ITO (E), NEW DELHI vs. M/S. N.P. GOEL EDUCATIONAL TRUST, NEW DELHI

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ITA 73/DEL/2017Status: DisposedITAT Delhi21 December 2017AY 2012-135 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 since the department had accepted the CIT(A)'s view in prior assessment years on both the royalty payment and the deemed interest on the interest-free deposit, there was no reason to deviate. The claim for depreciation was also allowed based on the prospective nature of Section 11(6).

What were the facts?

The assessee trust, registered under Section 12A, paid royalty and claimed it as deductible expenditure. The Assessing Officer disallowed it, but the CIT(A) allowed it, following a previous year's order accepted by the department. The trust also gave an interest-free deposit to a related party, on which the AO added deemed interest, which the CIT(A) deleted, again following a departmental-accepted order.

What were the issues?

Whether royalty payments and deemed interest on interest-free deposits are deductible for a charitable trust, and the applicability of Section 11(6) to depreciation claims.

Which sections of the Income-tax Act were involved?

Section 11(1)(a),Section 11(6)

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, DELHI BENCHES : SMC : NEW DELHI

Before: SHRI R.S. SYAL

For Appellant: Shri K. Sampath &, Shri V. Raja Kumar, Advocates, Shri Amit Jain, Sr. DR
Hearing: 21.12.2017Pronounced: 21.12.2017

This appeal by the Revenue arises out of the order passed by the CIT(A) on 13.10.2016 in relation to the assessment year 2012-13.

2.

The first ground is against allowing of exemption u/s 11(1)(a) in respect of Royalty payment of Rs.65,59,081/- to G.D. Goenka Pvt. Ltd.

3.

Briefly stated, the facts of the case are that the assessee-trust is registered u/s 12A of the Income-tax Act, 1961 and is also notified u/s 80G. The assessee-trust is running a school under the name and style of G.D. Goenka Public School at Ghaziabad. During the year under consideration, the assessee paid a sum of Rs.65,59,081/- as Royalty fee to G.D. Goenka Pvt. Ltd. and claimed the same as deductible expenditure. The Assessing Officer disallowed the same on the ground that such a payment was unwarranted. The ld. CIT(A), following his order for assessment year 2010-11, accepted the assessee’s claim. The Revenue is aggrieved against such deletion of addition.

4.

Having heard both the sides and perused the relevant material, it is found as an admitted position, as also conceded by the ld. DR, that the view on this issue taken in favour of the assessee by the ld. CIT(A) for the assessment year 2010-11, has been accepted by the Department and no further appeal was filed. In the light of these facts, it is clear that the Department has accepted the deductibility of Royalty fee to G.D.

Goenka for the preceding years. As such, there is no reason to take a different view. This ground is not allowed.

5.

Ground No.2 is against the deletion of addition of Rs.12 lac on account of deemed interest on interest free deposit of Rs.1 crore given to G.D. Goenka Pvt. Ltd. The Assessing Officer came to hold that the assessee ought to have charged interest on interest-free deposit of Rs.1 crore given to G.D. Goenka Pvt. Ltd. Applying the interest rate of 12%, he added a sum of Rs.12 lac to the assessee’s income. The ld. CIT(A) deleted the addition.

6.

Having heard both the sides and gone through the relevant material on record, it is seen that similar addition was made by the Assessing Officer for the assessment year 2011-12 which got deleted at the hands of the ld. CIT(A). The ld. DR frankly accepted that no second appeal was preferred on this issue and the view in favour of the assessee has been accepted by the Department. In this hue, we do not find any raison d’etre to deviate from the decision rendered by the ld. CIT(A) on this score. This ground is also not allowed.

7.

The last ground is against the deletion of addition on account of depreciation amounting to Rs.1,04,03,824/-.

8.

Having heard both the sides it is noted that this issue is no more res integra in view of the insertion of section 11(6) by the Finance (No.2)

Act, 2014 w.e.f. 01.04.2015 providing that depreciation on an asset can’t be treated as application of income. Thus, w.e.f. the insertion of this provision the claim of depreciation has become ineligible for deduction. The Hon'ble Karnataka High Court in CIT vs. Karnataka Reddy Janasangha (2016) 389 ITR 229 (Kar), has held that the insertion of section 11(6) by the Finance (No.2) Act, 2014 w.e.f. 01.04.2015 is prospective. We, therefore, countenance the view taken by the ld. CIT(A) on this score.

9.

In the result, the appeal filed by the Revenue is dismissed.

Order Pronounced in the open Court on 21.12.2017.

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