The Asstt. Commissioner of Income Tax (Exemptions), Circle-1, Ahmedabad V. Bholaram Education Society, Gandhinagar

ITA 848/AHD/2019

AI Insights

The case involves the Income Tax Appellate Tribunal Ahmedabad 'A' Bench hearing an appeal by the ACIT (Exemption) against the Bholaram Education Trust. The dispute centered on the assessment order for the Assessment Year 2015-16, where the Assessing Officer had made several additions to the income of the trust, including disallowances related to rent paid to trustees and treatment of a development fund as a revenue receipt. The Commissioner of Income Tax (Appeals) had reversed these additions, leading to the Revenue's appeal to the Tribunal. The Tribunal, referencing previous judgments and the specific circumstances of the case, upheld the CIT(A)'s decision, dismissing the Revenue's appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 114109 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 5 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 20-09-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 14-05-2019
• Other Referred Cases: Tax Appeal No. 306 of 2018, SLP (CIVIL) Diary No. 44677/2018, ITA No. 92/Ahd/2014, ITA No. 3041/Ahd/2016, ITA No. 2422/Ahd/2017
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Charitable institution; Fair market value; Valuation report; Capital receipt; Benefit of exemption; Capital expenditure
• Section: 12; 11; 143(3); 80G; 12AA; 13(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “A” BENCH Before: Smt. Annapurna Gupta, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member ACIT (Exemption), Circle-1, Ahmedabad (Appellant) Vs Bholaram Education Trust, C/o. Delhi Public School, Ambapur, Village, Nr. Koba Circle, Gandhinagar-382 421 (Gujarat) PAN: AAATB8415E (Respondent) Revenue Represented: Shri Akhilendra Pratap Yadav,CIT-DR Assessee Represented: Shri M.K.Patel, A.R. Date of hearing : 21-09-2023 Date of pronouncement : 10-11-2023 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:- This appeal is filed by the Revenue as against the appellate order dated 08.03.2019 passed by the Commissioner of Income Tax (Appeals)-9, Ahmedabad arising out of the assessment order passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year 2015-16. ITA No. 848/Ahd/2019 Assessment Year 2015-16 I.T.A No. 848/Ahd/2019 A.Y. 2015-16 Page No ACIT Vs. Bholaram Education Society 2 2. The brief facts of the case is that the assessee is a trust registered under the Society Registration Act engaged in the field of education and healthcare activities and it runs Delhi Public School, Goenka Research Institute and Goenka School. For the Assessment Year 2015-16, the assessee filed its Return of Income declaring Nil income. The return was taken up for complete scrutiny assessment and called for various details with regard to the activities and other financial aspect of the assessee Trust. 2.1. The Ld. A.O. noticed that assessee has paid building rent of Rs. 3,68,61,994/- to Smt. Manju Goenka and Shri Ramesh Prasad Goenka HUF and both these persons were trustees of the assessee Trust. The Assessing Officer has stated in Assessment Year 2010- 11 on the basis of similar fact it was held that undue benefit was taken by the Trustees being the specified persons and accordingly, provision of section 13(2) was applied to the case of the assessee Trust. The Assessing Officer has also stated that there appeared to be a business motive of giving premises owned by the individual to the Trust in which the individual are a trustee as well. 2.2. The Ld. A.O. further noticed that assessee has received development fund and same was claimed as exempt u/s. 11(1)(d) of the Act. The assessing officer show caused the assessee to explain why not the said development fund should be treated as revenue receipt. The assessee explained that said development fund was required to be spent as and when required for the development purpose of the children's education in the school and the said fund is collected and utilized for the purpose of development of activities I.T.A No. 848/Ahd/2019 A.Y. 2015-16 Page No ACIT Vs. Bholaram Education Society 3 in the school for the children such as swimming pool, cricket ground and other related educational activities. It is further submitted that the said fund was shown as liability in balance sheet, since the said fund was separate fund collected from the students for which the school was liable to spend, the same at any moment as and when required for the benefit of the students. The assessing officer has not accepted the above explanation of the assessee and was of the view that said development fund was part of one time admission fees and it was not a voluntary contribution. Thus the A.O. observed that development fees was a revenue income of the assessee and not capital receipt as claimed by the assessee and denied exemption u/s. 11(1)(d) of the Act. Accordingly, the Ld. A.O. treated the one time admission fees of Rs. 27,86,000/- as revenue receipt and added to the total income of the assessee. The A.O. also made other disallowances on capital expenditure and claim of donation. 3. Aggrieved against the assessment order, the assessee filed an appeal before Commissioner of Income Tax (Appeals). The Ld. CIT(A) following his predecessors order relating to the Assessment Year 2010-11 deleted the various additions and partly allowed the appeal in favour of the assessee. 4. Aggrieved against the same, the Revenue is in appeal before us raising the following Grounds of Appeal: 1. The Ld. CIT(A) has erred in law and on fact in neglecting the findings of A.O. regarding applicability of section 13(1)(c)(ii) of the Act. 2. The Ld. CIT(A) has erred in law and on facts in neglecting the findings of A.O. regarding justified in giving the benefit of section 11 & 12 to the assessee which the Assessing Officer disallowed by invoking the provisions of section 13(1)(c)(ii). I.T.A No. 848/Ahd/2019 A.Y. 2015-16 Page No ACIT Vs. Bholaram Education Society 4 3. The Ld. CIT(A) has erred in law and on facts in deleting the addition of expenses on travelling. 4. The Ld. CIT(A) has erred in law and on facts in deleting the addition of development fund of Rs.27,86,000/- 5. The Ld. CIT(A) has erred in law and on facts in deleting the addition of capital expenditure of Rs.4,65,47,552/- 6. The Ld. CIT(A) has erred in law and on facts in deleting the addition of expenses on donation of Rs. 75,00,000/-. 7. The Revenue craves to add, alter, amend, modify, substitute, delete and/or rescind all or any Grounds of Appeal on or before the final hearing, in necessity so arises. 5. Regarding Ground Nos. 1 & 2, that Ld. CIT(A) erred in holding that Section 13(1)(c)(ii) is not applicable and assessee is entitled to benefit of Section 11 & 12. 5.1. Ld. Counsel Mr. M.K. Patel appearing for the assessee submitted that this very same issue travelled to the Jurisdictional High Court by way of Revenue appeal and the same was dismissed vide order dated 10.04.2018 in Tax Appeal No. 306 of 2018. Further Revenue’s SLP before Supreme Court was also dismissed vide order dated 14.12.2018 in SLP (CIVIL) Diary No. 44677/2018, the same are placed at Page Nos. 26 to 31 of the Paper Book. Thus the Ld. Counsel submitted that the Grounds to be allowed is favour of the assessee. 6. Per contra, The Ld. CIT-DR Shri Akhilendra Pratap Yadav appearing for the Revenue could not dispute the dismissal of Revenue appeal’s before High Court and Supreme Court. 7. We have considered the rival submissions and perused the materials available on record. The Hon’ble High Court Gujarat in I.T.A No. 848/Ahd/2019 A.Y. 2015-16 Page No ACIT Vs. Bholaram Education Society 5 assessee’s own case for the Assessment Year 2010-11 in Tax Appeal No. 306 of 2018 held as follows: “....3. We would first address the question of payment of rent to the trustees or their HUF. Respondent-assessee is a trust running a school at Gandhinagar. For the period relevant to the assessment year 2010-11, the assessee had paid a rent of Rs. 1.98 crores for land and building which was used for the purpose of the school. The Assessing Officer held that such payment breached section 13(1)(c) of the Income Tax Act. In appeal, the CIT (Appeals) however, examined the issue at considerable length and noted that the Assessing Officer had held that such rent was excessive without any comparison. The materials on record suggested that the trust had utilized 36,355 sq.mtrs of NA land and further 1 lac sq.mtrs of agriculture land for the purpose of running the school. NA land also carried construction carried out at a cost of Rs. 1.10 crores and 3.56 crores totaling to Rs. 4.67 crores. Such land and building were leased to the trust for a period of 30 years. The assessee had also produced a valuation report obtained from the government approved valuer. As per this report, the valuation of the NA land was Rs. 9.10 crores and the value of construction would come to Rs. 13.08 crores. Thus, a total amount of valuation of land and building came to Rs. 25.66 crores. It was pointed out that the current fair market value of the property would come to Rs. 36.28 crores and the rent had been valued as per the prevailing rate fixed for the purpose of stamp duty. The assessee also pointed out that if 10% fair return on the investment was considered, the rent would come to Rs. 3.60 crores per annum as against which, rent of Rs. 1.98 crores was paid. The CIT (Appeals) was also influenced by the fact that the lease had a locking period of 30 years. Primarily on such grounds, the CIT (Appeal) was prompted to reverse the view of the Assessing Officer. Tribunal confirmed the view. Thereupon, the appeal has been filed. 4. It can be seen that the entire issue is in the realm of appreciation of materials on record. CIT (Appeals) and the Tribunal concurrently came to the conclusion that the rent was not excessive. The application under section 13(1)(c) of the Income Tax Act therefore would be ruled out. Remaining disallowances being consequential to the main one, no further discussion is necessary when we do not find any reason to interfere in connection with the main issue. In the result, Tax Appeal is dismissed” 7.1. This above High Court judgment is confirmed by Hon’ble Supreme Court by dismissing the SLP filed by the Revenue vide order dated 14.12.2018. Thus respectfully following the Jurisdictional High Court Judgment, Ground Nos. 1 & 2 raised by the Revenue are hereby dismissed and the assessee is entitled for benefit of exemption u/s. 11 & 12 of the Act. I.T.A No. 848/Ahd/2019 A.Y. 2015-16 Page No ACIT Vs. Bholaram Education Society 6 8. Ground No. 3 Ld. CIT(A) erred in deleting the addition of traveling expenses. 8.1. This issue does not arise from the assessment order and as no disallowances on travelling expenses, therefore this ground is also dismissed. 9. Ground No. 4 Ld. CIT(A) erred in deleting the addition of development fund of Rs. 27,86,000/-. 9.1. Ld. Counsel has brought to our notice that identical issue has been decided by Co-ordinate Bench of this Tribunal in assessee’s own case for the Assessment Year 2010-11 in ITA No. 92/Ahd/2014 dated 14.09.2017 which is confirmed by Hon’ble High Court and Supreme Court and Co-ordinate Benches orders in ITA No. 3041/Ahd/2016 dated 29.03.2019 for Assessment Year 2012-13 and ITA No. 2422/Ahd/2017 dated 15.11.2019 for the Assessment Year 2014-15 wherein held as under: “.....14. We have heard the rival contentions and perused the materials available on record. At the outset, we note that the tribunal in the own case of the assessee bearing ITA No. 92/AHD/2014 pertaining to the assessment year 2010-11 decided the issue against the Revenue and in favor of the assessee vide order dated 14-9-2017. The relevant extract of the order is extracted below. "8. The Revenue's fifth substantive ground seeks to revive Assessing Officer's action treating development fund amount of Rs.32,69,000/- as assessee's taxable income. We notice herein as well that the Assessing Officer made the impugned addition in page 8 without discussing anything on merits. The CIT(A) on the other hand decides the issue in assessee's favour as under: "10. I have considered the facts of the case, assessment order and the submission made by the Appellant. The A.O. has nowhere in his order discussed the reasons as to why the said addition of Rs.32,69,000/- is made. It is seen that the above figure appears in the balance sheet as addition to I.T.A No. 848/Ahd/2019 A.Y. 2015-16 Page No ACIT Vs. Bholaram Education Society 7 Development Fund and the A.O. has considered the said Development Fund as income because he has treated the Trust as AOP. As I have already decided the status of the appellant as 'Registered Trust" as per sec. 11 and 12 of the Act in Ground No. 1, 2 & 3 (supra). Therefore, this addition does not survive. Even otherwise, on the merits as submitted in the written submission, the Appellant has received the said Development Fund and also used for the purpose for which it was received. The said fund was received earmarked as "Development Fund" and it was used for the development activities, as is apparent from Audited Balance sheet submitted during the appellate proceedings. It is also seen that as per balance sheet, the entire fund has been utilized. The balance sheet indicates the head of "Development Fund (Utilised) Account" of Rs. 1,66, 15,000/-, which is more than the alleged Development Fund of Rs. 32,69,000/-. Thus this ground of Appeal is allowed and the A.O. is directed not to consider the development fund as part of income. 9. Heard both the parties. Relevant findings perused. It is no more in dispute that this assessee is a registered trust(supra) Learned counsel for the assessee takes us to pages 16 to 18 of the paper book indicating it to have utilized the impugned development fund in relevant previous year. A co-ordinate bench in ITO vs. J. D. Tytler School Society (2014) 49 taxmann.com 294 (Delhi) holds that such a development fund forming part of student fee as utilized in their amenities and welfare is in the nature of capital receipt not assesseable as income. We therefore find no reason to upset CIT(A)'s above extracted conclusion. This fifth substantive ground is accordingly rejected." 9.2. There is no change in the facts of the present case as far as this development fund is concerned except change in figures. Therefore respectfully following the Co-ordinate Bench decision in assessee’s own case, this ground of appeal raised by the Revenue is hereby dismissed. 10. Ground No. 5 Ld.CIT(A) erred in law in deleting the addition of capital expenditure of Rs. 4,65,47,552/-. I.T.A No. 848/Ahd/2019 A.Y. 2015-16 Page No ACIT Vs. Bholaram Education Society 8 10.1. The Ld. CIT(A) considered the issue in detail and passed the following order: “.....8.2 I have considered the facts of the case, assessment order and submission made by the appellant. It is seen that similar addition made by the AO had been allowed in favour of the appellant for A.Y.2010-11 by the CIT(A), Gandhinagar by holding as under :- "12.2 I have considered the facts of the case, assessment order as well as the submission of the Appellant. On page No. 8, para 1 of the assessment order, the A.O. has concluded that when the principal amount was applied for acquiring assets, it was treated as applied for charitable purpose and entire amount was claimed u/s. 11. The A.O. has not considered that there are two separate issues i.e. one is application of income, and second is computation of income. So far as application of income is concerned, amount applied for acquiring fixed assets is covered u/s. 11(1)(a) and the same is allowable as income applied for charitable or religious purpose, and the second is allowability of depreciation in computation of income. I have considered various judgments cited by the appellant and as held by the Hon'ble Supreme Court in the case of S.RM.M.CT.M Tiruppani Trust v. CIT [1998] 230 ITR 636 and CIT v. Tiny tots Education Society 330 ITR 21 (P&H) as well as the decision of the Gujarat High Court in the case of Satya Vijay Patel Hindu Dharmashala Trust v. CIT 86 ITR 683 wherein it has been "Held that the amount spent by the trustee in the construction of the new dharamshala was an application of income towards the charitable purposes of the trust". In all the judgments it has been held by the higher authorities that the amount utilized for acquiring Fixed assets is allowable as application of income as per sec. 11(1)(a) of the Act. There are two separate issues one is pertaining to application of income and other is computation of income. In application of income of trust, amount applied for acquiring fixed assets is considered as eligible, therefore this ground of appeal is allowed and AO is directed to allow amount of investment in the fixed assets as part of application of income as per sec, 11(1)(a)." Following the above findings, amount applied for acquiring fixed assets is considered as eligible, therefore this ground of appeal is allowed and AO is directed to allow amount of investment in the fixed assets as part of application of income as per sec. 11(1)(a) “Since the facts of the matter in hand are similar to one decided in earlier years and agreeing with the same, I do not find any reason to deviate from the decision taken in AYS 2010-11. Therefore, the AO is hereby directed to delete the addition made of Rs.6,62,45,376/- and allow the amount of investment in the fixed assets as part of application of income. However, I.T.A No. 848/Ahd/2019 A.Y. 2015-16 Page No ACIT Vs. Bholaram Education Society 9 while doing so, no expenditure on investment in fixed assets out of the capital or corpus receipts would be allowable as application of income u/s. 11(1)(a). The A.O is directed to verify the same. Accordingly, ground of appeal no.8 is allowed.” 10.2. The Hon’ble High Court in Tax Appeal No. 306 of 2018 held that remaining disallowances being consequential to the main one (application u/s. 13(1)(c) of the Act), no further discussion is necessary when the High Court do not find any reason to interfere in connection with the main issue and thus Revenue appeal is dismissed. As the assessee is held to be eligible for exemption u/s. 11 of the Act, therefore the capital expenditure is to be allowed as application of income. Thus the Ground No. 5 raised by the Revenue is hereby dismissed. 11. Ground No. 6 Ld. CIT(A) erred in law in deleting the donation of Rs. 75,00,000/-. 11.1. The Ld. CIT(A) after considering the issue in detail, deleted the addition as follows: “.....The case of the A.O is that donation will be allowed only on the basis of donee having registration u/s 80G As the appellant has furnished copy of 12AA and 80G certificates of the above trust i.e. Symphony Foundation, he has allowed 50% of the donation payment and balance 50% i.e.Rs.75,00,000/- was disallowed and added back to the total income of the appellant. The appellant's contention is that Symphony Foundation is also having similar set of objects which include relief to poor, education, medical relief and advancement of any other object to general public utility not involving the activity for profits. Therefore, this amount is proper application of funds by the appellant trust and hence required to be allowed 100%. In the return of income filed also, the appellant has not claimed any deduction u/s.80G of the Act, rather it has treated the contribution as the application of funds for the objects of the trust. On a careful consideration of the facts as available on record, the contention of the appellant is found to be legally correct. As both the appellant as well as the recipient trust are engaged in the same kind of charitable activities, therefore, the donation given to the Symphony Foundation has to be treated as an application of the fund for the objects of the trust. Further, in I.T.A No. 848/Ahd/2019 A.Y. 2015-16 Page No ACIT Vs. Bholaram Education Society 10 the return of income filed also, the appellant has not claimed any deduction u/s.80G which proves that from very beginning, the appellant has treated this contribution as application of the funds. Considering these facts, the A.O is directed to delete the addition so made. This ground of appeal is thus allowed.” 11.2. The Ld. D.R. could not produce any contra findings on the issue of donation. Thus the appeal filed by the Revenue are devoid of merits and the same is dismissed. 12. In the result, the appeal filed by the Revenue is hereby dismissed. Order pronounced in the open court on 10-11-2023 Sd/- Sd/- (ANNAPURNA GUPTA) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad : Dated 10/11/2023 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपीलȣय अͬधकरण, अहमदाबाद