The Dy. CIT.,GNR Circle, Ahmedabad V. Bholaram Education Society, Gandhinagar

ITA 92/AHD/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8594 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 8 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 14-08-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 10-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K SINGH
• Assessee Lawyers: G C PIPARA
• Keywords: Depreciation; Charitable institution; Maximum Marginal Rate; Diversion of income; Fair market value; Valuation report; Capital receipt; Cancellation of registration
• Section: 143(3); 12A; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMEDABAD BEFORE, SHRI N. K. BILLAIYA , ACCOUNTANT MEMBER AND SHRI S. S. GODARA, JUDICIAL MEMBER ITA NO. 92/AHD/2014 (ASSESSMENT YEAR: 2010-11) DY. COMMISSIONER OF INCOME-TAX, GANDHINAGAR CIRCLE, GANDHINAGAR APPELLAN T VS. BHOLARAM EDUCATION SOCIETY, C/O. DELHI PUBLIC SCHOOL, AMBAPUR VILLAGE, NR. KOBA, KOBA ADALAJ ROAD, GANDHINAGAR RESPONDENT PAN: AAATB8415E /BY ASSESSEE : SHRI G. C. PIPARA, A.R. /BY REVENUE : SHRI V. K. SINGH, SR. D.R. /DATE OF HEARING : 14.08.2017 /DATE OF PRONOUNCEMENT : 14.09.2017 ORDER PER S. S. GODARA, JUDICIAL MEMBER THIS REVENUES APPEAL FOR ASSESSMENT YEAR 2010-11 A RISES AGAINST THE CIT(A), GANDHINAGAR, AHMEDABADS ORDER DATED 10.10. 2013, IN CASE NO. CIT(A)/GNR/183/2012-13, IN PROCEEDINGS U/S. 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. ITA NO. 92/AHD/14 (DCIT VS. BHOLARAM EDUCATION SOCI ETY) A.Y. 2010-11 - 2 - 2. THE REVENUE PLEADS THE FOLLOWING SUBSTANTIVE GRO UNDS IN THE INSTANT APPEAL: 1. THE LEARNED CIT(APPEALS) HAS ERRED IN LAW AND ON FACTS IN TREATING THE ASSESSEE AS ' REGISTERED TRUST'. 2. THE LEARNED CIT(APPEALS) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION ON RENT PAID OF RS. 1,11,13,200/- TO HUF A ND IN NOT UPHOLDING THE APPLICABILITY OF SECTION 13. 3. THE LEARNED CIT(APPEALS) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION ON RENT PAID OF RS. 19448100/-. 4. THE LEARNED CIT(APPEALS) HAS ERRED IN LAW AND ON FACTS IN NOT TREATING THE ADDITION TO THE CORPUS FUND OF THE ASSESSEE AMOUNTI NG TO RS.94,60,000/- AS INCOME OF THE TRUST. 5. THE LEARNED CIT(APPEALS) HAS ERRED IN LAW AND ON FACTS IN NOT TREATING THE ADDITION TO DEVELOPMENT FUND AMOUNTING TO RS.32,69, 000/- AS INCOME OF THE TRUST. 6. THE LEARNED CIT(APPEALS) HAS ERRED IN LAW AND ON FACTS IN CONSIDERING THE EXPENDITURE ON DONATION OF RS.48,73,831/- TO DELHI PUBLIC SCHOOL AS PART OF EXPENDITURE. 7. THE LEARNED CIT(APPEALS) HAS ERRED IN LAW AND ON FACTS IN CONSIDERING THE INVESTMENT IN FIXED ASSETS AMOUNTING TO RS. 13,51,0 2,167/- AS APPLIED TO CHARITABLE PURPOSE AND ALLOWED AS DEDUCTION FROM TH E AMOUNT OF INCOME. 8. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN ALLO WING THE DEPRECIATION OF RS. 13360206/- ON FIXED ASSETS CLAIMED AS DEDUCTION U/S.11 OF THE ACT, IGNORING THAT BENEFIT OF DEDUCTION HAS ALREADY BEEN GIVEN IN THE VERY FIRST YEAR BY WAY OF APPLICATION OF INCOME. 3. LEARNED DEPARTMENTAL REPRESENTATIVE REFERS TO RE VENUES FIRST SUBSTANTIVE GROUND THAT THIS ASSESSEE / TRUST IS NO T REGISTERED U/S.12AA OF THE ACT. WE FIND NO MERIT IN THE INSTANT PLEA AS PAGE 31 OF THE PAPER BOOK SUFFICIENTLY INDICATES THAT THE DIT(E), AHMEDABAD H AD PASSED ASSESSEES REGISTRATION ORDER U/S.12AA OF THE ACT WAYBACK ON 2 7.02.2003. THERE IS NO CHANGE IN FACTS THEREAFTER SUGGESTING ANY MODIFICAT ION IN ASSESSEES STATUS AS A REGISTERED CHARITABLE TRUST. THE REVENUE THEREFO RE FAILS IN ITS SUBSTANTIVE GROUND. 4. THE REVENUES SECOND AND THIRD SUBSTANTIVE GROUN D ASSAIL CORRECTNESS OF THE LOWER APPELLATE ORDER ON LAW AND ON FACTS RE VERSING ASSESSING OFFICERS ACTION DISALLOWING /ADDING RENT (S) PAID TO M/S. RA MESH PRASAD SATYANARAYAN (HUF) AND MS. MANJU GOENKA AMOUNTING TO RS.1,11,13, 200/- AND ITA NO. 92/AHD/14 (DCIT VS. BHOLARAM EDUCATION SOCI ETY) A.Y. 2010-11 - 3 - RS.83,34,900/-; RESPECTIVELY TOTALING TO RS. 1,94,4 8,100/-. THE SAID TWO PAYEES ADMITTEDLY ARE ASSESSEES TRUSTEES. THE ABO VE PAYMENTS CONSTITUTE 17.61 % OF TOTAL RECEIPT OF RS.11,04,15,05/- AS PER ASSESSMENT ORDER. THE ASSESSING OFFICER SOUGHT THE RELEVANT RENT AGREEMEN TS COPIES. HE THEREAFTER TOOK INTO ACCOUNT THE TWO PAYEES TOTAL INVESTMENTS IN THEIR BALANCESHEETS AS ON 31.03.2010 TO CONCLUDE THAT THEY HAD BEEN PAID @ ALMOST 60% OF THEIR INVESTMENTS. HE THEN CHECKED RELEVANT RENT PAYMENT S IN ASSESSMENT YEAR 2007-08 TO CONCLUDE THE IMPUGNED SUMS TO BE EXCESSI VE. ALL THIS RESULTED IN THE IMPUGNED DISALLOWANCE BEING MADE IN ASSESSMENT ORDER DATED 22.01.2013. 5. THE CIT(A) DELETES THE ABOVE DISALLOWANCE AS UND ER: 6.2 I HAVE CONSIDERED THE FACTS OF THE CASE, A SSESSMENT ORDER AND SUBMISSION MADE BY THE APPELLANT IN THIS REGARD. THIS ISSUE HAS BEEN DISCUSSED BY THE A.O. IN THE AS SESSMENT ORDER WHEREIN IN PARA NO. 3, THE NAMES AND DETAILS OF THE TRUSTEE S HAS BEEN GIVEN AND IN PARA NO. 4, THE BALANCE SHEET OF MANJULA RAMESH PRASAD G OENKA, AND IN PARA NO. 5, THE BALANCE SHEET OF RAMESH PRASAD GOENKA HUF HAS B EEN REPRODUCED BY THE A.O. IN PARA NO. 7, A.O. HAS DISCUSSED THE PROVISIO NS OF SECTION 13(1)(C)(II) AND HELD THAT RENT PAID OF RS. 1,94,48,100/- IS USED DI RECTLY FOR THE BENEFIT OF PERSONS REFERRED TO IN SECTION 13(3) AND THEREFORE NO DEDUC TION/EXEMPTION UNDER SECTION 11 & 12 ARE ALLOWED TO THE APPELLANT. IN PARA NO. 8, T HE A.O. HAS REPRODUCED THE SHOW-CAUSE NOTICE AS PER ORDER SHEET DATED 05/12/20 12 AND FINALLY A.O. HAS HELD THAT RENT PAID TO THE TRUSTEES IS EXCESSIVE AND THE REFORE, APPLIED PROVISIONS OF SECTION 13, EXEMPTION AVAILABLE TO THE APPELLANT AN D THE STATUS OF THE APPELLANT AS REGISTERED TRUST UNDER SECTION 12A AND EXEMPTION U/ S 11 IS DENIED. THE CONTENTION OF THE AO IS THAT THE VALUE OF INVES TMENT IN PROPERTIES IN LAND AND BUILDING BY THE TRUSTEES TO WHOM THE PAYME NT OF RENT IS EXCESSIVE. ON PERUSAL OF THE BALANCE SHEET IN THE CASE OF SMT. MANJULA GOENKA, IT IS SEEN THAT THE VALUE OF LAND IS SHOWN RS. 15,13,894/ - AND IN CASE OF RAMESH PRASAD GOENKA HUF THE VALUE OF THE LAND IS RS. 14,00,000/- . AS PER LEASE AGREEMENT THE AREA OF THE LAND IS 36,355 SQ.MTS. OF N.A. LAND PLU S 1,00,000 SQ. MTS. OF ANOTHER LAND IN THE CASE OF RAMESH PRASAD GOENKA HUF. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE APP ELLANT HAS SUBMITTED THAT THE TOTAL AREA OF THE LAND ITSELF, THE INVESTM ENT MADE BY THE LAND OWNERS IS NOT RELEVANT FOR THE PURPOSE OF DETERMINING THE REASONA BLENESS OF THE RENT BY THE APPELLANT TRUST BECAUSE WHAT HAS BEEN LEASED AS THE ENTIRE LAND, INCLUDES BOTH ITA NO. 92/AHD/14 (DCIT VS. BHOLARAM EDUCATION SOCI ETY) A.Y. 2010-11 - 4 - N.A. AS WELL AS NON-N.A. LAND ALONG WITH CONSTRUCTI ON. N.A. LAND HAS BEEN UTILIZED FOR THE PURPOSE OF CONSTRUCTION, WHEREAS NON-N.A. L AND HAS BEEN UTILIZED FOR THE PURPOSE OF PLAY-AREA, GARDEN, ETC. WHICH ARE ALSO P ART OF THE SCHOOL ACTIVITIES. FURTHER, THE APPELLANT HAS SUBMITTED THAT IN THE CA SE OF SMT. MANJULA GOENKA, THE AMOUNT WHICH HAS BEEN SPENT ON CONSTRUC TION OF THE SCHOOL BUILDING IS RS.1,10,67,812/- AND IN CASE OF RAMESH PRASAD GOENK A HUF THE AMOUNT SPENT ON CONSTRUCTION FOR SCHOOL BUILDING IS RS.3 R 56,34,129/- TOTALING RS,4,67,01,941/-, THE ENTIRE BUILDING HAS BEEN CONSTRUCTED BY THESE CO-OW NERS AND BEING LEASED TO THE APPELLANT TRUST FOR THE PURPOSE OF SCHOOL BUILDING FOR THE PERIOD OF 30 YEARS IN THE YEAR 2004. IT IS ALSO SEEN THAT DURING THE COURSE O F ASSESSMENT PROCEEDINGS, THE APPELLANT HAS SUBMITTED THE COPY OF VALUATION REPOR T OBTAINED FROM GOVERNMENT APPROVED VALUER, DR. ALPESH C. PATEL WITH RESPECT T O THE IMPUGNED LAND AND BUILDING WHICH HAS BEEN LEASED TO THE APPELLANT. AS PER %E VALUATION REPORT ITSELF THE VALUE OF THE N.A. LAND IS ABOUT RS.9,10,93,800/ - AND THE VALUE OF THE CONSTRUCTION WHICH HAS BEEN LEASED IS RS. 13,08,13, 870/- AND THE TOTAL VALUE OF THE LAND PLUS LAND DEVELOPMENT AND BUILDING IS RS.25,66 ,10,070/-. THE RENT HAS BEEN VALUED AS PER THE PREVAILING RATE FOR THE PURPOSE OF STAMP DUTY. THE CURRENT FAIR MARKET VALUE HAS BEEN TAKEN AT RS.36,28,12,610/- AS PER THE SAID VALUATION REPORT. THIS VALUATION REPOR T CLEARLY SUGGESTS THE PRESENT VALUE OF THE PROPERTY AND THEREFORE, IT CAN BE CONC LUDED ON THE BASIS OF ABOVE FACTS THAT THE RENT PAID BY THE TRUST APPEARS TO BE REASO NABLE AND NOT EXCESSIVE. THE APPELLANT HAS FURTHER SUBMITTED IN THE SUBMISSI ON DATED 7/10/2013 THAT CONSIDERING 10% RETURN ON THE VALUE OF THE PROPERTY THE NORMAL RENT WOULD HAVE BEEN ABOUT RS.3.60 CR. AS AGAINST WHICH TOTAL RENT PAID BY THE APPELLANT IS RS.1.98 CRORE ONLY AND THEREFORE, THERE IS FORCE IN THE SUB MISSION MADE BY THE APPELLANT THAT CONSIDERING THE FAIR VALUE OF THE PROPERTY, TH E RENT CANNOT BE SAID TO BE EXCESSIVE. FURTHER, THE APPELLANT HAS SUBMITTED THA T THE LIFE OF THE BUILDING IS NORMALLY 30 TO 40 YEARS BUT IN THE CASE OF SCHOOL B UILDING THE LIFE IS ABOUT 30 YEARS BECAUSE OF MORE WEAR AND TEAR, INCREASE OF SHRILL A ND THEREFORE, AT THE END OF 30 YEARS THERE WILL BE AS SUCH NO VALUE TO THE BUILDIN G WHICH HAS BEEN LEASED AND IT IS TO BE ALSO KEPT IN MIND THAT THE LEASE RENT IS FOR A LONGER DURATION I.E. 30 YEARS AND THEREFORE, CONSIDERING THE FUTURE APPRECIATION OF T HE LAND, THE RENT IS ALWAYS CALCULATED KEEPING IN VIEW THE PERIOD, USE, AREA, E TC. THUS, IT IS SEEN THAT THE AO HAS NOT CONSIDERED THE ABOVE FACTS PRIOR TO DECIDING AND APPLYING THE PROVISIONS OF SECTION 13 OF THE ACT AND THE AO HAS MERELY LOOKED AT THE AMOUNT OF RENT WITHOUT EVEN CO MPARING THE SAME WITH THE MARKET RATE OF THE LAND, AMOUNT SPENT ON THE CONSTR UCTION OF THE SCHOOL BUILDING, LOCK-IN-PERIOD OF 30 YEARS OF THE LEASE AGREEMENT O N THE BASIS OF THE BOOK VALUE. THE A.O. HAS NOT MADE ANY EFFORTS TO WORK OUT WHAT IS THE AVERAGE RENT PAID FOR THE BUILDING OR LAND AND HE HAS SIMPLY LOO KED AT THE AMOUNT OF THE RENT COMPARED WITH BOOK VALUE OF LAND AND HELD THAT SUBS TANTIAL RENT IS BEING PAID AND THEREFORE, THE SAME IS CONSIDERED AS EXCESSIVE. THE RENT CANNOT BE EXCESSIVE OR OTHERWISE, WITHOUT COMPARING WITH; WHAT IS THE RENT PAID WITHOUT CONSIDERING THE PREVAILING RE NT AND OTHER CIRCUMSTANTIAL ITA NO. 92/AHD/14 (DCIT VS. BHOLARAM EDUCATION SOCI ETY) A.Y. 2010-11 - 5 - CONDITIONS SUCH AS LEASE PERIOD, TYPE OF USE, PERIO D OF LEASE, ETC. IT IS ALSO SEEN THAT IN THE EARLIER YEARS THE RENT PAID AS PER AGREEMENT HAS BEEN ALLOWED TO THE APPELLANT AS DEDUCTION TO THE APPELLANT ON THE BASI S OF SAME AGREEMENT AND BOOK VALUE. THE AO HAS NOT DISCUSSED ABOUT THE LEASE AGR EEMENT IN HIS ORDER. THE APPELLANT HAS ALSO SUBMITTED THAT BOTH THE PERS ONS ARE ASSESSED TO TAX ON MAXIMUM MARGINAL RATE AND REGULARLY FILING RETUR N OF INCOME. THEREFORE, I AM OF THE VIEW THAT THERE IS NO DIVERSION OF INCOME AL SO, AS CONTENDED BY THE A.O. THE APPELLANT HAS FURTHER SUBMITTED IN ITS SUBMISSI ON DATED 13/12/2012 THAT THE PROPERTY HAD BEEN ACQUIRED BY THE LAND-OWNERS L ONG BACK IN THE YEAR 2003 AND THEREAFTER PRICES OF THE PROPERTY HAS INCREASED MAN Y FOLDS AND DETAILS OF THE CONSTRUCTION HAS ALSO BEEN PROVIDED. THE APPELLANT HAS ALSO RELIED ON THE JUDGMENT OF THE HON'BLE HIGH COURT OF GUJARAT M THE CASE OF SURAT CITY GYMKHANA AND SUBMITTED THAT RENT PAID IS NOT EXCESSIVE AND THE S AME HAS BEEN CLAIMED TO BE REASONABLE. THE AO HAS MENTIONED THE SUBMISSION MAD E BY THE APPELLANT DATED 13/12/2012 BUT THERE IS NO DISCUSSION IN THE ORDER OF THE FACTS OF THE SUBMISSION MADE BY THE APPELLANT WHEREIN THE APPELLANT HAS SUB MITTED THE FACTS ABOUT THE AREA OF THE BUILDING, AREA OF THE LAND AND THE TDS DEDUC TED ON THE PAYMENT, NUMBER OF STUDENTS, LEGAL POSITION ETC. AS I HAVE MENTIONED H EREIN ABOVE, THE AO HAS NOT MADE ANY EFFORTS OF COMPARATIVE STUDY OF THE ALLEGE D EXCESSIVE RENT PAYMENT AND ALSO NO VITAL EVIDENCE WAS BROUGHT ON RECORD AS TO HOW THE RENT PAID IS EXCESSIVE. THE ALLEGED RENT CANNOT BE CONSIDERED EXCESSIVE UNL ESS THE COMPARATIVE STUDY HAS BEEN MADE. THEREFORE, LOOKING TO THE MARKET VALUE O F THE PROPERTY, AREA OF THE LAND & BUILDING, WEAR & TEAR OF THE BUILDING, LEASE PERI OD OF 30 YEARS, AFTER DEDUCTION OF TDS ON RENT PAYMENT, THE RENT PAID BY THE APPELL ANT CANNOT BE CONSIDERED AS EXCESSIVE. THEREFORE, I AM OF THE VIEW THAT THE PRO VISIONS OF SECTION 13(3) ARE NOT HIT IN THE CASE OF THE APPELLANT AND THE EXEMPTION UNDER SECTION 11 & 12 CANNOT BE DENIED. THE HON'BLE HIGH COURT OF GUJARAT IN THE CASE OF SU RAT CITY GYMKHANA (SUPRA), RELIED UPON BY THE APPELLANT HAS HELD AS U NDER: 'THE PROVISIONS OF SECTION 13 OF THE INCOME-TAX ACT , 1961, START WITH A NON OBSTANTE CLAUSE AND HENCE BY VIRTUE OF THE SAID PRO VISIONS EXCEPTIONS TO THE EXEMPTION PROVIDED BY SECTION 11 IS CARVED OUT AND AN ASSESSEE IS DENIED THE EXEMPTION UNDER SECTION 11 OF THE ACT IN A CASE WHERE THE INCOME OR PROPERTY OF THE TRUST IS USED OR APPLIED OR ENURES FOR THE BENEFIT OF ANY PERSON REFERRED TO IN SECTION 13(3) OF THE ACT. A P ERSON WHO MAKES A POSITIVE AVERMENT IS REQUIRED TO ESTABLISH THE SAME . IT IS NOT FOR THE PERSON AGAINST WHOM THE AVERMENT IS MADE TO ESTABLISH NEGA TIVELY THAT THE STATE OF AFFAIRS AVERRED BY THE OTHER PERSON DOES NOT EXIST. THE PROVISIONS OF SECTION 13 CARVE OUT AN EXCEPTION TO THE APPLICABILITY OF T HE PROVISIONS OF SECTION 11 OF THE ACT, AND, HENCE, THE EXCEPTION HAS TO BE STATED AND ESTABLISHED BY THE PERSON WHO SEEKS TO INVOKE AND APPLY THE EXCEPT ION'. FURTHER, RELIANCE IS ALSO PLACED ON THE JUDGMENT OF DELHI HIGH COURT IN THE CASE OF PARIWAR SEWA SANSTHAN (SUPRA) WHEREIN THE I SSUE RELATING TO THE PAYMENT OF HOUSE RENT WAS DISCUSSED. FROM THE POINT OF VIEW OF REASONABLENESS AND CONSIDERING THE LOCATION OF THE HOUSE AND THE FACT THAT NO MATERIAL HAS BEEN ITA NO. 92/AHD/14 (DCIT VS. BHOLARAM EDUCATION SOCI ETY) A.Y. 2010-11 - 6 - BROUGHT ON RECORD INDICATING THAT THE SAME IS EXCES SIVE, RENT PAID TO THE PERSONS COVERED U/S. 13(3) HAS BEEN HELD TO BE REASONABLE A ND ACCORDINGLY, CANCELLATION OF REGISTRATION BY THE A.O. HAS BEEN HELD TO BE IMPROP ER. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE APP ELLANT HAS ALSO DRAWN MY ATTENTION TO THE JUDGMENT OF HON'BLE ITAT, AHMED ABAD IN THE CASE OF ADHARSHILA EDUCATION & ... VS DEPARTMENT OF INCOME TAX VIDE FTA NO. 2221/AHD/2008 DATED 30/11/2010, WHEREIN THE SIMILAR ISSUE HAS BEEN DECIDED AS UNDER: 'REGARDING DISALLOWANCE OUT OF CLAIM OF BUILDING RE NT AND BUS RENT BELONGING TO ADHARSHILA ASSOCIATES WE ARE OF THE VI EW THAT REASONABLENESS OF PAYMENTS IN RESPECT OF SUCH ASSETS CANNOT BE DEC IDED ON THE BASIS OF RATE OF INTEREST. RATE OF INTEREST IN RESPECT OF LIQUID CASH IS DIFFERENT WHEREAS RENTAL INCOME IN RESPECT OF BUILDING IS DIFFERENT. IT CANNOT BE EQUATED WITH INTEREST. THE AO SHOULD HAVE GIVEN EXAMPLE TO SHOW THAT MARKET RATE OF PROPERTY SITUATED SIMILARLY IS LESSER. THERE SHOULD BE PROPER COMPARABLE CASES. IT WAS POINTED OUT IN THE WRITTEN SUBMISSION THAT SIMILAR RENT WAS ALLOWED IN EARLIER YEARS. THE FOLLOWING THE PRINCIP LES OF CONSISTENCY, THE CLAIM OF THE TRUST HAS TO BE ALLOWED UNLESS THERE A RE MATERIAL FACTS BROUGHT ON RECORD TO SHOW THAT MARKET RENT OF THE PROPERTY USED BY THE ASSESSEE TRUST ARE LESSER AS TO WHAT THE TRUST HAS SPENT THI S YEAR. IN ANY CASE COMPARISON WITH RESPECT TO INTEREST IS NOT A REASON ABLE CRITERIA. ACCORDINGLY, WE UPHOLD THE ORDER OF THE LD. CIT(A) AND DISMISS GROUND OF THE REVENUE.' THE HON'BLE TRIBUNAL HAS CLEARLY STATED THAT ONE HA S TO CONSIDER THE REASONABLENESS OF THE PAYMENT WITH RESPECT TO SERVI CES RENDERED IN CASE OF SALARY AND OTHERS AND THEREFORE, IN CASE OF RENT ONE HAS T O VIEW THE REASONABLENESS WITH RESPECT TO AREA, USE OF BUILDING, MARKET VALUE, PER IOD OF LEASE, ETC. AND THEREFORE, THOUGH ELABORATE SUBMISSION HAS BEEN MADE BEFORE TH E A.O. DURING THE COURSE OF ASSESSMENT PROCEEDINGS ALL THESE FACTS HAVE NOT BEE N DISPUTED BY THE A.O. AND SIMPLY RENT PAID CANNOT BE CONSIDERED AS EXCESSIVE WITHOUT LOOKING INTO THE RELEVANT PARAMETERS. THEREFORE, I AM OF THE VIEW THAT A.O. HAS WRONGLY C ONSIDERED THE PAYMENT OF THE RENT AS EXCESSIVE. THEREFORE, IT IS HELD THA T AO IS NOT JUSTIFIED IN DENYING THE BENEFITS OF DEDUCTION/EXEMPTION 11 & 12 OF THE ACT TO THE APPELLANT. THE AO IS THEREFORE, DIRECTED TO GRANT BENEFIT OF SECTION 11 & 12 OF THE ACT WHILE GIVING APPEAL EFFECT TO THIS ORDER. THEREFORE, THE FIRST T HREE GROUNDS OF APPEAL ARE DECIDED IN FAVOUR OF THE APPELLANT. 6. WE HAVE HEARD BOTH THE PARTIES STRONGLY REITERAT ING THEIR RESPECTIVE STANDS. CASE FILE INDICATES THAT THE ASSESSING OFF ICER ADMITTEDLY DID NOT DRAW ANY COMPARATIVE CHART OR VERIFICATION BETWEEN THE IMPUGNED PAYMENTS VIS-- VIS THEIR MARKET RATE OF RENT IN QUESTION. THE CIT (A) ON THE OTHER HAND HAS TAKEN INTO ACCOUNT AN APPROVED VALUERS REPORT AS W ELL AS ALL CORRESPONDING ITA NO. 92/AHD/14 (DCIT VS. BHOLARAM EDUCATION SOCI ETY) A.Y. 2010-11 - 7 - DOCUMENTS INDICATING ALL RELEVANT PARTICULARS INDIC ATING THE ASSESSEE TO BE UTILIZING VACANT SPACE ALONGWITH LAND AND BUILDING WHILST CONCLUDING THAT THE PAYMENTS IN QUESTION CANNOT BE HELD AS EXCESSIVE ON ES. IT HAS FURTHER COME ON RECORD THAT THE ASSESSEE HAD BEEN PAYING SIMILAR RENTS IN PRECEDING ASSESSMENT YEARS AS WELL. IT PLACES ON RECORD ASSE SSMENT ORDER(S) PERTAINING TO EARLIER ASSESSMENT YEARS NOT SHOWING ANY SUCH DI SALLOWANCE. THE REVENUE FAILS TO REBUT ALL THESE FINDINGS WITH THE HELP OF ANY COGENT EVIDENCE ON RECORD. WE THEREFORE AFFIRM THE CIT(A)S FINDINGS UNDER CHALLENGE. THE REVENUES SECOND AND THIRD SUBSTANTIVE GROUNDS ARE ACCORDINGLY REJECTED. 7. NEXT COMES REVENUES FOURTH SUBSTANTIVE GROUND T HAT THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING CORPUS FUND A DDITION OF RS.94,60,000/- MADE IN ASSESSEES INCOME. LEARNED AUTHORIZED REPR ESENTATIVE POINTS OUT THAT THERE IS NO SPECIFIC DISCUSSION IN ASSESSMENT ORDER DATED 22.01.2013. HE THEN STATES THAT THE CORRESPONDING COMPUTATION IN P AGE 8 OF THE ABOVE ASSESSMENT ORDER ADDED THE IMPUGNED CORPUS FUND AMO UNT AS ASSESSEES INCOME. THE CIT(A) ON THE OTHER HAND HOLDS IN PARA 8.2 THAT SUCH A CORPUS IS NOT ASSESSABLE AS TAXABLE INCOME AS PER CASE LAW DI T(E) VS. N. H. KAPADIA EDUCATION TRUST (2012) 20 TAXMANN.COM 702 (AHD) AND ITO VS. SARDAR VALLABHBHAI EDUCATION SOCIETY (2012) 26 TAXMANN.COM 174 (AHD.). THE REVENUE IS UNABLE TO POINT OUT ANY DISTINCTION ON F ACTS OR LAW THEREIN. WE THEREFORE DECLINE THE INSTANT SUBSTANTIVE GROUND AS WELL. 8. THE REVENUES FIFTH SUBSTANTIVE GROUND SEEKS TO REVIVE ASSESSING OFFICERS ACTION TREATING DEVELOPMENT FUND AMOUNT O F RS.32,69,000/- AS ASSESSEES TAXABLE INCOME. WE NOTICE HEREIN AS WEL L THAT THE ASSESSING OFFICER MADE THE IMPUGNED ADDITION IN PAGE 8 WITHOU T DISCUSSING ANYTHING ON MERITS. THE CIT(A) ON THE OTHER HAND DECIDES TH E ISSUE IN ASSESSEES FAVOUR AS UNDER: ITA NO. 92/AHD/14 (DCIT VS. BHOLARAM EDUCATION SOCI ETY) A.Y. 2010-11 - 8 - 10. I HAVE CONSIDERED THE FACTS OF THE CASE, ASSES SMENT 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 DEVELOP MENT FUND AND THE A.O. HAS CONSIDERED THE SAID DEVELOPMENT FUND AS INCOME BECA USE 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 M ERITS AS SUBMITTED IN THE WRITTEN SUBMISSION, THE APPELLANT HAS RECEIVED THE SAID DEV ELOPMENT 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 DEVEL OPMENT ACTIVITIES, AS IS APPARENT FROM AUDITED BALANCE SHEET SUBMITTED DURIN G THE APPELLATE PROCEEDINGS. IT IS ALSO SEEN THAT AS PER BALANCE SHEET, THE ENTI RE FUND HAS BEEN UTILIZED. THE BALANCE SHEET INDICATES THE HEAD OF 'DEVELOPMENT FU ND (UTILISED) ACCOUNT' OF RS. 1,66,15,000/-, WHICH IS MORE THAN THE ALLEGED DEVEL OPMENT 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 PERUS ED. IT IS NO MORE IN DISPUTE THAT THIS ASSESSEE IS A REGISTERED TRUST(SU PRA). LEARNED COUNSEL FOR THE ASSESSEE TAKES US TO PAGES 16 TO 18 OF THE PAPER BO OK INDICATING IT TO HAVE UTILIZED THE IMPUGNED DEVELOPMENT FUND IN RELEVANT PREVIOUS YEAR. A CO- ORDINATE BENCH IN ITO VS. J. D. TYTLER SCHOOL SOCIE TY (2014) 49 TAXMANN.COM 294 (DELHI) HOLDS THAT SUCH A DEVELOPMENT FUND FORM ING PART OF STUDENT FEE AS UTILIZED IN THEIR AMENITIES AND WELFARE IS IN THE N ATURE 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. 10. THE REVENUES SIX SUBSTANTIVE GROUND PLEADS THA T THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONSIDERING EXPENDITURE ON D ONATION OF RS.48,73,831/- TO DELHI PUBLIC SCHOOL AS PART OF EXPENDITURE. THE RE IS AGAIN NO DISCUSSION IN ASSESSMENT ORDER. THE ASSESSING OFFICER HAS ADDED THE IMPUGNED SUM IN PAGE 8 TABULATION. THE CIT(A)S ORDER ACCEPTS ASSE SSEES ARGUMENTS AS FOLLOWS: 11.2 I HAVE CONSIDERED THE FACTS OF THE CASE, ASSE SSMENT ORDER AND THE SUBMISSIONS MADE BY THE APPELLANT. ITA NO. 92/AHD/14 (DCIT VS. BHOLARAM EDUCATION SOCI ETY) A.Y. 2010-11 - 9 - GROUND NO. 6 IS RELATED TO DISALLOWANCE OF DONATION OF RS.48,73,831/- GIVEN BY THE APPELLANT. THE A.O. HAS NOT DISCUSSED IN HIS ASSESSMENT ORDER THE REASON WHY HE HAS DISALLOWED THE SAME BUT IT APPEAR S THAT HE HAS DISALLOWED THE SAME TREATING THE APPELLANT AS AOP. AS PER PROVISIO NS OF SEC. LL(L)(A) OF THE ACT, THE TRUST HAS TO APPLY ITS INCOME FOR THE PURPOSE O F CHARITABLE PURPOSES AND THERE IS NO BAR ON A TRUST NOT TO DONATE TO ANOTHER TRUST . DONATION GIVEN TO ANOTHER TRUST IS TANTAMOUNT TO APPLICATION OF INCOME. THE A PPELLANT HAS RELIED UPON THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT V. SARLADEVI SARABHAI TRUST [1988] 172 ITR 698, WHEREIN IT IS HELD THAT W HEN A DONOR TRUST WHICH ITSELF A CHARITABLE TRUST DONATES ITS INCOME TO ANOTHER TR UST, THE PROVISIONS OF SEC. 11(1)(A) CAN BE SAID TO HAVE BEEN MET WITH BY SUCH DONOR TRUST. ACCORDINGLY, I AM OF THE CONSIDERED VIEW THAT A TRU ST CAN GIVE DONATION TO ANOTHER TRUST WHICH TANTAMOUNT TO APPLICATION OF IN COME. THEREFORE, THIS GROUND OF APPEAL IS ALLOWED AND THE A.O. IS DIRECTED TO DELET E THE ADDITION MADE OF RS.48,73,831/-. 11. LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENTLY CONTENDS THAT ASSESSEES IMPUGNED DONATION GIVEN TO ANOTHER CHAR ITABLE TRUST DOES NOT AMOUNT TO ITS APPLICATION OF INCOME. WE HOWEVER FI ND THAT HONBLE JURISDICTIONAL HIGH COURTS DECISION IN SARLA DEVI SARABHAI TRUSTS CASE(SUPRA) ALREADY DECIDES THE VERY ISSUE IN ASSESSEES FAVOUR . WE THEREFORE AFFIRM THE CIT(A)S CONCLUSION UNDER CHALLENGE. THE REVENUE F AILS IN ITS SIXTH SUBSTANTIVE GROUND AS WELL. 12. THE REVENUES SEVENTH SUBSTANTIVE GROUND PLEADS THAT THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONSIDERING ASSESSEES INVESTMENT IN FIXED ASSETS AMOUNTING TO RS.13,51,02,167/- AS APPLICATION OF IN COME AS WELL AS ITS DEDUCTION. THERE IS NO DISPUTE ABOUT THE ASSESSEE HAVE INCURRED THE IMPUGNED EXPENDITURE. THE ASSESSING OFFICER WAS OF THE VIEW THAT ASSESSEES INSTANT ACTION AMOUNTED TO CLAIMING THE VERY RELIEF IN BOTH APPLICATION AS WELL AS COMPUTATION OF INCOME. THE CIT(A) REVERSES THE SAME AS UNDER: 12.2 I HAVE CONSIDERED THE FACTS OF THE CASE, ASSE SSMENT 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 W AS APPLIED FOR ACQUIRING ASSETS, IT WAS TREATED AS APPLIED FOR CHARITABLE PU RPOSE AND ENTIRE AMOUNT WAS CLAIMED U/S. 11. THE A.O. HAS NOT CONSIDERED THAT T HERE ARE TWO SEPARATE ISSUES I.E. ITA NO. 92/AHD/14 (DCIT VS. BHOLARAM EDUCATION SOCI ETY) A.Y. 2010-11 - 10 - ONE IS APPLICATION OF INCOME, AND SECOND IS COMPUTA TION 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 ALLOWABILIT Y OF DEPRECIATION IN COMPUTATION OF INCOME. I HAVE CONSIDERED VARIOUS JUDGMENTS CITE D 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 S OCIETY 330 ITR 21 (P&H) AS WELL AS THE DECISION OF THE GUJARAT HIGH COURT IN T HE CASE OF SATYA VIJAY PATEL HINDU DHARMASHALA TRUST V. CIT 86 ITR 683 WHEREIN I T 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 PURPOS ES OF THE TRUST'. IN ALL THE JUDGMENTS IT HAS BEEN HELD BY THE HIGHER AUTHORITIE S THAT THE AMOUNT UTILIZED FOR REQUIRING FIXED ASSETS IS ALLOWABLE AS APPLICATION OF INCOME AS PER SEC. 11(1)(A) OF THE ACT. THERE ARE TWO SEPARATE ISSUES ONE IS PE RTAINING 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 AMOUN T OF INVESTMENT IN THE FIXED ASSETS AS PART OF APPLICATION OF INCOME AS PER SEC. 11(1)(A). 13. HEARD BOTH THE SIDES. LEARNED DEPARTMENTAL REP RESENTATIVE QUOTES CASE LAW LISSIE MEDICAL INSTITUTIONS VS. CIT 348 IT R 344 (KERLA) TO CONTEND THAT THE CIT(A) HAD RIGHTLY MADE THE IMPUGNED DISAL LOWANCE. HE HOWEVER FAILS TO DISPUTE THAT THE SAME GOES CONTRARY TO HON BLE JURISDICTIONAL HIGH COURTS DECISION IN CASE OF SATYAVARDHAN PATEL HIND U DHARAMSHALA TRUST (SUPRA). WE THEREFORE EXPRESS OUR RESPECTFUL AGREE MENT WITH HONBLE JURISDICTIONAL HIGH COURTS DECISION TO AFFIRM THE CIT(A)S FINDINGS UNDER CHALLENGE. 14. THE REVENUES LAST SUBSTANTIVE GROUND PLEADS TH AT THE CIT(A) HAS ERRED ON FACTS AND IN LAW IN REVERSING ASSESSING OF FICERS ACTION DISALLOWING DEPRECIATION OF RS.133,60,206/- MADE ON THE GROUND THAT THE ASSESSEE COULD NOT HAVE CLAIMED THE CORRESPONDING SUMS SPENT ON AC QUISITION OF FIXED ASSETS FOR THE PURPOSE OF DEDUCTION AS WELL AS FOR THE IMP UGNED DEPRECIATION SINCE THE SAME AMOUNTED TO A DOUBLE DEDUCTION CASE. WE F IND THAT THIS ISSUE IS NO MORE RES INTEGRA AS HONBLE JURISDICTIONAL HIGH CO URTS DECISION IN CIT VS. SETH MANILAL RANCHHODLAL BHAVAN TRUST 188 ITR 598 , A CO-ORDINATE BENCH IN ITO VS. SARDAR PUBLIC CHARITABLE TRUST ITA NO.28 5 & 286/AHD/2013 ITA NO. 92/AHD/14 (DCIT VS. BHOLARAM EDUCATION SOCI ETY) A.Y. 2010-11 - 11 - ALONGWITH CIT VS. TINY TOTS EDUCATION SOCIETY (201 1) 330 ITR 21 (P&H) AND DIT VS. SHRI VILE PARLE KELAVANI MANDAL (2015) 378 ITR 593 (BOM.) HAVE ALREADY ADJUDICATED THE VERY ISSUE IN ASSESEE S FAVOUR. IT IS ALSO BROUGHT TO OUR NOTICE THAT THE LEGISLATURE HAS NOW AMENDED SECTION 11(6) OF THE ACT BY THE FINANCE ACT, 2014 W.E.F. 01.04.2015 DENYING SUCH A DOUBLE DEDUCTION CLAIM. HONBLE KARNATKA HIGH COURT HAS ALREADY H ELD THE SAME TO BE HAVING PROSPECTIVE OPERATION ONLY IN DIT VS. AL AMEEN CHAR ITABLE TRUST FUND (2016) 67 TAXMANN.COM 160. WE THEREFORE SEE NO REASON TO INTERFERE WITH THE CIT(A)S FINDING UNDER CHALLENGE. 15. THIS REVENUES APPEAL IS ACCORDINGLY DISMISSED. [PRONOUNCED IN THE OPEN COURT ON THIS THE 14 TH DAY OF SEPTEMBER, 2017.] SD/- SD/- ( N. K. BILLAIYA ) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL M EMBER AHMEDABAD: DATED 14/09/2017 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )*+ ,--. . /0 / DR, ITAT, AHMEDABAD 1 +23 / GUARD FILE. BY ORDER / . // . /0