SPRINGBIRD EDUCATIONS PVT. LTD.,MUMBAI vs. I.T.O. WARD 4(3)(4), MUMBAI

The first issue in the appeal of assessee is that CIT(A) erred in not considering deduction of Rs.25 lacs u/s 35(1)(iii) of the Income Tax Act, 1961 (in short ‘the Act’) paid to “Research Foundation for Jainology” on the ground that the CBDT has not issued notification in official gazette for the period from 1.4.2006 to 31.3.2009 though the foundation was approved by the Department of Scientific & Industrial Research,

Briefly stated, the facts are that the assessee-company, which was running a school, filed its return of income on 24.9.2009 declaring NIL income. The assessment was completed u/s 143(3) of the Act on 12.12.2011 determining the income of assessee at Rs.42,38,240/-. When completing the assessment, Assessing Officer noticed that assessee has claimed deduction u/s 80GGA of the Act on the donation/contribution of Rs. 25 lacs paid by assessee to “Research Foundation for Jainology”. The Assessing Officer required the assessee to explain as to how the deduction u/s 80GGA of the Act is allowable for the reason that no deduction u/s 80GGA is allowable in a case where the gross total income includes income chargeable to tax under the head ‘Profits and gains of business or profession’. Assessee vide letter dated 4.8.2011 submitted that claim of assessee is admissible u/s 35(1)(ii) of the Act. It was submitted that deduction is allowable at 125% in respect of donation to research institution or association approved u/s 35(1)(ii) of the Act and hence claim was made u/s 35(1)(ii) of the Act at Rs.31,25,000/-. The Assessing Officer, however, denied the deduction observing that assessee has not claimed deduction u/s 35(1)(ii) in the return of income nor any revised return was filed and it was only deduction u/s 80GGA which was claimed. The Assessing Officer referring to the decision of Hon'ble Supreme Court in the case of Goetze (India) Ltd. vs. CIT, 284 ITR 323 denied the claim of assessee observing that there is no claim in the return. The Assessing Officer was 3 M/s. Springbird Educations Pvt. Ltd.

Before us, the learned counsel for the assessee vehemently submits that CIT(A) is not at all justified in not accepting the alternative plea of assessee u/s 80G of the Act. The learned counsel for the assessee submits that the CIT(A) being an appellate authority has ample powers to admit any claim of assessee even though assessee has not claimed it in the return of income. The learned counsel for the assessee placing reliance on the decision of jurisdictional High Court in the case of CIT vs. Pruthvi Brokers & Shareholders Pvt. Ltd. (349 ITR 336) submitted that the decision of the Hon'ble Supreme Court in the case of Goetze (India) Ltd. (supra) was explained and it was held that appellate authorities have jurisdiction to admit the claim which was not there before the Assessing Officer or in the return filed originally.

The ld. DR vehemently supported the orders of the authorities below.

We have heard the rival submissions, perused the orders of the authorities below and the decisions relied on. Insofar as the deduction u/s 35(1)(ii)/(iii) of the Act is concerned, the learned counsel for the assessee failed to submit before us as to how the deduction is allowable in the absence of approval by the CBDT. Thus, the order of CIT(A) on this issue is sustained. However, in respect of the alternative claim of assessee that the donation paid by it to “Research Foundation for Jainology” is to be allowed as deduction u/s 80G, we are inclined to set

The next issue in the appeal of assessee is that CIT(A) erred in sustaining the order of Assessing Officer in treating the expenditure of Rs.12,75,141/- as Capital expenditure being an expenditure incurred on wire mesh fitted on the buses plied by assessee for the school children. The Assessing Officer, while completing the assessment, treated the expenditure incurred by assessee to the extent of Rs.12,75,141/- as Capital expenditure observing that assessee has incurred certain expenditure towards Aluminium mesh for 41 buses and this Aluminium mesh fitted on the buses cannot be termed as repair work, but is an addition to the asset. He treated this addition to the asset as an enduring benefit to the assessee and, therefore, not a Revenue expenditure. The Assessing Officer, however, allowed depreciation on such expenditure. On appeal, CIT(A) sustained the action of Assessing Officer in treating the said expenditure as Capital expenditure observing that Aluminium wire mesh installed is in the nature of capital expenditure providing enduring benefit to the usability of the assessee.

The learned counsel for the assessee before us submits that there is no enduring benefit in providing Aluminium mesh to the buses as it is only a current repairs to the existing asset as assessee has to take some precautionary measures for the safety of children. Therefore, Aluminium mesh was provided on the buses which transport the school children to school. The addition to asset by Aluminium mesh has no enduring benefit and is to be allowed as Revenue expenditure only.

We have heard the rival submissions and perused the orders of the authorities below. The Assessing Officer treated the expenditure incurred by assessee for Aluminium mesh fitted on the buses as Capital expenditure observing that it has enduring benefit, which the CIT(A) sustained. It is the submission of assessee that in order to take precautionary measures for safety of children, the school had to provide Aluminium mesh on the buses and there is no enduring benefit to the assessee. The addition made in the form of wire mesh is only in the form of current repairs to the asset and the expenditure is allowable u/s 37 or 31 of the Act. On a careful consideration of the facts and circumstances, we are of the view that the expenditure incurred by assessee on the Aluminium mesh fitted on the buses is not an asset which is creating an enduring benefit to the assessee. Every addition to the asset is not a Capital expenditure. The Aluminium mesh provided to the buses is not in the capital field but is of revenue in nature and there is no enduring benefit to the assessee. Thus, we reverse the orders of the authorities below and direct the Assessing Officer to allow the expenditure as Revenue expenditure.

In the result, appeal of assessee is partly allowed for statistical purposes.