Vignanajyothi, Secunderabad V. DDIT, Hyderabad

ITA 378/HYD/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66395 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 7 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 30-06-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 18-03-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V SRINIVAS
• Assessee Lawyers: V SIVA KUMAR
• Keywords: Depreciation; Capital receipt; Benefit of exemption
• Section: 6; 2; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL M EMBER ITA NO.378/HYD/2009 : ASSE SSMENT YEAR 2005-06 ITA NO.66/HYD/2010 : ASSESSMENT YEAR 2006-0 7 M/S. VIGNANA JYOTHI SECUNDERABAD. ( PAN - AAATV 1122 C) V/S. DY. DIRECTOR OF INCOME-TAX (EXEMPTION) III HYDERABAD (APPELLANT) (RESPONDENT) ITA 399/HYD 2009 : ASSESSMENT YEAR 2005-06 ITA NO.83/HYD/2010 : ASSESSMENT YEAR 200 6-07 DY. DIRECTOR OF INCOME - TAX (EXEMPTION) III HYDERABAD V/S. M/S. VIGNANA JYOTHI SECUNDERABAD. ( PAN - AAATV 1122 C) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI V.SIVAKUMAR DEPARTME NT BY : SHRI V.SRINIVAS DATE OF HEARING 29.8.2012 DATE OF PRONOUNCEMENT 19.10.2012 O R D E R PER SAKTIJIT DEY, JUDICIAL MEMBER: THESE ARE CROSS-APPEALS FOR TWO YEARS AND THEY AR E DIRECTED AGAINST SEPARATE ORDERS OF THE COMMISSIONER OF INCO ME-TAX(APPEALS) IV, HYDERABAD BOTH DATED 30.12.2008 FOR THE ASSESSMENT YEARS 2005-06 AND 2006-07. SINCE COMMON ISSUES ARE INVOLVED, THESE AP PEALS ARE BEING DISPOSED OFF WITH THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NO.378/HYD/2009 & 3 ORS M/S. VIGNANA JYOTHI SECUNDERABAD. 2 2. COMMON EFFECTIVE GRIEVANCE OF THE ASSESSEE IN BOTH OF ITS APPEALS IS WITH REGARD TO DENIAL OF ITS CLAIM FOR EXEMPTION OF ITS INCOME FROM TAX UNDER S.11 OF THE ACT, BY TREATING THE DONATIONS TO THE EXTENT OF RS.1,55,81,000 OUT OF RS.2,29,99,999 FOR THE ASSESS MENT YEAR 2005-06 AND OF RS.1,84,85,000 FOR THE ASSESSMENT YEAR 2006-07, CLAIMED TO HAVE BEEN RECEIVED BY THE ASSESSEE FROM THE PUBLIC, AS REPRES ENTING COLLECTION OF CAPITATION FEE FROM THE STUDENTS, OVER AND ABOVE TH E PRESCRIBED FEE. 3. SIMILARLY, IN THE APPEALS OF THE REVENUE, COMM ON EFFECTIVE GRIEVANCE OF THE REVENUE IS THAT THE CIT(A) IS NOT CORRECT IN HOLDING THAT DEPRECIATION HAS TO BE CONSIDERED WHILE COMPUTING T HE INCOME OF THE ASSESSEE ON COMMERCIAL BASIS WITHOUT GIVING BENEFIT OF EXEMPTION UNDER S.11, THE GROUND RAISED FOR THE ASSESSMENT YEAR 200 5-06 BY THE REVENUE SPECIFICALLY DISPUTED THE FINDING OF THE CIT(A) THA T DEPRECIATION IS INDEED REQUIRED TO BE CONSIDERED . 