TMI Blog2012 (9) TMI 954X X X X Extracts X X X X X X X X Extracts X X X X ..... than the DPS Society. 2. On the facts and in the circumstances of the case, the ld. CIT(A) has erred in allowing depreciation amounting to ₹ 12,55,50,824/- on certain fixed assets, particularly when full cost of such assets stood allowed in earlier years as application of income and further allowance by way of depreciation would now result in allowing double deduction. 2. Brief facts of the case giving rise to this appeal are that the assessee society was registered u/s 12AA of the Income Tax Act, 1961 (hereinafter referred to as the Act) for AY 2008-09 and filed a return at Nil. Subsequently, a notice u/s 143(2) of the Act was served on the assessee and he claimed exemption u/s 11 r/w Section 12 of the Act. The Assessing Officer noted that the assessee derives income namely from running of schools in the name of Delhi Public School (DPS). The assessee society runs 17 schools under its own umbrella and also granted permission to 90 other entities across the country to open the school and permitted to use of its brand name i.e. DPS. The Assessing Officer further noted that the assessee society received ₹ 6,39,42,882/- towards society maintenance charges which wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x(A) has erred in deleting addition of ₹ 6,39,42,882 made by the Assessing Officer in respect of franchisee fee received by the assessee DPS Society from different satellite schools which are running under the name and logo of DPS having a different management than the DPS Society. He further submitted that the Assessing Officer rightly held that in the absence of books of accounts as mentioned in clause (12A) of Section 2 of the Act, the contention of the assessee regarding meeting the stipulations laid down in sub-section (4A) of Section 11 of the Act cannot be accepted. Accordingly, the Assessing Officer rightly held that the amount received from satellite schools as franchisee fee is liable to be taxed u/s 11(4A) of the Act. Ld. DR finally submitted that the Commissioner of Income Tax(A) deleted the above addition without considering the peculiar facts and circumstances of the year under consideration and his order in this regard deserves to be set aside, restoring the assessment order. 8. Replying to the above submissions, the assessee s representative submitted that the assessee society is a charitable society which has been granted registration u/s 12AA of the Act a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstitution under sub-clause (iv) or sub-clause (v) or subclause (vi) or sub-clause (via), may call for such documents (including audited annual accounts) or information from the fund or trust or institution or any university or other educational institution or any hospital or other medical institution, as the case may be, as it thinks necessary in order to satisfy itself about the genuineness of the activities of the fund or trust or institution or any university or other educational institution or any hospital or other medical institution, as the case may be, and that Central Government or the prescribed authority, as the case may also make such inquiries as it may deem necessary in this behalf: 13. The provisions of Section 10(23-C)(vi), refers to any income and is therefore larger in scope than the provisions of Section 11 of the Act. It is not the case of the AO that the Assessee did not exist solely educational purposes. The prescribed authority before Issue of notification will be the sole judge on the question whether the assessee exists solely for educational purposes and that it does not exist for profit. The Revenue authorities seems to have proceeded by framing a qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of sec. 10(23C)(vi) of the Act. The Hon'ble AP High Court in the case of Governing Body of Rangaraya Medical College Vs ITO reported in 117 ITR 284 (AP) had an occasion to consider the meaning of the expression, for the purposes of profit , in the context of the applicability of exemption provisions. The Hon ole High Court had held that where a society exists for educational purposes but some surplus arises from the societies operations, it cannot be said that the institution was run for the purposes of profit so long as no person or individual was entitled to any portion of the said profit was utilized for the purposes and for the promotion of [he objects of the institution. In the present case, it is not the complaint of the AO that the receipts from satellite schools had been utilized for distribution to any individual. So long as no person or individual is entitled to any portion of the profit, the profit can be said to be used only for the purposes of promotion of the objects of the institution. A useful reference can also be made to the case of ACIT vs Thanti Trust reported in 247 ITR 785 (SC). The Hon'ble Supreme Court laid down that a public charitable trust wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re liable to be dismissed accordingly. 5. The learned DR was fair enough position. He, however, submitted that the department has not given up its stand. 