Income Tax Appellate Tribunal - Ahmedabad
The Acit, (Exemption), Circle-1,, ... vs M/S. N.H. Kapadiya Education Trust,, ... on 9 April, 2018
आयकर अपीलीय अिधकरण,
अिधकरण अहमदाबाद यायपीठ "ए" अहमदाबाद।
IN THE INCOME TAX APPELLATE TRIBUNAL
"A" BENCH, AHMEDABAD
BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND
SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER
ITA No. 2403/Ahd/2016 & CO No. 208/Ahd/2016
िनधा रण वष / Assessment Year : 2012-13
Asstt. Commissioner of NH Kapadiya Education Trust,
Income-tax (Exemption), Vs The HB Kapadiya New High
Circle-1, Ahmedabad School, Gurukul Road,
Memnagar, Ahmedabad-52
PAN : AAATN 1417 G
अपीलाथ / (Appellant) यथ / (Respondent/
Cross-Objector)
Revenue by : Shri Rajdeep Singh, Sr DR
Assessee by : Shri SN Divatia, AR
Date of Hearing : 03/04/2018
Date of Pronouncement in Court : 09/04/2018
आदेश/O R D E R
PER RAJPAL YADAV, JUDICIAL MEMBER:
The Revenue is in appeal before the Tribunal against the order of the learned Commissioner of Income-tax (Appeals)-9, Ahmedabad dated 14.07.2016 passed for Assessment Year 2012-13. On receipt of notice in the Revenue's appeal, the assessee has filed Cross-Objection bearing No. 208/Ahd/2016.
2. Revenue has raised following grounds in its appeal:-
"1. Whether on the facts and in the circumstances of the case, the ld. CIT(A) is justified in deleting the addition of Rs.4,39,72,358/- treating the same as capital expenditure which the AO disallowed treating revenue expenditure.
2. Whether on the facts and in the circumstances of the case, the ld. CIT(A) is justified in deleting the addition of Rs.56,78,373/-. Being depreciation disallowed by the AO."
3. At the time of hearing before us, the learned representatives fairly agree that the issue raised in ground no.1 is covered, in favour of the ITA Nos. 2403 & CO 208 /Ahd/2016 Assessee - NH Kapadiya Education Trust AY : 2012-13 2 assessee, by the order dated 05.04.2013 passed by the Co-ordinate Bench in ITA Nos. 279 to 281/Ahd/2013, in assessee's own case for Assessment Years 2004-05, 2005-06 & 2009-10, wherein the Tribunal, following the decision of Tribunal in assessee's own case for Assessment Year 2008-09, has held as under:-
"5. After hearing both the parties and perusing the record, we find that there is no dispute about the fact that all the issues involved in these appeals are covered by the decision of this Tribunal in assessee's own case in ITA No. 1321/Ahd/2011 for A.Y. 2008-09. Relevant portion of the Tribunal in respect of ground No. 1 reads as under:-
" (vi) Agitated with the treatment meted out at the findings of the CIT(A), the Revenue has come up with the present appeal. It was the case of the Revenue that the assessee had collected Rs.1,90,01,319/-
from students at the time of admission. This amount was not CREDITED to the income and expenditure but directly credited to the balance sheet. During the course of scrutiny, the assessee had claimed this as a corpus donation. The assessee could not furnish any evidence in support of the claim that the fees and funds collected from the students was a corpus donation. The fees contributed from students and their parents were for services to be rendered by the school. The contribution by the students and parents are quid pro quo (for service rendered mutually). It was, further, contended that these were not donations, but, payments for admission and services to be rendered by the school; that in the statement of income filed along with the return of income; the amount of corpus donation was shown as Nil. It was, further, argued that it was because the entire donation of Rs.1.90 crores has not been shown in the Income & Expenditure account, but, directly credited to balance sheet and no separate claim of deduction u/s 11(1)(d) of respect of the Act in respect of corpus donation has been claimed in the return.
(vii) We have duly considered the submissions of the either party, thoroughly perused the relevant case records and also the voluminous paper book containing, inter alia, copies of (i) audited annual account with tax audit report; (ii) trust deed; (iii) sample receipts towards corpus fund and tuition fees; (iv) banakath with Mrs Sonasl J Jacasania etc. furnished by the Ld. AR during the course of hearing.
(a) The core contention of the Revenue, as rightly highlighted by the CIT (A), was that the contributions aggregating to Rs.190 crores made by the parents/students at the time of admission in the ITA Nos. 2403 & CO 208 /Ahd/2016 Assessee - NH Kapadiya Education Trust AY : 2012-13 3 institution were in consideration of the services to be rendered by the school to the students. In contrast, the documentary evidences, adduced by the assessee go to prove that the amounts were, in fact neither fixed nor identical in all the cases and to illustrate the classical example that almost 331 students have been admitted to the Institution without receiving a penny for such a contribution. The assessee had, in fact, furnished a list running into staggering 29 pages showing the names of the students in standard-wise and also the contributions towards 'corpus fund' (Pages 111 - 138 of PB furnished by the Ld. AR. Copies of ledger accounts of different corpus funds produced by the assessee for verification exhibit that the amounts received have been credited to each fund account of each receipt from the parents/students. Apart from such contributions towards 'corpus funds', it was noticed that the students have also paid towards tuition fees every year. Had the contribution collected been towards education to be imparted by the school as alleged by the Revenue, the institution would not have resorted to charge separately the monthly/quarterly tuition, term and computer fees? Another salient feature noticed from the evidences produced was that the contribution by way of 'corpus donation' ranges Rs.10000 - 15000 with no consequence of the medium of instruction and the standard in which the ward (student) was to be admitted. But not admitting, if the contributions were to be quid pro quo as canvassed by the Revenue, the same should have been quite different depending upon the medium of instruction-wise and standard-wise. Another significant feature observed was that the one time payment of voluntary contribution was - non-refundable - towards different purposes, viz,, library, buildings, sports curriculum activities etc. whereas the tuition fees so collected will be spent for academic field such as education to be imparted to the students by way of stationary, workshop, computer education etc. As rightly refuge by the CIT (A) in the ruling of the Hon'ble Apex Court in the case of Kedarnath Jute Mfg. Ltd v. CIT (82 ITR 363 SC) to outwit the AO's contention that the so called contribution should have been reflected in the I & E account. The AO had rather failed to distinguish the receipt, of corpus funds from tuition fees, namely, to credit the different corpus fund is directly on the basis of the amount received from the parents/students; whereas under 'Educational infrastructure fund account' the credit is by way of appropriation at every month from tuition fees. At a glimpse of the sample copy of Receipt produced by the assessee as part of evidence ( P 81 A 82 of paperbook), it was noticed that:
Page.81 "Receipt towards trust's Corpus Fund Received with thanks contribution towards trust's corpus fund of Rs......:
ITA Nos. 2403 & CO 208 /Ahd/2016 Assessee - NH Kapadiya Education Trust AY : 2012-13 4 I affirm the donation to Corpus fund : Sign of donor" Page 82: Receipt No... .. Form No.......... Std................ Name:....................................................
Fees received as under:
Quarterly/monthly tuition fee (quarter/per month)......
Term fee (one term) Stationary & Workshop fee Computer fee Total The above illustration makes implicitly clear that there is distinction between the 'tuition fees' and 'corpus funds.
(b) Further, the Board of Trustees were empowered (source; sub-
clause 5 of clause 17 - free English translation recorded supra) to accept any money for the objects of the trust and, thus, the voluntary contributions given by the parents/students were the exclusive property of the trust which required to be utilized for the objects of the trust only.
(c) 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 Ld. CIT(A) is confirmed with respect to this issue."
6. In respect of Ground No. 2 and 3 the finding of the Tribunal is as under:
"We have conclusively considered the submissions of the assessee as well as the Revenue and also perused the various documentary evidences adduced by the assessee during the course of hearing. As pointed out by the CIT (A) the fund provided by the assessee trust has been paid to the vendor through its trustees and their relatives, precisely, to outsmart the restrictions on transfer of agricultural lands to a non-agriculturist - the assessee trust.. Since the agricultural lands could be purchased only by an agriculturist as such restriction was prevailed at that relevant time, one of the trustees
- Mrs. Rupali N Kapadia, being an agriculturist - was made as a conduit to get over the restriction.
ITA Nos. 2403 & CO 208 /Ahd/2016 Assessee - NH Kapadiya Education Trust AY : 2012-13 5 The AO's allegation that the purchase of the said land was intended by the trustees for their own benefits/gain etc, doesn't hold water as no documentary evidence was brought on record to thwart the assessee's claim.
With regard to the payment made by the trustees to the vendor, it was explained that the funds provided by the trust has been paid through its trustees for the reasons recorded supra and that the bankhat clearly indicates that the transaction was made for behalf and on the assessee trust only and not for the personal benefit of any of the trustees. As highlighted by the CIT (A) in the impugned order, the payment made towards purchase of land and was shown by the assessee in its books of account under the head 'advance towards land' (Annexure L to the audited annual a/c) and the Managing Trustee had not claimed anywhere in his books of account that the said payments towards purchase of land. To towering all neither the managing trustee nor any of his relatives for that matter have claimed that the said purchase was made on behalf of them or for their own benefits. We have also perused the confirmation of accounts furnished by Sonalben J Jakasania placed at P 89 of paper book. There were also no documentary evidences to attribute that the said transaction took place only to benefit the managing trustee or his relatives except that the funds of the trust were routed through the trustees to the vendor which merely exhibits the expediency which prevailed at that relevant time. Moreover, the utilization of the trust fund was not for purchase of agricultural land as investment, but was a stepping stone to set up an educational institution in that land. We, therefore, do not find any infirmity in the conclusion of the CIT (A) on this point. With regard to the observation of the AO that the funds of the trust cannot be said to be properly utilized for objects of the trust as no sale- deed had been executed or any construction work was carried out, we find that both the contractors - whom the money was advanced towards the construction work to be carried on at the site - in their letters dt. 20.11.2010 confirmed before the AO that they were in receipt of advances for the proposed construction work. This goes to prove the genuineness and dedication of the assessee trust to set up an educational institution for which, it had executed a banakhat for purchase of land; and for accomplishing the construction of the building by advancing monies to the contractors cannot be castigated as improper utilization of trust funds. In these circumstances, we do not find any infirmity in the finding of CIT (A) that 'the advance given by the appellant trust to both these contractors cannot be said to be improper utilization of trust funds."
ITA Nos. 2403 & CO 208 /Ahd/2016 Assessee - NH Kapadiya Education Trust AY : 2012-13 6 Moving on to the other allegation of the Revenue that the excessive salaries paid to Shri M.N. Kapadia and Smt. Rupali Kapadia, we would like to reiterate that due to unstinted efforts and farsightedness, Shri Kapadia has been managing a chunk of student community, also carrying on other administrative work, besides co- ordinate with various Government agencies. His experience, administrative skill and managing a flagship of institution cannot be that of the Principal of a school/college and other staff of the institution whose activities were confined to their ranks, experience and limited role to their assignments. Therefore, the salaries of Shri M,N. Kapadia and Mrs. Rupaii Kapadia cannot be eqated with that of other persons working in the institution at the behest of the assessee trust.
With regard to the use of motor cars provided to the trustees cannot also be considered to be excessive amenities provided to them. As they were expected to commute on day-to-day basis to various Government agencies and other allied places which were scattered all over the vast city of Ahmedabad, the assessee trust was expected to extend such minimum facilities to its trustees. This cannot be branded at any stretch of imagination that the trustees have been provided with excessive amenities. The AO's other allegation that the ultimate beneficiary from the student fees and contribution being the family of managing trustees was also without any basis or supported by any valid documentary evidence. On the hand the assessee trust has been magnanimous in its endeavor in contributing liberally by way of donations to various educational institutions, besides discharging its social obligations by admitting many needy students without collecting any contributions, providing free education, supplying of text books, uniforms etc; The services rendered by the assessee trust has been acknowledged by:
(i) Visamokids (pages 98 -104 of P.B)
(ii) Gujrat Research Organization Unity (pages 107 & 108 of P.B) (Planning Group)
(iii) Manav Sadhna Gandhi Ashram (page 109 of P.B)
(iv) Proch. Org (Page 110 of P.B.) In view of the facts and circumstances as deliberated upon in the foregoing paragraphs and also the reasons recorded exhaustively and elaborately in the impugned by the CIT(A), we are of the considered view that the assessee trust was entitled to exemption u/s 11 and 12 of the Act. The department appeal is dismissed."
Respectfully following the above, the Revenue's appeals are dismissed."
ITA Nos. 2403 & CO 208 /Ahd/2016 Assessee - NH Kapadiya Education Trust AY : 2012-13 7
4. Respectfully following the views so expressed by Co-ordinate Bench, we uphold the conclusions arrived at by the learned CIT(A) and decline to interfere in the matter. Ground No.1 of Revenue's appeal is thus dismissed.
5. Ground no.2 raised by the Revenue relates to deletion of addition of Rs.56,78,373/- being the depreciation disallowed by the Assessing Officer. We find that this issue is also covered, in favour of the assessee, by the decision of Hon'ble jurisdictional High Court in the case of CIT Vs. Sheth Manilal Ranchhoddas Vishram Bhavan Trust, reported in 198 ITR 598 (Guj), wherein it was held as under:-
"4. Whether depreciation has to be allowed as necessary deduction for computing the income of a charitable institution was the question which came up before the Karnataka High Court in CIT v. Society of the Sister of St. Anne [1984] 146 ITR 28. Noticing the difference between the word "income" and the expression "total income" and the necessity for providing depreciation in order to maintain correct accounts, the High Court held that the amount of depreciation debited to the accounts of the charitable institution has to be deducted to arrive at the income available for application to charitable and religious purposes. Same view has been taken by the Madhya Pradesh High Court in CIT v. Raipur Pallottine Society [1989] 180 ITR 579.
5. In CIT v. Rao Bahadur Calavala Cunnan Chetty Charities [1982] 135 ITR 485, the Madras High Court was required to consider whether, for the purpose of computing accumulation in excess of 25 per cent. as laid down in section 11(1)(a) of the Act, "income" has to be computed under the various heads enumerated in the Income-tax Act. It held that the income from the properties held under trust would have to be arrived at in the normal commercial manner without classification under the various heads set out in section 14. It held that the expression "income" has to be understood in the popular general sense and not in the sense in which the income is arrived at for the purpose of assessment to tax by application of some artificial provisions either giving or denying deduction. It observed that the computation under the different categories or heads arises only for the purposes of ascertaining the total income for the purposes of charge. Those provisions cannot be introduced to find out what the income derived from the property held under trust to be excluded from the total income is, for the purpose of the exemptions under Chapter III.
ITA Nos. 2403 & CO 208 /Ahd/2016 Assessee - NH Kapadiya Education Trust AY : 2012-13 8
6. We are in respectful agreement with the view taken by the Karnataka, Madhya Pradesh and Madras High Courts. We, therefore, answer both the question referred to us in the affirmative and against the revenue."
We also find that a Co-ordinate Bench of this Tribunal in the case DCIT Vs. Sardar Patel Institute of Public Administration for Assessment Year 2008-09 has also dealt with the same issue, wherein the Tribunal has held as under:-
"4. Before us Ld. CIT-DR has supported the assessment order and made submission that the view of the Assessing Officer was correct. On the contrary, the Ld. AR for the assessee argued that the judgment of Hon'ble Supreme Court in the case of Escorts Ltd. (supra) is not applicable in the present case. The AR further argued that in the identical facts and circumstances of Hon'ble Punjab and Haryana High Court has distinguished the judgment of the Hon'ble Supreme Court in favour of the assessee. The Ld. AR has relied upon the following case laws:-
i) CIT v. Sheth Manilal Ranchhoddas Vishram Bhavan Trust 198 ITR 590 (Guj)
ii) CIT v. Institute of Banking Personnel Selection 264 ITR 110 (Bom)
iii) CIT v. Society of the Sisters of St. Anne 146 ITR 28 (Ker)
iv) CIT v. Raipur Pallottine Society 180 ITR 579 (MP)
v) CIT v. Market Committee, Pipli 330 ITR 16 (P&H)
vi) CIT v. Tiny Tots Education Society 330 ITR 21 (P&H) We have considered facts and circumstances of the case and submissions made by the respective Representatives of the parties. The Assessing Officer has disallowed the claim following the judgment passed by the Hon'ble Supreme Court in the case of Escorts Ltd. (supra). We find the Hon'ble High Court Punjab and Haryana has distinguished the judgment of the Hon'ble Supreme Court in the case of CIT v. Tiny Tots Education Society 330 ITR 21 (P&H). In view of the fact that the issue has already been settled by the Hon'ble High Court of Punjab & Haryana respectfully following the ratio laid therein we find no infirmity into the impugned order of the Ld. CIT(A).
In view of the above, the appeal of the Revenue is dismissed."
8. In the light of the views so expressed by Hon'ble jurisdictional High Court in the case of Sheth Manilal Ranchhoddas Vishram Bhavan Trust (supra) and also considering the decision of Co-ordinate Bench of this Tribunal in the case of Sardar Patel Institute of Public Administration (supra), the grievance raised by the Revenue in this ground is devoid of any ITA Nos. 2403 & CO 208 /Ahd/2016 Assessee - NH Kapadiya Education Trust AY : 2012-13 9 legally sustainable merits. We, accordingly, reject the same and approve the conclusions arrived at by the learned CIT(A). Accordingly, ground No.2 of the Revenue's appeal is also dismissed.
9. In the result, Revenue's appeal is dismissed.
10. So far as the Cross-objection filed by the assessee is concerned, the ld. Counsel for the assessee did not press the cross-objection; hence the same is rejected.
11. In the result, appeal filed by the Revenue and the Cross-objection filed by the assessee, both are dismissed.
Order pronounced in the Court on 9th April, 2018 at Ahmedabad.
Sd/- Sd/-
(PRADIP KUMAR KEDIA) (RAJPAL YADAV)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad; Dated 09/04/2018
*Biju T., Sr. PS
आदेश क ितिलिप अ ेिषत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. संबंिधत आयकर आयु / Concerned CIT
4. आयकर आयु (अपील) / The CIT(A)
5. िवभागीय ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड फाईल / Guard file.
आदेशानुसार/ BY ORDER, TRUE COPY उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad
1. Date of dictation- ...06.04.2018
2. Date on which the typed draft is placed before the Dictating Member 06.04.2018 ...
Other member ...09.04.2018..........
3. Date on which the approved draft comes to the Sr.P.S./P.S. - ...09.04.2018......
4. Date on which the fair order is placed before the Dictating Member for Pronouncement ...09.04.2018
5. Date on which the file goes to the Bench Clerk ...09.04.2018
6. Date on which the file goes to the Head Clerk..................................
7. The date on which the file goes to the Assistant Registrar for signature on the order......
8. Date of Despatch of the Order..................