4. FACTS OF THE CASE IN BRIEF LEADING TO THE FILIN G OF THE PRESENT CROSS- APPEALS, AS TAKEN FROM THE APPEAL FOLDER FOR THE AS SESSMENT YEAR 2004-05, ARE THAT DURING THE ASSESSMENT PROCEEDINGS, A PER USAL OF THE BALANCE SHEET SHOWED THAT A SUM OF RS.2,29,99,999 HAD BEEN CAPITA LIZED DIRECTLY, WITHOUT INCLUDING THE SAME IN THE INCOME AND EXPENDITURE AC COUNT. ON EXAMINATION OF THE LIST OF DONORS AND OTHER DETAILS REGARDING A DDRESSES, PURPOSE OF DONATION, BANK, MODE OF PAYMENT, CONFIRMATIONS AND INCOME-TAX RECORDS OF THE DONORS, ETC. THE ASSESSING OFFICER FOUND THAT T HE CONFIRMATORY LETTERS WERE IN A STEREO TYPED STYLE AND LANGUAGE. HE ALSO OBSE RVED THAT THE DONATIONS HAD BEEN RECEIVED DURING THE MONTHS OF MAY AND JUNE , WHILE A FEW OF THEM IN THE MONTH OF JULY. VERY FEW DONATIONS HAD BEEN RECE IVED IN THE MONTHS OF AUGUST, SEPTEMBER, AND OCTOBER. THE ASSESSING OFFIC ER FOUND THAT THE MONTHS COINCIDED WITH THE DATES OF ADMISSION. THE ASSESSING OFFICER ITA NO.378/HYD/2009 & 3 ORS M/S. VIGNANA JYOTHI SECUNDERABAD. 3 ACCORDINGLY ISSUED LETTERS TO DONORS TO CONFIRM THE DONATIONS AND ASKED THEM TO EXPLAIN HOW THE SAME WERE REFLECTED IN THEIR ACC OUNTS. ENQUIRIES WERE ALSO MADE FROM BANKS ISSUING THE DEMAND DRAFTS, WITH A R EQUEST TO FURNISH XEROX COPIES OF THE CAHALLANS, REQUESTING ISSUE OF DEMAND DRAFTS, ETC. BASED ON THE RESULTS OF THE ENQUIRIES MADE WITH DONORS, BANK S AND OTHERS AND MATERIAL GATHERED IN RELATION TO THE DONATIONS RECEIVED, THE ASSESSING OFFICER, OBSERVING THAT AS THE LAW STANDS ON DATE, ANY AMOUN T IN THE NATURE OF VOLUNTARY CONTRIBUTION, CAN NEVER BE COLLECTED EITH ER AT THE INSTANCE OF THE INSTITUTION OR AT THE INSTANCE OF THE PUBLIC, AND A CCORDINGLY CONCLUDED THAT THE ASSESSEE HAD NOT BEEN ABLE TO SUBSTANTIATE THAT THE AMOUNTS HAD BEEN RECEIVE AS DONATION. IN VIEW OF THE APEX COURT JUD GMENT DATED 31.10.2002 IN THE CASE OF TMA PAI FOUNDATION AND OTHERS V/S. S TATE OF KARNATAKA AND OTHERS, THE ASSESSING OFFICER THEREFORE, TREATED A N AMOUNT OF RS.1,55,81,000/- OUT OF RS.2,29,99,999/- RECEIVED B Y THE ASSESSEE AS CAPITATION FEE AND ADDED BACK. 5. ON APPEAL, THE CIT(A) OBSERVED THAT THE ASSES SEE HAD TAKEN DONATION/CAPITATION FEE WHICH COULD BE DIRECTLY LIN KED TO THE ADMISSION OF STUDENTS TO THE COLLEGE. HENCE, FOLLOWING THE DECI SIONS OF THE TRIBUNAL IN SIMILAR MATTERS, THE CIT(A) HELD THAT THE ASSESSEE IS NOT ENTITLED FOR EXEMPTION EITHER UNDER S.10(23C) OR UNDER S.11 OF T HE ACT. THE CIT(A) HOWEVER, DIRECTED THE ASSESSING OFFICER TO COMPUTE THE TOTAL INCOME OF THE ASSESSEE IN THE MANNER OF A NORMAL BUSINESS VENTURE , AFTER CONSIDERING THE ENTIRE RECEIPTS AND ELIGIBLE EXPENDITURE, WITHOUT G IVING THE BENEFIT OF EXEMPTIONS UNDER THE SAID SECTIONS. 