TMI Blog2015 (11) TMI 590X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee during the year but pertains to next academic session which is outside the previous year in which such expenditure is paid. Therefore, the assessee is following a uniform accounting policy based on accrual and arising of income and expenditure. There is no dispute that even in the case of trust the income has to be understood in its commercial sense and there can be no computation of such income until the expenditure which is necessary for the purpose of earning the receipt is deducted there-from. This concept of accounting is well recognised by the accounting standard. Accordingly, on merits also, we do not subscribe the view taken by the CIT(A) on this issue when the assessee is consistently following mercantile/accrual basis of accounting both for the income as well as for expenditure recorded in the books of account. - Decided in favour of assessee. - ITA No.1022/Bang/2014, ITA No.1023/Bang/2014 - - - Dated:- 30-9-2015 - SHRI ABRAHAM P GEORGE, ACCOUNTANT MEMBER and SHRI VIJAY PAL RAO, JUDICIAL MEMBER For The Assessees : Shri R.S.Samria, CA. For The Respondent : Shri Sunil Kumar Agarwala, JCIT(DR) ORDER Per VIJAY PAL RAO, JM: These t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) in the impugned orders are also identical, therefore, for the sake of convenience, these two appeals are clubbed together for the purpose of hearing and are being disposed of by this consolidated order. 4. The facts in the case of Podar Education Trust are considered for adjudication of the common issues. The assessee is a charitable trust and registered u/s 12AA of the Income-tax Act, 1961. The assessee was carrying on the education activity and during the previous year relevant to the assessment year under consideration, the assessee received gross receipts of ₹ 14,57,81,212/- out of which ₹ 14,27,88,081/- was applied towards the object of educational activities of the assessee and the same was claimed as exempt u/s 11. While completing the assessment u/s 143(3) on 25/4/2012, the AO disallowed depreciation on school fixed assets on the ground that the assessee had already claimed exemption in respect of expenditure on the fixed assets being application of income u/s 11 of the ITA ct. 5. The assessee challenged the action of the AO before the CIT(A). The CIT(A) while adjudicating the issue being the claim of depreciation on the asset of the trust, directed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal and Delhi Bench of the Tribunal in a series of decisions. Thus, the learned AR of the assessee has submitted that the authorities below have committed an error by disallowing the claim of depreciation. 7. On the other hand, the learned departmental representative has relied upon the orders of the authorities below and submitted that the AO has relied upon the judgment of the Hon'ble Supreme Court in the case of Escort Ltd. another vs. Union of India Others (199 ITR 43). 8. We have considered the rival submissions as well as the relevant material on record. At the outset, we note that this issue is covered in favour of the assessee by the judgment of the Hon'ble Bombay High Court in the case of Institute of Banking Personnel Selection (supra) as under: 4. Question No. 2 herein is identical to the question which was raised before the Bombay High Court in the case of Director of Income Tax (Exemption) v. Framjee Cawasjee Institute (1993) 109 CTR 463 (Bom). In that case, the facts were as follows: The assessee was the Trust. It derived its income from depreciable assets. The assessee took into account depreciation on those assets in computing the inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing the decision of the jurisdictional High Court, we therefore, hold that the depreciation is to be deducted to arrive at an income available to charitable and religious purposes. 14. The above order of the Tribunal has not been reversed by the Hon ble jurisdictional High Court. The facts for the assessment year 2007-08 and 2008-09 being identical to the facts considered by the Tribunal for the assessment year 2006- 07, (I.T.A. No. 775/Bang/2009 dated January 29, 2010), we follow the co-ordinate Bench order of the Tribunal in the assessee's own case for the assessment year 2006-07 and hold that the Commissioner of Income-tax (Appeals) is justified in directing the Assessing Officer to grant depreciation in respect of the assessment years 2007-08 and 2008-09. Following the judgment of the Hon ble Bombay High Court as well as the decision of the co-ordinate bench of the Tribunal (Bangalore), we hold that the assessee is entitled for depreciation u/s 32 of the IT Act on the assets cost of which has already been claimed as application of income. 10. Ground No.2 regarding treating advance fee received from the students for the future academic year as income for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ideration. The learned AR of the assessee has referred to para.15.3 of the impugned order of the CIT(A) and submitted that the assessee has shown ₹ 2,81,90,128/- on account of advance fee in the balance sheet as on 31/3/2010 therefore, the assessee is consistently following accrual basis of accounting. The learned AR of the assessee has also referred to the notes forming part of the accounts and submitted that the accounts of the assessee have been prepared in accordance with generally accepted principle as a going concern and on mercantile system. As the assessee is recognising the fee pertaining to the financial year on accrual basis as income of the year under consideration, fee received in advance for the following financial year/term have been recorded in the books of account and are disclosed as advance fee under funds and liabilities. The authorities below have not disputed the consistent accounting method and policy adopted by the assessee. The taxing authorities cannot disturb the consistent accounting policy and method when there is nothing on record to warrant a departure from the consistently accepted account method and policy. Alternatively, learned AR of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd unpaid bills shall be excluded. It is directed accordingly. Thus it is clear from the relevant part of the impugned order that the CIT(A) has enhanced the assessment without giving any show cause notice to the assessee and therefore, the order of the CIT(A) is not sustainable under the provisions of se.251(1)(a) and 251(2). There is no quarrel on the point that the powers of the CIT(A) are co-terminus with that of the AO and while disposing of the appeal, the CIT(A) can enhance assessment. However, this power of the CIT(A) can be exercised subject to compliance of sub-sec.(2) of sec.251 which reads as under: 251(2) The Commissioner (Appeals) shall not enhance an assessment or a penalty or reduce the amount of refund unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction. Therefore, it is a mandatory condition that the CIT(A) shall grant a reasonable opportunity of showing cause against such enhancement to the assessee before enhancing assessment in the appellate proceedings. In the case in hand, the CIT(A) has not complied with the provisions of sub-section (2) of section 251 and therefore, the order of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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