Income Tax Appellate Tribunal - Ahmedabad
Dy. Dit(Exemp.), Ahmedabad vs Shri N.H. Kapadia Education Trust,, ... on 18 May, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD "C" BENCH AHMEDABAD
BEFORE, SHRI S. S. GODARA, JUDICIAL MEMBER
AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER
ITA No. 2387/Ahd/2014
(Assessment Year : 2010-11)
Deputy Director of Income-tax (Exemption),
Ahmedabad, 2nd Floor, Nature View Building,
Opp. H.K.House, Ashram Road, Ahmedabad-09 Appellant
Vs.
Shri N. H. Kapadia Education Trust,
The HBK New High School, Gurukul
Road, Memnagar, Ahmedabad 380052 Respondent
PAN: AAATN1417G
राज व क ओर से/By Revenue : Mr. Prasoon Kabra, Sr. D.R.
आवेदक क ओर से/By Assessee : Mr. S. N. Divatia, A.R.
सन
ु वाई क तार ख/Date of Hearing : 08.05.2017
घोषणा क तार ख/Date of
Pronouncement : 18.05.2017
ORDER
PER S. S. GODARA, JUDICIAL MEMBER
This Revenue's appeal for assessment year 2010-11 emanates against the CIT(A)-XXI, Ahmedabad's order dated 02.06.2014, passed in case no.
ITA No. 2387/Ahd/2014 (DC IT vs. Shri N. H. Kapadia Education Trust)A.Y. 2010-11 -2- CIT(A)-XXI/26/13-14, in proceedings u/s. 143(3) of the Income Tax Act, 1961; in short "the Act".
Heard both sides. Case file perused.
2. The Revenue's first substantive ground pleads that the CIT(A) has erred in law and on facts in deleting depreciation disallowance of Rs.54,38,051/- as made in the course of the impugned regular assessment framed on 25.03.2013. It is evident that the CIT(A)'s findings under challenge duly discussed Assessing Officer's conclusion and assessee's submissions challenging correctness thereof as under:
"6. Ground of appeal No.2 is against disallowance of depreciation of Rs.54,38,051/- on the ground that the depreciation in the case of trust would amount to double deduction. The Assessing Officer, in the assessment order, has observed as under:
"The investment in assets is allowed as deduction as application of funds. The allowance of depreciation as further application of receipts in subsequent year would apparently be double deduction which would be apparently inconsistent with accounting principles and not o as provided in law and hence untenable. The decision of the Supreme Court in the case of Escorts Ltd. 199 ITR 43 is applicable to the case of the assessee. As in this case, the Supreme Court held that when deduction u/s.35(2)(iv) was allowed in respect of capital expenditure on Scientific Research, no depreciation has to be allowed u/s.32 on the asset. For the said reason the amount so claimed as depreciation to the tune of Rs.54,38,057/- is added back to the income of the trust."
6.1 During the course of appellate proceedings, the appellant has made the following submissions:
"The appellant begs to submit that uring the course of assessment proceedings, the AO observed , that the assessee had claimed depreciation of Rs. 54,38,057/-. He was of the view that since the assessee had claimed capital expenditure in the statement of total income under the head 'Asset acquired during the year' and climed depreciation of Rs. 54,38,057/- in the statement of total income, assessee was not eligible for its claim of depreciation as the claim of capital expenditure and depreciation amounts to double deduction. He accordingly disallowed assessee's claim. The AO as of the view that the appellant was not entitled to deduction of depreciation in view of the decision in the case of Escorts Ltd. Vs. Union of India (199 ITR 43) (SC).ITA No. 2387/Ahd/2014 (DC IT vs. Shri N. H. Kapadia Education Trust)
A.Y. 2010-11 -3- Firstly, the AO has failed to appreciate that the identical issue was raised by AO in the asst. for A.Y.2009-10 in case of Janvikash Trust (ITA No. 2656/ahd/2012 dated 26.04.2013] by Ahmedabad Bench of ITAT and after considering the entire case law on the subject including decisions of Hon'ble Gujarat High Court and Kerala High Court, the same was decided in favour of the assessee. Accordingly, the AO should be directed to allow depreciation."
6.2 I have considered the assessment order and the submissions made by the appellant. The issue whether depreciation is to be allowed on the asset on which assessee has already been allowed 100% deduction as application towards objects of the trust in the preceding year has been decided by Jurisdictional High Court in the case of CIT Vs. Sheth Ranchooddas 198 ITR 588. The Hon'ble Gujarat High Court in the order dated 09.08.2012 in the case of DIT (Exemption) Vs. Ahmedabad South Indian Charitable Trust has considered the derision of Hon'ble Supreme Court in the case of Escorts Ltd. 199 ITR 43 relied upon by the AO and has confirmed that depreciation will be allowed in the case of trust. The Hon'ble ITAT, Ahmedabad in the case of Janvikas Trust for Asst. Year 2009-10 in ITA No. 2656/Ahd/2012 dated 26.04.2013, relying on the decision of Hon'ble Gujarat High Court in the case of DIT (E) Vs. Ahmedabad South Indian Charitable Trust (Tax Appeal No. 439 of 2012); ADIT (Exemption) Vs. Friends of WWB India in ITA No. 2658/Ahd/2012 & C.O. No. 6/Ahd/2012 order dated 31.01.2013 and also in case of ADIT (Exemption) Vs. The Xavier Kelvani Mandal Pvt. Ltd., decided the issue in favour of the appellant. Respectfully following the order of Jurisdictional High Court, disallowance of depreciation made by the Assessing Officer is deleted."
3. We have heard rival submissions. Learned Departmental Representative's only argument is that the assessee has already allowed cost of the assets in question for the purpose of seeking benefit of application of income towards activities performed in furtherance to its subject. He therefore submits that the assessee cannot get double deduction by claiming the impugned depreciation. He however fails to dispute the fact that hon'ble jurisdictional high court's decision in case of Ahmedabad South Indian Charitable Trust has already rejected Revenue's identical contention as followed by a catina of case law hereinabove. We thus see no reason to interfere with the lower appellate authority's findings under challenge. This former substantive ground fails.
ITA No. 2387/Ahd/2014 (DC IT vs. Shri N. H. Kapadia Education Trust)A.Y. 2010-11 -4-
4. The Revenue's second and last substantive ground avers that the lower appellate authority has wrongly deleted addition of Rs. 2,68,20,708/- after ignoring the fact that assessee's receipts collected from students at the time of admission were not specifically directed towards its corpus but meant for various services rendered by the school. Its contention therefore is that the Assessing Officer had rightly treated the same as its income. We notice that the CIT(A) has followed tribunal's order passed in assessment year 2004-05 in assessee's case itself. His findings under challenge read as under:
"7. Ground of appeal No. 3 is against of Corpus donation of Rs.2,68,20,708/-. The Assessing Officer has made the addition on the corpus donation as per para 3.2 and 3.3 of the assessment order. The relevant portion of the order is reproduced as under:
"From the verification of submission and annexure submitted by the assessee, shows that the assesses trust had compelled the guardians and parents of those students who sought admission in the school run by the trust to advance donations. Thus, the trust accepted these under the guise of donation given by these parents whih the trust further routed it under various funds such as Building fund, Educational Research fund, Educational Infrastructure fund, Literary fund, Sports Development fund, Staff Welfare Fund, Students Welfare Fund, etc. and credited it directly to the Balance Sheet showing it as a Corpus Fund. This proves that the assessee trust though is an educational trust established with an aim and objective to run educational activities has an ulterior motive (profit earning). For the said reason, the Trust is not entitled to exemption u/s.11 of the I.T. Act. Donations received from the parents by the trust at the time of seeking admission and subsequently allocating the said sum under seven (7) different funds and projecting it as an Earnmarked Fund/ Corpus Fund is treated as an income in the hands of the assessee trust and brought to tax. The addition to the corpus to the proceeding year comes to Rs.2,68,20,708/-."
7.1 During the course of appellate proceedings, the appellant has made the following submissions:
"The next ground of appeal relates to the corpus donation of Rs.2,68,20,708/- (net) treated as revenue receipt and liable to tax. The brief facts relating to this ground are that the appellant had credited Rs. 17,97,94,990/- as earmarked funds and taken to balance sheet. Since the appellant institution, while running the schools, carry on different activities, it has to create an infrastructure such as building, library, sports, staff & student welfare etc. The AO has observed that the appellant had compelled the guardians/ parents of the students desiring admission to ITA No. 2387/Ahd/2014 (DC IT vs. Shri N. H. Kapadia Education Trust) A.Y. 2010-11 -5- give donations which shows that it was established with an aim and objective of profit earning.
The appellant submits that identical issue was raised by AO in the asst for A.Y.2004-05,2005-06, 2008-09 and 2009-10 but on appeal, Hon'ble Tribunal has held in favour of the assessee that the contributions towards different corpus funds was not liable to tax. The copy of appellate orders are filed at page 54-106 and 107-116. Since the facts of the present appeal are identical to the facts of the said years, the impugned addition may please be deleted following the said appellate orders. The appellant has explained the nature and purpose of receipt in detail in reply dated 17.01.2013 and filed on 23.01.2013 with AO alongwith a chart showing name and address, PAN of the donors and sample of the receipts issued to them (Page-40-49). Therefore, the impugned addition made by AO may please be deleted."
7.2 I have considered the assessment order and the submissions made by the appellant. The Hon'ble ITAT in appellant's own case for Asst. Years 2004-05 in ITA No. 279, 280 & 281/Ahd/2013 on identical facts, has held that contribution towards different corpus funds were in the nature of corpus fund and as such exempt u/s. 12 of the I.T. Act. The relevant observation is reproduced as under:
"Taking into account all the facts as discussed in the foregoing paragraphs, we are of the considered view that the stand of the AO was rather misconceived in holding that the contribution towards different corpus funds aggregating to Rs.1.9 crores as current income of the assessee liable to be taxed whereas the CIT(A) was justified in her finding that the said contributions were in the nature of corpus funds and as such exempt u/s. 12 of the Act. Therefore, the order of the Id. CIT(A) is confirmed with respect to this issue."
7.3 Respectfully following the order of the Hon'ble ITAT, the addition made by the Assessing Officer on this account is deleted."
5. We have given thoughtful consideration to Revenue's vehement contentions seeking to restore the addition in question. We sought to know about any evidence forming part of the paper book which could indicate that the receipts in question were meant for the so called other services instead of assessee's corpus. Learned Departmental Representative fails to pinpoint any such evidence. Shri Divatia submits in the course of hearing that the assessee has already succeeded on the very issue before this tribunal in assessment years 2004-05, 2005-06, 2008-09 & 2009-10 wherein various co-ordinate benches have concluded that similar contributions made to corpus funds are ITA No. 2387/Ahd/2014 (DC IT vs. Shri N. H. Kapadia Education Trust) A.Y. 2010-11 -6- not taxable as incur. The said orders also form part of the case file from page 54 onwards. The Revenue is unable to point out any distinction on facts involved therein. We accordingly affirm CIT(A)'s findings qua the latter issue as well.
6. This Revenue's appeal is dismissed.
[Pronounced in the open Court on this the 18th day of May, 2017.] Sd/- Sd/-
(PRADIP KUMAR KEDIA) (S. S. GODARA)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad: Dated 18/05/2017
True Copy
S.K.SINHA
आदे श क त ल
प अ े
षत / Copy of Order Forwarded to:-
1. राज व / Revenue
2. आवेदक / Assessee
3. संबं धत आयकर आयु!त / Concerned CIT
4. आयकर आयु!त- अपील / CIT (A)
5. )वभागीय ,-त-न ध, आयकर अपील य अ धकरण, अहमदाबाद /
DR, ITAT, Ahmedabad
6. गाड3 फाइल / Guard file.
By order/आदे श से,
उप/सहायक पंजीकार
आयकर अपील य अ धकरण, अहमदाबाद ।