DCIT, Circle-1(1), Sambalpur, Sambalpur V. Roshni Vihar, Sambalpur

ITA 496/CTK/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7224 (ITAT-CUTTACK)
• Duration Of Justice: 2 year(s) 1 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 19-01-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 17-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A C ROUT
• Assessee Lawyers: PAWAN KUMAR AGRAWAL
• Keywords: Capital asset; Depreciation; Charitable institution; Corroborative evidences; Capital expenditure
• Section: 143(3); 12A; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK SMC BENCH, CUTTACK BEFORE SHRI N.S SAINI, ACCOUNTANT MEMBER ITA NO.496/CTK/2014 ASSESSMENT YEAR : 2010 - 2011 DCIT, CIRCLE 1(1), SAMBALPUR. VS. ROSHNI VIHAR, C/O. ST. JOSEPH CONVENT HIGH SCHOOL, SAMBALPUR PAN/GIR NO. AABTR 2503 A (APPELLANT ) .. ( RESPONDENT ) C.O.NO.21/CTK/2015 (ARISING OUT OF ITA NO.496/CTK/2014) ASSESSMENT YEAR : 2010 - 2011 ROSHNI VIHAR, C/O. ST. JOSEPH CONVENT HIGH SCHOOL, SAMBALPUR VS. DCIT, CIRCLE 1(1), SAMBALPUR. PAN/GIR NO. AABTR 2503 A (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI PAWAN KUMAR AGRAWAL, AR REVENUE BY : SHRI A.C.ROUT , DR DATE OF HEARING : 1 9 /01/ 2017 DATE OF PRONOUNCEMENT : 19 /01/ 2017 O R D E R THIS IS AN APPEAL FILED BY THE REVENUE AND CROSS OBJECTION OF THE ASSESSEE AGA INST THE ORDER OF CIT(A) - II, BHUBANESWAR, DATED 9.10.2014 , FOR THE ASSESSMENT YEAR 2010 - 2011 . 2 ITA NO.496/CTK/2014 C.O.NO.21/CTK/2015 ASSESSMENT YEAR : 2010 - 2011 2. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS: 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS FAILED TO APPRECIATE THE FACT THAT THE AO HAS COMPUTED THE TAX LIABILITY AFTER COMPUTING THE INCOME U/S.11(4) AND THAT THE APPLICATION OUT OF SUCH INCOME WAS LESS THAN 85% AS REQUIRED U/S.11 FOR ALLOWING EXEMPTION. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS FAILED TO APPRECIATE THAT IT IS NOT PROFIT MOTIVE WHICH HAS BEEN CONSIDERED BUT IT IS THE INCOME OF BUSINESS UNDERTAKINGS AND ITS APPLICATION THAT HAS BEEN TAKEN INTO ACCOUNT. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE ROSHIN I VIHAR IS A SOCIETY REGISTERED U / S .12A OF THE I.T. ACT, 1961. RETURN OF INCOME FOR THE A.Y.2010 - 11 WAS FILED ON 30.10.2010 DECLARING TOTAL INCOME OF RS.NIL. THE CASE WAS ASSESSED U/S. 143(3) OF THE I.T. ACT, 1961 DETERMINING TOTAL INCOME OF RS.37,58,565 / - . THE ASSESSING OFFICER WHILE DETERMINING ITS INCOME, HAS OBSERVED THAT TH E ASSESSEE HAD SUBMITTED A RECEIPT AND EXPENDITURE ACCOUNT CLAIMING THE INCOME TO BE 'NIL'. INCOME AS DEFINE D