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M/s All India JD. Educational Society Versus Dy. Director of Income Tax, Inv. Cirle-1, Delhi

2015 (3) TMI 888 - ITAT DELHI

Exemption u/s 10(23C)(vi) denied - exemption u/s 11 and 12 denied - whether CIT(A) has erred in upholding the contention of Ld. DGIT(E) that the activities of the assessee society are found to be for earning profit and not for charitable purposes and is not justified in declining the exemptions u/s 11 & 12 of the Income Tax Act, specially when registration u/s 12A of the Act is still in force and available for the assessee and which has not cancelled as on the date of the assessment? - Held that .....

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e claim of the assessee for grant of exemption u/s 11 of the Act cannot be rejected merely on the basis of order of the DGIT(E) which rejected application for registration u/s 10(23C)(vi) of the Act. At the same time, we also conclude that the exemption u/s 11 and 12 of the Act cannot be denied only on the basis of rejection of application of the assessee filed u/s 10(23C) of the Act. Before we part, we may point out that the CIT(A) in the impugned order has clearly held that action of the AO in .....

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and “miscellaneous donations” - AO making addition u/s 68 - Held that:- The assessee trust submitted all the required details before the authorities below but the AO objected to the claim of assessee only on this premise that the assessee could not produce in person the donor parties during the assessment proceedings. On similar liens, the CIT(A) upheld the action of the AO without addressing to the explanation and contentions of the assessee and remand report of the AO dated 4.3.2013, merely o .....

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of the assessee is squarely covered in favour of the assessee by the decision of DIT vs Bharat Kalyan Pratisthan (2007 (1) TMI 98 - DELHI HIGH COURT) and DIT(E) vs Keshav Social and Charitable Foundation (2005 (2) TMI 84 - DELHI High Court ) and therefore, we set aside the orders of the authorities below and directed the AO to delete the impugned addition made u/s 68 of the Act. - Decided in favour of assessee.

Excess salaries being allegedly charged with the intent of siphoning off .....

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the management also submitted documents pertaining to appointment, resignation and affidavits of the alleged employees and also some of them were also produced before the DGIT(E), therefore, act of siphoning of funds cannot be attributed to the management or trustees of the society. - Decided in favour of assessee.

Genuity of vehicle hiring expenses - AO held that in absence of maintenance of log book, it is not possible to verify the use of hired vehicles by the assessee society - H .....

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cting the entire claim of the assessee society. Therefore, we are of the considered view that the revenue authorities had not adjudicated this issue as per section 37 and other relevant provisions of the Act and, therefore, their findings are set aside and the issue is restored to the file of the AO to adjudicate the same in accordance with the provisions of the law - Decided in favour of assessee for statistical purposes.

Construction of College and Hospital building and hostel expen .....

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enses on construction of hospital and hostel building of ₹ 85,25,300 and hostel expenses of ₹ 9,51,664 are restored to the file of AO with a direction that the AO shall adjudicate both the issues afresh, after considering submissions and explanation of the assessee along with remand report of the AO (supra), after affording due opportunity of hearing for the assessee and without being prejudiced and influenced by the earlier orders on this issue. - Decided in favour of assessee for s .....

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11 and 12 has been denied to the assessee - Held that:- Claim of depreciation of the assessee society is legally allowable in the manner as held by Hon’ble Bombay High Court in the case of CIT vs Institute of Banking (2003 (7) TMI 52 - BOMBAY High Court) and the AO is directed to examine, verify and to allow the same, keeping in view the legal propositions as reproduced hereinabove.- Decided in favour of assessee for statistical purposes.

Denying claim of exemption u/s 11 - AO estima .....

