TMI Blog2016 (5) TMI 1166X X X X Extracts X X X X X X X X Extracts X X X X ..... t : Ms. Radhika Suri, Sr. Advocate with Mr. Rinku Dahiya, Advocate For The Respondent : Mr. Denesh Goyal, Advocate Ajay Kumar Mittal,J. 1. The delay in refiling the appeal is condoned. 2. This appeal has been preferred by the appellant-assessee under Section 260A of the Income Tax Act, 1961 (in short, the Act ) against the order dated 30.6.2009, Annexure A.1 passed by the Income Tax Appellate Tribunal, Amritsar Bench (in short, the Tribunal ) in ITA No.223 (ASR)/2009 for the assessment year 2004-05, claiming following substantial question of law:- Whether in the facts and circumstances of the case, the Hon'ble Income Tax (Appellate) Tribunal was correct in law in denying the exemption under section 11 of the Act on capital expenditure incurred by the assessee on objects of general public utility contrary to the judgment of the Hon'ble Apex Court in S.RM.M.CT.M Teruppani Trust vs. CIT reported in (1998) 230 ITR 636? 3. A few facts relevant for the decision of the controversy involved as narrated in the appeal may be noticed.The appellant-assessee was registered under section 12AA of the Act vide order passed by the Tribunal on 15.6.2007 in ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tractors for construction and other work to show that the assessee had expended the amount for charitable purposes. 6. In Pinegrove International Charitable Trust's case (supra), this Court inter alia was considering the question whether the amount spent on acquiring/constructing capital assets wholly and exclusively becomes part of the total income or it becomes entitled to exemption under Section 10(23C)(vi) of the Act. After considering the relevant case law on the point and following the judgment of the Apex Court in S.RM.M.CT.M. Tiruppani Trust's case (supra), it was held by this Court that in case of an educational institution, capital expenditure is to be deducted from its gross receipts/income whenever the institution applies its Income for the attainment of its object. Thus, the capital expenditure incurred by the trust would be application of Income and assessee would be entitled to exemption under section 11(1) of the Act. The relevant observations read thus:- 59. Even otherwise, unlike the provisions of Section 37 and 36 (1)(xii) of the Act, where the legislature has used the words not being in the nature of capital expenditure , which words ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted from the total income of the Trust for the purposes of finding out how much has been accumulated by the assessee-Trust. Thus, both on principle and precedents the capital expenditure is to be deducted from the gross income of the educational institutions like the petitioner-society. Admittedly, in the present case of the petitioner-society the application of income is more than 100% for the attainment and achievement of its objects in the last three years, a fact not disputed by the Chief Commissioner of Income Tax. The petitioner-society, when admittedly having utilized more than 100% of the income for achieving its objects, could by no stretch of imagination be held to be an educational institution existing for the purposes of making profit so as to be not entitled to exemption in view of the provisions of Section 10(23C) (vi) of the Act. The Chief Commissioner failed to keep in view the third proviso while wrongly holding that since the substantial profits are being earned year after year it could not be said that the surplus is arising incidentally and, therefore, the petitioner-society was not entitled to be exempted. 7. In S.RM. M.CT.M.Tiruppani Trust's case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Section 11(2)(a) and invests the amount accumulated in Government securities as per Section 11(2)(b). The restriction specified in clause (a)of subsection (1)/is clearly the restriction of 25% of the accumulated income (or Rs, 10,000/-, whichever is higher) being exempt. If more than 25% (or ₹ 10,000/-) is to be exempted then the assessee has to comply with the conditions prescribed under Section 11(2). In the case of Additional Commissioner of Income-Tax Anr. vs. A.L.N. Rao Charitable Trust reported in (1995) 216 ITR 697, this Court considered the provisions of Section 11(1)(a) in the light of Section 11(2) and held that Section 11(2) dose not in any manner restrict the operation of Section 11(1). The accumulated income which is exempt under Section 11(1)(a) need not be invested in Government securities. It is only in respect of any additional accumulated income beyond 25% that, if the assessee wants exemption of this additional accumulated income also, the assessee is required to invest the additional accumulated income in the manner laid down in Section 11(2) after following the procedure laid down therein. In the present case the assessee is not claiming any benef ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
