BABERWAD SHIKSHA SAMITI, Dausa V. CIT-EXEMPTION, Jaipur

ITA 487/JPR/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5478 (ITAT-JAIPUR)
• Duration Of Justice: 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 18-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D S KOTHARI
• Keywords: Depreciation; Charitable institution; Principle of natural justice; Retrospective amendment; Capital receipt; Capital expenditure
• Section: 143(3); 12A; 12AA; 263; 63; 12; 11

Judgement Text

AVK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VH-VKJ-EHUK] YS[KK LNL; ,OA JH YFYR DQEKJ] U;KF; D LNL; DS LE{K BEFORE: SHRI T.R.MEENA, AM & SHRI LALIET KUMAR, JM VK;DJ VIHY LA -@ ITA NO. 487/JP/2015 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2010-11 M/S BABERWAD SHIKSHA SAMITI, MANDAWAR ROAD, MAHWA, DAUSA. CUKE VS. COMMISSIONER OF INCOME TAX, (EXEMPTION), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AAATB 8749 B VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI MAHENDRA GARGIEYA (ADV) JKTLO DH VKSJ LS@ REVENUE BY : SHRI D.S. KOTHARI (CIT) & SHRI AJAY MALIK (ADDL.CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 02/02/2016. MN?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 12/02/2016. VKNS'K@ ORDER PER T.R. MEENA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 18/03/2015 OF THE LEARNED C.I.T.(EXEMPTIONS), JAIPUR FOR A.Y. 2010-11. THE EFFECTIVE GROUNDS OF APPEAL ARE AS UNDER:- 1. THE IMPUGNED ORDER PASSED U/S 263 OF THE ACT BY THE ID. CIT (EXEMPT), JAIPUR, IS BARRED BY LIMITATION A ND HENCE, KINDLY BE QUASHED. 2 ITA NO. 487/JP/2015 M/S BABERWAD SHIKSHA SAMITI VS CIT(E) 2. THE CIT (EXEMPTION), JAIPUR ERRED IN LAW AS WELL AS ON THE FACT OF THE CASE IN INVOKING THE PROVISIONS OF SEC.263 OF THE ACT. THEREFORE, THE IMPUGNED ORDER U/ S 263 OF THE ACT KINDLY BE QUASHED. 3. THE CIT (EXEMPTION), JAIPUR ERRED IN LAW AS WELL AS ON THE FACT OF THE CASE IN ASSUMING JURISDICTION U/S 2 63 OF THE ACT BY WRONGLY AND INCORRECTLY HOLDING THAT THE SUBJECTED ASSESSMENT ORDER PASSED ON DATED 31.12.2012, WAS WITHOUT MAKING PROPER ENQUIRIES. SUCH FINDING AND THE ASSUMPTION OF JURISDICTION, BOTH AR E CONTRARY TO THE PROVISIONS OF LAW AND FACTS ON RECOR D. HENCE, THE PROCEEDINGS INITIATED U/S 263 OF THE ACT AND THE IMPUGNED ORDER DATED 18.03.2015 KINDLY BE QUASHED. 4. THE CIT (EXEMPTION), JAIPUR ERRED IN LAW AS WELL AS ON THE FACT OF THE CASE IN DENYING THE CLAIM MADE U/S 10(23C)(IIIAD) OF THE ACT ON THE PLEA THAT THE AGGR EGATE ANNUAL RECEIPTS OF THE APPELLANT SAMITI EXCEEDED RS .1 CRORE WHICH IS AN INCORRECT FINDING OF FACT AND LEGA LLY UNSUSTAINABLE AND THUS, THEREBY DECLINING THE BENEF IT OF THE EXEMPTION TO THE APPELLANT SAMITI TO WHICH IT IS OTHERWISE ENTITLED TO. IN VIEW OF SUCH AN INTERPRETAT ION WHICH CONTRARY TO THE PROVISIONS OF LAW AND ALSO BASE D ON INCORRECT FACTS, THE IMPUGNED ORDER KINDLY BE QUASHED AND APPELLANT SAMITI BE HELD ENTITLED TO TH E EXEMPTION U/S 10(23C)(IIIAD) OF THE ACT, AS CLAIMED . 5. THE CIT (EXEMPTION), JAIPUR ERRED IN LAW AS WELL A S ON THE FACT OF THE CASE IN DENYING THE BENEFIT OF SEC. 11 & 12 OF THE ACT PURSUANT TO THE REGISTRATION GRANTED ON DATED 23.08.2011 U/S 12A OF THE ACT, IN THE YEAR UN DER CONSIDERATION TO WHICH, THE APPELLANT SAMITI IS OTHERWISE ENTITLED TO ON A TRUE AND CORRECT 3 ITA NO. 487/JP/2015 M/S BABERWAD SHIKSHA SAMITI VS CIT(E) INTERPRETATION OF THE PROVISO TO SEC.12A(2) OF THE ACT. THE SAID PROVISO WAS BROUGHT WITH A VIEW TO REMOVE THE UNINTENDED HARDSHIP AND THEREFORE, SHOULD BE GIVEN A RETROSPECTIVE EFFECT. ACCORDINGLY, THE APPELLANT SA MITI KINDLY BE HELD ENTITLED TO THE BENEFIT OF SEC. 11 & 12 OF THE ACT PURSUANT TO THE REGISTRATION GRANTED U/S 12 A OF THE ACT, IN THIS YEAR ALSO. 6. THE CIT (EXEMPTION), JAIPUR FURTHER ERRED IN LAW A S WELL AS ON THE FACT OF THE CASE IN HOLDING THAT THE DEPRECIATION IS MERELY A NOTIONAL EXPENDITURE AND N OT AN OUTGOING AND SAME IS NOT AN APPLICATION OF INCOM E PERMISSIBLE U/S 11 (1)(A) OF THE ACT, WHICH IS CONTR ARY TO THE PROVISIONS OF LAW AND FACTS AND HENCE, TO THE EX TENT OF THE DEPRECIATION, SO DISALLOWED, THE INCOME BE TREATED AS APPLICATION ELIGIBLE U/S 11 (1)(A) OF TH E ACT. 2. ALL THE GROUNDS OF THE ASSESSEES APPEAL ARE REV OLVING AROUND PASSING ORDER U/S 263 OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT), TREATING RECEIPTS MORE THAN RS. 1 CRORE, DENYING TH E BENEFIT U/S 11 AND 12 AND NOT ALLOWING DEPRECIATION. THE LD CIT(EXEMPTIO N) HAS OBSERVED THAT IN THIS CASE THE ASSESSEE FILED ITS RETURN FOR A.Y. 2010-11 ON 25/1/2011 DECLARING INCOME AT RS. NIL. THE ASSESSME NT WAS COMPLETED U/S 143(3) OF THE ACT BY THE DCIT, CIRCLE-BHARATPUR ON 31/12/2012 AT THE DECLARED INCOME. THE LD CIT(EXEMPTION) ON VERIFIC ATION, FOUND THAT THE ASSESSING OFFICER HAD COMPLETED THE ASSESSMENT BY ALLOWING THE EXEMPTION U/S 11 AS WELL AS U/S 10(23)(IIIAD) OF THE ACT AND TREATED THE 4 ITA NO. 487/JP/2015 M/S BABERWAD SHIKSHA SAMITI VS CIT(E) ASSESSEE SAMITI AS TRUST REGISTERED U/S 12AA OF THE ACT AND RECEIPTS WERE BELOW RS. 1 CRORE. IT HAS BEEN HELD THAT THE ASS ESSEE SAMITI WAS NOT REGISTERED U/S 12AA BEFORE COMPLETION OF ASSESS MENT. HE HAD ALSO EXAMINED CONSOLIDATED RECEIPT AND PAYMENT ACCOUNT, INCOME AND EXPENDITURE ACCOUNT AS WELL AS BALANCE SHEET AND FOU ND THAT AS PER INCOME AND EXPENDITURE ACCOUNT, TOTAL GROSS RECEIPT S WAS RS. 93,70,735/-, WHICH HAS BEEN TAKEN AS A BASIS FOR CLA IMING EXEMPTION U/S 10(23C)(IIAD) OF THE ACT BEING LESS THAN RS. 1 CRORE. IT IS FURTHER OBSERVED THAT THE ASSESSEE HAD NOT INCLUDED IN GROS S RECEIPTS, SCHOLARSHIP RECEIPTS OF RS. 51,05,380/-, THEREFORE, AFTER MAKING ADDITION OF BOTH THE RECEIPTS, THE GROSS RECEIPTS WERE MORE THAN RS. 1 CRORE AND ASSESSEE SAMITI IS NOT ELIGIBLE TO CLAIM EXEMPTION U/S 10(23C)(IIIAD) OF THE ACT. ACCORDINGLY, THE ASSESSEE HAD BEEN WRONGLY ALLOWED EXEMPTION U/S 11 AS WELL AS U/S 10(23C)(IIIAD) OF THE ACT. FUR THER THE ASSESSEE HAD