6. WHILE COMPLETING THE ASSESSMENT AS ABOVE, DENYI NG THE ASSESSEES CLAIM FOR EXEMPTION, THE ASSESSING OFFIC ER DISALLOWED THE ASSESSEES CLAIM FOR DEPRECIATION OF RS.1,46,87,771 , HOLDING THAT SUCH CLAIM ITA NO.378/HYD/2009 & 3 ORS M/S. VIGNANA JYOTHI SECUNDERABAD. 4 AMOUNTS TO DOUBLE DEDUCTION. DEALING WITH THIS ISS UE, ON APPEAL, THE CIT(A), IN CONSONANCE WITH THE DECISION HE HAS TAKEN IN REL ATION TO COMPUTATION OF INCOME OF THE ASSESSEE UNDER THE HEAD BUSINESS, A PPLYING COMMERCIAL PRINCIPLES APPLICABLE UNDER THE ACT, HAS DIRECTED T HE ASSESSING OFFICER TO VERIFY THE CLAIM OF DEPRECIATION AS PER RULES AND ALLOW SU CH DEPRECIATION ON VARIOUS ASSETS, WHILE WORKING OUT THE INCOME OF THE ASSESSE E ON COMMERCIAL LINES. 7. AGGRIEVED BY THE DIRECTIONS OF THE CIT(A) IN T HIS REGARD, CONFIRMING DENIAL OF EXEMPTION UNDER S.11/S.10(23C) OF THE ACT, ASSESSEE IN APPEAL, WHEREAS AGGRIEVED BY THE DIRECTIONS OF THE CIT(A) FOR COMPUTATION OF INCOME OF THE ASSESSEE ON COMMERCIAL LINES ALLOWING DEDUCTIONS IN RESPECT OF VARIOUS EXPENDITURE AND ALSO CLAIM OF THE ASSESSEE FOR DEPRECIATION ON VARIOUS ASSETS, ON DUE VERIFICATION, REVENUE PREFER RED THE PRESENT APPEALS BEFORE US. 8. BESIDES REITERATING THE CONTENTIONS URGED BEFO RE THE LOWER AUTHORITIES AND IN THE GROUNDS OF THESE APPEALS, TH E LEARNED COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE CHENNAI BENCH OF TH E TRIBUNAL IN THE CASE OF DCIT V/S. VELLORE INSTITUTE OF TECHNOLOGY(12 TAXMAN .COM.272(CHENNAI), A COPY OF WHICH IS ALSO FURNISHED BEFORE US, AND SUBM ITTED THAT EVEN IF ANY DONATION IS RECEIVED IN CONNECTION WITH ADMISSION O F A STUDENT, OVER AND ABOVE THE FEE PRESCRIBED, THE ASSESSEE WOULD BE ELI GIBLE FOR EXEMPTION OF ITS INCOME UNDER S.10(23C)/S.11 OF THE ACT. HE ALSO PLA CED RELIANCE ON THE DECISION OF THE MADRAS BENCH OF THE TRIBUNAL IN THE CASE OF ACIT V/S. BALAJI EDUCATIONAL & CHARITABLE PUBLIC TRUST (2011)15 TAXM ANN.COM 53(MAD), DULY FURNISHING COPY THEREOF BEFORE US. 9. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, STRONGLY SUPPORTED THE ORDERS OF THE LOWER AUTHORIT IES, INSOFAR AS DENIAL OF ITA NO.378/HYD/2009 & 3 ORS M/S. VIGNANA JYOTHI SECUNDERABAD. 