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2015 (12) TMI 695 - ITAT DELHI

2015 (12) TMI 695 - ITAT DELHI - TMI - Addition on account of income siphoned out - benefit of section 10(23C)(iiiad) denied - CIT(A) deleted the addition - Held that:- As the society is definitely engaged in educational activity which is charitable u/s 2(15) of the Act and has maintained separate accounts in respect of each educational institution. The institutions of the society is entitled for claiming benefit of section 10(23C)(iiiad) of the Act being income of each educational institutions .....

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ties of charitable purposes which are exempt u/s 10(23C)(iiiad) of the Act. We observe that the AO just based his findings on the outflow without examining its ultimate use and its accounting done by the assessee. Further, we also find that the AO has not brought any adverse material evidence on record to conclusively hold that the amount of ₹ 17,00,000/- was utilized for other than educational /charitable purposes. Accordingly, we do not find any infirmity in the order of the ld. CIT (A) .....

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Hindu Mahila Vidhyalya at ₹ 2,16,117/- is exempt u/s 10(23C)(iiiad) of the Act and thus, net surplus determined by the AO at ₹ 13,92,059/- has no basis, is correct and needs no interference. There is no merit in the contention of the revenue on this ground and so dismissed.- Decided against revenue

Addition on account of membership fee received during the year as the assessee was not registered u/s 12AA - CIT(A) deleted the addition - Held that:- We find that the amount is .....

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ed directly to the Corpus Fund in the Balance Sheet and the amount cannot be taken as income of the Samiti in any case. Accordingly, we do not find any infirmity in the impugned order of the ld. CIT (A), so the ground is dismissed. - Decided against revenue

Disallowance of depreciation - CIT(A) deleted the addition - Held that:- In the Balance Sheet of Shamli Samaj Kalyan Samiti, the addition to the fixed assets i.e. Building of the degree college is well proved and fully verifiable. .....

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itioner : Shri Ankit Gupta, Advocate For the Respondent : Shri James Singsun, Senior DR ORDER Per A. T. Varkey, Judicial Member These appeals, at the instance of the Revenue, are filed against the order of CIT (Appeals), Muzaffarnagar dated 12.09.2011 for the assessment years 2003-04 & 2004-05. 2. The grounds of appeal taken by the Revenue for the assessment year 2003-04 are as under :- 1. On the facts and in the circumstances of the case, the CIT (A) has erred in law in deleting the additio .....

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over expenditure by allowing the exemption under section 10(23c)(iiiad) of the I.T. Act, 1961 without appreciating the full facts of the case. 3. On the facts and in the circumstances of the case, the CIT (A) has erred in law in deleting the addition of ₹ 1,03,900/- made by the Assessing Officer on account of excess income over expenditure by allowing the exemption under section 10(23c)(iiiad) of the I.T. Act, 1961 without appreciating the full facts of the case. 3. The grounds of appeal t .....

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and in the circumstances of the case, the CIT (A) has erred in law in deleting the addition of ₹ 2,29,950/- made by the Assessing Officer on account depreciation without appreciating the full facts of the case as the Assessing Officer held that there was no construction carried out during the year. 3. On the facts and in the circumstances of the case, the CIT (A) has erred in law in deleting the addition of ₹ 1,94,609/- made by the Assessing Officer on account of excess income over .....

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ated order. 4. First, we take up the appeal for assessment year 2003-04 in ITA No.5781/Del/2011. 5. The facts of the case are that the assessee is a society which got registered u/s 12AA of the Income-tax Act, 1961 (hereinafter the Act ) vide order dated 03.03.2008 with effect from 29.03.2006. It is engaged in the activity of running of school and hospital. During the course of assessment proceedings for A.Y. 2005-06, it was gathered by the A.O. that the exemption u/s 11 and 10(23C)(iiiad) was n .....

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eted the aforesaid additions. The revenue, being aggrieved, is in appeal before us. Now, we take up the deletion of the additions challenged by the revenue ground-wise. 6. Ground No.1 is against the deletion of addition of ₹ 17,00,000/- made by the AO on account of income siphoned out. 7. The assessee had made withdrawal of ₹ 17,00,000/- from the corpus fund of SDRR Public School. The liability side of the balance sheet as on 31.03.2003 was reproduced by the A.O. as under.- Shamli Sa .....

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d to have made investment at ₹ 11,78,449/- in the construction. The AO further observed that there was no authority for sanction of remaining ₹ 15,00,000/-. Accordingly, vide order sheet noting dated 30.03.2010, the assessee was required to explain how the amount withdrawn from corpus fund of the school was utilized. For the sake of clarity, the same is reproduced as under:- ........ From the -letter dated 29-05-2002 addressed to Manager, Sarti Devi Raja Ram Public School, request is .....

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Public School is ₹ 17,00,000/- which is for social work. In ₹ 17 lac received from its unit namely Sarti Devi Raja Ram Public School and advance of ₹ 3,50,000/- to other unit namely Jeevan Jyoti Hospital. It is further stated that these are inter-unit entries involving no tax required in hand of the assessee. However the reply is contrary to the facts. The amount of ₹ 17,00,000/- is paid from the funds of SDRR Public School out of it ₹ 2,00,000/- is withdrawn by th .....

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assessee failed to give the authority for transfer of amount of ₹ 15 lakhs out of ₹ 17 lakhs. Thus, the AO vide notice dated 19.04.2010 required the assessee again to explain the payment of ₹ 17 lakhs from the corpus fund of the school. In response, the assessee submitted that the assessee trust had three units, namely, Sarti Devi Raja Ram Public School, Hindu Mahila Mahavidyalaya and Jeevan Jyoti Hospital and in respect of trust and three units, separate accounts were maintai .....

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come or expenditure under either of the unit). However, the AO observed that a perusal of balance sheet as on 31.03.2003 of the assessee trust revealed that the trust had lent a sum of ₹ 1,31,65,917.14 as on 31.03.2003 out of capital of Sarti Devi Raja Ram Public School and the amount received from the said School was not claimed as expenses or application of income strictly by account payee cheques and as such, the same could not be treated as income of the assessee. Further, it was obser .....

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at there was no authority or sanction to transfer the amount from the School to any other account, whereas the voucher having sanction of expenditure/transfer were maintained. Accordingly, the AO concluded that the expenditure on account of addition to construction out of payment from corpus fund was not genuine and the amount of ₹ 17,00,000/- was added to the income of the assessee. He further observed that the running of hospital was itself evidence that the society was not running the i .....

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shed the details of utilization of ₹ 17,00,000/- which reveal that the amount has been utilized in construction of building (conference hall), computer/printer, furniture and fixture to conference hall, etc. The appellant has also furnished copies of accounts along with bills and vouchers of the aforesaid expenses. Thus the amount of ₹ 17,00,000/- is utilized for educational and charitable purposes. It has been submitted that ₹ 17,00,000/- has been transferred from Sarti Devi R .....

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account of Sarti Devi Raja Ram Public School as appearing in the books of the appellant society the amount of ₹ 17,00,000/- have been received through cheques with have been credited to its account and the amount of ₹ 15,32,930/-being corpus during the year has been debited to its account and the same is reflected in the balance sheet of Sarti Devi Raja Ram Public School as income of the year. This implies that the amount of ₹ 1,31,65,917/- has been derived after accounting for .....

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iiad) of the Act being income of each educational institutions being less than ₹ 1 Crore. Hence the A.O. has wrongly invoked the provisions of section 11 of the Act as the appellant society is running educational institutions which are exempt u/s 10(23C)(iiiad) of the Act. The appellant has fully explained the out flow of the amount of ₹ 17,00,000/- by requisite details/evidences from books of accounts which were produced before the A.O. also and clearly showed that the same has been .....

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from corpus fund is not genuine has no legs and is accordingly rejected. In view of the above facts, it is held that the A.O. was not justified in making addition at ₹ 17,00,000/-. The same is directed to be deleted. Ground No.4 is allowed. 9. We have heard both the parties and perused the material. We find that the amount of ₹ 1,31,65,917/- has been derived after accounting for the amount of ₹ 17,00,000/- in the books of the assessee and no adverse inference can be drawn. Furt .....

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ciety is running educational institutions which are exempt u/s 10(23C)(iiiad) of the Act. We also find that the assessee has fully explained the outflow of the amount of ₹ 17,00,000/- by requisite details/evidences from books of accounts which were produced before the AO also and clearly showed that the same has been invested in educational activities of charitable purposes which are exempt u/s 10(23C)(iiiad) of the Act. We observe that the AO just based his findings on the outflow without .....

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y the AO on account of excess income over expenditure by allowing the exemption u/s 10(23C)(iiiad) of the Act. 11. The facts relating to this ground are as follows. During the assessment proceedings for AY 2005-06, the AO observed that the exemption u/s 11 and 10(23C)(iiiad) was not allowable to the assessee due to the following reasons:- (i) Shri Anand contractor engaged for construction work had made advance of ₹ 6,70,000/- to M/s Gupta Builder in which the trustee is partner. The said c .....

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exemption u/s 10(23C)(iiiad) of the Act. (iii) The assessee society was also running a hospital in the name of Jeevan Jyoti Charitable Hospital. Thus again the object of the society was not wholly and exclusively for education. Thus, the AO on the basis of above reasoning initiated action u/s 147 and issued notice u/s 148 on 15.07.2009 with the remark that request to issue reasons for issuing notice u/s 148 be made after filing the return. However, the assessee did not apply for supply of copy .....

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the application for registration is filed on 26.03.2006 i.e. one day before filing the return of income and the registration is also granted w.e.f. same day. Thus even on the date of filing return in compliance to notice u/s 148 for the assessment yew 2005-06, the assessee was in knowledge that the registration was not allowed for that year. As registration u/s 12AA is granted vide letter dated 03.03.2008 with effect from 29.03.2009. The benefit of exemption u/s 11 of the Income-tax is not allow .....

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ction work of the school had made advance of ₹ 6,70,000/- to M/s Gupta Builders in which the trustee (secretary) is partner. The said contractor further advanced ₹ 2,00,000/- to Sh.Mohit Gupta, a close associate of the secretary, the relevant evidences available on the Income-tax record of Sh. Anand Kumar (balance sheet as on 31.03.2005 and 31.03.2006 specifically copy of account of Sh. Anand Kumar in the books of account of M/s Gupta Builders, Shamli duly signed by the Secretary is .....

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usal of the return of Sh. Anand Kumar it is noticed that the amount of ₹ 6,70,000/- is advanced to M/s Gupta Builders in which, the Secretary of M/s Shamli Kalyan Samiti, Shamli is one of the partner. It shows that trust, M/s Shamli Kalyan Samiti, Shamli and the funds of the institution is being diverted for some personal use of the trustees. (d) The cheques issued by the assessee, M/s Shamli Kalyan Samiti, Shamli in favour of "Anand contractor" are being deposited in bank of Ana .....

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From the perusal of record, it is also appeared that neither any return is filed by the assessee nor any notice u/s 148 has been issued for assessment year 2003-04 and in view of above, I am having reason to believe that the exemption under section 10(23C)(iiiad) as well as u/s 11 of the Income-tax Act, 1961 is not available to the assessee and by estimate income to the extent of ₹ 20,00,000/- is escaped assessment. Issue notice u/s 148 of the Income-Tax Act, 1961.... " Subsequently, .....

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ontention raised by the assessee. The AO observed that the assessee filed the return in compliance to notice issued u/s 148 of the Act on 12.11.2009 in which the income or surplus of educational institution was deducted. The AO, after going through the income of the society and consolidated income and expenditure account, observed that excess of income was arrived at ₹ 13,92,059/- after adjusting surplus of income over expenditure as well as the excess of expenditure over income in differe .....

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d that in the preceding para it is held that the appellant's income from educational institutions is exempt u/s 10(23C)(iiiad) of the Act. Thus excess of income over expenditure in Sarti Devi Raja Ram Public School at ₹ 15,32,930/- and from Hindu Mahila Vidhyalya at ₹ 2,16,117/- is exempt u/s 10(23C)(iiiad) of the Act. Thus net surplus determined by the A.O. at ₹ 13,92,059/- has no basis and is held as untenable. Addition of ₹ 13,92,9301- is directed to be deleted&hel .....

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essee s income from educational institutions is exempt u/s 10(23C)(iiiad) of the Act. Thus, the conclusion of ld. CIT (A) that excess of income over expenditure in Sarti Devi Raja Ram Public School at ₹ 15,32,930/- and from Hindu Mahila Vidhyalya at ₹ 2,16,117/- is exempt u/s 10(23C)(iiiad) of the Act and thus, net surplus determined by the AO at ₹ 13,92,059/- has no basis, is correct and needs no interference. There is no merit in the contention of the revenue on this ground a .....

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is meant for Corpus fund of the society. He held that the AO was not justified in imposing his own judgement in respect of such receipts since the same was supported with documentary evidences which had not been rebutted by the AO even in the remand report. In such circumstances, the ld. CIT (A) held that the nature of the receipts as claimed by the assessee was acceptable and there was no reason to tax the same as donation in the hands of the society and accordingly, deleted the addition. 18. .....

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e Samiti in any case. Accordingly, the ld. AR relied on the order of the ld. CIT (A) and wanted us not to interfere with the order of the ld. CIT (A). 20. We have heard both the sides and perused the material on record. We find that the amount of ₹ 1,03,900/- is the membership fees received by the society from its regular and new members which is meant for Corpus fund of the society. We further find that such receipts have been corroborated with documentary evidences and which had not been .....

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21. Now, we take the appeal for assessment year 2004-05 in ITA No.5782/Del/2011. 22. Ground No.1 is similar to ground no.1 for assessment year 2004-05. The facts remaining the same this year too and the ld. DR failed to bring to our notice any change in facts, so we could take a different view, so we do not find any infirmity in the order of the CIT (A) and we uphold the same on this issue. It is ordered accordingly. Ground No.1 is rejected. 23. Ground No.2 is against the deletion of addition of .....

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