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2019 (6) TMI 293 - AT - Income TaxDepreciation claim of assessee trust - entitled to depreciation u/s 32 on assets whose cost has been allowed as application to charitable purposes - scope of Amendment in Section 11(6) - HELD THAT - Issue is covered in favour of the assessee by the Judgment of CIT vs. Rajasthan and Gujarat Charitable Foundation 2017 (12) TMI 1067 - SUPREME COURT in which it was held that the assessee is entitled to depreciation u/s 32 on assets whose cost has been allowed as application to charitable purposes u/s 11(1)(a) . We may also note that the Amendment in Section 11(6) has been brought by Finance Act, 2014, which becomes effective from A.Y. 2015-2016. Therefore, it is not applicable to assessment year under appeal i.e., 2010-2011. - Decided in favour of assessee Exemption u/s 11 - charitable activity or not? - hostel facility provided by the assessee society - HELD THAT - We are of the view that since assessee exist for educational purpose only and hostel facility provided by the assessee society is incidental to the main objectives of the assessee society for education only, therefore, the authorities below were not justified in considering it to be activity of business in nature. Thus, the surplus out of hostel facility shall have to be considered as for educational purpose only which have to be applied for educational purposes only. Therefore, the addition made by the authorities below cannot be sustained. We, accordingly, set aside the Orders of the authorities below and delete the entire addition. - Decided in favour of assessee
Issues:
1. Disallowance of depreciation claimed by the assessee. 2. Addition of surplus arising from hostel business. 3. Deletion of addition by the Revenue. Analysis: Issue 1: Disallowance of Depreciation The assessee challenged the disallowance of depreciation amounting to ?1,41,86,961. The Hon'ble Supreme Court's judgment in CIT vs. Rajasthan and Gujarat Charitable Foundation was cited, stating that depreciation is allowable on assets whose cost has been applied to charitable purposes. The Amendment in Section 11(6) of the I.T. Act was noted to be effective from A.Y. 2015-2016, not applicable to the assessment year 2010-2011. The ITAT Delhi set aside the lower authorities' orders and deleted the addition on account of depreciation, allowing the assessee's appeal. Issue 2: Addition of Surplus from Hostel Business The assessee contested the addition of ?24,98,271 arising from the hostel business. The assessee argued that hostel facilities were incidental to the main objective of education and not a separate business. The ITAT noted that education itself is considered a charitable activity and the hostel facility provided was in line with AICTE guidelines. The ITAT concluded that the hostel facility was not a business activity, and the surplus should be considered for educational purposes only. Therefore, the addition made by the authorities was deleted, allowing the assessee's appeal. Issue 3: Deletion of Addition by the Revenue The Revenue appealed the deletion of an addition of ?25,24,959. However, the tax effect fell below the monetary limit of ?20 lakhs as per CBDT Circular No.3/2018. The Circular directed that the Department shall not file an appeal where the tax effect does not exceed ?20 lakhs. As the Department's appeal did not fall under the exceptions provided in the Circular, it was deemed not maintainable. Consequently, the Department's appeal was dismissed. In conclusion, the ITAT Delhi allowed the appeal of the Assessee and dismissed the appeal of the Revenue. The orders of the lower authorities were set aside, and the additions made were deleted based on the legal interpretations and factual considerations presented during the proceedings.
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