MURUGAMMAI EDUCATIONAL TRUST,CHENNAI V. ITO, EXEMPTIONS WARD 4, CHENNAI

ITA 1790/CHNY/2024

AI Insights

The case involves Murugammai Educational Trust, which operates a CBSE Curriculum School and was assessed for the Assessment Year 2016-17. The primary issues in the appeal were the inclusion of a corpus/building fund amounting to Rs.425.65 Lacs in the gross receipts and the disallowance of depreciation amounting to Rs.48.17 Lacs. The Trust argued that the building fund should be treated as a capital receipt and not included in the gross receipts for calculating the Rs.1 Crore limit prescribed under Section 10(23C)(iiiad) of the Income Tax Act. The Assessing Officer had included these receipts and denied the exemptions claimed under Sections 10(23C)(iiiad) and 11. The Tribunal found that the issues raised require re-examination and thus set aside the CIT(A)'s order and restored the matter to the Assessing Officer.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 29449 (ITAT-CHENNAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2016-2017
• Other Referred Cases: ITO Exemptions Vs. Serum Institute of India Research Foundation, Divine Educational Institute and Social Development Society Vs. ITO Exemption, Ghaziabad, Commissioner of Income Tax, Exemptions Vs. Shanti Devi Educational Trust
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANDHYA RANI KURE LD.
• Assessee Lawyers: K. SRINANDAN LD
• Keywords: Set aside; Depreciation; Capital receipt; Charitable institution
• Section: 143(3); 11; 12AA; 12A; 12

Judgement Text

" आयकर अपीलीय अिधकरण “बी” \u000eा यपीठ चे\u0013ई म\u0016। IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, CHENNAI मा ननीय \u0019ी जॉज\u001c जॉज\u001c क े, उपा \u001f एवं मा ननीय \u0019ी मनोज क ुमा र अ&वा ल ,लेखा सद* क े सम । BEFORE HON’BLE SHRI GEORGE GEORGE K, VP AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकरअपील सं ./ ITA No.1790/Chny/2024 (िनधा \u001cरण वष\u001c / Assessment Year: 2016-17) Murugammai Educational Trust #10A, Vaigai Street Extension, Gurusamy Nagar, Sembakkam, Chennai-600 073. बना म/ Vs. ITO Exemptions Ward-4 Chennai. \u0001थायीलेखासं./जीआइआरसं./PAN/TAN No. AACTM-8568-K (अपीलाथ\u001a/Appellant) : (\u001d\u001eथ\u001a / Respondent) अपीलाथ\u001aकीओरसे/ Appellant by : Shri K. Srinandan (Advocate) – Ld.AR \u001d\u001eथ\u001aकीओरसे/Respondent by : Ms. Sandhya Rani Kure (JCIT) -Ld. Sr. DR सुनवाईकीतारीख/Date of Hearing : 07-01-2025 घोषणाकीतारीख /Date of Pronouncement : 27-02-2025 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year (AY) 2016-17 arises out of an order of learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [CIT(A)] dated 24-04- 2024 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s. 143(3) of the Act on 19-12-2018. The registry has noted delay of 2 days in the appeal, which stands condoned. The grounds of appeal read as under: - 2 As is evident, the grievance of the assessee is two-fold – (i) Addition of Corpus / Building fund amounting to Rs.425.65 Lacs; (ii) Disallowance of depreciation for Rs.48.17 Lacs. 2. The Ld. AR advanced arguments supporting the case of the assessee and filed written submissions which read as under: - 1. The appellant was registered as Charitable Trust vide doc no: 1290/2010 dt.27/05/2010 registered with SRO Tambaram. It is running a CBSE Curriculum School having 1200 students on record studying from Pre KG to 10th. At the time of filing of return registration u/s 12AA was not available. 2. It had filed a return of income for AY 2016-17 on 27/04/2017 admitting Rs.500/- as income claiming the gross receipts exempt u/s 10(23C)(iiiad)(Enclosed). The Appellant is eligible for exemption under Section 10(23C)(iiiad) of IT Act, 1961: 3. The CIT (A), omitted deciding the claim of exemption u/s 10(23C)(iiiad). 4. The appellant claimed Rs.4,25,65,750/-, which was received as Building Fund to be treated as Capital Receipt and that it should not be included in the gross receipts for calculating 1 Crore limit (amount prescribed in Rule 2BC) for deciding eligibility u/s 10(23C)(iiiad). 5. Even otherwise, the Fund is not directly for Educational activities and therefore, only the fee receipts ought to have been considered for 1 Crore limit. 6. This claim was made based on the following judgments, a. ITO Exemptions Vs. Serum Institute of India Research Foundation; b. Divine Educational Institute and Social Development Society Vs. ITO Exemption, Ghaziabad; c. Commissioner of Income Tax, Exemptions Vs. Shanti Devi Educational Trust; In the above judgments, Hon'ble Tribunals and Courts held that the donations received towards corpus/ specific funds, were to be treated as Capital Receipts even though the Trust had not obtained registration under Section 12AA of IT Act, 1961. Further, it was also held that donations to the building fund being termed as Capital receipt cannot be included to find out the gross receipt for claiming exemptions u/s 10(23C)(iiiad). 7. The CIT (A) failed to appreciate the fact that the decision in Commissioner of Income Tax, Exemptions Vs. Shanti Devi Educational Trust, decided by Hon'ble ITAT had attained finality as the Hon'ble Supreme Court of India vide its Order dated 20.04.2018 in (Civil) Diary No(s). 10671/2018 rejected the appeal preferred by the Department. Therefore, the decision having attained finality, it ought to have been followed and the Appellant's claim for exemption u/s 10(23C)(iiiad) ought to have been allowed. During the proceeding s relating to stay of collection of tax, CIT(E) had granted as the assessee has a good case on merits: 8. The Appellant had relied on the decision of Commissioner of Income Tax, Exemptions Vs. Shanti Devi Educational Trust, decided by Hon'ble ITAT had attained finality as the Hon'ble Supreme Court of India vide its Order dated 20.04.2018 in (Civil) Diary No(s). 10671/2018. The CIT (Exemptions) after perusing this judgment, agreed that the decision has attained finality and hence can be relied on. 9. Therefore, based on the above, the CIT (Exemptions) granted an order of stay of collection of tax. B. The relief granted u/s 12A, does not benefit the Appellant and hence this Appeal: 3 10. The appellant though has been given a relief u/s 12A of the Act, this has a catch, where the appellant has to file audit report in Form 108, which if now filed would be belated. The CIT (A) ought to have given the Appellant time to file Form 10B. 11. However, without prejudice, even if the relief was granted u/s 12A, the CIT{A) ought to have allowed the depreciation, which has not been done. The CIT(A) allowed the depreciation as computed by the AO, ignoring the fact that the depreciation was never claimed in the Appellant's return of income. The AO and the CIT(A) erred in reducing the claim of Depreciation for Rs.48,17.214/- to Rs.68,871/-: 12. The AO had issued a show cause notice, the issue of depreciation was never raised in the SCN. However, while passing the order, the AO had suddenly brought this issue and passed order, which is null and void. 13. Without prejudice, The Assessing Officer had given the following reasons for reducing the claim of depreciation: (i) The rates adopted by the assessee is as per Companies Act: This statement is completely incorrect. We have enclosed the rates as per Companies Act and as per Income tax Act. We have adopted rates as per Income tax Act only (ii) Depreciation was allowed only on addition to fixed assets and not on the opening balance: The Assessing Officer had not given any explanation for restricting the depreciation claim only for addition to fixed assets. The following table will show the difference between our claim and the claim given by the Assessing Officer Our claim as block of assets: As per AO As per our claim Plant and machinery Additions during the Year more than 180 days 1,62,295 15% 1,62,295 15% Furniture & Fixture Less than 180 days More than 180 days 77,420 168060 5% 10% 77,420 1,68,060 5% 10% Vehicles: The AO had taken additions to Computer as Vehicles wrongly More than 180 days 1,59,000 15% 1,59,000 60% (being computer a. Thus the calculation of Depreciation by Assessing Officer was incorrect on the following points: b. The Appellant had claimed depreciation on IT Rules only and not on Companies Act rates. The Assessing Officer erred in not allowing depreciation on opening balance. c. The Assessing Officer wrongly assumed COMPUTERS as Vehicles. The Ld. Sr. DR supported the findings of lower authorities. Having heard rival submissions and upon perusal of case records, our adjudication would be as under. Assessment Proceedings 3. The assessee being registered trust is running an educational institution by the name MAV Vidhyashram at Sembakkam. The assessee 4 claimed its entire income exempt u/s 10(23C)(iiiad). The assessee was not registered u/s 12AA of the act. The provisions of Sec. 10(23C)(iiiad) provide that income of any university or educational institution existing solely for education and not for purpose of profit would be exempt provided the aggregate annual receipts does not exceed the prescribed limits of Rs.1 Crore. However, the assessee admitted Rs.97.92 Lacs as its income and another amount of Rs.425.65 Lacs was admitted as receipt of building funds. The building funds receipts were claimed to be exempt u/s 11(1)(d). However, the assessee did not obtain approval u/s 10(23C)(vi). Since the aggregate receipts including building fund was more than threshold limit of Rs.1 Crore, Ld. AO held that it would not be eligible to claim exemption u/s 10(23C)(iiiad). The trust was also not registered u/s 12AA and therefore, the assessee was not eligible to claim exemption u/s 11 also. In such a situation, the income was to be computed on commercial principles. The amount received on account of building fund was brought to tax along with surplus. Finally, the total income was determined at Rs.475.62 Lacs. Appellate Proceedings 4. The assessee stated that capital receipt could not be included to compute aggregate annual receipts in terms of Sec.10(23C)(iiiad). It was also brought to the notice that during the pendency of assessment proceedings, the registration was granted to the assessee u/s 12AA on 14-12-2018. The Ld. CIT(A), considering the proviso to Sec.12A as inserted w.e.f. 01-10-2014, noted that the assessee received registration during pendency of assessment proceedings and therefore, the exemption u/s 11 & 12 would be allowable to the assessee. The ground 5 relating to depreciation was dismissed. Aggrieved, the assessee is in further appeal before us. Our findings an Adjudication 5. From the facts, it emerges that Ld. CIT(A) has allowed exemption u/s 11 & 12 but omitted to consider the claim of exemption u/s 10(23C)(iiiad). The Ld. AR has stated that building fund so received by the assessee is not to be included in gross receipts for calculating the prescribed limit of Rs.1 Crores for deciding eligibility u/s 10(23C)(iiiad). For the same, Ld. AR has relied on certain decisions. The Ld. AR has stated that the relief granted u/s 12A do not benefit the assessee at all since the assessee has not file requisite Form No.10B. It is another submission that depreciation has never been claimed in the return of income. Further, Ld. AO did not raise the issue of depreciation in the show cause notices. It has been submitted that depreciation has been allowed only on addition to fixed assets and not on the opening balance whereas the assessee has claimed depreciation as per Income Tax Rules only and not as per Companies Act rates. We are of the opinion that all these aspects require re-examination by Ld. AO. Therefore, keeping all the issues open, we set aside the impugned order and restore the assessment back to the file of Ld. AO for de novo consideration of assessee’s claim u/s 10(23C)(iiiad) and also considering the fact that the assessee has been granted registration u/s 12AA. The assessee is directed to substantiate its stand. 6 6. The appeal stand allowed for statistical purposes. Order pronounced on 27th February, 2025 Sd/- Sd/- (GEORGE GEORGE K) (MANOJ KUMAR AGGARWAL) उपा \u001f / VICE PRESIDENT लेखा सद* / ACCOUNTANT MEMBER चे1ई Chennai; िदनांक Dated :27-02-2025 DS आदेशकीIितिलिपअ&ेिषत/Copy of the Order forwarded to : 1. अपीलाथ\u001a/Appellant 2. \u001d\u001eथ\u001a/Respondent 3. आयकरआयु:/CIT Chennai. 4. िवभागीय\u001dितिनिध/DR 5. गाड?फाईल/GF "