M/s Doon Library & Research Centre, Dehradun V. DCIT, Dehradun

ITA 3742/DEL/2011

• Counselvise Citation: 374220114 RSA 2011
• Duration Of Justice: 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 04-08-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: Y KAKKAR
• Keywords: Depreciation; Revenue expenditure; Capital expenditure
• Section: 12A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D NEW DELHI BEFORE SHRI R.P. TOLANI AND SHRI A.N. PAHUJA ITA NO. 3742/DEL/2011 ASSTT. YR. 2007-08 M/S DOON LIBRARY & RESEARCH CENTRE, VS. DCIT CIRC LE-2, 4, SUBHASH ROAD, DEHRADUN. DEHRADUN. PAN/GIR NO. AABTD0719J (APPELLANT) ( RESPONDENT ) APPELLANT BY : SHRI K. SAMPATH ADV. RESPONDENT BY : MS. Y. KAKKAR DR O R D E R PER R.P. TOLANI, J.M : THIS IS ASSESSEES APPEAL AGAINST CIT(A)S ORDER DA TED 26-4-2011 RELATING TO A.Y. 2007-08. FOLLOWING GROUNDS ARE RAI SED: THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE AUTHORITIES BELOW ERRED IN I) TREATING THE GRANT RECEIVED FROM THE GOVERNOR OF UTTARAKHAND IN A SUM OF RS. 10 LACS AS REVENUE INCO ME CHARGEABLE TO TAX; II) IN NOT ALLOWING THE EXPENDITURE IN A SUM OF RS. 19,47,645/- TREATING THE SAME AS CAPITAL EXPENDITUR E. 2. BRIEF FACTS ARE: ASSESSEE IS A BRANCH OF ACCLAIM ED DOON SCHOOL ESTABLISHMENT. THIS INSTITUTION WAS ESTABLISHED ON 16-3-2006 AND IS PRIMARILY FINANCED BY THE GRANT IN- AID RECEIVED FROM THE DE PARTMENT OF EDUCATION, GOVT. OF UTTRAKHAND. ASSESSEE APPLIED FOR EXEMPTION U/S 12A ON 31-3-2008, BY THAT TIME DUE TO LEGISLATIVE AMENDMENT THE DIT( E) HAD NO POWER TO GRANT 12A REGISTRATION RETROSPECTIVELY, THE REGISTRATION WAS THUS GRANTED W.E.F. 31- ITA 3742/DEL/11 M/S DOON LIBRARY & RESEARCH CENTRE 2 3-08. CONSEQUENTLY DURING THIS YEAR IT WAS NOT REGI STERED U/S 12A. ASSESSEE FILED ITS RETURN OF INCOME DECLARING NIL INCOME. 2.1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AO FOUND THAT ASSESSEE HAS RECEIVED A SUM OF RS. 10 LACS FROM GOVERNOR OF UTTARAKHAND WITH CERTAIN DIRECTIONS WHICH WILL BE DEALT BELOW, IT WAS TREATE D BY THE ASSESSEE AS CORPUS DONATION. BESIDES ASSESSEE CLAIMED FOLLOWING REVENUE EXPENSES FROM ITS INCOME. BUILDING RENOVATION RS. 11,68,000/- FURNITURE & FIXTURE RS. 4,96,023/- BOOKS RS. 1,17,381/- MAGAZINES & JOURNALS RS. 87,457/- BROAD BAND RS. 10,537/- COMPUTER RS. 64,297/- GLOW SIGN BOARD RS. 3,950/- 2.2. AO CALLED IN QUESTION THESE ISSUES, WHICH WER E REPLIED AND EXPLAINED BY THE ASSESSEE. OFFICER HOWEVER HELD THAT THE ASSE SSEE, IN THE ABSENCE OF 12A REGISTRATION WAS TO BE TREATED AS AOP FOR THE P ERIOD; ABOVE GRANT WAS NOT CORPUS RECEIPT AND THE SAME WAS TREATED AS INCO ME. BESIDES, THE ABOVE EXPENDITURE WAS HELD TO BE CAPITAL IN NATURE THUS N OT ELIGIBLE TO BE REDUCED FROM INCOME AND WAS ADDED BACK ALLOWING DEPRECIATIO N THEREON HOLDING THE ITA 3742/DEL/11 M/S DOON LIBRARY & RESEARCH CENTRE 3 EXPENDITURE TO BE CAPITAL IN NATURE. AO COMPUTED TH E ASSESSEES INCOME AS UNDER: NET LOSS AS PER INCOME & EXPENDITURE A/C RS. 1,55, 249/- ADD: GRANT RECEIVED FROM THE GOVERNOR OF UTTARAKHAND. RS. 10,00,000/- CAPITAL EXPENDITURE, DISALLOWED RS. 19,47,645/- RS. 27,82,396/- LESS: DEPRECIATION RS. 3,47,413/- TOTAL INCOME RS. 24,44,983 2.3. AGGRIEVED ASSESSEE PREFERRED 1 ST APPEAL, ELABORATE SUBMISSIONS WERE MADE WHICH OR PLACED ON RECORD, THEY DID NOT FIND F AVOR WITH CIT(A) EITHER, THE APPEAL WAS DISMISSED. AGGRIEVED THE ASSESSEE IS BEFORE US: 3. LD COUNSEL FOR THE ASSESSEE CONTENDS THAT:. IT IS NOT DISPUTED THAT THE ASSESSEE IS OTHERWISE TREATED AS A CHARITABLE ORGAN IZATION AND ALLOWED REGISTRATION U/S 12A W.E.F 31-3-2008. ASSESSEE RECE IVED TWO GRANTS ONE FOR RS. 10 LAKHS AND OTHER FOR RS. 320.42 LAKHS FROM UT TRAKHAND GOVT. AS ENSHRINED IN THE RELEVANT NOTIFICATIONS, WITH DIRE CTIONS OF STRICT COMPLIANCE OF THE CONDITIONS. 3.1. GRANT OF RS. 320.40 LAKHS HAS BEEN SPECIFICALL Y GIVEN AS CORPUS DONATION. FOR THE GRANT OF RS. 10 LAKHS, THOUGH THE WORD CORPUS IS NOT MENTIONED, HOWEVER, THE TERMS AND CONDITIONS ARE AL MOST SAME FOR BOTH THE GRANTS. IN THE GOVERNING BODY MEETING HELD ON 27-8- 2006 IT WAS DECIDED THAT ITA 3742/DEL/11 M/S DOON LIBRARY & RESEARCH CENTRE 4 THE CAPITAL BUDGET OF RS. 10 LACS SANCTIONED BY THE GOVT. SHOULD BE USED FOR RENOVATION OF LIBRARY BUILDING, ACQUISITION OF FURN ITURE FIXTURES, BOOKS ETC. THIS EXPENDITURE WAS THUS NECESSARY TO COMMENCE THE CHARITABLE ACTIVITIES OF AVOWED OBJECTS OF LIBRARY AND RESEARCH CENTRE. THE ENTIRE PURPOSE WOULD HAVE OTHERWISE BEEN DEFEATED AS THE GOVT. MAY NOT H AVE ALLOWED FURTHER UTILIZATION OF FUNDS. UNDER THESE CIRCUMSTANCES IT WAS IMPERATIVE TO INCUR THIS EXPENDITURE. CONSEQUENTLY, THE NATURE OF GRANT OF RS. 10 LAKHS REMAINED CORPUS GRANT. 3.2. ADVERTING TO THE ISSUE OF NATURE OF GRANT OF RS 10 LACS, LD COUNSEL CONTENDS THAT : (I) IT WAS GRANTED FOR SPECIFIC PURPOSE OF LIBRARY GRAN T. (II) THE AMOUNT SHOULD BE SPENT AS PER RULES AND IT WAS SUBJECT TO VARIOUS GOVT. NOTIFICATIONS AS MENTIONED IN CLAUSE 3 OF THE GRANT LETTER. (III) ASSESSEE TREATED THIS SUM TO CORPUS DONATIONS AND A CCORDINGLY ACCOUNTED FOR IN BOOKS. (IV) THERE IS NO PRESCRIBED DEFINITION OF THE CORPUS A ND THE SAME IS TO BE GATHERED FROM THE INTENTION OF DONOR AND DONEE. (V) LIBRARY & RESEARCH CENTRE IS A DISTINCT AND SPECIFI C PROJECT. TO AUGMENT THE HISTORICAL IMPORTANCE OF DOON SCHOOL, T HE PROJECT WAS FUNDED. THEREFORE, THE GRANT OF RS. 10 LAKHS IN SUM AND SUBSTANCE IS FOR CORPUS. 3.3. RELIANCE IS PLACED ON - U.P. FINANCIAL CORPN. VS. IAC (1987) 23 ITD 389 (AL L.) - ITO VS. GUJARAT HANDICRAFT & HANDLOOM DEVELOPMENT C ORPN. LTD. (1983) 9 ITD 488 (AHD.) ITA 3742/DEL/11 M/S DOON LIBRARY & RESEARCH CENTRE 5 - CIT VS. KERALA LAND DEVELOPMENT CORPN. LTD. (1997) 232 ITR 575 (KER.) - MAHILA SIDH NIRMAN YOJNA VS. IAC (1994) 50 ITD 472 (DEL.) - CIT VS. STATE TRADING CORPN. OF INDIA LTD. (1972) 9 2 ITR 293 (DEL.) - LACHIT FILMS VS. CIT (1991) 195 ITR 402 (GAUHATI) - DHARAM PRATISHTHANAM VS. ITO (1984) 11 ITD 40 (DEL. ) - CIT VS. APPARELS EXPORT PROMOTION COUNCIL (1991) 19 0 ITR 163 (DEL.) - SIDDHARTHA PUBLICATIONS PVT. LTD. VS. CIT 129 ITR 6 03 (DEL.) - SADICHHA CHITRA VS. CIT (1990) 189 ITR 774 (BOM.). 3.4. APROPOS SECOND GROUND, IT IS PLEADED THAT LOWE R AUTHORITIES HAVE NOT APPRECIATED THE FACTS THAT THE EXPENDITURE CAPITALI ZED IN BUILDING ACCOUNT IS ACTUALLY RENOVATION WORK AND INVOLVES CURRENT REPAI RS THERETO WHICH ARE TO BE ALLOWED AS REVENUE EXPENDITURE AND NOT TO BE TREATE D AS CREATION OF ASSET ELIGIBLE FOR DEPRECIATION. SIMILARLY EXPENDITURE ON BOOKS AND PERIODICAL; MAGAZINES, BROAD BAND AND GLOW SIGN BOARDS ARE REVE NUE ITEMS ARE ELIGIBLE TO BE ALLOWED AS EXPENDITURE. IT IS TRITE LAW THAT THE ACTUAL NATURE OF EXPENDITURE IS TO BE SEEN AND NOT MERE BOOK ENTRIES ARE DECISIVE. IT IS PLEADED THAT IN THE INTEREST OF JUSTICE THE LOWER A UTHORITIES MAY BE DIRECTED TO APPRECIATE THIS ASPECT ON THIS ISSUE. 4. LEARNED DR ON THE OTHER HAND RELIES ON THE ORDER OF LOWER AUTHORITIES AND CONTENDS THAT THE GOVT. OF U.K. GAVE TWO GRANTS TO ASSESSEE ONE WAS SPECIFICALLY MENTIONED AS CORPUS DONATION, WHEREAS THE SAME DESCRIPTION AHS NOT BEEN GIVEN TO THE GRANT OF RS. 10 LACS WHICH IM PLIES THAT THE GOVT. DID NOT CONSIDER RS. 10 LACS TO BE CORPUS DONATION, THE REFORE, GRANT HAS BEEN RIGHTLY TREATED AS REVENUE RECEIPT. FURTHER RELIANC E IS PLACED ON THE JUDGMENT OF HONBLE SUPREME COURT JUDGMENT IN THE CASE OF U. P. FOREST CORPORATION 297 ITR 1 (SC). ITA 3742/DEL/11 M/S DOON LIBRARY & RESEARCH CENTRE 6 4.1. APROPOS GROUND NO.2, THE LEARNED DR CONTENDS T HAT THE EXPENDITURE HAS BEEN RIGHTLY HELD TO BE CAPITAL IN NATURE AND S UITABLE DEPRECIATION HAS BEEN ALLOWED BY THE AO. ORDERS OF LOWER AUTHORITIES ARE RELIED ON. 5. WE HAVE HEARD RIVAL CONTENTIONS. WE FIND MERIT I N THE ARGUMENT OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE WORD COR PUS DONATION IS NOT DEFINED IN THE INCOME-TAX ACT, THEREFORE, THE PURPO SE OF THE DONATION IS TO BE CONSTRUED FROM THE INTENTION AND CONDUCT OF BOTH TH E PARTIES. IT HAS NOT BEEN DISPUTED THAT BOTH THE GRANTS WERE FOR THE SPECIFIC PURPOSE OF LIBRARY AND RESEARCH CENTRE. THE SECOND GRANT HAS SUCCEEDED THE FIRST ONE. THE GRANT OF RS. 10 LACS IS FURTHER QUALIFIED BY GOVT. BY THE CO NDITIONS IMPOSED IN THE GRANT WHICH IS SUBJECT TO VARIOUS GOVT. NOTIFICATIO NS. IN OUR VIEW, NON- MENTIONING OF THE WORD CORPUS BY THE GOVT. OF UTT RAKHAND, CANNOT MILITATE AGAINST ITS OBJECT, WHICH IS TO BE READ IN HARMONY OF BOTH THE GRANTS. IT HAS ALSO NOT BEEN DISPUTED THAT THE AMOUNT OF RS. 10 LA CS HAS BEEN ACCOUNTED FOR BY THE ASSESSEE IN THE CORPUS DONATION ALONG WITH O THER GOVT. GRANT. THE ASSESSEE COULD NOT SPEND IT FOR ANY OTHER PURPOSE E XCEPT THE OBJECT PROVIDED THEREIN. IN VIEW THEREOF, WE ARE INCLINED TO HOLD T HAT THE AMOUNT OF RS. 10 LACS RECEIVED BY THE ASSESSEE FROM UTTRAKHAND GOVT. AMOUNTS TO CORPUS DONATION AND ACCORDINGLY THIS ADDITION IS DELETED. 6. COMING TO GROUND NO. 2, IN OUR VIEW, THE ISSUE A BOUT THE ITEMS OF BUILDING RENOVATION BEING CURRENT REPAIRS, HAS NOT BEEN CONSIDERED. BESIDES, THE ISSUE OF BOOKS, MAGAZINES AND JOURNALS ARE RECU RRING IN NATURE AND ARE TO BE ALLOWED AS REVENUE EXPENDITURE. SIMILARLY, EXPEN DITURES INCURRED BROAD BAND & GLOW SIGN BOARD ARE ALSO REVENUE EXPENDITURE . IN VIEW OF THE FOREGOINGS, WE SET ASIDE THE ISSUE OF BUILDING RENO VATION EXPENSES BACK TO ITA 3742/DEL/11 M/S DOON LIBRARY & RESEARCH CENTRE 7 THE FILE OF AO TO VERIFY THE DETAILS AND ALLOW THE ITEMS OF CURRENT REPAIRS TO THE ASSESSEE. BESIDES, THE EXPENDITURE IN RESPECT O F BOOKS = RS. 1,17,381/-; MAGAZINES JOURNALS = RS. 87,457/-; BROAD BAND = RS. 10,537; AND GLOW SIGN BOARD RS. 3,950/- BEING REVENUE IN NATURE, ARE DIRE CTED TO BE ALLOWED. 6.1. CONSEQUENTLY, GROUND NO. 1 IS ALLOWED AND GROU ND NO. 2 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 23-12-2011. SD/- SD/- ( A. N. PAHUJA ) ( R.P. TOLANI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 23-12-2011. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR