2010 (9) TMI 1224 - AT - Income Tax

Summary

Issues Involved
1. Deletion of addition of Rs. 2,10,00,000 by treating donations as application of income towards charitable purposes.
2. Applicability of Section 10(23C)(vi) of the Income Tax Act.
3. Entitlement to depreciation on assets.
4. Non-adjudication of additional grounds of appeal by CIT(A).
5. Chargeability of income at the maximum marginal rate.
6. Deduction under Section 80G of the Income Tax Act.

Detailed Analysis

1. Deletion of Addition of Rs. 2,10,00,000
The primary issue raised by the department was the deletion of the addition of Rs. 2,10,00,000 by treating donations made to three institutes as an application of income towards charitable purposes. The Assessing Officer (AO) had added this amount, arguing that donations made to other trusts should not be treated as application of income under Section 11(3)(d) of the Income Tax Act. The CIT(A) deleted the addition, stating that the donations were made out of the current year's income and not accumulated funds, thus qualifying for exemption under Section 11(1)(a). The Tribunal upheld the CIT(A)'s decision, referencing the Delhi High Court's ruling in the case of Director of Income Tax (Exemption) vs. Bagri Foundation, which allows donations out of current year's income to be treated as application of income.

2. Applicability of Section 10(23C)(vi)
The department raised an additional ground arguing that since the gross receipts of the assessee exceeded Rs. 1 crore, the specific provisions of Section 10(23C)(vi) should apply instead of the general provisions of Section 11. The Tribunal did not admit this ground, noting that neither the AO nor the CIT(A) had discussed this issue in their orders, and no facts were available on record to support this claim. Therefore, further enquiry or investigation would be required, making it inappropriate to admit this ground at this stage.

3. Entitlement to Depreciation on Assets
The assessee raised a cross-objection regarding the CIT(A)'s decision that depreciation on assets was not allowable since there was no income from letting out assets on hire. The Tribunal considered this issue academic because even without the claim of depreciation, the assessee would have spent 85% of its income, qualifying for exemption under Section 11(1).

4. Non-Adjudication of Additional Grounds of Appeal by CIT(A)
The assessee also contended that the CIT(A) erred in not adjudicating additional grounds of appeal. However, this issue was rendered academic due to the Tribunal's decision to uphold the CIT(A)'s order regarding the primary issue of donation.

5. Chargeability of Income at Maximum Marginal Rate
The assessee argued that its income should not be charged at the maximum marginal rate. This issue was also considered academic and not addressed in detail due to the Tribunal's decision on the primary issue.

6. Deduction under Section 80G
The assessee argued that if the donation of Rs. 2,10,00,000 was not considered as application of income, a deduction under Section 80G should be allowed. This issue was rendered academic as the Tribunal upheld the CIT(A)'s decision that the donation was an application of income.

Conclusion
The Tribunal dismissed both the department's appeal and the assessee's cross-objection. The deletion of the addition of Rs. 2,10,00,000 was upheld, and the additional grounds raised by the department were not admitted. The issues raised by the assessee in the cross-objection were considered academic following the Tribunal's decision to uphold the CIT(A)'s order.