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TMI Blog2020 (1) TMI 610X X X X Extracts X X X X X X X X Extracts X X X X ..... ows the assessee to enjoy double deduction. 3. That on the facts and circumstances of the case, the Ld. CIT(A) has erred in considering capital gain of Rs. 8,40,000/- on sale of cars to be qualified for exemption u/s. 11(1 A) of the Income Tax Act, 1961 ignoring that the sale proceeds was not utilized to acquire new assets as required in the provision, instead sale proceed was deducted from the block of fixed assets in a case where cost of acquisition of ail fixed assets is considered as nil after Exemption u/s. 11(1)(d) of the Income Tax Act, 1961. 4. That on the facts and circumstances of the case, the Ld. CIT(A) has erred in allowing administrative and establishment expenses" of Rs. 3,54,12,977/- in computation for determination of quantum of accumulation u/s. 11(1)(a) of the I. T. Act, 1961. 5. That on the facts and circumstances of the case, the Ld. CIT(A) has erred in allowing to set off of earlier loss of Rs. 6,04,16,031/- against the principles that loss is negative profit and when profit is exempted, loss is also exempted. 6. That on the facts and circumstances of the case, the Ld. CIT(A) has erred in allowing loss of Rs. 1,14,75,323/- from the business of running ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amounting to Rs. 2,84,67,351/-, as the claim of depreciation on assets for which the acquisition cost to the assessee is nil, allows the assessee to enjoy double deduction, which is not permitted under the Act. The ld DR further submitted that section 11(6) of the Act, inserted in this finance Act, put the debate to rest. Section 11(6) of the Act clearly stated that claim of depreciation would not be allowed if the cost of the asset is taken as application, therefore, the addition made by the AO should be sustained. On the other hand, ld Counsel for the assessee defended the order passed by the ld CIT(A). We note that sub-section (6) to section 11 was inserted by the Finance (no. 2) Act, 2014, w.e.f. 01.04.2015, which states that if acquisition of assets had been claimed as application, then depreciation is not allowable. We note that the said sub-section(6) of section 11 is applicable w.e.f. 01.04.2015 but in assessee`s case under consideration the assessment year is 2012-13, therefore amended section 11(6) does not apply to the assessee. Hence, the decision of the jurisdictional High Court of Calcutta in CIT vs. Siliguri Regulated Market Committee (2014) 366 ITR 51,will hold go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here cost of acquisition of all fixed assets is considered as nil after Exemption u/s. 11(1)(d) of the Income Tax Act, 1961." 8.Brief facts qua the issue are that during the assessment proceedings the AO noticed that assessee trust had sold capital assets for Rs. 8,40,000/-. The AO noted that in case of entities registered u/s 12AA of the Act, entire expenditure incurred for acquisition of capital assets are treated as application of income for charitable purposes u/s 11 (l)(a) of the Act, in the respective years in which such assets are procured. When capital expenditure is treated as application of income for charitable purposes, the assessee virtually enjoys a 100% write off of the cost of assets, therefore when the trust sales the said capital assets then net sale consideration is taxable as capital gain. That is, the AO was of the view that when acquisition of assets is treated as application of income for charitable purposes, the value of assets stands fully written off, and over and above, if it is again allowed to determine the capital gains, then the same will result in double deduction of capital expenditure leading to violation of the provisions of Section 11(1) which r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pital gains qualify for exemption u/s 11 (1A) of the Act. 11. Ground No. 4 raised by the Revenue reads as follows: 4. That on the facts and circumstances of the case, the Ld. CIT(A) has erred in allowing administrative and establishment expenses" of Rs. 3,54,12,977/- in computation for determination of quantum of accumulation u/s. 11(1)(a) of the I. T. Act, 1961. 12. Brief facts qua the issue are that during the assessment proceedings the AO noticed that assessee had claimed administrative & establishment expenses of Rs. 3,54,12,977/- which were neither directly nor proximately related to charitable purpose. These expenditures were not directly related to achieve the objectives of charity. It is the net income, after deducting these expenses, is available in the hands of the assessee trust for charitable activity. These are expenses attributable to earning income and not application of income u/s 11 of the Act. Thus AO was of the view that "All applications are undoubtedly expenses but all expenses are not application of income". The AO noted that income available for application u/s 11 is to be computed in normal commercial manner. The administrative and establishment expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) and other materials available on record. We note that ld. DR has primarily reiterated the stand taken by the Assessing Officer which we have already noted in our earlier para and the same is not being repeated for the sake of brevity and on the other hand the ld. Counsel for the assessee relied on the order of the ld CIT(A). We note that ld CIT(A) deleted the addition made by AO observing the following: "So here too- it is presumption, so choose and pick. Advertisement: It is normal and expected for a school to advertise. How else would be general public know about it. Audit fees: Audit is statutory; so the fess necessary. Conveyance: Unless conveyance is incurred, how will the teachers / staff, administration arrive / commute to the school. Other expenses: Are incidental expenses. License Fees: Necessary fees for the school to function. Professional charges: incurred as considered necessary by the school. Expenses of the society: Are expenses incurred for the society, so that the school is running and functioning. So, even on facts, it is but presumption and surmises. A moot point that requires to be considered, over and above these debates, is that in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee cannot base a fresh claim of this year by digging out facts from earlier years, proceeding of which has long been barred by limitation of time. In those years the returned and assessed income was Nil and not at loss. In view of all the above, the claim of the assessee in respect of set off of earlier years' excess of expenditure over income with the income of this year was not allowed by assessing officer. 17. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A) who has stated in his order that he had allowed substantive grounds therefore issue raised by the assessee became non est in the eye of law, as the revised total income is at Rs. Nil. However, ld CIT(A) also made it clear that such claim for set off is allowable as per judicial decisions of the said issue. 18. Aggrieved by the order of the ld. CIT(A), the revenue is in appeal before us. 19. We heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials availab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the Gujarat High Court have answered the questions in favour of the assessee and against the revenue. 6. Following the aforesaid decisions of the Rajasthan and the Gujarat High Courts, we answer the second question referred to us in favour of the assessee and against the revenue." 20. The findings of ld CIT(A), in brief is given below: "11.3.1 I was wondering, was bemused- that when this issue has been raised in the beginning part of the impugned assessment order [and the quantum involved also being the highest, at Rs. 6,04,16,031/-] - the opening overture to the impugned assessment order; then why did the appellant /A.R put this issue only towards the end of the Grounds of Appeal? And the A.R's submissions toosnappy? Upon considering the entire Appeal, and the preceding Grounds of Appeal above - then it is seen as to why the appellant / A.R. had aptly put this issue towards this end of the Grounds of Appeal - because it is only a residuary / alternate issue. Residuary because- the preceding quantum grounds of appeal were the determinant grounds. As stated in the impugned assessment order that no such claim was made in the return of income, but that the claim was made o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crutiny proceedings the AO noticed that assessee trust is providing school bus service to the students and also providing hostel facility for students on payment basis which is against the objective of the trust. The AO was of the view that these are pure business activities but pertaining to attainment of the objective of the trust. The total receipt from these services amounting to Rs. 7,79,57,500/- and Rs. 64,50,000/- on account of school bus and hostel fees respectively were booked in the income side of the Income & Expenditure account and the respective expenses amounting to Rs. 8,94,32,823/- and Rs. 85,06,304/- were booked on the expenses side. The AO was of the view that assessee trust is doing business by providing bus services and hostel services, hence assessee trust needs to maintain separate books of accounts. Therefore, AO disallowed the loss on account of school bus service at Rs. 1,14,75,323/-( Rs. 7,79,57,500-Rs. 8,94,32,823) and income of Rs. 20,56,304/-( Rs. 85,06,304 -Rs. 64,50,000) on account of hostel service. 23. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A) who has deleted the addition made b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and, the Hostel activities - are but necessary, and are incidental to the attainment of the objectives of the trust. Separate books of accounts are maintained. Thus these activities are squarely covered by the exemption u/s 11 (4A). Further, from the figures of the receipts and expenses itself, stated in the discussion in the impugned assessment order, it is clearly evident that in these activities the appellant had incurred loss. So where is the issue of being "business undertaking' u/s 11(4), or, 'business' u/s 11 (4A). Section 11(4) does not arise at all - as the school bus, as also the hostel are not business undertaking'. As already stated in preceding sub-para above - these are covered by the exemption u/s 11(4A). In this regards, for academic discussion sake, the DCIT AO for his views states that the income/loss need to be booked in the computation of income as per section 11(4) read with 11(4A). This cannot be so. Section 11(4) and 11(4A) are separate and exclusive - section 11(4) is when there is "business undertaking' and that the AO may determine the excess over as shown in the accounts; whereas section 11(4A) is for exemption of "business' provided that the busin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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