ACIT vs. M/S XAVIER INSTITUTE OF SOCIAL SERVICE,

IN THE INCOME TAX APPELLATE TRIBUNAL, RANCHI BENCH, RANCHI

BEFORE SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER

ITA No.100/Ran/2014 Assessment Year: 2009-2010

Asst. Commissioner of Vs. M/s. Xavier Institute of Income Tax, Circle-3, Social Service, Purulia Road, Ranchi. Ranchi PAN/GIR No. AAATX 0040 P (Appellant) .. ( Respondent)

Assessee by: Shri B.K.Banka, CA Revenue by : Shri D.K. Sutariaya, CIT (DR)

Date of Hearing : 24/05/ 2018 Date of Pronouncement : 30/05/ 2018

O R D E R Per N.S.Saini, AM

This is an appeal filed by the revenue against the order of the CIT(A)-

Ranchi dated 20.12.2013 for the assessment year 2009-2010.

the CIT(A) in deleting the addition under the head “Loans and advances” of

Rs.2,28,41,789/-.

2 IT A No.1 00/R an/2 014 Asse ssmen t Year: 2 009 -20 10 3. The brief facts of the case are that from the examination of balance

sheet, the Assessing Officer found that during the financial year 2008-09,

the assessee instate has given advance to staff members of

Rs.1,07,03,784/-. Similar advance was given to others totalling to

Rs.2,28,41,789/-. Thus, the total advance given was Rs.2,28,41,789/-. The

Assessing Officer required the assessee to explain justification for giving

such high amount as advance. The assessee was required to give

particulars of recovery of the same. The assessee was required to submit

specific details in respect of Rs.15,10,000/- advance given to Shri Durlabh

Mahto and Rs.8,78,905/- advance given to Shri Bhim Vishwakarma. The

assessee was required to file relevant ledger copy of the accounts. The

assessee informed that the documents have been lost and it is unable to

produce the same. The assessee filed copy of a letter written to Police

Station that it was carrying two bundles in Auto rickshaw on 14.11.2011,

which were lost. The Assessing Officer observed that the assessee has not

stated the reasons for giving advance to Shri Durlabh Mahto and has also

failed to file details of the alleged identity of the recipients of advance.

Therefore, he held that the assessee had no credible explanation for

utilisation of funds ostensibly stated to be given as advances. Therefore, he

assumed that the assessee has applied the money for the purpose other

than for which it has been granted exemption under section 10(23C)(vi) of

the Act and added the same to the income of the assessee.

3 IT A No.1 00/R an/2 014 Asse ssmen t Year: 2 009 -20 10 4. On appeal before the CIT(A), the assessee submitted that the

Assessing Officer has erred in not allowing advance of Rs.2,28,41,789/-has

not been applied for educational purpose and adding it to the income of the

assessee even though the loans and advances have been made in the

ordinary course of assessee’s educational activities. The assessee has

already applied 85% of its income towards object of the trust and has

specified conditions for exemption u/s.10(23C)(vi) of the Act. The loans and

advances have not been claimed as application of income. The Assessing

Officer has failed to consider that the assessee is entitled to exemption

u/s.11 of the Act as it is registered u/s.12AA of the Act. The assessee has

applied 85% of its income in their object even in the earlier years and the

same is accepted by the income tax Department for the assessment year

2008-09 and earlier assessment years. Since the assessee has applied more

than 85% of its income, the balance income is not subject to any further

restriction as specified in the provisions of section 10(23C)(vi) and section

11(2) of the Act.

the addition.

authorities and materials available on record. In the instant case, the

assessee claimed its entire income as exempt u/s.11 & 12 of the I.T.Act,

4 IT A No.1 00/R an/2 014 Asse ssmen t Year: 2 009 -20 10 1961. The Assessing Officer assessed the total income of the assessee at

Rs.3,36,05,892/- and levied tax thereon @ 30%.

“4.2 It is noted that the AO had made this addition on the basis that the assessee had applied loan and advance of INR Rs.2,28,41,789/- for the purpose of other than education activities. In the instant case, it is observed that as per the Gazettee of India issued on 24th January, 2005, in exercise of powers conferred by sub-section (1) read with clause (b) of the Section 35AC of the Income Tax Act, 1961 (43 of 1961) the Central Government had granted Rs.6.99 crores to the assessee concerned for F.Y. 2004-05, 2005-06 & 2006-07 for the promotion of Social & Economic Welfare. Further, it is also to be noted that Hon’ble Chief Commissioner of Income Tax, Ranchi vide 3rd Notification dated September 2009 bearing Memo 3/8th No.CIT/Ran/Tech/10(23C)-13/2008-09/4357-4410 dated September, 2009 had in exercise of the powers conferred by sub- clause (vi) of clause 23C of Section 10 of the income tax Act, 1961 read with Rule 2CA of the Income tax Rules, 1962 has granted approval to the assessee u/s 10(23C)(vi) of the Income tax Act, 1961 for the years 2009-10, 2010-11 and 2011-12 and the Hon’ble Chief Commissioner of Income tax, Ranchi vide Notification dated 27th September, 2012 vide Memo No.CCIT/Ran/Tech/10(23C/5/2011- 12/6748-68 dated 27th September, 2012 had also granted approval to the assessee u/s.10(23C)(vi) of the Income tax Act, 1961 for the F.Y. 2011-12 onwards. In the present case vide F.No.64 of 2006 dated 23.5.2007 the National Commissioner for Minority Education Institutions had issued a certificate to the assessee wherein it has been mentioned that Xavier Institute of Social Services, Purulia Road, Ranchi, Jharkhand managed by the Xavier Institute of Social Service, Ranchi exclusively is a minority education institution within the meaning of section 2(g) of the National Commissioner for Minority Education Institutions 2004. This certificate had also declared that this institution is a minority educational institution covered under Article 30 of the Constitution of India. It is also to be noted that in the assessee’s case the assessment orders for A.Ys 2008-09 & 2010- 11 were also passed u/s.143(3) of the I.T.Act, 1961, wherein, te ld A.Os have accepted the return of income of the assesse with the following observations. The assessee is trust. It had been registered under section 12A of the Act vide letter No.Tech/VII-30/12A/2003-

5 IT A No.1 00/R an/2 014 Asse ssmen t Year: 2 009 -20 10 04/1071-73 dated 15.12.2003. The assessee is a trust and exemption under section 10(23C)(vi) of the Act for the F.Y. 2009-10 was granted to the assessee on 8.9.2009 vide Memo No.CCIT/Ran/Tech/10(23C)/13/2008-09/4351-4410. It has also been accepted by both the AO during the A.Ys. 2008-09 and 2010-11 that the assessee is running a university and offers programme at bachelor’s and master’s level in management, science & technology and other allied areas and is receiving its income mainly from properties held by it, campus activity fund and interest income from fixed deposits. It is also to be noted that the appellant has applied more than 85% of its income, the balance income is not subject to the restrictions outlined in Section 11(2) of the Act and thus in the present case the provisions of section 11(3) of the Act cannot be invoked. In the instant case, it is seen that the assessee is running minority education institution and the advances given by it to staff and others are in the normal course of activities of the society and there is no enquiry made by the AO to establish that these advances have been given for purpose other than purpose of the society i.e. education. In view of these discussions and after nothing that assessee is entitled to exemption u/s.10(23C)(vi) the addition made under this head is difficult to be sustained in appeal and, therefore, this addition is directed to be deleted. Accordingly, this ground of appeal of the assessee is allowed.”

pointed out by ld D.R. No material was brought before us to show that the

approval granted to the assessee u/s.10(23C)(vi) of the Act or Section 12AA

of the Act was withdrawn by the department. In the above circumstances,

we do not find any good reason to interfere with the order of the CIT(A),

which is hereby confirmed and ground of appeal of the revenue is dismissed.

6 IT A No.1 00/R an/2 014 Asse ssmen t Year: 2 009 -20 10 11. Ground No.2 of appeal reads as under:

“That the CIT(A) is not justified in deleting the addition under the head ‘depreciation’. The CI(A) has not appreciated the fact that claiming of depreciation in case of trust is amount to double deduction, also assessee has placed no bills./vouchers for maintenance expenditure.”

to have added a sum of Rs.3,38,42,325/- during the financial year 2008-09.

From the accounts, it is also observed that the assessee has claimed to have

spent Rs.1,02,98,103.15 on the maintenance of building and other assets.

The assesse was asked to furnish the details and supporting evidences to

justify the amount incurred on maintenance. The assessee produced only

ledger but could not produce bills and vouchers in support of its claim. The

assessee was also requested to furnish approved plan for building and other

particulars regarding the size and cost. But as claimed by the assessee, the

documents were lost. In view of above, the Assessing Officer held that the

application of amount had not been incurred for educational purposes and,

therefore, disallowed Rs.1,02,98,103.15 and added the same to the income

of the assessee.

owns vehicles, building, staff quarters, furnitures and other assets on which

depreciation has been claimed. It has also been contended that the income

of a charitable trust as contemplated by section 11(1)(a) and Section

7 IT A No.1 00/R an/2 014 Asse ssmen t Year: 2 009 -20 10 10(23)(C) of the Act is required to be computed not in accordance with

those provisions, but in accordance with the normal rules of accountancy

where depreciation is always taken into account for finding out the real

income. It has also been contended that the amount of depreciation debited

to the accounts of the charitable institution has to be deducted to arrive at

the income available for application to charitable and religious purposes.

Ld CIT(A) noted that Hon’ble Gujarat High Court in the case of CIT Vs. Sheth

Manilal R.amchordas Vish.ram Bhawan Trust 198 ITR 598 has held that the

amount of depreciation debited to the accounts of a charitable trust has to

be deducted to arrive at the income available for application to charitable

and religious purposes. The CIT(A) observed that the books of accounts of

assessee were duly audited and assessee is running educational institution

and had spent money under the head of maintenance of buildings and other

assets to the tune of Rs.1,02,98,103/-. This expenditure includes

expenditure for maintenance of assets such as vehicle and buildings etc and

depreciation of R.s.63,47,874/-. All these expenses have been incurred for

the assessee's activities as educational society and there is no enquiry to

establish that these expenses were incurred for any other purpose.

Considering the above, the CIT(A) deleted the addition made by the

Assessing Officer.

8 IT A No.1 00/R an/2 014 Asse ssmen t Year: 2 009 -20 10 15. Before us, ld D.R. relied on the order of the Assessing Officer

pointed out by ld D.R. No contrary decisions of Hon’ble High Courts or

Hon’ble Supreme Court were placed by ld D.R. to take different view than

the view taken by the CIT(A). Hence, we find no good reason to interfere

with the order of the CIT(A), which is hereby confirmed and Ground No.2 of

appeal of the revenue is dismissed.

“That the CIT(A) is not justified in deleting the addition under the head ‘advance payment to Shri Durlabh Mahto’ to the tune of Rs.4,66,000/-. The CIT(A) failed to appreciate the fact that advance payment to Shri Durlabh Mahto cannot be treated as application of income for educational purposes.

Rs.4,66,000/-- to Shri Durlabh Mahto during the year under consideration.

In absence of any details filed by the assessee, the Assessing Officer treated

this amount to be spent not for the educational 'Purpose and added back to

the total income of the assessee.

the society has engaged Mr. Durlabh Mahto as its lawyer for assisting it with

9 IT A No.1 00/R an/2 014 Asse ssmen t Year: 2 009 -20 10 various legal matters and payment made to him by the appellant institute in

lieu of services provided by him. The counsel of the assessee has also

contended that the amount paid to Mr. Mahto is in connection with

appellant's education activities and has to be deducted to arrive at the

income available for application to charitable and religious purposes.

institutions and it has many legal matter and for this purpose for assisting its

lawyer payment was made to Mr. Durlabh Mahto during the year under

consideration. The Assessing Officer had not established by any enquiry that

the expenditure was not incurred for the normal educational activities of the

society. He noted that in the assessee's own case the Patna Bench of the

Tribunal in ITA No.366(Pat) of 1979 for the A.Y.1977-78 had observed that

the income and expenditure shown in the income and expenditure account

related to the educational institution and the assessee neither received any

income from any other source nor any amount was spent on any other

objects of the assessee and under the above circumstances, the assessee

fulfilled the condition of Section 10(22) of the Act and the same was also

supported by the decision in 118 ITR 235. In view of the above, the CIT(A)

deleted the addition made by the Assessing Officer.

10 IT A No.1 00/R an/2 014 Asse ssmen t Year: 2 009 -20 10 24. After hearing the rival submissions and perusing the orders of lower

authorities, we find that no specific error in the order of the CIT(A) could be

pointed out by ld D.R. We find that the CIT(A) has noted that the assessee

has given Rs.4,66,000/- to Shri Durlabh Mahto, who was rendering legal

assistance to the assessee. This fact is not controverted by ld D.R. by

showing any positive material before us. Hence, we find no good reason to

interfere with the order of the CIT(A) and dismiss the Ground No.3 of the

revenue.

Order pronounced in the open court on 30 /05/2018

Sd/- sd/- (PAVAN KUMAR GADALE) (N.S Saini) JUDICIAL MEMBER ACCOUNTANT MEMBER Ranchi; Dated 30/05 /2018 B.K.Parida, SPS Copy of the Order forwarded to : 1. The Appellant: Asst. Commissioner of Income Tax, Circle-3, Ranchi. 2. The respondent: M/s. Xavier Institute of Social Service, Purulia Road, Ranchi 3. The CIT(A), Ranchi 4. Pr. CIT, Ranchi 5. DR, ITAT, Ranchi 6. Guard file. BY ORDER, //True Copy//

SR.PS, ITAT, CAMP AT RANCHI