TMI Blog2018 (9) TMI 1625X X X X Extracts X X X X X X X X Extracts X X X X ..... her assessee has been able to prove that corpus fund was received for meeting out capital expenditure which according to explanation of assessee have been used actually to meet the capital expenditure. Thus, in our considered opinion, corpus fund which is meant for specific purpose to meet out capital expenditure could not be part of annual receipts of the Society, even if no registration u/s 12AA has been granted. Disallowance of depreciation claimed - Held that:- As observed that Principal Secretary, Uttarakhand on 29/03/11 directed Sports Department, Uttarakhand to bring assessee into existence. He nominated budget fund to meet planned cost for construction of building for assessee. It is observed that Ld. A.O. relied upon the view that the building owned by assessee has been constructed by the grant sanctioned by Government of Uttarakhand and, therefore, in view of Explanation 10 to Section 43(1), depreciation could not be allowed on such construction. As we have already held in preceding paragraphs that the money received by assessee from Government of Uttarakhand was in the nature of corpus which was to be utilised for capital expenditure of assessee, we differ to follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed u/s 12A/12AA of Income Tax Act, 1961 and Ld. CIT(A) ought to have deleted the addition. 3. That in any case and in any view of the matter, action of Ld. CTT(A) in confirming the action of Ld. AO in making addition of ₹ 5 crores on account of corpus fund as alleged income of assessee, is bad in law and against the facts and circumstances of the case. 4. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making disallowance of ₹ 94,66,932/- on account of depreciation claimed by assessee on the ground that grant/subsidy received from Govt. of Uttarakhand should not be included in the actual cost of asset and that too by recording incorrect facts and findings and in violation of principles of natural justice. 5. That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in making disallowance of ₹ 94,66,932/- on account of depreciation, is bad in law and against the facts and circumstances of the case . 6. That having regard to the facts and circumstances of the case, Ld.CIT(A) has erred in law and on facts in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. Under these circumstances, case of assessee was converted into complete scrutiny, based on which notice under section 142 (1) along with questionnaire was issued calling upon assessee to file various details/information regarding organisation and its objects. From details so filed, Ld.AO observed that assessee received grant from Government of Uttarakhand amounting to ₹ 5 crores, on which assessee earned interest of ₹ 55,21,641/-. Ld.AO accordingly called upon assessee to show cause, as to why, grant received from Director of Sports, should not be taxed as income of society, in view of definition of income under section 2 (24) of the Act and, why, interest income earned on FDs should not be treated as Income from Other Sources . 2.2. In response to query raised, assessee submitted that money received by Society from Government of Uttarakhand was towards corpus, as is evident from letter of approval issued in respect of the same. It was submitted by assessee that these funds were to be expended only after budget, and not to be used for day-to-day activities of society, therefore, did not fall under purview of section 2 (24) (iia) of the Act. After considering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Ld. CIT (A) rejected assessee s claim only for the reason that word corpus is not mentioned in letter specifically. 4.2. Ld.AR further submitted that taxability of contributions towards corpus fund of an Institution is de hors registration, under section 12 A/12 AA of the Act, and therefore authorities below erred in treating the amount received towards corpus fund as revenue receipt in the hands of assessee. He submitted that assessee received said fund from Government of Uttarakhand, with specific directions in the manner it has to be applied towards specific purpose. He thus submitted that amount received from State Government cannot be regarded as income under section 2 (24) (iia) of the Act, which applies only to voluntary contributions. 4.3. On the contrary Ld.Sr.DR placed reliance upon orders of authorities below, and submitted that funds received by assessee falls under the purview of section 2 (24) (iia) of the Act. It has been submitted that assessee is not carrying out any charitable activity as defined under section 2 (15) of the Act, and assessee benefits only a small set of individuals. Further it has been submitted by Ld.Sr.DR that assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion claimed amounting to ₹ 94, 66, 932/-. 7.1. Ld.AR submitted that Ld.AO disallowed depreciation claimed, in light of Explanation 10 to section 43 (1) of the Act. He submitted that disallowance made by Ld. AO is on the ground that, above funds received from Secretary Sports Department, Uttarakhand, was treated by Ld.AO as subsidy and construction having owned by Sports department, Uttarakhand. Ld.AR emphasised that Principal Secretary, Sports Department, Uttarakhand is Chairperson for regulating and monitoring construction of civil works of assessee. He is in the capacity of a trustee for assessee and any sum received for purposes of construction, would be towards corpus . It is also submitted that any construction so made would be included in assets of assessee on which depreciation cannot be denied. 7.2. Ld. Sr. DR placed reliance upon the orders of authorities below. 8. We have perused submissions advanced by both the sides in the light of records placed before us. 8.1 . It is observed that Principal Secretary, Uttarakhand on 29/03/11 directed Sports Department, Uttarakhand to bring assessee into existence. He nominated budget fund to meet planned co ..... 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