2014 (1) TMI 974 - AT - Income Tax

Whether receipt of Development Fund from students is liability or part of fees collected - Revenue receipt or capital receipt - exemption u/s 11 - Held that - The assessee has treated the receipts as liability because the same are being separated for being utilised in providing amenities to the school children - The assessee has been following the same treatment in earlier years and the AO has not disputed the same - No cogent reason for deviating from the past has been brought on record - As per the notification issued by the Director of Education - Funds so collected in this regard should be specifically incurred for the purpose for which it is collected - When the collection is meant for being spent on activities in the capital filed, the same cannot be treated by the Assessing Officer as revenue receipt. Depreciation on assets treated as application of income - Held that - Following CIT vs. Tiny Tots Education Society 2010 (7) TMI 377 - Punjab and Haryana High Court - The income of the assessee being exempt, the assessee is only claiming that depreciation should be reduced from the income for determining the percentage of funds which have to be applied for the purposes of the trust - No double benefit is given in allowing claim for deprecation for computing income for purposes of Section 11 - Decided against Revenue.

Summary

Issues:
1. Deletion of addition on account of Development Fund
2. Claim of depreciation

Deletion of addition on account of Development Fund:

The case involved an appeal by the Revenue against the order of the Ld. Commissioner of Income Tax (Appeals) pertaining to the assessment year 2008-09. The primary issue was the deletion of an addition on account of Development Fund. The Assessing Officer contended that the fund collected from students should be added to the total income, as it forms part of the fees. However, the Assessee, a registered society under section 12A(a) of the Income Tax Act, argued that the fund was utilized for the welfare of students and development of school amenities. The Ld. CIT(A) allowed the Assessee's appeal, stating that the fund was capital in nature and earmarked for development activities. The Tribunal upheld this decision, noting that the fund was utilized for specific development purposes and had been treated as capital in previous years as well. The Tribunal also referenced legal precedents supporting the Assessee's position, ultimately dismissing the Revenue's appeal.

Claim of depreciation:

Another issue in the case was the claim of depreciation amounting to Rs. 15,94,466. The Assessing Officer disallowed this claim, stating that the benefit of fund application had already been realized during asset purchase. However, the Ld. CIT(A) ruled in favor of the Assessee, citing a relevant case law. The Revenue appealed this decision, arguing that the claim constituted a double deduction. The Tribunal, after careful consideration, relied on a decision of the Hon'ble Punjab and Haryana High Court to uphold the Ld. CIT(A)'s decision. The Tribunal clarified that the Assessee was not claiming double deduction but seeking a reduction in income for determining the percentage of funds to be applied for trust purposes. The Tribunal found no infirmity in the Ld. CIT(A)'s order and dismissed the Revenue's appeal.

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