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e and we set aside the same. Accordingly, ground of the assessee is allowed with this direction to the AO that the assessment of the assessee trust for the year under consideration i.e. 2006-07 be reframed by granting exemption u/s 11 of the Act to the assessee society. - Decided in favour of assessee. - I.T.A.No.3317/Del/2013 - Dated:- 23-3-2015 - Shri Pramod Kumar And Shri Chandra Mohan Garg,JJ. For the Appellant : Shri P.K. Jain,CA For the Respondent : Shri P. Dankanungna, DR ORDER Per Chandr .....

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That the authorities below has relied upon the findings of the Learned DGIT (E) for rejecting the application of the appellant filed u/s 10(23)(c) of the IT Act, 1962; whereas in the appellant's case Hon'ble Apex Court vide their order dated 2-4-2012, has held that the findings of the order of DGIT(E) are restricted to AY 2007-08 as the Hon'ble Bench comprising Chief Justice has elaborated in their order that; "We uphold the order of rejection on the grounds of limitation as als .....

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order of DGIT -(E) is beyond the jurisdiction and against the directions of Hon'ble Supreme Court, therefore, the impugned order in appeal is liable to be quashed as bad in law and also contrary to the directions of Hon'ble Apex Court. 3. Ld. CIT -A erred in upholding the contention of Ld. DDIT(E) that the activities of the assessee society are found to be for profit and not for charitable purposes and is not justified in declining the exemptions Vis 11 & 12 of the Income Tax Act wh .....

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at having the regard to the facts and circumstances of the case, Ld. CIT -(A) erred in upholding the addition of ₹ 75,05,000/- as Unexplained Cash Credit' in the hands of the assessee Society u/s 68 of the Income Tax Act, 1961. Further a sum of ₹ 4,05,000/- was also upheld to be added as Other Donation to the income of the Society which is already included in total Donation figure of ₹ 75,05,000/- whereas the appellant has submitted all the documents with regards to each do .....

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charged with the intent of siphoning off funds of the appellant. Whereas the appellant contended that subsequent to the scrutiny of salary registers of society by the DGIT(E), the appellant got the information about the embezzlement and fraud of ₹ 1,59,9421-, which might have taken place and it is not an act with the intent of siphoning off funds. The finding of DGIT(E) were also not conclusive being decided without the expert advice. The embezzlement and fraud so stated does not in any w .....

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actual details disallowed the expense. 7. That having regard to the facts and circumstances o f the case, the ld. CIT -A erred while upholding the order of DDIT(E) alleging that the expenditure shown on account of construction of College and Hospital building and hostel expenses are inflated and the allegation that trust funds have been siphoned off. Whereas all the expenditures are properly vouched and find place in the books of accounts of the appellant and duly produced for verification durin .....

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the income of the appellant society at ₹ 59,60,363/- calculated at 50% of the gross receipts of the society for Rs.l,19,20,725/-, which is wholly unjustified and bad in law. 3. Briefly stated the facts giving rise to this appeal, as noted by the first appellate authority viz. CIT(A), are that the assessee was society registered on 14.8.2002 with the main object of setting up and running Hospitals and to set up educational institution, which was granted registration under Section 12-A of th .....

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for exemption u/s 10(23C) (vi) before the Director General of Income Tax(Exemption), Delhi on 05-11-2007, which was rejected on 28-11-2008 by the Learned DGIT(E) for alleged siphoning of the funds of the Society. 4. During the assessment proceedings for the year under consideration, the AO made certain adverse remarks in respect of the Corpus donations, Salary, and Cash Expenses for Construction & Hostel Expenses, Vehicle Hiring Charges and the Depreciation on Fixed Assets and rejected the .....

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filed an appeal before the CIT(A) which was also dismissed by passing the impugned order. Now, the empty handed assessee is before this Tribunal with the grounds as reproduced hereinabove. Ground No. 1, 2 and 3 6. Apropos these grounds, ld. AR submitted that the Ld. CIT-A has erred in law and on facts by upholding the orders of the DGIT(E), dated 31.12.2008 passed u/s 143(3) resulting in unsustainable huge demand. Ld. AR further contended that the authorities below have relied upon the findings .....

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made it clear that the order passed by their lordships in that case will not preclude the assessee from making an application for approval u/s 10(23C)(vi) or section 11 of the Act in future and if such an application is made, then the competent authority will decide the matter without being influenced by the order of the Hon ble Apex Court. Ld. AR further contended that the CIT(A) was not justified in upholding the contention of the AO which was purely influenced by the order of the DGIT(E) and .....

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u/s 12A of the Act is still in force and available for the assessee and which has not cancelled as on the date of the assessment. Ld. AR has also drawn our attention towards first paragraph at page 6 of the impugned order and submitted that while the CIT(A) has held that action of the AO in allowing exemption u/s 11 and 12 of the Act is beyond the jurisdiction exercised by him during the assessment proceeding, then the first appellate authority was not correct in upholding the order of the AO wh .....

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Del), decision of Hon ble Delhi High Court in the case of DIT vs Bharat Kalyan Pratishthan (2002) 257 ITR 0609 (Del), DIT(E) vs Keshav Social and Charitable Foundation (2005) 278 ITR 152 (Del), decision of Hon ble Bombay High Court in the case of CIT vs Institute of Banking (2003) 264 ITR 110 (Bombay) and decision of ITAT Delhi in the case of Aryan Educational Society vs CIT 281 ITR AT 0072 (ITAT Delhi). 9. Apropos ground no. 1, 2 and 3, ld. DR, supporting the assessment order, submitted that th .....

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e proceeding for cancellation of registration was started by DIT(E) by issuing notice dated 4.12.2008. Ld. DR further contended that, under these facts and circumstances the AO rightly proceeded to assess the income of the assessee without allowing the benefit of exemption as provided in section 11 and 12 of the Act and the assessee society was rightly assessed in the status of Association of Persons (AOP). 10. Ld. AR also placed rejoinder to above submissions of the department and submitted cop .....

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directions of the Tribunal order dated 17.06.2011 (supra) and the order granting registration u/s 12AA r/w section 12AA(1)(v) of the Act dated 3.9.2004 w.e.f. 1.4.2003 is in force till date. Ld. AR has further drawn our attention towards order of the ITAT A Bench Delhi for AY 2009-10 dated 18.7.2014 (supra) and submitted that the Tribunal has held that as the registration of assessee u/s 12A of the Act is in force, therefore, the order of the AO, as confirmed by the CIT(A) for that assessment y .....

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of the Tribunal for AY 2009-10 dated 18.7.2014 (supra), at the very outset, we note that the order of cancellation of registration u/s 12A of the Act has been set aside by the Tribunal and the issue was restored to the file of DIT(E) for a fresh adjudication but we are unable to see or note any fact that registration dated 4.9.2003 granted for the assessee w.e.f. 1.4.2003 has been cancelled or withdrawn by the department by following procedure u/s 12AA(3) of the Act. On a specific query from th .....

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ara at page 6 of the impugned order, we note that the CIT(A) has held that the action of the AO in not allowing the exemption u/s 11 and 12 of the Act is beyond the jurisdiction exercised by him during the assessment proceedings. The relevant observations and conclusion of the CIT(A) in these operative paragraphs read as under:- The appellant submitted that the order of the A.O was prima facie, influenced by the order of DGIT(E) as stated in the submission. Further, it is also submitted that Ord .....

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and the said activity comes under the purview of charitable activities as per the provisions contained in section 2( 15) of the Act. Secondly the rejection of application under section 10(23C)(vi) of the Act cannot be a reason to cancel the registration under section 12AA(3) of the Act. On going through the detailed submission, I considered that the findings of the DGIT(E) were followed by the AO during the assessment proceedings without further examining the same. The assessing officer is duty .....

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re the findings are to be of the assessing officer. Therefore I consider the allegations of the DGIT should be excluded from the assessment order and the effect of withdrawal of exemption u/s 11 & 12 was premature, as the AR place before me that the order of cancellation of registration dated 16-03-2009 (after the date of Asstt Order 31.12.2008) has also been set aside by the Hon'ble ITAT, New Delhi vide their order dated 17-06-2011. Therefore the action of the AO not allowing the exempt .....

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009 dated 17/06/2011. As the registration of the assessee u/s 12A is in force, we set aside the order of the AO as confirmed by the ld. CIT(A) and restore the matter to then file of the AO for fresh adjudication in accordance with law. As the registration u/s 12A is in force, the AO is directed to compute the income by granting exemption u/s 11 to the assessee. 14. We further take note of the order of the Supreme Court available at pages 41 and 42 of the Paper Book of the assessee wherein the or .....

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this situation, we respectfully note that even the Hon ble Supreme Court has allowed the assessee to file application u/s 10(23C)(vi) or section 11 of the Act and the revenue authorities have been directed to decide the same without being influenced by the order of Supreme Court for AY 2007-08. 15. Under the above noted facts and circumstances of the present case, we are of the considered view that the CIT(A) erred in upholding the contention of the AO in the assessment order which were influen .....

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e basis of order of the DGIT(E) which rejected application for registration u/s 10(23C)(vi) of the Act. At the same time, we also conclude that the exemption u/s 11 and 12 of the Act cannot be denied only on the basis of rejection of application of the assessee filed u/s 10(23C) of the Act. Before we part, we may point out that the CIT(A) in the impugned order has clearly held that action of the AO in allowing exemption u/s 11 and 12 of the Act is beyond jurisdiction exercised by him during the .....

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s donations and miscellaneous donations are bogus and the AO was not justified in making addition u/s 68 of the Act on the assumption that either the said donors are not existent or their addresses are not available. Ld. AR has further drawn our attention towards remand report of the AO dated 4.3.2013 available at paper book page 89-90 and submitted that the AO in the remand report, submitted to the CIT(A), has accepted that the assessee received corpus donations of ₹ 71 lakh and petty don .....

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ment proceedings, therefore, entire amount of donation was wrongly treated as unexplained cash credit without any sound footing. Ld. AR further contended that the AO has not raised any doubt or has not brought out any adverse material or fact to support his contention that the donors are either not available at the given address or do not have the capacity to make such donations and the veracity of the corpus donation remained unverified. 17. Ld. AR further pointed out that despite remand report .....

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ld the conclusion of the AO without addressing to the contention of the AO and submissions of the assessee and even the comments of the AO in the remand report which also support the case of the assessee. 18. Placing reliance on the decision of Hon ble Jurisdictional High Court of Delhi in the case of DIT(E) vs Bharat Kalyan Pratisthan (supra) and decision in the case of DIT(E) vs Keshav Social and Charitable Foundation (supra) and decision of the ITAT, Jaipur in the case of Arya Sanstha vs CIT .....

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ot brought out any adverse material or fact that either the corpus donations or petty donations were introduced by the assessee society to rotate its unexplained income and the same was not spent for charitable purposes, then the addition u/s 68 of the Act is not sustainable. 19. Replying to the above, ld. DR submitted that when the AO had drawn a conclusion that the activities of the assessee are found to be for profit and not for charitable purpose, then the assessee cannot be allowed benefit .....

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e and is chargeable to tax. Ld. DR further submitted that when the department was in the process of cancelling registration granted to the assessee u/s 12A of the Act, then the exemption u/s 11 and 12 of the Act was rightly denied and, therefore, corpus and petty donations which could into be substantiated by the assessee are rightly held to be the income of the assessee for the year under consideration and the addition made u/s 68 of the Act is sustainable. 20. On careful consideration of above .....

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2003 either stands cancelled or is not in force. In this situation, we can safely presume that the registration granted to the assessee u/s 12A of the Act is in force and, therefore, it is not open to the revenue authorities to discard or dismiss the claim of the assessee merely because the department is in the process of cancelling registration granted to the assessee u/s 12A of the Act since last 3-4 years i.e. after order of the Tribunal dated 17.6.2011 (supra). 21. We further take cognizance .....

