The Ved Prakash Mukand Lal Education Society, Yamunanagar V. DCIT, Yamunanagar

ITA 952/CHANDI/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7417 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 16-01-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 27-09-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JYOTI KUMARI
• Keywords: Depreciation; Charitable institution; Maximum Marginal Rate; Rule of consistency; Wrong claim
• Section: 143(3); 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO.952/CHD/2011 (ASSESSMENT YEAR : 2008-09) THE VED PRAKASH MUKAND LAL VS. THE D.C.I.T., EDUCATION SOCIETY, YAMUNA NAGAR. RADAUR YAMUNA NAGAR. PAN: AAATV4812B (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI TEJ MOHAN SINGH RESPONDENT BY : SMT.JYOTI KUMARI, DR DATE OF HEARING : 12.12.2011 DATE OF PRONOUNCEMENT : 25.01.2012 O R D E R PER SUSHMA CHOWLA, J.M, : THE APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME-TAX (APPEALS), PANCHKULA DAT ED 06.09.2011 RELATING TO ASSESSMENT YEAR 2008-09 AGAINST THE ORD ER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE AS UNDER: 1. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEAL S) HAS ERRED IN LAW IN ENHANCING THE ASSESSED INCOME OF RS.3,03,34,570/- BY RS.5,59,07,096/- WITHOUT ISSUANCE OF MANDATORY SHOW CAUSE NOTICE AND AFFORDING A REASONABLE OPPORTUNITY AS CONTEMPLATED UNDER SECTION 251(2) OF THE ACT WHICH IS ILLEGAL, ARBITRARY & UNJUSTIFIED. 2. WITHOUT PREJUDICE TO THE ABOVE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN UPHOLDING THAT ASSESSEE HAS NOT APPLIED 85% OF ITS INCOME WHICH IS FACTUALLY INCORRECT AND SUCH THE ORDER PASSED IS ARBITRARY AND UNJUSTIFIED. 3. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) HAS FURTHER ERRED IN LAW AS WELL AS ON FACTS IN HOLDING THAT THE ASSESSEE HAS FAILED TO FULFILL THE 2 REQUIREMENTS LAID DOWN UNDER SECTION 11(2)(A) OF THE ACT WHICH IS ARBITRARY AND UNJUSTIFIED. 4. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) HAS FURTHER ERRED IN UPHOLDING THAT INVESTMENT IN FDRS DOES NOT QUALIFY FOR DEDUCTION UNDER SECTION 11(1) OF THE ACT WHILE THE ASSESSEE HAS TREATED IT BE APPLICATION OF INCOME WHICH IS ARBITRARY & UNJUSTIFIED. 5. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) HAS FURTHER ERRED IN UPHOLDING THAT DEPRECIATION CLAIMED OF RS.2,16,39,334/- IS NOT APPLICATION OF INCOME IN UTTER DISREGARD OF THE CASE LAW CITED BEFORE HER WHICH IS ILLEGAL, ARBITRARY AND UNJUSTIFIED. 6. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN NOT ADJUDICATING UPON THE GROUND NO.4 WHICH READS AS UNDER: THAT WITHOUT PREJUDICE TO ABOVE, THE LEARNED ASSESSING AUTHORITY HAS FURTHER ERRED IN NOT ALLOWING CREDIT, AS APPLICATION OF INCOME FOR THE YEAR, FOR THE AMOUNT OF EXCESS OF EXPENDITURE OVER INCOME RS.140193, 147/- ACCUMULATED FOR EARLIER YEAR(S), AS HELD BY HON'BLE BOMBAY HIGH COURT INC ASSESSEE REPORTED AT 131 TAXMAN 386 (SUPRA) AND CLAIMED BY THE APPELLANT. 3. THE ASSESSEE HAS RAISED SEVERAL GROUNDS OF APPEA L, BUT THE ISSUE RAISED IS IN RELATION TO COMPUTATION OF INCOME OF A SSESSEE-SOCIETY IN VIEW OF THE PROVISIONS OF SECTION 11 AND 12 OF THE INCOME TAX ACT. THE ASSESSEE IS AGGRIEVED ON ACCOUNT OF UNDERMENTIONED INTERRELATED ISSUES:- A) COMPUTATION OF INCOME OF ASSESSEE-SOCIETY FOR TH E FINANCIAL YEAR. B) NON-ALLOWANCE OF DEPRECIATION ON ASSETS OF RS.21 6,39,334/- COST OF WHICH HAS BEEN CLAIMED AS APPLICATION OF IN COME. C) NON-QUALIFICATION OF INVESTMENT IN FDRS DURING T HE YEAR AS APPLICATION OF INCOME AND CONSEQUENT DEDUCTION UNDE R SECTION 11(1) OF THE ACT. D) COMPUTATION OF FIGURE OF 85% OF THE INCOME, WHIC H IS TO BE APPLIED FOR CHARITABLE PURPOSE DURING THE YEAR. E) NON-ALLOANCE OF CREDIT OF EXCESS OF EXPENDITURE OVER INCOME OF RS.140,193/- AS APPLICATION OF INCOME OF THE FIN ANCIAL YEAR. 3 4. ALL THE ISSUES RAISED BY THE ASSESSEE ARE INTERR ELATED AND WE PROCEED TO DISPOSE OFF THE SAME. 5. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN EDUCATIONAL SOCIETY AND HAD BEEN RUNNING AN INSTITUTION STYLED AS SETH JAI PRAKASH MUKAND LAL INSTITUTE & TECHNOLOGY, IMPARTING EDUCAT ION FOR AWARD OF B.TECH., MBA, MCA AND M.TECH. DEGREES AND IS AFFILI ATED TO THE KURUKSHETRA UNIVERSITY. THE ASSESSEE HAD FILED ITS RETURN OF INCOME DECLARING NIL INCOME ON 29.9.2008. THE ASSESSEE HA D SHOWN GROSS RECEIPTS OF RS.15,52,33,648/-, AGAINST WHICH APPLIC ATION OF INCOME FOR CHARITABLE PURPOSES HAD BEEN CLAIMED TO THE EXTENT OF RS.18,32,95,603/-. THE ASSESSING OFFICER NOTED THAT THE TOTAL RECEIPTS OF THE ASSESSEE FOR THE RELEVANT ASSESSMENT YEAR WAS RS.15,52,33,648/- AND 85% OF THIS INCOME CAME TO RS.13,19,48,601/-, AGAINST WHICH THE ASSESSEE HAS APPLIED INCOME OF RS.12,32,53,366/- (RS.9,06,31,316 /- EXPENDITURE AS PER INCOME & EXPENDITURE ACCOUNT + 3,26,22,050/- AD DITION TO THE FIXED ASSETS). THUS THE TOTAL SHORT FALL IN APPLICATION OF REQUIRED INCOME FOR CHARITABLE PURPOSES WORKED OUT TO RS.86,95,235/-. FURTHER THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS CLAIMED DEPRECIATION OF RS.2,16,38,334/-. THE DEPRECIATION IS NOT ALLOWABL