Sangam Educational Society, Ghaziabad V. Addl. CIT, Ghaziabad

ITA 4749/DEL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4912 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 17-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRAVAN GOTRU
• Keywords: Capital asset; Depreciation; Charitable institution; Capital expenditure
• Section: 143(3); 142(1); 80G; 12AA; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D : NEW DELHI) BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 4749/DEL/2015 ASSESSMENT YEAR: 2010-11 SANGAM EDUCATIONAL SOCIETY, VS ADDL. CIT, RANGE -1, C/O AKHILESH KUMAR, ADVOCATE, GHAZIABAD CHAMBER NO. 206-207, ANSAL SATYAM, RDC RAJ NAGAR GHAZIABAD (PAN: AABAS8335E) (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. DINESH KUMAR, ADV. REVENUE BY : SH. SHRAVAN GOTRU, SR. DR ORDER PER H.S. SIDHU, JM:- THE ASSESSEE HAS FILED THE APPEAL AGAINST THE ORDE R OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS), GHAZIABAD ON THE FOLLOWING GROUNDS:- 1. BECAUSE, THE ORDER OF LEARNED LOWER AUTHORITY I S BAD IN LAW AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE AND HENCE IS UNSUSTAINABLE. 2. BECAUSE, LEARNED COMMISSIONER OF INCOME TAX (APPEALS) GROSSLY ERRED IN CONFIRMING THE DISALLOWA NCE OF DEPRECIATION RS. 17,69,550/- WITHOUT PROPERLY APPRECIATING THE LAW ON THE ISSUE INCLUDING THE ONE THAT 2 WHERE THERE ARE TWO VIEWS THAN THE ONE WHICH IS FAVORABLE TO ASSESSEE SHALL APPLY. 3. BECAUSE, LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FURTHER ERRED IN HOLDING THE ISSUE AS ACA DEMIC IS AS MUCH AS THAT SUCH DISALLOWANCE IS SPECIFICALL Y CONSIDERED FOR PENALTY U/S 271(1)(C) BESIDE OTHER IMPACTS AND ARGUMENTS PUT FORWARD BY THE ASSESSEE. 4. BECAUSE, WITHOUT PREJUDICE TO ABOVE AND ONLY AS AN ALTERNATIVE, LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO CONSIDER THE FACT ON THE RECORD THAT EVEN AFTER CONSIDERING CLAIM OF DEPRECIATION AS DOU BLE DEDUCTION ONLY A SUM OF RS. 6,22,958/- COULD' HAVE BEEN CONSIDERED SO AGAINST THE SAID CLAIM AND BALANCE RS . 11,46,592/- SHOULD HAVE ALLOWED. THEREFORE, FINDING OF LOWER AUTHORITY UP HOLDING DISALLOWANCE OF 17,69,550/- MAY KINDLY BE HELD ILLE GAL AND PRAYED TO BE QUASHED. HOWEVER, WITHOUT PREJUDICE TO ABOVE AND ONLY AS AN ALTERNATIVE AND WITHOUT DILUTION TO ABOVE PRAYER, I T IS ALSO PRAYED ALTERNATIVELY SAID DISALLOWANCE MAY KINDLY B E RESTRICTED TO RS. 11,46,592/-. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE-SOCIETY FILED ITS RETURN OF INCOME ON 05.10.2010 DECLARING NIL IN COME. THE CASE OF THE ASSESSSEE WAS SELECTED UNDER COMPULSORY SCRU TINY. THE NOTICE 3 U/S. 143(2) OF THE INCOME TAX ACT, 1961 (HEREINAFTE R REFERRED AS THE ACT) DATED 20.9.2011 AND NOTICE U/S. 142(1) OF THE ACT ALONGWITH QUESTIONNAIRE DATED 27.8.2012 ALONGWITH THE STATUTO RY NOTICES WAS SERVED UPON THE ASSESSEE REQUIRING FOR VARIOUS DETA ILS AND INFORMATION AS CONSIDERED NECESSARY FOR SCRUTINY OF THE CASE. IN COMPLIANCE TO THE VARIOUS NOTICES THE AUTHORIZED RE PRESENTATIVE ATTENDED THE PROCEEDINGS ON BEHALF OF THE SOCIETY. THE DETAILS AS REQUIRED VIDE QUESTIONNAIRE HAVE BEEN FILED. THE BO OKS OF ACCOUNTS, BILLS AND VOUCHERS ETC., MAINTAINED BY THE SOCIETY HAVE BEEN PRODUCED AND THEY HAVE BEEN TEST CHECKED RANDOMLY. THE SOCIETY HAS BEEN REGISTERED UNDER THE SOCIETIES REGISTRATIO N ACT, VIDE REGISTRATION NO. 1028/2001-021 DATED 26.12.2001 AND RENEWED SUBSEQUENTLY. AS PER THE MEMORANDUM FILED, THE SOC IETY WAS ESTABLISHED WITH, THE AIM TO IMPART EDUCATION AND O THER CHARITABLE ACTIVITIES COVERED U/S 2(15) OF THE LT. ACT. SOCIET Y IS RUNNING A PROFESSIONAL CUM LAW COLLEGE AT GHAZIABAD. CERTIFIC ATE OF REGISTRATION U/S 12AA OF THE 1. T. ACT, 1961 HAS BEEN GRANTED BY THE COMMISSIONER OF INCOME TAX, GHAZIABAD VIDE C.NO. 57(88)/REGISTRATION/GZB/2005-06/562 DATED 06.05.200 5 AND EXEMPTION U/S 80G GRANTED VIDE C.NO. 58(L4)/EXEMPTI ON/CIT- GZB/2004-05/4198 DATED 02.12.2005. DURING THE PERIO D UNDER CONSIDERATION SOCIETY HAS SHOWN GROSS RECEIPTS OF R S. 12490020/- AND TOTAL EXPENDITURE (INCLUDING DEPRECIATION OF RS . 1769550/-) OF RS.10951419/-HAS BEEN SHOWN. SINCE THE SOCIETY HAS BEEN UTILIZING 4 ITS SURPLUS AS CAPITAL EXPENDITURE, HENCE AMOUNT OF DEPRECIATION OF RS. 1769550/-, CLAIMED BY THE ASSESSEE CANNOT BE AL LOWED. IN THIS REGARD THE AUTHORIZED REPRESENTATIVE WAS ASKED TO E XPLAIN AS TO WHY DEPRECIATION SHOULD NOT BE DISALLOWED. IN COMPLIANC E TO ABOVE THE AUTHORIZED REPRESENTATIVE VIDE HIS LETTER DATED 22. 01.2013 SUBMITTED HIS DETAILED NOTE WITH MENTIONING OF SECTION 11(1)( A) AND ALSO ATTENDED THAT EVEN IF THE DEPRECIATION IS DISALLOWE D EVEN THEN THERE IS EXCESS UTILIZATION OF FUNDS AVAILABLE DURING CUR RENT YEAR. THE AO AFTER CONSIDERING ALL THE DOCUMENTS AND EVIDENCES A ND THE SUBMISSIONS OF THE ASSESSEE, HAS DISALLOWED THE DEP RECIATION CLAIMED BY THE ASSESSEE AMOUNTING TO RS. 17,69,550/- AND A DDED BACK THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. AO FURTHE R OBSERVED THAT SINCE THE SOCIETY HAS UTILIZED RS. 12127693/- MORE THAN 85% OF ITS TOTAL FUNDS AVAILABLE FOR APPLICATION I.E. RS. 91,1 2,399/- (GROSS RECEIPTS RS. 12490020/- LESS DEPRECIATION RS. 17695 50/- = RS. 10720470/- AND 85% THEREOF RS. 9112399/-) FOR T HE PURPOSE FOR WHICH THE SOCIETY HAS BEEN FORMED I.E. CHARITABLE A CTIVITIES AS PER SECTION 2(15) OF THE I.T. ACT AND ACCORDINGLY, THE EXEMPTION CLAIMED ULS 11(1) WAS ALLOWED AS CLAIMED BY THE SOCIETY. D URING THE COURSE OF ASSESSMENT PROCEEDINGS ASSESSEE FILED DETAILS FR OM TIME TO TIME AS REQUIRED IN THE QUESTIONNAIRE WHICH HAS BEEN VER IFIED AND TEST CHECKED RANDOMLY. SINCE NOTHING ADVERSE HAS BEEN NO TED AND IN VIEW OF THE PROVISIONS OF SECTION 11 AND 12 OF THE IT ACT, THE RETURNED INCOME WAS ACCEPTED AND INCOME OF THE ASSE SSEE WAS 5 COMPLETED ON NIL INCOME VIDE ORDER DATED 22.1.2013 PASSED U/S. 143(3) OF THE ACT. AGAINST THE ASSESSMENT ORDER DAT ED 21.1.2013, ASSESSEE APPEALED BEFORE THE LD. CTI(A), WHO VIDE H IS IMPUGNED ORDER DATED 15.4.2015 HAS DISMISSED THE APPEAL OF T HE ASSESSEE. 3. AGGRIEVED WITH THE LD. CIT(A)S ORDER DATED 15.4 .2015, ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 4. DURING THE HEARING, LD. COUNSEL OF THE ASSESSEE HAS FILED A SMALL PAPER BOOK CONTAINING PAGES 1 TO 21 IN WHICH HE HAS ATTACHED THE COPY OF AUDIT REPORT /AUDITED FINANCIAL STATEME NTS FOR AY 2010- 11; COPY OF ORDER OF CIT(A) FOR AY 2012-13; COPY OF ORDER OF HONBLE DELHI HIGH COURT IN THE CASE OF INDRAPRASTHA CANCER SOCIETY 53 TAXMANN.COM 463; COPY OF DECISION OF ITAT, H-BENCH, NEW DELHI IN THE CASE OF DDIT VS. BHARDWAJ WELFARE TRUST (2015) 59 TAXMANN.COM 201 (DELHI H BENCH); COPY OF ITAT, G BENCH, NEW DELHI IN THE CASE OF KESAR CHARITABLE TRUST PASSED IN ITA NO. 56 32/2015, ORDER DATED 5.4.2016 AND STATED THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE AFORESAID DECISIONS. HENCE, HE REQUESTED THAT BY FOLLOWING THE AFORESAID DECISI ONS, THE ADDITION IN DISPUTE MAY BE DELETED AND APPEAL OF THE ASSESSEE M AY BE ALLOWED. 5. ON THE CONTRARY, LD. DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS. WE HAVE GONE THROUGH THE ORDERS PASSED BY THE REVENUE AUTHORITIES AS WELL AS THE CONTENTION RAISED BY THE ASSESSEE IN TH E GROUNDS OF 6 APPEAL AND ALSO COPY OF THE DECISIONS CITED BY THE LD. COUNSEL OF THE ASSESSEE ATTACHED WITH THE PAPER BOOK. 6.1 WE FIND THAT ON SIMILAR AND IDENTICAL ISSUE, T HE HONBLE HIGH COURT OF DELHI IN THE CASE OF INDRAPRASTHA CANCER S OCIETY (SUPRA) HAS OBSERVED AS UNDER (HEAD NOTES ONLY):- SECTION 32, READ WITH SECTION 11, OF THE INCOME TAX ACT, 1961 DEPRECIATION ALLOWANCE / RATE OF (IN CASE OF TRUST) WHETHER A CHARITABLE INSTITUTION, WHICH HAS PURCHASED CAPITAL ASSETS AN D TREATED AMOUNT SPENT ON PURCHASE OF CAPITAL ASSET AS APPLICATION OF INCOME, IS ENTITLED TO CLAIM DEPRECIATION ON SAME CAPITAL ASSET UTILIZED FOR BUSINESS HELD YES. [IN FAVOUR OF THE ASSESSEE]. 6.2 WE FURTHER FIND THAT ON SIMILAR AND IDENTICAL I SSUE, THE ITAT, G BENCH, NEW DELHI IN THE CASE OF KESAR CHARITABL E TRUST PASSED IN ITA NO. 5632/2015, ORDER DATED 5.4.2016 HAS HELD AS UNDER:- 11. THE COUNSEL OF THE ASSESSEE TOOK OUR ATTENTION TO THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF DIT(EXEMPTION) VS. INDRAPRASTHA CANCER SOCIETY (2015) 53 TAXMANN.COM 463 (DEL) WHEREIN SIMILAR QUESTION AROSE I.E. WHETHER A CHARITABLE INSTITUTIO N, WHICH HAD PURCHASED CAPITAL ASSETS AND TREATED THE AMOUNT SPENT ON PURCHASE OF CAPITAL ASSETS AS APPLICATION OF INCOME, IS ENTITLED TO CLAIM DEPRECIATION ON THE SAME CAPITAL ASSET UTILIZED FOR 7 BUSINESS. IN THE SAID CASE ALSO THE REVENUE CONTENTION WAS THAT THIS WOULD AMOUNT TO DOUBLE TAXATION AND HAD HEAVILY RELIED ON THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF ESCORTS LTD. AIR 1993 SC 1326, WHICH HAS BEEN CONSIDERED BY THE HONBLE HIGH COURT AND DISTINGUISHED THE SAME AND UPHELD THE CLAIM OF THE ASSESSEE BY OBSERVING IN PARA 9 OF ITS JUDGMENT THAT 'TO OUR MIND, THEREFORE, THE ISSUE HAS BEEN EXAMINED IN DEPTH AND DETAIL-WISE BASIS BY THE TRIBUNAL' AND DISMISSED THE APPEAL PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE TRIBUNAL GRANTING DEPRECIATION TO THE ASSESSEE. HOWEVER, THE HONBLE HIGH COURT OBSERVED THAT SUB-SECTION (6) OF SECTION 11 OF THE ACT HAS BEEN INSERTED W.E.F. 1.4.2015 TO THE EFFECT THAT WHERE ANY INCOME IS REQUIRED TO BE APPLIED, ACCUMULATED OR SET APART FO R APPLICATION, THEN FOR SUCH PURPOSES THE INCOME SHALL BE DETERMINED WITHOUT ANY DEDUCTION OR ALLOWANCE BY WAY OF DEPRECIATION OR OTHERWISE IN RESPECT OF ASSET, ACQUISITION OF WHICH HAS BEEN CLAIMED AS APPLICATION OF INCOME UNDER THIS SECTION IN THE SAME OR ANOTHER PREVIOUS YEAR. THE HON'BLE HIGH COURT CLEARLY HELD THAT THE AFORESAID CHANGE IN TERMS OF SECTION 11(6) OF THE ACT WHICH HAS BEEN INSERTED AND APPLICABLE W.E.F. 1.4.2015 AND SO IS NOT APPLICABLE TO THE ASSESSMENT YEAR IN QUESTION I.E. ASSESSMENT YEAR 2010-11. THUS, WE UPHOLD THE CLAIM OF THE ASSESSEE AND THE ADDITION OF RS.74,227/- MADE ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION IS ORDERED TO BE DELETED. THUS, GROUND NO.3 OF THE ASSESSEE IS ALLOWED. 8 7. AFTER PERUSING THE AFORESAID JUDGMENT OF THE HON BLE HIGH COURT OF DELHI AND THE DECISION OF THE TRIBUNAL, WE ARE OF THE CONSIDERED VIEW THAT THE ISSUE IN DISPUTE IS SQUARE LY COVERED BY THE AFORESAID JUDGMENT & DECISION, HENCE, RESPECTFULLY, FOLLOWING THE AFORESAID JUDGEMENT AND DECISION, WE DELETE THE AD DITION IN DISPUTE AND ALLOW THE GROUND RAISED BY THE ASSESSEE. 8. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED ON 01-09-2017. SD/- SD/- (PRASHANT MAHARISHI) (H.S. SIDHU) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 01-09-2017 SR BHATANGAR COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A), NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.