M/S. JANASEVA TRUST,BENGALURU vs. INCOME-TAX OFFICER, EXEMPTIONS, WARD-1, BENGALURU

This appeal filed by the assessee is against the DIN & Order No. ITBA/NFAC/S/250/2022-23/1050124599(1) dated 25.02.2023, passed by the CIT(Appeal),NAFC Delhi for the assessment year 2012- 13 on the following grounds of appeal:-

During the course of hearing none was present on behalf of the assessee, therefore, the case was heard qua the assessee.

The brief facts of the case are that the assessee filed return of income declaring nil income on 29/09/2012 claimed exemption u/s 11 of the Act. The case was selected for scrutiny and statutory notices were issued to the assessee. In response, the assessee filed reply stating the activities of the trust and other documents were filed. The AO noticed that assessee has claimed application of income as capital expenditure of Rs.1,09,46,304/- and depreciation on the same of Rs.31,97,283/-, thus making double claim. Accordingly the AO issued show cause notice. The AR of the assessee submitted that both are allowable as capital expenditure is application of income for purchase of capital asset and depreciation is due to wear and tear of the assets. The AO was not satisfied and observed that value of assets on which depreciation has been claimed has already been claimed towards application of income in the earlier years and depreciation of such assets again would amount to double deduction. Relying on some judgements, he disallowed the depreciation as application of income.

The AO further noted that the assessee has received donation of Rs.1,05,92,266/- [24,92,266 + 81,00,000] and claimed it as corpus fund for construction of building. In response to the query, the assessee produced copy of the receipts and list of the donors. On verification, the AO noted that there is no specific direction from the donors and submissions were not accepted by the AO, therefore, the amount of Rs.1,05,92,266 was treated as general receipts.

He further observed that the assessee has claimed loss on sale of assets of Rs.52,413/- which was not allowed by the AO. He further noticed that the assessee has refunded as caution money to students of Rs.58,000/-, In this regard the AR submitted that the this amount was collected from the students at the time of admission and refunded when they leave the institution. The details were called for but in absence of proof of payments/expenditure the same was not allowed as application of fund of the trust. Accordingly, the AO completed the assessment and computed the income as under:-

Aggrieved from the above order, assessee filed appeal before the CIT(A). The CIT(A) issued noticed but the assessee sought for adjournment and did not appear on the subsequent dates. Accordingly, the ld.CIT(A) passed order on the basis of materials available before him and confirmed the order of the AO.

Aggrieved from the above order, the assessee filed appeal before The Income Tax appellate Tribunal.

None appeared for the assessee. The ld.DR relied on the orders of the authorities below and she further submitted that ample opportunities were granted by the ld.CIT(A), in spite the assessee did not appear, so she requested the order of the lower authorities should be upheld.

We have heard the ld. DR and gone through the statement of facts, grounds of appeal filed by the assessee and materials on record, We notice that in ground No.1, the assessee has claimed depreciation of Rs.31,97,283/- which was claimed as application of income as per sec. 11 of the Act but not allowed by the AO observing that it would amount to double deduction since the assessee has already claimed application of income at the time of purchase of assets. We note that the case of the assessee is prior to 01.04.2015, therefore, the assessee is eligible for claim as application of income on the depreciation charged on fixed assets, even if the assessee has already claimed application of income on the fixed assets in the year of purchase. This issue has been settled by the Hon’ble Supreme Court prior to amendment in the case of CIT v. Rajasthan & Gujarati Charitable Foundation, Poona, [2018] 89 taxmann.com 127 (SC). The Hon’ble Apex Court has decided that the amendment made as prospective in nature. Respectfully following the above judgment, accordingly we allow ground No.1 of the assessee.

In the result, the appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the open court on 26th July, 2023.