2019 (7) TMI 128 - AT - Income Tax

Deduction u/s 11 - addition on account of donation given to other charitable institution - non-availability of information such as purpose of donation, basis of selection of done - reasons for utilization of fund that have been accumulated for the purpose and objectives of the assessee's trust, to a done whose objectives are on altogether different track - HELD THAT - We find merit in the arguments of the Ld. Counsel for the assesee that the AO could not enquire into the selection of the donee or the purpose of the donation unless the genuineness is doubted. It has been held in various decisions that donation by one charitable institution to another such institution is permissible in law and would be treated as application of income. The donee in the instant case is a charitable institution which is evidenced by the order passed by the DIT (Exemption) u/s. 80G on 31.03.2011 which covers the period for A. Y. 2011-12 onwards. The observation of the AO that the assessee had not furnished details of past years accumulations etc is also factually incorrect since such information was filed by the assesse vide letter dated 05.02.2005 addressed to the Assessing Officer, copy of which is placed at page No. 87 to 90 of the paper book. In view of the above discussion we are of the considered opinion that the Ld. CIT(A) is fully justified in deleting the addition made by the AO on account of donation given to M/s. Subros Educational Society (registered). The ground raised by the revenue is accordingly dismissed. Addition of sponsorship expenses payable to M/s. Escort Heart Institute and Research Centre - non production of the necessary details - HELD THAT - Although the amount of ₹ 1.50 crores has been claimed as sponsorship fee payable for organizing seminars and continuing medical education events, however, the assessee furnished only 2 vouchers for ₹ 11,16,000/- which the Assessing Officer has allowed. In our opinion the assessee is duty bound to furnish all the requisite details for the examination of the AO especially when an amount has been claimed as deduction on the basis of the claim made by another institution as sponsorship fees. Assessee cannot be absolved of its responsibility by not producing requisite details for the examination/ verification of the Assessing Officer. Considering the totality of the facts of the case and in the interest of justice we deem it proper to restore the issue to the file of the AO with a direction to give one more opportunity to the assessee to substantiate with evidence to his satisfaction Depreciation to assessee trust - HELD THAT - CIT(A) relying on various decisions held that assessee is entitled to claim depreciation even if the value of the asset has been claimed as application of income in the year of purchase in the light of various decision and in conformity with the past assessment. According to the CIT(A) the Act was amended w.e.f. 01.04.2015 to deny deduction on account of depreciation and not for the earlier years. We do not find any infirmity in the order of the Ld. CIT(A) on this issue. The Hon ble Supreme Court in the case of CIT Vs. Rajasthan and Gujarati Charitable Foundation Poona 2017 (12) TMI 1067 - SUPREME COURT has already decided the issue in favour of the assessee by holding that depreciation is allowable on the assets, the cost of which is fully allowed as application of income u/s. 11 in the past years.

Summary

Issues:
1. Allowability of donation made to M/s Subros Educational Society.
2. Allowability of sponsorship fee paid to M/s Escorts Heart Institute & Research Centre Ltd.
3. Allowability of depreciation claimed on assets previously treated as application of income.

Issue 1:
The first issue revolves around the allowability of a donation made to M/s Subros Educational Society. The Assessing Officer had disallowed the donation amount of ?2 crores, citing lack of substantiation regarding the purpose of the donation and the selection of the donee. The CIT(A) deleted the addition, emphasizing that the genuineness of the donation was not in doubt, and the Assessing Officer failed to make necessary inquiries from the donee. The CIT(A) also noted that the assessee had provided requisite information and that donation to another charitable institution is permissible in law. Various decisions were cited to support this proposition. The Tribunal upheld the CIT(A)'s decision, stating that the Assessing Officer's observations were factually incorrect, and the donation was justified based on the documents provided by the assessee.

Issue 2:
The second issue concerns the allowability of a sponsorship fee paid to M/s Escorts Heart Institute & Research Centre Ltd. The Assessing Officer disallowed a significant portion of the claimed amount due to lack of supporting documents and insufficient details. However, the CIT(A) overturned this decision, noting that the evidence provided, including a request letter and the nature of the expenditure, established the legitimacy of the claim. The Tribunal, while acknowledging the partial lack of documentation, directed the assessee to provide additional evidence to substantiate the remaining amount claimed. This issue was partially allowed for statistical purposes.

Issue 3:
The final issue involves the disallowance of depreciation claimed on assets that were previously treated as application of income. The Assessing Officer rejected the depreciation claim, arguing that the assets' cost had already been allowed as application of income in prior years. However, the CIT(A) supported the assessee's right to claim depreciation, citing legal amendments and past decisions. The Tribunal dismissed the revenue's appeal on this issue, highlighting that depreciation is allowable on assets whose costs were fully allowed as application of income in previous years.

In conclusion, the Tribunal's judgment addressed the issues of donation allowability, sponsorship fee deduction, and depreciation claim with a focus on legal precedents, factual accuracy, and the genuineness of the transactions. The decisions were made based on the principles of charity law, substantiation of expenses, and the treatment of assets under income application rules.