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way of fees, hospital development fees. Hostel fees, and receipts from the patients in the hospital. Further the assessee has stated that corpus donation of Rs . 71,00,000/- and ₹ 4,05.000/- (petty donations) were received and assessee had furnished the income tax return acknowledgment, copy of annual accounts and bank statements with Memorandum of Association of all the donor companies and obtained confirmations of all the petty donations with their identifications But the assessee could .....

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he AO to the CIT(A), we note that the assessee society had furnished income tax return, acknowledgement, copies of the annual account and bank statements of the donors along with Memorandum of Association of all the corpus donor companies and obtained confirmations of all petty donations with their identification before the AO. The AO also noted that the assessee could not produce corpus donors during the assessment proceedings and then AO made the additions considering the amount as unexplained .....

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urse of time, therefore, conclusion of the AO is correct and the CIT(A) upheld the addition. Since while dealing with ground no. 1, 2 and 3 of the assessee in the earlier part of this order, we have held that the CIT(A) at page 6 noted that the action of the AO not allowing exemption u/s 11 and 12 of the Act is beyond jurisdiction, then on the same fact, it was not open to the CIT(A) to uphold the action of the AO which denied the benefit of exemption u/s 11 and 12 of the Act to the assessee. Th .....

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n was of ₹ 71 lakh and amount of petty donation was ₹ 4,05,000 during the year under consideration. At this juncture, we respectfully take guidance from the decision of Hon ble Jurisdictional High Court of Delhi in the case of DIT vs Bharat Kalyan Pratisthan (supra) wherein it has been held that where the CIT(A) recorded a categorical finding that the Trust had furnished all details required by the AO and having done so, it was not for the Trust to produce the donors before the AO as .....

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eated the same amount as cash credit making addition u/s 68 of the Act. In this case, dismissing the appeal of the revenue, Hon ble High Court held that to obtain the benefit of exemption us/ 11 of the Act, the assessee was required to show that the donations were voluntary and the assessee had not only disclosed its donations but had also submitted a list of donors. In this case, speaking for the Hon ble Jurisdictional High Court, their lordships also held that even a complete list of donors ha .....

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nly on this premise that the assessee could not produce in person the donor parties during the assessment proceedings. On similar liens, the CIT(A) upheld the action of the AO without addressing to the explanation and contentions of the assessee and remand report of the AO dated 4.3.2013, merely observing that the activities of the assessee society are not genuine and registration granted to the assessee u/s 12A of the Act shall be cancelled in future in due course of time. This is not judicious .....

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av Social and Charitable Foundation (supra) and therefore, we set aside the orders of the authorities below and directed the AO to delete the impugned addition made u/s 68 of the Act. Ground No. 5 26. Apropos ground no. 5, ld. AR submitted that the CIT-A erred while upholding the contention of the DDIT(E) regarding excess salaries being allegedly charged with the intent of siphoning off funds of the appellant. The ld. AR further contended that subsequent to the scrutiny of salary registers of so .....

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rs or its management officers. Therefore, the conclusion of the AO deserves to be quashed. The AR further pointed that the revenue authorities have not brought out any evidence to show that the embezzlement or fraud have taken place by the officers or managers of the assessee society or with their help and therefore, the conclusion of the AO on this issue is not sustainable. 27. Ld. AR further pointed out that the management of the Trust has taken a serious action against the culprit employees f .....

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even after the resignation date of the respective alleged employee, therefore, the AO was correct in holding that there was siphoning of funds by the trustees/members of the assessee society and, therefore, observations and conclusion of the AO on this point are sustainable. 29. On careful consideration of above submissions, we note that the assessee society submitted before the AO that the embezzlement was planned on the employees who had left the organisation and the salaries were pocketed by .....

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f of the trust fund have taken place. 30. During the first appellate proceedings before the CIT(A), the assessee society submitted detailed submissions reiterating and elaborating the explanation and submissions made before the AO and it was also submitted that the above alleged salary payments were made by the person-in-charge, which came to the knowledge of the management only during the proceedings u/s 10(23C)(vi) of the Act. It was also submitted, on behalf of the assessee, that the manageme .....

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neither provided the affidavits of the employees nor these persons would have been produced for cross examination before the DGIT(E). Ld. AR further submitted that the DGIT impounded the salary register and sent it to Central Forensic Science Laboratory (CFSL), New Delhi and despite the fact that the CFSL experts expressed their inability to give report by 30.11.08, the DGIT(E) proceeded to adjudicate the application of the assessee for grant of registration u/s 10(23C) of the Act without assis .....

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us act which resulted into embezzlement and siphoning of the funds by the members/officers and trustees of the society as the salary payments have been made in cash for the period after resignation of respective employees and have been found to be bogus by DGIT(E) and there was no action by the assessee society then it may be inferred that the assessee society is responsible for siphoning of funds. 32. Ld. AR placed rejoinder to the above submissions of the department and submitted that even the .....

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ns or deviations in the accounts of the assessee that, by itself, did not substantiate the allegation that the assessee did not exist solely for educational purposes or that it existed mainly for a profit motive. Ld. AR further contended that the when the assessee society submitted complete details with regard to payment of salary including salary registers, copy of appointment and affidavits of the employees with their personal presence before the DGIT(E), then the management or trustees of the .....

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the management. 33. On careful consideration of above submissions, we note that in operative para 2 at page 7 of assessment order, the AO has taken cognizance of the conclusion of the DGIT(E) and has held that the salary payments have been made in cash and have been found bogus which indicates that siphoning of the trust fund has taken place. From the impugned order at page 17-18, we note that prior to recording the findings, the CIT(A) reproduced the observations and conclusion of the AO on thi .....

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ed to hold that although the authorities below have held that there was siphoning of funds from the funds of the society but there is no finding or conclusion that the siphoning of funds was made by the members and trustees of the society. We may also point out that when the act of embezzlement was noticed by the management during the proceedings before the DGIT(E), then the management proceeded to take action against the responsible employee and the management also submitted documents pertainin .....

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tions in the accounts of the assessee, that by itself cannot substantiate the allegation that the assessee does not exist solely for educational purposes or that it exists partly for a profit motive. The fact that the assessee had been granted exemption under section 10(22) of the Act since 1960 and even subsequent to the assessment year in question is a factor that cannot be easily overlooked. It is not possible to accept the view, in the absence of any cogent reason, that for one particular ye .....

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xemption under section 10(22) of the Act. Similarly, in this case, even if it is assumed that there are some discrepancies in the accounts of the assessee, that would not per se lead to any conclusion regarding a change in the object of the assessee. 35. On the basis of foregoing discussion and in the light of facts and circumstances of the present case, we are inclined to hold that there was no siphoning of funds by the management or trustees of the assessee society, therefore, the management o .....

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rove that vehicles were not being used by Dr. Sunil Mittal for his personal purpose. Ld. AR vehemently contended that merely on the basis of baseless allegation of siphoning of funds of the trust, the claim of expenditure of vehicle hiring charges cannot be held as not genuine. Ld. AR also submitted that the revenue authorities ought to have considered that if the assessee society had hired vehicles from the market, it would have cost higher than the actual expenses which has been incurred by th .....

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onus was on the assessee to show that the claim of vehicle hiring expenses is genuine and on failure to substantiate this fact, the AO was right in rejecting the claim of the assessee and the CIT(A) was also justified in upholding the conclusion of the AO. 38. On careful consideration of above submissions, we are of the considered view that for verification and allowability of claim of expense of vehicle charges, the prime issue to be adjudicated is that whether the vehicle was used for the pur .....

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37 and other relevant provisions of the Act and, therefore, their findings are set aside and the issue is restored to the file of the AO to adjudicate the same in accordance with the provisions of the law and keeping in view our aforesaid observations and after affording due opportunity of hearing for the assessee and without being prejudiced or influenced by the earlier orders on this issue. Before we part with the issue, we may also make it clear that the expenses claimed in regard to vehicle .....

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. Ground No. 7 40. Apropos ground no.7, we have heard arguments of both the sides and carefully perused the relevant material placed on record. Ld. AR contended that the CIT-A erred in upholding the order of AO that the expenditure shown on account of construction of College and Hospital building and hostel expenses are inflated and the that trust funds have been siphoned off. Ld. AR further contended that whereas all the expenditures are properly vouched and find place in the books of accounts .....

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, relevant cash memos, bills or vouchers had not been provided by the assessee trust. The DR further pointed out that the assessee trust could not demolish the allegations of the AO that the purchase of timber, tiles and iron as shown in a very shabby manner and were not having correct units as per items appearing in sl. No. 139, 140 and 141 and labor payment appearing at sl. No. 38 & 145. Ld. DR further submitted that the AO was quite justified in holding that all the hostel expenses are be .....

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e assessment proceedings in a hasty manner keeping his office open on a holiday in the name of shortage of time. The AR strenuously contended that in this situation, how the AO can justify proper consideration of all vouchers and records with details of construction and hostel expenses which was very well verifiable from the vouchers placed before him. Ld. AR vehemently contended that the AO as well as the CIT(A) ignored this material fact that the hospital, college and the hostel of the society .....

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r pointed out that the variation in month to month hostel expenses was caused due to get together and functions of the students which were organised in the month of October and January, thus, the variation in month to month hostel expenses occurred due to genuine reasons which cannot be doubted on the basis of surmises and conjectures. 43. On careful consideration of above rival submissions and careful perusal of the relevant material placed before us, at the outset, from the assessment order, w .....

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efore, genuineness of these payments could not be verified. We also note that the AO also noticed that no explanation was submitted by the assessee with regard to this erratic behaviour of hostel expenditure as there was a variation in the expenditure reported in month wise details of expenditure. 44. During the first appellate proceedings, the CIT(A) simply upheld the conclusion of the AO without addressing and adjudicating the contention of the AO as well as explanation of the assessee and the .....

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oubt only about unsupported payment of ₹ 85,25,300 out of total expenditure of ₹ 2,62,79,888. Meaning thereby the AO was satisfied about the correctness of the remaining payment which was not objected neither during the assessment proceedings nor during the first appellate proceedings. From the narration of the assessment order, we note that the AO has pointed out certain defects in Annexure A submitted by the assessee and after that the AO noted that no explanation was filed by the .....

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of construction and hostel expenses without addressing, evaluating and adjudicating the contentions of the AO in the light of submissions and explanation of the assessee. In this situation, it can safely be presumed that the AO did not afford opportunity to the assessee to explain discrepancies and inconsistencies noted by him during the assessment proceedings. We may also note that during first appellate proceedings, the CIT(A) has reproduced and mentioned detailed submission of the assessee o .....

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xpenses of ₹ 9,51,664 are restored to the file of AO with a direction that the AO shall adjudicate both the issues afresh, after considering submissions and explanation of the assessee along with remand report of the AO (supra), after affording due opportunity of hearing for the assessee and without being prejudiced and influenced by the earlier orders on this issue. Accordingly, ground no. 7 of the assessee is deemed to be allowed for statistical purposes for limited inquiry up to the ext .....

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ast years. 48. Placing reliance on the decision of Hon ble Bombay High Court in the case of CIT vs Institute of Banking (2003) 264 ITR 110 (Bombay), ld. AR submitted that the assessee society is entitled for depreciation on assets, the cost of which had been fully allowed as application of income u/s 11 of the Act during the earlier assessment proceedings held for the past years. Ld. DR supported the orders of the authorities below and submitted that the assessee has been allowed the benefit of .....

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wherein it has been held 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 u/s 11 in the past year. The operative part of this order is being reproduced for the sake of clarity in our conclusions which reads as under:- It was held by the Bombay High Court that section 11 of the Income Tax Act makes provision in respect of computation of income of the Trust from the properly held for charit .....

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rposes. It further provides for deduction subject to section 34. In that matter also, a similar argument, as in the present case, was advanced on behalf of the revenue, namely, that depreciation can be allowed as deduction only under section 32 of the Income Tax Act and not under general principles. The court rejected this argument. It was held that normal depreciation can be considered as a legitimate deduction in computing the real income of the assessee on general principles or under section .....

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ts. In all such cases, section 32 of the Income Tax Act providing for depreciation for computation of income derived from business or profession is not applicable. However, the income of the Trust is required to be computed under section 11 on commercial principles after providing for allowance for normal depreciation and deduction thereof from gross income of the Trust. In view of the aforestated Judgment of the Bombay High Court, we answer question No. 1 in the affirmative i.e., in favour of t .....

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ed under Chapter 4 as the benefit of section 11 and 12 has been denied to the assessee. The first appellate authority i.e. CIT(A) upheld the conclusion of the AO without any detailed adjudication and ignoring the ratio of the decision of Hon ble Mumbai High Court in the case of CIT vs Institute of Banking (supra). 51. During the first appellate proceedings, ld. AR of the assessee society also sought attention and consideration of the CIT(A) to the decision of ITAT Bench H Delhi in the case of DI .....

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of the trust, in as much as, depreciation is a legitimate deduction in computing the income of the trust. I am also of the opinion that the appellant is entitled to the claim of depreciation. The judgment of the Hon'ble Supreme Court in the case of Escorts Ltd Vs. Union of India 199 ITR 43, often relied upon by the AOs, is in respect of claim of deduction made u/s.35(2)(iv) as well as u/s.32 of the IT Act. Section 35(2)(iv) specifically lays 3 ITA No.3877/Del/2010 down that where the deduct .....

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eduction on account of depreciation as provided for u/s.35(2)(iv). There has never been a dispute that in case of charitable trust, the income should be computed on commercial principles. Furthermore, in my view the appellant has not claimed any double deduction so as to make the observation of "fundamental axiom" spelt out in the above judgement of Supreme Court applicable in the instant case. The provisions relating to compulsory application of income is altogether a different concep .....

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emption to a charitable institution. It has nothing to do with computation of income and is not a deduction. Therefore, the argument proffered by the AO's that the appellant is claiming double deduction has no substance and is to be rejected. In coming to this conclusion, reliance is placed on the judgment of Hon'ble ITAT, Delhi Bench, 'H', New Delhi in the case of ACIT Vs. Tiny Tots Education Society, in ITA No.3182/Del/2008, assessment year 2006-07 dated 2.6.2009, as also the f .....

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ts of ITAT, Delhi Bench, respectfully following the same, we sustain the order of the CIT (A) and dismiss the appeal of the revenue. 52. In view of above, we are of the considered view that the claim of depreciation of the assessee society is legally allowable in the manner as held by Hon ble Bombay High Court in the case of CIT vs Institute of Banking (supra) and the AO is directed to examine, verify and to allow the same, keeping in view the legal propositions as reproduced hereinabove. Accord .....

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reliance on the decision of ITAT Delhi A Bench in assessee s own case for AY 2009-10 dated 18.7.2014 (supra) submitted that as the registration granted u/s 12A of the Act to the assessee on 3.9.2004 w.e.f. 1.4.2003 is in force, therefore, the AO may kindly be directed to compute the income by granting exemption u/s 11 of the Act. Replying to the above submissions of the assessee, the ld. DR supported the action of the AO and submitted that when huge siphoning of funds and inflated claim has been .....

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