CLAIMED DEPRECIATION OF RS. 7,62,298/-. THIS CLAIM OF DEPRECIATION IS NOT ALLOWABLE AS THE CAPITAL EXPENDITURE INCURRED HAS AL READY BEEN ALLOWED IN THE YEAR OF PURCHASE OF THE ASSETS AS APPLICATIO N. ACCORDING TO HIM, THE DEPRECIATION ALLOWED ON THE SAME ASSET IS DOUBLE DEDUCTION ON THE SAME ASSET. HE FURTHER RELIED ON THE DECISION OF HO N'BLE SUPREME COURT 5 ITA NO. 487/JP/2015 M/S BABERWAD SHIKSHA SAMITI VS CIT(E) IN THE CASE OF ESCORTS LIMITED VS. UNION OF INDIA 1 99 ITR 43 (SC), LISSIE MEDICAL INSTITUTIONS VS. CIT 348 ITR 43 AND CHARANJIV CHARITABLE TRUST 267 CTR 305 (DELHI). AFTER OBSERVING AS ABOVE THE LD CIT(EXEMPTION) GAVE SHOW CAUSE NOTICE U/S 263 OF THE ACT TO THE ASS ESSEE SAMITI, WHICH IS REPRODUCED AS UNDER:- 1. THE ASSESSEE SAMITI MOVED AN APPLICATION IN FORM NO.10A DATED 04-02-2011 FOR REGISTRATION UNDER SECTION 12A . THE REGISTRATION WAS GRANTED VIDE ORDER DATED 23-08-2011 . IT MAY BE NOTED THAT THE PROVISO TO SECTION 12A(2) OF THE ACT INSERTED BY FINANCE (NO.2) ACT, 2014 W.E.F. 01.10.20 14 PROVIDES THAT WHERE REGISTRATION HAS BEEN GRANTED TO THE TRUST OR INSTITUTION U/S 12AA, THEN THE PROVISION O F SECTION 11 AND 12 SHALL APPLY M RESPECT OF ANY INCOME DERIVED FROM THE PROPERTY HELD UNDER TRUST OF ANY A.Y. PRECEDING THE AFORESAID AY, FOR WHICH ASSESSMENT PROCEEDINGS ARE PENDING BEF ORE THE AO AS ON THE DATE OF SUCH REGISTRATION. THIS PRO VISO INSERTED W.E.F 01.10.2014 IS A BENEFICIAL PROVISO TO REMOVE THE UNINTENDED HARDSHIP AND THEREFORE IT HAS A RETR OSPECTIVE EFFECT. THEREFORE, ONCE THE REGISTRATION HAS BEEN GR ANTED TO THE ASSESSEE U/S 12AA, THE BENEFIT OF SECTION 11 AN D 12 IS ALLOWABLE TO THE ASSESSEE FOR EARLIER YEARS ALSO. THE REFORE, THE ORDER PASSES BY AO ALLOWING THE EXEMPTION U/S 11 IN THE YEAR UNDER CONSIDERATION CANNOT BE SAID TO BE ERRON EOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE CONSIDER ING THE 6 ITA NO. 487/JP/2015 M/S BABERWAD SHIKSHA SAMITI VS CIT(E) LEGISLATIVE INTENT FOR WHICH PROVISO TO SECTION 12AA (2) HAS BEEN INSERTED. 2. THE ASSESSEE SOCIETY IS AN EDUCATIONAL INSTITUTI ON RUNNING EDUCATIONAL INSTITUTIONS AT MAHWA (DAUSA) LIKE, MAHA TMA GANDHI P.G. MAHAVIDHYALA, MAHATMA GANDHI TEACHERS TRAINING COLLEGE AND MAHATMA GANDHI ITI COLLEGE TO I MPART EDUCATION TO STUDENTS OF EVERY CASTE, RELIGION, ETC . ALL THE INCOME OF THE SOCIETY IS APPLIED FOR THE FULFILLMENT OF THE OBJECTS OF THE SOCIETY. DURING THE RELEVANT YEAR TH E GROSS RECEIPTS OF THE SOCIETY WERE RS. 93,70,735/- WHICH WER E BELOW RS. 1 CRORE AND THEREFORE THE AO HAS RIGHTLY H ELD THAT INCOME OF THE ASSESSEE IS EXEMPT FROM TAX. SO FAR A S SCHOLARSHIP RECEIPTS OF RS. 51,05,380/- IS CONCERNE D, IT IS HUMBLY SUBMITTED THAT THESE RECEIPTS IS NOT THE INC OME OF THE SOCIETY. THIS AMOUNT IS RECEIVED FROM THE GOVERN MENT FOR DISBURSEMENT TO THE ELIGIBLE STUDENTS STUDYING IN THE VARIOUS COLLEGES RUN BY THE SOCIETY. THIS IS EVIDENT FROM THE LETTER OF THE GOVERNMENT WHERE AGAINST THE AMOUNT