U/S. 12, INCLUDES: - (I) A NY VOLU NTARY CONTRIBUTIONS (II) D ONATIONS . HE FURTHER OBSERVED THAT SECTION 11 FURTHER STATES IN 11(1) (A) THAT IT IS 'INCOME DERIVED FROM PROPERTY HELD UNDER TRUST, WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES AND IN 11 (4) THAT 'PROPERTY HELD UNDER TRUST' INCLUDES A BUSINESS UNDERTAKING SO HELD. HE OBSERVED THAT IN THE CASE OF THE ASSESSEE , THE INCOME OF THE ASSESSEE WAS ASSESSED AS 'A BUSINESS UNDERTAKING' AND AFTER CONSIDERING THE APPLICATION OF RS.23,64,570 - / - IN CAPITAL ASSETS THE INCOME WAS DETERMINED AT RS.37,58,565 - / - . SINCE THE APPLICATIO N OF RS.23,64,570 - / - WAS LESS THAN 85% OF THE INCOME ( RS.61,23,135 - / - ) OF THE BUSINESS UNDERTAKING, THE EXEMPTION AVAILABLE U/S. 3 ITA NO.496/CTK/2014 C.O.NO.21/CTK/2015 ASSESSMENT YEAR : 2010 - 2011 11 WAS TREATED AS FORFEITED AS THE APPLICATION WAS NOT QUALIFYING AND NO FORM 10 WAS SUBMITTED PRIOR TO THE LAST DATE FOR SUBM ISSION OF RETURN. ACCORDINGLY THE INCOME WAS DETERMINED AT RS.37,58,565 - / - AND WAS TAXED. 4. ON APPEAL, THE CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE BY OBSERVING AS UNDER: G. THE AO HAS MADE A REFERENCE TO SECTION 11(4) OF THE ACT BY STATING THAT THE CLAIM OF DEPRECIATION MADE TO THE EXTENT OF RS. 6,37,925 INDICATED THAT THE APPELLANT WAS COMPUTING THE INCOME FOR THE PURPOSES OF THE INCOME - TAX ACT (AND NOT INCOME AS ACCOUNTED F OR IN THE ACCOUNTS AS CONTEMPLATED U/S 11 OF THE ACT). THIS, ACCORDING TO THE AO SHOWED THAT THE APPELLANT'S* BUSINESS OF RUNNING SCHOOLS AND DERIVING INCOMES WAS INCIDENTAL TO ITS STATED OBJECTS (SINCE AMONG THESE OBJECTS IS THE IMPARTING OF EDUCATION). I T IS IN THIS CONTEXT THAT THE APPELLANT HA S ARGUED IN ITS GROUNDS THAT IT IS A SOLELY EDUCATIONAL ORGANIZATION AND THAT THE AO HAD ERRONEOUSLY CONCLUDED THAT ITS 'PRIMARY' EDUCATIONAL ACTIVITY IS AN 'INCIDENTAL' BUSINESS ACTIVITY U/S. 11(4A). I CONCUR WITH THE APPELLANT THAT THIS ARGUMENT AND CONCLUSION OF THE AO IS FAR - FETCHED BECAUSE HE NEEDED TO FURTHER SHOW THAT THE STATED 'BUSINESS' OF RUNNING SCHOOLS WAS CARRIED OUT BY THE APPELLANT WITH A PROFIT MOTIVE AND COMMERCIAL INTENT, AND THAT SUCH MOTIVE AND COMMERCIAL INTENT WAS NOT INCIDENTAL TO THE APPELLANT'S STATED OBJECTS, WHICH THE AO HAS FAILED TO DO. A SIMPLE CLAIM OF DEPRECIATION MAY INDICATE THAT THE APPELLANT WAS INTENDING TO COMPUTE ITS INCOME NOT IN THE NORMAL COMMERCIAL SENSE FROM THE BOOKS OF A CCOUNTS, BUT AS IS TO BE COMPUTED UNDER THE PROVISIONS OF THE INCOME TAX ACT. HOWEVER, THIS CANNOT, IN THE ABSENCE OF ANY OTHER SUPPORTING EVIDENCE, BE REGARDED AS CONCLUSIVE PROOF IN ITSELF OF ANY COMMERCIAL MOTIVE OR PROFIT PURPOSE/INTENT ON THE PART OF THE APPELLANT THAT ARE NON - INCIDENTAL TO ITS STATED OBJECTS. AS ALREADY STATED ABOVE, THE AO NEEDS TO GUARD AGAINST LOOSE EMPLOYMENT OF SEMANTICS. H. HOWEVER, IN THE ABOVE MATTER, THE APPELLANT'S CONCURRENT CLAIM OF DEPRECIATION TO THE EXTENT OF RS. 6 ,37,925 ASIDE FROM THE INCLUSION OF CAPITAL EXPENSES AS APPLIED TOWARDS CHARITABLE PURPOSES N EEDS TO BE ANALYZED. ONE QUESTION BEFORE THE COURTS IS WHETHER, WHEN A TRUST HAS CLAIMED CAPITAL EXPENDITURE ON ACQUISITION OF AN ASSET AS AN APPLICATION OF INCOME FOR THE PURPOSES OF CLAIMING EXEMPTION U/S. 11, DEPRECIATION ON SUCH ASSETS WAS ALSO ALLOWABLE AS A DEDUCTION IN COMPUTING ITS INCOME. WHILE THE BOMBAY, PUNJAB AND HARYANA AND DELHI HIGH COURTS HAVE TAKEN THE VIEW THAT DEPRECIATION WOULD BE SEPARATELY ALL OWABLE AS A DEDUCTION EVEN IN SUCH CASES WHERE THE 4 ITA NO.496/CTK/2014 C.O.NO.21/CTK/2015 ASSESSMENT YEAR : 2010 - 2011 CAPITAL EXPENDITURE HAD BEEN ALLOWED AS AN APPLICATION OF INCOME FOR CHARITABLE PURPOSES, THE KERALA HIGH COURT HAS TAKEN A CONTRARY VIEW, HOLDING THAT SUCH DEPRECIATION SHOULD BE ADDED BACK TO THE INCOME OF THE TRUST AS DISCLOSED IN ITS BOOKS OF ACCOUNTS. THE RELEVANT JUDICIAL RATIOS ARE AS UNDER: (A) CITVS. INSTITUTE OF BANKING PERSONNEL SELECTION 264 ITR 110 (BOM.) (B) CITVS. MARKET COMMITTEE, PIPLI 330 ITR 16 (PUNJ. & HAR.) (C) DITVS. VI SHWA JAGRITI MISSION 73 DTR (DEL) 195 (DEL.) (D) LISSIE MEDICAL INSTITUTIONS VS. CIT 76 DTR (KER) 372 THE HON'BLE KERALA HIGH COURT WENT BY THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF ESCORTS LTD. V. UNION OF INDIA [1993] 199 ITR 43/[1992] 65 TAXMAN 420 AND CONSIDERED THE SAME AS SQUARELY APPLICABLE IN THE CASE UNDER REFERENCE. I. THE CBDT, IN SPITE OF ITS CLARIFICATION VIDE ITS CIRCULAR NUMBER 5 - P(LXX - 6) DATED 19TH JUNE 1968 THAT FOR THE PURPOSES OF SUCH EXEMPTION U/S. 11, THE INCOME OF A TRUST IS TO BE TAKEN IN THE COMMERCIAL SENSE (THEREBY IMPLICITLY ALLOWING DEPRECIATION AS A SEPARATE CLAIM OF DEDUCTION), AND NOT AS COMPUTED UNDER THE PROVISIONS OF THE INCOME TAX ACT PUT FORWARD THE FOLLOWING CONTENTION BEFORE THE KERALA HIGH COURT THAT SEEMS TO HAVE APPEALED TO THE HON'BLE COURT TO A GREAT EXTENT IN ITS DECISION IN THE CASE OF LISSIE MEDICAL INSTITUTIONS VS. CIT 16 DTR (KER) 372: 'THE CBDT IS OF THE CONSIDERED VIEW THAT WHERE AN ASSESSEE HAS ACQUIRED AN ASSET, THROUGH APPLICA TION OF INCOME AND HAS ALSO CLAIMED THIS AMOUNT AS EXPENDITURE IN ITS INCOME AND EXPENDITURE ACCOUNT, DEPRECIATION ON SUCH