6. We have carefully considered the entire material on record and the rival submissions. In view of the above admitted position, since the issue involved in these appeals is squarely covered in favour of the assessee by the earlier order of the Tribunal, we find no force in the appeals filed by the revenue. Accordingly, we uphold the order of the learned CIT(Appeals) and dismiss the appeals preferred by the revenue ' 12. In the assessee s own case, ITAT Delhi B Bench in ITA No. 4510 4511/Del/2007 for AY 2002-03 2004-05 dated 19.12.2008 held as under:- 3. At the time of hearing, it was fairly conceded by both the sides that the issue in appeal was squarely covered by the decision of this Tribunal in assessee s own case for AY 2001-02 in ITA No.4571/Del/04 dated 20.4.05 4. We have considered the submissions. We have also perused the order of this Tribunal in ITA No.4571/Del/04 dated 24.4.05 for the AY 2001-02 in the assessee s own case. It is noticed that in para 14 of the said order of the coordinate benc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and have gone through the material carefully. We have gone through the orders of the ITAT, Delhi Bench B in ITA No. 4571(Del) of 2004 for AY 2001-02 dated 20th April, 2005 carefully. We find that identical issued was decided by Delhi Bench of the Tribunal in AY 2001-02. ITAT. Delhi Bench F has also decided identical issue in AYs 1998- 99 to 2000-01 and 2003-04 in order dated 30th August, 2007. Since the appeal filed by the revenue is squarely covered in favour of the assessee, by earlier orders of the Tribunal, we do not find any infirmity in the order passed by the ld. Commissioner of Income Tax(A) deleting the addition of ₹ 5,69,79,770/-. 14. Now, we come to the judgement of Commissioner of Income Tax(A) passed in assessee s own case for AY 2006-07 and AY 2007-08 dated 23.06.2010 and 24.06.2010 respectively wherein the Commissioner of Income Tax(A) allowed the appeal of the assessee on this point of receipt of franchisee fee from satellite schools with the following observations:- 5.10 It is pointed out by the AR that the above discussed order of the ITAT, Delhi in appellant's own case pertaining to A.Y. 2001-02 has been followed by CIT(A) - XXIX, New Delh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceipts towards reimbursement of the expenses from various other schools. 5.12 In this context, reference is also invited to the decision of Bombay High Court in the case of Sheraton Apparels 256 ITR 20 relied by the AO on the issue of separate books of accounts. A perusal of the above said judgement reveals that while deciding whether levy of penalty u/s. 27I(I)(c) was justified or not, the Hon'ble Bombay High Court also discussed the meaning of books of accounts, However, any discussion on the same is irrelevant, as the Hon'ble ITAT in appellant's own case for A.Yr.2001-02 vide para15 has clearly given a finding that it has maintained separate books of accounts under the heading Secretary's office . The relevant portion of the ITAT order is extracted here below:- With regard to the separate books of accounts, it is seen that the assessee had maintained a separate account under the heading Secretary's office . In this account, the receipts towards reimbursement to the society/or common expenses from various schools with which it had entered into agreement to provide services have been duly incorporated. 5.13 There being no change .in the factual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT Act, during the year as borne out by the assessment order itself. The AO has concluded in the assessment order that separate books of accounts have not been maintained, which is violative of the provisions of section 11 (4A), 11/12 of the IT Act. He has also admitted to be following the Departmental stand in the earlier years on this issue. In the order passed by IT AT, Delhi for A.Y. 2001-02 on this issue it was held by ITA T in para 14 that - For the reasons given above, we are of the view that the provisions 0/ section 11 (4A) of the Act were not applicable in the present case. In para 15 it was further held that - As already observed a separate set of books' of accounts were maintained by the assessee showing receipts towards reimbursement of the expenses from various other schools. 5.13 In this context, reference is also invited to the decision of Bombay High Court in the case of Sheraton Apparels 256 ITR 20 relied by the AO on the issue of separate books of accounts. A perusal of the above said judgement reveals that while deciding whether levy of penalty u/s. 27I(I)(c) was justified or not, the Hon'ble Bombay High Court also discussed the meaning of boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 11 and 12. 5.14 There being no change in the factual position for assessment year under appeal, respectfully following the aforesaid order of IT AT and my predecessor's orders (Supra) in the case of appellant itself, it is held that the amount of fees received from satellite schools aggregating to Rs,6,39,42,8801- is not liable to tax and hence the addition is deleted. Grounds No.3 4 are allowed in favour of appellant. 