VIJAYKIRAN EDUCATIONALTRUST,BANGALORE KARNATAKA vs. DEPUTY COMMISSIONER OF INCOME TAX, (EXEMPTIONS), CIRCLE-1, BANGALORE

We have heard the both the parties on admission of additional grounds. In our opinion, all the facts are already on record and there is no necessity of investigation of any fresh facts for the purpose of adjudication of above grounds. Accordingly, by placing reliance on the judgement of Hon’ble Supreme Court in the case of NTPC Vs. CIT 229 ITR 383 (SC) we inclined to admit the additional grounds for the purpose of adjudication as there was no investigation of any fresh facts otherwise on record and the action of the assessee is bonafide. 4. There was a delay of 66 days in filing the appeal before this Tribunal. The assessee filed petition along with affidavit for condonation of delay stating that N. Vijay Kumar, main trustee of the assessee trust was having poor health and has undergone treatment for Carcinoma Prostate with Iliac and Retroperitoneal Nodes disease as per medical certificate dated 27.9.2023 issued by Manipal Hospital and she submitted that on medical ground the delay of 66 days to be condoned.

ITA No.974/Bang/2024 Vijaykiran Educational Trust, Bangalore Page 3 of 9 5. We have heard the rival submissions and perused the materials available on record. We find that there is a good and sufficient reason for filing the appeal belatedly before this Tribunal by 66 days since the assessee main trustee N. Vijay Kumar was suffering from serious sickness. Accordingly, we condone the delay of 66 days and admit the appeal for adjudication. 6. Now coming to the main ground of appeal, the facts of the issue are that as culled out from the assessment order of the AO are that the assessee e-filed the return of income for the A.Y. 2018- 19 on 19.10.2013 declaring total income at Nil. The case was selected for Complete Scrutiny assessment under the E-assessment Scheme, 2019 on the issues: i. Expenditure for Charitable or Religious Purposes; ii. Receipts of Trust. During the course of assessment proceedings, on a perusal of the details furnished by the assessee, it was observed by the AO that the assessee had declared a sum of Rs. 6,67,36,705/- as depreciation in the Income and Expenditure Account. The assessee had claimed this amount as an application of income. It was also noticed by the AO that the capital asset amounting to Rs. 9,48,93,808/- was acquired by the asssessee during the year under consideration and cost of which was claimed as an application of income. On perusal of earlier year's ITRs, it was seen by the AO that the capital expenditure/ acquisition of capital asset had been claimed as an application of income in the respective years. Therefore the ld. AO was of the view that the assessee had already claimed the cost of the assete as an application of income. 6.1. The AO has further observed that with regard to the application of fund in respect of depreciation and capital asset of Section 11(6) which is applicable from 01/04/2015 clearly states that :- “(6) In this section where any income is required to be applied or accumulated or set apart for application, then for such purposes the income shall

ITA No.974/Bang/2024 Vijaykiran Educational Trust, Bangalore Page 4 of 9 be determined without any deduction of allowance by way of depreciation or otherwise in respect of any asset, acquisition of which has been claimed as application of income under this section in the same or any other previous year”. The ld. AO was of the view that in the instant case, the assessee had claimed depreciation of Rs. 6,67,36,705/- on assets which were already considered for application of income in the earlier years. Therefore, the provisions of Section 11 (6) applicable from 01/04/2015 are squarely applicable in the case of the assessee. In this context, a notice/ letter was issued on 01.04.2021 to the assessee by the AO to explain the eligibility for claiming depreciation in view of provision of section 11 (6) of the Act but no submission/ reply was furnished by the assessee. Further, a detailed show cause notice alongwith draft assessment order was issued to the assessee by the AO on 16.04.2021 requiring the assessee to show cause as to why amount of Rs. 6,67,36,705/- may not be disallowed. In compliance to the show cause notice, no submission/reply was furnished by the assessee. Therefore, considering the facts of the case, the amount of depreciation claimed could not be allowed as application of income of the year under consideration. Accordingly the sum of Rs. 6,67,36,705/was disallowed from the application of income claimed by the assessee. 6.2 During the appellate proceedings, it is the submission of the assessee that the addition to building is on account of takeover of building constructed by M/S. VK Academy of Education Private Limited- PAN no. AABCV8166E on the land belonging to the Vijaykiran Educational Trust. The assessee has also submitted that the depreciation amount of Rs. 6,67,36,705/- also includes depreciation of Rs.34,90,800 on movable assets such as furniture and fixtures, computer and laboratory equipment has to be allowed as business expenditure as investment on such assets are not claimed as application of trust fund in any of earlier years or during the year.

ITA No.974/Bang/2024 Vijaykiran Educational Trust, Bangalore Page 5 of 9 6.3 Having considered the factual matrix of the case, the ld. CIT(A) observed that the above mentioned additions were made by the ld. AO as there was no response from the assessee to various notices/SCN issued by the ld. AO. He observed that during the course of assessment proceedings, on a perusal of the details furnished by the assessee, it was observed by the AO that the assessee had declared a sum of Rs. 6,67,36,705/as depreciation in the Income and Expenditure Account. The assessee had claimed this amount as an applicatio of income. It was also, noticed by the AO that the capital asset amounting to Rs.9,48,93,808/- was claimed as an application of income. The ld. AO was of the view that with regard to the application of fund in respect of depreciation and capital asset, provisions of section 11(6) which is applicable from 1.4.2015 clearly state that where any sum is claimed as application of income, the same could not be considered for depreciation. After giving the assessee a notice/SCN which not responded to, the AO disallowed the sum of Rs. 6,67,36,705/- was from the application of income claimed by the assessee. The ld. CIT(A) also found that the assessee did not file any submissions before the AO during the course of assessment proceedings. Nor did the assessee file any submissions supported by proper evidence along with a petition under Rule 46A for admission of evidence in the appellate proceedings. The assessee has not controverted the findings of the AO supported by proper evidence. He also found that the additions made by the AO are based on solid evidence and amended provisions of law which were confronted to the assessee by the AO and the additions are made as per the provisions of law. No evidence whatsoever has been filed by the assessee to substantiate and buttress the grounds of appeal. 6.4 The provisions of Section 11 (6) which is applicable from 01/04/2015 clearly states that :- "(6) In this section where any income is required to be applied or accumulated or set apart tor application, then for such purposes the income shall be determined

ITA No.974/Bang/2024 Vijaykiran Educational Trust, Bangalore Page 6 of 9 without any deduction or allowance by way of depreciation or otherwise in respect of any asset, acquisition of which has been claimed as application of income under this section in the same or any other previous year."

6.5 The assessee had claimed depreciation of Rs. 6,67,36,705/- on assets which were already considered for application of income in the earlier years. Therefore, the provisions of Section 11 (6) applicable from 01/04/2015 are squarely applicable in O the case of the assessee. In the circumstances, I do not see any reason to interfere with the well reasoned and speaking order of the AO. Therefore the additions made by the AO are confirmed. 6.6 Hence, the grounds of appeal. In the result, the appeal of the assessee is dismissed. 7. The ld. A.R. submitted that the Assessing Officer as well as the CIT(A) rejected the depreciation on fixed assets and movable assets by applying the provisions of Section 11(6) of the Act, without appreciating that additional fixed assets and movable fixed assets were not claimed as application of income during the year (as same is supported by the Balance Sheet at page no. 37) to the extent of Rs.9,48,93,808/- Furthermore, for the assessment years 2016-17, after the amendment of provision 11(6), the CIT(A) has allowed depreciation on fixed assets claimed by the assessee, and the revenue is not on appeal. Hence it is requested to allow depreciation on movable and immovable assets to the extent of Rs.9,48,93,808/- 8. The ld. D.R. relied on the order of lower authorities. 9. We have heard the rival submissions and perused the materials available on record. In this case, the main contention of ld. A.R. is that the lower authorities has strongly applied the provisions of section 11(6) of the Act though the assessee has not claimed cost of additional fixed assets and movable assets as an application in the assessment year under consideration. As such, assessee entitled for depreciation of fixed assets and movable assets in the assessment year under consideration. Further, also assessee

ITA No.974/Bang/2024 Vijaykiran Educational Trust, Bangalore Page 7 of 9 pleaded that in view of applicability of principles of consistency to the income tax proceedings since the assessee’s claim has been in the assessment year 2016-17 on the same logic this claim of assessee to be allowed. In our opinion, this requires verification at the end of ld. AO if the assessee not claimed the cost of acquisition of additional fixed assets and movable assets as an application in the assessment year under consideration then the assessee is entitled for alternative claim with regard to depreciation of fixed assets and movable assets. In view of this, we remit the issue to the file of ld. AO for the limited purpose to examine these facts and decide accordingly after giving opportunity of hearing to the assessee. 10. Next additional ground is with regard to disallowance of capital expenditure. 11. The ld. A.R. submitted that the learned AO has restricted the capital expenditure to the extent of 9,48,93,808/- instead of total capital expenditure incurred by the assessee to the extent of the 15,54,79,076/-. The same is disclosed in the balance sheet as addition into fixed assets (placed at Page 59 of assessee’s paper book). Further this is genuine capital expenditure incurred by the assessee for the construction of the building. The AO also failed to appreciate that the capital expenditure is not allowed to be carried forward because of provision of section 11 of the act. The application of current year income is allowable. There is no provision to carry forward current year excess expenditure. The same can be verified from the accounts of the assessee and allowed as per law. 12. The ld. D.R. submitted that the issue may be remitted to the ld. AO as he has no occasion to examine this issue. 13. We have heard the rival submissions and perused the materials available on record. In our opinion, it is appropriate to remit the issue to the file of ld. AO since this is an additional

ITA No.974/Bang/2024 Vijaykiran Educational Trust, Bangalore Page 8 of 9 ground before us and ld. AO has no occasion to examine this issue accordingly, the issue is remitted to the file of ld. AO to decide the allowability of this expenditure to the extent of surplus available in this assessment year under consideration. Ordered accordingly. 14. Next additional ground is with regard to repayment of loan as application of income. 14.1 The ld. A.R. submitted that the assessee has not claimed exemption towards cost of assets as application of income in the year in which assets were acquired and further if it is not claimed as application of income same should be allowed as at the time of repayment of loan to the extent of Rs. 7,08,30,760/- as application of income which is supported by jurisdictional high court decision in the case of CIT(A) Vs. Janmabhumi Press Trust, and also supported by the assesseels affidavit. Hence the ld. A.R. prayed to verify and allow if the assets are not claimed as application of income during the year as acquisition of assets. 15. The ld. D.R. submitted that the issue may be remitted to the file of ld. AO since this is a new ground raised by assessee before this Tribunal. 16. We have heard the rival submissions and perused the materials available on record. Admittedly, this is an additional ground before us and the ld. AO have no occasion to examine this issue. Hence, this issue is remitted to the file of ld. AO to examine in the light of above judgement in the case of Janmabhumi Press Trust cited (supra). Ordered accordingly. 17. In the result, appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the open court on 5th Aug, 2024

Sd/- Sd/- (Soundararajan K.) (Chandra Poojari) Judicial Member Accountant Member

Bangalore, Dated 5th Aug, 2024. VG/SPS

ITA No.974/Bang/2024 Vijaykiran Educational Trust, Bangalore Page 9 of 9

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Asst. Registrar, ITAT, Bangalore.