E TO THE ASSESSEE, SINCE THE ENTIRE COST OF THE FIXED ASSETS ON WHICH DEPRECIATION HAS BEEN CLAIMED, HAD ALREADY BEEN FULLY ALLOWED AS APPLICAT ION OF INCOME U/S 11 IN THE PAST YEARS AND THE CURRENT YEAR. THE AO MADE A DISALLOWANCE OF RS.2,16,39,334/- ON ACCOUNT OF WRONG CLAIM OF DEPRE CIATION. TOTAL DISALLOWANCE ON ACCOUNT OF SHORTFALL IN APPLICATION OF INCOME AND WRONG CLAIM OF DEPRECIATION WAS MADE AT RS.3,03,34,569/- (86,95,235 + 2,16,39,334). 4 6. THE CIT (APPEALS) HELD AS UNDER : 6.6 KEEPING IN VIEW THE FAILURE OF THE APPELLANT T O APPLY 85% OF ITS INCOME FOR CHARITABLE PURPOSES AND FAILURE TO ACCUMULATE AS PER PROVISIONS OF SECTION 11(2) IT IS HELD THAT THE ENTIRE SURPLUS CREATED BY THE APPELLANT AT RS.8,62,41,666/- (15,52,33,648 6,89,91,982) IS ASSESSED TO TAX AS UNDER:- TOTAL RECEIPTS AS INCOME & EXP. ACCOUNT RS.15,52,33,648/- LESS:- EXPENDITURE EXCLUDING DEPRECIATION RS.6,89,91,982/- SURPLUS INCOME RS.8,62,41,666/- THIS RESULTS IN ENHANCEMENT OF INCOME BY RS.5,59,07,096 I.E. (8,62,41,666 3,03,34,570) COMPUTED AS UNDER:- SURPLUS INCOME(SUPRA)ASSESSABLE RS.8,62,41,666/- LESS:-ADDITION MADE BY THE A.O. RS.3,03,34,5 70/- ENHANCEMENT RS.5,59,07,096/- AS A RESULT, THE ADDITION MADE BY THE A.O. IS ENHAN CED BY RS.5,59,07,096/-. THE AO IS DIRECTED TO RE-COM PUTE THE TAX AT MAXIMUM MARGINAL RATE IN THE STATUS OF APO. 7. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF C IT (APPEALS). THE LEARNED A.R. FOR THE ASSESSEE POINTED OUT THAT THE TOTAL RECEIPTS OF THE ASSESSEE SOCIETY DURING THE YEAR WERE 15.52 CRORES AS AGAINST WHICH THE ASSESSEE HAD MADE APPLICATION OF INCOME TO THE EXTE NT OF RS.18.32 CRORES. REFERENCE WAS MADE TO THE DETAILS INCORPOR ATED AT PAGE 2 OF THE ASSESSMENT ORDER. THE LEARNED A.R. FOR THE ASSESSE E POINTED OUT THAT UNDER THE PROVISIONS OF ACT, 85% OF THE TOTAL RECEI PTS I.E. RS.15.52 CRORES WORKS OUT TO RS.13.19 CRORES AND THE SAME HA D TO BE CONSIDERED FOR APPLICATION OF INCOME. ASSAILING THE ORDER OF THE ASSESSING OFFICER THE LEARNED A.R. FOR THE ASSESSEE POINTED OUT THAT FIRST THE DISALLOWANCE OF DEPRECIATION OF RS.2.16 CRORES WAS NOT WARRANTED IN THE CASE AND FURTHER THE NON-ALLOWANCE OF APPLICATION OF INCOME BY WAY OF DEPOSIT IN FIXED DEPOSIT WAS ALSO NOT WARRANTED. THE LEARNED A.R. FOR THE ASSESSEE 5 STRESSED THAT THE OBSERVATIONS OF THE CIT (APPEALS) IN PARA 6.6 NEEDS TO BE EXPUNGED. THE LEARNED A.R. FOR THE ASSESSEE FU RTHER STATED THAT THE CLAIM OF DEPRECIATION ON ASSETS IS COVERED BY THE R ATIO LAID DOWN BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT, KARNAL VS. MARKET COMMITTEE, PIPLI (ITA NO.535 OF 2009). IN RESPECT OF THE INVESTMENT IN FDRS, IT WAS POINTED OUT BY THE LEARNED A.R. FOR TH E ASSESSEE THAT THE SAME IS COVERED UNDER THE PROVISIONS OF SECTION 11( 5)(III) OF THE ACT AND ALSO BY THE RATIO LAID DOWN BY THE HON'BLE DELHI HI GH COURT IN DIRECTOR OF INCOME TAX (EXEMPTION) VS. DLF QUTAB ENCLAVE COM PLEX CHARITABLE TRUST [115 TAXMAN 520 (P&H)]. THE CONTENTION OF TH E LEARNED A.R. FOR THE ASSESSEE WAS THAT IF THE INVESTMENT IN FDRS WAS CONSIDERED AS APPLICATION OF INCOME, THEN THE TOTAL APPLICATION O F INCOME WAS MORE THAN 85% OF THE INCOME OF THE FINANCIAL YEAR AND HE NCE THERE WAS NO REQUIREMENT OF ANY NOTICE TO BE GIVEN UNDER SECTION 11(2) OF THE ACT. THE LEARNED A.R. FOR THE ASSESSEE ALSO DREW OUR ATT ENTION TO THE MEMORANDUM OF ASSOCIATION OF THE SOCIETY UNDER WHIC H THE MAIN OBJECT OF THE SOCIETY WAS TO MAKE INVESTMENTS AS PER THE R EQUIREMENTS UNDER SECTION 11(5) OF THE ACT. THE NEXT PLANK OF THE AR GUMENT WAS THAT IN THE PRECEDING YEARS, WHILE COMPLETING THE ASSESSMENT UN DER SECTION 143(3) OF THE ACT THE AFORESAID APPLICATION OF INCOME BY W AY OF INVESTMENT IN FDRS HAS BEEN ACCEPTED. THE COPIES OF THE ASSESSME NT ORDERS RELATING TO ASSESSMENT YEARS 2005-06 TO 2007-08 WERE REFERRED T O BY THE ASSESSEE. A PLEA WAS RAISED BY THE LEARNED A.R. FOR THE ASSES SEE THAT IN VIEW OF THE SETTLED POSITION, PRINCIPLE OF CONSISTENCY SHOULD B E APPLIED. RELIANCE WAS PLACED IN CIT VS. PORRITS & SPENCER (ASIA) LTD. [324 ITR 257 (P&H)] AND IN CIT VS. PRAKASH INDUSTRIES LTD. [ 324 ITR 391 (P&H)]. GROUND NO. 6 RAISED BY THE ASSESSEE WAS CLAIMED TO BE AN ALTERNATE GROUND. 6 8. THE LEARNED D.R. FOR THE REVENUE PLACED RELIANCE ON THE ORDER OF CIT (APPEALS). 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE-SOCIETY IS AN EDUCATION SOCIETY AND IS RUN NING SETH JAI PRAKASH MUKAND LAL INSTITUTE & TECHNOLOGY FOR B.TECH., MBA, MCA AND M.TECH. DEGREES IN AFFILIATION WITH KURUKSHETRA UNI VERSITY. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD FILED RET URN OF INCOME IN WHICH GROSS RECEIPTS WERE DECLARED AT RS.15,52,33,6 48/-. AGAINST THE SAID RECEIPTS, THE ASSESSEE HAD CLAIMED EXPENDITURE AS PER ITS INCOME AND EXPENDITURE ACCOUNT, INCLUDING DEPRECIATION AT RS.9 ,06,31,316/-. THE ASSESSEE HAD FURTHER CLAIMED THE SET OFF OF APPLICA TION OF INCOME BY WAY OF ADDITIONS TO FIXED ASSETS TOTALING RS.3,26,22,09 50/-. THE ASSESSEE HAD ALSO CLAIMED NET ADDITIONS TO FDRS DURING THE YEAR AT RS.6,30,42,237/- AND AFTER SET OFF OF LOAN AGAINST FDRS NET AMOUNT C LAIMED WAS RS.6,00,42,237/-. IN TOTALITY, THE EXPENDITURE AND APPLICATION OF INCOME WAS CLAIMED AT RS.18,32,95,603/- I.E. MORE THAT THE GROSS RECEIPTS OF THE ASSESSEE FOR THE FINANCIAL YEAR. ADMITTEDLY, THE E XPENDITURE CLAIMED BY THE ASSESSEE IN ITS INCOME AND EXPENDITURE ACCOUNT WAS ALLOWED BY THE ASSESSING OFFICER, EXCEPT FOR THE CLAIM OF DEPRECIA TION. THE AUTHORITIES BELOW WERE OF THE VIEW THAT THE DEPRECIATION ON ASS ETS, VALUE OF WHICH HAVE BEEN ALLOWED AS APPLICATION OF INCOME AMOUNTS TO DOUBLE DEDUCTION AND AS SUCH THE SAID DEPRECIATION IS NOT ALLOWABLE TO THE ASSESSEE. 10. WE FIND THAT SIMILAR ISSUE OF ALLOWANCE OF DEPR ECIATION ON ASSETS, VALUE OF WHICH HAS ALSO BEEN CONSIDERED AS APPLICAT ION OF INCOME IN THE YEAR OF PURCHASE OF THE ASSETS WAS BEFORE THE HON'B LE PUNJAB & HARYANA HIGH COURT IN CIT VS. MARKET COMMITTEE PIPLI [ITA N O.535 OF 2009 (P&H)] AND CIT VS. MARKET COMMITTEE, KARNAL [ITA NO S. 237,238,239 & 245 OF 2010(P&H)]. COPIES OF THE JUDGMENT ARE PL ACED ON RECORD BY 7 THE ASSESSEE. WE FIND THAT THE JURISDICTIONAL HIGH COURT IN THE CASE OF VARIOUS MARKET COMMITTEES HAD HELD THAT THERE IS NO CLAIM OF DOUBLE DEDUCTION ON ACCOUNT OF DEPRECIATION AS SUGGESTED B Y THE REVENUE. THE HON'BLE HIGH COURT HELD THAT THE INCOME OF THE ASSE SSEE BEING EXEMPT, THE CLAIM OF THE ASSESSEE WAS THAT DEPRECIATION SHO ULD BE REDUCED FROM THE INCOME FOR DETERMINING THE PERCENTAGE OF FUNDS WHICH WERE TO BE APPLIED FOR THE PURPOSE OF THE TRUST. FOLLOWING TH E ABOVE SAID PRINCIPLE WE ARE OF THE VIEW THAT THE ASSESSEE IS ENTITLED TO THE CLAIM OF DEPRECIATION AT RS.2,16,39,334/-. 11. THE NEXT ISSUE IS THE APPLICATION OF INCOME OF THE YEAR UNDER CONSIDERATION IN VIEW OF THE PROVISIONS OF SECTION 11/12 OF THE ACT. FIRST THE APPLICATION OF INCOME CLAIMED BY THE ASSE SSEE IN RESPECT OF NET ADDITIONS TO FIXED ASSETS DURING THE YEAR BY THE CO LLEGE AS PER SCHEDULE OF FIXED ASSETS AT RS.3,26,22,050/- HAS BEEN ALLOWE D BY THE AUTHORITIES BELOW. HOWEVER, FURTHER APPLICATION OF INCOME BY W AY OF ADDITIONS TO FDRS IS RS.6,00,42,237/-. THE ASSESSEE CLAIMED THA T IN VIEW OF THE PROVISIONS OF SECTION 11(5) OF THE ACT IT WAS ENTIT LED TO THE BENEFIT OF SUCH INVESTMENT MADE IN FDRS. WE FIND THAT UNDER T HE PROVISIONS OF SECTION 11(5) OF THE ACT, THE MODES OF INVESTMENT F OR CLAIMING EXEMPTION UNDER SECTION 11 ARE PROVIDED. SUB-CLAUS E (III) TO SUB-SECTION (5) OF THE ACT IS IN RESPECT OF DEPOSITS WITH SCHED ULED BANK OF COOPERATIVE SOCIETY CARRYING ON THE BUSINESS OF BAN KING. AS PER THE MEMORANDUM OF ASSOCIATION OF THE ASSESSEE-SOCIETY, COPY OF WHICH IS PLACED AT PAGES 21 TO 29 OF THE PAPER BOOK, THE OBJ ECTS OF THE ASSESSEE- SOCIETY IN ADDITION TO RUNNING EDUCATIONAL AND TECH NOLOGY INSTITUTION, AS PER CLAUSE (VII) IS TO INVEST THE MONEY OF THE SOC IETY IN A MANNER AS PROVIDED UNDER SECTION 11(5) OF THE ACT FROM TIME T O TIME BE DETERMINED, AND FROM TIME TO TIME TRANSFERRED SUCH INVESTMENT. THE ASSESSEE 8 DURING THE FINANCIAL YEAR CLAIMED THAT THERE WAS NE T ADDITIONS TO FDRS I.E. AT THE BEGINNING OF THE YEAR TOTAL INVESTMENT IN THE FDRS WAS RS.5,53,90,856/- AND AT THE CLOSE OF THE YEAR WAS R S.11,84,33,093/- I.E. NET ADDITION OF RS.6,30,42,237/-. AFTER SET OFF OF LOAN AGAINST THE FDRS THE AFORESAID INVESTMENT IN FDRS WAS RS.6,00,42,237 /-. THE SAID CLAIM OF THE ASSESSEE WAS DENIED BY HOLDING THAT THE INVE STMENT IN FDRS DOES NOT AMOUNT TO APPLICATION OF INCOME FOR CHARITABLE PURPOSE UNDER SECTION 11(1) OF THE ACT. WE FIND NO MERIT IN THE ABOVE SA ID PLEA OF THE ASSESSEE IN VIEW OF THE PROVISIONS OF SECTION 11(2) OF THE A CT, UNDER WHICH IT IS PROVIDED THAT WHERE 85% OF THE INCOME REFERRED TO IN SUB-SECTION (1)(A) OR (B) READ WITH EXPLANATION, IS NOT APPLIED , OR NOT DEEMED TO HAVE BEEN APPLIED, TO CHARITABLE OR RELIGIOUS PURPOSE DU RING THE PREVIOUS YEAR, AND THE SAME IS ACCUMULATED OR SET APART, FOR APPLI CATION TO SUCH PURPOSE, THEN SUCH INCOME SO ACCUMULATED SHALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE PREVIOUS YEAR IN THE HANDS OF T HE PERSON, PROVIDED EITHER OF THE TWO CONDITIONS ARE FULFILLED; A) SUCH PERSON BY NOTICE IN WRITING SPECIFIES TO THE ASSESSING OFFICER THE PURP OSE FOR WHICH THE INCOME IS BEING ACCUMULATED OR SET APART AND THE PE RIOD FOR WHICH IT IS SO ACCUMULATED OR SET APART; B )THE MONEY SO ACCUMULATED OR SET APART IS INVESTED OR DEPOSITED IN THE MODES SPECIFIED IN SUB -SECTION (5). THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD CO MPLIED WITH THE PROVISIONS OF SECTION 11(5) OF THE ACT BY INVESTING THE SURPLUS IN FDRS. EVEN OTHERWISE ONE OF THE OBJECTS OF THE ASSESSEE-S OCIETY WAS TO INVEST SURPLUS MONEY IN THE DEPOSITS SPECIFIED UNDER SECTI ON 11(5) OF THE ACT. WHERE THE SURPLUS MONEY HAS BEEN SO INVESTED IN THE FDRS, THE SAID INVESTMENT IS TO BE TREATED AS APPLICATION OF INCOM E OF THE PREVIOUS YEAR IN WHICH SUCH INVESTMENT IS MADE, IN THE HANDS OF T HE ASSESSEE. WE FIND THAT SIMILAR INVESTMENT IN FDRS IN THE EARLIER YEAR S BY WAY OF COMPLIANCE TO SECTION 11(5)(II) HAS BEEN ALLOWED AS APPLICATION OF MONEY 9 IN THE HANDS OF ASSESSEE-SOCIETY BY THE ASSESSING O FFICER HIMSELF VIDE ORDERS PASSED UNDER SECTION 143(3) OF THE ACT. THE ASSESSEE HAS PLACED ON RECORD COMPUTATION OF INCOME AND ASSESSMENT ORDE RS RELATING TO ASSESSMENT YEARS 2005-06 TO 2007-08 IN THE PAPER BO OK STARTING FROM PAGES 35 TO 100. PRINCIPLE OF CONSISTENCY DEMANDS THAT SIMILAR ISSUE, WHICH IS SETTLED IN THE HANDS OF THE ASSESSEE, IN T HE PRECEDING YEARS, UNLESS FACTS ARE AT VARIANCE, SHOULD BE ACCEPTED. ACCORDINGLY, WE HOLD THAT THE ASSESSEE IS ENTITLED TO THE BENEFIT OF THE INVESTMENT IN FDRS AS APPLICATION OF INCOME OF THE CURRENT YEAR. IN ANY CASE, WHILE COMPUTING THE APPLICATION OF INCOME OF THE PREVIOUS YEAR, ONL Y 85% OF THE INCOME I.E. RECEIPTS AFTER ADJUSTING EXPENDITURE, ARE TO B E CONSIDERED. THE CIT (APPEALS) HAD ERRED IN HIS OBSERVATIONS IN PARA 6.6 TO THAT EXTENT. 12. IN VIEW OF OUR OBSERVATIONS IN PARAS HEREINABO VE, THE TOTAL EXPENDITURE INCURRED BY THE ASSESSEE AND THE ADDITI ONS TO FIXED ASSETS AND FDRS, WHICH ARE ALLOWED AS APPLICATION OF INCOM E OF THE PREVIOUS YEAR, AMOUNTS TO RS.18,32,95,603/-. THE GROSS RECE IPTS OF THE PREVIOUS YEAR IN THE HANDS OF THE ASSESSEE-SOCIETY BEING RS. 15,52,33,648/-, THERE IS NO MERIT IN THE STAND OF THE AUTHORITIES BELOW T HAT THE ASSESSEE WAS TO SHOW HIS INTENTION OF SETTING APART THE INCOME WHIC H HAS NOT BEEN UTILIZED DURING THE YEAR, BY WAY OF ANY NOTICE UNDE R SECTION 11(2) OF THE ACT. THE ASSESSEE HAVING INVESTED MORE THAN ITS IN COME BY WAY OF APPLICATION OF INCOME IN THE FORM OF FIXED ASSETS A ND FDRS INVESTED DURING THE YEAR, THERE WAS NO PROVISIONS OF THE ACT COMPELLING THE ASSESSEE TO ISSUE THE NOTICE OF ITS INTENTION TO MA KE THE INVESTMENTS IN THE SUCCEEDING YEARS. IN VIEW THEREOF, WE SET ASID E THE ORDER OF CIT (APPEALS) AND DIRECT THE ASSESSING OFFICER TO ADOPT THE INCOME OF THE ASSESSEE-SOCIETY AT NIL. GROUND NO. 1 TO 5 RAISED BY THE ASSESSEE ARE THUS ALLOWED. 10 13. IN VIEW OF OUR ALLOWING THE APPEAL OF THE ASSE SSEE THE ALTERNATE PLEA RAISED BY THE ASSESSEE BY WAY OF ADJUSTMENT OF EXCESS OF EXPENDITURE OVER THE INCOME OF THE PRECEDING Y EAR AS APPLICATION OF INCOME FOR THE PREVIOUS YEAR DOES NOT MERIT ADJUDIC ATION AND THE SAME IS DISMISSED. 14. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH DAY OF JANUARY, 2012. SD/- SD/- (MEHAR SINGH) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 25 TH JANUARY, 2012 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. TRUE COPY BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH