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TMI Blog2016 (5) TMI 1567X X X X Extracts X X X X X X X X Extracts X X X X ..... case and in law, the Ld.CIT(A) has erred in allowing the claim of depreciation to the assessee on the fixed assets which were claimed as application of income in earlier years. 4. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in allowing the claim of depreciation of Rs. 33,34,307/- to the assessee ignoring the recent judgement of the jurisdictional High Court in the case of Charanjiv Charitable Trust vs DIT(E) in ITA No.321, 322 and 323/2013 dated 18.03.2014 wherein the Hon'ble Court has held that the Tribunal was not justified in directing the allowance of depreciation in respect of such assets. 5. The appellant craves leave to add, to alter or amend any ground of appeal raised above at the time of hearing." 2. Right at the outset, it was submitted by the ld.AR that the point at issue is fully covered in favour of the assessee as the CIT(A) has followed the order of the ITAT passed in the immediately preceding assessment year on identical facts and circumstances. The position was not disputed by the Revenue. Accordingly the Ld.AR was required to show how it is claimed that the issues are same. The Ld.Sr.DR stated that he has no objec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considering the order of the ITAT merely placed reliance on the assessment order. No distinguishing facts or circumstance was brought to the notice of the Bench in order to canvass a contrary view. 4. We have heard the rival submissions and perused the material available on record. It is seen that the AO in the year under consideration as in the earlier year formed the view that the assessee fell in the scope of "general utility" as per section 2(15) of the Income Tax Act, 1961. It is an admitted fact that the facts and circumstances in the year under consideration continue to remain the same as in the earlier years and that there is no change in the Memorandum of Association and the activities of the assessee as compared to the earlier years. The AO took into consideration the fact that the assessee is registered u/s 12A of the Income Tax Act, 1961 vide registration dated 15.05.1971. The Trust also received order u/s 80G(5)(vi) vide DIT (Exemption) Delhi order dated 02.12.2009 applicable for period commencing from A.Y.2010-11 to A.Y.2012-13. The objects of the Society the AO noticed was claimed to be to maintain and conduct one or more National or International Youth Centres at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order of the ITAT for 2009-10 A.Y. and taking note of the fact that there was a similar denial in 2010-11 A.Y. also on identical fact which issue also stood concluded in favour of the assessee, the appeal of the assessee was allowed by the CIT(A) holding as under:- 4. "The facts emanating from the order of the AO and the submissions of the assessee is that the assessee is charitable Trust and is registered as per Trust Deed dated 10.08.1961. The Trust is registered u/s 12AA(1) dated 15.05.11974 and also u/s 80G dated 02.12.2009. The Trust was founded with the object of charitable work of promoting the welfare with youth etc. The Trust was founded by the World Assembly of Youth, India and the following trustees were appointed:- i) Shri Morari Desai (Chairman) ii) Smt. Indira Gandhi iii) Shri Naval H.tata iv) Shri Ravindra Verma v) Shri Viren J.Shah vi) Shri Ram Krishna Bajaj (Managing Trustee) 4.5. "I have considered the order of the AO and the submissions of the assessee and I find considerable merit in the submissions of the assessee that the AO is not justified to deny the exemption u/s 11(1) as the assessee is involved in the charitable work of promoting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a 24.11.2008 120690 C/o Asianet 13.03.2009 7300 4.5. In the facts of the present case also a similar inference has been drawn by the AO on the basis of the following entries in Form 26AS:- Form 26AS Entry Amount Paid (Rs.) Janvikas 329782 Centre for Science and Environment 382758 Indira Gandhi National Centre for the Arts 1146263 NASSCOM 880658 National School of Drama 3891667 4.6. The inference drawn on those facts for concluding that there was commercial activity was dispelled by the ITAT in the aforesaid order concurring with the following conclusion of the CIT(A):- 4.1. "The CIT(A) further elaborated the finding arrived at in para 6.2 by holding that the AO has not been able to appreciate the nature of the hostel and canteen activities and the AO had also not appreciated that the receipt on account of the auditorium and Conference Hall of Rs. 1.43 crore odd included the sum of Rs. 1.02 crore odd on account of the rental and the balance amount represented the receipt on account of conferences organized in the auditorium. He held that all these activities were part of the objects of the trust and for the cause of the youth on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eria. Accordingly the general and vague answer of the assessee have rightly been rejected by the AO who has held that the hostel/canteen facility were utilized by the assessee and run on commercial lines. Inviting attention to Section 2(15) of the Income Tax Act, it was her submission that the activities which were in the nature of trade, commerce, business as per the proviso cannot termed to be coming under the umbrella of "other charitable activities" as envisaged by the statute and the claim of the assessee has rightly been rejected by the AO. The AO it was her submission has identified the features which distinguish an activity which is in the nature of trade and business and all the requirements are fulfilled by the assessee. The judgements relied upon by the AO it was her submission have been distinguished on frivolous reasons by the assessee. Inviting attention to the list of sponsors as were available in the 26AS information available to the department vis-à-vis the list given by the assessee, it was her submission that there were a lot of discrepancies. It was also her submission that membership list given by the assessee pertaining to specific period i.e 01.04.2008 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prior to them for making these arrangements personally or over phone. After enquiry we left the place. Sd/- Sushma Rani Inspector Trust Circle-II, New Delhi Witness 1. Omvir Singh, Sr. TA 2. Arun Kumar, TA 3. (emphasis provided) 4.8. The arguments of the Revenue were equally vehemently contested by the Ld.AR. For the sake of completeness these are reproduced hereunder:- 5.2. "Ld. AR on the other hand heavily relying upon the impugned order contended that the CIT(A) has met each and every argument/objections of the AO with cogent reasoning. It was his submission that the AO on the other hand has failed to appreciate that the activities of the trust were towards the aims and objects of the trust alone. It was also his contention that undue emphasis has been laid upon the Inspector's Report by the AO as apart from that this which has been explained there are only suspicious which it was submitted cannot take the place of evidence. It was argued where the inmates of the hostel necessarily utilize the facility for short duration the hostel inmates frequently change in such a scenario it is practically impossible for anyone to ensure control to the extent that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounts vary. Looking at the sheer number of students who utilize the facilities it was submitted makes it impossible to monitor whether the person utilizing the facilities is actually a resident of the hostel or an outsider and if any stray person has utilized these facilities hoodwinking the serving staff than the assessee trust cannot penalized. Inviting attention to paper book page no-27 which contains the copy of the trust deed whose objects are enshrined at page 31, the said deed it was submitted underwent a change in regard to its name by way of a supplementary deed of trust copy placed at page 23-35 of the paper book. Addressing the same it was submitted that the name of the assessee trust was changed from "World Assembly of youth India" to "India Youth Centre". The objects continued to remain the same. Inviting attention to page 30 it was submitted that the trust was having a corpus of Rs. 1000/- as the trust's funds and inviting attention to page 619-814 it was submitted that this contains a copy of list of the Organizations/NGOs, Members and the documents which have been submitted or collected showing their eligibility of membership and before the hostel facility or semina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nataka State. The target group is identified as under :- "Targget Group (e.g. children/Women/Youth etc.)-Schools, colleges, Technical Colleges students, SHG Groups, Hostel etc." The thrust area is "the State of Karnataka". The project undertaken is "State Government Grant Project, Aded School Grant, Watershed Grant, Zilla Panchayat Grant etc." 5.2.4. Herein also, it was submitted that the relevant documents are attached namely copy of Registration Certificate, copy of the trust deed, Annual Report, Audited statement of account, Memorandum of Association, etc. are attached along with this. Accordingly it was his submission that the suspicion raised by the Sr. DR by referring to the fact that there is no name recorded in the bill is incorrect and each and every bill will show that not only the name but even the Copy of the Trust Deed or Registration etc. of the organization required to be furnished and is available on record and an abbreviation of the NGO recorded does not mean that the documentation is wanting. It was his submission that the documents were available before the AO, he does not care to look at them and operates on suspicion and even today the paper book is av ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by them and no where they had committed that it will be served also for the purposes other than the objectives of the activities for which it was intended. They had merely answered a query. Therefore, it would be inappropriate to conclude that what they had stated involve commercial activities." ............................... 4.9. Considering these arguments, it is seen that the order which has been followed by the CIT(A) proceeded to give a detailed finding on facts and rejecting the departmental grounds and upholding the impugned order. The same is reproduced hereunder for ready-reference:- 6. We have heard the rival submissions and perused the material available on record. The documents relied upon before us in the paper book and the case laws referred to and the orders of the authorities have been taken into consideration. The objects of the trust available at pages 31 & 32 read as under :- "4.(a) To establish, maintain and conduct one or more National or international Youth Centre at suitable centres in India for practicing international understanding and cooperation and developing youth leadership; (b) Each such Youth Centre may be multi-purpose in character fun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s merely attending conference or is a rank outsider has not been accepted. On account of this lack of full control by the canteen staff on their facilities being used as is evidenced by Inspector's Report, the Revenue would want to argue that the assessee trust through its canteen facilities is functioning on commercial lines. Similarly the Revenue has also assailed the impugned order on the ground that information as per the 26 AS is that certain corporate entities have utilized the facilities thereby leading to the presumption that the hostel and canteen facilities are being used on commercial lines. On the other hand, on behalf of the assessee, the contention has been that the assessee maintains very strict checks for making available its hostel facilities. Various pages in the paper book referred to show that the assessee requires the filling of Membership Form which requires the specific and relevant information of the organization making a booking. If it is a Trust/NGO etc., the copy of the Deed of Registration, financial statements, sources of fund, the purpose of the stay, the aims and objects the thrust area, the target group etc. are required to be mentioned. It has also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emonstrate that specific no for rooms have been book by specified organizations on specified dates namely M/s Positive Women Network; Socio Legal Information Centre; and Indo- Global Social Service Society respectively and all these bills have a similar narration with regard to the membership fee that it is only for 28 days starting from the date of checkin which necessarily differs for each one of them. For ready-reference, we reproduce from pages 79-81 of the paper book as under :- M/s Positive Women Network Note:-This membership fees is valid for the next 28 days from the date of checkin 01-Oct-2008 and Upto 28-Oct-2008 for rooms only. Please retain copy of this bill to avoid the repayment of membership fees. This membership fees is valid for Room(s0 only and cannot be adjusted against the other services. Socio Legal Information Centre Note:-This membership fees is valid for the next 28 days from the date of checkin 26-Jun-2008 and Upto Date 23-Jul-2008 for rooms only. Please retain copy of this bill to avoid the repayment of membership fees. This membership fees is valid for Room(s) only and cannot be adjusted against the other services. Indo-Global Social Servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We have also taken into consideration, the objections posed by the AO to the advertisement which was placed by the assessee in order to invite attention of the NGOs etc. to utilize the hostel facilities and auditorium and seminar facilities in order to promote leadership activities for the youth of the country and find ourselves in harmony with the findings of the CIT(A) as it does not lead to the conclusion that the activities are in the nature of commercial activity. Merely advertising the fact that facility of hostel, seminar halls, auditorium etc. can be used by organizations interested in having leadership programs for the benefit of youth does not make the activity a commercial activity. We have also taken into consideration the arguments advanced by the assessee before us in support of the impugned order which are found supported by the explanation dtd. 19.12.2011 afforded by the assessee before the AO, copies placed at pages 510-516 of the paper book in response to show cause notice dated 19.12.2011 wherein apart from relying upon the letters dated 8.8.2011, 8.9.2011.13.10.2011, 20.11.2011, 28.11.2011, 5.12.2011 and 12.12.2011 the assessee as an illustration has made refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s seen that identical claim of the Revenue has been considered by the ITAT. No change in fact or circumstance has either been referred to by the Ld. Sr. DR nor has been brought out in the assessment order. In the absence of any infirmity having been pointed out, we find no good reason to deviate from the view taken. Holding the conclusion of the CIT(A) in relying thereon justified on facts and law the departmental ground is dismissed. 5. Addressing the issue raised in Ground No.3 & 4 by the Revenue, the Ld.AR again placed reliance on the afore-said order on the ITAT and invited specific attention to pages 29 to 31 para 7 to 7.1 of the same also submitted that the issue is covered in assessee's favour. Referring to the judgements cited by the Revenue in its ground namely DIT(E) vs Charaniv Charitable Trust in ITA No.322-323/2013 dated 18.03.2014, it was submitted that the said judgement has been over-ruled by the Delhi High Court in the DIT(E) vs Indraprastha Cancer Society []2015 229 Taxman 93 (Delhi). The Ld. Sr. DR did not offer any argument in rebuttal on considering the following finding arrived at by the ITAT:- 7. "We have heard the rival submissions and perused the materia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of its income under Section 11. The only question is whether the income of/he assessee should be computed on commercial principles and in doing so whether depreciation on fixed assets utilized for the charitable purposes should he allowed. On this issue. there seems to be a consensus of judicial thinking as is seen from the authorities relied upon by the CIT(Appeals) as well as the Tribunal. In ClT vs. The Society of the Sisters of St. Anme (Supra), an identical question arose before the Karnataka High Court. There the society was running a school in Bangalore and was allowed exemption under Section11. The question arose as to how the income available for application to charitable and religious purposes should be computed. Jagannatha Setty, J speaking for the Division Bench of' the Court held that income derived from property held under trust cannot be the "total income" as defined in Section 2(45) of the Act and that the word "income" is a wider term than the expression "profits and gains of business or profession". Reference was made to the nature of depreciation and it was pointed out that depreciation was nothing but decrease in the value of property through wear, deter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Revenue nor any contrary decision has been referred to for our consideration we find no merit in the departmental ground. Being satisfied with the reasoning and finding of the CIT(A), the ground is dismissed. 6. We further find that the Hon'ble Delhi High Court in the case Indraprastha Cancer Society (cited supra) following the Vishwa Jagriti Missiion decided the issue as under:- 10. "The aforesaid paragraph refers to the decision in the case of Vishwa Jagriti Mission (supra) but ratio was distinguished on the ground that in the said case the Court was concerned with computation of income of a charitable trust/institution on commercial principles and if so whether depreciation on fixed assets used for charitable purposes should be allowed as a deduction. The consensus of judicial opinion on the said aspect was referred to. It is noticeable that in Charanjiv Charitable Trust (supra) it stands observed that the Tribunal overlooked the fact that the cost of asset had been allowed as a "deduction" and thereafter deprecation was being claimed. The said case, therefore, appears to be a peculiar one wherein deduction as expenditures and deprecation was being claimed simultaneous ..... X X X X Extracts X X X X X X X X Extracts X X X X
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