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2019 (3) TMI 1930 - AT - Income TaxExemption u/s 11 Denied - AO denied by holding that the assessee had charged excess fees then approved by the statutory body - CIT(A) allowed relief to the assessee u/s 11 - HELD THAT - CIT(A) held that assessee is a deemed university to which special ordinance of U.P. Government 04.07.2012 was applicable and after becoming deemed university the provision of fee fixation committee of State Government is not applicable. Clause 29 of Extra Ordinarily Gazette of U.P. State Government clearly defines that ordinance shall be made by the Executive Council for the purpose of fee to be charged for courses being studied in the university and for admission to the examination degrees, diploma and certificate of the university. The ld. CIT(A) has appreciated the entire facts and has given a categorical finding that the assessee was a deemed university established by Special Ordinance of U.P. Government dated 04.07.2012. The above finding do not require any interference as we do not find any infirmity in the same, therefore, the Ground No.1 of appeal of the Revenue is dismissed Disallowance of depreciation - assessee claimed depreciation which was rejected by the AO on the ground that the capital expenditure incurred during the accounting year was allowed as deduction form the income of the assessee, the deduction of depreciation was not allowed on the ground that full deduction had been allowed in respect of capital cost of the asset and if the depreciation was allowed, as claimed by the assessee, it would result in double deduction - HELD THAT - On a reference, the Hon'ble Bombay High Court confirmed the view taken by the Tribunal by holding that the Tribunal was right in law in directing the AO to allow depreciation on the assets, the cost of which had been fully allowed as application of income under section 11 in the past year. We, therefore, keeping in view the ratio laid down in the aforesaid referred to case of Institute of Banking 2003 (7) TMI 52 - BOMBAY HIGH COURT set aside the order passed by the learned CIT(A) and direct the Assessing Officer to allow the depreciation on the written Dawn Value of the assets. Anonymous donation - As per sub Section (3) of 115BBC, anonymous donation mean voluntary contribution where a person receiving such contribution does not maintain a record of identity indicating the name and address of the person making such contribution - HELD THAT - We find that only requirement u/s 115BBC of the Act is the name and address of the donor has to be maintained which the assessee had maintained. We further find that the assessee had declared entire receipt of donations in the total income as is apparent for computation which had already been made part of this order and had utilized the entire amount for charitable purposes as the total application of funds is more than fee receipt and voluntarily contribution. Disallowance of adhoc expenditure - HELD THAT - We find that the percentage of expenditure during the year under consideration in respect to fee income was 31.73% as against 40.20% in the earlier year which was lower than the earlier year - Assessing Officer had made the disallowance only on adhoc basis without rejection of books of account and without pointing out any deficiency in the vouchers. We further find that the assessee had placed on record complete list of personal expenses and copy of which is also placed and therefore, there was no justification of the Assessing Officer to make the addition and therefore, the ld. CIT(A) has rightly deleted the same. Disallowance of expenditure out of administrative expenses on adhoc basis - AO has disallowed expenses on adhoc basis without pinpointing any specific defect in bills/ vouchers produced - if an addition has been made in the case of charitable trust the same would be treated as application for charitable purpose - HELD THAT - Since the registration u/s 12A of the Act of the appellant trust is restored by Hon'ble I.T.A.T. and as already discussed above that the appellant is eligible for exemption u/s 11 of I.T. Act. Accordingly, since the income of the appellant is exempt, the addition made on account of disallowance from expenses will also amount to application of Income and will have no sanctity. Disallowance of interest paid on term loan - HELD THAT - We find that the AO had disallowed the same holding the same to be as capital expenses where the fact remain that the expenditure was incurred for the building which was also put to use and assessee had claimed depreciation on the building also. We further find if expenditure was not allowable as revenue expenditure even then the same was allowable as utilization as capital expenditure is also allowed for the purpose of calculating exemption u/s 11 of the Act. The entire capital as well as revenue expenditure has to be taken into account as utilization of funds.
Issues Involved:
1. Allowance of benefit under Section 11 for surplus income. 2. Disallowance of depreciation on fixed assets. 3. Addition of unexplained credits under Section 68. 4. Disallowance of personal expenses. 5. Disallowance of administrative expenses. 6. Disallowance of interest paid on term loan. Issue-wise Detailed Analysis: 1. Allowance of Benefit Under Section 11: The Revenue argued that the assessee charged extra fees from students, amounting to capitation fees, which violates Sections 11 and 12 of the IT Act. The Tribunal upheld the CIT(A)'s decision, noting that the assessee is a deemed university governed by a special ordinance of the U.P. Government, which allows it to set its own fee structure. The Tribunal found no evidence of profit motive or violation of Section 11 and dismissed the Revenue's appeal, citing the Madras High Court's decision in CIT vs. Balaji Educational and Charitable Public Trust. 2. Disallowance of Depreciation on Fixed Assets: The Revenue contended that since the assessee had claimed the full value of fixed assets in earlier years, the WDV was zero, and thus depreciation could not be claimed. The Tribunal noted that the assessee had not claimed depreciation as an application of funds and had added back the depreciation amount in its computation of income. The Tribunal cited the Bombay High Court's decision in CIT vs. Institute of Banking, which allows depreciation even if the cost of acquisition was claimed as an application of funds. The Tribunal upheld the CIT(A)'s decision and dismissed the Revenue's appeal. 3. Addition of Unexplained Credits Under Section 68: The Revenue argued that the assessee could not explain unexplained credits amounting to ?8,57,31,152/-. The Tribunal noted that the assessee had provided the names and addresses of donors, fulfilling the requirements under Section 115BBC. The Tribunal found that the donations were not anonymous and had been applied for charitable purposes. The Tribunal upheld the CIT(A)'s decision, citing several judicial precedents, and dismissed the Revenue's appeal. 4. Disallowance of Personal Expenses: The Revenue argued that the assessee could not produce proper vouchers for personal expenses. The Tribunal found that the percentage of personal expenses relative to gross receipts was lower than in the previous year and that the Assessing Officer had made the disallowance on an ad hoc basis without rejecting the books of account. The Tribunal upheld the CIT(A)'s decision, noting that the expenses were directly linked to fee income and student intake, and dismissed the Revenue's appeal. 5. Disallowance of Administrative Expenses: The Revenue argued that the assessee could not substantiate the increase in administrative expenses. The Tribunal found that the assessee had provided complete details of vouchers and books of account, which were not rejected by the Assessing Officer. The Tribunal noted that the disallowance was made on an ad hoc basis without any specific deficiencies being pointed out. The Tribunal upheld the CIT(A)'s decision and dismissed the Revenue's appeal. 6. Disallowance of Interest Paid on Term Loan: The Revenue argued that the interest on a term loan for building construction was a capital expenditure and could not be claimed as an expense. The Tribunal found that the building was put to use, and depreciation was claimed on it. The Tribunal noted that capital expenditure is also considered for calculating exemption under Section 11. The Tribunal upheld the CIT(A)'s decision and dismissed the Revenue's appeal. Conclusion: The Tribunal dismissed the Revenue's appeal on all grounds, upholding the CIT(A)'s decisions regarding the allowance of benefit under Section 11, disallowance of depreciation, addition of unexplained credits, disallowance of personal and administrative expenses, and disallowance of interest on a term loan.
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