16. In view of above judgements by the ITAT and Commissioner of Income Tax(A) from AY 1998-99 to 2007-08, we observe that the amount received by the assessee society from various satellite schools which are running under the name and logo of DPS having a different managerial set up than the assessee DPS society was considered as not liable to tax and additions made by the Assessing Officer in this regard had been deleted following principle of consistency. From the assessment order for the year under consideration, we are unable to see any reasonable or sound reason for deviation from the stand taken by the revenue authorities in assessee s own cases related to the immediately preceding years. We also observe that the Assessing Officer has not brough ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as no point of double deduction claimed by the assessee. He also placed reliance on the recent judgment of Hon ble High Court of Punjab Haryana in ITA No. 93/Del/2010dated 28.07.2010 in the case of Commissioner of Income Tax vs Tiny Tots Education Society (unreported). 20. In the case of M/s Tiny Tots Education Society, the Hon ble High Court of Punjab Haryana considered the judgment of Hon ble Supreme Court in the case of Escorts Ltd. Another vs Union of India Others (1993) 199 ITR 43 wherein it was held that the assessee could not claim deduction when its income was exempt, as it will amount to getting double deduction benefit. Relevant para of above judgement of Hon ble High Court of Punjab Haryana is being respectfully reproduced below:- 4. Learned counsel for the Revenue submits that in view of judgment of the Hon'ble Supreme Court in Escorts Ltd. and another v. Union of India and others [1993J 199 ITR 43, the Assessee could not claim deduction when its income was exempt, as it will amount to getting double benefit. 5. We are unable to accept the submission. 6. The matter was discussed in our recent judgment dated 5.7.2010 in I.T.A. NO.535 of 2009 T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titute (1993) 109 CTR 463. 2) CIT vs. Institute of Banking (2003) 264 ITR 110 The CIT(Appeals) also distinguished the judgment of the Supreme Court in Escorts Limited Vs. Union of India (1993) 199 ITR 43 holding that depreciation under Section 32 of the Act can be denied only in cases where the provisions of Section 35(2)(iv) are applicable. He was of the view that there was never any dispute that in the case of a charitable trust, its income should be computed on commercial principles. There was no double deduction claimed by the assessee as can happen when a claim for deduction of capital expenditure is made under Section 35 and depreciation on the very same asset created by the expenditure is claimed under Section 32. In this view of the matter, he directed the Assessing Officer to allow the claim of depreciation. 10. The revenue preferred an appeal before the Tribunal and contended that the CIT(Appeals) was wrong in allowing the depreciation. The Tribunal referred to the fact that the decision of the CIT(Appeals) to allow the depreciation was based on several authorities including some orders of the Delhi Benches of the Tribunal and felt bound by those orders. Accordingly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lications thereof towards the purpose of the trust or otherwise, and also after adding back any debits made for capital expenditure incurred for the purposes of the trust or otherwise. It should be noted, in this connection, that the amounts so added back will become chargeable to tax u/s. 11(3) to the extent that they represent outgoings for purposes other than those of the trust. The amounts spent or applied for the purposes of the trust from out of the income computed in the aforesaid manner, should be not less than 75 per cent. Of the latter, if the trust is to get the full benefit of the exemption u/s. 11(1). 12. A similar view was earlier expressed by the Andhra Pradesh High Court in Commissioner of Income-tax. v. Nizam's Suppl. Religious Endowment Trust (1981) 127 ITR 378 and by the Madras High Court in Commissioner Of Income-Tax vs Rao Bahadur Calavala Cunnan Chetty Charities (1982) 135 ITR 485. The Madhya Pradesh High Court in CIT vs. Raipur Pallottine Society (supra) has held, following the judgment of the Karnataka High court cited above, that in computing the income of a charitable institution/trust, depreciation of assets owned by the trust/institution is a nec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us and at any rate no judgment taking a contrary view has been brought to our notice. In the circumstances, we decline to admit the present appeal and dismiss the same with no order as to costs. 22. In view of above submissions and after careful consideration of the ratio of judgments cited before us, we are of the view that the Assessing Officer disallowed the claim of depreciation ignoring the fact that the assessee society is a charitable society and in a case where capital expenditure has been treated to have been applied for the object of the trust, the allowance of deduction on account of depreciation would not amount to double deduction. The Assessing Officer relied on the judgment of Hon ble Apex Court in the case of Escorts Ltd. (supra) which was carefully considered by the Hon ble Jurisdictional High Court in the case of Vishwa Jagriti Mission (supra) by Hon ble High Court of Punjab Haryana in the case of M/s Tiny Tots Education Society wherein their Lordships after careful scrutiny of the facts and circumstances held that in the case of Escorts Ltd., the Hon ble Supreme Court was not concerned with the case of charitable trust or institution involving the question ..... X X X X Extracts X X X X X X X X Extracts X X X X
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