Sri Satya Sai Educational and Service Society, Srikakulam V. Income Tax Officer, Exemption Ward, Visakhapatnam

ITA 5/VIZ/2022

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 4035 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 7 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2019-2020
• Appeal Filed On: 12-01-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation
• Section: 32; 11; 12A; 143(1)

Judgement Text

आयकरअपीऱीयअधिकरण, विशाखापटणमपीठ, विशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM श्रीद ु व्ि ू रुआरएऱरेड्डी, न्याययकसदस्यएिंश्रीएसबाऱाक ृ ष्णन, ऱेखासदस्यकेसमक्ष BEFORE SHRI DUVVURU RL REDDY, HON’BLE JUDICIAL MEMBER & SHRI S BALAKRISHNAN, HON’BLE ACCOUNTANT MEMBER आयकरअऩीऱसं./ I.T.A. No.5/Viz/2022 (ननधधारणवषा/ Assessment Year :2019-20) Sri Satya Sai Educational and Service Society, Srikakulam. PAN: AAJTS 0421 Q Vs. Income Tax Officer, Exemption Ward, Visakhapatnam. (अऩीऱधथी/ Appellant) (प्रत्यथी/ Respondent) अऩीऱधथीकीओरसे/ Appellant by : Sri GVN Hari, Advocate प्रत्यधथीकीओरसे/ Respondent by : Sri ON Hari Prasadarao, Sr AR स ु नवधईकीतधरीख/ Date of Hearing : 14/07/2022 घोषणधकीतधरीख/Date of Pronouncement : 23/08/2022 O R D E R PER S. BALAKRISHNAN, Accountant Member : This appeal filed by the assessee is against the order of the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [Ld. CIT(A)] vide DIN and order No. ITBA/NFAC/S/250/2021-22/1037639463(1), dated 2 9/12/2021arising out of the order passed U/s. 143(1) of the Income Tax Act, 1961 [“the Act”] for the AY 2019-20. 2. Brief facts of the case are that the assessee is a registered society under the Societies Registration Act established for charitable purpose filed its return of income disclosing voluntary contribution towards corpus amounting to Rs. 52,70,000/-. The return was processed summarily u/s. 143(1) of the Act by disallowing the exemption u/s. 11 of the Act. The total income determined in the intimation was at Rs. 57,56,182/- and also depreciation of Rs. 3,80,813/- was disallowed in the intimation. Aggrieved by the summary assessment, the assessee filed an appeal before the Ld. CIT(A), NFAC, Delhi. The Ld.CIT(A) dismissed the appeal in limine upholding the intimation u/s. 143(1). Aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before us. 3. The assessee has raised the following grounds of appeal: “1. The order of the Ld. CIT(A) is contrary to the f acts and also the law applicable to the f acts of the case. 2. The Ld. CIT(A) ought to have held that the adjustments made by CPC while processing the return of income were beyond the scope of intimation u/s. 143(1) of the Act. Without prejudice to the above 3 3. The Ld.CIT(A) is not justif ied in sustaining the adjustment of Rs. 47,20,000/- made towards disallowance of exemption claimed in respect of voluntary contributions forming corpus. 4. The Ld. CIT(a) is not justif ied in sustaining the adjustment of Rs. 5,50,000 made towards disallowance of exemption claimed towards voluntary contributions f orming other than corpus but given f or specif ic purposes. 5. The Ld. CIT(A) is not justif ied in sustaining the adjustment made towards disallowance of expenditure of Rs. 3,82,340/-. 6. Any other grounds may be urged at the time of hearing.” 4. The Learned Authorized Representative [Ld. AR] submitted that the assessee is a registered society under Societies Registration Act w.e.f 04/05/2015. The Ld. AR relied on the decision of the jurisdictional Bench in ITA No.101/Viz/2015 (AY: 2010-11), dated 22/11/2017 in the case of Touching Heart Ministries vs. ITO, wherein it was held even though the society does not have 12A registration any amount received as corpus shall not be treated as income U/s. 2(24)(iia) of the Act. The Ld. AR submitted that an amount of Rs. 47.20 lakhs received for construction of building and Rs. 5.50 lakhs was received towards plantation expenses and disclosed in the Schedule-VC (Voluntary Contributions) in corpus fund donation received by the assessee while filing the ITR-7 for the AY 2019-20. The Ld. AR therefore pleaded that they shall not be treated as income of the assessee for the assessment year under consideration. 4 Per contra, the Ld. DR relied on the orders of the Ld. Revenue Authorities. 5. We have heard both the sides and perused the material available on record and also the orders of the Ld. Revenue Authorities. The admitted facts are that the assessee has received voluntary contribution towards corpus for the construction of building for Rs. 47,20,000/- and for plantation expenses Rs. 5,50,000/-. Disclosure was also rightly made while filing the return of income for the AY 2019-20. However, while processing the return summarily, due to non-availability of Registration u/s. 12A of the Act, these contributions were treated as income of the assessee. Reliance placed by the Ld. AR on the jurisdictional coordinate Bench in ITA No. 101/Viz/2015 (supra) wherein vide para 6.2 of the order the Tribunal has held as follows: “6.2. In the instant case, the donations were received for specif ic purpose for acquiring fixed assets. This is evidenced by the letters placed before us from the donors. The funds are not freely available to the assessee society, for utilizing its objectives other than acquiring specified assets. The entire amount received for acquiring the fixed assets was utilized by the assessee and there are no surplus funds available to the assessee. The above facts are not disputed by the Ld. DR. the fact that the amount was utilized was evidenced by the Balance Sheet, thus the facts of the case is squarely covered by the decision of the Coordinate Bench of Bangalore in the case of Vokkalingara Sangha Cited supra, wherein the coordinate Bench held that 5 contributions received for specific purpose cannot be regarded as income U/s. 2(24)(iia) of the Act. Respectfully following the view taken by the ITAT, Bangalore, we hold that the donations received for specific purpose of acquiring the capital assets are tied up grants and cannot be treated as income U/s. 2(24)(iia) of the IT Act. Accordingly, we set aside the orders of the lower authorities and allow the appeal of the assessee.” 6. Further, it is also observed that the Ld. Revenue Authorities have not disputed the contributions received but denied the exemption only due to the fact that the assessee is not registered u/s. 12A of the Act. The observation of the Ld. CIT(A) in para 4.21 of his order that the assessee is not registered under any Law either as a Society or as a Trust is not factually correct. The Ld. AR has produced a copy of the Registration Certificate duly registering the assessee-society under the Societies Registration Act vide Registration No.464 of 1995. Respectfully following the decision of the jurisdictional Coordinate Bench of the Tribunal, we hold that contributions received for a specific purpose cannot be treated as income u/s. 2(24)(iia) of the Act. Accordingly, we set-aside the order of the Ld. CIT(A) on Grounds no.3 and 4 raised by the assessee and these grounds raised by the assessee are allowed. 7. With respect to Ground No.5, the Ld. CIT(A) has disallowed the depreciation and bank charges aggregating to Rs. 3,82,340/- 6 on the basis that the assessee is not entitled to the benefit of section 32 of the Act. The Ld. AR relied on the section 11(6) of the Act stating that where any deduction has been claimed for the acquisition of the asset, no deduction is allowable in the form of depreciation for the same asset. The Ld. AR in his submissions as given in page 86 of the paper book invited our attention to the fact that the depreciation has been claimed on the cost of assets which are neither claimed as a deduction nor as an allowance either in the same year or in any previous year. In view of the above submissions, we find that since the asset has not been claimed as a deduction or exemption in the same year or in any previous year, the depreciation claimed by the assessee should be allowed as expenditure u/s. 32 of the Act. Therefore, we are of the considered view that the assessee is eligible to claim depreciation and bank charges aggregating to Rs. 3,82,340/- as revenue expenditure and allow the same. Accordingly, Ground no.5 raised by the assessee is allowed. 8. With respect to Ground No.2, since the appeal has been adjudicated on merits, this ground raised by the assessee is disposed off accordingly. 7 9. Grounds No.1 and 6 are general in nature and need not be adjudicated. 10. In the result, appeal filed by the assessee is allowed. Pronounced in the open Court on the 23 rd August, 2022. Sd/- Sd/- (द ु व्ि ू रुआर.एऱरेड्डी) (एसबाऱाक ृ ष्णन) (DUVVURU RL REDDY) (S.BALAKRISHNAN) न्याययकसदस्य/JUDICIAL MEMBER ऱेखासदस्य/ACCOUNTANT MEMBER Dated : 23.08.2022 OKK - SPS आदेशकीप्रतिलिपिअग्रेपिि/Copy of the order forwarded to:- 1. ननधधाररती/ The Assessee–Sri Satya Sai Educational and Service Society, Ramakrishnapuram Village, Gurudas Puram Panchayat, Palasa Mandal, Srikakulam. 2. रधजस्व/The Revenue –Income Tax Officer, Exemption Ward, Infinity Towers, Sankaramatham Road, Visakhapatnam. 3. The Principal Commissioner of Income Tax, 4. आयकरआय ु क्त (अऩीऱ)/ The Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi. 5. ववभधगीयप्रनतननधध, आयकरअऩीऱीयअधधकरण, ववशधखधऩटणम/ DR,ITAT, Visakhapatnam 6. गधर्ाफ़धईऱ / Guard file आदेशधन ु सधर / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam