ITO(E), New Delhi V. J.D. Tytler School Society, New Delhi

ITA 4476/DEL/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73947 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 08-01-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 05-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHAMEER SHARMA
• Keywords: Depreciation; Capital receipt
• Section: 12; 11

Judgement Text

ITA NO. 4476/DEL/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D, NEW DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 4476/DEL/2011 A.Y. : 2008-09 ITO (E), TW-IV, AAYAKAR BHAVAN, LAXMI NAGAR, DISTT. CENTRE, DELHI 110 092 VS. J.D. TYTLER SCHOOL SOCIETY, 869, EAST PARK ROAD, KAROL BAGH, NEW DELHI 110005 (PAN: AAATJ0755F) (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) ASSESSEE BY : NONE DEPARTMENT BY : SH. SHAMEER SHARMA, SR. D.R. ORDER ORDER ORDER ORDER PER PER PER PER SHAMIM YAHYA: AM SHAMIM YAHYA: AM SHAMIM YAHYA: AM SHAMIM YAHYA: AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-XXI , NEW DELHI DATED 16.8.2011 PERTAINING TO ASSESSMENT YEA R 2008-09. 2. THE GROUNDS RAISED READ AS UNDER:- I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING ADDITION ON ACCOUNT OF DEVELOPMENT FUND OF RS. 66,25,049/-. THE LD. CIT(A) HAS NOT APPRECIATED THE FACT THAT THE INCOME TAX ACT DOES NOT PERMIT ITA NO. 4476/DEL/2011 2 TO EXCLUDE THE FEES AMOUNT COLLECTED FROM THE STUDENTS FOR DEVELOPMENT FUND FROM THE TOTAL RECEIPT OF THE YEAR, EVEN IF THE SAME IS BEING UTILIZED FOR PURPOSES OF STUDENTS WELFARE IN ANY MANNER. II) THE LD. CIT(A) HAS ERRED IN ALLOWING THE CLAIM OF DEPRECIATION OF RS. 15,94,466/- WITHOUT APPRECIATING THE FACT THAT IT IS A DOUBLE DEDUCTION OF DEPRECIATION CLAIM, AS THE ASSESSEE HAS ALREADY CLAIMED THE SAID AMOUNT WHILE PURCHASING THE ASSETS. III) THE APPELLANT CRAVES LAVE TO ADD, TO ALTER OR AMEND ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARING. 3. APROPOS DELETION OF ADDITION ON ACCOUNT OF DEVE LOPMENT FEE IN THIS CASE THE ASSESSEE IS A SOCIETY REGISTERED UNDER SECTION 12A(A) OF THE INCOME TAX ACT. THE MAIN OBJ ECTS ARE TO ESTABLISH, MAINTAIN AND RUN THE SCHOOLS AND COLLEG ES ETC. DURING THE COURSE OF ASSESSMENT, ASSESSING OFFICER OBSERVED THAT ASSESSEE HAS RECEIVED RS. 66,25,049/- WHICH HA S BEEN DIRECTLY TAKEN TO THE BALANCE SHEET AS LIABILITY UNDER THE HEAD DEVELOPMENT FUND. AO WAS OF THE OPINION THAT THI S WAS NOT APPROPRIATE AND HE WAS OF THE OPINION THAT THIS SHO ULD BE ADDED TO THE TOTAL INCOME, SINCE DEVELOPMENT FUND IS COLLECTED FROM STUDENTS AND FORM PART OF FEES. ASSESSEE RES PONDED AS UNDER:- ITA NO. 4476/DEL/2011 3 AS FAR AS YOUR QUERY REGARDING NON-CONSIDERATION OF DEVELOPMENT FUND IN RECEIPT VIDE QUERY NO. 8 IS CONCERNED, IT IS SUBMITTED THAT AS PER THE DIRECTIO N ISSUED BY THE DIRECTORATE OF EDUCATION THE SCHOOL I S ENTITLED TO COLLECT DEVELOPMENT FEE FOR THE PURPOSE OF SUPPLEMENTING THE RESOURCES FOR PURCHASE, UPGRADATION AND REPLACEMENT OF FURNITURE, FIXTURE AND EQUIPMENT. FURTHER THE FUND COLLECTED FROM THE STUDENT IS BEING UTILIZED FOR DEVELOPMENT OF THE AMENITIES FOR THE BENEFIT AND WELFARE OF THE CHILDR EN. APART FROM THIS THE SCHOOL HAD DURING THE PREVIOUS YEARS PROVIDED SWIMMING POOL AND OTHER GAMES FACILITIES. IN ADDITION TO THE SAME, THE SCHOOL HA S ALSO PROVIDED COMPUTERS AND LOT OF TESTING EQUIPMENT IN THE SCIENCE LABORATORY. FOR ALL THESE, SCHOOL COLLE CTED DEVELOPMENT FUND AND THE SAME WAS TREATED AS CAPITAL FUNDS BEING EARMARKED FOR DEVELOPMENT OF THE AFORESAID ACTIVITIES. THE EXPENDITURE INCURRED WAS ALSO DEBITED TO THE FUND AND THE AMOUNT WAS KEPT SEPARATELY FOR DEVELOPMENT ACTIVITIES OF THE SCHOOL. PRINCIPALLY THE FUND IS CAPITAL RECEIPT BE ING AMOUNTS COLLECTED FOR VARIOUS DEVELOPMENT ACTIVITIE S AS STATED SUPRA. THE POLICY FORWARD IS IN ACCORDANCE WITH THE PRINCIPLES OF ACCOUNTING AND AS PER THE DIRECTION O F THE DIRECTORATE OF EDUCATION. FURTHER AS PER THE DELHI SCHOOL EDUCATION ACT AND RULES AND NOTIFICATION ISSUED BY THE DIRECTORAT E ITA NO. 4476/DEL/2011 4 OF EDUCATION, IT IS SPECIFICALLY PROVIDED THAT THE DEVELOPMENT FEE SHALL BE CHARGED TO BE TREATED AS CAPITAL RECEIPT AND IN PURSUANT THERETO, THE SAME W AS RIGHTLY CAPITALIZED DURING THE YEAR. 3.1 ASSESSING OFFICER WAS NOT SATISFIED, HE HELD TH AT AS PER THE PROVISIONS OF SECTION 11 AND 12 ALL THE RECEIPTS CO LLECTED FROM THE STUDENTS IN WHATEVER FORM ARE TO BE CONSIDERED AS INCOME OF THE TRUST/SOCIETY. HE FURTHER OBSERVED THAT THE NOTIFICATION ISSUED BY THE DIRECTORATE OF EDUCATION ARE WITH REG ARD TO THE FACT THAT THE FUND SO COLLECTED SHOULD BE SPECIFICA LLY INCURRED FOR THE PURPOSE FOR WHICH IT IS COLLECTED BUT DOES NOT SAYS THAT THE SAME WILL NOT BE INCLUDED IN THE RECEIPTS AS PE R INCOME TAX ACT. THEREFORE, HE ADDED THE SAME TO THE TOTAL RECEIPTS OF THE ASSESSEE. 4. AGAINST THE ABOVE ORDER THE ASSESSEE APPEALED B EFORE THE LD. CIT(A). LD. CIT(A) UPON PERUSAL OF THE DET AILED SUBMISSIONS FILED BY THE ASSESSEE HELD AS UNDER:- I HAVE GONE THROUGH THE FINDING OF THE AO IN THE ASSESSMENT ORDER AND WRITTEN SUBMISSION OF THE LD. AR. IN THIS REGARD, I HAVE ALSO VERIFIED THE COPY O F BALANCE SHEET FILED ALONG WITH THE SUBMISSION AVAILABLE AT PAGE NO. 41 OF THE PAPER BOOK, WHEREIN , AMOUNT OF DEVELOPMENT FUND AMOUNTING TO RS. 66,25,049/- HAS BEEN CAPITALISED. FURTHERMORE, IN EARLIER YEARS ASSESSMENT, THE AO HAS NOT GIVEN ANY ADVERSE FINDING ON THIS ISSUE THOUGH FACTS AND CIRCUMSTANCES WERE THE SAME. SO, I DO NOT FIND ANY ITA NO. 4476/DEL/2011 5 MERIT IN THE ACTION OF THE AO, ARRIVING AT ADVERSE INFERENCE IN THIS YEAR ONLY. FURTHERMORE, COPY OF NOTIFICATION DATED 10.2.2005 ALSO SUPPORTS THE CASE OF THE APPELLANT. THE CASE LAWS RELIED UPON BY THE LD. AR ARE APPRECIATED. IN VIEW OF THE ABOVE DISCUSSION, GROUNDS NO. 1 AND 2 OF THE APPELLANT AR E ALLOWED. 5. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEA L BEFORE US. 6. WE HAVE HEARD THE LD. DR. NONE APPEARED ON BEHA LF OF THE ASSESSEE. HOWEVER, IN OUR CONSIDERED OPINION, THE MATTER CAN BE DISPOSED OFF BY PERUSING THE RECORDS AND HE ARING THE LD. DR. IN THIS CASE, WE FIND THAT AS PER THE DIRE CTIONS ISSUED BY THE DIRECTOR OF EDUCATION, THE SCHOOL IS ENTITL ED TO COLLECT THE DEVELOPMENT FUND FOR THE PURPOSE OF SUPPLEMENTI NG THE RESOURCES FOR PURCHASE, UPGRADATION AND REPLACEMENT OF FURNITURE, FIXTURE AND EQUIPMENTS. IT HAS BEEN THE SUBMISSION OF THE ASSESSEE BEFORE THE AUTHORITIES BELOW THAT T HE FUND COLLECTED FROM THE STUDENTS WAS UTILISED FOR DEVELO PMENT OF AMENITIES FOR THE BENEFIT AND WELFARE OF THE CHILD REN. FURTHERMORE, THE SCHOOL HAD DURING THE PREVIOUS YEA R PROVIDED SWIMMING POOL AND OTHER GAMES FACILITIES AND ALSO P ROVIDED COMPUTERS AND TESTING EQUIPMENT IN THE SCIENCE LABO RATORIES. THE ABOVE SUBMISSIONS OF THE ASSESSEE HAS NOT BEEN DISPUTED BY THE ASSESSING OFFICER. FOR ALL THESE ACTIVITIES THE SCHOOL COLLECTED THE DEVELOPMENT FUND WHICH WAS TREATED AS CAPITAL FUND BEING EARMARKED FOR DEVELOPMENT OF THE AFORESA ID ACTIVITIES. THE EXPENDITURE INCURRED IN THIS REGARD WAS ALSO ITA NO. 4476/DEL/2011 6 DEBITED TO THE FUND AND THE AMOUNT WAS KEPT SEPARAT ELY FOR DEVELOPMENT ACTIVITIES OF THE SCHOOL. THE ABOVE HA S NOT BEEN DISPUTED BY THE LD. DR ALSO. IN THIS VIEW OF THE M ATTER, WE AGREE WITH THE CONTENTION OF THE ASSESSEE THAT THE FUND IS CAPITAL FIELD RECEIPT BEING AMOUNT COLLECTED FOR VA RIOUS DEVELOPMENT ACTIVITIES. 6.1 FURTHERMORE, WE ALSO NOTE THAT THIS SYSTEM OF A CCOUNTING HAS BEEN FOLLOWED BY THE ASSESSEE IN EARLIER PERIOD ALSO AND THE SAME WAS NOT DISTURBED BY THE REVENUE. 6.2 NO COGENT REASON FOR DEVIATING FROM THE PAST HA S BEEN BROUGHT ON RECORD. WE FURTHER NOTE THAT IN THE SUBM ISSIONS BEFORE THE LD. CIT(A) ASSESSEE HAS SUBMITTED THAT H ONBLE APEX COURT VIDE ITS DECISION IN THE CASE OF MODERN SCHOO L VS. UOI & ORS. HAD PERMITTED TO CHARGE 10-15% OF THE TOTAL ON LY TUITION FEE AS DEVELOPMENT FUND. FURTHERMORE, WE NOTE THAT THE NOTIFICATION ISSUED BY THE DIRECTOR OF EDUCATION ME NTIONED THAT FUNDS SO COLLECTED IN THIS REGARD SHOULD BE SPECIFI CALLY INCURRED FOR THE PURPOSE FOR WHICH IT IS COLLECTED. HENCE, WHEN THE COLLECTION IS MEANT FOR BEING SPENT ON ACTIVITIES I N THE CAPITAL FILED, THE SAME CANNOT BE TREATED BY THE ASSESSING OFFICER AS REVENUE RECEIPT. IN THE BACKGROUND OF THE AFORESAI D DISCUSSIONS AND PRECEDENT, WE DO NOT FIND ANY INFIR MITY IN THE ORDER OF THE LD. CIT(A), ACCORDINGLY, WE UPHOLD THE SAME. 7. APROPOS THE CLAIM OF DEPRECIATION ON THIS ISSUE ASSESSING OFFICER NOTED THAT ASSESSE E HAS CLAIMED DEPRECIATION OF RS. 15,94,466/- IN THE INCO ME AND EXPENDITURE ACCOUNT. ASSESSING OFFICER HELD THAT S INCE THE ITA NO. 4476/DEL/2011 7 BENEFIT OF APPLICATION OF FUND HAS ALREADY BEEN TAK EN WHEN THE ASSETS WERE PURCHASED, THIS CLAIM OF THE ASSESSEE W AS NOT ALLOWABLE. HENCE, ASSESSING OFFICER DISALLOWED THE CLAIM OF THE DEPRECIATION. 8. UPON ASSESSEES APPEAL LD. CITA(A) DECIDED THE I SSUE IN FAVOUR OF THE ASSESSEE BY PLACING RELIANCE UPON THE CASE LAW OF CIT VS. TINY TOTS EDUCATION SOCIETY REPORTED IN 330 ITR 21. 9. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEAL BEFORE US AND THE GROUND HAS BEEN RAISED THAT CLAIM OF DEP RECIATION BY THE ASSESSEE AMOUNTS TO CLAIM OF DOUBLE DEDUCTI ON. HOWEVER, UPON CAREFUL CONSIDERATION, WE FIND THAT T HE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE D ECISION OF THE HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CA SE OF CIT VS. TINY TOTS EDUCATION SOCIETY. IN THIS CASE, THE HONBLE HIGH COURT HAS OBSERVED AS UNDER:- IN THE PRESENT CASE THE ASSESSEE IS NOT CLAIMING DEDUCTION ON ACCOUNT OF DEPRECIATION AS HAS BEEN SUGGESTED BY LEARNED COUNSEL FOR THE REVENUE. THE INCOME OF THE ASSESSEE BEING EXEMPT, THE ASSESSEE IS ONLY CLAIMING THAT DEPRECIATION SHOULD BE REDUCE D FROM THE INCOME FOR DETERMINING THE PERCENTAGE OF FUNDS WHICH HAVE TO BE APPLIED FOR THE PURPOSES OF THE TRUST. THERE IS NO DOUBLE DEDUCTION CLAIMED B Y THE ASSESSEE AS CANVASSED BY THE REVENUE. JUDGMENT OF THE HONBLE SUPREME COURT IN ESCORTS LTD. AND ANOTHER (SUPRA) IS DISTINGUISHABLE FOR THE ABOVE REASONS. IT CANNOT BE HELD TAT DOUBLE BENEF IT ITA NO. 4476/DEL/2011 8 IS GIVEN IN ALLOWING CLAIM FOR DEPRECATION FOR COMPUTING INCOME FOR PURPOSES OF SECTION 11. THE QUESTIONS PROPOSED HAVE, THUS, TO BE ANSWERED AGAINST THE REVENUE AND IN FAVOR OF THE ASSESSEE. 10. RESPECTFULLY FOLLOWING THE ABOVE PRECEDENT, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A), ACCOR DINGLY, WE UPHOLD THE SAME. 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 08/1/2014, UP ON CONCLUSION OF HEARING. SD/- SD/- [ [[ [BHAVNESH SAINI BHAVNESH SAINI BHAVNESH SAINI BHAVNESH SAINI] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 08/1/2014 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES ITA NO. 4476/DEL/2011 9