2012 (6) TMI 833 - AT - Income Tax

Eligibility for exemption u/s. 11 - Held that - Find out whether the assessee has received any money over and above the fees prescribed and thereafter decide the issue afresh in accordance with law after giving reasonable opportunity of hearing to the assessee. We make it clear that the assessee is not entitled for exemption either u/s 11 or u/s 10(23C) in case it collected any money by whatever name it is called i.e. donation building fund auditorium fund etc. etc. over and above the prescribed fee for admission of students. Depreciation claimed by the assessee trust - Held that - Where an assessee trust is claiming depreciation on assets where cost of the relevant assets stood claimed as an application of income for a preceding and/or the current year under S.11(1) its claim under S.32(1)is eligible only in respect of business assets and where entire cost of the asset stands allowed by way of application of income under S.11(1) the depreciation claimed by the assessee under S.32(1) is not allowable as the trust is not undertaking any business activity. In view of the above the Assessing Officer is directed to verify in respect of each asset on which depreciation claimed whether the value of such asset was in fact allowed under S.11 and if it was so allowed the depreciation would not be allowed in respect of such asset. Only if the value of the asset was not allowed as expenditure under S.11 the Assessing Officer is required to allow depreciation thereon

Summary

Issues:
1. Exemption under section 11 of the Income Tax Act.
2. Claim for depreciation by the assessee.

Exemption under section 11 of the Income Tax Act:
The appeal by the Revenue challenged the order of the Commissioner of Income-tax(Appeals) regarding the eligibility of the assessee for exemption under section 11 of the Income Tax Act. The Revenue contended that the assessee is not eligible for exemption under section 11 and should have obtained notification under section 10(23)(C)(iv) of the Act. The Tribunal referred to previous judgments and highlighted that if donations are received compulsorily for student admissions, the assessee may not be entitled to exemption under section 11. The Tribunal emphasized that the assessing officer needs to examine whether the assessee is collecting capitation fees from students and directed a reevaluation based on Supreme Court judgments. The Tribunal set aside the lower authorities' orders and remitted the matter back to the assessing officer for a fresh decision after considering the relevant facts.

Claim for depreciation by the assessee:
The second issue concerned the addition made on account of depreciation claimed by the assessee. The Assessing Officer disallowed the depreciation claim, citing that the entire cost of acquisition used for trust objectives is treated as application of income, thus depreciation is not allowable. The Tribunal heard both parties and referred to various Tribunal decisions to support the allowance of depreciation on fixed assets necessary for charitable purposes. The Tribunal directed the Assessing Officer to verify if the value of assets claimed for depreciation was previously allowed under section 11. If not allowed, the depreciation should be permitted. The issue was set aside for fresh consideration by the Assessing Officer in line with the observations made.

In conclusion, the Revenue's appeal was partly allowed for statistical purposes, with the Tribunal providing detailed reasoning and directions for reconsideration of both issues.