TMI Blog2022 (3) TMI 153X X X X Extracts X X X X X X X X Extracts X X X X ..... qualify as business income. The earning of interest on surplus funds kept with GSFC Limited is incidental to its dominant objective i.e. to encourage sports in the State of Gujarat, which we have concluded itself cannot qualify as a business activity. Therefore, in our considered view, interest income earned from surplus fund cannot qualify as income from business and profession . - Decided against assessee. Claim of depreciation against Interest Income - HELD THAT:- As noted above, the assessee in the present set of facts is not earning any business income and has earned only interest income which is assessable as income from other sources . Accordingly, in our view, depreciation as claimed by the assessee cannot be allowed. We accordingly uphold the order of Ld. CIT(A) and dismiss the appeal of the assessee in respect of ground no. 3. - ITA No. 943/Ahd/2019 - - - Dated:- 28-2-2022 - Shri P.M. Jagtap, Vice President And Shri Siddhartha Nautiyal, Judicial Member For the Assessee : Shri Suresh Gandhi, A.R. For the Revenue : Shri Anshu Prakash, CIT-D.R. ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:- This is an appeal filed by the assessee aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lared under the head income from business and profession . During the course of assessment proceedings, the assessee admitted that the Society got its registration u/s. 12AA of the Act only on 06-09-2015 w.e.f. A.Y. 2015-16. Therefore, the Society is not eligible for exemption u/s. 12AA of the Act for the year under consideration i.e. A.Y. 2010-11. The Assessing Officer on perusal of the objectives listed in memorandum of objectives filed by the assessee noted that none of objectives speaks of any business or profession or even any ancillary business to the said sporting activities. The Assessing Officer noted that the interest income has been earned by the Society out of investment of surplus grants in GSFC Ltd. The ld. Assessing Officer asked the assessee as to why the claim of depreciation out of interest income is allowable against this interest income. 3.1 In response, the assessee submitted that the assessee receives grants from Government in one go (lump sum) and the utilization takes place in installments and therefore there is surplus fund which is used to create fixed deposits on which interest income is earned. The interest income so earned is subsequently utilized f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim of depreciation to the tune of ₹ 1,15,65,042/- was disallowed by the Assessing Officer. 4. In the appeal before the ld. CIT(A) -9 Ahmedabad, the assessee raised similar arguments to the effect that interest income earned on fixed deposits made for the purpose of business should be considered as business income and not as income from other sources and accordingly depreciation should be allowed on the same. The ld. CIT(A) rejected the assessee s claim while observing that the case of Samsung Engineering Ltd. on which reliance has been placed by the assessee is distinguishable on facts since in that case, the surplus funds were deposited in the form of fixed deposits so as to obtain the letters of credit and performance bonds at the instances of bankers who insisted on keeping the margin money with the bankers. In the instant case, the assessee had made deposits with GSFC (a Govt. undertaking) with the prime object to earn interest on the surplus funds lying with the assessee. Considering these facts, the ld. CIT(A) confirmed the Assessing Officer s action to treat the interest income of ₹ 1,15,71,995/- as income from other sources. In respect of assessee s claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.2 The assessee is a society registered under the under the Society Registration Act, 1960 with the object to augment and promote sports in the State of Gujarat. From a perusal of the Memorandum of Objectives filed by the AR of the assessee before the Ld. AO, he observed that the assessee society has been created by the Gujarat Government to promote sport in the State of Gujarat (clause 2 of the said Memorandum). The Ld. AO noted that there are 25 Objectives listed in the said Clause 2 but none of the objectives is about carrying out any business or profession or even ancillary business to the said sporting activity. The Society is funded by the Government of Gujarat by way of grant provided by the Ministry of Sports and Cultural activities of the Government of Gujarat to carry out various sports related activities. The interest income is earned out of deposit of surplus funds in GFSC Limited. During the course of arguments before us, the Ld. AR of the assessee has not brought forth any arguments or placed any material to contest or disprove the above factual finding of fact recorded by the Ld. AO. The only argument put forth by the Ld. AR of the assessee is that interest inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the sustenance of charitable activities, that a fee could be charged. In the case of the assessee on the other hand, there is no fee whatsoever and in fact, it is passive income not involving any activity whatsoever. Therefore, the AO was not correct in holding that act of deposit of money in schedule bank account and receipt of interest thereon is an activity in the nature of trade, commerce or business. 6.6 In the case of Institute of Chartered Accountants of India v. Director General of Income-tax (Exemptions), Delhi [2013] 35 taxmann.com 140 (Delhi) , the Delhi High Court held that where dominant objective of ICAI was to regulate profession of Chartered Accountancy in India, it was a charitable institution and conducting coaching classes and campus placements for a fee could not be held as business as per section 2(15). The Delhi High Court made the following observations: After going through the provisions of the ICAI Act and the Regulations framed therein as well as various activities carried on by the petitioner, we are of the view that the petitioner institute does not carry on any business, trade or commerce . The activity of imparting education in the field ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Taxman 275/[2013] 40 taxmann.com 250 (Mad .), the assessee, a Cricket Association, receiving income from holding of matches and was receiving sums therefrom, was denied exemption on the ground that it was engaged in the activities in the nature of trade or commerce or business. The Hon'ble High Court reversed the order holding that substantial/regular surplus cannot taint receipts as arising from business/commerce. By the volume of receipt one cannot draw inference that the activity is commercial. 6.9 In the case of Dahisar Sports Foundation v. ITO [2017] 87 taxmann.com 313 (Mumbai) , the ITAT Mumbai held that where main object or purpose of assessee charitable trust was promotion of sports and games, merely because trust collected certain charges from coaching camps meant for promotion of sports and games only could not alter its character of being charitable. 6.10 In Director of Income-tax (Exemptions), Mumbai v. Shree Nashik Panchvati Panjrapole [2017] 81 taxmann.com 375 (Bombay), the Bombay High Court held that where dominant activity carried out by assessee-trust for over 130 years was to take care of old, sick and disabled cows, incidental activity of selling mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that depreciation u/s. 32(1) or 32(2) is allowable in case any income is assessable under this head only if it is income from letting on hire of any machinery, plant or furniture. However, in the instant case, since income received is from interest on investment of surplus fund and since the same is assessable under the head income from other sources , in our view, depreciation u/s. 32 of the Act is not allowable to the assessee. With respect to the contention of the assessee that in view of the decision of Rakesh Singh Vs. ACIT, ITAT Bangalore wherein the Hon ble Bangalore Bench had held that the Assessing Officer was duty bound to grant depreciation allowance, whether the same is claimed by the assessee or not, in our view, the aforesaid decision in the case of Rakesh Singh vs. ACIT is not applicable to the assessee s set of facts. This aspect was earlier correctly noted by the ld. CIT(A) in his order who held that in the case of Rakesh Singh (supra) there was positive income under the head profits and gains on business or profession and depreciation was claimed on the motor cars which were used for the purpose of business of the assessee and on fulfilling the conditions as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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