2012 (12) TMI 529 - AT - Income Tax

Approval u/s. 10(23C)(vi) - denial of exemption u/s. 11 - Educational income of the Trusts & Societies - Held that - Following view taken by the coordinated benches of Tribunal in similar matters the order of the CIT(A) for the years under appeal is set aside and restore the matter to the file of AO with a direction to verify the aspect of donation, capitation fee etc., if any collected by the assessee, and if it is found that besides fulfilling other prerequisites for exemption under S.11, the assessee has not charged any money i.e. donation, building fund, auditorium fee etc, over and above the prescribed fee for the admission of students, the assessee would be entitled for exemption under S.11, even though the notification under S.10(23C)(vi) have not been received by it - in favour of revenue by way of remand. Depreciation claim denied - Held that - AO directed to verify in respect of each asset on which depreciation claimed, whether the value of such asset was in fact allowed under S.11, and if it was so allowed, the depreciation would not be allowed in respect of such asset - Impugned order of the CIT(A) set aside and the matter restored to the file of the AO for fresh consideration - in favour of revenue by way of remand. Unrecorded capitation fees collected from the students admitted under the management quota - Held that - Substantive additions having been made in the hands of the trustees on protective basis and as substantive additions have reached finality which has not been controverted by DR the impugned protective additions have no legs to stand - CIT(A) justified in deleting the said additions - in favour of assessee.

Summary

Issues Involved:
1. Eligibility for benefits under Section 11 in alternative to Section 10(23C)(vi) of the Act.
2. Allowability of depreciation claimed by the assessee.
3. Additions made on account of unrecorded capitation fees collected from students admitted under the management quota.

Issue 1:
The first issue pertains to the eligibility of the assessee for benefits under Section 11 of the Act in lieu of Section 10(23C)(vi). The Tribunal referred to previous decisions where it was held that an educational institution is entitled to exemption under either section if no donations were collected from students. The Tribunal directed the assessing officer to verify if the assessee had not charged any additional fees beyond the prescribed amount for student admissions. The Tribunal set aside the CIT(A) order and restored the matter for verification.

Issue 2:
The second issue revolves around the allowability of depreciation claimed by the assessee. The Assessing Officer disallowed depreciation on the basis that the entire cost of acquisition of capital assets used for trust objectives was either written off in the first year or treated as application of income. The CIT(A) allowed the claim, leading to an appeal by the Revenue. The Tribunal cited precedents from different benches, emphasizing that depreciation on fixed assets is an allowable deduction to determine income for charitable purposes. The matter was remanded to the Assessing Officer for fresh consideration in line with the Tribunal's observations.

Issue 3:
The final issue concerns additions made on account of unrecorded capitation fees collected from students admitted under the management quota. The assessee argued that substantive additions were already made in the hands of trustees, and the additions in the assessee-society's hands were protective. As the substantive additions had been finalized and not appealed, the Tribunal upheld the CIT(A)'s decision to delete the protective additions. The grounds of the Revenue on this issue were dismissed.

In conclusion, the Tribunal partly allowed all four appeals of the Revenue for statistical purposes, addressing the issues of eligibility for Section 11 benefits, depreciation claim, and unrecorded capitation fees. The judgments and directions were based on legal precedents and interpretations of relevant sections of the Income Tax Act.