TMI Blog2017 (8) TMI 1245X X X X Extracts X X X X X X X X Extracts X X X X ..... 11 during the course of assessment proceedings and the ld CIT(A) has rightly allowed the same. Depreciation is held admissible to the assessee society registered under section 12AA and held eligible for exemption under section 11 and 12 of the Act. TDS u/s. 194C - defect in vouchers under the head building construction account which was not claimed as revenue expenses but capital expenses - Held that:- It is assessee’s contention that the expenses disallowed and partly sustained by the ld CIT(A) have not been claimed as revenue expenditure during the year. There is no finding recorded by the AO or ld CIT(A) in this regard. We accordingly set aside this matter to the file of the AO to examine the said contention of the assessee and decide the matter a fresh as per law. In the result, both the grounds of revenue and assessee are allowed for statistical purposes. Invoking the provisions of section 13(1)(c)(ii) r.w.s 13(2)(g) - Held that:- What is relevant to examine is the year in which the money has been invested or shares have been brought otherwise than in the prescribed mode and income arising therefrom during the previous year. In absence of any finding of the AO in thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Deleting the taxing of surplus amount to ₹ 11,95,189/- by holding that the provisions of Sec. 11 12 will apply to any pending assessment as on date of such registration without appreciating the facts that the assessee has claimed exemption neither in original return of income nor any revised return was filed. The CIT(A) has erred by not applying the decision of Hon ble Supreme Court in Goetze (India) Ltd. Vs CIT 284 ITR 323 (SC) in the assessee s case. 3. deleting the addition made on account of disallowance of depreciation amounting to ₹ 1,89,57,668/- without appreciating the fact that the application of 100% expenditure of the capital asset is already allowed as capital expenditure hence further allowance of the depreciation on the same capital asset would tantamount to double deduction. 4. Deleting the addition on disallowance of Charity/Donation amounting to ₹ 18,039/- without appreciating the fact the assessee has not furnished any evidence in support of his claim. 5. Deleting the addition of ₹ 15,00,000/- made out of expenses. ITA No. 296/JP/2016 ( Assessee s ground): (1) Ld. CIT(A) has erred in law and on facts in sust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the genuineness of this increase in building fund, the AO issued a show cause as under: The details filed and records produced have revealed that the building fund is received from students as a part of regular fees. Copies of the receipts issued to these students have also been gone through wherein it is clearly mentioned that the building fund is received as part and parcel of the regular fees as any other fees under the head admission fees, tuition fees and caution money. Furthermore the building fund is fixed by the management of University. Prima facie these receipts of building fund is not a voluntary contribution but the students were bound to pay as a part of regular fees. Similar issue was also dealt with by the AO while completing the assessment for A.Y. 2011-12 wherein the AO has held that the building fund was a part of revenue receipts. In view of the aforementioned facts you are required to furnish your explanation as to why the building fund should not be treated as revenue receipts as a part of the fees received from the students. 2.1 The ld CIT DR took us through the findings of the AO which are as under: 5.2 The material available on recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt of building fund has been examined in detail which has resulted in holding that it is a receipt of revenue nature as such it has to be rounded through the Income and Expenditure account. Accordingly in view of aforementioned discussion the building fund of ₹ 5,29,48,789/- is held to be a revenue receipts for the year under consideration. 3. Per contra, the ld AR submitted that during the year, the assessee trust has received voluntary donation of ₹ 5,29,48,789/- from students/parents toward building fund from the students/parents which was one time donation. The building fund so received is neither fixed nor identical amount in all cases of donors, since it is voluntary.No donation toward building fund was received from more than 35% of the students.The amount so received was property accounted for and credited directly to Building fund account of the assessee (in balance sheet).The building fund donations were applied in construction of buildings for educational purposes in subsequent period whereas out of tuition fee, the major part was spent in imparting education. Assessee Trust was granted registration u/s 12AA of IT Act on 08.08.2014 (Paper book page 83), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot taxable as income. (3) Director of Income tax (Exemption) vs. Shri Ramakrishna Seva Ashram (2013) 357 ITR 731 (Karn):Voluntary contributions for specific purpose constitute Corpus fund. 85% of amount is not utilized for charitable purpose, not relevant. The word Corpus used in context of Income Tax Act is to be understood in context of capital as opposed to an expenditure. If a voluntary contribution is made with a specific direction, it shall be treated as the capital of the Trust for carrying on its charitable or religious activities. Then such income falls under section 11(1)(d) and is not liable to tax. (4) Director of Income tax (Exemption) vs. National Association of Software Services Companies (2012) 345 ITR 362 (Del): Corpus Donation is one time admission fee paid by members who are aware that it could be spent by assessee only for acquiring capital asset is Corpus Donation, not taxable income. (5) CIT vs. Children s Education Society (2014) 264 CTR (Kar) 389: If the donations are received by assessee from students who are studying in the School run by it and the same are properly accounted for in the Building fund/Infrastructure fund and said amount is uti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal for AY 2011-12 in ITA No. 110/JP/15 vide our order dated 1.11.2016, we have already examined the matter at length and after referring to the contention of both the parties, have set-aside the matter to the file of the AO to examine the matter afresh. For the year under consideration, our findings and directions given for AY 2011-12 shall apply mutatis-mutandis to this appeal as well. For sake of convenience, the said findings are reproduced as under: 3.6 If we were to read the ratio emerging out of the above two judgements, what clearly emerges is to determine the intention of the donor and the treatment of the receipts by the donee trust. Where the intention of the donor is that the amount/donation given is to be treated as capital and the income from that capital has to be utilized for the charitable purposes, then the said voluntary contribution is towards the part of the corpus of the assessee trust. It is not necessary that the persons who made these contributions specifically direct that they shall form part of the corpus of the trust. Similarly, the assessee trust after receiving the amount, keeps the amount in deposit and only utilise the income from the deposit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a, the ld DR submitted that the students are paying fees to pursue their educational qualifications and there is no voluntary element involved in it rather it is compulsory for them to pay fees for these courses. Further, the question of giving specific direction does not arise as this is not the donation but the fees received for acquiring educational qualifications. Mere assigning the name of Building Fund to receipts of revenue nature does not warrant that these receipts will be considered as capital receipts. Students do not have choice to donate the amount for building fund with specific directions . There is no donor/donee relationship which is perquisite for donation but in the instant case the students are getting their educational qualification in lieu of payment made to institution and the amount in question is nothing but the fees received from students in the name of building fund . It was further submitted that no separate books of accounts are being maintained for the use of this fund i.e. no separate account in the form of building fund is being maintained in any bank so that its use can be ascertained. Assessee has failed to establish that these funds are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iginal return filed and as well as no revised return has been filed so as to make the claim for exemption u/s 11 based on the registration granted u/s 12AA of the Act. The assessee s claim cannot be entertained. The only available ground for claiming the exemption is by way of either making a claim in the original return of income or to file a revised return but this is not so in the assessee s case. Therefore, in view of the Hon ble Apex Court s decision in the case of Goetze (India) Ltd. Vs. CIT 284 ITR 323 (SC), the assessee s claim was not accepted by the AO. However, the ld CIT(A) accepted the said claim and now, the Revenue is in appeal before us and the ld CIT DR relied on the findings of the AO. 6. In this regard, the ld AR submitted that the original return of income was submitted on 06.05.2013. On 07.04.2014 when request was made to AO, the first proviso to section 12A(2) was not in statute book, nor the assessee could file revised return for a belated return, therefore, there was no occasion to file any revised return of income for claiming deduction u/s 11 and 12 of IT Act. The assessee had claimed the exemption which has also been admitted by ld. AO at para 1.8 of o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is granted u/s 12AA, the provisions of sec 11 12 will apply to any pending assessment as on the date of such registration. In the present case registration was granted on 08.08.2014. On this date assessment for A.Y. 12-13 was pending therefore benefit of section 11 12 is available to the assessee. So far as AO s observation that assessee has not claimed deduction in return of Income, therefore the same is not allowable in view of Supreme Court decision in 284 ITR 323 (Goetze India), is concerned the same has no relevance as this decision is not applicable to appellant authorities. Considering all these facts the AO is directed to allow the benefit of sec. 11 to the assessee. 