TMI Blog2020 (4) TMI 393X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ld.CIT(A) has travelled beyond his jurisdiction while deciding the consequential order. We observe from the consequential order that since the AO has failed to examine the claim of the assessee for exemption u/s 10(23C), 11, 12 and 13 and the Ld.CIT(A) has rightly examined the issue and allowed eligible exemption which is within the jurisdiction of the CIT(A). Hence, we do not find any reason to interfere with the order of the Ld.CIT(A) and the same is upheld. The appeal of the revenue is dismissed. - I.T.A.No.376/Viz/2019 and 377/Viz/2019, Cross Objection No.122/Viz/2019 Arising out of I.T.A.No.376/Viz/2019, I.T.A.No.403/Viz/2019 - - - Dated:- 30-1-2020 - Shri V. Durga Rao, Judicial Member And Shri D.S. Sunder Singh, Accountant Member For the Assessee : Shri M.A.Rahim, AR For the Revenue : Shri Ravi Shankar Narayan, CIT, DR ORDER PER SHRI D.S.SUNDER SINGH, ACCOUNTANT MEMBER : These appeals are filed by the revenue against the order of the Commissioner of Income Tax (Appeals) [CIT(A)], Vijayawada in Appeal No.10118 10119/CIT(A)/VJA/18-19 dated 15.03.2019 for the Assessment Year (A.Y.) 2013-14 and 2014-15, cross appeal filed by the assessee against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision of Hon ble Supreme Court in the case of CIT Vs. Rajasthan and Gujarathi Charitable Foundation Poona (2018) 402 ITR 441, wherein, Hon ble Apex Court held that the depreciation is allowable on the value of capital assets that was treated as application of income in the years in which the assets were acquired. Thus, the Ld.AR contended before the Ld.CIT(A) that the AO has wrongly assessed the income at ₹ 6,99,55,960/-. The Ld.AR further stated that in the consequential order though the AO has allowed the exemption of income but disallowed the entire depreciation without verifying the details disregarding the direction of the Ld.CIT(A), therefore, argued that the consequential order passed by the Ld.AO was incorrect and bad in law, hence, requested to set aside the order of the AO and allow the appeal of the assessee. The Ld.CIT(A) considered the submissions of the assessee and found that AO has not examined the issues of exemption u/s 11,12 13 and 10(23C). The Ld.CIT(A) also found that the CIT(A) has directed the AO to allow the depreciation on those assets whose value was not claimed as application of income by the assessee in the years in which the assets were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ui/s 10(23C) the entire income of the assessee is eligible for exemption if the provisions of section 10(23C) are invoked. Accordingly the Ld.CIT(A) deleted the additions made by the AO and allowed the appeal of the assessee. 5. Against which the revenue has filed appeal before the Tribunal. During the appeal hearing, the Ld.DR argued that the Ld.CIT(A) has travelled beyond his jurisdiction while deciding the appeal. In the original appeal order dated 01.03.2018, the Ld.CIT(A) allowed the exemption u/s 10(23C), 11 and 12 of the Act, however, with regard to the depreciation, the Ld.CIT(A) directed the AO to allow the depreciation only on the assets which were not claimed as application of income in the years in which the assets were acquired. The consequential order required to be restricted to the directions of the CIT(A), according to which the AO is required to allow exemption u/s 10(23C,) 11 and 12 and the depreciation on the assets which were not claimed as application of income. The AO given effect to the order of the Ld.CIT(A) accordingly, hence argued that the Ld.CIT(A) travelled beyond his jurisdiction and allowed exemption u/s 10(23C) and 11 and 12 recasting the enti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applied the provisions u/s 10(23C)(iv), 10 and 11 correctly and given a correct finding. Hence submitted that there is no error in the order of the Ld.CIT(A) and requested to uphold the order of the Ld.CIT(A) and allow the appeal of the assessee. 7. We have heard both the parties and perused the material placed on record. As observed from para No.7.4 of the order of the Ld.CIT(A) in assessee s case, the ITAT, Visakhapatnam vide I.T.A. 93 241/Viz/2015 and I.T.A. No.01/Viz/2016 dt.10.11.2017 held that the assessee is eligible for exemption under the provisions of section 11, 12 and 13 of the Act and also section 10(23C)(iv) which was already granted to the assessee from the A.Y.2008-09 onwards by CCIT, Hyderabad-III vide letter dated 27.02.2009. Hence, the Ld.CIT(A) directed the AO to allow the exemption u/s 11, 12 and 10(23C)(iv) of the Act. However, the Ld.CIT(A) directed the AO to restrict the depreciation on the assets which were not claimed as application of income in the year in which they were acquired. The AO given effect to the order of the Ld.CIT(A) which is placed in page No.4 of the paper book. The AO simply allowed relief of ₹ 5,96,56,184/- without examining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Application of income required to the extent of 85% of the above for being eligible for the exemption 25,01,80,265 Application of income during the year : Revenue expenditure debited to Income Expenditure account including depreciation 23,41,95,993 Add : Capital expenditure during the year 6,82,78,322 30,24,74,315 Less : depreciation 6,99,55,960 Application of income 23,25,18,355 Shortfall in application of income 1,76,61,910 24. It was further pointed out that the assessee has given advances during the year towards meeting various expenses, which are in excess of the above mentioned shortfall of ₹ 1,76,61,910/- and the said advances also have to be considered as application of income for the purpose of exemption u/s. 11 of the Act. It was contended that if the advances given are considered as application of income to the said extent of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As can be seen from the above, the application of income made by the assessee during the year amounted to ₹ 23,25,18,355/- as against the required amount of application of income of ₹ 25,01,80,265/-. Thus, it is seen that there is a shortfall in the application of income to the extent of ₹ 1,76,61,910/-. In this regard, it was contended by the assessee that it has given advances during the year for meeting various expenses which are in excess of ₹ 1,76,61,910/- and that the said advances are eligible to be considered as application of income, It was contended that if the same are taken into consideration, the assessee has fulfilled the requirement of application of 85% of the income and the entire income of the assessee is therefore exempt u/s. 11 of the Act. 34. In view of the above, it cannot be considered that the shortfall of ₹ 1,76,61,910/- in the application of income for the year has been made good by way of advances given during the year. Consequently, it is required to be held that the assessee is not eligible for exemption u/s.11 to the extent of the shortfall of ₹ 1,76,61,910/-, though it is eligible for the exemption of the remai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the entire, income of the assessee is exempt u/s. 10(23C)(iv) and the taxable income of the assessee is Nil for the assessment year under consideration. The AO is directed accordingly. These grounds of appeal are therefore allowed. 8. From the above order of the Ld.CIT(A), it is found that the Ld.CIT(A) has applied the provisions of section 10(23C) correctly and allowed the exemption and given a finding that the taxable income would be Rs.Nil since, the assessee had applied the income to the extent of 85% as required u/s 10(23C) of the Act. Further, the Hon ble Supreme Court in the case of CIT Vs. Rajasthan and Gujarathi Charitable Foundation Poona (supra) held that the depreciation allowable on the assets treated as application of income also in the years in which the assets were acquired. As on the date of passing the order of the Ld.CIT(A), the decision of Hon ble Supreme Court is available, hence, the Ld.CIT(A) is bound to consider the decision of Hon ble Apex court also. The department could not find any mistake in the order of the Ld.CIT(A) except arguing that the Ld.CIT(A) has travelled beyond his jurisdiction while deciding the consequential order. We observe fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lfilled the condition laid down in third proviso to Sec. 10(23C) for claiming exemption with regard to the shortfall of Ps. 61,21,693/-in the application of income. Hence, the assessee is not eligible for exemption u/s 10(23c)(iv) with regard to the shortfall in application of income of ₹ 61,21,693/-. 11. We have heard rival contentions and perused the material placed on record. The facts are identical to the issues raised in A.Y.2013-14 except the difference in amounts. We have already decided the appeal in the earlier appeal that the AO is bound to allow the exemption u/s 10(23C), 11, 12 and 13. In the consequential order, the AO did not examine the issues, therefore, the Ld.CIT(A) has rightly examined the issue and allowed the appeal of the assessee partly. However, the Ld.CIT(A) did not consider the decision of Hon ble Supreme Court in the case of CIT Vs. Rajasthan and Gujarathi Charitable Foundation Poona (supra) and wherein, the Hon ble Apex Court held that the depreciation is allowable on assets treated as application of income also. Since the decision of Hon ble apex court is available at the time of deciding the appeal, the appellate authorities are bound to fol ..... X X X X Extracts X X X X X X X X Extracts X X X X
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