TMI Blog2018 (12) TMI 207X X X X Extracts X X X X X X X X Extracts X X X X ..... not sustainable in the eyes of law and therefore CIT(A) should have allowed full relief to the assessee and, therefore, we direct the AO to allow full claim of expenditure and in view of that cross objections filed by the assessee are allowed, and Revenue’s appeals on this account is also dismissed. - ITA No.265 & 266/LKW/2017 And C.O. Nos. 15 And 16/LKW/2018 - - - Dated:- 30-11-2018 - SHRI. T.S. KAPOOR, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY,JUDICIAL MEMBER For The Department : Shri A. K. Bar, CIT (DR) and Shri C. K. Singh, D.R. For The Assessee : Shri Ashish Bansal, Advocate ORDER PER T.S.KAPOOR, A.M: These are two appeals filed by the Revenue against the orders of the ld. CIT(A), Allahabad dated 14/12/2016 and 15/12/2016 respectively. Assessee has also filed cross objections to these appeals. 2. These appeals were heard together and involve similar issues, therefore, for the sake of convenience, a common and consolidated order is being passed. 3. At the outset, ld. D.R. submitted that assessee had claimed depreciation on additions to fixed assets and had claimed these as application of funds for the purpose of exemption und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld. CIT(A) on account of disallowance made by the Assessing Officer on account of depreciation on fixed assets which the assessee had purchased and for which assessee had already availed benefit under section 11 of the Act. Second issue relates to repayment of term loan which has been claimed under section 11 of the Act which the Assessing Officer had denied as in his opinion assessee was given benefit when assets were purchased and further claim on account of repayment of such term loan will amount to double deductions. These two issues have elaborately been discussed by ld. CIT(A) and after relying on a number of case laws ld. CIT(A) has allowed relief to the assessee. For the sake of convenience, issue of depreciation as discussed by the ld. CIT(A) along with submission of assessee are reproduced below:- 5.01 The Assessee has debited ₹ 1,34,88,135 to the Income and Expenditure Account by way of depreciation on various fixed assets used for carrying out the activities of the Society during the FY 2011-12. This has been done on sound commercial principles. 5.02 The Ld. A.O. has disallowed the claim for depreciation on the following grounds- (i) Depreciation am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or acquisition of these assets has already been allowed as -application of income. (iv) Judgment of SC in Escorts case [1993] 199 ITR 43, which has been relied upon by the Ld. A.O. in the impugned assessment order has been distinguished and held not applicable. (iv) [2014] 366 ITR 51 (Cal) - CIT Vs. Siliguri Regulated Market Committee Held at Page 58- ( i) Depreciation claim is to be allowed in the computation of income of a charitable institution. ( ii) By computing the income in a commercial manner, the object of feeding the public charity is achieved. It cannot be disputed that the assets used for the purpose of charity diminishes in value over the time. Therefore providing for such diminution in value would keep the corpus of the trust intact. 5.05 It is further submitted that claim for depreciation was allowed in all the earlier assessment years. There is no change in the facts and circumstances in the current assessment year. Hence, on principle of consistency, the expenditure in question ought to have been allowed as held by the SC in [19992] 193 ITR - 321 (SC) - RadhasoamiSatsang V. CIT. At page 329 of ITR, the Hon'ble SC has observed as under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wable expense. Keeping in view all these facts and circumstances, we do not find any infirmity in his order, therefore, the issue of depreciation is decided in favour of the assessee. 11. The other issue of repayment of loans has similarly be discussed by the ld. CIT(A) and he has allowed relief to the assessee relying on a number of case laws. The relevant findings of the ld. CIT(A) along with written submissions of assessee are reproduced below:- 8.00 REG. GROUND No. 5: DISALLOWANCE OF REPAYMENT OF LOANS AGGREGATING TO ₹ 1,35,22,495 AS APPLICATION OF INCOME 8.01 The Assessee has taken Loans from Punjab National Bank and Union Bank of India for purchase / construction of fixed assets required for the activities of the Society. These loans were partly repaid during AY 2012-13. The details of these loans and repayments are give below s. No. Lender Bank Loan A/c Nos. / Purpose of loan Years in which loan taken/ Utilized Amount of Loan (Rs.) Amount Repaid during the AY. 2012-13 (Rs.) 1 Punjab National Bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim any deduction in respect of fixed assets acquired out of above loans in any earlier years. This fact is verifiable from the earlier years' Income Tax Returns and Assessment Orders which are placed in the Paper Book. 8.06 So far as the current assessment year i.e. AY 2012-13 in concerned, the claim for additions to fixed assets is restricted to ₹ 1,66,72,312, being assets financed out of current year's income and not out of any loans. As can be seen from the Schedule of Depreciation forming part of the Audited Accounts for the FY 2011-12 (AY 2012-13), the total additions to fixed assets during the year amounted to ₹ 5,38,58,691 whereas the deduction is claimed for ₹ 1,66,72,312 only. For verification of above fact, the Ld. A.O. asked the Assessee to submit details of such purchases and copies of purchase bills. In compliance, the Assessee, vide Replies dated 20.02.2015 and 03.03.2015, submitted a statement showing the details of assets purchased out of current year's income as well as copies of purchase bills. Copies of Audited Accounts for FY 2011-12, above Replies and statement of purchases of fixed assets are placed in the Paper Book. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s regard, namely [2009] 315ITR 237 (Mad) - Dl (Exemption) Vs. GovinduNaicker Estate and [2000] 242 ITR 703 (Karn) - CIT Vs. Janmabhoomi Press Trust are apt and to the point wherein it has been categorically held that repayment of loan by the assessee should be treated as an application of fund. Respectfully following those decisions, I hereby hold that the repayment of loan (taken by the assessee for incurring of capital expenditure) will be treated as an application of fund. The A.O. is directed to allow the same. 12. The ld. CIT(A) has noted in his order that assessee had not claimed any exemption when it purchased fixed assets in earlier years. Moreover, finding this issue in favour of the assessee covered by various decisions of various courts relied on by the ld. CIT(A), we do not find any infirmity in the orders of the ld. CIT(A) on this issue. 13. As regards ground No.1 in ITA No.266/LKW/2017, we find that the Assessing Officer had disallowed the benefit of section 11 by making addition of whole of excess of income over expenditure treating the same as business income as in his opinion assessee had charged fee which was beyond the prescribed amount of fees decided b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer had made out of counseling expenses. We find that ld. CIT(A) has allowed part relief to the assessee by holding that though the expenses are allowable expenditure, but since assessee had incurred expenditure in cash, therefore, he sustained disallowance to the extent of 50%, findings of the ld. CIT(A) as contained in para 3.3 are reproduced below:- Having gone through the findings given by the A.O. and also the written submission made by the Ld. A.R., I had requested the Ld. A.R. to furnish a list of persons to whom these payments were made. Once the list was provided, I chose two names randomly and asked the Ld. A.R. to produce them for verification. The two names selected by me were (i) Sri Vivek Mishra and (ii) Sri Sandeep Kumar Pandey. Their statements were receded by me which have been placed on record. From these statements, it is clear that it is an accepted practice amongst the lesser known Engineering College like the instance case that suitable service charges/ compensation is being paid by the college authorities to different persons who are commissioned to motivate the potential students or their parents for admission in this college. From the statement so ..... X X X X Extracts X X X X X X X X Extracts X X X X
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