8. We have heard the rival submissions and pursued the material available on record. Similar issue has come up in assessee s own case for AY 2011-12 where we have taken a view that where during pendency of appeal before the ld CIT(A), the assessee was granted registration under section 12AA, it would be a case of pendency of assessment proceedings and the assessee would be eligible to claim benefits of section 11 and 12 of the Act. In the instant case, the facts are on a better footing as registr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect of (f), depreciation of fixed assets, the same is allowable in view of decision of Rajasthan High Court in case of CIT vs. Krishi Upaj Mandi Samiti, Jaisalmer wherein it has held that in computing the income of a charitable trust/institution, depreciation of assets owned by such institution is a necessary deduction on commercial principles, hence, the amount of depreciation has to be deducted to arrive at the income available even though that capital expenditure has already been allowed in the year under consideration. Respectfully following the decision of Hon ble Jurisdictional High Court, the disallowance of depreciation of ₹ 18957668/- made by the AO is deleted. 12. The subject issue is no more res integra. As per Hon ble Karnataka High Court in the case of DIT Vs. Al-Ameen Charitable Fund Trust (ITA No. 62 and 414 of 2010 vide order dated 22.02.2016), the plain language of the amendment by way of insertion of sub-section 6 to section 11 establishes the intent of the legislature in denying the depreciation deduction in computing the income of Charitable Trust is prospective in nature with effective from 1.4.2015. This view is further supported by the No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... smissed. 15. In respect of ground No. 4 of the Revenue s appeal, the AO has disallowed donation and charity of ₹ 18,039 on ground of lack of evidence and fact that the claim of exemption under section 11 was rejected. 16. It was submitted by the ld AR that in addition to the education, charity and donations is also object of the assessee Trust. Books of accounts of the assessee Trust are audited u/s 44AB of IT Act and the issue was also examined by the Auditors. Otherwise also, the same is within limit of 15% of gross receipts of ₹ 10,10,74,418/- as provided under section 11(1) of IT Act, not liable to tax. 17. As we have held above, the assessee is eligible for claim of benefit under section 11 and 12 of the Act. We accordingly set aside this matter to the file of the AO to examine the claim of the assessee that it is within limits of 15%. The assessee is also directed to submit the necessary evidence in support of the said claim to the satisfaction of the AO. In the result, ground no. 4 of revenue s appeal is allowed for statistical purposes. 18. In respect of ground No. 5 of the Revenue s appeal and assessee s ground of appeal no. 3(ii), it was submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,89,67,745 2,89,67,745 Nill 34,76,129 Nirmal Panwar Finance P. Ltd. 42,33,751 35,33,751 Nil 84,000 Ambassy Tourism Dev. P. Ltd. 33,75,000 41,75,000 8,00,000 5,01,000 Addition sustained by ld. CIT(A) (for which ld. AO applied sec. 13(1)(c)(ii) r.w.sec. 13(2)(g) 42,13,821 20.1 It was further submitted that the assessment for immediately preceding assessment year (A.Y 2011-12) was completed under section 143(3) of IT Act in which no addition was made u/s sec. 13(1)(c)(ii)/13(2)(g) of IT Act on advances to majority of the same debtors b/f. in year under appeal, considering nature of advances not covered u/s 13(3) of IT Act and interest free funds available with assessee Trust. However, in the year under appeal, in avoidance of the fact that major advances are b/f balances of preceding year and assessee Trust had interest free unsecured loans of ₹ 49,69,466/-, ld. AO mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s diverted during the previous year in favour of the person referred to in section 13(3). The action u/s 13(2)(g) therefore lies in the year of diversion of income in favour of interested person. In light of the same, given that no amount has been advanced to Pratima Pawar and Kiran Singh during the year under consideration, there is no cause of action that lies under section 13(1)(c)(ii) r.w.s 13(2)(g) of Act and hence, the addition made in this regard is deleted. 24. In respect of Prime Location Developers Ltd, the AO has invoked provisions of section 13(1)(c)(ii) r.w.s 13(2)(g) and section 11(5) of Act. The AO has stated in his order that the assessee is making payment since AY 2007-08 and upto year under consideration and the payment has reached to a level of ₹ 2,89,67,745 for which no interest has been charged. Per contra, the ld AR has submitted that no payment has been made during the year. In view of the conflicting facts and no further material available on record, we are unable to take a view in the matter. Further, there is no finding as to how the provisions of section 11(5) are attracted in the instant case. The matter is accordingly set-aside to the file of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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