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Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH
Before: Shri Rajpal Yadav & Shri Amarjit Singh
Revenue by: Shri Kishan Vyas, CIT-D.R. Assessee by: Shri G.C. Pipara, A.R. Date of hearing : 25-09-2019 Date of pronouncement : 15-11-2019 आदेश/ORDER PER : AMARJIT SINGH, ACCOUNTANT MEMBER:-
This revenue’s appeal for A.Y. 2014-15, arises from order of the CIT(A)-9, Ahmedabad dated 29-08-2017, in proceedings under section 143(3) of the Income Tax Act, 1961; in short “the Act”.
The revenue has raised following grounds of appeal:- “1) The Ld. CIT(A) has erred in law and on fact in neglecting the findings of A.O. regarding applicability of section 13(1)(c)(ii).
Page No 2 Dy. CIT vs. Bholaram Education Society 2) The Ld. CIT(A) has erred in law and on fact in deleting the amount of depreciation of Rs.2,99,77,044/- which amount to double deduction as 100% of deduction was allowed to the assessee as application of income. 3) The Ld. CIT(A) has erred in law and on facts in deleting the addition of development fund of Rs. 33,46, 000/- 4) Whether on the facts and circumstances of the case is the Ld. CIT(A) justified in giving the benefit of section 11 & 12 to the assessee which the Assessing Officer disallowed by invoking the provisions of section 4.1 The Ld. CIT(A) has failed to appreciate that the assessee paid huge rent to specified persons and the assessee has not been able to justify its reasonability. Further, the onus is on the assessee to prove the genuineness of expenditure incurred for the objects of the trust. 4.2 The Ld. CIT(A) has also not considered the fact that the decision of Hon'ble ITAT in the case of Aadharshila Education and Charitable Trust Vs. Department of Income tax, relied on by the Ld.ClT(A) has been challenged before the Hon'ble Gujarat High Court. 4.3 The Ld. CIT(A) has further failed to appreciate that the assessee had incurred huge expenses on traveling without any justification or clarity/purpose as to why relatives, trustees and the chairman of the society had carried out the travelling , which were for the personal benefits and advantage of the trustees and therefore is covered by the provisions of section 13(1)(c)(ii) of the Act. 4.4 The Ld. CIT(A) has not appreciated the fact that the resources of the trust are using for its own advantage and personal benefits of the Trustees, which is covered by the provision of section 13(1)(c)(ii) of the Act. 5) The Ld. CIT(A) has erred in law and on facts in deleting the addition of capital expenditure of Rs.6,62,45,376/-.”
The fact in brief is that return of income declaring income of Rs. Nil was filed on 30th Sep, 2014. The case was subject to scrutiny and notice u/s. 143(2) of the act was issued on 30th August, 2015. The assessee is a trust registered under the Society Registration Act, 1960. The assessee trust is engaged in the educational and healthcare educational activities and it runs Delhi Public School, Goenka Research Institute and Goenka School. During the course of assessment, the assessing officer has noticed that assessee had claimed depreciation as well as addition in fixed assets as application of income. The Trust has claimed depreciation of Rs. 2,99,77,044/-. On query of the assessing officer that the claim is accounted to double deduction, the assessee has explained that the assessee trust is entitled for deduction by cost of investments in fixed assets and also entitled to deprecation on such assets. However, the assessing officer was not agreed with the submission of the assessee and disallowed the claim of deprecation of Rs. 2,99,77,044/- and added to the total income of the assessee. During the course of assessment, the assessing officer has also noticed that assessee has received development Page No 3 Dy. CIT vs. Bholaram Education Society fund and same was claimed as exempt u/s. 11(1)(d) of the act. The assessing officer show caused the assessee to explain why not the said development fund should be treated as revenue receipt. The assessee explained that said development fund was required to be spent as and when required for the development purpose of the children’s education in the school and the said fund is collected and utilized for the purpose of development of activities in the school for the children such as swimming pool, cricket ground and other related educational activities. It is further submitted that the said fund was shown as liability in balance sheet since the said fund was separate fund collected from the students for which the school was liable to spend the same at any moment as and when required for the benefit of the students. The assessing officer has not accepted the explanation of the assessee and was of the view that said development fund was part of one time admission fees and it was not a voluntary contribution. The assessing officer observed that development fees was a revenue income of the assessee and not capital receipt as claimed by the assessee and the assessee was not entitled for exemption u/s. 11(1)(d) of the act. Accordingly, the assessing officer has treated the one time admission fees of Rs. 33,46,000/- as revenue receipt and added to the total income of the assessee.
The assessee has also noticed that assessee has paid building rent of Rs. 3,51,06,658/- to Smt. Manju Goenka and Shri Ramesh Prasad Goenka HUF and both these persons were trustees of the assessee trust. The assessing officer has stated in assessment year 2010-11 on the basis of similar fact it was held that undue benefit was taken by the trustee and specified person and accordingly, provision of section 13(2) was applied to Page No 4 Dy. CIT vs. Bholaram Education Society the case of the assessee. The assessing officer has also stated that there appeared to be a business motive of giving premises owned by the individual to the trust in which the individual are a trustee as well.
The assessing officer has further noticed from the details of travelling expenses furnished by the assessee that it also includes the expenses incurred for the travelling of trustees. The assessee explained that travelling expenses incurred were related to attending of meeting of the trust running Delhi Public School at different locations held throughout the year from time to time. Similar travelling expenses were incurred for visit of Chairman of DPS Society where teachers and staff members travelling students participated at different locations and trustees attended official meeting of DPS Society, Head Office at Delhi etc. The assessing officer has not accepted the explanation of the assessee for paying huge rent to specified persons and also stated that assessee could not clarify the purpose for which the trustee and the chairman of the society had incurred the travelling expenses. Considering the aforesaid aspect, the assessing officer has stated that assessee trust is hit by the provision of section 13(1)(c)(ii) of the act and the exemption claimed by the assessee u/s. 11 and 12 of the income tax act is not available to the assessee.
Aggrieved assessee has filed appeal before the ld. CIT(A). The ld. CIT(A) has allowed the appeal of the assessee.
During the course of appellate proceedings before us, the ld. counsel has brought to our notice that the identical issue on similar facts has been Page No 5 Dy. CIT vs. Bholaram Education Society adjudicated by the ITAT vide in the case of Dy. CIT vs. Bholaram Education Society dated 14-09-2017 and ACIT vs. Bholaram Education Society dated 29.03.2019 in ITA No. 3041/Ahd/2016. With the assistance of Ld. representatives, we have gone through the above referred order of the ITAT and noticed that the identical issue on similar facts has been adjudicated in favour of the assessee. The ld. departmental representative was fair enough not to contradict the aforesaid undisputed fact that issue has been decided in favour of the assessee. Relevant part of the decision of ITAT is reproduced as under:- “8. We have heard the rival contentions and perused the materials available on record. At the outset, we note that the tribunal in the own case of the assessee bearing ITA No. 92/AHD/2014 pertaining to the assessment year 2010-11 decided the issue against the Revenue and in favor of the assessee vide order dated 14-9-2017. The relevant extract of the order is extracted below. “14. The Revenue’s last substantive ground pleads that the CIT(A) has erred on facts and in law in reversing Assessing Officer’s action disallowing depreciation of Rs.133,60,206/- made on the ground that the assessee could not have claimed the corresponding sums spent on acquisition of fixed assets for the purpose of deduction as well as for the impugned depreciation since the same amounted to a double deduction case. We find that this issue is no more res integra as hon’ble jurisdictional high court’s 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.285 & 286/Ahd/2013 alongwith CIT vs. Tiny Tots Education Society (2011) 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. Hon’ble Karnatka high court has already held the same to be having prospective operation only in DIT vs. Al Ameen Charitable Trust fund (2016) 67 taxmann.com 160. We therefore see no reason to interfere with the CIT(A)’s finding under challenge.” 8.1. As the issue on hand is identical to the facts of the case as discussed above, therefore we do not find any reason to interfere in the finding of the learned CIT-A. Hence the ground of appeal
of the Revenue is dismissed.
9. The second issue raised by the Revenue is that learned CIT (A) erred in deleting the addition made by the AO on account of development fund amounting to ₹ 41,66,000.00.
10. The assessee during the year has received one-time development fee from the students and treated the same as corpus fund under section 11(1)(d) of the Act. However, the AO was of the view that such receipt is a voluntary contribution and accordingly treated the income of the assessee.
11. The aggrieved assessee preferred an appeal to learned CIT (A) who has deleted the addition made by the AO.
12. Being aggrieved by the order of learned CIT (A), the Revenue is in appeal before us.
13. The learned DR and the learned AR before us relied on the order of authorities below as favorable to them.
14. We have heard the rival contentions and perused the materials available on record. At the outset, we note that the tribunal in the own case of the assessee bearing ITA No. 92/AHD/2014 pertaining to the assessment year 2010-11 decided the issue against the Revenue and in favor of the assessee vide order dated 14-9-2017. The relevant extract of the order is extracted below. “8. The Revenue’s fifth substantive ground seeks to revive Assessing Officer’s action treating development fund amount of Rs.32,69,000/- as assessee’s taxable income. We notice herein as well that the Assessing Officer made the impugned addition in page 8 without discussing anything on merits. The CIT(A) on the other hand decides the issue in assessee’s favour as under:
Page No 6 Dy. CIT vs. Bholaram Education Society
“10. I have considered the facts of the case, assessment 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 Development Fund and the A.O. has considered the said Development Fund as income because 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 merits as submitted in the written submission, the Appellant has received the said Development 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 development activities, as is apparent from Audited Balance sheet submitted during the appellate proceedings. It is also seen that as per balance sheet, the entire fund has been utilized. The balance sheet indicates the head of "Development Fund (Utilised) Account" of Rs. 1,66,15,000/-, which is more than the alleged Development 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 perused. It is no more in dispute that this assessee is a registered trust(supra). Learned counsel for the assessee takes us to pages 16 to 18 of the paper book indicating it to have utilized the impugned development fund in relevant previous year. A co-ordinate bench in ITO vs. J. D. Tytler School Society (2014) 49 taxmann.com 294 (Delhi) holds that such a development fund forming part of student fee as utilized in their amenities and welfare is in the nature 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.” 14.1. As the issue on hand is identical to the facts of the case as discussed above, therefore we do not find any reason to interfere in the finding of the learned CIT-A. Hence the ground of appeal of the Revenue is dismissed.
15. The third issue raised by the Revenue is that learned CIT (A) erred in allowing the benefit of section 11 & 12 of the Act for the rent paid to the trustees. 15.1. The AO during the assessment proceedings found that the assessee has paid rent to the trustees in contravention to the provisions of section 13(1)(c)(ii) of the Act. Accordingly, the AO held that the assessee is not eligible for exemptions under section 11 and 12 of the Act.
16. The aggrieved assessee preferred an appeal to learned CIT (A) who has deleted the addition made by the AO.
17. Being aggrieved by the order of learned CIT (A), the Revenue is in appeal before us.
18. The learned DR and the learned AR before us relied on the order of authorities below as favorable to them.
19. We have heard the rival contentions and perused the materials available on record. At the outset, we note that the tribunal in the own case of the assessee bearing pertaining to the assessment year 2010-11 decided the issue against the Revenue and in favor of the assessee vide order dated 14-9-2017. The relevant extract of the order is extracted below. “6. We have heard both the parties strongly reiterating their respective stands. Case file indicates that the Assessing Officer admittedly did not draw any comparative chart or verification between the impugned payments vis-à-vis their market rate of rent in question. The CIT(A) on the other hand has taken into account an approved valuer’s report as well as all corresponding documents indicating all relevant particulars indicating the assessee to be utilizing vacant space alongwith land and building whilst concluding that the payments in question cannot be held as excessive ones. It has further come on record that the assessee had been paying similar rents in preceding assessment years as well. It places on record assessment order(s) pertaining to earlier assessment years not showing any such disallowance. 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 Revenue’s second and third substantive grounds are accordingly rejected.” 19.1. As the issue on hand is identical to the facts of the issue as discussed above, therefore we do not find any reason to interfere in the finding of the learned CIT-A. Hence the ground of appeal of the Revenue is dismissed.
20. The fourth issue raised by the Revenue is that learned CIT (A) erred in deleting the addition made by the AO on account of capital expenditure amounting to ₹ 8,10,86,589.00.
21. The assessee during the year has incurred an expense of ₹ 8,10,86,589.00 on account of addition to fixed assets on which the assessee also claimed depreciation. The AO was of the view that the assessee is claiming the benefit of depreciation as well as expenses incurred on the addition of such fixed assets by way of application of income. Accordingly, the AO disallowed the same and added to the total income of the assessee.
22. The aggrieved assessee preferred an appeal to learned CIT (A) who has deleted the addition made by the AO.
Page No 7 Dy. CIT vs. Bholaram Education Society
Being aggrieved by the order of learned CIT (A), the Revenue is in appeal before us.
The learned DR and the learned AR before us relied on the order of authorities below as favorable to them. 25. We have heard the rival contentions and perused the materials available on record. At the outset, we note that the tribunal in the own case of the assessee bearing pertaining to the assessment year 2010-11 decided the issue against the Revenue and in favor of the assessee vide order dated 14-9-2017. The relevant extract of the order is extracted below. “12. The Revenue’s seventh substantive ground pleads that the CIT(A) has erred in law and on facts in considering assessee’s investment in fixed assets amounting to Rs.13,51,02,167/- as application of income 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 assessee’s 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, assessment 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 was applied for acquiring assets, it was treated as applied for charitable purpose and entire amount was claimed u/s. 11. The A.O. has not considered that there are two separate issues i.e. one is application of income, and second is computation 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 allowability of depreciation in computation of income. I have considered various judgments cited 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 Society 330 ITR 21 (P&H) as well as the decision of the Gujarat High Court in the case of Satya Vijay Patel Hindu Dharmashala Trust v. CIT 86 ITR 683 wherein it 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 purposes of the trust". In all the judgments it has been held by the higher authorities 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 pertaining 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 amount 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 Representative quotes case law Lissie Medical Institutions vs. CIT 348 ITR 344 (Kerla) to contend that the CIT(A) had rightly made the impugned disallowance. He however fails to dispute that the same goes contrary to hon’ble jurisdictional high court’s decision in case of Satyavardhan Patel Hindu Dharamshala Trust (supra). We therefore express our respectful agreement with hon’ble jurisdictional high court’s decision to affirm the CIT(A)’s findings under challenge.” 25.1. As the issue on hand is identical to the facts of the issue as discussed above, therefore we do not find any reason to interfere in the finding of the learned CIT-A. Hence the ground of appeal of the Revenue is dismissed.” Considering the above, the decision of ITAT as cited above on similar issue and similar facts, we do not find any reason to interfere in the decision of ld. CIT(A).