TMI Blog2019 (9) TMI 901X X X X Extracts X X X X X X X X Extracts X X X X ..... para no 5.4.9 of the impugned Appellate Order is erroneous and deserved to be deleted. As regards ground no 4 we have separately decided the issue in the subsequent paragraphs. Accordingly, ground no 2 is allowed in favour of the Assessee and the Assessing Officer is directed to accept the method of accounting regularly adopted by the Assessee. Denial of exemption under section 11 by holding that advance given to the director for petty cash expenses was hit by the restrictions u/s 13(3) - HELD THAT:- Findings of the Assessing Officer and the ld. CIT(A) are not correct because the break up of the alleged amount of ₹ 11,57,000/- is as given above and does not partake the character of loans and advances to related parties. The first two amounts (₹ 20,000 + ₹ 10,22,000) pertained to another trust which is also registered with the DG Shipping and is a section 25 company and therefore, charitable and not hit by section 13(3) of the Act. The last amount of ₹ 1,15,000/- represented reimbursement to be recovered from the students towards counseling fees. None of the students are related to the Assessee under appeal. We therefore, find merits in the argument of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in confirming disallowance of ₹ 87,45,207/ for violation of provision under section 13(3) of the Act and denied exemption under section 11 of the Act even after holding that the Assessing Officer erred in holding that the rent paid to the persons specified was excessive in Para 7.4.1 of his Appellate Order. 4) In the facts and the circumstances of law, the Commissioner of Income Tax(A) erred in confirming denial of exemption under section 11 of the Act by holding that advance given to the director for petty cash expenses was hit by the restrictions u/s 13(3) to the extent of ₹ 11,57,000/- being advance given to company in which directors are common. 5) In the facts and the circumstances of law, the Commissioner of Income Tax(A) erred in confirming the denial of exemption under section 11 of the Act in respect of donation and contribution of ₹ 1,43,000/ and erred in not deciding deduction u/s 80G of the Act. 6) In the facts and the circumstances of law, the Commissioner of Income Tax (A) erred in confirming disallowance of ₹ 1,68,48,487/- by holding that the cost of acquisition of the fixed assets was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntative of the assessee has argued that the department has not filed any appeal against the order of the ld. CIT(A) and therefore, whichever grounds are partly or conditionally allowed stood allowed in the favour of the Assessee. The Ld. Representative of the Department has confirmed the said contention. We have heard the rival contentions and find that the whole issue is around disallowance of exemption u/s 11 of the Income Tax Act, 1961 ( The Act ) in respect of income earned by the Assessee. 6. Under this ground of appeal, the Authorized Representative of the Assessee pointed out that the Commissioner of Income Tax(A) rightly held in concluding that the activities undertaken by the Appellant satisfies the requirements of the term education but erred in mentioning that the same is subject to ground number 4 before the Commissioner of Income Tax(A) and now ground 3 before the Hon ble Tribunal. 6.1. In this regard, the Ld. DR relied upon the order of the Assessing Officer and fairly conceded that the Department had not filed any appeal against ground no 1 allowed by the Ld. Commissioner of Income Tax (A). 6.2. We have heard the riva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the Regional Director, Western Region, MCA as filed at page No 140 of paper book, certificate u/s 12AA issued by the DIT(E), Mumbai filed at page No 141 of Paper book, renewal certificate issued by DIT(E), Mumbai filed page No 142 of Paper book and certificate issued by DG, Shipping filed at page 143 to 145 of Paper book. The Assessee also relied upon C.B.D.T. circular no 11/2008 allowing exemption u/s 11 in case of Assessee claiming to be charitable and mutual organization which included educational institute u/s 2(15)(ii) filed at page no. 146 of Paper book. The ld. CIT (A) also observed that five courses conducted by the Assessee as well as list of courses on the website of DG Shipping which included courses offered by the Assessee. The ld. CIT(A) also observed from the copy of email returned by DG Shipping for course certification, certificate of continuous discharge. The Assessee also relied upon a copy of Seafarer s Identity Documents Convention, 1958 filed at page no. 212 to 215 of the Paper book and decision of the DIT(E) national safety council at page no. 216 to 219 of Paper book). The ld AR also drew our attention to decision in the case of Shree Kamdar Education Trus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gment in the case of Radha Swami Satsang (No. 1) [201 ITR 449 (Allahabad)] and Aroni Commercial Ltd. [393 ITR 673 (Bombay)] to contend that exemption granted u/s 11 and 12 in other years by accepting this method of accounting ought to be followed in the year under appeal as well. 7.2. We have carefully considered the rival submissions and find merit in the contentions of the Assessee that treating the fees as income only in the year in which the student completed the course was regularly followed by the Assessee over the years and accepted by the Assessing Officer in other years as well. Therefore, on the principle of consistency, this method ought to be accepted being tax neutral, particularly when the income of the Assessee is exempt u/s 11 and 12. Moreover, we also find strength in the arguments of the Assessee that fees of the students are refundable as was held in the case of BSB Vs A Rajappa Ors SC 578 in case of deficiency in service to students. The seminal 1978 judgment by the Supreme Court (BSB Vs A Rajappa Ors SC 578) established that education is an industry and students are customers. Many subsequent judgements have upheld this view. On an overall c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f exemption under section 11 of the Act by holding that advance given to the director for petty cash expenses was hit by the restrictions u/s 13(3) to the extent of ₹ 11,57,000/- being advance given to company in which directors are common. 10.1. In this regard we find that the Assessing Officer has treated the entire amount of ₹ 11,57,000/- as payment made to related parties and consequently disallowed the exemption u/s 11 and 12. The DR supported the case of the Assessing Officer as well as the ld. CIT(A). On the other hand, the ld. AR of the Assessee strongly contended that the ld. CIT(A) has overlooked the facts cited before him and confirmed the disallowance of exemption on the basis of payment made to the alleged related parties. The ld AR vehemently contended that (i)₹ 20000 was given to BP Marine Academy and Research Centre which is also a section 25 company. Therefore, it is charitable and not hit by 13(3) of the Act(ii)₹ 1022000/- paid to BP Marine Services Pvt. Ltd. which is also approved by DG shipping as qualified for recruitment and placement services of the students(iii)₹ 1,15,000/- are reimbursement to be recovered from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is ground of appeal is only consequential and therefore, allowed in the favour of Assessee. The Assessing Officer is directed to allow the exemption u/s 11 instead of deduction u/s 80G in respect of contribution of ₹ 1,43,000/- made by the Assessee. In the result ground no 5 stands allowed in the favour of Assessee 12. In the sixth ground of appeal, the Assessee has challenged the order of CIT(A) in confirming disallowance of ₹ 1,68,48,487/- by holding that the cost of acquisition of the fixed assets was not eligible for exemption u/s 11(1) as application of income and also erred in not deciding about the depreciation allowed by the Assessing Officers.. 12.1.In this regard, we find that the Assessing Officer had allowed depreciation and disallowed cost of fixed assets from application of income which was confirmed by the ld CIT(A) because the exemption u/s 11(1) was denied by the AO. 12.2. We have considered rival submissions and find that this ground of appeal is also consequential to ground nos 1, 2, 3 and 4 which are allowed in the favour of the Assessee. The Assessing Officer is directed to allow the cost of acquisitio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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