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2020 (5) TMI 371 - AT - Income TaxExemption u/s.11 - registration u/s.12A cancelled - allegatin that assessee charges fees to students as per its prospectus but no charitable work is carried out as students are enrolled with full fees and other expenses which they have to incur. - assessee has set apart 15% of the amount to be carried forward to subsequent years - HELD THAT - In the case of the assessee students who get admission pay the development fee and without the same there would be no admission for them. There is an element of quid pro quo for them and therefore the students are exactly aware for what purpose their fee is going to be used for. For a moment even if it is held that development fee is revenue receipts the same are still eligible for deduction u/s.11 of the Act in the light of the fact that there is no violation of either 11(5) or 13 of the Act in the case of the assessee as has been held by the Pune Bench of the Tribunal in assessee s own case 2013 (9) TMI 1120 - ITAT PUNE in the 12A matter. Therefore addition made was deleted by the Ld. CIT(Appeals). - Decided against revenue.
Issues Involved:
1. Eligibility of deposits with Madhyamik Adhyapak Sahakari Patsanstha and Ravindra Nagari Patsantha for investment under section 11(5) of the Income Tax Act. 2. Eligibility of payment to Marleshwar Construction Pvt. Ltd. for investment under section 11(5) and compliance with section 13 of the Income Tax Act. 3. Classification of development fee as corpus in nature. 4. Allowability of depreciation on assets already claimed as application of income. Detailed Analysis: Issue 1: Eligibility of Deposits for Investment under Section 11(5) The Revenue challenged the eligibility of deposits amounting to ?65,00,000 with Madhyamik Adhyapak Sahakari Patsanstha and ?50,000 with Ravindra Nagari Patsantha for investment under section 11(5) of the Income Tax Act. The Assessing Officer (AO) concluded that these deposits violated section 13 of the Act, thereby disqualifying them from exemption under section 11. However, the CIT(A) referred to the Tribunal's earlier decision, which reinstated the trust's registration under section 12A and found no infringement of sections 11(5) or 13. Consequently, the CIT(A) deleted the addition of ?65,50,000 made by the AO, and this decision was upheld by the Tribunal. Issue 2: Eligibility of Payment to Marleshwar Construction Pvt. Ltd. The AO identified payments amounting to ?21,53,830 to Marleshwar Construction Pvt. Ltd. as violating section 13, thus disqualifying them from exemption under section 11. The CIT(A), relying on the Tribunal's earlier decision in the assessee's own case, found that these transactions had been previously adjudicated in favor of the assessee. The CIT(A) deleted the addition, and the Tribunal upheld this decision, confirming that the payments were eligible for exemption. Issue 3: Classification of Development Fee as Corpus The AO classified the development fee of ?38,34,640 as revenue receipts, arguing that the fees were collected for specific purposes and not voluntary in nature. The CIT(A) disagreed, stating that the development fees were collected and used for specific capital purposes, thus qualifying as corpus donations. The CIT(A) further noted that even if classified as revenue receipts, they would still be eligible for deduction under section 11, as there was no violation of sections 11(5) or 13. The Tribunal upheld the CIT(A)'s decision, confirming the classification of the development fee as corpus. Issue 4: Allowability of Depreciation The AO disallowed the depreciation claim of ?78,27,777 on assets already claimed as application of income, citing the Supreme Court's decision in Escorts Ltd. The CIT(A) referred to the Bombay High Court's decision in Shri Vile Parle Kelavani Mandal, which allowed depreciation on assets acquired from the income of the trust, stating that it did not amount to double deduction. The Tribunal upheld the CIT(A)'s decision, allowing the depreciation claim. Conclusion: The Tribunal upheld the CIT(A)'s findings on all issues, dismissing the Revenue's appeal and the assessee's cross-objection. The Tribunal confirmed the eligibility of the deposits and payments for exemption under section 11, classified the development fee as corpus, and allowed the depreciation claim. The decisions were based on prior rulings in the assessee's own case and relevant High Court judgments. The appeal of the Revenue and the cross-objection filed by the assessee were both dismissed.
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