2015 (12) TMI 695 - AT - Income Tax

Addition on account of income siphoned out - benefit of section 10(23C)(iiiad) denied - CIT(A) deleted the addition - Held that - As the society is definitely engaged in educational activity which is charitable u/s 2(15) of the Act and has maintained separate accounts in respect of each educational institution. The institutions of the society is entitled for claiming benefit of section 10(23C)(iiiad) of the Act being income of each educational institutions being less than ₹ 1 Crore, therefore, we observe that the AO has wrongly invoked the provisions of section 11 of the Act as the assessee society is running educational institutions which are exempt u/s 10(23C)(iiiad) of the Act. We also find that the assessee has fully explained the outflow of the amount of ₹ 17,00,000/- by requisite details/evidences from books of accounts which were produced before the AO also and clearly showed that the same has been invested in educational activities of charitable purposes which are exempt u/s 10(23C)(iiiad) of the Act. We observe that the AO just based his findings on the outflow without examining its ultimate use and its accounting done by the assessee. Further, we also find that the AO has not brought any adverse material evidence on record to conclusively hold that the amount of ₹ 17,00,000/- was utilized for other than educational /charitable purposes. Accordingly, we do not find any infirmity in the order of the ld. CIT (A) on this issued and the same is upheld. - Decided against revenue Addition on account of excess income over expenditure by allowing the exemption u/s 10(23C)(iiiad) - CIT(A) deleted the addition - Held that - We have concurred with the ld. CIT (A) that the assessee s income from educational institutions is exempt u/s 10(23C)(iiiad) of the Act. Thus, the conclusion of ld. CIT (A) that excess of income over expenditure in Sarti Devi Raja Ram Public School at ₹ 15,32,930/- and from Hindu Mahila Vidhyalya at ₹ 2,16,117/- is exempt u/s 10(23C)(iiiad) of the Act and thus, net surplus determined by the AO at ₹ 13,92,059/- has no basis, is correct and needs no interference. There is no merit in the contention of the revenue on this ground and so dismissed.- Decided against revenue Addition on account of membership fee received during the year as the assessee was not registered u/s 12AA - CIT(A) deleted the addition - Held that - We find that the amount is the membership fees received by the society from its regular and new members which is meant for Corpus fund of the society. We further find that such receipts have been corroborated with documentary evidences and which had not been rebutted by the AO even in the remand report, so we uphold that the nature of the receipts as claimed by the assessee was acceptable and there was no reason to tax the same as donation in the hands of the society. We further find that membership fees have been credited directly to the Corpus Fund in the Balance Sheet and the amount cannot be taken as income of the Samiti in any case. Accordingly, we do not find any infirmity in the impugned order of the ld. CIT (A), so the ground is dismissed. - Decided against revenue Disallowance of depreciation - CIT(A) deleted the addition - Held that - In the Balance Sheet of Shamli Samaj Kalyan Samiti, the addition to the fixed assets i.e. Building of the degree college is well proved and fully verifiable. AO has not brought any adverse material evidence on record to hold that depreciation @ 10% was required for disallowed. Before us also, the ld. DR has not brought any evidence to substantiate the addition made by the AO. Accordingly, we do not find any infirmity in the order of the ld. CIT (A) on this issue and the same is upheld - Decided against revenue

Issues Involved:
1. Deletion of addition on account of income siphoned out (Rs. 17,00,000/- for AY 2003-04 and Rs. 22,99,500/- for AY 2004-05).
2. Deletion of addition on account of excess income over expenditure (Rs. 13,92,059/- for AY 2003-04 and Rs. 1,94,609/- for AY 2004-05).
3. Deletion of addition on account of membership fee received (Rs. 1,03,900/- for AY 2003-04).
4. Deletion of addition on account of depreciation (Rs. 2,29,950/- for AY 2004-05).

Issue-wise Detailed Analysis:

1. Deletion of Addition on Account of Income Siphoned Out:
For AY 2003-04, the AO added Rs. 17,00,000/- to the income of the assessee, alleging that the amount withdrawn from the corpus fund of SDRR Public School was not for educational purposes and lacked proper authorization. The CIT (A) deleted the addition, observing that the amount was utilized for educational and charitable purposes, supported by documentary evidence. The Tribunal upheld the CIT (A)'s decision, noting that the assessee's income from educational institutions is exempt under section 10(23C)(iiiad) of the Act, and the AO failed to provide any adverse material evidence to suggest otherwise.

For AY 2004-05, the AO added Rs. 22,99,500/- on similar grounds. The CIT (A) deleted the addition, and the Tribunal upheld this decision, noting that the facts remained unchanged from the previous year, and the AO failed to bring any new evidence to warrant a different conclusion.

2. Deletion of Addition on Account of Excess Income Over Expenditure:
For AY 2003-04, the AO added Rs. 13,92,059/- to the income of the assessee, arguing that the exemption under section 10(23C)(iiiad) was not allowable due to various reasons, including the involvement of the trustee in transactions and the running of a hospital by the society. The CIT (A) deleted the addition, concluding that the assessee's income from educational institutions is exempt under section 10(23C)(iiiad). The Tribunal upheld the CIT (A)'s decision, agreeing that the AO's determination lacked basis and the exemption under section 10(23C)(iiiad) was applicable.

For AY 2004-05, the AO added Rs. 1,94,609/- on similar grounds. The CIT (A) deleted the addition, and the Tribunal upheld this decision, noting that the facts remained unchanged from the previous year, and the AO failed to bring any new evidence to warrant a different conclusion.

3. Deletion of Addition on Account of Membership Fee Received:
For AY 2003-04, the AO added Rs. 1,03,900/- to the income of the assessee, treating the membership fee received as income. The CIT (A) deleted the addition, observing that the amount was meant for the corpus fund of the society and supported by documentary evidence. The Tribunal upheld the CIT (A)'s decision, agreeing that the membership fees were correctly credited to the corpus fund and could not be considered income of the society.

4. Deletion of Addition on Account of Depreciation:
For AY 2004-05, the AO added Rs. 2,29,950/- to the income of the assessee, arguing that there was no construction carried out during the year to justify the depreciation claim. The CIT (A) deleted the addition, noting that the AO did not provide any adverse material evidence to support the disallowance. The Tribunal upheld the CIT (A)'s decision, agreeing that the AO's determination lacked basis and the depreciation claim was justified.

Conclusion:
In all the issues, the Tribunal upheld the CIT (A)'s decisions, finding no merit in the contentions of the revenue and dismissing the appeals for both assessment years. The Tribunal concluded that the assessee's income from educational institutions is exempt under section 10(23C)(iiiad) and that the AO failed to provide sufficient evidence to support the additions made.

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