COMMISSIONER OF INCOME TAX EXEMPTIONS vs. MAHIMA SHIKSHA SAMITI
What did the High Court hold?
The High Court held that the Tribunal's decisions were justified and answered all issues in favour of the assessee. Regarding the first issue, the Court found that payments to persons referred to in Section 13(3) did not disqualify the assessee from Section 11 benefits if the university was a statutory creation controlled by the same trustees and the transfer was for educational purposes. The Court reasoned that Section 13 must be considered with its explanation, and merely having common trustees or directors in another institution does not automatically bring it under Section 13. For the second issue, the Court held that the amendment to Section 11(6) is prospective, and prior to April 1, 2015, depreciation was rightly allowed, following jurisdictional High Court judgments. On foreign travelling expenses, the Court agreed with the Tribunal that these were for student exchange programs and educational purposes, thus covered under the trust's objects. The Court also affirmed that the Tribunal's findings on these matters were based on appreciation of facts and did not raise substantial questions of law. Consequently, all appeals filed by the Revenue were dismissed.
What were the facts?
This judgment concerns a consolidated group of appeals filed by the Commissioner of Income Tax (Exemptions) and Commissioner of Income Tax, Jaipur-II, against Mahima Shiksha Samiti. The appeals challenge various orders passed by the Income Tax Appellate Tribunal (ITAT) for assessment years not explicitly stated but implied to be prior to April 1, 2015. The core dispute revolves around the assessee's eligibility for benefits under Section 11 of the Income Tax Act, 1961, as a charitable trust, and related disallowances made by the revenue authorities. The procedural history involves multiple appeals filed over several years, with a review application leading to the matter being recalled and re-heard.
What were the issues?
The Tribunal had to decide the following questions of law: 1. Whether, in the facts and circumstances, the Tribunal was justified in allowing the benefit of Section 11(1) as a charitable trust despite huge surpluses being withdrawn by way of payments to persons referred to in Section 13(3). 2. Whether the Tribunal was justified in allowing depreciation on assets under Section 32, even where these assets had already been claimed as application of income in previous years. 3. Whether the Tribunal was justified in deleting additions made for foreign travelling expenses under Section 37, despite the assessee failing to prove the justification for these expenses. 4. Whether the Tribunal was justified in deleting the addition for disallowance of interest under Section 36(1)(iii), despite the assessee failing to discharge its onus of furnishing evidence of the use of assets. Assessee's Contentions (implied from the judgment's reasoning and reliance on jurisdictional High Court judgments): The assessee argued that payments to persons referred to in Section 13(3) did not disqualify it from Section 11 benefits, especially if the university was a creation of statute with controlled by the same trustee and the transfer was for educational purposes. They also contended that depreciation was rightly allowed as amendments to Section 11(6) were prospective and prior period law applied. Foreign travel expenses were for student exchange programs and educational purposes. The Tribunal's findings were based on appreciation of facts, not substantial questions of law. Revenue's Contentions (implied from the questions raised): The revenue contended that the Tribunal erred in allowing Section 11 benefits due to payments to persons covered under Section 13(3). They also argued against allowing depreciation when already claimed as application of income, disallowed foreign travel expenses due to lack of justification, and disallowed interest due to failure to prove asset usage.
Which sections of the Income-tax Act were involved?
Section 11,Section 11(1),Section 11(6),Section 13,Section 13(3),Section 32,Section 36(1)(iii),Section 37
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
Judgment 03/10/2017 1. Since, this group of matters relate to the same assessee, the matter was heard on 23.9.2017, however, a review application was filed and in view of that the matter was recalled and now following questions are raised for our consideration:-
Appeal No. 708/2008 case the Tribunal was justified in law and has acted the I.T. Act.
the previous years.
to prove the justification of these expenses.
case the Tribunal was justified in law and has acted evidence of use of the assets.” (2) Appeal No. 107/2009 case the Tribunal was justified in law and has acted the I.T. Act.
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the previous years.
to prove the justification of these expenses.
case the Tribunal was justified in law and has acted evidence of use of the assets.” (3) Appeal No. 67/2010 case the Tribunal was justified in law and has acted the I.T. Act.
the previous years.
to prove the justification of these expenses.
case the Tribunal was justified in law and has acted evidence of use of the assets.” (4) Appeal No. 68/2010 case the Tribunal was justified in law and has acted (6 of 39) [ITA-262/2017]
the I.T. Act.
the previous years.
to prove the justification of these expenses.
case the Tribunal was justified in law and has acted evidence of use of the assets.” (5) Appeal No. 70/2010 case the Tribunal was justified in law and has acted the I.T. Act.
the previous years.
to prove the justification of these expenses.
case the Tribunal was justified in law and has acted evidence of use of the assets.” (6) Appeal No. 126/2011 case the Tribunal was justified in law and has acted (7 of 39) [ITA-262/2017]
the I.T. Act.
the previous years.
to prove the justification of these expenses.
case the Tribunal was justified in law and has acted evidence of use of the assets.” (7) Appeal No. 118/2012 case the Tribunal was justified in law and has acted the I.T. Act.
the previous years.
to prove the justification of these expenses.
case the Tribunal was justified in law and has acted evidence of use of the assets.” (8) Appeal No. 235/2012 case the ITAT was justified in law and has acted (8 of 39) [ITA-262/2017]
the I.T. Act.
case the ITAT was justified in law in allowability of the previous years.
case the ITAT was justified in law in deleting addition made for foreign travelling expenses u/s 37 of the Act despite of the fact that the assessee failed to prove the justification of these expenses.
case the ITAT was justified in law and has acted evidence of use of the assets. (v) Whether on the facts and in the circumstances of the case, the ITAT was justified in holding that the provisions of Section 60 of Income Tax Act, 1961 cannot be invoked in the present case despite the fact that the referred society, i.e., Ankur Udhodhak Samiti was not filing returns of income and was not registered under Section 12A of the Act?” (9) Appeal No. 101/2014 “(i) Whether, in the facts and circumstances of the case the Tribunal was justified in law in directing to grant approval u/s 80G(5) holding that the activities of the society as charitable despite of the fact that the society is controlled and managed by one family and the motive is to earn profit which cannot be held to be charitable as defined u/s.2(15) of the Act.” (10) Appeal No. 115/2014 case the Tribunal was justified in law and has acted the I.T. Act.
the previous years.
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to prove the justification of these expenses.
In two appeals no.262/2017 & 263/2017, the appeal are admitted on the following substantial question of law:- Appeal No.262/2017 (i) Whether on the facts and in the circumstances of the case and in law, the Hon’ble ITAT is right in confirming the decision of Ld. CIT (A) in allowing the assessee’s claim of exemption u/s 11 even though provisions of section 13 are attracted? (ii) Whether on the facts and in the circumstances of the case and in law, the Hon’ble ITAT is right in confirming the decision of Ld. CIT (A) in allowing salary expenses to the member of Bakshi Family which is higher than reasonable? (iii) Whether on the facts and in the circumstances of the case and in law, the Hon’ble ITAT is right in allowing contribution made to Jaipur National University during the year under consideration as application of income u/s 11 of the Act despite of the fact that the assistance provided to JNU is the violation of bye laws of society as well as violation of provision of Sec.13(1)(c) and 13(2) of the IT Act? (iv) Whether on the facts and in the circumstances of the case and in law, the Hon’ble ITAT is right in confirming the decision of ld. CIT(A) in allowing foreign traveling expenses inspite of the fact that the assessee society failed to prove that these expenses were incurred for the objects of society? (v) Whether on the facts and in the circumstances of the case and in law, the Hon’ble ITAT is right in holding that the assessee is eligible to claim deduction of depreciation of Rs.62,73,413/- on the assets which were claimed as application u/s 11 at the time of purchase? (vi) Whether on the facts and in the circumstances of the case and in law, the Hon’ble ITAT is right in allowing the depreciation without appreciating the fact that the application of 100% expenditure of the (10 of 39) [ITA-262/2017]
capital assets is already allowed as capital expenditure hence further allowance of depreciation on the same capital asset would amount to double allowance? (vii) Whether on the facts and in the circumstances of the case and in law, the Hon’ble ITAT is right in allowing the depreciation without appreciating the fact that the assessee has not carried out the business activities but the receipts utilized for charity. As there was no business, the claim of depreciation was not allowable, the deprecation is allowable only in the case of business or profession or in case of “income from other sources”? Appeal No.263/2017 (i) Whether on the facts and in the circumstances of the case and in law, the Hon’ble ITAT is right in confirming the decision of Ld. CIT (A) in allowing the assessee’s claim of exemption u/s 11 even though provisions of section 13 are attracted? (ii) Whether on the facts and in the circumstances of the case and in law, the Hon’ble ITAT is right in confirming the decision of Ld. CIT (A) in allowing salary expenses to the member of Bakshi Family which is higher than reasonable? (iii) Whether on the facts and in the circumstances of the case and in law, the Hon’ble ITAT is right in allowing contribution made to Jaipur National University during the year under consideration as application of income u/s 11 of the Act despite of the fact that the assistance provided to JNU is the violation of bye laws of society as well as violation of provision of Sec.13(1)(c) and 13(2) of the IT Act? (iv) Whether on the facts and in the circumstances of the case and in law, the Hon’ble ITAT is right in holding that the assessee is eligible to claim deduction of depreciation of Rs.62,73,413/- on the assets which were claimed as application u/s 11 at the time of purchase? (v) Whether on the facts and in the circumstances of the case and in law, the Hon’ble ITAT is right in allowing the depreciation without appreciating the fact that the application of 100% expenditure of the capital assets is already allowed as capital expenditure hence further allowance of depreciation
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on the same capital asset would amount to double allowance? (vi) Whether on the facts and in the circumstances of the case and in law, the Hon’ble ITAT is right in allowing the depreciation without appreciating the fact that the assessee has not carried out the business activities but the receipts utilized for charity. As there was no business, the claim of depreciation was not allowable, the deprecation is allowable only in the case of business or profession or in case of “income from other sources”?
Since, the matters involved common question of law and facts, they are decided by this common judgment.
The facts of the case are that the respondent assessee namely Mahima Shiksha Samiti is engaged in imparting education, medical facility and other general public utility and for this purpose the assessee is running two educational institutions i. Seedling Public School, Jawahar Nagar and ii. Seeding Modern High School, Mahaveer Nagar.
1 The assessee is a society registered under Rajasthan Society Registration Act, 1958 and is further registered u/s 12AA of the Act w.e.f. 17.12.1990. For the relevant assessment year on 15.10.2010, the assessee filed its return declaring total income NIL after claiming exemption u/s 11(1)(a) of the Act. The case of assessee was selected for scrutiny and for that notice u/s 143(2)/142(1) were issued from time to time and assessee in compliance thereto attended the proceedings and furnished the required details. After considering the return of income and the details filed during the course of assessment proceedings, the ld.
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AO vide his order dt.25.3.2013, completed the assessment u/s 143(3) at the income of Rs.8,46,93,400/-
Counsel for the appellant contended in view of provisions of Section 10 (x), 23 (c) and Section 11 of the Income Tax Act. The contention which has been raised is that the provisions of Section 11 and Section 23 (3) would stand on a different footing and benefits which are conferred u/s 11 will not be available in a case which are granted in Sec. 23(3).
1 To support of his arguments, Mr. Jain has taken us Sec.2(13) of the IT Act which reads as under:- (13) " business" includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture;
2 He has also taken us to the definition of Charitable purpose as defined u/s 2(15) which reads as under:- “charitable purpose” includes relief of the poor, education, yoga, medical relief, preservation of environment (including watersheds, forests and wildlife)
and preservation
of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility. Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or (13 of 39) [ITA-262/2017]
retention, of the income from such activity, unless— (i) such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility; and (ii) the aggregate receipts from such activity or activities during the previous year, do not exceed twenty per cent of the total receipts, of the trust or institution undertaking such activity or activities, of that previous year.
3 He also taken us to the following provisions of the Act:- Section 11 Income from property held for charitable or religious purposes . (1) Subject to the provisions of sections 60 to 63, the following income shall not be included in the total income of the previous year of the person in receipt of the income- (a) 3 income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India; and, where any such income is accumulated or set apart for application to such purposes in India, to the extent to which the income so accumulated or set apart is not in excess of twenty- five per cent of the income from such property; (b) income derived from property held under trust in part only for such purposes, the trust having
been created
before
the commencement of this Act, to the extent to which such income is applied to such purposes in India; and, where any such income is finally set apart for application to such purposes in India, to the extent to which the income so set apart is not in excess of twenty five per cent of the income
from such property;] (c) income 4 derived] from property held under trust-(i) created on or after the 1st day of April, 1952 , for a charitable purpose which tends to promote international welfare in which India is interested, to the extent to which such (14 of 39) [ITA-262/2017]
income is applied to such purposes outside India, and (ii) for charitable or religious purposes, created before the 1st day of April, 1952 , to the extent to which such income is applied to such purposes outside India: Provided that the Board, by general or special order, has directed in either case that it shall not be included in the total income of the person in receipt of such income; (d) 1 income in the form of voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or institution.] 13. 1 Section 11 not to apply in certain cases
(1) Nothing contained in section 11 3 or section 12] shall operate so as to exclude from the total income of the previous year of the person in receipt thereof-(a) any part of the income from the property held under a trust for private religious purposes which does not enure for the benefit of the public; (b) in the case of a trust- for charitable purposes or a charitable institution created or established after the commencement of this Act, any income thereof if the trust or institution is created or established for the benefit of any particular religious community or caste; (c) in the case of a trust for charitable or religious purposes or a charitable or religious institution, any income thereof- (i) if such trust or institution has been created or established after the commencement of this Act and under the terms of the trust or the rules governing the institution, any part of such income enures, or (ii) if any part of such income or any property of the trust or the institution (whenever created or established) is during the previous year used or applied, directly or indirectly for the benefit of any person referred to in sub- section (3): Provided that in the case of a trust
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or institution created or established before the commencement of this Act, the provisions of sub- clause (ii) shall not apply to any use or application, whether directly or indirectly, of any part of such income or any property of the trust or institution for the benefit of any person refer- red to in sub- section (3), if such use or application is by way of compliance with a mandatory term of the trust or a mandatory rule governing the institution: Provided further that in the case of a trust for religious purposes or a religious institution (whenever created or established) or a trust for charitable purposes or a charitable institution created or established before the commencement of this Act, the provisions of sub- clause (ii) shall not apply to any use or application, whether directly or indirectly, of any part of such income or any property of the trust or institution for the benefit of any person referred to in sub- section (3) in so far as such use or application relates to any period before the 1st day of June, 1970 ; (d) 1 in the case of a trust for charitable or religious purposes or a charitable or religious institution, any income thereof, if for any period during the previous year- (i) any funds of the trust or institution are invested or deposited after the 28th day of February, 1983 otherwise than in any one or more of the forms or modes specified in sub- section (5) of section 11; or (ii) any funds of the trust or institution invested or deposited before the 1st day of March, 1983 otherwise than in any one or more of the forms or modes specified in sub- section (5) of section 11 continue to remain so invested or deposited after the 30th day of November, 1983 ; or (iii) any shares in a company[ not being a Government company as defined in section 617 of the Companies Act, 19563 (1 of 1956 ), or a corporation established by or under a Central,. State or Provincial Act are held by the trust or institution after the 30th day of November, 1983.
4 Section 28 -Profits and gains of business or profession.
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The following income shall be chargeable to income-tax under the head "Profits and gains of business or profession",— (i) the profits and gains78 of any business or profession78 which was carried on by the assessee at any time during the previous year ; (ii) any compensation78 or other payment due to78 or received by78 ,— (a) any person, by whatever name called, managing the whole or substantially the whole of the affairs of an Indian company, at or in connection with the termination of his management or the modification of the terms and conditions relating thereto; (b) any person, by whatever name called, managing the whole or substantially the whole of the affairs in India of any other company, at or in connection with the termination of his office or the modification of the terms and conditions relating thereto ; (c) any person, by whatever name called, holding an agency in India for any part of the activities relating to the business of any other person, at or in connection with the termination of the agency or the modification of the terms and conditions relating thereto ; 79[(d) any person, for or in connection with the vesting in the Government, or in any corporation owned or controlled by the Government, under any law for the time being in force, of the management of any property or business ;] Section 29. Income from profits and gains of business or profession, how computed The income referred to in section 28 shall be computed in accordance with the provisions contained in sections 30 to 1 43D].
5 He further contended that in view of decision of Supreme Court in Escorts Limited and anr. vs. Union of India & ors. reported in 199 ITR 49 wherein it has been held as under:- Section 32(1)(ii) provides for depreciation. As under the 1922 Act, it is allowed at a percentage of the written down value of certain capital assets employed in the business. The topic of scientific research expenditure is dealt with by Section 35. Section 35(1) provides for the deduction of four types of expenditure on scientific
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research and what we are concerned with is the deduction provided under Section 35(1) (iv), which is to the following effect: (iv) in respect of any expenditure of a capital nature on scientific research related to the business carried on by the assessee, such deduction as may be admissible under the provisions of Sub-section (2). Sub-section (2) provides that, for the purposes of Clause (iv) of Sub-section (1), one-fifth of the capital expenditure incurred in any previous year shall be deducted for that previous year; and the balance of the expenditure shall be deducted in equal installments in each of the four immediately succeeding previous years. There is an explanation which is not relevant for our present purposes. Reading Section 35(2) further, it provides in Clauses (iv) and (v) as follows: (iv) where a deduction is allowed for any previous year under this section in respect of expenditure represented wholly or partly by an asset, no deduction shall be allowed under Clauses (i), (ii) and (iii) of Sub-section (1) of Section 32 for the same previous year in respect of that asset; (v) where the asset mentioned in Clause (ii) is used in the business after it ceases to be used for scientific research related to that business, depreciation shall be admissible under Clauses (i), (ii) and (iii) of Sub-section (1) of Section 32. 5. Reference must also be made to Explanation 1 to Section 43(1) in this context. It read as follows at the relevant time: Explanation : Where an asset is used in business after it ceases to be used for scientific research related to that business and a deduction has to be made under Clause (i), Clause (ii) or Clause (iii) of Sub- section (1) or Sub-section (1A) of Section 32 in respect of that asset, the actual cost of the asset to the assessee, as reduced by the amount of any deduction allowed under Clause (iv) of subsection (1) of Section 35 or under any corresponding provision of the Indian Income-tax Act, 1922 (11 of 1922).
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From the above it will be seen that the provisions of Section 32(1)(ii) and Section 35(2)(i)(iv) and (v) read with Explanation 1 to Section 43(1) virtually repeat the provisions contained in Section 10(2)(vi) and Section 10(2)(xiv) of the 1922 Act, so that the question earlier posed still loomed in the background of 1961 Act.
In 1968 there was an amendment in the provisions of Section 35(2). The Sub-section was amended to read as follows: (2) For the purposes of Clause (iv) of subsection (1),: (i) in a case where such capital expenditure is incurred before the 1st day of April, 1967, one-fifth of the capital expenditure incurred in any previous year shall be deducted for that previous year; and the balance of the expenditure shall be deducted in equal installments for each of the four immediately succeeding previous years; (i-a) in a case where such capital expenditure is incurred after the 31st day of March, 1967, the whole of such capital expenditure incurred in any previous year shall be deducted for that previous year. The effect of this amendment was only to provide that the entire amount of capital expenditure incurred in relation to scientific research was allowed as a deduction in one year instead of being spread over a period of five years as was the position earlier.
At this stage, the Finance (No. 2) Act, 1980 intervened. It amended Section 35(2) (iv) to read as follows: (iv) where a deduction is allowed for any previous year under this section in respect of expenditure represented wholly or partly by an asset, no deduction shall be allowed under Clauses (i), (ii) and (iii) of Sub-section (1) of Section 32 for the same or any other previous year in respect of that asset. The Finance Act made this amendment retrospective w.e.f. 1-4-62, that is, the date of the commencement of the 1961 Act. The contention on behalf of the assessees was that the allowances in respect of (19 of 39) [ITA-262/2017]
depreciation on the one hand and in respect of capital expenditure on scientific research on the other are two totally different and independent heads of allowances. One is a notional allowance to provide for the wear and tear of a capital asset employed in the business as the years roll by; the other is an allowance for actual expenditure of a capital nature granted, on the eve of our country's independence, in order to give fillip to new industrial innovations and the development of indigenous know-how and techniques by proper
planning
on research
and development by various business houses. It is therefore suggested that there is nothing absurd in construing the statutes act as providing cumulatively for both types of deductions in respect of the same capital asset. The only limitations on this right are the two placed by the statute itself. The first limitation, contained in Clause (d) of the proviso to Section 10(2)(xiv) and Section 35(2)(iv) is that both the deductions cannot be claimed "for the same previous year" in respect of the same capital asset. The second limitation is found in Clause (e) of the proviso to Section 10(2)(xiv) and Section 35(2)(v) which say that if a capital asset used for scientific research ceases to be so used but is thereafter brought into a business for use therein, the actual cost for purposes of granting depreciation in respect of the asset thereafter should be taken as the amount of its original cost reduced by the amount of deductions allowed under Section 10(2)(xiv) or Section 35(2). In other words, the contention of the assessee was and is that both the types of allowances are permissible under the statute except to the extent limited by Clauses (d) and (e) of the proviso to Section 10(2)(xiv) of the 1922 Act and reproduced in Clauses (iv) and (v) of Section 35(2) of the 1961 Act.
Before us it is claimed on behalf of the assessee that this interpretation of the statutory provisions is very clear, patent and unambiguous. It is alleged that, despite this, some Income-tax Officers started disallowing the claim of depreciation in respect of such capital assets even in previous years during
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which no deduction was claimed or allowed under Section 10(2)(xiv) or Section 35(2), contrary to the clear language of Clause (d) of Section 10(2)(xiv) and Section 35(2)(iv). These orders were reversed on appeal either by the Appellate Commissioner or by the Tribunal. It was suggested that these decisions were almost unanimously in favour of the assessee but the department persisted in pursuing the matter up to the stage of the High Court. Only one reference on this topic came up before the High Courts and is reflected in the decision of the Karnataka High Court, reported as CIT v. Indian Telephone
Industries
Ltd. MANU/KA/0158/1980MANU/KA/0158/1980 : [1980]126ITR548(KAR) . This was a reference of the year 1977 made at the instance of the Commissioner of Income-tax and the Commissioner of Income-tax lost this reference. The High Court re-affirmed the position contended for by the assessee as the one and only possible interpretation of the statutory provisions. It is, therefore, contended that there was, and could have been, no doubt that an assessee was entitled to claim depreciation allowance in respect of such assets in respect of previous years other than those in which an allowance had been allowed under the other head. We shall revert later to this aspect of the matter.
The Revenue says that the deduction provided by Section 35(1)(iv) is in the alternative to the deduction provided by Cls. (i), (ii) and (iii) of Sub-section (1) and Sub- section (1A) of Section 32. If one is availed of, the other is not available, not only during the year or years in which the deduction under Section 35(1)(iv) is availed of, but permanently. The reason, according to them, is obvious: if both are allowed to be availed of, it amounts to grant of 200% deduction .viz., 100% under Section 35(1)(iv) and another 100% under Sub-sections (1) and (1A) of Section 32. This is totally outside the contemplation of the Act, they say. On the other hand, the case of the assessees is that the bar created by Clause (iv) of Sub-section (2) applies only to that previous year or those previous years during which the said expenditure is allowed as a deduction. That is the express language of the clause. The (21 of 39) [ITA-262/2017]
bar does not extend beyond the year or years in which the deduction under Section 35(1)(iv) is , availed. There is no reason -- more so in a ' taxing enactment -- to extend the said bar beyond the limit prescribed by the statute. They say, if the intention of the Parliament was to bar the claim of depreciation in respect of such asset for all time to come, nothing was easier than to say so in clear words, as was done by Sub- section (4) of Section 20 of U.K. Finance Act, 1944. It is pointed out that Clause (xiv) of Sub-section (2) of Section 10 was introduced in the Indian Income-tax Act within two years of the introduction of a similar provision in the English Act, evidently inspired by the Amendment in the English Act. But while incorporating the said provision, a conscious departure was made by the Indian Legislature, say the assessees. Having regard to the scant investment in scientific research in India, it is submitted, the legislature must have thought it necessary to provide an . additional inducement over and above the 'deduction ITR 344 wherein it has been held as under:-
We do not find in any of these decisions this aspect is considered and discussed by any of the High Courts. Learned senior counsel though referred Circular No. 5P (LLX- 6), dated June 19, 1968 (See endnote 1 on page 349), which is with regard to computation of income of charitable trusts, strangely depreciation is not specifically dealt with in the circular. No decision is seen rendered by the Supreme Court on the merits on this issue, even though one of the special leave petitions filed by the Department against one of the above decisions was dismissed by the Supreme
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Court. No amendment is seen made to the statute requiring the trust claiming depreciation to write back the depreciation as income of the previous year, if payment for acquisition of assets is treated as application of income for charitable purposes.
It is settled position through several decisions of High Courts and the Supreme Court that when business is held in trust by charitable institutions income from business has to be computed by granting deductions provided under sections 30 to 43D as provided under section 29 of the Income-tax Act.
Senior counsel, Sri A.K.J. Nambiar, appearing for the assessee, submitted that the assessee has been filing income-tax returns for several years including the assessment year 2005-06, and disallowance is made only for this year. Since business income has to be as stated in section 29 by granting all deductions provided under sections 30 to 43D which includes depreciation under section 32, the assessee is entitled is the case pressed before us by the senior counsel appearing for the assessee. We have no doubt in our mind that business income of charitable trust also has to be computed in the same manner as provided under section 29 of the Income-tax Act. However, the issue that requires consideration is when the expenditure incurred for acquisition of depreciable assets itself is treated as application of income for charitable purposes under section 11(1)(a) of the Act, should not the cost of such assets to be treated as nil for the assessee and in that situation depreciation to be granted turns out
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to be nil. However, if depreciation provided is claimed on notional cost after the assessee claims 100 per cent of the cost incurred for it as application of income for charitable purposes, the depreciation so claimed has to be written back as income available. In fact, going by the several decisions of the various High Courts, we are sure that based on these decisions all the charitable institutions will be generating unaccounted income equal to the depreciation amount claimed on an year to year basis which is nothing but black money. This aspect is not seen considered in any of these decisions. We, therefore, sought the views from the Central Board of Direct Taxes. Senior standing counsel, Sri P.K.R. Menon appearing for the Revenue, produced clarification obtained from the Central Board wherein they have stated as follows : The Central Board of Direct Taxes is of the considered view that where an assessee has acquired an asset through application of income and has also claimed this amount as expenditure in its income expenditure account, depreciation on such asset would not be allowable to the assessee. Such notional
statutory
deductions
like depreciation, if claimed as deduction while computing the income of the 'the property held under trust' under the relevant head of income, is required to be added back while computing the income for the purpose of application in the income expenditure account. This would imply that a correct figure of surplus from the trust property is (24 of 39) [ITA-262/2017]
reflected in the income and expenditure account of the trust to determine the income for the purpose of application under section 11 of the Income-tax Act. This would reduce the possibility of revenue leakage which may be a cause for generation of black money.
7 He also contended that in view of the fact that it is a trust, Section 13 prohibits the persons who are beneficiary or trustee or founder of the trustees will not be entitled for the expenses namely salary and other benefits which are granted like Foreign Trip and other benefits will not be allowed and they will not be covered u/s 13. In that view of the matter, it is contended that on close scrutiny of Sec.11 & 13, the expenses will not be admissible u/s 13. 6. Taking into account, he contended that the tribunal has committed serious error in allowing the appeal preferred by the assessee and dismissing the appeal preferred by the department.
On the issue of depreciation, he contended that in view of the Sec.28 read with Sec.23 in view of the expenses which are for charitable purpose, therefore, depreciation claimed is not business expenses and Section 32 will not be admissible to a charitable purpose in view of the fact that it is not for business purpose nor profession.
In that view of the matter, while relying upon the decision in Escorts and Kerala High Court (supra) he contended that in view
(25 of 39) [ITA-262/2017]
of the two decisions, double benefit cannot be granted and the tribunal has committed serious error.
On Foreign Trip, it has been contended that the tribunal has not appreciated the fact that it was a personal trip under the guise of student exchange programme and the tribunal has wrongly granted the benefit to the trust.
On the other issue of transfer of money of excess profit systematic service which has been created by primary school where transfer by sponsoring a University is contrary to very object of Sec.11 and in that view of the matter, it is clear that Sec.13 (1) C and 13 (2) will not apply.
He also contended that the money which is transferred to the private university is also controlled by the same family members who are same trustees in the university and they are controlling the affairs and indirectly they are transferring money which is surplus to meet the higher education and they are taking double benefit of Sec.11 readwith Sec.13 in another education institution which is not a part of the trust which has been exempted u/s 12AA of the Act.
Counsel for the respondent has taken us to the judgment of the tribunal and contended that the tribunal being the fact finding authority has given a well reasoned judgment.
On first issue, the case is covered by the reasoning of this court in the case of same assessee in ITA No.708/2008 wherein it has been held as under:-
(26 of 39) [ITA-262/2017]
Counsel for the appellant contended that the issue is required to be viewed seriously inasmuch as the tours and other expenditure which are made are not in consonance with the object of the Trust.
Counsel for the respondent has relied upon the observations made by the Tribunal in para 10, 17, and 19 which reads as under:
The ld A/R submitted that the legislature is not averse to earning of income by charitable institutions bu desires that if the income is earned through pursuing charitable objects, such income should be re-applied into the charitable objects and for charitable purpose so that the society and the nation can enjoy the larger benefits from such charitable institutions. The logic behind devising such scheme is that even after collection of taxes the Government applies the same towards public charitable purposes
therefore why to at all collect tax from such institutions which are themselves utilizing their incomes for charitable purposes. Therefore to all those charitable institutions, which plough back their earnings for charitable purposes, the fiscal incentive of exemption under section 11 is allowed and no tax is being charged.
The ld. A/R pointed out that the appellant society was granted registration under section 12A, as a charitable institution, by ld. Commissioner of Income Tax after considering and examining the objects and activities of the society. This registration under section 12A/12AA is in force even as on date. Therefore, ld. AO is not entitled to raise questions in relation to “charitable purpose” which the appellant is persuading consistently for past several years. There is no denial to the fact that the AO is entitled to examine the application of income for “charitable purpose” and can also examine the breach of any condition/falling into any disqualification criteria under section 13 but he cannot be allowed to go into the existence of the trust for “charitable purpose”. This is for the reason that else it would imply that the subordinate authority has “set at naught” the judgment of a superior authority. This is against the principles of Administrative law as well as jurisprudence. The “charitable Purpose” can be questioned only by the Commissioner and he has been granted the statutory powers even to cancel the registration if a doubt arises about the “charitable purpose” subsequent to granting of registration.
Without prejudice to above, reliance is placed on the decision of Hon’ble Rajasthan High Court in case of Deputy Commissioner Income-Tax v. Cosmopolitan Education Society 244 ITR 494 where the appeal of (27 of 39) [ITA-262/2017]
the department was rejected by affirming the finding of ld. Income Tax Appellate Tribunal and ld. Commissioner of Income-Tax Appeals that in case there was any misutilisation of the funds of the society or mismanagement of the activities of the society, the action could be taken against the members of the society as per the provisions of various statues governing the society. However, even such misutilisation or mismanagement by the members could not be the basis of rejection of the claim of exemption ot the assessee educational society. The Special Leave Petition against this judgment also stood dismissed vide 241 ITR (St) 132. Therefore, these grounds of disallowance of exemption are not sustainable in law.”
1 He also relied upon the following decisions:- 3.3(i) In Queen’s Education Society vs. CIT reported in (2015) 372 ITR 699 (SC), the Supreme Court held as under:-
It is clear, therefore, that the Uttarakhand High Court has erred by quoting a non existent passage from an applicable judgment, namely, Aditanar and quoting a portion of a property tax judgment which expressly stated that rulings arising out of the Income Tax Act would not be applicable. Quite apart from this, it also went on to further quote from a portion of the said property tax judgment which was rendered in the context of whether an educational society is supported wholly or in part by voluntary contributions, something which is completely foreign to Section 10(23C) (iiiad). The final conclusion that if a surplus is made by an educational society and ploughed back to construct its own premises would fall foul of Section 10(23C) is to ignore the language of the Section and to ignore the tests laid down in the Surat Art Silk Cloth case, Aditanar case and the American Hotel and Lodging case. It is clear that when a surplus is ploughed back for educational purposes, the educational institution exists solely for educational purposes and not for purposes of profit. In fact, in S.RM.M.CT.M. Tiruppani Trust
v.
Commissioner
of Income Tax MANU/SC/0107/1998 : (1998) 2 SCC 584, this Court in the context of benefit claimed Under Section 11 of the Act held:
In the present case, the Assessee is not claiming any benefit Under Section 11(2) as it cannot; because in respect of this assessment year, the Assessee has not complied with the conditions laid down in Section 11(2). The Assessee, however, is entitled to claim the benefit of Section 11(1)(a). In the present case, the Assessee has (28 of 39) [ITA-262/2017]
applied Rs. 8 lakhs for charitable purposes in India by purchasing a building which is to be utilised as a hospital. This income, therefore, is entitled to an exemption Under Section 11(1). In addition, Under Section 11(1)(a), the Assessee can accumulate 25% of its total income pertaining to the relevant assessment year and claim exemption in respect thereof. Section 11(1)(a) does not require investment of this limited accumulation in government securities. The balance income of Rs. 1,64,210.03 constitutes less than 25% of the income for Assessment Year 1970-71. Therefore, the Assessee is entitled to accumulate this income and claim exemption from income tax Under Section 11(1)(a). We set aside the judgment of the Uttarakhand High Court dated 24th September, 2007. The reasoning of the ITAT (set aside by the High Court) is more in consonance with the law laid down by this Court, and we approve its decision. (ii) In Chief Commissioner of Income Tax, Chandigarh vs. St. Peter’s Education Society (2016) 385 ITR 66 (SC), the Supreme Court observed as under:- We may record at this stage that there was a difference of opinion among various High Courts on the aforesaid issue. While summarizing the law, this Court approved the judgments of Punjab and Haryana High Court, Delhi and Bombay High Courts and reversed the view taken by the Uttarakhand High Court. In so far as the judgment of the Punjab and Haryana High Court is concerned, it was given in the case of Pinegrove International Charitable Trust v. Union of India MANU/PH/0146/2010 : [2010] 327 ITR 73 (P&H). The relevant para in this behalf which also states as to how such cases are to be dealt with reads as under:
"
We approve the judgments of the Punjab and Haryana, Delhi and Bombay High Courts. Since we have set aside the judgment of the Uttarakhand High Court and since the Chief Commissioner of Income- tax's orders cancelling exemption which were set aside by the Punjab and Haryana High Court were passed almost solely upon the law declared by the Uttarakhand High Court, it is clear that these orders cannot stand. Consequently, the Revenue's appeals from the Punjab
(29 of 39) [ITA-262/2017]
and Haryana High Court's judgment dated January 29, 2010, and the judgments following it are dismissed. We reiterate that the correct tests which have been culled out in the three Supreme Court judgments stated above, namely, Surat Art Silk Cloth, Aditanar and American Hotel and Lodging, would all apply to determine whether an educational institution exists solely for educational purposes and not for purposes of profit. In addition, we hasten to add that the 13th proviso to Section 10(23C) is of great importance in that assessing authorities must continuously monitor from assessment year to assessment year whether such institutions continue to apply their income and invest or deposit their funds in accordance with the law laid down. Further, it is of great importance that the activities of such institutions be looked at carefully. If they are not genuine, or are not being carried out in accordance with all or any of the conditions subject to which approval has been given, such approval and exemption must forthwith be withdrawn. All these cases are disposed of making it clear that the Revenue is at liberty to pass fresh orders if such necessity is felt after taking into consideration the various provisions of law
contained
in Section 10(23C)read
with Section 11 of the Income-tax Act." In all those appeals which have come from the High Court of Punjab and Haryana and filed by the Department of Income-tax except one from the Gujarat High Court, the High Court has followed its aforesaid judgment in Pinegrove International Charitable Trust. Since this view stands approved, all these appeals are dismissed. We, however, make it clear that observations made in para. 25, reproduced above, shall apply in these cases. One appeal is from the Gujarat High Court which has also followed the view taken by the Punjab and Haryana High Court in Pinegrove International Charitable Trust, which also stands dismissed. We also make it clear that the observations made in para. 25 in Queen's Educational Society v. CIT MANU/SC/0287/2015 : [2015] 8 SCC 47 : [2015] 372 ITR 699, 729 (SC) shall be followed. 6.2 123/2006, decided on 8th February, 2017, this Court while considering the identical question observed as under:
(30 of 39) [ITA-262/2017]
“15. Before coming to the basic contentions, it is not in dispute that the appellant is as by name itself suggests that it is an academic Samiti carrying on activities of educational purpose for establishing any educational institution. There is need of infrastructure and expansion of every activity whether it is a residential accommodation or physical or competitive requirement or other requirement and also the maintenance of the institution is a mandatory for which one has to collect the funds.
From the record it seems that an endeavour is made that during the relevant year they have a surplus fund which is prescribed or described by the authority as a profit and compared to the expenses or the other income which has been received as 34,91,251/-. Thus, it has been stated that there is profit of 33 per cent.
In our view, any educational institution which is required to be run they have to have a surplus fund for educational activity to sustain the consistency in the efficiency and very purpose of collecting donation is to sustain activity of institution. Merely, because surplus fund it cannot be envisaged as profit, the institution has not crossed one crore limit and they are well within their prescribed limit. The income was received by the trust which is reflected in the books of accounts.
In our view, the view taken by the authority is required to be reversed and it is required to be looked into the foundation of the ratio laid down by the Supreme Court in the case of Queen’s Education Society (supra) where funds which has been surplus is within a corpus fund and it has been kept as reserve fund which is not in dispute and they have not crossed the limit of one crore.
Taking into consideration the aforesaid, we are of the opinion that the contention raised by Mr. Jhanwar is required to accepted.
Therefore, the first question, we answering in favour of the assessee that it is an income entitled for exemption under Section 23C(iiiad) of the Act.”
Thus, in view of the above, all the issues are required to be answered in favour of assessee and against the Department.
On depreciation he has relied upon the judgment in Commissioner of Income Tax-II, Jodhpur vs. Krishi Upaj Mandi Samiti (2016) 388 ITR 605 wherein it has been held as under:-
(31 of 39) [ITA-262/2017]
“4. The assessee is a charitable institution registered under Section 12-A of the Act of 1961 and 100% capital expenditure was availed by it against the asset concerned i.e. a building. Section 32(1) of the Act of 1961 provides for depreciation in respect of building, plant and machinery owned by the assessee and used for business purposes. Income of a charitable trust like the present assessee derived from the depreciable heads is also liable to be computed on commercial basis, however, while doing so it is to be kept in mind that ultimately assessee is a charitable institution and its income for tax purposes is required to be determined by taking into consideration provisions of Section 11 of the Act of 1961 after extending normal depreciation and deductions from its gross income. In computing the income of a charitable institution/trust depreciation of assets owned by such institution is a necessary
deduction
on commercial principles, hence, the amount of depreciation has to be deducted to arrive at the income available.
In view of the discussions made above, we find ourselves in agreement with the view taken by Bombay High Court in Director of Income Tax v. Framjee Cawasjee Institute (supra) and in CIT v. Institute of Banking Personnel (supra). The substantial question framed in the instant matter, thus, is answered in the terms that the Income Tax Appellate Tribunal rightly allowed depreciation claimed by the assessee on capital assets for which capital expenditure was already given in the year under consideration.”
1 Decision of Punjab and Haryana High Court in Commisioner wherein it has been held as under:-
The Karnataka High Court in Commissioner of Income Tax, Karnataka v. Society of the Sisters
of St.
Anne. MANU/KA/0045/1983MANU/KA/0045/1983 : [1984] 146 ITR 28 drawing support from (32 of 39) [ITA-262/2017]
Madras High Court in Rao Bahadur Calavala Cunnan Chetty Charities (supra) had recorded that if depreciation is not allowed as a necessary deduction for computing the income of a charitable institution then the corpus of the trust for deriving the income cannot be preserved and that the amount of depreciation debited to the account of a charitable institution is to be deducted to arrive at the income available for application to charitable and religious purposes. This decision was followed by Madhya Pradesh High Court in CIT v.
Raipur
Pallottine
Society MANU/MP/0335/1989MANU/MP/0335/1989 : [1989] 180 ITR 579. Similar view was taken by Gujarat High Court in CIT v. Seth Manilal Ranchhoddas
Vishram
Bhawan
Trust MANU/GJ/0026/1992MANU/GJ/0026/1992 : [1992] 198 ITR 598 by relying upon the aforesaid decisions. We are in respectful agreement with the view taken by Madras, M.P., Karnataka, Gujarat and Bombay High Courts referred to above. No contrary view has been brought to our notice.
In all fairness to the learned Counsel for the Revenue, reference is made to the judgment of the Hon'ble Apex Court in Escort Limited's case (supra), on which reliance has been placed by the learned Counsel for the Revenue. The Hon'ble Supreme Court in that case was dealing with a case relating to two deductions both under Sections 10(2)(vi) and 10(2)(xiv) of the 1922 Act or both under Sections 32(1)(ii) and 35(1)(iv) of the Act. The assessee therein had incurred expenditure of a capital nature on scientific research relating to the business which resulted into acquisition of an asset. The assessee had sought to claim a specified percentage of the written down value of the asset as depreciation and at the same time claimed deduction, in five consecutive years of the expenditure incurred on the acquisition of the asset. The apex Court observed: Where a capital asset used for scientific research related to the business of the assessee is also ipso facto an asset used for the purpose of the business, it is impossible to conceive of the Legislature having envisaged a double deduction in respect of the same expenditure, one by way of depreciation under (33 of 39) [ITA-262/2017]
Section 32 of the Income Tax Act, 1961 and other by way of allowance under Section 35(1) (iv) of a part of the capital expenditure on scientific research, even though the two heads of deduction do not completely overlap and there is some difference in the rationale of the two deductions....It was further recorded that: There is a fundamental, though unwritten, axiom that no Legislature could have at all intended a double deduction in regard to the same business outgoing; and, if it is intended, it will be clearly expressed. In other words, in the absence of clear statutory indication to the contrary, the statute should not be read so as to permit an assessee two deductions.…
In the present case, the assessee is not claiming double deduction on account of depreciation as has been suggested by learned Counsel for the Revenue. The income of the assessee being exempt, the assessee is only claiming that depreciation should be reduced from the income for determining the percentage of funds which have to be applied for the purposes of the trust. There is no double deduction claimed by the assessee as canvassed by the Revenue. Judgment of the Hon'ble Supreme Court in Escorts Ltd. and Taxman.com 463 wherein it has been held as under:-
The aforesaid paragraph refers to the decision in the case of Vishwa Jagriti Mission (supra) but ratio was distinguished on the ground that in the said case the Court was concerned with computation of income of a charitable trust/institution on commercial principles and if so whether depreciation on fixed assets used for charitable purposes should be allowed as a deduction. The (34 of 39) [ITA-262/2017]
consensus of judicial opinion on the said aspect was referred to. It is noticeable that in Charanjiv Charitable Trust (supra) it stands observed that the Tribunal overlooked the fact that the cost of asset had been allowed as a "deduction" and thereafter depreciation was being claimed. The said case, therefore, appears to be a peculiar one wherein deduction as expenditure and depreciation was being claimed simultaneously, while computing the taxable income under the head "profits and gains from business". The said decision dated 18th March, 2014 does not refer to the decision in Indian Trade Promotion Organisation (supra) which was decided on 27th November, 2013. The judgment in the case of Indian Trade Promotion Organisation (supra) was not cited and referred to. The judgment in the case of Charanjiv Charitable Trust (supra) is authored by the same Judge, who has also authored the decision in the case of Vishwa Jagriti Mission (supra) . It is obvious that in Charanjiv Charitable Trust (supra) , the Division Bench could not have taken a different view on the legal ratio as interpreted in Vishwa Jagriti Mission (supra) . Further, the decisions in the case of Vishwa Jagriti Mission and Indian Trade Promotion Organisation (supra) being prior in point of time would act as binding precedents and could not have been overruled or dissented from by a coordinate Division Bench.
By Finance (No. 2) Act of 2014, sub- section (6) to Section 11 stands inserted with effect from 1st April, 2015 to the effect that where any income is required to be applied, accumulated or set apart for application, then for such purposes the income shall be determined without any deduction or allowance by way of depreciation or otherwise in respect of an asset, the acquisition of which has been claimed as application of income under this Section in the same or any other previous year. The legal position, therefore, would undergo a change in terms of Section 11(6) , which has been inserted and applicable with effect from 1st April, 2015 and not to the assessment years in question. The newly enacted sub- section relates to application of income.
(35 of 39) [ITA-262/2017]
3 Decision of Punjab & Haryana High Court in Commissioner of wherein it has been held as under:-
The matter was discussed in our recent judgment dated July 5, 2010 in I. T. A. No. 535 of 2009 CIT v. Market Committee, Pipli [2011] 330 ITR 16 (P and H). After referring to the judgments in CIT v. Sheth Manilal Ran- chhoddas Vishram Bhavan Trust [1992]198 ITR 598 (Guj) and CIT v. Institute of Banking Personnel Selection (IBPS) [2003] 264 ITR 110 (Bom) : [2003] 131 Taxman 386 (Bom), CIT v. Rao Bahadur Calavala Cunnan Chetty Charities [1982]135 ITR 485 (Mad), CIT v. Society of the Sisters of St. Anne [1984] 146 ITR 28 (Kar)and CIT v. Raipur Pallottine Society [1989]180 ITR 579 (MP), the judgment of the hon'ble Supreme Court in Escorts Ltd. [1993]199 ITR 43, was held not to be applicable to the situation where depreciation was claimed by a charitable institution in determining percentage of funds applied for the purposes of charitable objects. It was observed (page 20 supra):
In the present case, the Assessee is not claiming double deduction on account of depreciation as has been suggested by learned Counsel for the Revenue. The income of the Assessee being exempt, the Assessee is only claiming that depreciation should be reduced from the income for determining the percentage of funds which have to be applied for the purposes of the trust. There is no double deduction claimed by the Assessee as canvassed by the Revenue. The judgment of the hon'ble Supreme Court in Escorts Ltd. [1993]199 ITR 43 is distinguishable for the above reasons. It cannot be held that double benefit is given in allowing claim for depreciation for computing income for purposes of Section 11. The questions proposed have, thus, to be answered against the Revenue and in favour of the Assessee.
(36 of 39) [ITA-262/2017]
He contended that the jurisdictional high court has considered the Kerala High Court judgment which has been sought to be relied upon and allowed the expenses.
However, Mr. Jain has contended that in view of the tax limit, the same has not been challenged. He also contended that in view of the amendment u/s 11 subclause (6) w.e.f. 1.4.2015, they have not claimed any benefit after 1.4.2015 and all appeals are prior to 1.4.2015. In that view of the matter, the law which was prevailing prior to 31.3.2015 will be covered by the jurisdictional high court judgments.
On the other issue, whether the expenses which are granted or which has been considered by the authority, he relied upon the judgment of this court in Commissioner of Income Tax, Jaipur-II vs. Consulting Engineering Group Ltd. (2014) 365 ITR 284 wherein it has been held as under:-
In view of what we have discussed hereinabove, on all the three issues, the Tribunal, after appreciation of evidence, has come to the conclusion that the disallowance out of job work charges, soil testing and surveying charges and directors' remuneration is not proper and it had been rightly deleted by the CIT(A) and we do not find any infirmity or perversity in the said order of the Tribunal. It is purely a finding of fact and no question of law much less substantial question of law can be said to emerge out of the said order of the Tribunal so as to call for any interference of this Court. In our view, no substantial question of law arises out of the order passed by the Tribunal. Consequently, the appeal, being devoid of merit, is hereby dismissed in limine. No order as to costs.
(37 of 39) [ITA-262/2017]
as under:-
Learned counsel for the assessee Mr. Jhanwar submits that the amount of salary claimed on account of payment to the sons i.e., Anoop and Alock was reasonable, as both are looking after the business and assessee has got paralytic attack in the year 1983, therefore, the payment of salary to these persons at the rate of Rs. 6,000 and Rs. 5,000 per month, respectively, was justified.
The facts on record reveal that both are graduates and Anoop, to whom assessee has paid Rs. 6,000 p.m. in the year under consideration was getting only Rs. 1,000 p.m. just in the preceding year. So far paralytic attack to the assessee is concerned, it happened in the year 1983. The assessee has carried on the business even after paralytic attack without the help of these two sons.
We also notice that in the preceding year i.e., 1991, assessee has disclosed income of Rs, 70,000. This year he has disclosed only income of Rs. 45,673. On these facts, there is no justification of paying such heavy salary to the sons of the assessee, who are employed by the assessee for the purpose of his business.
It is also pertinent to note that what should be the reasonable salary is basically a question of fact and Tribunal is a fact-finding final body in this regard. Finding of the Tribunal cannot be said to be perverse on these facts. No interference is called for in the order of Tribunal. In the result, we answer the question in affirmative i.e., in favour of the Revenue and against the assessee.
(38 of 39) [ITA-262/2017]
On the first issue as stated above, the same is required to be answered in favour of the assessee that u/s 11 & 13, the expenses which are transferred to the private university while holding Sec.13 definition and explanation and substantial controlled or substantial transferred are not in their name. It may be private institution which is a creation of statue having controlled by the same trustee and will not indirectly covered u/s 13 merely because the trustees of the beneficiaries of the trust or any person controlling the trust which is part of another institution. The object is to see where even transfer for educational purpose or not that has been done. In that view of the matter, the contention that the university will be covered u/s 13, in our considered opinion merely because same trustees or the directors or the persons are there, Sec.13 except with the explanation is required to be considered and the tribunal has rightly considered that the trustees will not be covered u/s 13. 21. Regarding depreciation in view of the amendment Sec.11(6) it will be prospective and in view of jurisdictional high court judgment binding on us and we are following the same.
In that view of the matter, depreciation is rightly allowed. On the question of foreign trip after taking into consideration the student exchange programme the tribunal has come to the conclusion that it is covered under the purpose of the trust object and are done for the educational institution and benefit of the (39 of 39) [ITA-262/2017]
students, in our considered opinion, the expenses of foreign trip are also rightly allowed.
In view of the above, we are in complete agreement with the view taken by the tribunal. All the issues are answered in favour of the assessee and against the department.
The appeals stand dismissed. (VIJAY KUMAR VYAS),J. (K.S. JHAVERI),J. Bmg 11 & 12, 28 to 37.
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