5 ASSESSEES CLAIM FOR EXEMPTION IN RESPECT OF ITS IN COME IS CONCERNED, THOUGH HE DISPUTED THE DIRECTIONS OF THE CIT(A) IN THE IMP UGNED ORDERS FOR COMPUTATION OF INCOME OF THE ASSESSEE ON COMMERCIAL LINES, DULY CONSIDERING DEDUCTIONS TOWARDS EXPENDITURE AND DEPRECIATION. 10. WE HEARD BOTH SIDES AND PERUSED THE IMPUGNE D ORDERS OF THE LOWER AUTHORITIES. WE HAVE ALSO EXAMINED THE ORDER S OF THE INCOME-TAX APPELLATE TRIBUNAL CHENNAI BENCH CITED BEFORE US BY THE ASSESSEE. IN THE CASE OF VELLORE INSTITUTE OF TECHNOLOGY (SUPRA), CH ENNAI BENCH OF THE TRIBUNAL, CONSIDERING THE QUESTIONS (A) WHETHER IF A STUDENT OR HIS PARENTS ARE SO PARTICULAR TO GAIN ADMISSION INTO AN INSTITUTION AND FOR THAT PURPOSE ARE WILLING TO DONATE MONEY FOR IMPROVEMENT OF THE INST ITUTION, THEN IT IS VOLUNTARY ACT, AND, THEREFORE, EVEN IF DONATIONS WERE PAID AT THE TIME OF OR TO SECURE ADMISSION INTO INSTITUTION, IT WILL NOT C EASE TO BE VOLUNTARY SO AS TO FALL OUTSIDE THE AMBIT OF S.11(1)(D) OR 12(1) OF TH E ACT, AND (B) WHETHER SUCH VOLUNTARY CONTRIBUTION WOULD NOT FORM PART OF TRUST BUT WOULD ONLY BE A CAPITAL RECEIPT, DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. THE TRIBUNAL ALSO ANSWERED IN THE AFFIRMATIVE THE QUESTION WHETHER TH US, CORPUS DONATIONS RECEIVED AT THE TIME OF ADMISSION, BY AN INSTITUTIO N WITH A SPECIFIC WRITTEN DIRECTION FROM DONOR THAT DONATION WAS TOWARDS CORP US FUND OR TRUST FOLLOWED UP BY FACTUM OF ACTUAL APPLICATION OF DONATION FOR CAPITAL PURPOSES OF TRUST COULD NOT BE TREATED AS CAPITATION FEE RECEIPT. TH E EARLIER DECISION OF THE MADRAS BENCH OF THE TRIBUNAL IN THE CASE OF BALAJI EDUCATIONAL AND CHARITABLE PUBLIC TRUST (SUPRA) IS ALSO TO THE SAME EFFECT. 11. SIMILAR ISSUE, AS IS INVOLVED IN THIS APPEAL, CAME UP IN THE CASE OF VODITHALA EDUCATIONAL SOCIETY V/S. ADIT (20 SOT 35 3), WHEREIN IT HAS BEEN HELD THAT THE ASSESSEE IS RUNNING EDUCATIONAL INSTI TUTIONS COLLECTING FEE FROM STUDENTS OVER AND ABOVE THE FEE PRESCRIBED BY THE G OVERNMENT, AND IS ITA NO.378/HYD/2009 & 3 ORS M/S. VIGNANA JYOTHI SECUNDERABAD. 6 COLLECTING CAPITATION FEES FROM THE STUDENTS, AND W AS THUS ENGAGED IN SELLING PROFESSIONAL COURSES, AND THAT BEING SO, THE ACTIVI TY OF THE ASSESSEE, NO LONGER REMAINED CHARITABLE WITHIN THE MEANING OF S. 2(15) OF THE ACT, AND HENCE, THE ASSESSEE WAS NOT ELIGIBLE FOR DEDUCTION UNDER S.11 OF THE ACT. WE FIND THAT THE CONSTITUTIONAL BENCH OF APEX COURT IN THE CASE OF T.M.A. PAI FOUNDATIONS AND OTHERS VS. STATE OF KARNATAKA & OTH ERS (2002) 8 SCC 481 EXAMINED THE ISSUE OF COLLECTION OF CAPITATION FE ES FOR THE ADMISSION OF STUDENTS OVER AND ABOVE FEES PRESCRIBED BY THE PRIV ATE INSTITUTION AND HELD THAT THE INSTITUTION WHICH ARE COLLECTING CAPITATIO N FEES FOR ADMISSION OF STUDENTS OVER AND ABOVE THE FEES PRESCRIBED CANNOT BE CONSTRUED AS CHARITABLE/EDUCATION INSTITUTION. APEX COURT FURTHE R OBSERVED THAT THE FEES COLLECTED OVER AND ABOVE THE PRESCRIBED FEE FOR ADM ISSION OF THE STUDENT HAS TO BE CONSTRUCTED AS CAPITATION FEE. THE APEX COUR T, FURTHER OBSERVED THAT THE CONCERNED UNIVERSITY AND REGULATED BODY HAS TO TAKE ACTION FOR WITHDRAWAL OF THE RECOGNITION IN CASE IT IS FOUND T HAT THE EDUCATIONAL INSTITUTION RECEIVED ANY MONEY OVER AND ABOVE THE F EES PRESCRIBED FOR THE COURSES. SAME VIEW WAS TAKEN BY APEX COURT IN THE C ASE OF ISLAMIC ACADEMY OF EDUCATION AND ANOTHER VS. STATE OF KARNATAKA & A NOTHER (2003) 6 SCC 697. IF THE DONATIONS WERE RECEIVED COMPULSORILY F OR ADMISSION OF STUDENTS, THE ASSESSEE IS NOT ENTITLED FOR EXEMPTION EITHER U /S 10(23C) OR U/S 11 OF THE IT ACT. SIMILAR VIEW WAS TAKEN BY US IN THE CASE OF M/S. JAMIA NIZAMIA IN ITA NO.763/HYD/2007 DATED 30.6.2008, IN THE CASE OF INTERNATIONAL EDUCATIONAL ACADEMY, HYDERABAD IN ITA NO.494/HYD/20 07 AND 518/HYD/2008 FOR THE ASSESSMENT YEARS 2002- 2003 A ND 2004-05 AND SRI SAI SUDHIR EDUCATIONAL SOCIETY, HYDERABAD IN ITA NO .999/HYD/20-06 FOR THE ASSESSMENT YEAR 2003-04. 12. HOWEVER, IT IS EVIDENT FROM THE RECORDS THAT THE ASSESSEE HAS STRONGLY DISPUTED THE FINDING ARRIVED AT BY THE ASS ESSING OFFICER ON THE BASIS ITA NO.378/HYD/2009 & 3 ORS M/S. VIGNANA JYOTHI SECUNDERABAD. 7 OF THE ENQUIRY CONDUCTED BY HIM. BEFORE THE CIT(A) ALSO THE ASSESSEE HAS SPECIFICALLY SUBMITTED THAT THE ASSESSING OFFICER T HOUGH HAS MADE ENQUIRIES WITH EIGHT DONORS, ONLY TWO LETTERS IN RESPECT OF S HRI MURALI RAJU AND SHRI A.VENKAT REDDY HAVE BEEN PROVIDED TO THE ASSESSEE. EVEN IN THE CASE OF THOSE TWO PERSONS, VIZ. SHRI MURALI RAJU AND SHRI A .VENKAT REDDY, IT IS THE CONTENTION OF THE ASSESSEE THAT THEY HAVE NOT SPECI FICALLY ADMITTED OF HAVING PAID THE CAPITATION FEE. IT IS THE SPECIFIC CONTEN TION OF THE ASSESSEE THAT VARIOUS PERSONS AND MEMBERS, SATISFIED WITH THE FAC ILITIES WERE GIVING DONATIONS VOLUNTARILY AND EACH RUPEE OF THE DONATIO N IS APPLIED FOR THE OBJECT FOR WHICH THE TRUST WAS CREATED. IT IS ALSO THE SP ECIFIC CONTENTION OF THE ASSESSEE THAT IT HAS NEVER VIOLATED THE GO(MS) NO.3 3 AND COLLECTED FEE IN EXCESS OVER THE FEE FIXED BY THE FEE COMMITTEE. IT IS THE