DCIT(E), NEW DELHI vs. M/S. G.R. GOENKA EDUCATION SOCIETY, NEW DELHI

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ITA 4134/DEL/2015Status: DisposedITAT Delhi04 July 2018AY 2010-116 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the facts and circumstances were similar to previous years where exemption under Section 11(1) was allowed, and the jurisdictional High Court had upheld those decisions. The Tribunal also followed previous rulings to delete the addition of notional interest and allow depreciation on assets purchased from application of income.

What were the facts?

The assessee, a registered educational society, was denied exemption under Section 11(1) of the Income Tax Act for multiple assessment years. The Assessing Officer invoked the proviso to Section 2(15) alleging profit-making as the dominant object. The assessee also challenged additions made on account of interest income and disallowance of depreciation.

What were the issues?

Whether the assessee society's dominant object was profit-making, thereby disentitling it to exemption under Section 11(1). Whether notional interest on loans to another society and depreciation on assets purchased from application of income were rightly disallowed.

Which sections of the Income-tax Act were involved?

Section 11(1),Section 2(15),Section 80G,Section 12AA(1)

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, DELHI BENCH: ‘B’ NEW DELHI

Before: SHRI R.S. SYAL & SHRI K.N. CHARY

For Respondent: DR Assessee by Sh. Amit Goel, CA
Hearing: 03.07.2018Pronounced: 04.07.2018

ORDER PER K. NARSIMHA CHARY, J.M.

Revenue preferred all these appeals challenging the orders of the learned Commissioner of Income Tax (Appeals) (for short “Ld. CIT(A)”) for the assessment years 2005-06, 2010-11 and 2011-12 respectively. Assessee preferred cross objections relating to the assessment year 2005-06.

ITA Nos. 4133 to 4135 /Del/2015 & CO 35/Del/2016 2. Common grounds in all these appeals relate to the direction given by the Ld. CIT(A) to the Assessing Officer (“ld. AO”) to allow the exemption under section 11 (1) of the Act to the assessee. Additional ground in relates to the deletion of addition of Rs. 10,80,000/-made by the Ld. AO on account of interest income. So also the other additional ground involved in other two appeals are against the allowance of depreciation on the assets purchased by the application of the receipts. It is submitted on behalf of the assessee that all these issues are squarely covered by the decisions of the coordinate bench of this Tribunal in assessee’s own case.

3.

Briefly stated facts are that the assessee is registered under the Societies Registration Act, 1860 and also registered under section 12AA(1) of the Income Tax Act (“the Act”) besides enjoying the benefit of section 80 G of the Act. Insofar as the assessment year 2005-06 is concerned the assessment was completed in section 143(3) of the Act without drawing any adverse remark by the Ld. AO. However subsequently the assessment was reopened and the Ld. AO denied the exemption under section 11(1) of the Act by invoking the mischief of proviso to section 2(15) of the Act on the ground that the assessee is making huge profits and the dominant object is profit-making. So also for the assessment years 2010-11 and 11-12 exemption under section 11(1) of the Act was denied during the scrutiny under section 143(3) of the Act.

4.

At the outset, the 1st appellate order reads that the Ld. CIT(A) followed the order in assessee’s own case for the 2 to 4135 /Del/2015 & CO 35/Del/2016 Assessment Year 2009-10 inasmuch as the facts and circumstances of the case are the same and there is no material to deviate from such decision of the earlier year. It is also brought to our notice by the Ld. AR that this issue has been directly and substantially been dealt a with the by the Tribunal in assessee’s own case for the assessment years 2009-10 and 2012-13 and also the Hon’ble jurisdictional High Court upheld the findings of the Tribunal for Assessment Year 2009-10. Ld.

5.

DR argued at length while making reference to the observations of the Ld. AO on the aspect of trade Mark of “GD Goenka” and the modus operandi of accrual of the franchise fee etc. However, there is no denial of the fact that there is no change in the facts and circumstances of the case from the years 2009-10 and 2012-13. Hon’ble jurisdictional High Court in ITA 871/2017 by order dated 30/10/2017 dealt with these aspects and upheld the findings of the Tribunal for the Assessment Year 2009-10.

6.

On a careful perusal of the orders of the Tribunal and of the Humble High Court we are convinced that the facts continue to be the same and there is no reason for us to take a different view from the view taken for the assessment years 2009-10 and 2012-13. With this view of the matter we do not find any illegality or irregularity in the impugned orders, as such there is no reason for us to interfere with the same. We therefore dismiss the grounds of appeal relevant to this issue.

7. The additional ground relating to assessment year 2005- 06 is, as stated above, in respect of the deletion of addition of to 4135 /Del/2015 & CO 35/Del/2016 Rs. 10, 80, 000/-made on account of interest income. During the scrutiny of the assessment fun reassessment year 2005-06 Ld. AO observed that the assessee society had given some loans to Sh. Balkrishan Education and Social Welfare Society and added the notional interest at 12% to the income of the assessee.

8. This aspect has been considered at length by the coordinate bench of this Tribunal for the assessment year 2009- 10 and Tribunal deleted the same holding that the interest free funds transferred to Sri Balakrishna Society, having similar charitable objects, have finally reached to Sri Balakrishna Education and Social Welfare Society for construction of school building wherein 600 students of the assessee are studying. On this aspect also there is no allegation that the funds have not reached back finally to Sri Balakrishna Education and Social Welfare Society with which the assessee merged, for construction of school building. While respectfully following the observations of the coordinate bench of this Tribunal in we find that there are no merits in this ground and the same is accordingly dismissed.

9.

Now coming to the other grounds in the appeals relating to the assessment years 2010-11 and 2011-12, they relate to the allowing of the claim of depreciation which the Ld. AO disallowed on the premise that the purchase of assets was an application of income and hence the grant of depreciation would amount to double benefit. This issue was considered by the coordinate bench of this Tribunal in in the light of the decision of the Hon’ble Apex Court in CIT vs. 4 Rajasthan and Gujarati Charitable Foundation, Poona (2018) 89 taxmann.com 127 (SC) to reach a conclusion that subsection (6) of section 11 was inserted by Finance Act, 2014 and is only prospective in nature, as such, depreciation cannot be disallowed. While respectfully following the same, we dismiss the grounds of appeal of revenue relating to this issue.

10.

Cross objections are not pressed by the assessee, as such, there dismissed as not pressed.

11.

In the result appeals of the revenue and the cross objection of the assessee are dismissed.

Order pronounced in the open court on 04.07.2018

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