ITAT Delhi Judgments — June 2019

The Tribunal held that the assessee appeared to be no longer interested in pursuing the appeal. Following established precedents, the appeal was dismissed for non-prosecution.

The ITAT held that the CIT(A) should have decided the appeal on merits, even in the absence of the assessee, by providing reasons for the decision. Dismissing the appeal solely for non-prosecution was not sustainable in law.

The Tribunal set aside Ground No. 11 regarding the carving out of technical support services from business support services back to the TPO for fresh adjudication. Consequently, grounds 8-10 and 12-13 were also set aside for fresh decision by the TPO.

The Tribunal held in favour of the assessee on both grounds. Regarding depreciation, it followed the Supreme Court's decision in CIT vs. Rajasthan and Gujarat Charitable Foundation, stating that depreciation is allowable on assets whose cost has been allowed as application to charitable purposes under Section 11(1)(a). The Tribunal noted that the amendment to Section 11(6) by the Finance Act, 2014, effective from AY 2015-2016, was not applicable to the assessment year under appeal (2010-2011). Consequently, the disallowance of depreciation was deleted, and the assessee's grounds were allowed. Concerning the hostel surplus, the Tribunal found that education itself is a charitable activity under Section 2(15). It held that providing hostel facilities is incidental to the main educational objective and not a separate business activity. The Tribunal noted that the assessee provided these facilities only to its students, not to the general public, and that the charges were reasonable. Relying on the precedents cited by the assessee, the Tribunal concluded that the authorities below were not justified in treating the hostel surplus as business income. The entire addition was deleted, and the assessee's grounds were allowed. The Revenue's appeal was dismissed as the tax effect was below the monetary limit prescribed by CBDT Circular No. 3/2018.