ITO, CHENNAI vs. BHAKTAVATSALAM MEMORIAL TRUST, CHENNAI

: Department by Mr.N.Madhavan, ACIT Assessee by : Mr.S.Sridhar, Adv. सुनवाई क3 तार�ख/Date of Hearing : 11.01.2018 घोषणा क3 तार�ख /Date of Pronouncement : 11.01.2018 आदेश / O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER:

Order of the Commissioner of Income Tax (Appeals)-VII, Chennai, in dated 31.12.2013 for the AY 2010-11 & ITA No.684/Mds/2015 is an appeal filed by the Revenue against the Order of the Commissioner of Income Tax (Appeals)-17, Chennai, in ITA No.92/14- 15 dated 24.12.2014 for the AY 2011-12.

ITA No.971/Mds/2014 & :- 2 -:

2.0 As both the appeals are related to the same assessee and involves identical issues, the appeals are being disposed off by this common order.

3.0 Shri N.Madhavan, ACIT, represented on behalf of the Revenue and Shri S.Sridhar, Adv., represented on behalf of the assessee.

ITA No.971/Mds/2014 for the AY 2010-11:

4.0 Ground Nos.1 & 5 are general in nature.

4.1 In regard to Ground Nos.2 & 4, it was submitted by the Ld.DR that the issue was against the action of the Ld.CIT(A) in holding that there was no violation u/s.13(1)(b) and 13(1)(d) of the Act. It was a submission that in the course of assessment, the AO had held that the assessee is a Public Charitable Society, had given an advance of Rs.2.00 Cr. to M/s.Khader Ghani Charitable and Educational Trust, Chennai, and the same was shown as outstanding advance as on 31.03.2010. Since the loans have been given to another society which was not having similar objects, the AO had denied the assessee the benefit of exemption u/s.11 of the Act. It was a submission that Ground Nos.2 & 4 were interconnected in so far as consequent to the denial of the benefit of exemption u/s.11 on account of the loan given to M/s.Khader Ghani Charitable and Educational Trust, the corpus donation of Rs.1.66 Cr. received by the assessee was brought to tax. It was a submission that on appeal, the Ld.CIT(A) had deleted the addition by following the decision of ITA No.971/Mds/2014 & :- 3 -: the Co-ordinate Bench of this Tribunal in the assessee’s own case in & ITA No.1819/Mds/2012 dated 20.12.2013. It was a submission that the order of the Ld.CIT(A) was liable to be reversed.

4.2 In reply, the Ld.DR drew our attention to the decision of the Co- ordinate Bench of this Tribunal in the assessee’s own case for the AY 2009-10 referred to supra wherein Para No.7 of the Co-ordinate Bench of this Tribunal has held as follows:

4.3 As it is noticed that the issues are squarely covered by the decision of the Co-ordinate Bench in the assessee’s own case, the issue is held in favour of the assessee. Consequently, Ground Nos.2 & 4 of the Revenue’s appeal stands dismissed.

5.0 In regard to Ground No.3, it was submitted by the Ld.DR that the issue was against the action of the Ld.CIT(A) in deleting the disallowance of the claim of the depreciation. He vehemently supported the order of the AO and the Ld.CIT(A).

ITA No.971/Mds/2014 & :- 4 -:

5.1 In reply, the Ld.AR drew our attention to the decision of the Hon’ble Supreme Court in the case of Rajasthan Gujarati Charitable Foundation, Poona, in Civil Appeal No.7186 of 2014 wherein it has been held as follows:

After hearing learned counsel for the parties, we are of the opinion that the aforesaid view taken by the Bombay High Court correctly states the principles of law and there is no need to interfere with the same. It may be mentioned that most of the High Courts have taken the aforesaid view with only exception thereto by the High Court of Kerala which has taken a contrary view in 'Lissie Medical Institutions v. Commissioner of Income Tax'. It may also be mentioned at this stage that the legislature, realizing that there was no specific provision in this behalf in the Income Tax Act, has made amendment in Section 11(6) of the Act vide Finance Act No. 2/2014 which became effective from the Assessment Year 2015-2016. The Delhi High Court has taken the view and rightly so, that the said amendment is prospective in nature. It also follows that once assessee is allowed depreciation, he shall be entitled to carry forward the depreciation as well.

5.2 It was a submission that the order of the Ld.CIT(A) was liable to be sustained.

5.3 We have considered the rival submissions. A perusal of the decision of the Hon’ble Supreme Court in the case of Rajasthan Gujarati Charitable Foundation referred to supra shows that the assessee is entitled to the claim of depreciation even though it is registered u/s.12A of the Act. In these circumstances, respectfully following the decision of the Hon’ble Supreme Court in the case of Rajasthan Gujarati Charitable Foundation referred to supra, the findings of the Ld.CIT(A) on this issue stands confirmed. Consequently, Ground No.3 of the Revenue’s appeal stands dismissed.

ITA No.971/Mds/2014 & :- 5 -: 6.0 In the result, the appeal filed by the Revenue in stands dismissed. ITA No.684/Mds/2015 for the AY 2011-12: 7.0 Ground No.1 is general in nature.

7.1 In regard to Ground No.2, it was submitted by the Ld.DR that the issue was against the action of the Ld.CIT(A) in holding that the corpus donation received by the assesse is squarely covered u/s.11(1)(d) r.w.s.12 of the Act. It was a submission that the Ld.CIT(A) had followed the decision of the Co-ordinate Bench of this Tribunal in the assessee’s own case in & ITA No.1819/Mds/2012 dated 20.12.2013 for the AY 2009-10. It was a submission that the order of the Ld.CIT(A) was liable to be reversed.

7.2 In reply, Ld.AR drew our attention to Para Nos.16 & 17 of the order of this Tribunal in the assessee’s own case wherein it has been held as follows:

ITA No.971/Mds/2014 & :- 6 -: of the previous year. On reading of the assessment order as well as the order of the Commissioner of Income Tax (Appeals), there appears to be no dispute that the donations received are not corpus donations. However, the Commissioner of Income Tax (Appeals) was of the view that since Rs.82,70,000/- out of corpus donations there is no specific directions/purposes for which it has to be used he has construed that it should form part of income though they are corpus donations. This finding of the Commissioner of Income Tax (Appeals) appears to be not correct. Section 11(1)(d) stipulates that voluntary contributions made with a specific direction that it shall form part of corpus of trust should not be treated as income of the previous year. The provision did not say that the purpose for which such donation is given should be specified. The requirement of the section will be satisfied once the donation is specific for corpus fund. In the circumstances, we hold that the entire corpus donations of Rs.1,77,70,000/- received by the assessee shall not form part of income of the assessee as they are given for corpus fund. The grounds of appeal raised by the assessee on this issue are allowed.

7.3 It was a submission that the order of the Ld.CIT(A) was liable to be sustained.

7.4 We have considered the rival submissions. As it is noticed that the issue is squarely covered by the decision of the Co-ordinate Bench of this Tribunal in the assessee’s own case referred to supra, the findings of the Ld.CIT(A) on this issue stands confirmed. Consequently, Ground No.2 stands dismissed.

8.0 In regard to Ground No.3, it was submitted by the Ld.DR that the issue was against the action of the Ld.CIT(A) in deleting the addition representing the agricultural income received by the assessee but treated as unexplained income by the AO. It was a submission that the order of the Ld.CIT(A) was liable to be reversed. It was a submission that the Ld.CIT(A) had admitted fresh evidence.

ITA No.971/Mds/2014 & :- 7 -:

8.1 In reply, Ld.AR submitted that no further evidence has been produced. It was also a submission that the assessee was running an Agricultural College and the assessee had nearly 340 acres of land on which agricultural operations were carried on for more than 15 years. It was also a submission that the agricultural income offered by the assessee for the earlier assessment years and the subsequent assessment years have also been accepted. The Ld.AR vehemently supported the order of the Ld.CIT(A). The Ld.AR drew our attention to Para No.4.5 & 4.6 of the order of the Ld.CIT(A). It was a submission that no fresh evidence had been produced before the Ld.CIT(A).

8.2 We have considered the rival submissions. At the outset, it may be mentioned here that the Revenue has not been able to point out as to what is the fresh evidence produced before the Ld.CIT(A). It is an undisputed fact that the assessee is having agricultural land of more than 340 acres and the details of the various crops is also available in the order of the Ld.CIT(A) at Page No.6 Para No.4.5. Admittedly, this has not been disputed by the Revenue. The Revenue’s allegation is that there was no evidence of sale of the agricultural produce. A perusal of the order of the Ld.CIT(A) clearly shows that before the AO the details had been produced.

In these circumstances, as it is noticed that the AO has not done any verification but has blindly disbelieved the claim of agricultural income, the same is not sustainable. It is also noticed that the assessee has disclosed agricultural income in the earlier assessment years and the ITA No.971/Mds/2014 & :- 8 -: subsequent assessment years and no dispute has been raised regarding those. This being so, we find no error in the findings of the Ld.CIT(A) on this issue and the same stands confirmed. Consequently, Ground No.3 of the Revenue’s appeal stands dismissed.

9.0 In regard to Ground No.4, it was submitted by the Ld.DR that the issue was against the action of the Ld.CIT(A) in holding that the remuneration of Rs.12.00 lakhs paid to a trustee, was not a violation of Sec.11(1)(a) r.w.s. 13(2)(c) of the Act. It was a submission that the salary of Rs.12.00 lakhs having been paid to the trustee, there is a violation of Sec.11(1)(a) r.w.s. 13(2)(c) of the Act. It was a prayer that the order of the Ld.CIT(A) was liable to be reversed.

9.1 In reply, Ld.AR submitted that the salary of Rs.12.00 lakhs was paid in the earlier assessment years and the subsequent assessment years also and there was no disallowance nor there was a claim of violation of Sec.

11(1)(a) r.w.s. 13(2)(c) of the Act. It was a submission that if the AO wanted to show that the payment was unreasonable even that has not been done in so far as no comparative case has also been shown.

9.2 We have considered the rival submissions. As it is noticed that the salary has been paid to the trustee in the earlier assessment years and the subsequent assessment years and there is no claim of violation of Sec.11(1)(a) r.w.s. 13(2)(c) of the Act in the earlier assessment years and ITA No.971/Mds/2014 & :- 9 -: the subsequent assessment years and as the AO has not been able to show how the payment is unreasonable. We have upheld the findings of the Ld.CIT(A) on this issue. Consequently, Ground No.4 of the Revenue’s appeal stands dismissed.

10.0 In regard to Ground No.5, the issue was against the action of the Ld.CIT(A) in allowing the depreciation. This is identical to Ground No.3 of the Revenue’s appeal in for the AY 2010-11. We have already held that the depreciation is eligible in view of the decision of the Hon’ble Supreme Court in the case of Rajasthan Gujarati Charitable Foundation in Civil Appeal No.7186 of 2014 dated 13.12.2017.

Respectfully following the decision of the Hon’ble Supreme Court, the findings of the Ld.CIT(A) in granting the depreciation to the assessee stands upheld. Consequently, Ground No.5 of the Revenue’s appeal stands dismissed.

Order pronounced in the Open Court on January 11, 2018, at Chennai.