ADIT (E) I(2), MUMBAI V. SACRED HEART SCHOOL TRUST, MUMBAI

ITA 6643/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8918 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2008-2009
• Appeal Filed On: 04-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V KRISHNAMOORTHY
• Keywords: Depreciation; Benefit of exemption
• Section: 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI BEFORE SHRI DINESH KUMAR AGARWAL (J.M.) AND SHRI N.K. BILLAIYA (A.M.) ITA NO. 6643/MUM /2011 ASSESSMENT YEAR : 2008-09 ASSTT. DIRECTOR OF INCOME-TAX (E)-1(2), ROOM NO. 504, PIRAMAL CHAMBERS, 5 TH FLOOR, PAREL, MUMBAI 400 012. VS. SACRED HEART SCHOOL TRUST, RHS, 1/12, SECTOR VI, VASHI, NAVI MUMBAI - 400 703. PAN AABT5656B (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI DEEPAK TRALSHAWALA DEPARTMENT BY : SHRI V. KRISHNAMOORTHY DATE OF HEARING 04-9-2012 DATE OF PRONOUNCEMENT 12-9-2012 O R D E R PER DINESH KUMAR AGARWAL, J.M. THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED A GAINST THE ORDER DTD. 18-7-2011PASSED BY THE LD. CIT(A) 1,MUMBAI F OR A.Y. 2008-09. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE TRUST IS AN EDUCATIONAL INSTITUTE, FILED RETURN OF INCOME DECLA RING TAXABLE INCOME AT RS. NIL. DURING THE COURSE OF ASSESSMENT, IT WAS INTER ALIA OBSERVED BY THE A.O. THAT THE ASSESSEE IS TAKING DONATIONS FROM THE STUDENTS. ACCORDING TO THE A.O. THE SAME IS NOT ALLOWABLE IN THE CASE OF INSTITUTION CLAIMING THE BENEFIT OF EXEMPTION U/S 11 OF THE INC OME TAX ACT, 1961 ITA NO. 6643/MUM/2011 2 (THE ACT). THE ASSESSEE WAS ASKED TO JUSTIFY THE A CCEPTANCE OF DONATION FROM THE STUDENTS. IN RESPONSE, IT WAS SUBMITTED B Y THE ASSESSEE THAT THE DONATIONS ARE RECEIVED FOR THE EXTENSION OF THE RENOVATION OF THE EXISTING SCHOOL BUILDING AND THE ASSESSEE HAS FULLY COMPLIED WITH ALL THE CONDITIONS LAID DOWN IN SECTION 11 TO 13 OF THE ACT . HOWEVER, THE A.O. FOLLOWING THE DECISION OF THE TRIBUNAL IN VODITHALA EDUCATION SOCIETY VS. ADIT (EXEM) (2008) 20 SOT 353 (HYD.) WHEREIN IT HAS BEEN HELD THAT WHEN THE ASSESSEE COLLECTS MONEY OVER AND ABOVE TH E FEES PRESCRIBED BY THE GOVERNMENT, IT AMOUNTS TO SELLING THE EDUCATION AND THE ELEMENT OF CHARITY NO LONGER REMAIN IN THE ACTIVITIES OF THE A SSESSEE NOT ELIGIBLE FOR EXEMPTION, ADDED THE AMOUNT OF DONATION TOWARDS ES TABLISHMENT AND DEVELOPMENT FUND RS. 5,41,500/- TO THE TOTAL INCOME OF THE ASSESSEE. APART FROM THIS, THE A.O. FURTHER OBSERVED THAT THE ASSESSEE HAS CLAIMED DEPRECIATION OF RS. 25,86,438/- ON THE ASSETS, COST OF WHICH HAS ALREADY BEEN CLAIMED TO BE APPLICATION OF INCOME TOWARDS OB JECT OF THE TRUST, THE A.O. FOLLOWING THE RATIO OF THE JUDGMENT IN THE CAS E OF ESCORTS LTD. VS. UNION OF INDIA (1993)199 ITR 43 (SC) AND J.K. SYNTH ETICS LTD. V. UNION OF INDIA (1992) 65 TAXMAN 420 (SC) HELD THAT DEDUCTION CLAIMED BY THE ASSESSEE AMOUNTS TO CLAIMING DOUBLE DEDUCTION, WHIC H IS NOT ALLOWABLE AND ACCORDINGLY COMPUTED THE ASSESSMENT AT AN INCOM E OF RS.62,07,160/- VIDE ORDER DATED 29.12.2010 PASSED U /S.143(3) OF THE ACT. ON APPEAL THE LD. CIT(A) ON THE ISSUE OF ADDI TION OF DONATIONS RS. 5,41,500/- WHILE DISTINGUISHING THE DECISION OF THE TRIBUNAL IN THE CASE ITA NO. 6643/MUM/2011 3 OF VODITHALA EDUCATION SOCIETY (SUPRA) HELD THAT TH E DONATION RECEIVED BY THE ASSESSEE HAS BEEN UTILISED FOR THE PURPOSE OF S OCIETY AND HAS NOT BEEN UTILISED BY ANY OF THE TRUSTEES, THEREFORE, TH E A.O. WAS NOT JUSTIFIED IN NOT ALLOWING THE EXEMPTION TO THE APPELLANT. ON THE ISSUE OF DISALLOWANCE OF DEPRECIATION VIS--VIS DOUBLE DEDUC TION, THE LD. CIT(A) DISMISSED THE ASSESSEES GROUND BEING WITHDRAWN BY THE ASSESSEE. 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE REVENUE IS IN APPEAL BEFORE US TAKING THE FOLLOWING GROUNDS OF AP PEAL:- 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) WAS RIGHT IN DIRECTING TO ALLOW THE DEDUCTION BENEFIT OF EXEMPTI ON U/S 11 OF THE I.T. ACT WHILE THE ASSESSEE HAS VIOLATED THE CONDITION F OR CLAIMING THE BENEFIT OF EXEMPTION U/S 11. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, LD. CIT(A) WAS RIGHT IN IGNORING THE RATIO OF HONBLE SUPREME COURT JUDGMENTS IN THE CASE OF ESCORTS LTD. V/S UOI 199 I TR 43 WHEREIN HONBLE SUPREME COURT HAS HELD THAT DOUBLE DEDUCTIO N CANNOT BE PRESUMED IF THE SAME IS NOT SPECIFICALLY PROVIDED B Y LAW, IN ADDITION TO NORMAL DEDUCTION. 4. AT THE TIME OF HEARING THE LD. D.R. ON BOTH THE GROUNDS SUPPORTS THE ORDER OF THE A.O. 5. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSES SEE SUBMITS THAT ON THE ADDITION OF DONATION AMOUNT OF RS. 5,41,500/ -, THE SAME WAS RECEIVED FOR EXTENSION OF THE RENOVATION OF THE EXI STING SCHOOL BUILDING WHICH IS AS PER THE PROVISIONS OF SECTION 11 TO 13 OF THE ACT. THE LD. COUNSEL FOR THE ASSESSEE WHILE DISTINGUISHING THE D ECISION OF THE TRIBUNAL IN VODITHALA EDUCATION SOCIETY (SUPRA) SUB MITS THAT IN THAT ITA NO. 6643/MUM/2011 4 CASE IN PARA 14 OF THE ORDER IT HAS BEEN HELD THAT MATERIAL FOUND DURING THE COURSE OF SURVEY OPERATION FURTHER ESTABLISH TH AT THE MONEY COLLECTED OVER AND ABOVE THE PRESCRIBED FEES FOR ADMITTING A STUDENTS WAS PAID TO THE CHAIRMAN AND OTHER INTERESTED PERSONS OF THE SO CIETY. THEREFORE, IT HAS BEEN HELD THAT THERE IS A CLEAR VIOLATION OF TH E PROVISIONS OF SECTION 13(1)(C) OF THE INCOME TAX ACT AND, HENCE, THE ASSE SSEE IS NOT ENTITLED FOR EXEMPTION U/S 11 OF THE INCOME TAX ACT. HE FURTHER SUBMITS THAT IN THE ABSENCE OF SUCH MATERIAL ON RECORD, THE A.O. WAS NO T JUSTIFIED IN RELYING ON THE DECISION IN THE CASE OF VODITHALA EDUCATION SOCIETY (SUPRA). HE, THEREFORE, SUBMITS THAT IN VIEW OF THE FINDING RECO RDED BY THE LD. CIT(A) THAT THE AMOUNT OF DONATION IS NOT TAXABLE AND, HEN CE, THE ORDER PASSED BY THE LD. CIT(A) BE UPHELD. 6. ON THE ISSUE OF DISALLOWANCE OF DEPRECIATION VIS --VIS DOUBLE DEDUCTION, THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT BEFORE THE LD. CIT(A) THE ASSESSEE HAS WITHDRAWN THAT GROUND, THER EFORE, THE GROUND TAKEN BY THE REVENUE IS LIABLE TO BE REJECTED. 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FI ND THAT THE FACTS ARE NOT IN DISPUTE INASMUCH AS IT IS ALSO NOT IN DISPUT E THAT THE ASSESSEE HAS COLLECTED THE DONATIONS FROM THE STUDENTS FOR THE E XTENSION OF THE RENOVATION OF THE EXISTING SCHOOL BUILDING AS PER T HE OBJECTS OF THE TRUST/MEMORANDUM OF ASSOCIATION. ITA NO. 6643/MUM/2011 5 8. IN VODITHALA EDUCATION SOCIETY (SUPRA) IT HAS BE EN HELD (PARA 14) : ..EVEN OTHERWISE, THE MATERIAL AVAILABLE OF RECO RD, WHICH WAS FOUND DURING SURVEY OPERATION CLEARLY SHOWS THE RECEIPT O F MONEY OVER AND ABOVE THE FEES PRESCRIBED BY THE COMMITTEE CONSTITU TED BY THE GOVERNMENT, FOR ADMITTING THE STUDENTS UNDER THE MA NAGEMENT QUOTA. THE MATERIAL FOUND DURING THE COURSE OF SURVEY OPER ATION, FURTHER ESTABLISHES THAT THE MONEY COLLECTED OVER AND ABOVE THE PRESCRIBED FEE FOR ADMITTING STUDENTS WAS PAID TO THE CHAIRMAN AND OTHER INTERESTED PERSONS OF THE SOCIETY. THEREFORE, THERE IS A CLEA R VIOLATION OF THE PROVISIONS OF SECTION 13(1)(C) OF THE INCOME-TAX AC T. UNDER SECTION 13(1)(C) IF ANY PART OF INCOME OF THE INSTITUTION, IS USED OR APPLIED DIRECTLY/INDIRECTLY FOR THE BENEFIT OF A PERSON I.E ., THE FOUNDER OR ANY INTERESTED PERSON, AS REFERRED TO IN SECTION 13(3) OF THE INCOME-TAX ACT, THEN THE ASSESSEE SHALL NOT BE ENTITLED TO EXEMPTIO N UNDER SECTIONS 11 AND 12 OF THE INCOME-TAX ACT. THEREFORE, IN OUR OP INION, THE ASSESSEE IS NOT ENTITLED FOR EXEMPTION UNDER SECTION 11 OF THE INCOME-TAX ACT. 9. IN THE PRESENT CASE IT IS NOT THE CASE OF THE RE VENUE THAT THE DONATIONS RECEIVED FROM THE STUDENTS ARE NOT FOR TH E BENEFIT OF THE INSTITUTION OR THE SAME WAS PAID TO THE CHAIRMAN OR OTHER INTERESTED PERSONS OF THE SOCIETY FOR THEIR PERSONAL BENEFITS. IN THE ABSENCE THEREOF, WE ARE OF THE VIEW THAT THE DECISION RELIED ON BY T HE REVENUE IS DISTINGUISHABLE AND NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. 10. FOR THE REASONS AS DISCUSSED ABOVE, WE ARE OF T HE VIEW THAT THE A.O. WAS NOT JUSTIFIED IN MAKING THE ADDITION OF DO NATION OF RS. 5,41,500/- TO THE INCOME OF THE ASSESSEE WHICH WAS RIGHTLY DELETED BY THE LD. CIT(A). THE GROUND TAKEN BY THE REVENUE IS , THEREFORE, REJECTED. 11. AS REGARDS THE CLAIM OF DEPRECIATION VIS--VIS DOUBLE DEDUCTION, WE FIND MERIT IN THE PLEA OF THE LD. COUNSEL FOR THE A SSESSEE THAT THE SAME HAS BEEN WITHDRAWN BY THE ASSESSEE BEFORE THE LD. C IT(A), THEREFORE, THE ITA NO. 6643/MUM/2011 6 GROUND TAKEN BY THE REVENUE IS NOT MAINTAINABLE AND , HENCE, THE SAME IS REJECTED. 12. IN THE RESULT, REVENUES APPEAL STANDS DISMISSE D. ORDER PRONOUNCED ON 12 TH SEP. 2012 SD/- (N.K. BILLAIYA) ACCOUNTANT MEMBER SD/- (DINESH KUMAR AGARWAL) JUDICIAL MEMBER MUMBAI, DATED : 12-09-2012. RK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- 22, MUMBA I 4. COMMISSIONER OF INCOME TAX CENTRAL - 10 MUMBA I 5. DEPARTMENTAL REPRESENTATIVE, BENCH E, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI