ITO(Exemptions), Ahmedabad V. Chamunda Foundation, Ahmedabad

ITA 829/AHD/2015

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4462 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 1 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 17-08-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 09-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: CHHAJED AR SHRI JAGDISH
• Keywords: Capital asset; Invalid notice; Depreciation; Charitable institution; Maximum Marginal Rate; Retrospective amendment; Benefit of exemption; Capital expenditure; TDS; Set aside
• Section: 143(3); 5(2); 12A; 12AA; 32; 12; 11; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND MS. MADHUMITA ROY, JUDICIAL MEMBER SL. NOS. ITA NO(S)/CO NO(S) ASSESSMENT YEAR (S) APPEAL(S) BY APPELLANT VS. RESPONDENT APPELLANT RESPONDENT 1. 1071/AHD/2013 - CHAMUNDA FOUNDATION 8/182, SUN DRIVE PARK NR.ASIA SCHOOL DRIVE IN ROAD AHMEDABAD (ASSESSEE) PAN: AAATC8826G CIT GANDHINAGAR 2. 1072/AHD/2013 2009-10 -DO- ASSESSEE ACIT, GANDHINAGAR CIRCLE, GANDHINAGAR 3. CO 82/AHD/2015 (IN ITA 828/AHD/2015) 2010-11 -DO- ASSESSEE ITO (EXEMPTION) WARD-1 AHMEDABAD 4. ITA NO.829/AHD/2015 2011-12 ITO (EXEMPTION) WARD-1, AHMEDABAD ASSESSEE 5. CO 83/AHD/2015 (IN ITA 829/AHD/2015) 2011-12 ASSESSEE ITO (EXEMPTION) WARD-1, AHMEDABAD ASSESSEE BY : SHRI M.S. CHHAJED, AR REVENUE BY : SHRI JAGDISH, CIT-DR & SHRI NILAMDAS GUPTA, SR.DR / DATE OF HEARING 07/05/2019 / DATE OF PRONOUNCEMENT 31/05/2019 / O R D E R PER BENCH: THE CAPTIONED APPEALS AND CROSS OBJECTIONS HAVE BEE N FILED AT THE INSTANCE OF THE ASSESSEE AND REVENUE AGAINST THE SE PARATE ORDERS OF THE ITA NOS.1071 & 1072/AHD/2013, CO NO.82/AHD/15 ITA NO.829/AHD/15 (BY REVENUE) &CO 83/AHD/15 CHAMUNDA FOUNDATION VS. CIT/ACIT ASST.YEARS -2009-10, 2010-11, 2011 -12 - 2 - COMMISSIONER OF INCOME TAX AND COMMISSIONER OF INCO ME TAX (APPEALS), GANDHINAGAR [CIT(A) IN SHORT] VIDE APPEA L NO.CIT(A)/GNR/164 & 463/2011-12 & 2013-14 DATED 28/03/2013 15/02/2013 & 06/01/2015 RELEVANT TO ASSESSMENT YEA RS (AYS) 2009-10, 2010-11 & 2011-12. FIRST, WE TAKE UP ITA NO1071/AHD/2013 AN APPEAL BY THE ASSESSEE. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1) THE ORDER PASSED BY THE LD. CIT GANDHINAGAR IS AGAI NST LAW, EQUITY AND JUSTICE. 2) THE LD. CIT, GANDHINAGAR HAS ERRED IN LAW AND ON FA CTS IN CANCELLING REGISTRATION OF APPELLANT TRUST GRANTED U/S 12AA OF THE ACT WITH RETROSPECTIVE EFFECT FROM 27/04/2007. 3) THE LD.CIT GANDHINAGAR HAS ERRED IN LAW AND ON FACT S IN CONSIDERING THAT APPELLANT TRUST IS NOT CARRYING CHARITABLE ACT IVITIES DEFINED U/S 2(15) OF THE ACT. 4) THE APPELLANT CRAVES LEAVE TO ADD, ALTER, MODIFY OR AMEND ANY OR ALL GROUND OF APPEAL BEFORE FINAL HEARING. THE ASSESSEE IN THIS APPEAL HAS CHALLENGED THE CANC ELLATION ORDER OF THE LD. CIT FOR THE REGISTRATION CERTIFICATE GRANTED UN DER SECTION 12AA OF THE ACT. 2. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE I S A REGISTERED CHARITABLE TRUST U/S 12AA OF THE INCOME TAX ACT, 1961 (HERE-IN -AFTER REFERRED TO AS THE ACT) HAVING THE PRIMARY OBJECT OF PROVIDING E DUCATION. THE ASSESSEE-TRUST IS PROVIDING AN EDUCATION FACILITY, PARTICULARLY DEGREE ITA NOS.1071 & 1072/AHD/2013, CO NO.82/AHD/15 ITA NO.829/AHD/15 (BY REVENUE) &CO 83/AHD/15 CHAMUNDA FOUNDATION VS. CIT/ACIT ASST.YEARS -2009-10, 2010-11, 2011 -12 - 3 - COURSES OF MBA. THE ASSESSEE-TRUST IS AFFILIATED WI TH THE MANIPAL UNIVERSITY. DURING THE ASSESSMENT PROCEEDINGS FOR AY 2009-10, T HE AO FOUND THAT THE ASSESSEE IS NOT DOING ANY CHARITABLE ACTIVITY U NDER THE TRUST. ACCORDINGLY, THE AO ISSUED A LETTER FOR REJECTION O F REGISTRATION OF TRUST U/S 12AA OF THE ACT TO THE LD. CIT GANDHI NAGAR. FURTHER, THE LD. CIT ISSUED A SHOW-CAUSE NOTICE TO THE ASSESSEE FOR THE CANCELATION OF THE REGISTRATION GRANTED U/S 12AA OF THE ACT BY RECORDING THE REASONS AS DETAILED UNDER: 1) DURING THE ASSESSMENT PROCEEDING FOR THE AY 2009-10 , THE AO NOTICED THAT THE ASSESSEE COLLECTED THE FEES FROM T HE STUDENTS AMOUNTING TO RS. 5,06,55,100/-. 2) DURING THE ACADEMIC YEARS 2007-09, 2008-10, 2009-1 1, 2010-12, THE ASSESSEE NEITHER PROVIDED ANY FREE EDUCATION NO R ANY CONCESSION IN THE FEES EVEN TO THE DOWNTRODDEN OF T HE SOCIETY OR ANY OTHER DESERVING SECTION OF THE SOCIETY. THEREFO RE THE ASSESSEE IS ENGAGED IN THE BUSINESS ACTIVITY. 3) IN AY 2009-10 THE ASSESSEE HAS SHOWN A PROFIT IN TH E PROFIT & LOSS ACCOUNT AT RS. 1,88,26,808/- AGAINST THE GROSS RECE IPT OF RS. ITA NOS.1071 & 1072/AHD/2013, CO NO.82/AHD/15 ITA NO.829/AHD/15 (BY REVENUE) &CO 83/AHD/15 CHAMUNDA FOUNDATION VS. CIT/ACIT ASST.YEARS -2009-10, 2010-11, 2011 -12 - 4 - 5,92,48,759/- WHICH ALSO REFLECTS THAT THE ASSESSEE IS DOING BUSINESS ACTIVITIES. IN SPITE OF THE HUGE PROFIT, THE ASSESSEE NEITHER REDUCED THE FEES NOR PROVIDED CONCESSION TO THE STU DENTS. 4) ASSESSEE PURCHASED A PLOT OF LAND IN BANGALORE AMOU NTING TO RS. 6 CRORES TO EXPAND THE BUSINESS ACTIVITIES. 5) THE ASSESSEE HAS NOT FILED ITS RETURN OF INCOME AN D AUDIT REPORT FOR AY 2010-11 & 2011-12. IN VIEW OF THE ABOVE, IT IS CLEAR THAT THE ASSESSEE TRUST WAS CARRYING OUT THE COMMERCIAL ACTIVITY WHICH DOES NOT FALL WITHIN THE MEANING OF THE CHARITY AS DEFINED UNDER SECTION 2(15) OF THE ACT. AS SUCH, THE ASSESSEE TRUST CEASES TO BE A CHARITABLE ORGANIZATION AS PER THE PROVISION OF SECTION 2(15) OF THE ACT AS AMENDED BY FINANCE ACT 2010. HOWEVER, THE ASSESSEE ON THE QUESTION BY THE LD. CI T SUBMITTED AS UNDER: 1) PRESENTLY THE ASSESSEE-TRUST IS RUNNING COLLEGE FRO M RENTED PREMISES. THE ASSESSEE-TRUST FOR PROVIDING A BETTER ENVIRONMENT TO THE STUDENT PURCHASED LAND TO CONSTRUCT ITS CAMPUS FOR THE EDUCATION. 2) THE ASSESSEE-TRUST FILED THE RETURN OF INCOME UP TO THE AY 2011- 12. ITA NOS.1071 & 1072/AHD/2013, CO NO.82/AHD/15 ITA NO.829/AHD/15 (BY REVENUE) &CO 83/AHD/15 CHAMUNDA FOUNDATION VS. CIT/ACIT ASST.YEARS -2009-10, 2010-11, 2011 -12 - 5 - 3) THE ASSESSEE FURTHER SUBMITTED THAT THERE NO PROVIS ION UNDER THE ACT WHICH DENIES AVAILING THE BENEFIT OF THE SECTIO N 12AA OF THE ACT IN THE CASE IT HAS THE SURPLUS INCOME. FURTHER SECTION 11(2) OF THE ACT, PROVIDE THE FACILITY OF ACCUMULATION OF IN COME FOR 5 YEARS. 4) AS PER SECTION 12AA(3) OF THE ACT, THE LD. CIT CAN EXERCISE THE POWER OF CANCELLATION IN THE FOLLOWING TWO SITUATIO N A) THE ACTIVITIES OF THE TRUST ARE NOT GENUINE. B) THE ACTIVITIES OF THE TRUST ARE NOT BY THE OBJECT O F THE TRUST. BUT, THE ASSESSEE TRUST DOES NOT FALL IN THE ABOVE TWO SITUATIONS. SO THE QUESTION OF THE CANCELLATION OF THE CERTIFICATE DOE S NOT ARISE. HOWEVER, THE LD. CIT AFTER CONSIDERING THE SUBMISSI ON MADE BY THE ASSESSEE OBSERVED AS UNDER: 1) THE PROVISION OF SECTION 12AA(3) OF THE ACT EMPOWER S TO EXAMINE WHETHER THE ACTIVITIES ARE CARRIED OUT BY THE TRUST /INSTITUTION IN ACCORDANCE WITH THE OBJECTS OF SUCH TRUST. IN CASE, HE (THE CIT) IS SATISFIED THAT THE ACTIVITIES OF THE TRUST ARE NOT CHARITABLE IN NATURE, HE HAS THE POWER TO CANCEL IT. 2) THE AO HAS TO APPLY THE PROVISIONS OF SECTION 11, 1 2, & 13 OF THE ACT, THOUGH THE ASSESSEE IS REGISTERED U/S 12AA OF THE ACT. 3) THE HUGE PROFIT GENERATED BY THE TRUST ESTABLISHES THE FACT THAT THE MOTIVE OF THE TRUST IS TO EARN PROFIT AND NOT THE C HARITY AS DEFINED ITA NOS.1071 & 1072/AHD/2013, CO NO.82/AHD/15 ITA NO.829/AHD/15 (BY REVENUE) &CO 83/AHD/15 CHAMUNDA FOUNDATION VS. CIT/ACIT ASST.YEARS -2009-10, 2010-11, 2011 -12 - 6 - U/S 2(15) OF THE ACT. THE DETAILS OF PROFIT EARNED BY THE ASSESSEE- TRUST ARE AS UNDER: A) FY 2009-10 RS. 2,22,94,074/- B) FY 2008-09 RS. 1,88,26,808/- C) FY 2007-08 RS. 38,12,635/- 4) THE ASSESSEE-TRUST HAS PROVIDED AN INTEREST-FREE LO AN TO THE TRUSTEES VIOLATING THE PROVISIONS OF SECTION 13(1)(C) OF THE ACT. IN VIEW OF THE ABOVE, THE CIT HELD THAT THE ACTIVIT IES OF THE TRUST ARE NOT GENUINE AND ALSO NOT CONDUCTED IN ACCORDANCE WITH I TS OBJECT. AS PER AMENDMENT BY THE FINANCE ACT, 2010 THE TRUST LOST I TS CHARACTER AS A CHARITABLE INSTITUTION AND THEREFORE REGISTRATION C ANCELLED AY 2008-09 ONWARDS. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT THE ASS ESSEE IS IN APPEAL BEFORE US. 3. THE LD.AR BEFORE US FILED TWO PAPER BOOKS RUNNI NG FROM PAGES 1 TO 93 AND 1 TO 21 AND SUBMITTED THAT THE ACTIVITY EDUC ATION IS A CHARITABLE ACTIVITY WITHIN THE MEANING OF THE SECTION 2(15) OF THE ACT. THE LEARNED AR ALSO SUBMITTED THAT THERE WAS THE DE FICIT OF INCOME COMPUTED AS PER THE PROVISIONS OF SECTION 11 OF THE ACT. THE LEARNED AR IN SUPPORT OF HIS CLAIM FILED THE CHART SHOWING THE DEFICIT IN DIFFERENT ASSESSMENT YEARS WHICH IS PLACED ON RECORD. ITA NOS.1071 & 1072/AHD/2013, CO NO.82/AHD/15 ITA NO.829/AHD/15 (BY REVENUE) &CO 83/AHD/15 CHAMUNDA FOUNDATION VS. CIT/ACIT ASST.YEARS -2009-10, 2010-11, 2011 -12 - 7 - SIMILARLY, THE ADVANCE SHOWN IN THE NAME OF THE TRU STEE IS NOTHING BUT THE REIMBURSEMENT TRUSTEE FOR THE EXPENSES INCURRED BY THE TRUSTEE ON BEHALF OF THE TRUST. 4. ON THE OTHER HAND, THE LEARNED DR BEFORE US SU BMITTED THAT THE ASSESSEE IS DOING COMMERCIAL ACTIVITY BY PROVIDING EDUCATION. SIMILARLY, THE TRUST HAS EXTENDED TO BENEFIT TO THE TRUSTEE BY PROVIDING INTEREST-FREE LOAN. ACCORDINGLY, THE LEARNED DR WAS OF THE VIEW T HAT THE ASSESSEE IS NOT ELIGIBLE FOR EXEMPTION UNDER SECTION 11 OF THE ACT. THUS, THE LEARNED DR VEHEMENTLY SUPPORTED THE ORDER OF THE AUTHORITY. 5. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH T HE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. FROM THE PRECEDI NG DISCUSSION, WE NOTE THAT THE ASSESSEE IS ENGAGED IN PROVIDING EDUCATION TO THE STUDENTS. THE ASSESSEE IN THE COURSE OF ITS ACTIVITIES HAS SHOWN HUGE SURPLUS AS WELL AS THE INVESTMENT IN THE LAND. ACCORDINGLY, THE AO WAS OF THE VIEW THAT THE ASSESSEE IS ENGAGED IN COMMERCIAL ACTIVITIES. SUBSE QUENTLY, A PROPOSAL WAS MADE BY THE AO TO THE LD. CIT FOR CANCELLATION THE REGISTRATION CERTIFICATE GRANTED TO THE TRUST UNDER SECTION 12AA OF THE ACT. THE LD. CIT SUBSEQUENTLY CANCELLED THE REGISTRATION CERTIFI CATE AFTER GIVING THE DUE OPPORTUNITY TO THE ASSESSEE. ON PERUSAL OF THE OBJECT OF THE TRUST AS SUBMITTED BEFORE THE LD. CIT, WE NOTE THAT THE OBJECT OF THE ASSESSEE WAS TO PROVIDE THE EDUCATION. AS SUCH, THE ASSESSEE WAS PROVIDING EDUCATION TO THE MBA STU DENTS, AND IT WAS ITA NOS.1071 & 1072/AHD/2013, CO NO.82/AHD/15 ITA NO.829/AHD/15 (BY REVENUE) &CO 83/AHD/15 CHAMUNDA FOUNDATION VS. CIT/ACIT ASST.YEARS -2009-10, 2010-11, 2011 -12 - 8 - ALSO AFFILIATED WITH MANIPAL UNIVERSITY. THE LD. CI T DID NOT DISPUTE THESE FACTS. THERE IS NO DISPUTE THAT THE CHARITABL E ACTIVITY INCLUDES THE EDUCATION, AND THIS IS NOT GOVERNED BY THE PROVISO ATTACHED TO SECTION 2(15) OF THE ACT. ACCORDINGLY, WE HOLD THAT THE ASS ESSEE IS VERY MUCH ENGAGED IN THE ACTIVITIES OF EDUCATION, WHICH IS CH ARITABLE. IN THIS REGARD, WE FIND SUPPORT AND GUIDANCE FROM THE JUDGMENT OF H ONBLE GUJARAT HIGH COURT IN THE CASE OF DIT VS N H KAPADIA EDUCAT ION TRUST IN APPEAL NO. 356 OF 2012 WHEREIN IT WAS HELD AS UNDER: 20. THE REVENUE'S RELIANCE ON THE AMENDED SECTION 2(15) IS ALSO OF NO AVAIL. SECTION 2(15) OF THE ACT DEFINES CHARITABLE PURPOSE AS TO INCLUD E ANY RELIEF FOR THE POOR, EDUCATION, YOGA, MEDICAL RELIE F, PRESERVATION OF ENVIRONMENT INCLUDING WATER SHEDS, FORESTS AND WILD LIFE AND PRESERVATION OF MONUMENTS OR PLACES OR OBJECTS OF ARTISTIC OR HISTO RIC INTEREST AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY. PROVISIO TO SUB- SECTION (15) TO SECTION 2 OF THE ACT WAS ADDED C/TAXAP/356/2012 JUDGMENT BY THE FINANCE ACT , 2010 PROVIDING THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, IF IT INVOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NAT URE OF TRADE, COMMERCE OR BUSINESS OR ANY ACTIVITY OF RENDERING ANY SERVICE I N RELATION TO ANY TRADE, COMMERCE OR BUSINESS FOR CESS OR FEE OR ANY OTHER C ONSIDERATION IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION O F THE INCOME FROM SUCH ACTIVITY. THIS PROVISO THEREFORE APPLIES TO ACTIVIT Y FOR THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. SUCH ACTIVI TY WOULD BE EXCLUDED FROM THE DEFINITION OF CHARITABLE PURPOSE IF IT INVOLVES CAR RYING ON ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR FOR CESS O R FEE OR ANY OTHER CONSIDERATION. CLEARLY, THE LEGISLATURE DID NOT DES IRE THIS CONDITION OR RESTRICTION TO BE ATTACHED TO THE REMAINING ACTIVIT IES WHICH WERE DEFINED OR CATEGORIZED AS CHARITABLE PURPOSE UNDER SUB-SECTION (15) WHICH INCLUDES THE EDUCATION. WE FURTHER NOTE THAT THE ASSESSEE IN ALL THE YEARS HAS SHOWN A DEFICIT IN THE COMPUTATION OF INCOME MADE AS PER THE PROVISION S OF SECTION 11 OF ITA NOS.1071 & 1072/AHD/2013, CO NO.82/AHD/15 ITA NO.829/AHD/15 (BY REVENUE) &CO 83/AHD/15 CHAMUNDA FOUNDATION VS. CIT/ACIT ASST.YEARS -2009-10, 2010-11, 2011 -12 - 9 - THE ACT. A CHART TO THIS EFFECT IS AVAILABLE ON REC ORD. AS SUCH, THE ASSESSEE IN ITS INCOME & EXPENDITURE HAS SHOWN THE SURPLUS I NCOME, BUT IN THE STATEMENT OF INCOME FILED WITH THE RETURN OF INCOME , IT HAS SHOWN A DEFICIT. THUS THE ALLEGATION OF THE LD. CIT THAT TH E ASSESSEE HAS SHOWN SURPLUS IS DEVOID OF ANY MERIT. FURTHERMORE, THE ACTIVITIES CARRIED OUT BY THE ASSE SSEE CANNOT BE HELD AS NON-GENUINE MERELY ON THE GROUND THAT THERE IS SURP LUS AVAILABLE TO THE ASSESSEE AND THE ASSESSEE IS NEITHER PROVIDING FREE EDUCATION NOR CONCESSION IN THE FEES TO THE STUDENTS. WE ALSO NOTE THAT THERE WAS NO CHANGE IN THE OBJECT S OF THE TRUST SINCE THE INCEPTION. AS SUCH ON THE SAME OBJECTS THE TRUST WA S GRANTED THE REGISTRATION CERTIFICATE UNDER SECTION 12AA OF THE ACT VIDE ORDER DATED 14-12-2007. WE ALSO FIND SUPPORT AND GUIDANCE FROM THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF DIT VS. KHAR GYMKH ANA REPORTED IN 70 TAXMANN.COM 181 WHEREIN IT WAS HELD AS UNDER: THE JURISDICTION TO CANCEL THE REGISTRATION ONLY A RISES IF THERE IS CHANGE IN THE NATURE OF ACTIVITIES OF THE TRUST OR THE ACTIVI TIES OF THE TRUST ARE NOT GENUINE. SIMILARLY, WE ALSO NOTE THAT THE REGISTRATION CERTI FICATE UNDER SECTION 12 AA OF THE ACT CANNOT BE REJECTED MERELY ON THE GROU ND THAT THE ASSESSEE ITA NOS.1071 & 1072/AHD/2013, CO NO.82/AHD/15 ITA NO.829/AHD/15 (BY REVENUE) &CO 83/AHD/15 CHAMUNDA FOUNDATION VS. CIT/ACIT ASST.YEARS -2009-10, 2010-11, 2011 -12 - 10 - HAS EXTENDED THE BENEFIT TO THE TRUSTEES. IN SUCH A SITUATION, THE DISALLOWANCE CAN BE MADE TO THE EXTENT OF SUCH BENE FIT EXTENDED THE TRUSTEES. IN SUPPORT OF THE AFORESAID VIEW, WE FIND GUIDANCE FROM THE JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VERSU S ORPART CHARITABLE TRUST REPORTED IN 55 TAXMANN.COM 211 WHEREIN IT WAS HELD AS UNDER: 7. HEARD, LEARNED COUNSEL FOR THE PARTIES AND PERUSED THE MATERIAL ON RECORD AS WELL AS THE ORDERS PASSED BY THE LEARNED CIT(A) AND THE TRIBUNAL. AS STATED BY MR. PATEL, HEREIN ABOVE, THE ISSUES INVOLVED IN THIS MATTER ARE NO MORE RES INTEGRA AND WE HAVE ALREADY DECIDED THE SAME IN FAV OUR OF THE ASSESSEE AND AGAINST THE REVENUE BY OBSERVING AND HOLDING AS UND ER IN PARAS-5 AND 6 OF THE AFORESAID DECISION; '5. HAVING HEARD LEARNED ADVOCATES FOR THE PARTIES WE ARE OF THE OPINION THAT THE TRIBUNAL WAS JUSTIFIED IN UPHOLDING THE ORDER P ASSED BY CIT(A). THE CIT(A) HAS VERY CLEARLY OBSERVED THAT THE PROVISION S OF SECTION 11(1)(A) ARE VERY CLEAR AND PROVIDE THAT THE INCOME DERIVED FROM THE PROPERTY HELD UNDER TRUST SHALL NOT BE INCLUDED IN THE INCOME TO THE EX TENT IT IS APPLIED FOR THE CHARITABLE OR RELIGIOUS PURPOSES (EXPENSES INCURRED DURING THE YEAR) OR ACCUMULATED/SET APART TO BE APPLIED FOR THAT PURPOS E IN FUTURE OUT OF 75% TO WHICH THE RESTRICTION U/S 11(5) APPLIES. THE TRIBUN AL HAS RELIED UPON ITS OWN DECISION ON A SIMILAR ISSUE RENDERED IN ITA NO. 644 TO 646/RJT/2003 DATED 22.12.2003. WE ARE IN COMPLETE AGREEMENT WITH THE R EASONINGS ADOPTED BY THE CIT(A) AS WELL AS TRIBUNAL. 6. EVEN OTHERWISE, THE LAW ON THE SUBJECT IS ALSO W ELL SETTLED. IN THE CASE OF FR. MULLERS CHARITABLE INSTITUTIONS (SUPRA) THE KARNATA KA HIGH COURT HAS HELD THAT A PERUSAL OF SECTION 13(1)(D) OF THE INCOME-TA X ACT, 1961 MAKES IT CLEAR THAT IT IS ONLY THE INCOME FROM SUCH INVESTMENT OR DEPOSIT WHICH HAS BEEN MADE IN VIOLATION OF SECTION 11(5) OF THE ACT THAT IS LIABLE TO BE TAXED AND VIOLATION UNDER SECTION 13(1)(D) DOES NOT RESULT IN DENIAL OF EXEMPTION UNDER SECTION 11 TO THE TOTAL INCOME OF THE ASSESSEE AND THAT WHERE THE WHOLE OR PART OF THE RELEVANT INCOME IS NOT EXEMPTED UNDER SECTIO N 11 BY VIRTUE OF VIOLATION OF SECTION 13(1) (D) OF THE ACT, TAX SHALL BE LEVIE D ON THE RELEVANT INCOME OR ITA NOS.1071 & 1072/AHD/2013, CO NO.82/AHD/15 ITA NO.829/AHD/15 (BY REVENUE) &CO 83/AHD/15 CHAMUNDA FOUNDATION VS. CIT/ACIT ASST.YEARS -2009-10, 2010-11, 2011 -12 - 11 - PART OF THE RELEVANT INCOME AT THE MAXIMUM MARGINAL RATE. THEREFORE, WE DO NOT SEE ANY REASON IN INTERFERING WITH THE IMPUGNED ORDERS.' 8. IN THE RESULT, ALL THE APPEALS FAIL AND ARE DISMIS SED. THE QUESTIONS RAISED IN THESE APPEALS ARE ANSWERED AGAINST THE APPELLANT-RE VENUE AND IN FAVOUR OF THE RESPONDENT-ASSESSEE, ACCORDINGLY. NO ORDER AS TO CO STS. IN VIEW OF THE ABOVE, WE HOLD THAT THE ACTIVITIES C ARRIED OUT BY THE ASSESSEE ARE NOT CONTRARY TO THE OBJECTS FOR WHICH THE TRUST WAS ESTABLISHED. ACCORDINGLY, WE DIRECT THE LD.CIT TO R ESTORE THE REGISTRATION CERTIFICATE GRANTED TO THE ASSESSEE UNDER SECTION 1 2AA OF THE ACT. HENCE THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN I TA NO.1071/AHD/2013 IS ALLOWED. ITA NO.1072/AHD/2013 FOR A.Y. 2009-10 7. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWING GROUND OF APPEAL: 1) THE ORDER PASSED BY THE LEARNED CIT(A) IS AGAINST LAW, EQUITY AND JUSTICE. 2) THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONSIDE RING THAT APPELLANT TRUST IS NOT ELIGIBLE FOR GETTING DEDUCTION U/S 11. 3) THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONSIDE RING THAT APPELLANT TRUST IS NOT ELIGIBLE FOR GETTING DEDUCTION U/S 11 BY CONSIDERING THAT APPELLANT TRUST HAS VIOLATED THE CONDITIONS OF SEC. 13(3) OF THE ACT. ITA NOS.1071 & 1072/AHD/2013, CO NO.82/AHD/15 ITA NO.829/AHD/15 (BY REVENUE) &CO 83/AHD/15 CHAMUNDA FOUNDATION VS. CIT/ACIT ASST.YEARS -2009-10, 2010-11, 2011 -12 - 12 - 4) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN SPI TE OF ADMITTING THAT APPELLANT IS ELIGIBLE FOR DEDUCTION U/S 11 OF THE A CT HAS NOT GIVEN DIRECTION TO THE LD.A.O. TO ALLOW DEDUCTION FOR APP LICATION OF FUND FOR CAPITAL EXPENDITURE INCURRED OF RS.1,05,12,798/-. 5) THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDI NG THE ORDER OF THE LD.A.O. OF NOT ALLOWING DEDUCTION FOR AMOUNT SET AP ART FOR APPLICATION TO CHARITABLE/RELIGIOUS PURPOSE TO THE EXTENT OF 15% O F THE INCOME DERIVED FROM THE PROPERTY HELD UNDER TRUST OF RS.8887314/-. 6) THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDI NG THE ORDER OF THE LD.A.O. FOR MAKING DISALLOWANCE FOR COMPUTER OF RS. 17,55,000/-. 7) THE CIT(A) HAS ERRED IN LAW AND FACTS ON IN CONSIDE RING THE REIMBURSEMENT TO THE TRUSTEE AS ADVANCE AND THUS CH ARGING INTEREST ON IT. 8) THE APPELLANT CRAVES LEAVE TO ADD, ALTER, MODIFY OR AMEND ANY OR ALL GROUND OF APPEAL BEFORE FINAL HEARING. THE ISSUE RAISED BY THE ASSESSEE IN THE GROUND NO. 1 TO 5 IS THAT THE LD. CIT-A ERRED IN NOT GRANTING THE EXEMPTION UNDER 11 OF THE ACT. 8. DURING THE ASSESSMENT PROCEEDINGS FOR THE YE AR UNDER CONSIDERATION, THE AO FOUND THAT THE REGISTRATION GRANTED TO THE A SSESSEE U/S 12AA OF THE ACT IS LIABLE TO BE CANCELLED DUE TO THE FOLLOWING REASONS. 1) THE ASSESSEE HAS GIVEN INTEREST-FREE LOAN TO THE TR USTEE WITHOUT ANY CONSIDERATION WHICH IS PROHIBITED U/S 13(1)(C) OF T HE ACT. 2) THE ASSESSEE FAILED TO PROVIDE THE LIST OF THE VISI TING FACULTY TO WHOM THE LAPTOPS WERE GIVEN. THUS IT IS CLEAR THAT THE LAPTOPS WERE SOLD OUT BY THE TRUSTEE OUT OF BOOKS OF ACCOUNTS. ITA NOS.1071 & 1072/AHD/2013, CO NO.82/AHD/15 ITA NO.829/AHD/15 (BY REVENUE) &CO 83/AHD/15 CHAMUNDA FOUNDATION VS. CIT/ACIT ASST.YEARS -2009-10, 2010-11, 2011 -12 - 13 - 3) THE ASSESSEE IS NOT DOING ANY CHARITABLE ACTIVITIES IN PURSUANCE TO THE PROVISIONS OF SECTION 2(15) OF THE ACT. 4) DURING THE ACADEMIC YEAR 2007-09, 2008-10, 2009-11 , 2010-12, NEITHER ANY FREE EDUCATION WAS PROVIDED, NOR THE CO NCESSION WAS GRANTED BY THE ASSESSEE EVEN TO THE DOWNTRODDEN OF THE SOCIETY OR ANY OTHER DESERVING SECTION OF THE SOCIETY. THE DET AILS OF THE FEES RECEIVED BY THE TRUST PER STUDENT PER YEAR STAND AS UNDER: ACADEMIC YEAR FEES COLLECTED FEES COLLECT ED IN 1 ST YEAR IN 2 ND YEAR 2007-09 RS.1,76,000/- RS.1,76,0 00/- 2008-10 RS.2,05,000/- RS.2,00,000/- 2009-11 RS.2,35,000/- RS.2,25,000/- 2010-12 RS.2,35,000/- RS.2,25,000/- THE DETAILS OF INCOME EARNED BY THE ASSESSEE ARE AS UNDER: FY 2009-10 RS. 2,22,94,074/- FY 2008-09 RS. 1,88,26,808/- FY 2007-08 RS. 38,12,635/- THE AO ALSO NOTICED THAT THE ASSESSEE COLLECTED THE FEES FROM ALL STUDENTS AMOUNTING TO RS. 5,06,55,100/- ONLY IN THE YEAR UNDER CONSIDERATION. THEREFORE, THE ASSESSEE WAS ENGAGED IN THE BUSINESS ACTIVITY. 5) THE ASSESSEE DID NOT FILE RETURN OF INCOME AND A UDIT REPORT FOR AY 2010-11 & 2011-12. 6) THE ASSESSEE PURCHASED A PLOT OF LAND IN BANGALO RE AMOUNTING TO RS. 6 CRORES TO EXPAND ITS BUSINESS ACTIVITIES. ITA NOS.1071 & 1072/AHD/2013, CO NO.82/AHD/15 ITA NO.829/AHD/15 (BY REVENUE) &CO 83/AHD/15 CHAMUNDA FOUNDATION VS. CIT/ACIT ASST.YEARS -2009-10, 2010-11, 2011 -12 - 14 - 7) THE ACTIVITIES OF THE ASSESSEE TRUST ARE ALSO CO VERED IN THE PROVISO INSERTED IN SECTION 2(15) BY FINANCE ACT 2010. IN VIEW OF THE ABOVE, IT IS CLEAR THAT THE ASSESSEE -TRUST HAS NOT CARRIED OUT ANY CHARITABLE ACTIVITIES. SINCE ASSESSEE FAILED TO FULFILL THE CONDITION LAID DOWN IN 12AA CERTIFICATE, THEREFORE, THE CERTIFICAT E U/S 12AA OF THE ACT AUTOMATICALLY GOT CANCELLED. ON THE QUESTION BY THE AO, THE ASSESSEE SUBMITTED T HAT THE TRUST IS A REGISTERED TRUST AND ITS OBJECTS ARE CHARITABLE. HOWEVER, THE AO DISREGARDED THE CONTENTION OF THE A SSESSEE BY OBSERVING THAT THE ASSESSEE FAILED TO BRING ON RECORD ANY EVI DENCING THAT THE TRUST IS ENGAGED IN CHARITABLE ACTIVITIES AS DEFINED U/S 2(1 5) OF THE ACT. THE AO ALSO OBSERVED THAT HAD THE ASSESSEE BEEN DOING EDUC ATIONAL ACTIVITIES FOR THE NONPROFIT MOTIVE, THEN IT MUST HAVE APPLIED FOR THE REGISTRATION CERTIFICATE U/S 10(23C) OF THE ACT. IN VIEW OF THE ABOVE, THE EXEMPTION CLAIMED BY THE ASSESSEE WAS DENIED UNDER SECTION 11 OF THE ACT. ACCORDINGLY, THE AO AD DED THE SUM OF RS. 1,88,26,808.00 TO THE TOTAL INCOME OF THE ASSESSEE. THE AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE T HE LD.CIT (A) THE ASSESSEE BEFORE THE LD. CIT (A) SUBMITTED AS UNDER: ITA NOS.1071 & 1072/AHD/2013, CO NO.82/AHD/15 ITA NO.829/AHD/15 (BY REVENUE) &CO 83/AHD/15 CHAMUNDA FOUNDATION VS. CIT/ACIT ASST.YEARS -2009-10, 2010-11, 2011 -12 - 15 - 1) THE AO HAS NEITHER GIVEN ANY OPPORTUNITY NOR SHOW C AUSE NOTICE BEFORE DENYING THE EXEMPTION U/S 11 & 12 OF THE ACT . 2) THERE IS NO PROVISION UNDER THE ACT EMPOWERING THE AO TO CANCEL THE REGISTRATION U/S 12AA OF THE ACT. AS SUCH, THE CERTIFICATE IS GRANTED BY THE HIGHER AUTHORITY, I.E. LD. CIT. THUS THE AO CANNOT CANCEL THE SAME. 3) THE AO HAS NOT REBUTTED THE EXPLANATION GIVEN BY TH E ASSESSEE DURING THE ASSESSMENT PROCEEDING. 4) AS PER SECTION 12AA(3) OF THE ACT, THE LD. CIT CAN EXERCISE THE POWER OF CANCELLATION IN THE FOLLOWING TWO SITUATIO NS AS GIVEN UNDER: (I) THE ACTIVITY OF TRUST IS NOT GENUINE. (II) THE ACTIVITY OF THE TRUST IS NOT IN ACCORDANCE WITH THE OBJECT OF THE TRUST. 5) THE AO HAS NOT BROUGHT ON RECORD ANY EVIDENCE THAT THE TRUST CARRIED OUT ITS ACTIVITY IN VIOLATION OF THE OBJECT OF THE TRUST AND THE ACTIVITIES OF THE TRUST ARE NOT GENUINE. 6) PRESENTLY THE ASSESSEE-TRUST IS RUNNING A COLLEGE F ROM RENTED PREMISES. THE ASSESSEE-TRUST FOR PROVIDING A BETTER ENVIRONMENT TO THE STUDENT PURCHASED LAND TO CONSTRUCT ITS CAMPUS. THE ACTIVITY OF ITA NOS.1071 & 1072/AHD/2013, CO NO.82/AHD/15 ITA NO.829/AHD/15 (BY REVENUE) &CO 83/AHD/15 CHAMUNDA FOUNDATION VS. CIT/ACIT ASST.YEARS -2009-10, 2010-11, 2011 -12 - 16 - THE EDUCATION IS DULY COVERED UNDER THE DEFINITION OF CHARITABLE PURPOSE U/S 2(15) OF THE ACT. 7) THERE IS NO PROVISION UNDER THE INCOME TAX ACT, WHI CH DENIES AVAILING THE BENEFIT OF THE SECTION 12AA OF THE ACT IF THE TRUST HAS SURPLUS INCOME. FURTHER, THE PROVISIONS OF SECTION 11(2) OF THE ACT PROVIDE THE FACILITY OF ACCUMULATION OF INCOME FOR 5 YEARS. 8) ONCE THE TRUST HAS FULFILLED THE ALL REQUISITE REQU IREMENTS OF SECTION 11, THEN THE TRUST IS ENTITLED TO THE BENEFIT OF EX EMPTION, EVEN THE CONDITIONS OF SECTION 10(23C) OF THE ACT HAVE NOT C OMPLIED. 9) DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE A PPLIED THE INCOME OF RS. 1,05,21,798/- ON PURCHASE OF CAPITAL ASSETS. ALL THE VOUCHER RELATED TO THE PURCHASE WERE FILED BEFORE T HE AO, AND NO DEFECT WAS POINTED THEREIN. AS SUCH, THE DEDUCTION FOR THE CAPITAL EXPENDITURE IS COVERED U/S 11 OF THE ACT AS THE APP LICATION OF INCOME. THE LD. CIT, AFTER CONSIDERING THE SUBMISSION MADE BY THE ASSESSEE, ACCEPTED THE SUBMISSION OF THE ASSESSEE FOR THE FOL LOWING: 1) THE REGISTRATION UNDER SECTION 12AA OF THE ACT WAS DULY GRANTED TO THE ASSESSEE, AND THE SAME WAS NOT WITHDRAWN. ITA NOS.1071 & 1072/AHD/2013, CO NO.82/AHD/15 ITA NO.829/AHD/15 (BY REVENUE) &CO 83/AHD/15 CHAMUNDA FOUNDATION VS. CIT/ACIT ASST.YEARS -2009-10, 2010-11, 2011 -12 - 17 - 2) THE ACTIVITIES OF THE EDUCATION FALL UNDER THE DEFI NITION OF THE CHARITABLE PURPOSE U/S 2(15) OF THE ACT. 3) AS PER THE JUDGMENT HONBLE PUNJAB & HARYANA HIGH COURT IN CASE OF MAHASABHA GURUKUL VIDYAPEETH REPORTED IN 326 ITR 25 WHERE IN IT WAS HELD THAT ONCE THE ALL REQUISITE REQUIREM ENT OF SECTION 11 TO AVAIL THE BENEFIT OF THE EXEMPTION FULFILLED BY THE TRUST, THE TRUST ENTITLED IS TO THE BENEFIT OF EXEMPTION EVEN THE CO NDITION OF THE SECTION 10(23C) OF THE ACT NOT COMPLIED. IN VIEW OF THE ABOVE, THE LD. CIT-A HELD THAT THE B ENEFIT OF SECTION 11 CANNOT BE DENIED ON THE ABOVE BASIS. HOWEVER, THE LD. CIT-A FURTHER OBSERVED THAT THE AS SESSEE HAD VIOLATED THE PROVISIONS OF SECTION 13(1) FOR EXTENDING THE INTEREST-FREE LOAN TO THE TRUSTEE AND MISAPPROPRIATION OF LAPTOPS. THEREF ORE THE BENEFIT OF EXEMPTION UNDER SECTION 11 OF THE ACT IS NOT AVAILA BLE TO THE ASSESSEE. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CIT (A) , THE ASSESSEE IS IN APPEAL BEFORE US. 9. THE LD. AR BEFORE US SUBMITTED THAT THERE WAS N O BENEFIT EXTENT TO THE TRUSTEE OF THE TRUST, THEREFORE THE QUESTION OF NOT ALLOWING THE EXEMPTION UNDER SECTION 11 OF THE ACT DOES NOT ARISE. 10. ON THE OTHER HAND, THE LD. DR VEHEMENTLY SUPPO RTED THE ORDER OF THE AUTHORITIES BELOW. ITA NOS.1071 & 1072/AHD/2013, CO NO.82/AHD/15 ITA NO.829/AHD/15 (BY REVENUE) &CO 83/AHD/15 CHAMUNDA FOUNDATION VS. CIT/ACIT ASST.YEARS -2009-10, 2010-11, 2011 -12 - 18 - 11. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET WE NOTE THAT THE IMPUGNED ISSUE HAS BEEN DECIDED IN FAVOUR OF ASSESSEE BY US IN THE APPEAL FILED BY THE ASSESSEE BEARING ITA NO. 1071/AHD/2013 VIDE PAR AGRAPH NUMBER 5 OF THIS ORDER. FOR A DETAILED DISCUSSION, PLEASE RE FER THE RELEVANT PARA AS DISCUSSED ABOVE. ACCORDINGLY, WE DIRECT THE AO ALLO W THE DEDUCTION OF THE CAPITAL EXPENDITURE INCURRED BY THE ASSESSEE AS THE APPLICATION OF INCOME UNDER 11 OF THE ACT AS PER THE PROVISION OF THE LAW. THEREFORE RESPECTFULLY FOLLOWING THE SAME, THE GROUND OF APPE AL RAISED BY THE ASSESSEE IS ALLOWED. 12. THE ISSUE RAISED BY THE ASSESSEE IN THE GROUN D NO. 6 IS THAT THE LD. CIT (A) ERRED IN CONFIRMING THE ADDITION MADE BY TH E AO FOR RS. 17,55,000/- ON ACCOUNT OF COMPUTER EXPENSES. THE AO DURING THE ASSESSMENT PROCEEDINGS FOUND THAT THE ASSESSEE PURCHASED 400 LAPTOPS @45000/- PER LAPTOP. ON VERIF ICATION OF BOOKS OF ACCOUNT AND AUDIT REPORT, IT IS FOUND THAT THE 39 L APTOPS ARE MISSING OUT OF 400 LAPTOPS. ON THE QUESTION, THE ASSESSEE ADMITTED THAT 39 LAPT OPS ARE MISSING AND ALSO SUBMITTED THAT THESE WERE GIVEN TO VISITING FA CULTY & OTHERS. BUT THE ASSESSEE DID NOT PROVIDE THE LIST OF THEM. ACCORDIN GLY, THE AO WAS OF THE ITA NOS.1071 & 1072/AHD/2013, CO NO.82/AHD/15 ITA NO.829/AHD/15 (BY REVENUE) &CO 83/AHD/15 CHAMUNDA FOUNDATION VS. CIT/ACIT ASST.YEARS -2009-10, 2010-11, 2011 -12 - 19 - VIEW THAT THE LAPTOPS HAVE BEEN SOLD OUT BY THE TRU STEE OUTSIDE THE BOOKS OF ACCOUNTS. THEREFORE, THE AO TREATED THE PURCHASE VALUE MISSIN G LAPTOP AMOUNTING TO RS 17,55,000/- ( 39* 45000/-) AS INCOME OF THE A SSESSEE. THE AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE T HE LD.CIT (A). THE ASSESSEE BEFORE THE LD. CIT (A) SUBMITTED THAT ASSE SSEE HAD GIVEN LAPTOPS TO THE VISITING FACULTIES AS A MATTER OF HO NOUR, BUT NO SIGNATURE ON THE RECEIPT WAS TAKEN. THEREFORE IT COULD NOT PRODU CE THE NECESSARY DETAILS IN SUPPORT OF SUCH LAPTOPS. THE ASSESSEE FURTHER SUBMITTED THAT THE AO MADE ADD ITION BASED ON A PRESUMPTION THAT THE TRUSTEE SOLD THE LAPTOPS OUT O F THE BOOKS WITHOUT ANY COGENT MATERIAL. HOWEVER, THE LD. CIT CONFIRMED THE ADDITION MADE BY THE AO BY OBSERVING THAT THE ASSESSEE FAILED TO PROVIDE THE L IST OF FACULTIES TO WHOM THE LAPTOPS WERE GIVEN. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT (A) THE ASSESSEE IS IN APPEAL BEFORE US. ITA NOS.1071 & 1072/AHD/2013, CO NO.82/AHD/15 ITA NO.829/AHD/15 (BY REVENUE) &CO 83/AHD/15 CHAMUNDA FOUNDATION VS. CIT/ACIT ASST.YEARS -2009-10, 2010-11, 2011 -12 - 20 - 13. THE LD.AR BEFORE US SUBMITTED THAT THE LAPTOPS WERE PURCHASED BY THE TRUST WHICH WERE GIVEN TO THE VISITING FACULTIE S. BUT THERE WAS NO ACKNOWLEDGEMENT RECEIPT WAS SIGNED FROM SUCH VISITI NG FACULTIES. AS THE PURCHASES OF THE LAPTOP HAVE NOT BEEN DOUBTED, THER EFORE THE ASSESSEE IS ELIGIBLE FOR DEDUCTION FOR SUCH EXPENSES. 14. ON THE OTHER HAND THE LD. DR SUBMITTED THAT THE ASSESSEE IS UNDER THE OBLIGATION TO JUSTIFY BASED ON COGENT DOCUMENTA RY EVIDENCE THAT THE LAPTOPS WAS UTILIZED FOR THE ACTIVITIES OF THE ASSE SSEE. BUT THE ASSESSEE HAS FAILED TO DO SO. THE LEARNED DR VEHEMENTLY SUPPORTE D THE ORDER OF THE AUTHORITIES BELOW. 15. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE ISSUE IN THE PRESENT CASE RELATES TO THE DISALLOWANCES OF THE EXPENSES CLAIMED BY THE AS SESSEE FOR RS. 17,55,000/- ON ACCOUNT OF NON-AVAILABILITY OF SUPPO RTING DOCUMENTS. THEREFORE THE AO MADE THE DISALLOWANCE WHICH WAS SU BSEQUENTLY CONFIRMED BY THE LD.CIT (A). INDEED, THE ONUS LIES ON THE ASSESSEE TO FURNISH TH E SUFFICIENT DETAILS IN SUPPORT OF THE EXPENSES CLAIMED BY IT. IN THE ABSEN CE OF DOCUMENTARY EVIDENCE, THE DEDUCTION OF SUCH EXPENSES CANNOT BE ALLOWED TO THE ASSESSEE. THUS IN THE ABSENCE OF SUFFICIENT DOCUMEN TARY EVIDENCE, WE ARE ITA NOS.1071 & 1072/AHD/2013, CO NO.82/AHD/15 ITA NO.829/AHD/15 (BY REVENUE) &CO 83/AHD/15 CHAMUNDA FOUNDATION VS. CIT/ACIT ASST.YEARS -2009-10, 2010-11, 2011 -12 - 21 - NOT INCLINED TO DISTURB THE FINDING OF THE AUTHORIT IES BELOW. HENCE THE GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 16. THE ISSUE RAISED BY THE ASSESSEE IN THE GROU ND NO. 7 IS THAT THE LD. CIT (A) CONSIDERED THE REIMBURSEMENT TO THE TRUSTEE AS ADVANCE FREE OF INTEREST. THE AO DURING THE ASSESSMENT PROCEEDINGS OBSERVED T HAT THE TRUST HAD GIVEN LOAN TO THE TRUSTEE WITHOUT INTEREST, WHICH I S AGAINST THE PROVISION OF SECTION 13(1) OF THE ACT. ACCORDINGLY, THE AO D ISALLOWED THE PROPORTIONATE AMOUNT OF INTEREST ON INTEREST-FREE L OAN GIVEN TO THE TRUSTEE BY WITHDRAWING THE EXEMPTION U/S 11 OF THE ACT. THE AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE T HE LD.CIT (A). THE ASSESSEE BEFORE THE LD. CIT (A) SUBMITTED AS UNDER: THE AO ASSUMES THAT THE TRUST HAS PROVIDED AN INTER EST-FREE LOAN TO THE TRUSTEE. AS, SUCH, IT IS THE ONLY REIMBURSEMENT OF THE DEPOSIT PAID BY THE TRUSTEE TO BOOK THE HOSTEL FOR THE STUDENTS. BUT TH E CORRESPONDING ENTRY WAS NOT PASSED IN THE BOOKS OF ACCOUNTS DURING THE YEAR UNDER CONSIDERATION. THEREFORE, DUE TO THE NON-SETTLEMENT OF THE ACCOUNT OF THE TRUSTEE, THE AMOUNT WAS SHOWN AS AN ADVANCE IN THE NAME OF THE TRUSTEE. HOWEVER, THE EFFECT IN THE BOOKS OF ACCOUNTS HAS BE EN PASSED IN THE SUBSEQUENT YEAR. ITA NOS.1071 & 1072/AHD/2013, CO NO.82/AHD/15 ITA NO.829/AHD/15 (BY REVENUE) &CO 83/AHD/15 CHAMUNDA FOUNDATION VS. CIT/ACIT ASST.YEARS -2009-10, 2010-11, 2011 -12 - 22 - THE AO MADE AN ADDITION ON ACCOUNT OF INTEREST ON A N AD-HOC BASIS. THE ADVANCE WAS GIVEN ONLY FOR ONE DAY, BUT THE AO CHAR GED THE INTEREST @ 12% FOR THE WHOLE OF THE YEAR. THE LD. CIT (A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE PARTLY ALLOWED THE APPEAL BY OBSERVING AS UNDER: THE ADVANCE OF RS. 1,80,000/- WITHOUT INTEREST WAS REFLECTED IN THE BALANCE SHEET IN THE NAME OF SHRI KISHORE JAIN. BUT THE SUBMISSION OF THE ASSESSEE IS NOT ACCEPTABLE BECAUSE AS THE ASSESSEE FILED THE BELATED RETURN ON 31-03-2010. THUS THE RELEVANT ENTRY COULD HAVE B EEN UPDATED WITH THE CORRECT ENTRY. IN VIEW OF THE ABOVE, THE LD. CIT HELD THAT INCOME OF THE TRUST HAS BEEN DIRECTLY APPLIED FOR THE BENEFIT OF THE TRUSTEE U/S 13(1) OF THE ACT. THEREFORE THE ASSESSEE IS NOT ELIGIBLE FOR BENEFIT U/S 11 OF THE ACT AS IT IS HIT BY SECTION 13(1)(C) OF THE ACT. ACCORDINGLY, THE LD. CIT-A DIRECTED THE AO TO DISAL LOW THE INTEREST ONLY FOR ONE DAY AS THE ADVANCE WAS GIVEN ONLY FOR ONE D AY. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT (A) THE ASSESSEE IS IN APPEAL BEFORE US. ITA NOS.1071 & 1072/AHD/2013, CO NO.82/AHD/15 ITA NO.829/AHD/15 (BY REVENUE) &CO 83/AHD/15 CHAMUNDA FOUNDATION VS. CIT/ACIT ASST.YEARS -2009-10, 2010-11, 2011 -12 - 23 - 17. THE LD. AR BEFORE US SUBMITTED THAT THE AMOU NT SHOWN AS ADVANCE IN THE NAME OF THE TRUSTEE IS REPRESENTING THE REIM BURSEMENT OF THE COST INCURRED BY THE TRUSTEE ON BEHALF OF THE TRUST. THE SAME WAS ADJUSTED IN THE BOOKS OF ACCOUNTS IN THE SUBSEQUENT ASSESSMENT YEAR. 18. ON THE OTHER HAND, THE LD. DR VEHEMENTLY SU PPORTED THE ORDER OF THE AUTHORITIES BELOW. 19. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE ISSUE IN THE INSTANT CASE RELATES TO THE INTEREST-FREE ADVANCES GIVEN BY THE ASSESSEE FO R RS. 1.80 LAKHS TO THE TRUSTEE. THEREFORE THE AO MADE THE DISALLOWANCE OF THE INTEREST EXPENSES OF RS. 21,600 BEING 12% OF SUCH ADVANCES. HOWEVER, THE LD.CIT (A) FOUND THAT THE ASSESSEE PROVIDED SUCH ADVANCE FOR O NE DAY ONLY. ACCORDINGLY, HE DIRECTED TO MAKE THE DISALLOWANCE O F THE INTEREST EXPENSES PROPORTIONATELY I.E. ONLY FOR ONE DAY. NOW, THE ISSUE BEFORE US ARISES WHETHER THE ADVANCE WAS GIVEN BY THE ASSESSEE IS FOR THE PURPOSE OF ITS ACTIVITIES IN TH E GIVEN FACTS AND CIRCUMSTANCES. AT THE OUTSET, WE NOTE THAT THE LD. COUNSEL FOR THE ASSESSEE HAS NOT SUBSTANTIATED HIS ARGUMENT BASED O N ANY DOCUMENTARY EVIDENCE THAT SUCH ADVANCES TO THE TRUSTEE WERE GIV EN IN THE COURSE OF ITS ACTIVITIES. THUS IN THE ABSENCE OF SUCH DOCUMENTARY EVIDENCE, WE DO NOT ITA NOS.1071 & 1072/AHD/2013, CO NO.82/AHD/15 ITA NO.829/AHD/15 (BY REVENUE) &CO 83/AHD/15 CHAMUNDA FOUNDATION VS. CIT/ACIT ASST.YEARS -2009-10, 2010-11, 2011 -12 - 24 - FIND ANY REASON TO INTERFERE IN THE FINDING OF THE AUTHORITIES BELOW. HENCE, THE GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 20. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. CO NO. 82/AHD/2015 (IN ITA NO.828/AHD/2015) FOR AY 2010-11. 21. IN THIS CROSS OBJECTION, THE ASSESSEE HAS RAI SED FOLLOWING GROUNDS IN ITS CO: 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN CON SIDERING THE ASSESSMENT VALID IN ABSENCE OF NO VALID NOTICE WAS SERVED BY THE JURISDICTION ASSESSING OFFICER. 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT ALLOWING THE DEDUCTION CLAIMED BY APPLICATION OF FUND OF RS.2,65,00,000/-. 3. THE APPELLANT CRAVES LIBERTY TO ADD, AMEND, ALTER O R MODIFY ALL OR ANY GROUNDS OF APPEAL BEFORE FINAL HEARING. THE ASSESSEE IN ITS 1 ST GROUND OF APPEAL HAS CHALLENGED THE ASSESSMENT PROCEEDINGS FRAMED UNDER SECTION 143(3) OF THE ACT ON THE GROUND THAT NO VALID NOTICE WAS SERVED UPON THE ASSESSEE. 22. AT THE OUTSET, WE NOTE THAT THE ASSESSEE HAS BEEN FILING ITS RETURN OF INCOME WITH THE DCIT/ACIT GANDHI NAGAR HAVING JURIS DICTION OVER THE ASSESSEE. ACCORDINGLY, THE ASSESSEE FOR THE YEAR UN DER CONSIDERATION FILED ITA NOS.1071 & 1072/AHD/2013, CO NO.82/AHD/15 ITA NO.829/AHD/15 (BY REVENUE) &CO 83/AHD/15 CHAMUNDA FOUNDATION VS. CIT/ACIT ASST.YEARS -2009-10, 2010-11, 2011 -12 - 25 - ITS RETURN OF INCOME IN GANDHINAGAR AS EVIDENT FROM THE ACKNOWLEDGMENT OF THE INCOME TAX RETURN PLACED ON PAGE 1 OF THE PA PER BOOK. HOWEVER, THE ITO WARD 10(1) OF AHMEDABAD HAS ISSUED A STATUTORY NOTICE UNDER SECTION 143(2) OF THE ACT VIDE DATED 2 7-9-2012 FOR MAKING THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT. THE ASSESSEE AGAINST THE ISSUANCE OF THE NOTICE UND ER SECTION 143(2) HAS ALSO FILED THE OBJECTION VIDE LETTER DATED 8-2-2013 TO THE OFFICER HAVING JURISDICTION AT GANDHI NAGAR. THE COPY OF SUCH OBJE CTION IS PLACED ON PAGE 19 OF THE PAPER BOOK. 23. IN VIEW OF THE ABOVE, THE LD. AR BEFORE US CONTENDED THAT NON- ISSUANCE OF THE NOTICE UNDER SECTION 143(2) OF THE ACT BY THE AO HAVING JURISDICTION OVER THE ASSESSEE RENDERS THE ASSESSME NT VOID AB INITIO . 24. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT THE STATUTORY NOTICES ARE GENERATED THROUGH THE COMPUTER SYSTEM. THEREFOR E, THERE IS NO ROLE OF THE OFFICER HAVING JURISDICTION OVER THE ASSESSEE F OR ISSUING SUCH NOTICE. THE LD. DR VEHEMENTLY SUPPORTED THE ORDER OF THE AU THORITIES BELOW. 25. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THERE IS NO DISP UTE TO THE FACT THAT THE NOTICE UNDER SECTION 143(2) OF THE ACT WAS NOT ISSU ED BY THE OFFICER ITA NOS.1071 & 1072/AHD/2013, CO NO.82/AHD/15 ITA NO.829/AHD/15 (BY REVENUE) &CO 83/AHD/15 CHAMUNDA FOUNDATION VS. CIT/ACIT ASST.YEARS -2009-10, 2010-11, 2011 -12 - 26 - HAVING JURISDICTION OVER THE ASSESSEE. AS SUCH THE STATUTORY NOTICE WAS ISSUED UNDER SECTION 143(2) OF THE ACT BY THE AO OF WARD 10(1) WHO DOESNT HAVE JURISDICTION OVER THE ASSESSEE. IT IS ALSO PERTINENT TO NOTE THAT THE ASSESSEE HAS OBJECTED BEFORE THE OFFICER HAVING JURISDICTION OVER IT REGARDING THE ISSUANCE OF SUCH NOTICE AS DISCUSSED ABOVE. NOW TO RESOLVE THE CONTROVERSY, AS DISCUSSED ABOVE, WE FIND IMPORTANT TO REFER THE JUDGMENT OF THE HONBLE GUJARAT HIGH COUR T IN THE CASE OF SHIRISHBHAI HARGOVANDAS SANJANWALA VS. ACIT REPORTE D IN 88 TAXMANN.COM 578 WHEREIN IT WAS HELD AS UNDER: HELD THAT THE ASSISTANT COMMISSIONER CIRCLE 5(2) H AD NO JURISDICTION TO ASSESS THE PETITIONER. SHE COULD NOT HAVE ISSUED NO TICE FOR REASSESSMENT. THIS WAS NOT A MERE IRREGULARITY OR A DEFECT WHICH COULD BE CURED, BUT QUESTION OF JURISDICTION OF THE AUTHORITY TO REOPEN THE ASSESSM ENT. THEREFORE, THE NOTICE WAS LIABLE TO BE QUASHED. WE ALSO NOTE THAT THE ASSESSEE BEFORE THE LEARNED C IT (A) HAS ALSO OBJECTED THE VALIDITY OF THE NOTICE ISSUED UNDER SE CTION 143(2) OF THE ACT. THE SUBMISSION OF THE ASSESSEE REASONS UNDER: THE APPELLANT TRUST HAS FILED ITS RETURN OF INCOME FOR THE YEAR UNDER REFERENCE PHYSICALLY SHOWING TOTAL DEFICIT OF RS.1, 40,71,711/- ON 29.03.2012 IN THE OFFICE OF THE LD.A.O. THE JURISDICTION OF THE APPELLANT TRUST FALLS WITHIN THE AMBIT OF THE LD.A.O. ONLY. THE APPELLANT TRUST HAS FILED ALL ITS RETURNS BEFORE THE LD.A.O. HAVING JURISDICTION OVER APPELLANT. AL L EARLIER NOTICES, SCRUTINY, ASSESSMENT ETC. HAD BEEN DEALT OUT BY THE LD.A.O. H AVING VALID JURISDICTION. THE APPELLANT TRUST HAD RECEIVED NOTICE U/S.143(2) OF THE ACT FROM THE INCOME TAX OFFICER, WARD 10(1) AHMEDABAD ON 27.09.2012 WHO HAS NO VALID JURISDICTION OVER THE APPELLANT TRUST. ITA NOS.1071 & 1072/AHD/2013, CO NO.82/AHD/15 ITA NO.829/AHD/15 (BY REVENUE) &CO 83/AHD/15 CHAMUNDA FOUNDATION VS. CIT/ACIT ASST.YEARS -2009-10, 2010-11, 2011 -12 - 27 - APPELLANT TRUST IS REGISTERED AS PUBLIC TRUST BY TH E CHARITY COMMISSIONER, GANDHINAGAR AND REGISTRATION U/S 12AA OF THE ACT & 80-G ARE GIVEN BY THE COMMISSIONER OF INCOME TAX GANDHINAGAR. IN NO CASE, THE JURISDICTION OF THE APPELLANT TRUST FALLS WITH ITO WARD 10(1) AHMEDABAD. THERE IS NOT A SINGLE INSTANCE WHICH SH OWS THAT THE JURISDICTION OF THE APPELLANT TRUST FALLS WITH THE ITO WARD 10(1 ), AHMEDABAD. THERE WAS NO ORDER PASSED U/S.127 OF THE ACT TO TRA NSFER THE JURISDICTION OF THE APPELLANT FROM THE LD.A.O. TO ITO WARD 10(1), A HMEDABAD. THE NOTICE U/S.143(2) OF THE ACT WAS ISSUED BY THE INCOME TAX OFFICER WARD 10(1), AHMEDABAD HAVING NO JURISDICTION OVER APPELL ANT, HENCE SAID NOTICE IS ILLEGAL AND BAD IN THE EYES OF LAW. ALL THE PROCEE DINGS CONDUCTED ON THE BASIS OF SAID ILLEGAL NOTICE IS ILLEGAL AND VOID AB INITI O. EVEN ASSESSMENT ORDER PASSED ON THE BASIS OF SAID NOTICE IS BAD AND REQUI RED TO BE QUASHED. APPELLANT HAS DRAWN THE ATTENTION OF THE LD.A.O. TH AT NO VALID NOTICE U/S. 143(2) OF THE ACT IS ISSUED BY HIM. APPELLANT ALSO OBJECTED THAT IN ABSENCE LEGAL AND VALID NOTICE U/S 143(2) OF THE ACT, ASSES SMENT PROCEEDINGS ARE ILLEGAL. THE LD. DR AT THE TIME OF THE HEARING HAS NOT BROUG HT ANYTHING ON RECORD AGAINST THE SUBMISSION OF THE ASSESSEE AS DISCUSSED ABOVE. IN VIEW OF THE ABOVE, WE HOLD THAT THE NOTICE ISSUE D BY THE AO HAVING NO JURISDICTION OVER THE ASSESSEE IS INVALID NOTICE WH ICH CANNOT BE CURED EVEN UNDER SECTION 292BB OF THE ACT. ACCORDINGLY, W E QUASH THE ASSESSMENT ORDER AS THE SAME IS NOT SUSTAINABLE IN THE EYES OF THE LAW. HENCE THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOW ED. THE OTHER GROUND RAISED BY THE ASSESSEE DOES NOT RE QUIRE ANY SEPARATE ADJUDICATION IN VIEW OF THE FACT THAT THE ORDER PAS SED BY THE AO WAS NOT ITA NOS.1071 & 1072/AHD/2013, CO NO.82/AHD/15 ITA NO.829/AHD/15 (BY REVENUE) &CO 83/AHD/15 CHAMUNDA FOUNDATION VS. CIT/ACIT ASST.YEARS -2009-10, 2010-11, 2011 -12 - 28 - SUSTAINABLE AS ELABORATED IN THE PRECEDING PARAGRAP H. ACCORDINGLY, WE ARE NOT INCLINED TO ADJUDICATE THE ISSUE RAISED BY THE ASSESSEE ON MERIT. HENCE WE DISMISS THE SAME. 26. IN THE RESULT, THE CROSS-OBJECTION NO.82/AHD /15 FILED BY THE ASSESSEE IS PARTLY ALLOWED. COMING TO REVENUES APPEAL IN ITA 829/AHD/2015 FOR AY 2011-12 27. THE REVENUE HAS RAISED THE FOLLOWING GROUND S OF APPEAL: 1) THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) HAS E RRED IN LAW AND ON FACTS IN HOLDING THAT THE ASSESSEES ACTIVITIES ARE IN THE NATURE OF EDUCATION AND NOT GENERAL PUBLIC UTILITY. II) THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) HA S ERRED IN LAW AND ON FACTS IN HOLDING THAT THE APPELLANT TRUST IS ELIGIB LE FOR GETTING DEDUCTION U/S.11. III) THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) H AS ERRED IN LAW AND ON FACTS IN ALLOWING DEPRECIATION ON THE ASSETS, THE C OST OF WHICH HAS ALREADY BEEN ALLOWED AS A DEDUCTION ON ACCOUNT OF APPLICATI ON OF INCOME AS THIS WOULD AMOUNT TO DOUBLE DEDUCTION. IV) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.COMMISSIONER OF INCOME-TAX (APPEALS) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. V) IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE L D. COMMISSIONER OF INCOME- TAX (APPEALS) MAY BE SET ASIDE AND THAT OF THE ASSE SSING OFFICER BE RESTORED. ITA NOS.1071 & 1072/AHD/2013, CO NO.82/AHD/15 ITA NO.829/AHD/15 (BY REVENUE) &CO 83/AHD/15 CHAMUNDA FOUNDATION VS. CIT/ACIT ASST.YEARS -2009-10, 2010-11, 2011 -12 - 29 - THE 1 ST ISSUE RAISED BY THE REVENUE IS THAT LD. CIT (A) ER RED IN HOLDING THAT THE ACTIVITIES OF THE ASSESSEE ARE IN THE NATU RE OF EDUCATION ACTIVITIES. 28. AT THE OUTSET, WE NOTE THAT WE HAVE DE CIDED THE IDENTICAL ISSUE IN FAVOR OF THE ASSESSEE IN ITA 1071/AHD/2013 VIDE PARA NUMBER OF 5 THIS ORDER. RESPECTFULLY FOLLOWING THE SAME, WE DO NOT FIND ANY REASON TO DISTURB THE FINDING OF THE LD. CIT (A). HENCE THE G ROUND OF APPEAL OF THE REVENUE IS DISMISSED. 29. THE 2 ND ISSUE RAISED BY THE REVENUE IS THAT THE LD.CIT (A) ERRED IN DELETING THE ADDITION MADE BY THE AO BY DISALLOWING THE DEPRECIATION ON THE ASSETS IN RESPECT OF WHICH THE ASSESSEE HAS ALR EADY CLAIMED THE DEDUCTION AS THE APPLICATION OF INCOME. THE AO DURING THE ASSESSMENT PROCEEDINGS FOUND THAT THE ASSESSEE HAS CLAIMED DEPRECIATION IN ITS PROFIT & LOSS ACCOUNTS AMOUNTING TO RS. 19,30,011/- HOWEVER, THE AO OBSERVED THAT IN CASE OF A TRUST, T HE ENTIRE BENEFIT OF CAPITAL EXPENDITURE IS GIVEN IN THE VERY FIRST YEAR IN WHICH THE ASSET WAS PURCHASED. THEREFORE FURTHER DEDUCTION BY WAY OF DE PRECIATION IS NOT ALLOWABLE. IF THE DEPRECIATION IS ALSO ALLOWED, THE N DEDUCTION SHALL EXCEED THE COST OF THE ASSET, WHICH IS NOT THE INTENTION/P URPOSE OF THE LAW. ITA NOS.1071 & 1072/AHD/2013, CO NO.82/AHD/15 ITA NO.829/AHD/15 (BY REVENUE) &CO 83/AHD/15 CHAMUNDA FOUNDATION VS. CIT/ACIT ASST.YEARS -2009-10, 2010-11, 2011 -12 - 30 - THE AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE T HE LD.CIT (A) WHO DELETED THE ADDITION MADE BY THE AO BY PLACING RELI ANCE ON THE JUDGMENT OF HONBLE ITAT AHMEDABAD IN CASE OF ITO (EXEMPTION ) VS. SARDAR PUBLIC CHARITABLE TRUST IN ITA NO 285 & 286/AHD/201 3 VIDE ORDER DATED 19/07/2013 WHERE THE HONBLE ITAT ALLOWED THE DEPRE CIATION. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT (A) THE REVENUE IS IN APPEAL BEFORE US. BOTH THE LD. DR AND THE LD. AR BEFORE US RELIED ON THE ORDERS OF THE AUTHORITIES BELOW AS FAVOURABLE TO THEM. 30. AT THE OUTSET, WE NOTE THAT THE ASSESSEE IS ENTITLED TO CLAIM THE ENTIRE AMOUNT OF CAPITAL EXPENDITURE AS THE APPLICA TION OF INCOME AS WELL AS IT CAN ALSO CLAIM THE DEPRECIATION ON SUCH CAPIT AL EXPENDITURE. REGARDING THIS WE FIND SUPPORT AND GUIDANCE FROM TH E JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF CIT V. RAJASTHAN & GUJARATI CHARITABLE FOUNDATION [2018] 89 TAXMANN.COM 127/253 TAXMAN 165/402 ITR 441 (SC) WHEREIN THEIR LORDSHIPS HAVE, INTER ALIA, OBSERVED AS FOLLOWS: IT IS A MATTER OF RECORD THAT ALL THE ASS ESSEES ARE CHARITABLE INSTITUTIONS REGISTERED UNDER SECTION 12A OF THE IN COME TAX ACT (HEREINAFTER REFERRED TO AS 'ACT'). FOR THIS REASON, IN THE PREV IOUS YEAR TO THE YEAR WITH WHICH WE ARE CONCERNED AND IN WHICH YEAR THE DEPRECIATION WAS CLAIMED, THE ENTIRE EXPENDITURE INCURRED FOR ACQUISITION OF CAPITAL ASS ETS WAS TREATED AS APPLICATION OF INCOME FOR CHARITABLE PURPOSES UNDER SECTION 11( 1)(A) OF THE ACT. THE VIEW ITA NOS.1071 & 1072/AHD/2013, CO NO.82/AHD/15 ITA NO.829/AHD/15 (BY REVENUE) &CO 83/AHD/15 CHAMUNDA FOUNDATION VS. CIT/ACIT ASST.YEARS -2009-10, 2010-11, 2011 -12 - 31 - TAKEN BY THE ASSESSING OFFICER IN DISALLOWING THE D EPRECIATION WHICH WAS CLAIMED UNDER SECTION 32 OF THE ACT WAS THAT ONCE T HE CAPITAL EXPENDITURE IS TREATED AS APPLICATION OF INCOME FOR CHARITABLE PUR POSES, THE ASSESSEES HAD VIRTUALLY ENJOYED A 100 PER CENT WRITE OFF OF THE C OST OF ASSETS AND, THEREFORE, THE GRANT OF DEPRECIATION WOULD AMOUNT TO GIVING DOUBLE BENEFIT TO THE ASSESSEE. THOUGH IT APPEARS THAT IN MOST OF THESE CASES, THE CIT (APPEALS) HAD AFFIRMED THE VIEW, BUT THE ITAT REVERSED THE SAME AND THE HI GH COURTS HAVE ACCEPTED THE DECISION OF THE ITAT THEREBY DISMISSING THE APPEALS OF THE INCOME TAX DEPARTMENT. FROM THE JUDGMENTS OF THE HIGH COURTS, IT CAN BE DISCERNED THAT THE HIGH COURTS HAVE PRIMARILY FOLLOWED THE JUDGMENT OF THE BOMBAY HIGH COURT IN 'CIT V. INSTITUTE OF BANKING PERSONNEL SELECTION (I BPS)' [2003] 131 TAXMAN 386 . IN THE SAID JUDGMENT, THE CONTENTION OF THE DEPARTM ENT PREDICATED ON DOUBLE BENEFIT WAS TURNED DOWN IN THE FOLLOWING MANNER: '3. AS STATED ABOVE, THE FIRST QUESTION WHICH REQUI RES CONSIDERATION BY THIS COURT IS: WHETHER DEPRECIATION WAS ALLOWABLE ON THE ASSET S, THE COST OF WHICH HAS BEEN FULLY ALLOWED AS APPLICATION OF INCOME UNDER SECTIO N 11 IN THE PAST YEARS? IN THE CASE OF CIT V. MUNISUVRAT JAIN 1994 TAX LAW REPORTE R, 1084 THE FACTS WERE AS FOLLOWS. THE ASSESSEE WAS A CHARITABLE TRUST. IT WA S REGISTERED AS A PUBLIC CHARITABLE TRUST. IT WAS ALSO REGISTERED WITH THE C OMMISSIONER OF INCOME TAX, PUNE. THE ASSESSEE DERIVED INCOME FROM THE TEMPLE P ROPERTY WHICH WAS A TRUST PROPERTY. DURING THE COURSE OF ASSESSMENT PROCEEDIN GS FOR ASSESSMENT YEARS 1977-78, 1978-79 AND 1979-80, THE ASSESSEE CLAIMED DEPRECIATION ON THE VALUE OF THE BUILDING @ 2% AND THEY ALSO CLAIMED DEPRECI ATION ON FURNITURE @ 5%. THE QUESTION WHICH AROSE BEFORE THE COURT FOR DETER MINATION WAS : WHETHER DEPRECIATION COULD BE DENIED TO THE ASSESSEE, AS EX PENDITURE ON ACQUISITION OF THE ASSETS HAD BEEN TREATED AS APPLICATION OF INCOM E IN THE YEAR OF ACQUISITION? IT WAS HELD BY THE BOMBAY HIGH COURT THAT SECTION 11 O F THE INCOME-TAX ACT MAKES PROVISION IN RESPECT OF COMPUTATION OF INCOME OF TH E TRUST FROM THE PROPERTY HELD FOR CHARITABLE OR RELIGIOUS PURPOSES AND IT ALSO PR OVIDES FOR APPLICATION AND ACCUMULATION OF INCOME. ON THE OTHER HAND, SECTION 28 OF THE INCOME-TAX ACT DEALS WITH CHARGEABILITY OF INCOME FROM PROFITS AND GAINS OF BUSINESS AND SECTION 29 PROVIDES THAT INCOME FROM PROFITS AND GAINS OF B USINESS SHALL BE COMPUTED IN ACCORDANCE WITH SECTION 30 TO SECTION 43C. THAT, SE CTION 32(1) OF THE ACT PROVIDES FOR DEPRECIATION IN RESPECT OF BUILDING, P LANT AND MACHINERY OWNED BY THE ASSESSEE AND USED FOR BUSINESS PURPOSES. IT FUR THER PROVIDES FOR DEDUCTION SUBJECT TO SECTION 34. IN THAT MATTER ALSO, A SIMIL AR ARGUMENT, AS IN THE PRESENT CASE, WAS ADVANCED ON BEHALF OF THE REVENUE, NAMELY , THAT DEPRECIATION CAN BE ALLOWED AS DEDUCTION ONLY UNDER SECTION 32 OF THE I NCOME-TAX ACT AND NOT UNDER GENERAL PRINCIPLES. THE COURT REJECTED THIS ARGUMEN T. IT WAS HELD THAT NORMAL DEPRECIATION CAN BE CONSIDERED AS A LEGITIMATE DEDU CTION IN COMPUTING THE REAL INCOME OF THE ASSESSEE ON GENERAL PRINCIPLES OR UND ER SECTION 11(1)(A) OF THE INCOME-TAX ACT. THE COURT REJECTED THE ARGUMENT ON BEHALF OF THE REVENUE THAT ITA NOS.1071 & 1072/AHD/2013, CO NO.82/AHD/15 ITA NO.829/AHD/15 (BY REVENUE) &CO 83/AHD/15 CHAMUNDA FOUNDATION VS. CIT/ACIT ASST.YEARS -2009-10, 2010-11, 2011 -12 - 32 - SECTION 32 OF THE INCOME-TAX ACT WAS THE ONLY SECTI ON GRANTING BENEFIT OF DEDUCTION ON ACCOUNT OF DEPRECIATION. IT WAS HELD T HAT INCOME OF A CHARITABLE TRUST DERIVED FROM BUILDING, PLANT AND MACHINERY AN D FURNITURE WAS LIABLE TO BE COMPUTED IN NORMAL COMMERCIAL MANNER ALTHOUGH THE T RUST MAY NOT BE CARRYING ON ANY BUSINESS AND THE ASSETS IN RESPECT WHEREOF D EPRECIATION IS CLAIMED MAY NOT BE BUSINESS ASSETS. IN ALL SUCH CASES, SECTION 32 OF THE INCOME-TAX ACT PROVIDING FOR DEPRECIATION FOR COMPUTATION OF INCOM E DERIVED FROM BUSINESS OR PROFESSION IS NOT APPLICABLE. HOWEVER, THE INCOME O F THE TRUST IS REQUIRED TO BE COMPUTED UNDER SECTION 11 ON COMMERCIAL PRINCIPLES AFTER PROVIDING FOR ALLOWANCE FOR NORMAL DEPRECIATION AND DEDUCTION THE REOF FROM GROSS INCOME OF THE TRUST. IN VIEW OF THE AFORESATATED JUDGMENT OF THE BOMBAY HIGH COURT, WE ANSWER QUESTION NO. 1 IN THE AFFIRMATIVE I.E., IN F AVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT. 4. QUESTION NO. 2 HEREIN IS IDENTICAL TO THE QUESTI ON WHICH WAS RAISED BEFORE THE BOMBAY HIGH COURT IN THE CASE OF DIRECTOR OF INCOME -TAX (EXEMPTION) V. FRAMJEE CAWASJEE INSTITUTE [1993] 109 CTR 463 . IN THAT CASE, THE FACTS WERE AS FOLLOWS: THE ASSESSEE WAS THE TRUST. IT DERIVED ITS INCOME FROM DEPRECIABLE ASSETS. THE ASSESSEE TOOK INTO ACCOUNT DEPRECIATION ON THOSE ASSETS IN COMPUTING THE INCOME OF THE TRUST. THE ITO HELD THAT DEPRECIA TION COULD NOT BE TAKEN INTO ACCOUNT BECAUSE, FULL CAPITAL EXPENDITURE HAD BEEN ALLOWED IN THE YEAR OF ACQUISITION OF THE ASSETS. THE ASSESSEE WENT IN APP EAL BEFORE THE ASSISTANT APPELLATE COMMISSIONER. THE APPEAL WAS REJECTED. TH E TRIBUNAL, HOWEVER, TOOK THE VIEW THAT WHEN THE ITO STATED THAT FULL EXPENDI TURE HAD BEEN ALLOWED IN THE YEAR OF ACQUISITION OF THE ASSETS, WHAT HE REALLY M EANT WAS THAT THE AMOUNT SPENT ON ACQUIRING THOSE ASSETS HAD BEEN TREATED AS 'APPL ICATION OF INCOME' OF THE TRUST IN THE YEAR IN WHICH THE INCOME WAS SPENT IN ACQUIR ING THOSE ASSETS. THIS DID NOT MEAN THAT IN COMPUTING INCOME FROM THOSE ASSETS IN SUBSEQUENT YEARS, DEPRECIATION IN RESPECT OF THOSE ASSETS CANNOT BE T AKEN INTO ACCOUNT. THIS VIEW OF THE TRIBUNAL HAS BEEN CONFIRMED BY THE BOMBAY HIGH COURT IN THE ABOVE JUDGMENT. HENCE, QUESTION NO. 2 IS COVERED BY THE D ECISION OF THE BOMBAY HIGH COURT IN THE ABOVE JUDGMENT. CONSEQUENTLY, QUESTION NO. 2 IS ANSWERED IN THE AFFIRMATIVE I.E., IN FAVOUR OF THE ASSESSEE AND AGA INST THE DEPARTMENT.' 2. AFTER HEARING LEARNED COUNSEL FOR THE PARTIES, W E ARE OF THE OPINION THAT THE AFORESAID VIEW TAKEN BY THE BOMBAY HIGH COURT CORRE CTLY STATES THE PRINCIPLES OF LAW AND THERE IS NO NEED TO INTERFERE WITH THE SAME . 3. IT MAY BE MENTIONED THAT MOST OF THE HIGH COURTS HAVE TAKEN THE AFORESAID VIEW WITH ONLY EXCEPTION THERETO BY THE HIGH COURT OF KERALA WHICH HAS TAKEN A CONTRARY VIEW IN 'LISSIE MEDICAL INSTITUTIONS V. CI T [2012] 24 TAXMANN.COM 9/209 TAXMAN 19 (MAG.)/348 ITR 344 '. ITA NOS.1071 & 1072/AHD/2013, CO NO.82/AHD/15 ITA NO.829/AHD/15 (BY REVENUE) &CO 83/AHD/15 CHAMUNDA FOUNDATION VS. CIT/ACIT ASST.YEARS -2009-10, 2010-11, 2011 -12 - 33 - 4. IT MAY ALSO BE MENTIONED AT THIS STAGE THAT THE LEGISLATURE, REALISING THAT THERE WAS NO SPECIFIC PROVISION IN THIS BEHALF IN THE INC OME-TAX ACT, HAS MADE AMENDMENT IN SECTION 11(6) OF THE ACT VIDE FINANCE ACT NO. 2/2014 WHICH BECAME EFFECTIVE FROM THE ASSESSMENT YEAR 2015-2016 . THE DELHI HIGH COURT HAS TAKEN THE VIEW AND RIGHTLY SO, THAT THE SAID AM ENDMENT IS PROSPECTIVE IN NATURE. 5. IT ALSO FOLLOWS THAT ONCE ASSESSEE IS ALLOWED DE PRECIATION, HE SHALL BE ENTITLED TO CARRY FORWARD THE DEPRECIATION AS WELL. RESPECTFULLY FOLLOWING THE ESTEEMED VIEWS OF HON'BL E SUPREME COURT, WE APPROVE THE CONCLUSIONS ARRIVED AT BY THE LD. CI T(A), WHICH ARE IN CONSONANCE WITH THE AFORESAID DECISION, AND DECLINE TO INTERFERE IN THE MATTER. HENCE THE GROUND OF APPEAL OF THE REVENUE I S DISMISSED. 31. IN THE RESULT, THE APPEAL FILED BY THE REV ENUE IS DISMISSED. COMING TO THE CO 83/AHD/ 2015 FOR AY 2011-12 FILED BY THE ASSESSEE 32. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN ITS CROSS OBJECTION: 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS UPHOLD ING DISALLOWANCE U/S.40A(IA) OF THE ACT FOR CONSULTANCY EXPENSES OF RS.3,14,666/-. 2. THE APPELLANT CRAVES LIBERTY TO ADD, AMEND, ALT ER OR MODIFY ALL OR ANY GROUNDS OF APPEAL BEFORE FINAL HEARING. ITA NOS.1071 & 1072/AHD/2013, CO NO.82/AHD/15 ITA NO.829/AHD/15 (BY REVENUE) &CO 83/AHD/15 CHAMUNDA FOUNDATION VS. CIT/ACIT ASST.YEARS -2009-10, 2010-11, 2011 -12 - 34 - THE ONLY ISSUE RAISED BY THE ASSESSEE IS THAT THE L D. CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE MADE BY THE AO FOR RS. 3,14,666/- ON ACCOUNT OF NON-DEDUCTION OF TDS UNDER SECTION 40(A) (IA) OF THE ACT IN RESPECT OF CONSULTANCY EXPENSES. THE AO DURING THE ASSESSMENT PROCEEDINGS OBSERVED T HAT THE ASSESSEE HAD NOT DEDUCTED THE TDS IN RESPECT OF CERTAIN EXPE NSES, INCLUDING CONSULTANCY EXPENSES. THEREFORE THE SAME WAS DISALL OWED BY THE AO AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE AMOUNTING TO RS. 1,01,16,942/- INCLUDING CONSULTANCY EXPENSE OF RS. 3,14,666/- ONL Y. THE ASSESSEE CARRIED THE MATTER TO THE LD.CIT (A) W HO DISMISSED THE APPEAL OF THE ASSESSEE IN PART EXCEPT FOR THE CONSU LTANCY FEES AMOUNTING TO RS. 3,14,666.00 BY OBSERVING THAT THE ASSESSEE H AS NOT RAISED GROUND OF APPEAL QUA THE AMOUNT OF NON-DEDUCTION OF TDS ON CO NSULTANCY CHARGES. BEING AGGRIEVED BY THE ORDER OF THE LD.CIT (A) THE ASSESSEE IS IN CO BEFORE US. 33. THE LD. AR BEFORE US PLACED THE PAPER BOOK RU NNING FROM PAGES 1 TO 37 AND SUBMITTED THAT THE ISSUE OF NON-DEDUCTION OF TDS IS ARISING FROM THE ORDER OF THE AO. HOWEVER, THE ASSESSEE INA DVERTENTLY MENTIONED ITA NOS.1071 & 1072/AHD/2013, CO NO.82/AHD/15 ITA NO.829/AHD/15 (BY REVENUE) &CO 83/AHD/15 CHAMUNDA FOUNDATION VS. CIT/ACIT ASST.YEARS -2009-10, 2010-11, 2011 -12 - 35 - IN THE GROUND OF APPEAL, THE AMOUNT OF RS. 98,02,27 6/- INSTEAD OF RS. 1,01,16,942/- DISALLOWED BY THE AO IN THE APPEAL FI LED BEFORE THE LD.CIT (A). ACCORDINGLY, THE LD. AR PRAYED BEFORE US TO RE STORE THE ISSUE TO THE FILE OF THE AO FOR FRESH ADJUDICATION. 34. ON THE OTHER HAND, THE LD. DR DID NOT RAISE ANY OBJECTION IF THE MATTER IS SET ASIDE TO THE FILE OF THE LD. CIT(A) F OR FRESH ADJUDICATION. 35. HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET, WE NOTE THAT THE AO ALLEGES THAT THE ASSESSEE HAS NOT DEDUCTED THE TDS ON CERTAIN EXPENSES. THEREFORE THE DISALLOWANCE IS WARRANTED. HOWEVER, ON PERUSAL OF PAGE 28 OF THE PA PER BOOK, WE NOTE THAT THE ASSESSEE HAS DEDUCTED THE TDS. HOWEVER, TH IS FACT HAS NOT BEEN VERIFIED BY THE LD. CIT-A. THEREFORE IN THE INTERES T OF JUSTICE AND FAIR PLAY, WE ARE INCLINED TO RESTORE THIS ISSUE TO THE FILE OF THE LD. CIT-A FOR FRESH ADJUDICATION AS PER THE PROVISIONS OF LAW. HE NCE, THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL P URPOSES. 36. IN THE RESULT, THE CO NO.83/AHD/2015 FILED B Y THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ITA NOS.1071 & 1072/AHD/2013, CO NO.82/AHD/15 ITA NO.829/AHD/15 (BY REVENUE) &CO 83/AHD/15 CHAMUNDA FOUNDATION VS. CIT/ACIT ASST.YEARS -2009-10, 2010-11, 2011 -12 - 36 - 37. WE SUMMARIZE THE RESULT IS AS UNDER: 1. ITA NO.1071/AHD/2013 FILED BY THE ASSESSEE IS ALLOWED. 2. ITA NO.1072/AHD/2013 FOR AY 2009-10 FILED BY THE ASSESSEE IS PARTLY ALLOWED. 3. ITA NO.829/AHD/2015 FOR AY 2011-12 FILED BY THE REVENUE IS DISMISSED. 4. CO NO.82/AHD/2015 FOR AY 2010-11 FILED BY THE AS SESSEE IS PARTLY ALLOWED. 5. CO NO.83/AHD/2015 FOR AY 2011-12 FILED BY THE AS SESSEE IS ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER PRONOUNCED IN OPEN COURT ON 31/05/2019 SD/ SD/- (MS. MADHUMITA ROY) (WASEEM A HMED) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 31/05/2019 .. ,... / T.C. NAIR, SR. PS / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. '# ! / THE RESPONDENT. 3. $%$&' ( / CONCERNED CIT 4. ( ( ) / THE CIT(A)-GANDHINAGAR 5. +,-'&' , &' , % / DR, ITAT, AHMEDABAD 6. -012 / GUARD FILE. / BY ORDER, #+' //TRUE COPY// / ( DY./ASSTT.REGISTRAR) !, / ITAT, AHMEDABAD