ASSETS WOULD NOT BE ALLOWABLE TO THE ASSESSEE. SUCH NOTIONAL STATUTORY DEDUCTIONS LIKE DEPRECIATION, IF CLAIMED AS DEDUCTION WHILE CO MPUTING THE INCOME OF THE PROPERTY HELD UNDER TRUST UNDER THE RELEVANT HEAD OF INCOME, IS REQUIRED TO BE ADDED BACK WHILE COMPUTING THE INCOME FOR THE PURPOSE OF APPLICATION IN THE INCOME AND EXPENDITURE ACCOUNT. THIS WOULD IMPLY THAT THE CORRECT FIGURE OF SURPLUS FROM THE TRUST PROPERTY IS REFLECTED IN THE INCOME AND EXPENDITURE ACCOUNT OF THE TRUST TO DETERMINE THE INCOME FOR THE PURPOSES OF APPLICATION UNDER SECTION 11 OF THE INCOME TAX ACT. THIS WOULD REDUCE THE POSSIBILITY OF REVENUE LEAKAGE WHICH MAY BE A CAUSE FOR GENERATION OF BLACK MONEY. J. THE ARGUMENT IN THIS REGARD IS AS FOLLOWS. IF EXPENDITURE ON ACQUISITION OF ASSETS IS TREATED AS APPLICATION OF INCOME FOR CHARI TABLE PURPOSES UNDER SECTION 11(1 )(A) AND IF A CLAIM OF DEPRECIATION ON THE VALUE OF SUCH ASSETS IS CONCURRENTLY MADE, THEN IN ORDER TO REFLECT THE TRUE INCOME TO BE AVAILABLE FOR APPLICATION FOR CHARITABLE PURPOSES, THE APPELLANT SHOULD HAVE WRITTEN BACK IN THE ACCOUNTS THE DEPRECIATION AMOUNT TO FORM PART OF THE INCOME TO BE ACCOUNTED FOR APPLICATION FOR CHARITABLE PURPOSES. THIS HAS OBVIOUSLY NOT BEEN DONE AND SO MUCH SO, THE INCOME WHICH SHOULD BE AVAILABLE FOR APPLICATION FOR CHARITABLE PURPOSES HAS BEEN REDUCED BY THE DEPRECIATION AMOUNT, WHICH 5 ITA NO.496/CTK/2014 C.O.NO.21/CTK/2015 ASSESSMENT YEAR : 2010 - 2011 DENOUEMENT IS NOT PERMISSIBLE UNDER S ECTION 1 L(L)(A) OF THE ACT. IN FACT, THE NET EFFECT WILL BE THAT AFTER WRITING OFF FULL VALUE OF THE CAPITAL EXPENDITURE ON ACQUISITION OF ASSETS AS APPLICATION OF INCOME FOR CHARITABLE PURPOSES AND WHEN THE ASSESSEE AGAIN CLAIMS THE SAME AMOUNT IN THE FO RM OF DEPRECIATION, SUCH NOTIONAL CLAIM BECOMES CASH SURPLUS AVAILABLE WITH THE ASSESSEE, WHICH GOES OUTSIDE THE BOOKS OF ACCOUNTS OF THE TRUST UNLESS IT IS WRITTEN BACK WHICH IS NOT DONE. IT IS NOT PERMISSIBLE FOR A CHARITABLE INSTITUTION TO GENERATE INCO ME OUTSIDE THE BOOKS IN THIS FASHION. IN OTHER WORDS, WHEN ACQUISITION OF ASSETS IS TREATED AS APPLICATION OF INCOME FOR CHARITABLE PURPOSES, THE VALUE OF ASSETS STANDS FULLY WRITTEN OFF, AND OVER AND ABOVE, IF DEPRECIATION IS ALLOWED, THE SAME WILL RESULT IN DOUBLE DEDUCTION OF CAPITAL EXPENDITURE LEADING TO VIOLATION OF THE PROVISIONS OF SECTION 11(1) WHICH REDUCES AVAILABILITY OF ACTUAL INCOME FOR CHARITABLE PURPOSES. K. IT IS THEREFORE THOUGHT PROPER TO FOLLOW THE RATIOS (SUPRA) OF THE HON'BLE SUPREME COURT AND THE KERALA HIGH COURT THAT IN LINE WITH THE CBDT'S CURRENT THINKING ON THE ISSUE. THE APPELLANT HAS NOT EXPRESSLY SHOWN THAT THE DEPRECIATION CLAIM MADE DOES NOT RELATE TO THE CAPITAL EXPENSES APPLIED TOWARDS CHARITABLE PURPOSES DURING THE F.Y. 2 009 - 10. THIS MEANS THAT THE APPELLANT MAY HAVE AVAILED OF A DOUBLE DEDUCTION TO THE EXTENT OF THE CLAIM OF DEPRECIATION MADE OF RS.J5,3 7,925. IN SUM, WHEN THE APPELLANT HAS CLAIMED EXPEND ITURE FOR ACQUISITION OF ASSETS/ APPLICATION OF INCOME FOR CHARITABL E PURPOSES, THEN IT CANNOT SIMULTANEOUSLY CLAIM DEPRECIATION IN THE COMPUTATION OF INCOME. L. HOWEVER, THE APPELLANT HAS DURING THE APPELLATE PROCEEDINGS PRODUCED DOCUMENTARY EVIDENCES TO SHOW THAT THE DEPRECIATION CLAIMED OF RS. 6,37,925 DO NOT RELATE TO THE CAPITAL EXPENSES MADE DURING THE IMPUGNED F.Y. 2009 - 10 BUT RELATE TO INVESTMENTS MADE IN PRECEDING FINANCIAL YEARS. THE CAPITAL EXPENSES INCURRED DURING THE YEAR ARE TOWARDS THE ONGOING CONSTRUCTION OF SCHOOL BUILDINGS ON WHICH DEPRECIATION HAS NOT BE EN CLAIMED. UNDER THESE CIRCUMSTANCES, IT APPEARS THAT THE CLAIM OF DEPRECIATION MADE BY THE APPELLANT MAY NOT RESULT IN DOUBLE DEDUCTION OF THE SAME AMOUNT. M. THE APPELLANT HAS PROVIDE T HE ADDITIONAL COMPUTATIONS TO PROVE THAT (WITHOUT PREJUDICE TO ITS ABOVE STANDS) EVEN IF IN THE EXTREME CAUSE DEPRECIATION CLAIMED IN THE A.Y. 2010 - 11 ON THE INVESTMENTS ON ASSETS MADE FROM 01.04.2007 UNTIL 31.03.2010 IS CONSIDERED FOR DISALLOWANCE DURING THE A.Y. 2010 - 11, SUCH DEPRECIATION WOULD BE LOWER THAN THE DEFICIT OF 4,27,677/ - ARISING OUT OF COMPUTATIONS MADE U/S 11(1 )(A). THIS WOULD MEAN THAT THE APPELLANT COULD STILL NOT BE HELD, EVEN IN SUCH AN EXTREME SCENARIO, AS HAVING VIOLATED THE CONDITIONS OF SECTION 11. A. THE APPELLANT SHOWED THAT THE OPENING BALANCE OF THE CAPITAL INVESTMENTS BEING FIXED ASSETS OF THE INSTITUTION STOOD AT RS. 1,03,99,665 ON 01.04.2007 FROM WHICH DATE REGISTRATION U/S 12A 6 ITA NO.496/CTK/2014 C.O.NO.21/CTK/2015 ASSESSMENT YEAR : 2010 - 2011 BECAME EFFECTIVE. PRIOR TO THIS DATE EXEMPTION WAS BEING CLAIMED U/S 10(23C((IIIAD) OF THE ACT THAT DID NOT ALLOW THE CLAIM OF CAPITAL EXPENSES AS A DEDUCTION. THE CAPITAL EXPENDITURE CLAIMED IN THE FOLLOWING F.Y. 2007 - 08 AND F.Y. 2008 - 09 WERE RS. 33,68,967 AND RS. 8,74,727 RESPECTIVELY, TOTALING RS. 42,43,684. B. NO DEPRECIATION WAS CLAIMED IN F.Y. 2007 - 08 BUT AN AMOUNT OF RS. 4,28,368 WAS CLAIMED AS DEPRECIATION IN F.Y. 2008 - 09 @ 10% OF THE TOTAL CAPITAL INVESTMENTS OF RS. 42,43,684 MADE DURING THE F.Y. 2007 - 08 AND F.Y. 2008 - 09. THIS WOULD RESULT IN A WDV OF RS. 3 8,19,316 AS ON 01.04.2010 WHICH