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Income Tax Appellate Tribunal, DELHI BENCHES: ‘F’, NEW DELHI
Before: SHRI R.S. SYAL & SMT. BEENA A PILLAI
ORDER
PER BEENA A PILLAI, JUDICIAL MEMBER
The present appeal has been filed by the revenue against order dated 23/09/15 passed by Ld. CIT(A)-40 for assessment year 2010- 11 on the following grounds of appeal:
1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.9,75,31,625/- made by AO in respect of franchisee fees received by the DPS Society from different satellite schools which are running under the name and logo of Delhi Public School having different management that the DPS Society.
2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in allowing the claim of depreciation amounting to Rs. 11,53,37,424/- as in a case where the capital expenditure has ITA 6627/Del/2015 A.Y. 2010-11 The Delhi Public School Society been treated to have been applied for the object of the trust, allowance of deduction on account of depreciation will amount to double deduction. 3: On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in allowing the claim of depreciation of Rs. 11,53,37,424/- to the assessee in view of the recent decision of the Hon'ble High Court in the case of DIT(E) Vs Charanjiv Charitable Trust dated 18.03.2014. 4.On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in allowing the deficit of earlier assessment, as there is no provision for set off of losses u/s I11, 12 and 13 of the Income Tax Act, 1961'"
5. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in allowing the claim of carry forward of losses disregarding the facts that the set-off and carry forward of losses are dealt with by the provisions of section 70,71,72,73&74 of Income Tax Act.
The appellant craves leave to add, to alter or amend any ground of appeal raised above at the time of hearing.
Brief facts of the case are as under: The assessee filed its return of income declaring nil income on 30/09/10. The return was accompanied by audited report in form 10 B and the case was selected for scrutiny. Notices under section 143(2) and 142(1) were issued along with questionnaire upon the assessee. In response to statutory notices received, representatives of assessee appeared and filed various necessary submissions which were examined on test check basis. 2.1. Assessee had claimed exemption under section 11 read with section 12 of the Income Tax Act, 1961 (the Act) and runs 11 core schools in the name of Delhi Public School (DPS) under its own umbrella. Assessee has also been granted permission to around ITA 6627/Del/2015 A.Y. 2010-11 The Delhi Public School Society hundred other entities across the country to open school and make use of its brand name. Such other schools which have been allowed permission to use it’s name are termed as satellite schools. 2.2. During the year under consideration, assessee had received certain amount towards maintenance charges which were in fact in the nature of franchisee fees obtained by Society for allowing such satellite schools to use its brand name. 2.3. Ld. AO observed that assessee had claimed depreciation on fixed assets utilised for charitable objects of the trust. The Ld. AO observed that assessee had claimed set off of excess expenditure of earlier assessment year and has carried forward certain losses. He was of the opinion that assessee being a trust was not eligible for set off and carry forward of losses. 2.4. Ld.Assessing officer passed assessment order making an addition of Rs. 9,75,31,625/-. 2.5. Aggrieved by the assessment order, assessee preferred appeal before Ld. CIT (A), who deleted the additions. 2.6. Aggrieved by the order passed by Ld. CIT (A) revenue is in appeal before us now.
At the outset it has been pointed out by Ld.AR that the issues raised by revenue now stand covered vide order passed by this Tribunal in assessee’s own case in for assessment year 2001-02, ITA No. 2580 to 2583/del/2006 for assessment year 1998-99 to 2000-01 and 2003-04, ITA No. 4510 and 4511/del/2011 for assessment year 2002-03 and 2004-05, ITA number 2046/del/2008 for assessment year 2005-06, ITA No.
ITA 6627/Del/2015 A.Y. 2010-11 The Delhi Public School Society 4177 and 4178/del/2010 for assessment year 2006-07 and 2007- 08 and for assessment year 2009-10. Copies of these orders have been annexed in the paper book from pages 37 to 77.
Ground No. 1 This ground has been raised by revenue against the addition that has been deleted in respect of franchisee fees received by assessee from different satellite schools which are running under the name and logo of assessee, having different management than assessee society. 4.1. It is seen from various orders placed in the paper book for the various assessment years in assessee’s own case, passed by this Tribunal that, this issue now stands settled in favour of assessee and against revenue. It is also observed that Ld.CIT (A) followed the binding decision of this Tribunal in assessee’s own case for the previous assessment years. In view of the above we do not find any infirmity in the order passed by Ld. CIT (A) and the ground raised
by revenue stands dismissed.
5. Ground No. 2&3 This ground has been raised by revenue, as Ld. CIT (A) allowed deduction on account of depreciation. The Ld. AO was of the opinion that assessee was a trust and it was deriving income from depreciable assets. As assessee took into account depreciation on those assets while computing income of trust, Ld.AO held that depreciation could not be taken into account because full capital expenditure has been allowed in the year of acquisition of the ITA 6627/Del/2015 A.Y. 2010-11 The Delhi Public School Society assets. The Ld. DR placed reliance upon the decision of Hon’ble Delhi High Court in the case of DIT vs. Chiranjiv Charitable Trust reported in 223 Taxmann.com 71. 5.1. On the contrary assessee placed reliance upon a subsequent decision of Hon’ble Delhi High Court in the case of CIT vs. Indraprastha Cancer Society reported in 53 Taxmann.com 463. 5.2. We have perused the submissions advanced by both the sides in the light of the decisions relied upon by them. 5.3. It is observed that order passed by this Tribunal in assessee’s own case for assessment year 2009-10 in placed at page 68 of the paper book dealt with this issue as under: “10. Furthermore, we note the Hon’ble Jurisdictional High Court decision in the case of DIT vs. Vishwa Jagriti Mission in ITA no.140/2012 vide order dated 29.3.2012. In this case the Ld.CIT(A) on the basis of the order passed by the Ld.DIT(E) accepted assessee’s claim for exemption u/s 11. As regards the claim of depreciation on fixed assets utilised for charitable objects of the trust, he accepted assessee’s claim. The tribunal confirmed the decision of Ld.CIT(A) on appeal. On appeal the Jurisdictional High Court has held as under. “There is no dispute that the assessee has been granted registration u/s 12AA and, therefore, it was entitled to exemption of its income u/s 11. The only question is whether the income of the assessee should be computed on commercial principles and in doing so whether depreciation on fixed assets utilized for the charitable ITA 6627/Del/2015 A.Y. 2010-11 The Delhi Public School Society purposes should be allowed. On this issue, there seems to be a consensus of judicial thinking. Having regard to the consensus of judicial opinion, we are not inclined to admit the appeal and frame any substantial question of law. There does not appear to be any contrary view plausible on the question raised before us and at any rate no judgement taking a contrary view has been brought to our notice.”
In view of the above mentioned decision of ITAT in assessee’s own case as well as decision of Hon’ble Jurisdictional High Court, we do not find any infirmity or illegality in the order of Ld.CIT(A), hence, we uphold the same on this issue. In the result, this ground raised by revenue stands dismissed.” 5.4. Further Hon’ble Delhi High Court in the case of Indraprastha Cancer Society (supra) dealt with the issue as under: The aforesaid paragraph refers to the decision in the case of VishwaJagriti 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 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 ITA 6627/Del/2015 A.Y. 2010-11 The Delhi Public School Society 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. {Para 10) 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 ITA 6627/Del/2015 A.Y. 2010-11 The Delhi Public School Society years in question. The newly enacted sub-section relates to application of income. (Para 11) In these circumstances, we do not find any merit in the appeals in the case of Indraprastha Cancer Society, Abul Kalam Azad Islamic Awakening and in the case of M/s Sanskriti Educational Society {ITA No. 348/2014}. Similarly, we do not think it is necessary and required that we should issue notice in the application for con donation of delay filed in the case of M/s Sanskriti Educational Society (ITA Nos.463 and 464/2014) as on merits the revenue is not entitled to succeed. In these appeals, the applications for condonation of delay shall be treated as dismissed and as a sequitur the appeals will be treated as dismissed.(Para 12). 5.5. After considering all the facts and circumstances of the case, view of Hon’ble Delhi High Court decision in the case of Indraprastha Cancer Society (supra) and by this Tribunal in assessee’s own case for the preceding assessment year, we do not find any infirmity in the view taken by Ld. CIT (A). Accordingly this ground raised
by the revenue stands dismissed.
6. Ground No. 4&5 This issue has been raised by revenue against the order of Ld. CIT (A) in allowing the set off of loss and carry forward of claim for excess application for the year. 6.1. AO disallowed the set off of Rs. 104,05,05,503/-, excess of expenditure while concluding the assessment proceedings. The Ld. AO was of the opinion that the said claim is not reflected in the audited accounts of assessee.
ITA 6627/Del/2015 A.Y. 2010-11 The Delhi Public School Society 6.2. Ld.AR at the outset submitted that the issue stands covered by this Tribunal in for assessment year 2009-10. This Tribunal dealt with this issue as under: “16. We have heard the rival contentions in light of the material 'produced and precedent relied upon. Ld. Counsel of the assessee submitted that the issue is covered in favour of the assessee by the decision of the Hon'ble jurisdictional High Court in the case of Raghuvanshi Charitable Trust (Supra). The Ld. Departmental Representative could not produce any decision contrary in this regard.
Hence, upon careful consideration, we find that the Hon'ble jurisdictional High Court in the case of D.I.T. vs. Raghuvanshi Charitable Trust (Supra) has held as under (Heads notes only):- "Section 11 of the Income Tax Act, 1961 - Charitable or religious trust - Exemption of income from property held under - Whether a trust can be allowed to carry forward deficit of current year and to set off same against income of subsequent years - Held, yes - Whether adjustment of deficit of current year against income of subsequent year would amount to application of income of trust for charitable purposes in subsequent year within meaning of section 11(1)(a) - Held, yes."
In view of the aforesaid exposition by the Hon'ble Jurisdictional High Court, we find that there is no infirmity in the order of the Ld. Commissioner of Income Tax (A), accordingly, we uphold the same. In the result, the issue raised by the Revenue stands dismissed. 6.3. Respectfully following the same we do not find any infirmity in the order of Ld. CIT (A).
ITA 6627/Del/2015 A.Y. 2010-11 The Delhi Public School Society 6.4. In view of above this ground raised by revenue stands dismissed.
7. In the result appeal filed by the revenue stands dismissed. Order pronounced in the open court on 29.11.2017.