CONTENTION OF THE LEARNED AUTHORISED REPRESENTATIVE FOR THE ASSESSEE THAT THE LEARNED ASSESSING OFFICER HAS PRESUMED THAT THE DONATIONS R ECEIVED WERE IN THE NATURE OF CAPITATION FEE ONLY ON THE BASIS OF THE L ETTERS RECEIVED FROM SHRI MURALI RAJU AND SHRI A.VENKAT REDDY AND THERE IS NO MATERIAL BEFORE HIM TO COME TO SUCH A CONCLUSION. THE ENQUIRY CONDUCTED BY THE ASSESSING OFFICER WITH HANDFUL OF PERSONS DOES NOT APPEAR TO HAVE BRO UGHT OUT THE REALITY OF THE SITUATION AS TO THE COLLECTION OF CAPITATION FE E BY THE ASSESSEE. IN THIS VIEW OF THE MATTER AND CONSIDERING THE AFORESAID CO NTENTIONS OF THE ASSESSEE, WE ARE OF THE OPINION THAT ADEQUATE ENQUIRY SHOULD HAVE BEEN CONDUCTED BY THE LOWER AUTHORITIES BEFORE COMING TO THE CONCLUSI ON THAT THE ASSESSEE HAS CHARGED CAPITATION FEE. CONSEQUENTLY, IN OUR CONSI DERED OPINION, THE ASSESSEE DESERVES ANOTHER OPPORTUNITY TO SUBSTANTIA TE ITS CLAIM BEFORE THE ASSESSING OFFICER THAT IT HAS NOT CHARGED ANY CAPIT ATION FEE FROM THE STUDENTS. WE THEREFORE, REMIT THE MATTER BACK TO TH E FILE OF THE ASSESSING OFFICER FOR DECIDING THE ISSUE AFRESH AND DETERMINE AS TO WHETHER THE ASSESSEE HAS COLLECTED CAPITATION FEE FROM THE STUD ENTS, KEEPING IN VIEW THE PRINCIPLES ENUNCIATED BY THE APEX COURT AND OTHERS IN THE JUDICIAL ITA NO.378/HYD/2009 & 3 ORS M/S. VIGNANA JYOTHI SECUNDERABAD. 8 PRONOUNCEMENTS DISCUSSED ABOVE. THE ASSESSING OFFI CER SHALL ACCORDINGLY RE- EXAMINE THE MATTER IN ACCORDANCE WITH LAW AND AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 13. IN VIEW OF OUR DECISION ON THE ISSUE RELATING TO THE ASSESSEES CLAIM FOR EXEMPTION OF ITS INCOME FROM TAX, THE DIR ECTIONS OF THE CIT(A) FOR DETERMINING THE INCOME OF THE ASSESSEE ON COMMERCIA L LINES, AND HIS SPECIFIC DIRECTIONS IN RELATION TO THE CLAIM FOR DEPRECIATIO N, ARE RENDERED ACADEMIC, AND NEED NO SPECIFIC CONSIDERATION AT THIS STAGE.. 14. IN THE RESULT, APPEALS OF THE ASSESSEE AS WELL AS THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 19.10.2012 SD/- SD/- (CHANDRA POOJARI) (SAKTI JIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DT/- 19 TH OCTOBER, 2012 COPY FORWARDED TO: 1. M/S. VIGNANA JYOTHI, PLOT NO.7, XAVIER BHAVAN, ROAD NO.16, WEST MARREDPALLY, SECUNDERABAD- 500026. 2. 3. 4 DY. DIRECTOR O F INCOME - TAX(EXEMPTION) III HYDERABAD COMMISSIONER OF INCOME-TAX(APPEALS)IV HYDERABAD COMMISSIONER OF INCOME-TAX II, HYDERABAD 5 COMMISSIONER OF INCOME - TAX IV HYDERABAD 6. DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S.