2019 (5) TMI 24 - AT - Income Tax

Exemption u/s 11 denied - assessee had received book bank fees, dress charges, examination fee and misc. fees which was in the form of capitation fee - HELD THAT - These charges were charged to the students as the assessee had provided extra facilities like providing dress to the students. The examination fee charged by the assessee was deposited with the UPTU who is engaged in conducting exams. The learned CIT(A) has held that in the earlier years under similar circumstances the Assessing Officer had not made any addition. The assessee, before learned CIT(A), has also filed fee fixation committee letter - The charges were charged for additional facilities which included WIFI system. Under similar circumstances in the case of DCIT vs. Prayag Dant Vigyan Anusandhan Sansthan, 2018 (12) TMI 207 - ITAT LUCKNOW has held the extra charges, charged from the students as not a capitation fees and has allowed relief to the assessee - Decided against revenue Addition to the corpus fund - evidences proving the genuineness of the transactions and creditworthiness of the persons who had given the donation and in the absence of the assessee having filed bank pass-book - HELD THAT - We find that the assessee had furnished complete list of donors including the names, addresses and PAN numbers of the donors. The list, as noted above, demonstrates that most of the donors have given amounts of ₹ 10,000/- and the list contains the names, addresses and also the mode of payment as to whether cheque or cash. Assessee on its own had added back the amount of ₹ 28,80,000/- in its income which is evident from the copy of computation sheet and after inclusion of such amount in the income the assessee has applied the same for the charitable purposes . CIT(A) has categorically mentioned this fact in his order. Therefore, we do not find any infirmity in the findings of learned CIT(A).- Decided against revenue Addition u/s 68 - addition made by holding that the assessee had not produced copy of income tax return and bank statement of the donors - HELD THAT - It will not be out of place here to mention that Mr. Avnish Kumar was the trustee, and chairman of the society who used to appear before the AO. How is that the AO was not convinced about his identity and added the amount given by him to the trust as loan, as unverifiable? Similarly Sri Naresh Kumar was also a trustee. His copy of a/c, ITR, bank a/c and statement of trust was on record and also furnished during the appellate proceedings. Mr Avnish Kumar Agrawal was a partner of Sree Ganga Khandsari Udyog which advanced ₹ 20,05,000/- as loan to the trust. The A.O. seemed to have ignored these facts. These documents must have been available to the AO also as these are bank and IT records and are handmade. It is not understood as to how and why the AO could completely disregard such evidences. There was no application of mind, enthusiasm to prove found in his order. He made the addition mechanically without any evidence to support his order.- Decided against revenue Expenditure incurred by the assessee under the head help to poor students - HELD THAT - Relief given by CIT(A) for help to poor students, we find that assessee has incurred an expenditure of ₹ 62,61,703/- on account of help to poor students, the detail of which is placed in paper book. The expenses booked under this head are on account of journal entries which shows that the amounts were credited to the students the names of which is also mentioned in the ledger account. CIT(A) confirmed the addition to the extent of ₹ 4,38,803/- payments in cash to various other students on several dates amounting to a amount as paid in cash of different persons as prize money, some of them were not the student of the institute when a competition need in the institute. Obviously there is no way to examine this expenditure whether they had actually been incurred or not and has allowed relief for the remaining amount Addition made u/s 40(a)(ia) - CIT-A deleted the addition - HELD THAT - CIT(A) has held that section 40(a)(ia) is not applicable as the income of the assessee was not taxable under the head business or profession. The findings of learned CIT(A) are correct as the assessee is entitled to exemption u/s 11 and provision of section 40(a)(ia) are applicable only under the head business and profession appearing in Chapter-IV of the Act. We further find that even if disallowance is upheld the addition will result into enhanced income which again will be exempt u/s 11 of the Act. - Decided against revenue

Summary

Issues Involved:
1. Allowance of benefit under section 11.
2. Deletion of addition/disallowance of ?28,80,000/-.
3. Deletion of addition of ?2,11,95,398/-.
4. Deletion of addition/disallowance of ?58,22,900/-.
5. Deletion of addition/disallowance of ?3,69,940/- under section 40(a).

Issue-wise Detailed Analysis:

1. Allowance of Benefit under Section 11:
The Revenue contended that the assessee charged ?57,75,900/- as Book Bank Fees, Dress Charges, Examination Fee, and Miscellaneous Fees beyond the prescribed amount, indicating non-charitable activities. The Assessing Officer (AO) treated these charges as capitation fees, relying on the Supreme Court's judgment in Unni Krishnan J.P. & Others vs. State of Andhra Pradesh & Others, and categorized the income as business income.

The Tribunal found that these charges were for additional facilities like providing dress and examination fees, which were deposited with UPTU. The CIT(A) noted that similar charges were allowed in earlier years without any additions. The Tribunal upheld the CIT(A)'s findings, which were based on the fact that the extra charges were not capitation fees and were used for the institution's charitable purposes. Thus, the Tribunal dismissed the Revenue's appeal on this ground.

2. Deletion of Addition/Disallowance of ?28,80,000/-:
The AO made an addition of ?28,80,000/- under section 68, citing the assessee's failure to produce bank pass-books and income tax returns of the donors. The assessee provided a list of donors with names, addresses, and PAN numbers, and added back the amount in its income, applying it for charitable purposes.

The Tribunal upheld the CIT(A)'s decision, noting that the assessee had furnished sufficient details of the donors and had included the amount in its income for charitable purposes. Thus, the Tribunal dismissed the Revenue's appeal on this ground.

3. Deletion of Addition of ?2,11,95,398/-:
The AO added ?2,11,95,398/- under section 68, questioning the genuineness and creditworthiness of unsecured loans from five persons. The assessee provided copies of accounts, bank statements, and ITRs of the loan providers, showing opening balances and transactions through cheques.

The Tribunal upheld the CIT(A)'s findings, which noted that the loan providers were trustees or had sufficient balances in their accounts. The CIT(A) criticized the AO for disregarding the evidence and making the addition mechanically. Thus, the Tribunal dismissed the Revenue's appeal on this ground.

4. Deletion of Addition/Disallowance of ?58,22,900/-:
The AO added ?62,61,703/- for help to poor students, questioning the journal entries and cash payments. The CIT(A) allowed relief for ?58,22,900/-, noting that the journal entries were for crediting fees to students' accounts and had sufficient details. However, the CIT(A) confirmed the addition of ?4,38,803/- for cash payments due to lack of verifiable evidence.

The Tribunal found the CIT(A)'s findings exhaustive and based on facts, thus dismissing the Revenue's appeal on this ground.

5. Deletion of Addition/Disallowance of ?3,69,940/- under Section 40(a):
The AO disallowed ?3,69,940/- for non-deduction of TDS on payments to K. Lounge Tailors under section 40(a)(ia). The CIT(A) held that section 40(a)(ia) was not applicable as the assessee's income was exempt under section 11, and the provision applies only to business or profession income.

The Tribunal upheld the CIT(A)'s findings, noting that even if the disallowance was upheld, the income would still be exempt under section 11. Thus, the Tribunal dismissed the Revenue's appeal on this ground.

Conclusion:
The Tribunal dismissed the Revenue's appeal on all grounds, upholding the CIT(A)'s order, which allowed the benefit under section 11 and deleted the additions/disallowances made by the AO.