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2012 (10) TMI 432 - AT - Income TaxExemption u/s 11 - exemption of the educational income of the Trusts, Societies etc - the main grievance of the Revenue is with regard to the conclusion of the CIT(A) that the assessee is eligible for benefits of Section 11 of the Act in alternative to the provisions of S.10(23C)(vi) of the Act. - Held that - Assessee has not charged any money by whatever name it is called, i.e. donation, building fund, auditorium fee etc, over and above the prescribed fee for the admission of students, the assessee would be entitled for exemption under S.11, even though the notification under S.10(23C)(vi) of the Act have not been received by it - Impugned order of the CIT(A) be set aside and restore the matter to the file of the assessing officer with a direction to verify the aspect of donation, capitation fee etc. if any collected by the assessee, after giving an opportunity of being heard to assessee. Depreciation - Held that - As the purchase of capital asset is used to promote the objective of the trust it is allowed as application of income where the entire cost of acquisition is either written off in the first year itself or in subsequent years and depreciation is not allowable on capital asset as it is not used for Business activity - in favour of revenue for statistical purposes.
Issues Involved:
1. Eligibility for benefits under Section 11 of the Income Tax Act as an alternative to Section 10(23C)(vi). 2. Allowance of depreciation claimed by the assessee. Issue-wise Detailed Analysis: 1. Eligibility for Benefits under Section 11 of the Income Tax Act: The main grievance of the Revenue was the CIT(A)'s conclusion that the assessee is eligible for benefits under Section 11 of the Act as an alternative to Section 10(23C)(vi). The Revenue contended that obtaining approval from the prescribed authority is mandatory under Section 10(23C)(vi) and that the CIT(A) failed to appreciate the distinction between Section 10(22) and Section 10(23C). The Tribunal referenced its earlier decisions, specifically in the case of Dy. Director of Income-tax (Exemption) Hyderabad vs. Exhibition Society, Hyderabad, where it had set aside the CIT(A)'s order for verification by the assessing officer regarding the collection of capitation fees. The Tribunal emphasized that if the assessee collected any money over and above the prescribed fee, it would not be entitled to exemption under Section 11 or Section 10(23C). The Tribunal rejected the assessee's argument that the matter should not be set aside for verification. It upheld that the Tribunal has the authority to direct verification by the assessing officer, even if such directions were not explicitly raised in the grounds of appeal, as long as they pertain to the subject matter of the appeal. This stance is supported by several judicial precedents, including decisions from the Supreme Court and High Courts. The Tribunal concluded by setting aside the CIT(A)'s order and directing the assessing officer to verify whether the assessee collected any money over and above the prescribed fee. If no such excess collection is found, the assessee would be entitled to exemption under Section 11, even without notification under Section 10(23C)(vi). 2. Allowance of Depreciation Claimed by the Assessee: The second issue pertained to the addition made on account of depreciation claimed by the assessee. The Assessing Officer had disallowed the depreciation claim, citing the Supreme Court's decision in Escorts Ltd., which held that depreciation is not allowable on capital assets where the cost of acquisition is treated as an application of income. The Tribunal reviewed similar cases, including decisions from the Jaipur Bench in Jaipur Stock Exchange and the Delhi Bench in Mahila Sidh Nirman Yojna, which held that depreciation is necessary to arrive at the income available for application to charitable purposes. The Tribunal also referenced the Cochin Bench's decision in Dy. CIT vs. Adi Sankara Trust, which stated that depreciation is allowable only if the value of the asset was not allowed as expenditure under Section 11. The Tribunal directed the Assessing Officer to verify whether the value of each asset on which depreciation was claimed was allowed under Section 11. If the value was allowed, depreciation would not be allowed; otherwise, it should be allowed as per applicable rates. The issue was thus set aside for fresh consideration by the Assessing Officer. Conclusion: The Tribunal allowed the Revenue's appeal for statistical purposes, directing the Assessing Officer to verify the collection of capitation fees and the allowance of depreciation in accordance with the law and after providing a reasonable opportunity for hearing to the assessee.
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