Income Tax Appellate Tribunal - Delhi
Vaswani Education Society, vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH 'H' : NEW DELHI)
BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER
AND
SHRI B.C. MEENA, ACCOUNTANT MEMBER
ITA No.3556/Del./2005
(ASSESSMENT YEAR : 1999-2000)
M/s. St. Vaswani Education Society, vs. DCIT, Central Circle 13,
A - 1, Paschim Vihar, New Delhi.
New Delhi.
(PAN : AAAAS4779B)
ITA No.3637/Del./2005
(ASSESSMENT YEAR : 1999-2000)
ACIT, Central Circle 13, vs. M/s. St. Vaswani Education Society,
New Delhi. C/o Bhatnagar International School,
A - 1, Paschim Vihar,
New Delhi.
(PAN : AAAAS4779B)
ITA No.3539/Del./2005
(ASSESSMENT YEAR : 2001-02)
ACIT, Central Circle 13, vs. St. Vaswani Education Society,
New Delhi. C/o Bhatnagar International School,
A - 1, Paschim Vihar,
New Delhi.
(PAN : AAAAS4779B)
ITA No.3552/Del./2007
(ASSESSMENT YEAR : 2002-03)
DCIT, Central Circle 13, vs. St. Vaswani Education Society,
New Delhi. A - 1, Paschim Vihar,
New Delhi.
(PAN : AAAAS4779B)
2 ITA Nos.3556, 3637, 3539 & 3541/Del/2005
ITA No.3552/Del/2007
ITA No.3541/Del./2005
(ASSESSMENT YEAR : 2001-02)
M/s. St. Vaswani Education Society, vs. ACIT, Central Circle 13,
A - 1, Paschim Vihar, New Delhi.
New Delhi.
(PAN : AAAAS4779B)
(APPELLANT) (RESPONDENT)
ASSESSEE BY : Shri P.C. Parwal, CA
REVENUE BY : Shri Sameer Sharma, Senior DR
ORDER
PER B.C. MEENA, ACCOUNTANT MEMBER :
Both these cross appeals (ITA No.3556/Del/2005 & ITA No.3637/Del/2005) emanate from the order of the CIT (A)-II, New Delhi dated 29.06.2005 for the Assessment Year 1999-2000.
2. The assessee is a registered society under the Societies Registration Act of 1860 having come into existence on 26.5.1977. The assessee society was registered u/s 12A of the Income Tax Act, 1961 on 27.01.1979. The return of income declaring Nil income was filed by claiming its income as exempt u/s 11 / 10(23C)(vi) of the Act. The Assessing Officer denied the exemption. The Assessing Officer held that the assessee is running the school and deriving income from business and the schools were run for profit and, therefore, exemption was not granted. The CIT (A) confirmed part of the 3 ITA Nos.3556, 3637, 3539 & 3541/Del/2005 ITA No.3552/Del/2007 action of the Assessing Officer. Now, the assessee is in appeal (ITA No.3556/Del/2005) by taking the following grounds of appeal:-
"1. The Learned Commissioner of Income Tax (Appeals) has erred in facts and in law in confirming the action of assessing officer in denying exemption u/s 10(23C)(VI) to the assessee.
1.1 The Learned Commissioner of Income Tax (Appeals) has erred in facts and in law in not allowing the benefit of exemption u/s 11 of Income Tax Act, 1961.
2. Learned Commissioner of Income Tax (Appeals) has erred in facts and in law in confirming the disallowance of Rs.6,43,613/- on account of depreciation on Building at Virendra Gram, though not making separate disallowance as covered by block assessment.
3. The Learned Commissioner of Income Tax (Appeals) has erred in facts and in law in confirming the disallowance of Rs.50,000/- out of transport and refreshment expenses.
4. The Learned Commissioner of Income Tax (Appeals) has erred in facts and in law in confirming the disallowance of Rs.78,000/- out of various expenses as mentioned in page no. 14 of appellate order.
5. The Learned Commissioner of Income Tax (Appeals) has erred in facts and in law in confirming the disallowance of Rs.19,64,000/- on account of contribution for Vasant Kunj Buildings.
6. The Learned Commissioner of Income Tax (Appeals) has erred in facts and in law in confirming the charging of interest u/s 234A and 234B of Income-tax Act, 1961.
7. The appellant craves to alter, amend and modify any ground of appeal.
8. Necessary cost be awarded to the assessee."4 ITA Nos.3556, 3637, 3539 & 3541/Del/2005 ITA No.3552/Del/2007
Grounds of Department appeal (ITA No.3637/Del/2005) read as under :-
"1. On the facts and circumstances of the case, the Ld. CIT (A) has erred in directing the AO to adopt negative figure of Rs.3,66,763/- instead of NIL figure as per Income & Expenditure A/c for A.Y. 1999-2000 when the same was not accepted by the A.O., as no proper books of account were maintained.
2. On the facts and circumstances of the case, the Ld. CIT (A) has erred in deleting the addition of Rs.9,50,000/- made on account of bogus transport and refreshment expenses when the A.O. had specifically mentioned in the assessment order that the disallowances are made only after considering disallowances made in the block assessment and the assessee will not be entitled to any adjustment for disallowances made in block assessment on account of bogus transport & refreshment expenses.
3. On the facts and circumstances of the case, the Ld. CIT (A) has erred in deleting the addition of Rs.8,02,000/- made on account of expenses other than transport expenses when the A.O. had specifically mentioned in the assessment order that the disallowances are made only after considering disallowances made in the block assessment and the assessee will not be entitled to any adjustment for disallowances made in block assessment on account of bogus expenses."
3. At the time of hearing, the ld. AR submitted that he is not pressing the issue of exemption u/s 10(23C)(vi) of the Act raised vide ground no.1 in the appeal. Therefore, this issue is dismissed as not pressed.
4. With regard to the exemption u/s 11 of the Act raised in ground no.1.1, ld. AR submitted that the assessee society is registered u/s 12A of the Act since long. All the allegations of the Assessing Officer as well as CIT (A) have no relevance to the exemption u/s 11 of the Act. He submitted that 5 ITA Nos.3556, 3637, 3539 & 3541/Del/2005 ITA No.3552/Del/2007 Assessing Officer alleged that society is controlled by salaried persons. In reply to that, the assessee has stated that this allegation is without any basis and there is no prohibition that person managing the society and school cannot draw salary so long as it is reasonable. The Assessing Officer has not disputed the reasonableness of the salary. Further, the Assessing Officer alleged that students transferred from M.S. School to R-Block, Rajinder Nagar and this transfer of students is treated as unity and command by Shri V.K. Bhatnagar. Ld. AR submitted that the students were transferred to another school for higher education and it has no relevance with the exemption u/s 11 of the Act. He further submitted that the allegation of Assessing Officer that the documents of one school or society have been found from the premises of other, i.e. MS-3, A-7 where the details of refreshment of six schools was found and the premises related to Manav Sthali School, Double Storey, Rajinder Nagar, i.e. Manav Shiksha Samiti. In this regard, he submitted that the availability of few papers of one society at premises of other society does not affect the claim of exemption. The other allegation is that the resolution or minutes book have not been produced. Ld. AR submitted that there is only memorandum of records and this also does not affect the claim of exemption. The other allegation is that for any petty work of getting cheque from banks requires the approval of Shri V.K. Bhatnagar. He submitted that this is only administrative control to ensure that 6 ITA Nos.3556, 3637, 3539 & 3541/Del/2005 ITA No.3552/Del/2007 all the funds are utilized for the purpose of the education and this does not also affect the claim of exemption. The Assessing Officer alleged that the analysis of seized documents shows that society has been used as a tool to earn income and claim exemption. The ld. AR submitted that the societies are for educational purpose and not for the purpose of profit. On the allegation of Assessing Officer that various assets acquired by Shri V.K. Bhatnagar and his family members are earning from schools, he submitted that the observation is completely without any basis or without considering the material available on record and it is only the assumption of the Assessing Officer and there is not a single instance of nexus that the personal assets are acquired out of the funds of the schools. The Assessing Officer's allegation that a society is AOP and AOP consists of Shri V.K. Bhatnagar and his family members. This allegation is also not correct. The status of assessee is AOP and it does not mean that it is AOP of Shri V.K. Bhatnagar and his family members. It is an independent society. The Assessing Officer relied on the judicial pronouncements in support of his contention for rejection of claim. The allegation that there are innumerable transactions, which reflect a diversion of funds for personal benefit and under statement of income, various modes of drawing of funds for personal benefits is also without any basis. The DCIT concerned has relied only on the report of the DDIT (Inv.) without making any independent enquiry. The donations received for the education purpose 7 ITA Nos.3556, 3637, 3539 & 3541/Del/2005 ITA No.3552/Del/2007 which is not an advantage use of the funds for Virendra Gram is for the development of the common facilities used by the various schools for the educational purpose. The funds were never used for construction of the residential house. All these allegations are baseless. All the receipts are accounted for. The transfer of the land is as per the decree of the court and the land so exchanged is being used for society for education activities. The assessee has not purchased any share of Baron Air Ltd. as alleged by the Assessing Officer. The observation of the Assessing Officer that the vehicles of the societies/school are used by Shri V.K. Bhatnagar and family is also without any basis. The allegation that salaries are not paid as per the recommendation of the pay commission. The salaries had not been paid and all these persons are actively engaged in the administration of school/society. The funds are withdrawn from the caution money for payment was not commercial purposes but for Virendra Gram for education purposes. The Assessing Officer has not confronted with the persons who have denied the payment and not a single instance of caution money withdrawn through bearer cheque pointed out by the assessing authorities and baseless observation has been made by the Assessing Officer. Similarly, the allegation that payments drawn by Shri Anil Sehgal, consultant in the name of mother and wife is also not correct. No such instances were confronted to the assessee. The allegation that computerized books were produced after a gap 8 ITA Nos.3556, 3637, 3539 & 3541/Del/2005 ITA No.3552/Del/2007 of two years is not correct as the books of accounts were found in the course of search operation. The allegation that loans from societies were taken by Shri V.K. Bhatnagar amounting to Rs.1.01 crore on which no interest has been paid is also not correct and during the year no loan has been given by the society to Shri V.K. Bhatnagar and family members. The actual position is that Shri V.K. Bhatnagar has given loan to V.B. Sansthan and the amount outstanding was Rs.52.84 lacs as on 31.03.1998. The Assessing Officer's observation that the amounts surrendered under the VDIS was only because of donation collection at the time of admission from students is also not correct as there is no evidence to prove the nexus between the donation received from the students and the income declared in the VDIS. The Assessing Officer's allegation that by claiming the depreciation, the assessee has admitted that it is running schools for earning business income has no meaning that how this will effect the claim of exemption of the assessee. There is no evidence that the assessee has diverted the funds and invested in Hotel Hawa Mahal, Jaipur is from his own source of Shri V.K. Bhatnagar and his family members. With regard to the financial control of Shri V.K. Bhatnagar over the schools and Shri Bhatnagar is Chairman in all the societies, the ld. AR submitted that Shri V.K. Bhatnagar has only rendered honorary services for proper administration of different societies and schools run by them. The inflow/outflow of funds is duly recorded in the books and 9 ITA Nos.3556, 3637, 3539 & 3541/Del/2005 ITA No.3552/Del/2007 there is no relevance to exemption. He submitted that the claim of exemption u/s 11 needs to be analysed each year and on the basis of general observations and such benefit cannot be denied. Ld. AR placed reliance on the orders in the cases of Aditanar Educational Institution vs. Additional CIT - 224 ITR 310 (SC), CIT vs. Lagan Kala Upvan - 259 ITR 489 (Del.), Director of Income-tax vs. Lovely Bal Shiksha Parishad - 266 ITR 349 (Del.), ACIT vs. South Point Montessorie School - (2007) 109 TTJ (Gau)(TM) 488. He also relied on the decision of ITAT in the case of Manav Shiksha Samiti (ITA No.1343/Del/2006 order dated 19.06.2006), one of the education society of assessee group.
5. We have heard both the sides on the issue. The assessee society is registered u/s 12A. The assessee submitted audit report in the form of 10B along with audited accounts. The assessee's total receipt for the year was Rs.1,63,65,521/- and the expenditure incurred for the year was Rs.2,19,91,33/-. There was no surplus for the year. This issue has not been discussed by the Assessing Officer and has summarily rejected by the CIT (A). Considering all these facts, we find that revenue is failed to establish that assessee is not entitled for exemption u/s 11 of the Income-tax Act, 1961. The ITAT in the case of Manav Shiksha Samiti, cited supra, one of the education of assessee group, has held as under :-
" The Assessing Officer in the title of the assessment order has clearly accepted that business of the assessee is that of 10 ITA Nos.3556, 3637, 3539 & 3541/Del/2005 ITA No.3552/Del/2007 "running of educational institution". The Assessing Officer allowed exemption to income in excess over expenditure disclosed in the profit and loss account. In other words income other than alleged undisclosed investment was accepted to be exempted under section 10(22) of the Income Tax Act. The requirement of the section 10(22) as noted above is to see whether institution in the relevant period existed solely for education purpose and not for the purpose of profit. There is no finding nor there is shown to any examination of question that assessee did not exist for educational purpose but existed for the purpose of making profit. It has not been disputed even by the Assessing Officer that assessee was an educational institution existing solely for an educational purposes. The above exemption could be denied to the Institution with finding that assessee existed not for purposes of education but for making profit. Without material and without finding on above lines, I see no justification to deny claim of exemption to the assessee. If the assessee satisfied the condition that it is existing solely for educational purposes about which no dispute was raised by the Assessing Officer, then all its income from whatever source is to be granted exemption under the statutory provision. The provision of section 10(22) is independent of provisions of section 11 to 13 of Income Tax Act. It is possible that an educational institution, the assessee can additionally claim that it is a charitable institution and therefore exemption u/s 11 to 13 is also available. In that case question of application and utilizing of income become relevant. But revenue authorities cannot impose condition of section 13 on an assessee claiming exemption u/s 10(22) of the I. T. Act. But it appears that above provisions of section 11 to 13 of the I. T. Act were taken into account by the Assessing Officer and Commissioner of Income Tax (Appeals) to deny exemption to the assessee. In the above approach they clearly ignored requirement of section 10(22) of Income Tax Act and were in error in denying exemption to the assessee. Even otherwise an educational society where total Income is exempt is unlikely to have any undisclosed income (Para 7).
Further held that "utilization of funds may be relevant for the purpose of section 13 of the Income Tax Act, if the institution is existing solely for the purpose of education about which no dispute has been raised in this case. Utilization of funds for 11 ITA Nos.3556, 3637, 3539 & 3541/Del/2005 ITA No.3552/Del/2007 building of school is clearly utilization of funds for educational purposes. Therefore, in my opinion Revenue has made no case for taxing any income in the hands of the assessee (Para 8).
Considering all these aspects, we direct the Assessing Officer to grant the exemption u/s 11 of the Income-tax Act, 1961.
6. In the ground no.2, the issue involved is confirming the disallowance of Rs.6,43,613/- on account of depreciation on building at Virendra Gram, though not making separate disallowance as covered by block assessment.
7. The assessee has claimed depreciation on various assets owned and used by it. This issue also includes the depreciation on the investment made in building at Virendra Gram at Rs.6,43,613/-. Various societies have made contribution for making building at Virendra Gram wherein various educational activities viz. running of classes, sports activities for students, running of hostel etc. are performed. The AO held that the depreciation on this Building is not allowable to the assessee by alleging that right of ownership and evidence of user are not filed. The CIT (A) has confirmed the action of the AO. Section 32 of the Income-tax Act, 1961 provides that in respect of depreciation of buildings, machinery, plant or furniture owned wholly or partly by the assessee and used for the purpose of business or profession, deduction shall be allowed. Thus deduction u/s 32 is allowed even if the asset is partly owned by the assessee. In the present case, various societies have made contribution for construction of building at Virendra 12 ITA Nos.3556, 3637, 3539 & 3541/Del/2005 ITA No.3552/Del/2007 Gram and they all are using the building for their purpose. This issue has also come up before the ITAT in assessee's own case for Assessment Year 2000- 01 in ITA No.1199/De1/2004 dated 28.9.2004 where the ITAT has upheld the findings of the CIT (A) in allowing depreciation on the building at Virendra Gram. This view is also supported by the decision of Hon'ble Kerala High Court in the case of CIT Vs. Prathas Trust 249 ITR 120 (Ker.) wherein it is held that the property may belong to one person and the structure may belong to another person. Since there was no dispute that the assessee had put up the structure, the Tribunal was right in holding that the assessee was entitled to depreciation. In the case of CIT Vs. Poddar Cement Pvt. Ltd. 226 ITR 625 (SC), similar issue has been also endorsed. Similarly, in the case of Mysore Minerals Ltd. vs. CIT - 229 ITR 775 (SC), the assessee was held to be entitled for depreciation where the assessee has not obtained a deed of conveyance from the vendor although it has taken possession and made part payment of the consideration. Keeping these facts in view, this ground of assessee is allowed.
8. Ground nos.3 & 4 of the assessee's appeal are against the confirmation of the disallowance of Rs.50,000/- out of transport and refreshment expenses and Rs.78,000/- out of various expenses as mentioned at page 14 of CIT (A)'s order. In the departmental appeal, ground nos.2 & 3 are against the deletion of addition of Rs.9,50,000/- out of addition of Rs.10,00,000/- on account of 13 ITA Nos.3556, 3637, 3539 & 3541/Del/2005 ITA No.3552/Del/2007 transport expenses and refreshment expenses, and Rs.8,02,000/- out of disallowance of Rs.8,80,000/- made out of various expenses other than transport expenses. It has been mentioned that these disallowances are made only after considering disallowance made in the block assessment and the assessee will not be entitled to any adjustment made in the block assessment expenses on account of these bogus expenses.
9. The Assessing Officer made disallowance out of various expenses claimed by the assessee society. The reasons for making disallowance by the Assessing Officer are reproduced by the CIT (A) in his order from pages 6 to 9 and the assessee's submission reproduced at pages 9 to 13. The CIT (A) held that in the year under consideration, disallowance have been made by Assessing Officer for Rs.10,00,000/- under the head Transport & Refreshment and Rs.9,00,000/- out of various expenses. In the block assessment, total disallowance of Rs.58,36,214/- was made by the AO on account of bogus expenses out of various heads of expenses out of which Rs.28,26,746/- is confirmed. However, the period from 16.01.1999 to 31.03.1999 was not covered by the block period assessments, therefore, CIT (A) confirmed the disallowance to that extent of Rs.1,28,000/- as tabulated at page 14 of the order. While pleading on behalf of the assessee, ld. AR submitted that the Assessing Officer referred to a list of 50 parties alleged to be found bogus by DDIT during the course of search. Further the Assessing 14 ITA Nos.3556, 3637, 3539 & 3541/Del/2005 ITA No.3552/Del/2007 Officer also made reference of 10 other parties from whom enquiries have been conducted. It was alleged that either these parties denied to have received any payment from the parties or found bogus. Ld. AR submitted that out of the 50 parties mentioned by the Assessing Officer, no expenses have been debited in the books of account in most of the parties. Further enquiries made from these parties were behind the back of the assessee and assessee was not provided an opportunity to cross examination these parties, therefore, such addition cannot be made. Ld. AR further submitted that details of all these expenditure filed before the Assessing Officer containing name of the party, address, phone no., date, amount and cheque no. etc. The Assessing Officer has not pointed out any specific defect in the details furnished by the assessee and a disallowance was made by making general observation and on the basis of DDIT enquiry which was not confronted to the assessee. The assessee also made detailed submission before CIT (A). He also pointed out that none of the authorities has pointed out any expenditure incurred during this period which was not verifiable. The CIT (A) deleted major addition for the reason that disallowance on account of this expenditure is confirmed by him in the block assessment and he finally pleaded that the remaining disallowance confirmed by the CIT (A) may also be deleted.
10. We have heard both the sides on the issue. The expenditure of Rs.28,26,746/- had been confirmed in the block assessments. For the period 15 ITA Nos.3556, 3637, 3539 & 3541/Del/2005 ITA No.3552/Del/2007 which was not covered by block assessment period, CIT (A) confirmed part disallowance. The details are as under :-
Addition made by Relief Addition
A.O. Given Confirmed
Transport & Refreshment 1000000.00 950000.00 50000.00
Educational Improvement 100000.00 100000.00 -
Legal & Consul. Expenses 30000.00 27000.00 3000.00
Diesel & Petrol 30000.00 27000.00 3000.00
R & M (Vehicle) 60000.00 54000.00 6000.00
R & M (Build.) 80000.00 72000.00 8000.00
Gardening & Plantation 60000.00 54000.00 6000.00
Labour Charges 10000.00 9000.00 1000.00
Student Welfare 200000.00 180000.00 20000.00
Professional Charges 50000.00 45000.00 5000.00
R & M (Elec.) 50000.00 45000.00 5000.00
R & M ( Others) 20000.00 18000.00 2000.00
Tour & Travels 50000.00 45000.00 5000.00
Sweeping & Cleaning 20000.00 18000.00 2000.00
Prize & Funct. 60000.00 54000.00 6000.00
Music & Dance 60000.00 54000.00 6000.00
After considering pleadings of both the sides, we hold that CIT (A) has quite reasonably sustained the addition to cover the period not covered by block period assessment. Accordingly, ground nos.3 & 4 of assessee's appeal and ground no.2 & 3 of revenue's appeal are dismissed.
11. Ground No.5 in assessee's appeal is against confirming the disallowance of Rs.19,64,000/- on account of contribution for Vasant Kunj building.
12. The Assessing Officer disallowed this amount by holding that the expenditure of Rs.19,64,000/- being contribution for construction of building at Vasant Kunj in the case of Bhatnagar International School, A-1, Paschim 16 ITA Nos.3556, 3637, 3539 & 3541/Del/2005 ITA No.3552/Del/2007 Vihar and the same is disallowed being capital expenditure. The CIT (A) confirmed this addition by holding that this amount has been given to another society named Virendra Bhatnagar Sansthan for construction of school building at Vasant Kunj for students. No asset has been created by the assessee society. Also, there was no obligation on the part of the assessee society to make this payment. Even no depreciation has been allowed on this. Ld. AR submitted that the aims and objects of the assessee society are to impart education. The schools run by the assessee were imparting education only up to 4th Standard. At the time of admission, the parents are given assurance for education of children up to 12th Standard as the another group society Virendra Bhatnagar Sansthan which runs Bhatnagar International School, Vasant Kunj, imparts education up to 12th Standard. For development of Infrastructure at Bhatnagar International School, Vasant Kunj, all the group societies have given contribution to promote education in their own interest. Such contribution is given in course of carrying out educational activities. This is an expenditure directly related to the activities carried on by the assessee which is allowable as a revenue expenditure. Otherwise also, it is an application of the receipt entitled for deduction u/s 11. He submitted that this addition may be deleted.
13. We have heard both the sides on the issue. This was the amount paid by the assessee society towards the construction of the building at Vasant 17 ITA Nos.3556, 3637, 3539 & 3541/Del/2005 ITA No.3552/Del/2007 Kunj of Bhatnagar International School. The assessee's submission that at the time of admission, the assessee imparts education only up to 4th standard and it has given assurance to the parents for education up to 12th standard as another group society is running a school up to 12th standard has no logic for claiming this amount as deduction. Although it may be a contribution to the another society for construction of the building, therefore, such expenditure cannot be held to be directly related to the activities carried out by the assessee and to be allowed as revenue expenditure. Therefore, we are not able to accept the assessee's contention and we sustain the order of the CIT (A) on this issue and dismiss this ground of assessee's appeal.
14. Ground No.6 is against confirming the charging of interest u/s 234A and 234B of the Income-tax Act, 1961. It has been settled that the charging of interest u/s 233A and 234B is mandatory in law. Therefore, after hearing the assessee, we find no merits in this ground of assessee's appeal and accordingly, the same is dismissed.
15. Ground nos.7 & 8 are general in nature and does not require any adjudication, hence the same are dismissed.
16. Ground No.1 in the revenue's appeal being ITA No.3637/Del/2005 is with regard to directing the Assessing Officer to adopt negative figure of Rs.3,66,763/- instead of Nil figure as per Income & Expenditure account for Assessment Year 1999-00. After hearing both the sides, we find that this 18 ITA Nos.3556, 3637, 3539 & 3541/Del/2005 ITA No.3552/Del/2007 ground of revenue's appeal has no merit as there is negative figure of Rs.3,66,763/- as per income & expenditure account. Therefore, we dismiss this ground of revenue's appeal.
17. In the result, the appeal of the assessee in ITA No.3556/Del/2005 is partly allowed and appeal of the revenue in ITA No.3637/Del/2005 is dismissed.
ITA No.3539/Del/2005
18. This appeal filed by the revenue emanates from the order of CIT (A)-X, New Delhi dated 07.06.2005.
19. The only ground in this appeal is allowing the depreciation amounting to Rs.12,32,259/- on the fixed assets of the schools in respect of the common assets which were claimed to be not owned by the society and belong to other societies also.
20. This issue has already been decided by us following the various decisions of the Hon'ble Courts in the ground no.2 of the assessee's appeal in ITA No.3556/Del/2005 and we hold that the depreciation is allowable to the assessee on the buildings at Virendra Gram. Respectfully following the same, we dismiss this ground of revenue's appeal.
21. In the result, the appeal of the revenue being ITA No.3539/Del/2005 is dismissed.
19 ITA Nos.3556, 3637, 3539 & 3541/Del/2005ITA No.3552/Del/2007
ITA No.3552/Del./2007
22. This appeal filed by the revenue emanates from the order of the CIT (Appeals)-II, New Delhi dated 25.05.2007 for the Assessment Year 2002-03. The grounds of appeal taken by the revenue read as under :-
"1. On the facts and in the circumstances of the case, the ld. CIT (A) has erred in directing the Assessing Officer to allow the exemption u/s 11 of the Income-tax Act, 1961 as claimed by the assessee.
2. On the facts and in the circumstances of the case, the ld. CIT (A) has erred in deleting the addition of Rs.17,70,450/- and 11,84,000/- made by the Assessing Officer on account of Development fund and progressive & reconstructive project funds respectively holding the same as capital receipts chargeable to tax.
3. On the facts and in the circumstances of the case, the ld. CIT (A) has directed in directing the Assessing Officer to allow depreciation as claimed by the assessee.
4. On the facts and in the circumstances of the case, the ld. CIT (A) has erred in directing the Assessing Officer to compute the income as per provision of section 11 of Income-tax Act, 1961."
23. In the ground no.1, the issue involved is allowing the exemption u/s 11 of the Income-tax Act, 1961 by the CIT (A). This issue has been decided in ITA No.3556/Del/2005 for Assessment Year 1999-2000 wherein we have held the assessee society eligible for exemption u/s 11 of the Income-tax Act, 1961. The details of which are given at para 5 of this order. Therefore, we dismiss this ground of revenue's appeal.
20 ITA Nos.3556, 3637, 3539 & 3541/Del/2005ITA No.3552/Del/2007
24. In the ground no.2, the issue raised by the revenue is against the deletion of addition of Rs.17,70,450/- and Rs.11,84,000/- on account of development fund and progressive and reconstructive project funds respectively by holding the same as capital receipts.
25. We have heard both the sides on this issue. Development fund and progressive and reconstructive projects funds are capital receipts. Separate receipts have been issued against these funds and collected one time. These funds were directly credited to the development fund and carried forward to the next financial years and these are used specifically for the purpose of development. Thus, these are receipts u/s 11(1)(d) of the Act which are voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or institution. Therefore, in our considered view, the CIT (A) has rightly treated the amount received towards progressive and reconstruction funds as capital receipts. As we uphold the order of the CIT (A) on this issue, this ground of revenue's appeal stands dismissed.
26. In the ground no.3, the issue involved is allowing depreciation on the assets which are partially owned at Virendra Gram building. This issue has been decided by us in favour of the assessee in para 7 of this order wherein the assessee has been held to be entitled for depreciation on the building at Virendra Gram. Therefore, we find no merits in this ground of revenue's appeal and accordingly, this ground is dismissed.
21 ITA Nos.3556, 3637, 3539 & 3541/Del/2005ITA No.3552/Del/2007
27. In the ground no.4, the issue involved is directing the Assessing Officer to compute the income as per provisions of section 11 of the Income-tax Act, 1961. We have already decided in this order that the assessee is eligible for exemption u/s 11 of the Income-tax Act, 1961. Therefore, we find no merits in this ground of revenue's appeal and the same stands dismissed.
28. In the result, the appeal of the revenue being ITA No.3552/Del/2007 stands dismissed.
ITA No.3541/Del/2005
29. This appeal filed by the assessee emanates from the order of the CIT (Appeals)-X, New Delhi dated 07.06.2005 for the Assessment Year 2001-02. The grounds of appeal taken by the assessee read as under :-
"1. That the learned CIT (Appeals) has erred in disallowing the benefit of section 11 of the Income-tax Act, 1961 available to the society. The disallowance has been made based on the finding of block assessment.
2. That the learned CIT (A) was not justified in following the findings in the block assessment without appreciating the facts of the present case and also ignoring the settled principle that every year is an independent year.
3. That the learned CIT (A) has also erred in disallowing the claim of the society under section 10(23)(c)(vi) of the Income-tax Act, 1961 without assigning any reasons for the same.
4. That the learned CIT (A) was not justified in disallowing the claim under section 10(23)(c)(vi) as the said claim was available to the assessee society on the mere reading of the provisions of law and the accepted facts of the present case on record.22 ITA Nos.3556, 3637, 3539 & 3541/Del/2005 ITA No.3552/Del/2007
5. That the learned CIT (A) was not justified in confirming the addition of Rs.831824/- being the amount paid to M/s. Excursion & Symposlums on the presumptions that no school in Delhi would bear the food expenses of the students without getting the same reimbursed from the students.
6. That the learned CIT (A) was also not justified in confirming the additions of Rs.1614650/- and Rs.1729500/- under the.
7. Development fund and Reconstruction project receipts respectively as not being covered under section 11(1)(d) of the Income-tax Act, 1961.
8. That the learned CIT (A) has erred in disallowing the charging of interest under section 234 of the Act.
9. That the orders of the learned CIT (A) are bad in law and facts which may be set aside after deleting the additions made."
30. Ground Nos.3 & 4 relating to the claim of society u/s 10(23)(c)(vi) of the Income-tax Act, 1961 were not pressed at the time of hearing, therefore, ground nos.3 & 4 are dismissed as not pressed. Ground No.9 is general in nature and does not require any adjudication, hence the same is dismissed.
31. In the ground nos.1 & 2, the issue involved is disallowing the benefit of section 11 of the Income-tax Act, 1961 to the assessee's society. We have already held this issue in favour of the assessee in para 5 of this order wherein we have found the assessee's society as eligible for exemption u/s 11 of the Income-tax Act, 1961. In the case of Manav Sthali School, one of the education society of the group, the ITAT has already decided the issue in 23 ITA Nos.3556, 3637, 3539 & 3541/Del/2005 ITA No.3552/Del/2007 favour of the assessee on the similar facts and circumstances. Considering these facts, we allow ground nos.1 & 2 of the assessee's appeal.
32. In the ground no.5, the issue involved is confirming the addition of Rs.8,31,824/- being the amount paid to M/s. Excursion & Symposiums. This disallowance was made on the presumption that no school in Delhi would bear the food expenses of the students without getting the same reimbursed from the students.
33. We have heard both the sides on the issue. This addition is made only on the presumption that no school in Delhi would bear the food expenses of the students without getting the same reimbursed from the students. There is no evidence that the assessee has reimbursed these expenses from the students. In the absence of any such specific finding, we are unable to sustain this addition. Therefore, we direct to delete the same. Accordingly, ground no.5 of the assessee is allowed.
34. In the ground nos.6 & 7, the issue involved is confirming the addition of Rs.16,14,650/- and Rs.17,29,500/- under the development fund and reconstruction project receipts respectively as not being covered u/s 11(1)(d) of the Income-tax Act, 1961. We have already decided this issue in favour of the assessee in ITA No.3552/Del/2007. The facts remain the same, therefore, we allow this ground of assessee's appeal.
24 ITA Nos.3556, 3637, 3539 & 3541/Del/2005ITA No.3552/Del/2007
35. In the ground no.8, the issue involved is charging of interest u/s 234 of the Income-tax Act, 1961. It has been settled that the charging of interest u/s 233A and 234B is mandatory in law. Therefore, after hearing the assessee, we find no merits in this ground of assessee's appeal and accordingly, the same is dismissed.
36. In the result, the appeal of the assessee being ITA No.3541/Del/2005 is partly allowed.
37. To sum up : ITA No.3556/Del/2005 and ITA No.3541/Del/2005 filed by the assessee are partly allowed and ITA Nos.3637/Del/2005, 3539/Del/2005 and 3552/Del/2007 filed by the revenue are dismissed.
Order pronounced in open court on this 16th day of May, 2014.
Sd/- sd/-
(R.P. TOLANI) (B.C. MEENA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated the 16th day of May, 2014
TS
Copy forwarded to:
1.Appellant
2.Respondent
3.CIT
4.CIT(A)-II, New Delhi
5.CIT(ITAT), New Delhi. AR, ITAT
NEW DELHI.