MEAN AN ALLOWABLE CLAIM OF DEPRECIATION @ 10% OF RS. 3,81,932 FOR THE IMPUGNED F.Y. 20 09 - 10. THIS WOULD MEAN THAT THE TO TAL DEPRECIATION CLAIMED ON ANY CAPITAL ADDITIONS MADE POST 01.04.2007 WOULD BE LOWER THAN THE DEFICIT O F 4,27,677/ - ARISING OUT OF COMPUTATIONS MADE U/S 11(1 )(A). C. IN ANOTHER (WORST CASE) SCENARIO, IT WAS POINTED OUT BY THE APPELLANT THAT THE TOTAL DEPRECIATION CLAIMED BY THE APPELLANT WAS NOT RS. 6,37,925 AS STATED BY THE AO BUT A HIGHER AMOUNT OF RS. 10, 9J65JL(RS. 6,37,925 CLAIMED IN RESPECT OF ST. JOSEPH'S CONVENT HIGHER SECONDARY SCHOOL AND RS. 4,55,732 CLAIMED IN RESPECT OF ST. JOSEPH'S CONVENT SCHOOL, BONAIGARH AS DULY RECORDED IN ITS STATEMENTS OF ACCOUNTS). THIS WAS SHOWN TO BE THE TOTAL OF RS. 6,7 9,989 BEING THE DEPRECIATION CLAIMED ON THE WDVS AS ON 31.03.2010 OF CAPITAL ASSETS STANDING IN THE ACCOUNTS OF THE APPELLANT AS ON 01.04.2007 AND RS. 4,13,668 BEING THE DEPRECIATION THAT COULD BE AND WAS CLAIMED ON ALL ADDITIONS TO CAPITAL ASSETS BETWEEN 01.04.2007 TO 31.03.2010. THIS LATTER AMOUNT OF RS. 4,13,668 WAS HIGHER THAN THE CLAIM OF RS. 3,81,932 COMPUTED @ 10% ON THE CAPITAL ADDITIONS MADE IN FROM 01.04.2007 TO 31.03.2010 [NB: IN REALITY, THESE INCLUDE ONLY THE ADDITIONS MADE FROM 01.04.2007 TO 3 1.03.2009, SINCE, FOR THE F.Y. 2009 - 10, THE CAPITAL ADDITIONS RELATED TO ONGOING BUILDING CONSTRUCTIONS ON WHICH NO DEPRECIATION WAS CLAIMED] BUT LOWER THAN THE DEFICIT OF 4,27,677/ - ARISING OUT OF COMPUTATIONS MADE U/S 1 L(L)(A). D. CONSEQUENTLY, EVEN IF THE DEPRECIATION CLAIMS FOR F.YRS 2007 - 08 AND 2008 - 09 WERE DISALLOWED UNDER ANY PRETEXT OR ARGUMENT, THE APPELLANT WOULD STILL NOT FALL FOUL OF THE PROVISIONS OF SECTION 11 R.W.S 12A OF THE INCOME - TAX ACT. N. THESE ARGUMENTS OF THE APPELLANT ARE ACCEPTED . IN ANY CASE, NO DEPRECIATION IN RESPECT OF THE CAPITAL ADDITIONS MADE DURING THE F.Y. 2009 - 10 HAVE BEEN CLAIMED BY THE APPELLANT, ENTAILING DOUBLE DEDUCTION OF ANY AMOUNT. 7 ITA NO.496/CTK/2014 C.O.NO.21/CTK/2015 ASSESSMENT YEAR : 2010 - 2011 O. THE ABOVE COMPUTATIONS ALSO SHOW THAT THERE IS A DOUBLE DEDUCTION CLAIM MADE O F RS. 87,472 BY WAY OF DEPRECIATION DURING THE F.Y. 2008 - 09 (RELATING TO THE A.Y. 2009 - 10) SINCE CAPITAL EXPENSES TO THE EXTENT OF RS. 8,74,717 HAVE BEEN SIMULTANEOUSLY CLAIMED IN THAT FINANCIAL YEAR. IN VIEW OF THE DECISIONS ON THE HON'BLE KERALA HIGH COU RT IN THE CASE OF LISSIE MEDICAL INSTITUTIONS VS. CIT 16 DTR (KER) 372 AND OF THE HON'BLE SUPREME COURT IN THE CASE OF ESCORTS LTD. V. UNION OF INDIA [1993] 199 ITR 43/[1992] 65 TAXMAN 420 AND THE CBDT'S CURRENT THINKING ON THE ISSUE, NECESSARY STEPS MAY B E TAKEN BY THE ASSESSING OFFICER TO .EXAMINE THE TAXABILITY OF THIS AMOUNT IN THE A.Y. 2009 - 10. 