2018 (2) TMI 1593 - AT - Income Tax

Benefit of exemption u/s 12AA - Addition of administrative expenses as inadmissible being 30% of the expenses claimed under this head - addition of claim for application of income towards capital assets - addition of allowed as concession against fee of students as no details of such students to whom the concession was provided had been filed - Held that - We find that it is undisputed fact that the assessee is a registered trust and is also enjoying exemption u/s 12A of the Act. It is also undisputed fact that the benefit of exemption u/s 12A was not withdrawn. Learned CIT(A) after going through the detailed submissions of the assessee and after obtaining remand report of the Assessing Officer has rightly deleted the addition by holding that the registration u/s 12A was not cancelled. CIT(A) has categorically held that the books of account of the assessee were audited and necessary audit report in the prescribed form was filed with the return of income. He has also held that the Assessing Officer during the remand proceedings had not commended adversely on the written submissions filed by the assessee. As regards the adverse comments by the Assessing Officer regarding depreciation claimed by the assessee we find that in the case of CIT vs. Krishi Utpadan Mandi Samiti 2013 (11) TMI 1062 - ALLAHABAD HIGH COURT under similar facts and circumstances has held that depreciation was allowable even if the entire capital expenditure was allowed as deduction. With effect from 01/04/2015 section 11(6) has been inserted by which it has been laid down that income of trust/society registered u/s 12A shall be determined without any deduction or allowance by way of depreciation or otherwise in respect of any asset acquisition of which has been claimed as an application of income u/s 11 in the same or any other previous year. This amendment is prospective and is applicable from 01/04/2015 and before this many courts as noted by learned CIT(A) in his order have held that depreciation claim is allowable. The case of assessee relates to assessment year 2011-12 and therefore this amendment will not be applicable in the case of the assessee. - Decided against revenue

Issues Involved:
1. Addition of ad hoc disallowance out of administrative expenses.
2. