Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, DELHI BENCH ‘SMC’, NEW DELHI
Before: SH. R.K PANDA
The above two appeals filed by the assessee are directed 1. against the separate orders dated 27.03.2018 of the CIT(A), Ghaziabad relating to A.Y. 2013-14 and 2014-15 respectively. Since common issues are involved in both these appeals, therefore, these were heard together and are being disposed of by this common order for the sake of convenience.
ITA No.3587/Del/2018 ( A. Y. 2013-14)
Ground No.1 and 2 by the assesee reads as under :-
“1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in not allowing the development fees of Rs. 20,00,000/- paid to M/s. Agra Diocesan Trust Association, Agra i.e. parent body of assessee as application of income.
2. That in any case and in any view of the matter, action of ld. CIT(A) in confirming the action of Ld. AO in not allowing the development fees of Rs.20,00,000/- paid to M/s. Agra Dioceasn Trust Association, Agra as application of income, is bad in law and against the facts and circumstances of the case.”
The facts of the, case in brief, are that the assessee is a society and is registered with the Registrar of Society, U. P, under Society Registration Act. The assessee society has been granted registration u/s 12 AA of the IT Act by the CIT, Meerut vide order dated 28.05.2009. It filed its return of income on 06.11.2013 declaring nil income. The AO during the assessment proceedings observed that assesee has debited development fees of Rs. 20,00,000/- to the income and expenditure account. He, therefore, asked the assessee to explain the nature of payment of development fees of Rs. 20,00,000/- and also furnish the copy of agreement entered into and furnish the details of last five years. The assessee filed the requisite details alongwith a copy of letter dated 02.02.2016 by Agra Diocesan Trust Association (ADTA in 2 short) a company registered u/s 25 of Company Act 1956 u/s 8 of the company Act 2013 registered u/s 12A of the IT Act and is parent body of Diocese of Agra and its all institutions. The Diocese of Agra managing properties of many colleges, Junior Colleges, Schools, Hospitals, Churches and chapels. This includes Hindi Medium schools and village schools also. All Saint’s School Bulandshahr is a unit of Agra Diocesan Trust Association and the amount was transferred u/s 12 A to contribute the funds to develop and maintain other institutions economically. The assessee also enclosed a letter of ADTA which the AO has reproduced in the order and which reads as under :-
“This is to kindly bring to your notice that Agra Diocesan Trust Association (ADTA) a registered company u/s 25 company Act, 1956 company Act, 1956 u/s 8 Company Act, 2013 and registered u/s 12 A of the Income Tax Act and is parent body of Diocese of Agra and its all institution. All sants School, Bulandshahr is also under the Agra Diocesan Trust Association of Diocese of Agra having independent Managing Committee. We do hereby certify that a sum of Rs.20,00,000/- was sent / given by all Saint School Bulandshahr during F. Y.2012-13 as development fees / contribution to the parent body for the purpose of furtherance of main object of the trust. It is further certified that we have utilized the said amount for the furtherance of main object (Education) of the Trust.”
However, the Assessing Officer was not satisfied with the arguments advanced by the assessee. He observed that there is no agreement and the money is siphoned off every year in the shape of 3 development fee and assesee has taken the benefits of application of income against the total receipts. He accordingly rejected the claim of development fees of Rs.20 lacs as application of income.
In appeal the Ld. CIT(A) confirmed the addition made by the AO by observing as under :-
“7.3 Ground no. 2: The appellant has challenged addition of Rs. 20,00,000/- made by the AO disallowing contribution/ development fee to the parent body of appellant duly registered u/s 12AA. During the course of appellate proceedings it has been submitted that appellant has declared total receipts during the year of Rs. 2,76,74,483/-. During the year appellant has donated Rs. 20,00,000/- to its parent body Agra Diocesan Trust Association (ADTA) which is a separately registered body under 12AA.
7.3.1 Examination of facts reveals that the payment has been made without agreement and ADTA is a company registered under company's Act which olding trust of Diocese of Agra and managing properties of many colleges, schools, churches etc. During the course of appellate proceedings it has been argued that the above said donation or contribution should be allowed as it is for the same purposes as that of appellant and placed reliance on CIT vs Thanthi Trust (SC) (1999) 239 ITR 502, CIT vs Shri Aurobindo Memorial Funds Society Madras 162 CTR 254, CIT vs Shri Ram Memorial Foundation (Del.) (2004) 140 Taxman 263, CIT vs H.P.S. Social Social Welfare Foundation (Del.) (2011) 198 Taxman 63. It is noted that neither during appellate proceedings nor during assessment proceedings appellant could prove that objective of ADTA is same as that of 4 appellant and the donation is towards corpus of the ADTA. The memorandum of association of ADTA reveals that ADTA works for furtherance of religious and charitable work of church of North India and in management of property etc. Thus case laws relied upon by the appellant are not applicable to the facts and circumstances of appellant's case. Keeping in view above facts the donation given by appellant to ADTA cannot be treated application of income within the provisions of section 11. Thus this ground of appeal is dismissed.”
6. Aggrieved with such order of the CIT(A), the assessee is in appeal before the Tribunal.
The Ld. counsel for the assessee at the outset submitted that the assessee has been paying regularly the development fees/ contribution over the years and no such disallowance has been made in the past. Referring to page 244 of the paper book, the Ld. Counsel for the assessee drew the attention of the Bench to the income and expenditure account for the year ending on 31.03.2010 and submitted that an amount of Rs.10 lacs has been debited to the income and expenditure account as development fees to ADTA. Referring to page 254 of the paper book he drew the attention of the bench to the debit of development fees to ADTA of Rs. 12 lacs for the year ending on 31.03.2011. He submitted that for both the assessment years no disallowance has been made. Referring to the assessment order passed A. Y.2012-13 he submitted that no such disallowance has been made in the order passed u/s 143 (3) dated 19.01.2015, although an amount of Rs. 15 lacs has been debited to the income and expenditure account towards development fees paid to ADTA for the year ending 31.03.2012. Referring to the copy of the 5 assessment order for A. Y. 2011-12 copy of which is placed at page 257 of the paper book he submitted that Assessing Officer in the order u/s 143 (3) on 30.01.2014 has not made any such disallowance. He submitted that since in the preceding and subsequent years no such disallowance has been made by the Assessing Officer towards payment of development fees to ADTA by the assessee, therefore, following the Rule of consistency, no disallowance is called for. Further no amount has been paid for the benefit of any person specified u/s 13 (3) of the IT Act pursuant to which benefit to section 11 and 12 may be denied by the Assessing Officer. 8. So far as contention of the lower authority that contribution / donation to ADTA has been made without any prior agreement is concerned, he submitted that donations are never made with any prior agreement and is solely governed by the will and capabilities of the donor. Therefore, the contention of the Assessing Officer/CIT(A) is arbitrary and without any merit. He also relied on CBDT instruction No.1132 regarding availability of exemption in the hands of charitable trusts of amounts paid as donation to other charitable trust and the decision of Hon’ble Gujarat High Court in the case of CIT Vs. Sarladevi Sara Bhai Trust No.2 reported 172 ITR 698. 9. The Ld. DR on the other hand heavily relied on the order of the Assessing Officer and CIT(A). 10. I have considered the rival arguments made by both the sides and perused the orders of the lower authorities. I find the Assessing Officer rejected the claim of development fees of Rs.20 lacs paid to ADTA as application of income on the ground that the money has 6 been siphoned off every year and further there is no such agreement between the assessee and ADTA. I find the Ld. CIT(A) upheld the action of the Assessing Officer which has been reproduced in the preceding paragraph. It is the submission of the Ld. Counsel for the assessee that the assessee is paying such development fees to ADTA since last so many years and the Assessing Officer in the past as well as subsequent years has accepted such expenditure as application of income in the orders passed u/s 143 (3). Further it is also his submission that donations are never made with prior agreement and it is governed by the will/ capabilities of the donor. I find merit in the above arguments of the Ld. Counsel for the assessee. As mentioned earlier the Assessing Officer in the orders passed u/s 143 (3) for A. Y. 2011-12 and 2012- 13 has not made any such disallowance towards the development fees to ADTA. Further in the subsequent years also no such disallowance has been made as argued by the Ld. Counsel for the assessee and not controverted by the Ld. DR. Therefore, following the Rule of consistency the disallowance made by the Assessing Officer and upheld by the CIT(A) cannot be sustained. Further I find merit in the submission of the Ld. Counsel for the assessee that donations are never made with prior agreement and it is solely governed by the will and capabilities of the donor. It is also seen that no amount has been paid for the benefit of any person specified u/s. 13 (3) of the IT Act for which benefit of section 11 and 12 may be denied to the asessee. Further the CBDT vide instruction No.1132 dated 05.01.1978 has held that the payment of a sum by one charitable trust to another for utilization by the donee trust towards its charitable objects is proper application of income 7 for charitable purpose in the hands of the donee trust, and the donor trust will not lose exemption u/s 11 of the IT Act, 1961 merely because the donee trust did not spent the donation during the year of receipt itself. In view of the above discussion I hold that the order of the CIT(A) upholding the action of the Assessing Officer is not justified. Accordingly I set aside the order of the CIT(A) and grounds of appeal
No. 1 and 2 of the assessee are allowed.
11. Ground No.3 of the assessee reads as under :-
3. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not deleting the disallowance of Rs. 1,22,738/- fully made by Ld. AO on account of EPF contribution of employees u/s 36(l)(va) rws 2(24)(x) and further erred in sustaining the same to the extent of Rs.42,614/-.
12. After hearing both the sides I find the Assessing officer disallowed an amount of Rs.1,39,581/- u/s 36 (I) (va) r.w.s. 2 (24) (X) on account of delay in deposit of Employees Provident Fund. Before the CIT(A) it was argued that the provisions of section 36 (1) (va) r.w.s. 2 (24) (x) are not applicable to trust. However, the Ld. CIT(A) was not satisfied with the arguments advanced by the assessee and upheld the action of the Assessing Officer on the ground that although the payments have been made before the due date of filing of the return, however, they were paid after the due date prescribed under the EPF Act. It is the submission of the Ld. Counsel for the asseessee that in view of the decision of Hon’ble Supreme court in the case of CIT Vs. Alom Extrusions reported in 319 ITR 306 and various other decisions payments made prior to due date of filing of return as prescribed u/s. 139 (1) cannot be 8 disallowed u/s. 36 (1) (va) r.w.s. 2 (24) (x). Since in the instant case admittedly the deposits towards EPF has been deposited prior to the due date of filing of return u/s. 139 (1) therefore, following the consistent view of the coordinate benches of the Tribunal I am of the considered opinion that no disallowance u/s. 36 (1) (va) r.w.s. 2 (24) (x) can be made. The ground raised
by the assessee is accordingly allowed.
13. Ground No.4 of the appeal reads as under :-
1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not allowing the benefit of deemed application of Rs.2,81,769/- on account of interest accrued but not received under clause 2 of explanation to section 11 (1) of Income Tax Act, 1961.
14. After hearing both the sides I find the Assessing Officer did not allow the benefit of deemed application of Rs.2,81,769/- on account of interest accrued but not received under clause 2 of explanation to section 11 (1) of the IT Act, 1961. In appeal the Ld. CIT(A) upheld the action of the Assessing Officer. It is the submission of the Ld. Counsel for the asessee that an amount of Rs.2,81,769/- is the interest accrued on FDR. However, as per the form No.10B the assessee has exercised under clause 2 of explanation u/s. 11 (1) of of the impugned amount. Therefore, the amount of accrued interest of FDR amounting to Rs.2,81,769/- is the income derived during the impugned assessment years but not received shall be treated as deemed to be applied. I find merit in the above arguments of the ld. counsel for the assessee. A perusal of the computation of income for the A.Y.2013-14, copy of which is placed at page 110 of the 9 paper book, shows that the net surplus of Rs.73,93,794/- includes the income of Rs.2,81,769/- which has not actually been received. The assessee in its form No.10B in clause No.2 of annexure containing statement of particulars, copy of which is placed at page 112 of the paper book, has clearly mentioned that the assessee has exercised the option of clause 2 of the explanation to section 11 (1) according to which the amount of income of Rs.2,81,769/- is the income deemed to have been applied to charity/ religious purpose in India. Since the amount of interest accrued but not received amounting to Rs.2,81,769/- is the deemed application of income under clause 2 of explanation to section 11 (1) of the IT Act, 1961 therefore, I am of the considered opinion that the Ld. CIT(A) is not justified in denying the benefit of deemed application. The ground No. 4 raised by the assessee is accordingly allowed.
15. The ground No. 5 of the appeal is as under :- 1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not allowing the depreciation of Rs. 18,38,087/- as application of income.
16. The assessee has also taken the following additional grounds which are as under :- 1. That having regard to the facts and circumstances of the case, Ld. CIT(A) ought to have considered income after depreciation in view of several judicial decisions.
2. That in any case and in any view of the matter, depreciation ought to have been deducted from the amount of income. 10
17. Referring to the decision of Hon’ble Supreme Court in the case of NTPC Limited Vs. CIT reported in 229 ITR 383 and the decision in the case of Singhad Technical Education Society reported in 397 ITR 344, he submitted that since the above grounds do not require fresh facts to be investigated and go to the root of the matter, therefore, the same should be admitted.
18. After hearing both the sides and considering the fact that no fresh facts are required to be investigated, the additional grounds raised
by the assessee are allowed.
19. The facts of the case, in brief are that the Assessing Officer did not allow depreciation of 18,38,087/- being the depreciation claimed for the year as application of income. Although this ground has not been raised before the CIT(A), however in view of the additional grounds raised by the assessee which has been admitted, we proceed to adjudicate the same. The Hon’ble Supreme Court in the case of CIT Vs. Rajasthan & Gujarati Charitable Foundation Poona reported in 402 ITR 441 has held that income of trust was required to be computed u/s 11 on commercial principles after providing for allowance for normal depreciation and deduction thereof from gross income of trust. Since, the issue stands decided in favour of the assessee by the decision of Hon’ble Supreme Court cited (supra) therefore, ground No. 5 of appeal raised by the assessee and additional grounds raised by the assessee are allowed.
20. Ground Nol.1 and 2 of the appeal reads as under :- 11
1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in not allowing the development fees of Rs.25,00,000/- paid to M/s Agra Diocesan Trust Association, Agra i.e. parent body of assessee as application of income.
2. That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in not allowing the development fees of Rs.25,00,000/- paid to M/s Agra Diocesan Trust Association, Agra as application of income, is bad in law and against the facts and circumstances of the case. 21. After hearing both the sides. I find the above grounds are identical to Ground No. 1 and 2 in for A. Y. 2013-14. I have already decided the issue and the grounds have been allowed. Following similar reasonings the above two grounds of the appeal of assessee are allowed.
22. Ground No. 3 of appeal reads as under :- 1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not allowing the benefit of deemed application of Rs.4,28,390/- on account of interest accrued but not received under clause 2 of explanation to section 11 (1) of Income Tax Act, 1961.
After hearing both the sides. I find the above ground is identical to Ground No.4 in for A. Y. 2013- 14. I have already decided the issue and the ground has been allowed. Following similar reasonings the above ground of appeal of the assessee is allowed. 12
24. Ground No.4 by the assessee and the additional grounds read as under :-
4. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not allowing the depreciation of Rs.89,94,945/- as application of income. Additional grounds :-
1. That having regard to the facts and circumstances of the case, Ld. CIT(A) ought to have considered income after depreciation in view of several judicial decisions.
2. That in any case and in any view of the matter, depreciation ought to have been deducted from the amount of income.
After hearing both the sides, I find the above grounds are identical to Ground No. 5 and additional grounds in for A. Y. 2013-14. I have already decided the issue and the grounds have been allowed. Following similar reasonings the above ground No.5 and additional grounds of appeal
of the assessee are allowed. 26. In the result, both the appeals filed by the assessee are allowed. Order pronounced in the open court on 29.03.2019.