5. I HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. THE DISPUTE IN THIS APPEAL LIES IN A NARROW COMPASS. ACCORDING TO THE ASSESSEE, THE EXPENSES INCURRED FOR RUNNING EDUCATIONAL INSTITUTION IS TO BE TREATED AS APPLICATION FOR CHARITABLE PURPOSES. 6. ON THE OTHER HAND, AS PER THE REVENUE, THE EXPENSES FOR RUNNING THE EDUCATIONAL INSTITUTION IS TO BE REDUCED FROM THE RECEIPT OF EDUCATIONAL INSTITUTION AND THE NET INCOME SO ARRIVED AT SHOULD BE TREA TED AS INCOME OF THE ASSESSEE ON WHICH 85% IS TO BE UTILIZED FOR CHARITABLE PURPOSE FOR GETTING FULL EXEMPTION U/S.11 OF THE ACT. 7. ON APPEAL, LD CIT(A) AGREED WITH THE VIEW OF THE ASSESSEE. 8. I FIND THAT THE CIT(A) HAS OBSERVED THAT ONE OF THE OBJECTS OF THE ASSESSEE TRUST WAS TO IMPART EDUCATION. THEREFORE, THE EXPENSES INCURRED FOR RUNNING THE EDUCATIONAL INSTITUTION WAS APPLICATION OF THOSE AMOUNTS FOR THE OBJECT OF IMPARTING EDUCATION. 8 ITA NO.496/CTK/2014 C.O.NO.21/CTK/2015 ASSESSMENT YEAR : 2010 - 2011 9. LD D.R. COULD NOT BRING ANY MATERIAL BEFORE ME TO SHOW THAT THE ABOVE FINDINGS OF LD CIT(A) WAS NOT CORRECT. 10. IN VIEW OF THE SAME, I DO NOT FIND ANY ERROR IN THE ORDER OF THE CIT(A) ON THIS COUNT. IT IS NOT IN DISPUTE THAT ONE OF THE OBJECTS OF THE ASSESEE CHARITABLE TRUST WAS TO IMPART EDUCATION AND ALL THE EXPENSES IN QUESTION WERE INCURRED FOR FURTHERANCE OF THIS OBJECT OF THE ASSESSEE. THEREFORE, THE EXPENSES SO INCURRED IS TO BE TREATED AS APPLICATION TOWARDS THE OBJECTS OF THE ASSESSEE TRUST. I, THE REFORE, DISMISS THE GROUNDS OF APPEAL OF THE REVENUE. 11 . THE CROSS OBJECTION FILED BY THE ASSESSEE IS IN SUPPORT OF THE ORDER OF THE CIT(A). SIN CE, I HAVE DISMISSED THE APPEAL OF THE REVENUE, CROSS OBJECTION FIL ED BY THE ASSESSEE HAS BECOME INFRUCTUOUS A ND HENCE, DISMISSED. 12 . IN THE RESULT, APPEAL OF THE REVENUE AND CR OSS OBJECTION OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCE D IN THE OPEN COURT ON 1 9 / 01/2017 IN THE PRESENCE OF PARTIES. SD/ - ( N.S SAINI) A CCOUNTANT MEMBER CUTTACK; DATED 19 /01 /2017 B.K.PARIDA, SPS 9 ITA NO.496/CTK/2014 C.O.NO.21/CTK/2015 ASSESSMENT YEAR : 2010 - 2011 COPY OF THE ORDER FORWARDED TO : BY ORDER, ASST.REGISTRAR, ITAT, CUTTACK 1. THE APPELLANT : DCIT, CIRCLE 1(1), SAMBALPUR. 2. THE RESPONDENT. ROSHNI VIHAR , C/O. ST. JOSEPH CONVENT HIGH SCHOOL, SAMBALPUR 3. THE CIT(A) - II, BHUBANESWAR 4. CIT , SAMBALPUR 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//