SANCTIONED FOR THE SCHOLARSHIP, THE NAME OF THE STU DENT AND AMOUNT OF SCHOLARSHIP TO BE GIVEN TO THAT STUDENT I S MENTIONED AND THE SAMITI IS REQUIRED TO GIVE THE SC HOLARSHIP AMOUNT TO THE STUDENT AS PER THE LETTER OF THE GOVE RNMENT. COPY OF FEW LETTERS ISSUED BY THE GOVERNMENT IN THIS CONNECTION IS ENCLOSED. THE SAMITI HAS NO AUTHORITY TO RETAIN ANY PART OF THE SCHOLARSHIP AMOUNT FOR ITS OWN BENEF IT IN AS 7 ITA NO. 487/JP/2015 M/S BABERWAD SHIKSHA SAMITI VS CIT(E) MUCH AS IF THE SCHOLARSHIP IS NOT CLAIMED BY ANY ST UDENT FOR ANY REASON, THE SAME HAS TO RETURNED BACK TO THE GOVERNMENT. THUS, IN RESPECT OF THIS AMOUNT, THE SOC IETY IS ONLY ACTING AS A CONDUIT FOR DISBURSING THE SCHOLAR SHIP AMOUNT IS NOT THE INCOME OF THE SOCIETY BUT ONLY AN OBLIGATION GIVEN BY THE GOVERNMENT FOR DISBURSING I T TO THE STUDENTS. THIS ISSUE HAS BEEN EXAMINED BY THE AO ALS O IN COURSE OF ASSESSMENT PROCEEDINGS. IT MAY BE CLARIFI ED THAT AT PRESENT SUCH SCHOLARSHIP IS GIVEN BY THE GOVERNMENT DIRECTLY TO THE STUDENTS AND NOT ROUTED THROUGH THE SOCIETY. IN ANY CASE SINCE IT IS NOT THE INCOME OF THE SOCIETY, THE AO HAS RIGHTLY ALLOWED EXEMPTION TO THE ASSESSEE U/S 10(23C )(IIIAD) AS INCOME OF THE ASSESSEE IS LESS THAN RS. 1 CRORE. 3. THE ASSESSEE SOCIETY HAS CLAIMED DEPRECIATION OF RS. 7,62,298/- DURING THE RELEVANT YEAR. THE SOCIETY HAS NOT CLAIMED ANY CAPITAL EXPENDITURES AS APPLICATION OF INCOME IN AS MUCH AS IN ALL EARLIER YEARS SOCIETY HAS CLAIMED EXEMPTION U/S 10(23C)(IIIAD). THEREFORE, THE DEPRECIATION IS ALLOWABLE TO THE ASSESSEE. OTHERWISE ALSO, EVEN IN A CASE WHERE INCOME IS COMPUTED U/S 11, BOTH THE DEPRECIATION AN D APPLICATION IS ALLOWABLE IN RESPECT OF THE CAPITAL E XPENDITURE AS HELD IN THE FOLLOWING CASES: CIT VS. DEVI SAKUNTALA THARAL CHARITABLE FOUNDATION (2013) 358 ITR 452 (MP)(HC) DIT VS. VISHWA JAGRITI MISSION (2012) 73 DTR 195 (DEL .)(HC) CIT VS. MARKET COMMITTEE, PIPLI 330 ITR 16 (P&H)(HC) 8 ITA NO. 487/JP/2015 M/S BABERWAD SHIKSHA SAMITI VS CIT(E) CIT VS. TINY TOTS EDUCATIONAL SOCIETY 330 ITR 21 (P&H) (HC) CIT VS. SHRI GUJRATI SAMAJ (REGD) 349 ITR 559 (MP)(H C) CIT VS. INSTITUTE OF BANKING PERSONNEL SELECTION 26 5 ITR 110 (BOM.)(HC) IN VIEW OF ABOVE AND CONSIDERING THE FACT THAT ALL THE ISSUED RAISED BY YOU HAS BEEN CONSIDERED BY THE AO WHILE FR AMING THE ASSESSMENT U/S 143(3), THE ORDER PASSED BY THE HIM IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST O F THE REVENUE AND THEREFORE IT IS REQUESTED YOUR HONOUR T O PLEASE DROP THE PROCEEDINGS INITIATED U/S 263 AND OBLIGE. THE ASSESSEE SOCIETY HAD ALSO SUBMITTED REPLY AND HE HELD THAT THE ASSESSEE SOCIETY HAD RECEIVED 12AA REGISTRATION SUB SEQUENTLY, IT SHOULD BE GIVEN BENEFIT OF NEWLY INSERTED PROVISO TO SECTIO N 12A(2). HOWEVER, AS THE NEW PROVISION HAS BEEN INSERTED W.E.F. 01/10/ 2014, THEREFORE, THE BENEFIT OF THE SAME PROVISION CANNOT BE GIVEN T O THE APPELLANT SOCIETY AS IT FILED APPLICATION FOR REGISTRATION ON 04/2/2011. AS PER SECTION 10(23)(IIIAD), THE ASSESSEE HAS TO FULFILL THE FOLLOWING CONDITION:- (I) ASSESSEE MUST BE A UNIVERSITY OR OTHER EDUCATIO NAL INSTITUTION. (II) IT MUST EXIST SOLELY FOR EDUCATION PURPOSES. (III) IT MUST NOT EXIST FOR THE PURPOSE OF PROFIT. 9 ITA NO. 487/JP/2015 M/S BABERWAD SHIKSHA SAMITI VS CIT(E) (IV) ITS AGGREGATE RECEIPTS MUST NOT EXCEED THE PRE SCRIBED LIMITS (I.E. RS. 1 CRORE). THE LD CIT(EXEMPTION) HAD HELD THAT SCHOLARSHIP RECEI PTS BY THE ASSESSEE SAMITI WERE NOT DISBURSED FULLY DURING THE YEAR UNDER CONSIDERATION, THEREFORE, IT IS INCLUDABLE IN THE A GGREGATE ANNUAL RECEIPT. FOR EXCLUSION OF RECEIPTS, THERE IS SPECIFIC CLAUSE FOR CORPUS DONATION, WHICH IS NOT THE CASE OF THE ASSESSEE. THUS, THE ASSE SSEE WAS NOT ENTITLED FOR BENEFIT OF RS. 10(23C)(IIIAD). AS THE PROPER ENQUIRY HAD NOT BEEN MADE BY THE ASSESSING OFFICER, THE MATTER IS R EQUIRED TO BE RESTORED BACK TO THE ASSESSING OFFICER FOR MAKING P ROPER ENQUIRY. WITH REGARD TO DEPRECIATION CLAIMED BY THE SOCIETY, HE H ELD THAT IT IS A DOUBLE DEDUCTION ON THE SAME ASSETS BY RELYING ON THE CASE LAWS I.E. ESCORTS LIMITED VS. UNION OF INDIA AND LISSIE MEDICAL INSTI TUTIONS VS. CIT (SUPRA) 2.1 THE LD CIT(EXEMPTION) HAS FURTHER HELD THAT AS TH E PROPER ENQUIRY HAD NOT BEEN MADE, THE MATTER IS ALSO REQUIRED TO R ESTORE BACK TO THE ASSESSING OFFICER FOR MAKING PROPER ENQUIRY. THEREFO RE, HE HELD THAT ORDER OF THE ASSESSING OFFICER IS ERRONEOUS AND PRE JUDICE TO THE INTEREST OF REVENUE ON THE ISSUE OF SCHOLARSHIP RECEIPT NOT SHOWN IN THE RECEIPT AND PAYMENT ACCOUNT AS WELL AS CLAIM OF DEPRECIATION . 10 ITA NO. 487/JP/2015 M/S BABERWAD SHIKSHA SAMITI VS CIT(E) 3. NOW THE ASSESSEE IS IN APPEAL BEFORE US. THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT U/S 263 OF THE ACT, THE TWIN CONDITIONS ARE TO BE SPECIFIED BY THE LD CIT(EXEMPTION) I.E. ORDER OF THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTERES T OF REVENUE. THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVE RY TYPE OF MISTAKES OR ERROR COMMITTED BY THE ASSESSING OFFICER, IT IS ONLY WHEN AN ORDER IS ERRONEOUS AS ALSO PREJUDICIAL TO THE REVENUES INTE REST, THAT THE PROVISION WILL BE ATTRACTED. EVERY LOSS OF REVENUE AS A CONSEQ UENCE OF THE ORDER OF THE ASSESSING OFFICER CANNOT BE TREATED AS PREJUDIC IAL TO THE INTEREST OF THE REVENUE, IF THE ASSESSING OFFICER HAS ADOPTED O NE OF THE TWO OR MORE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND ASSESSING OFFICER HAS TAKEN ONE VIEW WITH WHICH THE CIT DOES NOT AGREE, IT CANNOT BE TR EATED AS AN ERRONEOUS ORDER AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. FOR WHICH HE RELIED ON THE DECISION IN THE CASE OF MALABAR IN DUSTRIAL CO. LTD. VS. CIT (2000) 243 ITR 83 (SC). HE ALSO RELIED ON THE DEC ISION IN THE CASE OF CIT VS. MAX INDIA LTD. (2007) 295 ITR 282 (SC). HE FU RTHER ARGUED THAT SCHOLARSHIP FEES RECEIPTS BY THE ASSESSEE IS NOT PA RT OF THE AGGREGATE ANNUAL RECEIPT. AGGREGATE ANNUAL RECEIPT INCLUDES O NLY THOSE RECEIPTS TO 11 ITA NO. 487/JP/2015 M/S BABERWAD SHIKSHA SAMITI VS CIT(E) WHICH THE INSTITUTION HAS LAWFUL RIGHT TO MAKE RECOVE RIES E.G. THE RECEIPT OF SCHOOL FEES, LIBRARY FEES, SPORTS FEES, CANTEEN FEES ETC., WHICH THE INSTITUTION BY VIRTUE OF AN AGREEMENT WITH THE STUDE NT/SCHOLAR. IN THE CASE OF ASSESSEE, THE ASSESSEE SAMITI IS CUSTODIAN OF RECEIPT OF SCHOLARSHIP RECEIVED FROM THE STATE GOVERNMENT AND HAD BEEN DISTRIBUTED THE AMOUNT TO THE ELIGIBLE STUDENT. THE APPELLANT KEPT SUCH RECEIPTS IN THE FIDUCIARY CAPACITY AS A TRUSTEE OF THE STATE GOVERNMENT AS A LIABILITY, WHICH HAS BEEN SHOWN IN THE BALANCE S HEET. HE HAS DRAWN OUR ATTENTION ON PAGE NO. 9 TO 37 OF THE PAPER BOOK AND ARGUED THAT MOST OF THE SCHOLARSHIP RECEIPTS HAD BEEN DISTRIBUT ED BUT PARTLY HAD NOT BEEN DISTRIBUTED. IT IS A CONTINUOUS PROCESS IN EVE RY YEAR TO CARRY FORWARD CERTAIN UNDISTRIBUTED SCHOLARSHIP IN THE SUB SEQUENT YEAR OTHERWISE AS PER GOVERNMENT RULE, IT IS LIABLE TO PA Y BACK TO THE STATE GOVERNMENT FOR WHICH HE HAS DRAWN OUR ATTENTION ON L ETTERS OF THE SOCIAL WELFARE OFFICER, DAUSA, PAGE NO. 50 TO 58 OF THE PAPER BOOK. IT IS ALSO ARGUED THAT THIS QUANTUM OF SCHOLARSHIP HAS PR OVIDED ON THE BASIS OF ONE OF THE PARTICULAR STUDENT, CLASS, YEAR, RATE AND TOTAL AMOUNT FROM THE SOCIAL WELFARE DEPARTMENT. THE SCHOLARSHIP IS BEI NG PAID THROUGH ACCOUNT PAYEE CHEQUE IN THE ACCOUNTS OF THE STUDENT S. THE LD ASSESSING 12 ITA NO. 487/JP/2015 M/S BABERWAD SHIKSHA SAMITI VS CIT(E) OFFICER CONSISTENTLY ALLOWED THE ASSESSEES CLAIM UP TO A.Y. 2009-10. HE HAS FURTHER RELIED ON THE DECISION OF HONBLE ITAT, JAPUR BENCH IN THE CASE OF ACIT VS. PUBLIC ROSE SHIKSHA SAMITI IN ITA N O. 363/JP/2013 ORDER DATED 11/08/2015 WHEREIN, IT HAS BEEN HELD BY CONSIDERING THE HONBLE MADRAS HIGH COURT DECISION IN THE CASE OF C IT VS. MADRASA-E- BAKHIYATH-US-SALIHATH ARABIC COLLEGE (2015) 120 DTR 238/278 CTR 0374 (MAD) THAT OTHER RECEIPTS ARE NOT PART OF THE AGGRE GATE ANNUAL RECEIPT. THE HON'BLE MADRAS HIGH COURT HAS HELD THAT SALE PRO CEEDS OF LAND AND BONDS WERE CAPITAL RECEIPT AND NOT RECURRING INCOME. HE FURTHER RELIED ON THE DECISION IN THE CASE OF CIT VS. BIJLI COTTON MILLS 116 ITR 60 (SC) AND ARGUED THAT AS PER SECTION 44AB SUCH RECEIPTS A RE NOT CONSIDERED FOR AUDIT PURPOSE. HE FURTHER ARGUED THAT THE ASSES SEE SAMITI RIGHTLY CLAIMED DEPRECIATION ON ASSETS. THIS ISSUE ALSO COVE RED BY THE HONBLE JAIPUR ITAT IN THE CASE OF ITO VS. KRISHI UPAJ MAND I SAMITI (2012) 53 SOT 500 (JP), CIT V/S INSTITUTE OF BANKING PERSONNEL SELECTION (2003) 185 CTR (BOM) 492, CIT V/S MARKET COMMITTEE, PIPLI (2 011) 238 CTR (P&H) 103, CIT V/S TINY TOTS EDUCATION SOCIETY (2011) 330 ITR 21 (P&H), DIT (EXEMPTION) V/S FRAMJEE CAWASJEE INSTITUT E (1993) 109 CTR (BOM) 463, CIT V/S RAIPUR PALLOTTINE SOCIETY(1989) 8 0 CTR (MP) 127, 13 ITA NO. 487/JP/2015 M/S BABERWAD SHIKSHA SAMITI VS CIT(E) CIT V/S SOCIETY OF THE SISTERS OF ST. ANNE (1984) 3 9 CTR (KAR) 9, AND CIT V/S INSTITUTE OF BANKING (2003) 264 ITR 110 (BOM) . THE CASE LAWS CITED BY THE LD CIT(EXEMPTION) IS DISTINGUISHABLE AN D ARGUED THAT THE ASSESSEE SAMITI NEVER CLAIMED ANY CAPITAL EXPENDITU RE AS AN APPLICATION OF INCOME IN THE EARLIER YEAR. THE LD CIT (EXEMPTION) RIGHTLY ALLOWED THE DEPRECIATION IN PAST AND IN THE YEAR UNDER CONSIDER ATION. THE CASE LAWS RELIED UPON BY THE LD CIT(EXEMPTION) OF HON'BLE SUPR EME COURT WAS TO DECIDE THE APPLICATION OF FUND OF THE CHARITABLE OB JECT. THE LD ASSESSING OFFICER ALSO PASSED ORDER BY APPLYING HIS MIND AFTE R MAKING PROPER ENQUIRY. THE LD CIT(EXEMPTION) HAS NOT GIVEN SHOW CAUS E NOTICE ON PROPER ENQUIRY, EVEN THEN HE HAS DECIDED THAT THE A SSESSING OFFICER HAS NOT MADE PROPER ENQUIRY. HE HAS DRAWN OUR ATTENTION ON THE SHOW CAUSE LETTER ISSUED BY THE LD CIT(EXEMPTION) AT PAGE 47 TO 53 OF THE PAPER BOOK AND ARGUED THAT NO SUCH ISSUE WAS RAISED BY THE LD CIT(EXEMPTION). THEREFORE, FINDINGS GIVEN BY THE LD C IT(EXEMPTION) U/S 263 ARE AGAINST THE PRINCIPLES OF NATURAL JUSTICE, FOR WHICH HE RELIED ON THE DECISION IN THE CASE OF B.S. SANGWAN VS ITO (20 15) 38 ITR 11 (DELHI)(TRIB) WHEREIN IT HAS BEEN HELD THAT THE REVI SION ON GROUNDS DIFFERENT FROM THOSE SET DOWN IN SHOW CAUSE NOTICE I S NOT PERMISSIBLE. 14 ITA NO. 487/JP/2015 M/S BABERWAD SHIKSHA SAMITI VS CIT(E) THE LD ASSESSING OFFICER SCRUTINIZED THE CASE THOROU GHLY AFTER MAKING PROPER ENQUIRY. ALL THE DETAILS, QUERIES WERE REPLIE D BY THE ASSESSEE AGAINST THE QUESTIONNAIRE DATED 17/10/2012. THE ASSE SSEE SUBMITTED VARIOUS REPLIES ON 19/11/2012 AND 15/12/2012. THE AC COUNTS WERE AUDITED AND NO ADVERSE REMARK HAS BEEN MADE BY THE ACCOUNTANT. THE ISSUE OF SCHOLARSHIP HAS BEEN CONSIDERED BY THE ASS ESSING OFFICER FOR WHICH HE HAS DRAWN OUR ATTENTION ON PAGE NO. 41 OF T HE PAPER BOOK, WHICH IS A COPY OF LETTER DATED 19/11/2012 ADDRESSED TO THE ACIT, CIRCLE-BHARATPUR. WHEN CASE WAS SCRUTINIZED U/S 143( 3) OF THE ACT, THE CIT, ALWAR HAS BEEN INVESTIGATING THE CASE FOR REGIST RATION NO. 12A OF THE ACT. HE HAS FURTHER RELIED ON THE FOLLOWING CASE LAWS:- (I) CIT VS GANPAT RAM BISHNOI (2005) 198 CTR 546 (RA J). (II) CIT VS RAJASTHAN FINANCIAL CORPORATION (1996) 1 34 CTR 145 (RAJ). (III) CIT VS VIKAS POLYMERS (2010) 47 DTR 348. (IV) BALWANT SINGH VS. ITO (1996) 54 TTJ 560 (JP). (V) CIT VS HINDUSTAN MARKETING & ADVERTISING CO. LTD . (2010) 46 DTR 109 (DEL). (VI) CIT VS TRUSTEES ANUPAM CHARITABLE TRUST (1987) 16 7 ITR 129 (RAJ). (VII) CIT VS SUNBEAM AUTO LTD. (2009) 227 CTR 133 (D EL.). (VIII) CIT VS G.M. MITTAL STAINLESS STEEL (P) LTD. ( 2003) 263 ITR 255 (SC). 15 ITA NO. 487/JP/2015 M/S BABERWAD SHIKSHA SAMITI VS CIT(E) THEREFORE, HE PRAYED TO SET ASIDE THE ORDER OF THE L D CIT(EXEMPTION) PASSED U/S 263 OF THE ACT. 4. AT THE OUTSET, THE LD CIT DR HAS VEHEMENTLY SUPPO RTED THE ORDER OF THE LD CIT(EXEMPTION). 5. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IN TH IS CASE, THE SCRUTINY ASSESSMENT HAS BEEN COMPLETED BY THE ASSESSING OFFI CER ON 31/12/2012. THE LD ASSESSING OFFICER ISSUED DETAILE D QUESTIONNAIRE ON 17/10/2012, THE ASSESSEE FURNISHED REQUISITE DETAIL S/INFORMATION/BOOKS OF ACCOUNT ETC. BEFORE HIM. THE LD ASSESSING OFFICER HELD THAT THE REGISTRATION W.E.F. 23/08/2011 U/S 12AA HAVE BEEN GR ANTED BY THE LD CIT, ALWAR. THE SOCIETY WAS WORKING AS PER ITS BYELAWS AN D CARRIED OUT CHARITABLE ACTIVITY. ALL THE INCOME OF THE SOCIETY WAS APPLIED FOR FULFILLMENT OF THE OBJECT OF THE SOCIETY. THE EDUCAT IONAL INSTITUTIONS ARE EXISTING SOLELY FOR EDUCATIONAL PURPOSES AND NOT FO R THE PURPOSE OF PROFIT. THE AGGREGATE ANNUAL RECEIPTS OF THE SOCIETY DURING THE YEAR UNDER CONSIDERATION WAS RS. 93,70,725/-, WHICH IS BEL OW RS. 1 CRORE. ALL THE ANNUAL RECEIPTS OF THE SAMITI IS EXEMPTED U/S 1 0(23C)(IIIAD) OF THE ACT. THE LD ASSESSING OFFICER ACCEPTED THE ASSESSEE S RETURNED INCOME 16 ITA NO. 487/JP/2015 M/S BABERWAD SHIKSHA SAMITI VS CIT(E) BY ORDER DATED 31/12/2012. THE LD ASSESSING OFFICER ISSUED QUERY LETTER ON 17/10/2012 ON BOTH THE ISSUES IN ITEM NO. 3,4 AN D 8, WHICH WAS REPLIED BY THE ASSESSEE VIDE LETTER DATED 19/11/201 2 AT ITEM NO. 3 AND 8. THUS, THE ASSESSING OFFICER MADE DETAILED ENQUIRY ON BOTH THE ISSUES AND NO ADVERSE INFERENCE HAD BEEN DRAWN BY HIM. FURT HER BOTH THE ISSUES I.E. AGGREGATE ANNUAL RECEIPTS AND DEPRECIAT ION ARE ALSO COVERED IN FAVOUR OF THE ASSESSEE AS VARIOUS ITATS AS WELL AS HON'BLE HIGH COURTS HAVE HELD THAT OTHER RECEIPTS, WHICH ARE NOT DIRECTLY RELATED WITH THE RECEIPTS OF THE INSTITUTION/TRUST, ARE NOT PART OF AGGREGATE ANNUAL RECEIPTS. ON DEPRECIATION ALSO, VARIOUS ITATS AND HO N'BLE HIGH COURTS HAVE HELD THAT THE INCOME OF THE TRUST IS TO BE CALC ULATED AS PER ACT. THE DEPRECIATION IS ALLOWABLE EVEN THE ASSESSEE HAD A PPLIED ITS RECEIPTS AGAINST THE ASSETS WHICH SEEMS TO BE DOUBLE DEDUCTI ON TO THE ASSESSING OFFICER BUT VARIOUS COURTS HAS DECIDED THAT THE DEP RECIATION ON ASSETS IS ALLOWABLE. NOW THE LAW HAS BEEN AMENDED ON THIS ISSUE BUT WHICH IS OPERATIVE PROSPECTIVELY. THE CASE LAWS RELIED BY THE ASSESSEE ARE SQUARELY APPLICABLE. WE FIND THAT THE ASSESSING OFF ICER HAS FORMED ONE OF THE VIEW BUT THE LD CIT(EXEMPTION) HAS FORMED ANOT HER VIEW ON SAME FACTS AND CIRCUMSTANCES, THEREFORE, CHANGE OF OPINI ON IS NOT PERMISSIBLE 17 ITA NO. 487/JP/2015 M/S BABERWAD SHIKSHA SAMITI VS CIT(E) UNDER THE LAW. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD CIT(EXEMPTION) PASSED U/S 263 OF THE ACT. 6. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12/02/2016. SD/- SD/- YFYR DQEKJ VH-VKJ-EHUK (LALIET KUMAR) (T.R. MEENA) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 12 TH FEBRUARY, 2016 RANJAN* VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- M/S BABERWAD SHIKSHA SAMITI, DAUSA. 2. IZR;FKHZ @ THE RESPONDENT- THE CIT, (EXEMPTION),JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO.487/JP/2015) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR