Sarojini Naidu Vanita Pharmacy Maha Vidyalaya, Hyd, Hyderabad V. ADIT (Exemptions)-1, Hyd, Hyderabad

ITA 849/HYD/2015

• Counselvise Citation: 84922514 RSA 2015
• Duration Of Justice: 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 23-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G SURYA PRASAD
• Assessee Lawyers: C P RAMASWAMI
• Keywords: Depreciation
• Section: 143(3); 10; 154; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 849/HYD/2015 ASSESSMENT YEAR: 2007-08 SAROJINI NAIDU VANITA PHARMACY MAHA VIDYALAYA, HYDERABAD. PAN AADAS1055R VS. ADDL. DIRECTOR OF INCOME-TAX, (EXEMPTION), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI C.P. RAMASWAMI REVENUE BY : SHRI G. SURYA PRASAD DATE OF HEARING 24-09-2015 DATE OF PRONOUNCEMENT 04-11-2015 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE OR DER DATED 24/04/2015 OF LD. CIT(A)-9, HYDERABAD FOR THE AY 20 07-08. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT, THE ASSE SSEE FILED ITS RETURN OF INCOME FOR THE AY UNDER CONSIDERATION DEC LARING NIL INCOME AFTER CLAIMING EXEMPTION U/S 10(23C)(VI) OF THE INC OME-TAX ACT, 1961 (ACT). ASSESSMENT WAS COMPLETED U/S 143(3) ON 29/12 /2009 DETERMINING TOTAL INCOME AT RS. 1,37,95,149/- BY DI SALLOWING 1) EXEMPTION CLAIMED U/S 10(23C)(VI) AS ASSESSEE DID N OT GET APPROVAL U/S 10(23C)(VI), 2) DEPRECIATION CLAIM OF RS. 30,88 ,320 AND 3) RESERVE FOR CONSTRUCTION OF BUILDING OF RS. 95,00,0 00/-. ON APPEAL, LD. CIT(A) ALLOWED DEPRECIATION CLAIMED BY ASSESSEE AND CONFIRMED THE OTHER ADDITIONS MADE BY AO. AGAINST THE ORDER O F LD. CIT(A), REVENUE PREFERRED APPEAL BEFORE THE TRIBUNAL. ACCOR DING TO THE AO, 2 ITA NO. 849 /HYD/2015 SAROJINI NAIDU VANITA PHARMACY MAHA VIDYALAYA THE TRIBUNAL VIDE ITS ORDER DATED 16/04/2012 IN ITA NO. 725/HYD/2011 HAS GIVEN DIRECTIONS TO AO AS UNDER: THE AO IS DIRECTED TO VERIFY IN RESPECT OF EACH ASS ET ON WHICH DEPRECIATION CLAIMED, WHETHER THE VALUE OF SUCH AS SET WAS IN FACT ALLOWED U/S 11 AND IF IT WAS SO ALLOWED, THE DEPRECIATION WOULD NOT BE ALLOWED IN RESPECT OF SUCH ASSET 3. EVEN THOUGH, THE ASSESSEE BROUGHT TO THE NOTICE OF AO THAT APPROVAL U/S 10(23C)(VI) WAS GRANTED ON 16/08/2011 FOR THE AY UNDER CONSIDERATION AND A COPY OF WHICH WAS FILED BEFORE AO, AO DENIED EXEMPTION U/S 10(23C)(VI) OBSERVING AS THE ASSESSEE COLLECTED DEVELOPMENT FEE FROM THE STUDENTS AGAINST THE GOVT. G.OS ALSO AO DISALLOWED DEPRECIATION SINCE ASSESSEE CLAIMED COST OF ASSETS AS APPLICATION OF INCOME IN THE EARLIER ASSESSMENT YEA RS. THE ASSESSEE MOVED AN APPLICATION U/S 154 WHEREIN, POINTING OUT THE APPARENT MISTAKES IN THE ORDER I.E. WHEN APPROVAL U/S 10(23C )(VI) IS IN FORCE EXEMPTION U/S 10 CANNOT BE DENIED AND COST OF FIXED ASSETS WAS NOT CLAIMED NOR ALLOWED AS APPLICATION OF INCOME IN THE EARLIER YEARS BECAUSE INCOME WAS EXEMPT U/S 10(23C)(IIIAD) UP TO AY 2006-07. HOWEVER, THE AO REJECTED THE APPLICATION OF ASSESSE E U/S 154 OBSERVING THAT THERE WAS NO MISTAKE APPARENT FROM R ECORD. 4. AGGRIEVED BY THE ORDER OF AO, ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A) CHALLENGING THE REJECTION OF APPLICA TION U/S 154. 5. LD. CIT(A) UPHELD THE ACTION OF AO BY HOLDING TH AT IN THE ABSENCE OF ANY INFORMATION ON RECORD, THERE IS NOTH ING TO SUGGEST THAT THERE WAS A MISTAKE APPARENT FROM THE RECORD SINCE THERE IS SIMPLY NO INFORMATION OR DOCUMENTS AVAILABLE ON RECORD WITH T HE A.O. 6. AGGRIEVED BY THE ORDER OF LD. CIT(A) ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL RAISING THE FOLLOWING GROUNDS O F APPEAL: 1) THE ORDER OF THE LEARNED CIT(APPEALS) IS AGAINST LAW, WEIGHT OF EVIDENCE AND PROBABILITIES OF THE CASE. 2) A) THE LEARNED CIT(APPEALS) GROSSLY ERRED IN IG NORING THE APPROVAL GRANTED BY THE CHIEF COMMISSIONER OF INCOME-TAX-II I, HYDERABAD U/S.L0(23C)(VI) TO THE APPELLANT BY OBSERVING THAT THE SAME WAS NOT 3 ITA NO. 849 /HYD/2015 SAROJINI NAIDU VANITA PHARMACY MAHA VIDYALAYA ADJUDICATED BY THE HON'BLE ITAT. CONSEQUENTLY, SH E ERRED IN DISMISSING THE APPEAL. B) THE LEARNED CIT(APPEALS) FAILED TO APPRECIATE T HAT ONCE THE APPELLANT INSTITUTION WAS APPROVED U/S.10(23C)(VI) BY THE CCIT IT WAS BINDING ON ALL THE AUTHORITIES CONCERNED AND CONS EQUENTLY SHE WAS OBLIGED TO TAKE THE SAME INTO COGNIZANCE. C) THE LEARNED CIT(APPEALS) FAILED TO APPRECIATE T HAT MISTAKE OF LAW IS ALSO AN APPARENT MISTAKE AND THAT FAILURE OF THE ASSESSING OFFICER TO GIVE EFFECT TO THE APPROVAL U/S.L0(23C)(VI) SHOUL D NOT HAVE BEEN UPHELD BY HER BY OBSERVING THAT APPLICATION U/S.154 WAS RIGH TLY REJECTED. 3) THE LEARNED CIT(APPEALS) ERRED IN CONFIRMING TH E DISALLOWANCE OF DEPRECIATION DESPITE THE FACT THAT COST OF FIXED ASSETS WAS NEVER CLAIMED AS APPLICATION OF INCOME PRIOR TO THE ASSESSMENT YEAR 2007-08. SHE OUGHT TO HAVE DELETED THE DISALLOWANCE. 7. BEFORE US, LD. AR SUBMITTED THAT CCIT HAS GRANTE D APPROVAL U/S 10(23C)(VI) TO ASSESSEE VIDE APPROVAL DATED 16/08/2 011, A COPY OF WHICH IS AVAILABLE ON RECORD. LD. AR ALSO SUBMITTED THAT ONCE ASSESSEE WAS GRANTED APPROVAL U/S 10(23)(VI) BY CCI T, IT WAS BINDING ON ALL THE CONCERNED AUTHORITIES. THEREFORE, AO SHO ULD HAVE CONSIDERED THE APPROVAL GRANTED BY CCIT AND RECTIFI ED THE MISTAKE APPARENT ON RECORD U/S 154 OF THE ACT. 8. LD. DR, ON THE OTHER HAND SUPPORTED THE ORDERS O F REVENUE AUTHORITIES. 9. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD AS WELL AS THE ORDERS OF REV ENUE AUTHORITIES. IT IS OBSERVED THAT AO HAS EXTRACTED THE DIRECTIONS OF THE ITAT IN THE ASSESSMENT ORDER, WHICH ARE AS UNDER: THE AO IS DIRECTED TO VERIFY IN RESPECT OF EACH ASS ET ON WHICH DEPRECIATION CLAIMED, WHETHER THE VALUE OF SUCH AS SET WAS IN FACT ALLOWED U/S 11 AND IF IT WAS SO ALLOWED, THE DEPRECIATION WOULD NOT BE ALLOWED IN RESPECT OF SUCH ASSET 9.1 FOR THE ABOVE DIRECTIONS, AO HAS WRONGLY QUOTED THE ITA REFERENCE NO. AS 725/HYD/2011 DATED 16/04/12 WHEREA S THE CORRECT ORDER WAS ITA NO. 888/HYD/2011 DATED 17/04/2012. NO T ONLY THE AO HAD REFERRED WRONG ITA REFERENCE, EVEN THE DIRECTIO N OF THE ITAT EXTRACTED WAS WRONG. HONBLE ITAT IN ITS ORDER IN I TA NO. 4 ITA NO. 849 /HYD/2015 SAROJINI NAIDU VANITA PHARMACY MAHA VIDYALAYA 888/HYD/2011 HAD REPRODUCED THE RATIO OF THE EARLIE R JUDGMENT IN THE CASE OF M/S ISLAMIA EDUCATIONAL SOCIETY, SECUNDERAB AD IN ITA NO. 1616/HYD/2011. AO HAD EXTRACTED FOR HIS OWN CONVENI ENCE FROM THE ABOVE RATIO AS DIRECTION OF THE COORDINATE BENCH OF THIS TRIBUNAL, WHICH IS NOT CORRECT. THE BENCH HAS ACCEPTED ONLY THE GRO UNDS OF THE REVENUE. 9.2 AO IS AWARE OF THE FACT THAT THE ASSESSEE HAD O BTAINED THE APPROVAL UNDER SECTION 10(23)(C)(VI) OF THE ACT FRO M THE CCIT-III, HYDERABAD. HE DECLINED TO GRANT THE EXEMPTION BY OB SERVING AS UNDER: 5. THE AR OF THE ASSESSEE SUBMITTED THAT APPROVAL U/S 10(23C)(VI) WAS GRANTED ON 16.08.2011 FOR A.Y.2007-08 AND SO TOTAL INCOME OF THE ASSESSEE IS EXEMPTED FROM TAX INCLUDING THE AMOUNT OF DEPRECIATION EVEN IF ADDED BACK AND DISALLOWED. TO THIS EFFECT THE A SSESSEE FILED COPY OF APPROVAL U/ S 10(23C)(VI). 6. HOWEVER, DISALLOWANCE OF THE EXEMPTION WAS NOT DISALLOWED, ONLY FOR THE REASON THAT THE ASSESSEE DID NOT GET APPROVAL U/S 10(23C)(VI) AT THAT TIME BUT ALSO FOR VIOLATION OF GO PASSED BY THE GOVERNM ENT OF ANDHRA PRADESH VIDE G.O.MS.NO.33, DT 11.06.2003 AS THE ASSESSEE C OLLECTED DEVELOPMENT FEES FROM STUDENTS. IN THIS REGARD, THE DECISION O F THE HONBLE JURISDICTIONAL ITAT IS ALSO QUITE CLEAR AS WAS PR ONOUNCED IN SO MANY CASES THAT IF THE ASSESSEE CHARGES DONATION, BUILDING F UND AUDITORIUM FUND ETC OVER AND ABOVE THE PRESCRIBED FEES FROM THE S TUDENTS THEN EXEMPTION U/S 11 OR 10(23C) (VI) WILL NOT BE AVAILABLE . FEW OF SUCH CASES ARE (J) M/S JAMIA NIZAMIA IN ITA NO. 7631 HYD/2007, DT 30. 06.2008 (2) (INTERNATIONAL EDUCATIONAL ACADEMY IN ITA NO.494/H YD/2007 AND 518/HYD/2008 FOR A.Y.2002-03 AND 2004-05 AND (3) S RI SAI SUDHIR EDUCATIONAL SOCIETY ITA NO 999/HYD/2005-06 06 OR A .Y.2003-04. 9.3 FROM THE ABOVE, AO HAD DECLINED TO GIVE EXEMPTI ON BY RELYING ON THE ABOVE BELIEF. IN THIS CONNECTION, WE EXTRACT THE OBSERVATIONS OF THE BENCH IN THE ORDER PASSED IN ITA NO. 725/HYD/20 11, DT. 01/07/2015, WHICH ARE AS UNDER: 8. AS FAR AS ALLEGATION OF AO THAT ASSESSEE HAS C OLLECTED DEVELOPMENT FEE OF RS. 36,30,400 DURING THE YEAR IN VIOLATION OF GOVT. ORDER, ON PERUSAL OF BALANCE SHEET OF ASSESSEE AS AT 31/03/07, SUCH ALLEGATION IS FOUND TO BE FACTUALLY INCORRECT AS THE AMOUNT IN QUESTION IS O NLY AN OPENING BALANCE. THEREFORE, THE BASIS FOR DENYING EXEMPTION TO ASSE SSEE APPEARS TO BE NON- EXISTENT. MOREOVER, LD. CCIT MUST HAVE EXAMINED AL L THESE ASPECTS AND ONLY AFTER SATISFYING HIMSELF OF THE FACT THAT ASS ESSEE FULFILLS ALL CONDITIONS HAS GRANTED APPROVAL U/S 10(23C)(VI). IN ANY CASE OF THE MATTER, AS ASSESSEE HAS BEEN GRANTED APPROVAL U/S 10(23C)(VI) OF THE ACT, PRIMA FACIE, IT IS ELIGIBLE FOR EXEMPTION UNDER THE SAID PROVISION TILL SUCH APPROVAL REMAINS IN FORCE. HOWEVER, CONSIDERING THE FACT TH AT AT THE TIME OF COMPLETION OF ASSESSMENT OR EVEN AT THE FIRST APPE LLATE STAGE THE APPROVAL 5 ITA NO. 849 /HYD/2015 SAROJINI NAIDU VANITA PHARMACY MAHA VIDYALAYA U/S 10(23C)(VI) WAS NOT THERE, WE DEEM IT APPROPRI ATE TO REMIT THE MATTER BACK TO THE FILE OF THE AO TO VERIFY THE APPROVAL GRANTED U/S 10(23C)(VI) OF THE ACT AND ALLOW EXEMPTION TO THE ASSESSEE IN ACC ORDANCE WITH LAW. 9.4. FROM THE ABOVE DECISION OF THE COORDINATE BENC H, IT IS VERY CLEAR THAT THE BASIS OF DENIAL FOR THE EXEMPTION IS NOT CORRECT AND BASELESS. EVEN THOUGH, THE ASSESSEE IS AGGRIEVED WI TH THE ORDER U/S 154, WE ARE OF THE VIEW THAT IT NEEDS RELOOK AT THE AO LEVEL CONSIDERING JUDGMENT OF THIS BENCH IN ITA NO. 725/H YD/2011, DT. 01/07/2015. 9.5 CONSIDERING THE ABOVE OBSERVATIONS, WE ARE REMI TTING BACK THE FILE TO AO FOR FRESH CONSIDERATION IN THE LIGHT OF THE DIRECTION OF THE ITAT TO HIM TO DO THE ASSESSMENT AS PER THE PROVISI ONS OF THE IT ACT AFTER CONSIDERING THE FACTS AVAILABLE ON RECORD. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOW ED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 4 TH NOVEMBER, 2015. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAHM AN) JUDICIAL MEMBER ACC OUNTANT MEMBER HYDERABAD, DATED: 4 TH NOVEMBER, 2015 KV COPY TO:- 1) SAROJINI NAIDU VANITA PHARMACY MAHA VIDYALAYA, C/O DR. C.P. RAMASWAMI, ADVOCATE, FLAT NOS. 102 & 303, GITANJALI APTS., PLOT NO. 108, SRINAGAR COLONY, HYDERABAD 073 2) ADIT(E), HYDERABAD 3 CIT(A)-9, HYDERABAD 4) DIT(E), HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 6 ITA NO. 849 /HYD/2015 SAROJINI NAIDU VANITA PHARMACY MAHA VIDYALAYA