR SHIKSHA SANSTHAN (SUPRA), WE DECLINE TO INTERFERE IN THE ORDER OF CIT(A) ON THIS ISSUE. GROUND NO. 1 OF THE REVENUES APPEAL IS REJECTED. 12. IN THE RESULT, THIS APPEAL OF THE REVENUE IS PARTLY ALLOWED. 13. NOW WE TAKE UP THE REMAINING APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2007 - 08 I.E. I.T.A. NO.375/LKW/2011. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER: 1. THAT THE LD. COMMISSIONER OF INCOM E TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE ASSESSING OFFICER TO ALLOW DEPRECIATION OF RS.1,66, 97 ,7 67 / - ON CAPITAL EXPENDITURE WITHOUT APPRECIATING THE FACT THAT ENTIRE COST OF CAPITAL EXPENDITURE HAS ALREADY BEEN ALLOWED AS D EDUCTION U/S 11 OF THE INCOME TAX ACT, 1961, AGAINST THE INCOME OF TRUST IN RESPECTIVE YEARS AND THEREFORE, ALLOWANCE OF REVENUE EXPENDITURE U/S 11 OF THE ACT, ON ASSETS WHICH HAD ALREADY BEEN CLAIMED AND ALLOWED AS DEDUCTION ON ACCOUNT OF CAPITAL EXPENDIT URE, TANTAMOUNT DOUBLE DEDUCTION. 2. T HAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN SAW AND ON FACTS IN DELETING THE ADDITION OF RS.1 6 , 40 , 236 / - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF EXPENDITURE INCURRED ON ACCOUNT OF SCHOLARSHIP PAID TO ONE MR. ADHEESH BHAGAT, AS IT CANNOT BE SAID TO HAVE BEEN PAID FOR CHARITABLE PURPOSES. 3. THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR DATED 30.03.2011 NEEDS TO BE QUASHED AND THE ORDER PASSED BY THE ASSESSING OFFICER DATED 30 . 03 .20 11 BE RESTORED. 18 4. THAT THE APPELLANT CRAVES LEAVE TO MODIFY ANY OF THE GROUNDS OF A PPEAL MENTIONED ABOVE AND/OR TO ADD ANY FRESH GROUNDS AS AND WHEN IT IS REQUIRED TO DO SO. 14. IT WAS AGREED BY BOTH THE SIDES THAT BOTH THE ISSUES ARE IDENTICAL TO ASSESSMENT YEAR 2006 - 07 AND THEREFORE, THIS APPEAL CAN BE DECIDED ON SIMILAR LINE AS IN ASSESSMENT YEAR 2006 - 07. IN ASSESSMENT YEAR 2006 - 07 , WE HAVE REJECTED GROUND NO. 1 OF THE REVENUE AND HAVE ALLOWED GROUND NO. 2. ACCORDINGLY, IN THE PRESENT YEAR ALSO, GROUND NO. 1 IS REJECTED AND GROUND NO. 2 IS ALLOWED. 15. IN THE RESULT, THIS APPEAL OF THE REVENUE IS PARTLY ALLOWED. 16. IN THE COMBINED RESULT, THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2004 - 05 IS ALLOWED AND REMAINING TWO APPEALS ARE PARTLY ALLOWED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 0 4 /0 7 /2014. *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR