Karl Kubel Foundation for Child and Family, Kochi V. ACIT,

ITA 867/CHNY/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6017 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 07-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Depreciation; Charitable institution; Cost of acquisition
• Section: 12AA; 32; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , , ' # BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ ITA NOS.867 & 868/MDS/2017 & '& / ASSESSMENT YEAR : 2009-10 & 2010-11 M/S KARL KUBEL FOUNDATION FOR CHILD AND FAMILY, 39/741, IYATTIL ROAD, IYATTU JN., KOCHI 682 011. PAN : AAATK 2501 N V. THE ASSISTANT COMMISSIONER OF INCOME TAX (EXEMPTION), COIMBATORE. ()*/ APPELLANT) (+,)*/ RESPONDENT) )* - . / APPELLANT BY : SHRI P.M. VEERAMANI, CA +,)* - . / RESPONDENT BY : SHRI AR.V. SREENIVASAN, JCIT / - 0' / DATE OF HEARING : 29.08.2017 12' - 0' / DATE OF PRONOUNCEMENT : 05.10.2017 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: BOTH THE APPEALS OF THE ASSESSEE ARE DIRECTED AGA INST THE RESPECTIVE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS) -2, COIMBATORE, DATED 30.01.2017 AND PERTAIN TO ASSESSM ENT YEARS 2009-10 AND 2010-11. SINCE COMMON ISSUE ARISES FOR CONSIDERATION IN BOTH THE APPEALS, WE HEARD BOTH TH E APPEALS TOGETHER AND DISPOSING OF THE SAME BY THIS COMMON O RDER. 2 I.T.A. NOS.867 & 868/MDS/17 2. SHRI P.M. VEERAMANI, THE LD. REPRESENTATIVE FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSEE - CHARITABLE TRUST WAS REGISTERED UNDER SECTION 25 OF THE COMPANIES ACT. THE ASSESSEE- TRUST WAS ALSO GRANTED REGISTRATION UNDER SECTION 1 2AA OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). ACCORDI NG TO THE LD. REPRESENTATIVE, THE ASSESSING OFFICER GRANTED EXEMP TION UNDER SECTION 11 OF THE ACT FROM THE DATE OF ITS INCORPOR ATION. HOWEVER, FOR BOTH THE ASSESSMENT YEARS, THE ASSESSING OFFICE R DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE ASSESS EE IS RECEIVING FEE FROM THE PEOPLE WHO ARE PARTICIPATING IN THE TR AINING PROGRAMME. ON APPEAL BY THE ASSESSEE, ACCORDING TO THE LD. REP RESENTATIVE, THE CIT(APPEALS) FOUND THAT CHARGING OF FEE FOR TRAININ G AND OTHER PROGRAMMES CANNOT STAND IN THE WAY OF EXEMPTION CLA IMED BY THE ASSESSEE UNDER SECTION 11 OF THE ACT. ACCORDINGLY, THE CIT(APPEALS) DIRECTED THE ASSESSING OFFICER TO GRAN T EXEMPTION IN RESPECT OF THE PROGRAMMES CONDUCTED BY THE ASSESSEE IN ITS CONVENTION HALL. HOWEVER, IN RESPECT OF HIRING CHA RGES RECEIVED FROM THE CORPORATES FOR LETTING OUT ITS CONVENTION HALL, THE CIT(APPEALS) FOUND THAT THE ASSESSEE IS NOT ENTITLE D FOR EXEMPTION UNDER SECTION 11 OF THE ACT. ACCORDING TO THE LD. REPRESENTATIVE, 3 I.T.A. NOS.867 & 868/MDS/17 THE CIT(APPEALS) HAS ALSO CONFIRMED THE ORDER OF TH E ASSESSING OFFICER WITH REGARD TO TRAINING FEE RECEIVED FROM C ORPORATES TO THE EXTENT OF ` 9,97,045/- FOR THE ASSESSMENT YEAR 2009-10 AND ` 5,19,634/- FOR THE ASSESSMENT YEAR 2010-11. ACCORD ING TO THE LD. REPRESENTATIVE, THE TRAINING PROGRAMMES WERE CONDUC TED AS PER OBJECT OF THE TRUST, THEREFORE, THE CIT(APPEALS) HA S NO REASON TO CONFIRM THE ORDER OF THE ASSESSING OFFICER. 3. REFERRING TO THE CLAIM OF DEPRECIATION, THE LD. REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT WHEN THE ASSET WAS ACQUIRED, THE ASSESSEE HAD NOT CLAIMED THE INVESTMENT AS APPLICAT ION OF FUNDS. THEREFORE, THE ASSESSEE IS ELIGIBLE FOR DEPRECIATIO N. 4. ON THE CONTRARY, SHRI AR.V. SREENIVASAN, THE LD. DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE ASS ESSEE ADMITTEDLY IS REGISTERED AS CHARITABLE INSTITUTION UNDER SECTION 12AA OF THE ACT. ACCORDING TO THE LD. D.R., THE ASSESSE E WAS CLAIMING DEDUCTION CLAIMING THAT IT IS PROMOTING WELFARE OF FAMILY AND CHILD IN INDIA, ESPECIALLY, IN RESPECT OF POOR AND NEEDY. T HE ASSESSEE IS RECEIVING FEE FROM THE PARTICIPANTS OF PROGRAMMES C ONDUCTED BY IT. THEREFORE, ACCORDING TO THE LD. D.R., THE ASSESSING OFFICER FOUND 4 I.T.A. NOS.867 & 868/MDS/17 THAT THE ASSESSEE IS NOT CARRYING ON ANY CHARITABLE ACTIVITY, HENCE, HE DENIED THE EXEMPTION ON THE CLAIM OF THE ASSESSE E. 5. REFERRING TO THE CLAIM OF DEPRECIATION, THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSING OFFICER FOUND THAT THE KERALA HIGH COURT IN LISSIE MEDICAL INSTITUTIONS V. CIT (2012) 348 ITR 344, AFTER SEEKING CLARIFICATION FROM CBDT, FOU ND THAT WHEN THE ASSESSEE ACQUIRED AN ASSET AND CLAIMED THE COST AS APPLICATION OF INCOME, DEPRECIATION ON SUCH ASSET WOULD NOT BE ALL OWABLE. THE HIGH COURT FURTHER FOUND THAT DEPRECIATION BEING A NOTIONAL STATUTORY DEDUCTION, HAS TO BE ADDED BACK WHILE COMPUTING INC OME FROM THE PROPERTY HELD UNDER TRUST. THEREFORE, ACCORDING TO THE LD. D.R., THE CIT(APPEALS) HAS RIGHTLY CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 6. BY WAY OF REJOINDER, THE LD. REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT RECENTLY THE MADRAS HIGH COURT HAS F OUND THAT THE ASSESSEE IS ENTITLED FOR DEPRECIATION ON COMMERCIAL PRINCIPLE EVEN THOUGH THE COST OF ACQUISITION WAS ALLOWED AS APPLI CATION OF INCOME IN THE YEAR IN WHICH THE ASSET WAS ACQUIRED. IN TH E CASE BEFORE US, ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSEE H AS NOT CLAIMED 5 I.T.A. NOS.867 & 868/MDS/17 THE COST OF ACQUISITION AS APPLICATION OF INCOME, T HEREFORE, THE ASSESSEE IS ENTITLED FOR DEPRECIATION. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE FIRST ISSUE ARISES FOR CONSIDERATION IS TRAINING FEE AND RENT R ECEIVED FROM CORPORATES FOR LETTING OUT THE CONVENTION HALL. IN RESPECT OF TRAINING FEE RECEIVED FROM POOR AND UNDER PRIVILEGED, THE CI T(APPEALS) ALLOWED THE CLAIM OF THE ASSESSEE AND DIRECTED THE ASSESSING OFFICER TO GRANT EXEMPTION. THE REVENUE HAS NOT FI LED ANY APPEAL BEFORE THIS TRIBUNAL. THEREFORE, IN RESPECT OF FEE COLLECTED FROM THE POOR AND UNDER PRIVILEGED, THE ASSESSEE IS ENTITLED FOR EXEMPTION UNDER SECTION 11 OF THE ACT AND THE ISSUE ATTAINED FINALITY. 8. APART FROM THE FEE COLLECTED FROM POOR AND UNDER PRIVILEGE, THE ASSESSEE HAS ALSO COLLECTED FEE FROM CORPORATES AND ALSO RENT FROM LETTING OUT THE CONVENTION HALL. THE ASSESSEE APPEARS TO HAVE LET OUT THE CONVENTION HALL TO CORPORATES BESIDES N GOS AND GOVERNMENT DEPARTMENTS. IN RESPECT OF HIRING CHARG ES RECEIVED FROM NGOS AND GOVERNMENT DEPARTMENTS, THE CIT(APPEA LS) ALLOWED THE CLAIM OF THE ASSESSEE. THE REVENUE HAS NOT FILED ANY FURTHER APPEAL. THE CIT(APPEALS) CONFIRMED THE ORD ER OF THE 6 I.T.A. NOS.867 & 868/MDS/17 ASSESSING OFFICER ONLY IN RESPECT OF HIRING CHARGES RECEIVED FROM CORPORATES. IT IS NOT KNOWN THE REASON FOR DISTINC TION BETWEEN RENT RECEIVED FROM NGOS / GOVERNMENT DEPARTMENTS AND COR PORATES. THE FACT REMAINS THAT THE ASSESSEE IS RECEIVING HIR E CHARGES FROM NGOS, GOVERNMENT DEPARTMENTS, OTHER EDUCATIONAL INS TITUTIONS AND CORPORATES. THE HIRING CHARGE RECEIVED BY THE ASSE SSEE IS ADMITTEDLY USED FOR ITS CHARITABLE ACTIVITY. 9. WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS OF SECTION 11 OF THE ACT. THE INCOME RECEIVED FROM PROPERTY HELD UNDER TRUST IS ENTITLED FOR EXEMPTION PROVIDED THE SAME IS APPLIED FOR THE OBJECT OF THE TRUST. IN THIS CASE, IT IS NOT IN DISPUTE THAT THE ASSESSEE APPLIED ITS INCOME FOR CHARITABLE ACTIVITY. IT IS ALSO NOT IN DISPUTE THAT CONVENTION HALL IS THE PROPERTY HELD UNDER TRUST WH OLLY FOR THE OBJECT OF THE TRUST. THEREFORE, THIS TRIBUNAL DO NOT MAKE ANY DISTINCTION IN RESPECT OF INCOME FROM NGOS / GOVERNMENT DEPARTMENT S AND THE INCOME FROM CORPORATES, FOR LETTING OUT CONVENTION HALL. IRRESPECTIVE OF THE HIRER, THE RENTAL / HIRE CHARGE S REMAINS TO BE SAME. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERE D OPINION THAT THE HIRE CHARGES OR THE RENTAL INCOME IS AN INCOME DERI VED FROM PROPERTY HELD UNDER TRUST. IN THIS CASE, THE PROPE RTY IS CONVENTION 7 I.T.A. NOS.867 & 868/MDS/17 HALL. WHEN SUCH AN INCOME WAS RECEIVED FROM CONVEN TION HALL, WHICH WAS HELD UNDER TRUST, EVEN THOUGH IT IS RECEI VED FROM CORPORATES IS ELIGIBLE FOR EXEMPTION UNDER SECTION 11 OF THE ACT. THE VERY FACT THAT THE REVENUE HAS NOT DISPUTED THE HIRE CHARGES FROM NGOS AND GOVERNMENT DEPARTMENTS SHOWS THAT THE PROPERTY, NAMELY, CONVENTION HALL, IS HELD UNDER TRUST AND RE NTAL INCOME IS ELIGIBLE FOR EXEMPTION UNDER SECTION 11 OF THE ACT ON APPLICATION FOR THE OBJECT OF THE ASSESSEE-TRUST. HENCE, THE HIRI NG CHARGE SAID TO BE RECEIVED FROM CORPORATES ALSO IS ELIGIBLE FOR EX EMPTION UNDER SECTION 11 OF THE ACT PROVIDED IT IS APPLIED FOR CA RRYING OUT THE OBJECT OF THE ASSESSEE INSTITUTION. THEREFORE, WE ARE UNA BLE TO UPHOLD THE ORDERS OF THE LOWER AUTHORITIES. ACCORDINGLY, THE ORDERS OF THE AUTHORITIES BELOW ARE SET ASIDE AND THE ASSESSING O FFICER IS DIRECTED TO GRANT EXEMPTION UNDER SECTION 11 OF THE ACT IN R ESPECT OF THE HIRE CHARGE RECEIVED FROM CORPORATES ALSO PROVIDED THE S AME IS APPLIED FOR THE OBJECT OF THE TRUST OR ACCUMULATED AS PER P ROVISIONS OF LAW. 10. THE NEXT ISSUE IS DISALLOWANCE OF ` 9,97,045/- FOR THE ASSESSMENT YEAR 2009-10 AND ` 5,19,634/- FOR THE ASSESSMENT YEAR 2010-11 SAID TO BE RECEIVED FROM CORPORATES TOWARDS TRAINING FEE. THE ASSESSEE IS RECEIVING TRAINING FEE FROM POOR AN D UNDER 8 I.T.A. NOS.867 & 868/MDS/17 PRIVILEGED. THE ASSESSEE IS ALSO RECEIVING TRAININ G FEE FROM NGOS AND GOVERNMENT DEPARTMENTS. IN RESPECT OF THE TRAI NING FEE RECEIVED FROM NGOS AND GOVERNMENT DEPARTMENTS, THE CIT(APPEALS) DIRECTED THE ASSESSING OFFICER TO ALLO W THE CLAIM OF EXEMPTION UNDER SECTION 11 OF THE ACT. THE CIT(APP EALS) FURTHER FOUND THAT RUNNING OF TRAINING PROGRAMME IS INCIDEN TAL TO THE MAIN OBJECT OF THE ASSESSEE-TRUST. THE CIT(APPEALS) ALS O FOUND THAT RUNNING OF TRAINING PROGRAMME FOR DEGRADED GROUP AN D MEMBERS OF NGOS AND GOVERNMENT DEPARTMENTS IS ALSO INCIDENTAL TO THE ACHIEVEMENT OF ACTIVITIES OF THE ASSESSEE FOUNDATIO N. FROM THE ORDER OF THE CIT(APPEALS) IT APPEARS THAT SOME OF T HE TRAINING PROGRAMMES WERE RUN BY THE ASSESSEE-TRUST WITHOUT C HARGING FEE. SOME OF THE PROGRAMMES WERE CONDUCTED ON CHARGING F EE FROM THE MEMBERS OF NGOS AND GOVERNMENT DEPARTMENTS. THE CIT(APPEALS) ALLOWED THE CLAIM OF THE ASSESSEE IN R ESPECT OF FEE CHARGED FROM NGOS AND GOVERNMENT DEPARTMENTS. THER EFORE, THIS TRIBUNAL HAS NO REASON TO DISCRIMINATE THE FEE RECE IVED FROM CORPORATES. 11. WHEN THE NGOS AND GOVERNMENT DEPARTMENTS ARE DE PUTING THEIR EMPLOYEES / MEMBERS FOR TAKING TRAINING IN TH E ASSESSEE- 9 I.T.A. NOS.867 & 868/MDS/17 FOUNDATION, THE CORPORATES ARE ALSO EQUALLY ELIGIBL E TO DEPUTE THEIR EMPLOYEES. THE TRAINING PROVIDED BY THE ASSESSEE A RE ON THE SUBJECTS LIKE CLIMATIC CHANGE AND LIVELIHOOD ISSUES , SANITARY WORKERS SOLID WASTE MANAGEMENT, AGEING GRACEFULLY, HERBAL WAY HEALTH WAY, TRIBAL WELFARE, HEALTH AWARENESS PROGRAMME FOR SELF -HELP GROUP, WOMEN AND HEALTH LIVELIHOOD DEVELOPMENT, ETC. WHEN THESE TRAINING PROGRAMMES WERE GIVEN TO THE MEMBERS OF NG OS AND GOVERNMENT DEPARTMENTS, THE CIT(APPEALS) FOUND THAT THE TRAINING FEE IS ELIGIBLE FOR EXEMPTION UNDER SECTION 11 OF T HE ACT. WHEN SUCH TRAINING WAS OFFERED TO THE CORPORATE PEOPLE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE SAME EFFECT WILL HA VE IN THE SOCIETY. THEREFORE, THE ASSESSEE RECEIVED TRAINING FEE FROM CORPORATES IN THE COURSE OF ITS ACTIVITY, HENCE, IT IS ELIGIBLE F OR EXEMPTION UNDER SECTION 11 OF THE ACT ON APPLICATION TO THE OBJECT OF THE TRUST. THEREFORE, THE ORDERS OF THE AUTHORITIES BELOW ARE SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO ALLOW ` 9,97,045/- FOR THE ASSESSMENT YEAR 2009-10 AND ` 5,19,634/- FOR THE ASSESSMENT YEAR 2010-11 BEING THE TRAINING FEE RECEIVED FROM CORPOR ATES PROVIDED THE SAME WAS APPLIED FOR OBJECT OF THE TRUST OR ACC UMULATED AS PER THE PROVISIONS OF INCOME-TAX ACT. 10 I.T.A. NOS.867 & 868/MDS/17 11. NOW COMING TO THE CLAIM OF DEPRECIATION, THE AS SESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE BY PLA CING RELIANCE ON THE JUDGMENT OF KERALA HIGH COURT IN LISSIE MEDICAL INSTITUTIONS (SUPRA). IN THE CASE BEFORE KERALA HIGH COURT, THE ASSESSEE CLAIMED THE COST OF ACQUISITION OF ASSET AS APPLICA TION OF INCOME. IN THE CASE BEFORE US, THE ASSESSEE CLAIMS THAT THE CO ST WAS NOT CLAIMED AS APPLICATION OF INCOME. IT IS NOT KNOWN WHEN THE ASSESSEE ACQUIRED THE ASSET. THERE IS NO DOCUMENT AVAILABLE ON RECORD TO VERIFY WHETHER THE ASSESSEE CLAIMED COST OF ACQUISITION AS APPLICATION OF INCOME UNDER SECTION 11 OF THE ACT. MOREOVER, THE COPY OF LATEST JUDGMENT OF MADRAS HIGH COURT RELIED ON BY THE LD. REPRESENTATIVE IS ALSO NOT AVAILABLE BEFORE THIS TR IBUNAL. WHEN THE ASSESSEE CLAIMS THAT IT IS A CHARITABLE INSTITUTION , WHETHER SECTION 32 IS APPLICABLE OR NOT ALSO NEEDS TO BE EXAMINED. S INCE THIS TRIBUNAL HAS NO OCCASION TO GO THROUGH THE LATEST JUDGMENT O F MADRAS HIGH COURT SAID TO BE PASSED RECENTLY, THE MATTER NEEDS TO BE RE- EXAMINED BY THE ASSESSING OFFICER. ACCORDINGLY, TH E ORDERS OF THE AUTHORITIES BELOW ARE SET ASIDE AND THE CLAIM OF DE PRECIATION IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RE-EXAMINE THE MATTER AFRESH AFTER CO NSIDERING THE LATEST JUDGMENT OF MADRAS HIGH COURT AND THEREAFTER DECIDE THE 11 I.T.A. NOS.867 & 868/MDS/17 ISSUE IN ACCORDANCE WITH LAW, AFTER GIVING A REASON ABLE OPPORTUNITY TO THE ASSESSEE. 12. IN THE RESULT, BOTH THE APPEALS FILED BY THE AS SESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 5 TH OCTOBER, 2017 AT CHENNAI. SD/- SD/- ( ) ( . . . ) (S. JAYARAMAN) (N.R.S. GANESAN) ' / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 4 /DATED, THE 5 TH OCTOBER, 2017. KRI. - +056 76'0 /COPY TO: 1. )* /APPELLANT 2. +,)* /RESPONDENT 3. / 80 () /CIT(A)-2, COIMBATORE 4. CIT, EXEMPTIONS, CHENNAI 5. 69 +0 /DR 6. :& ; /GF.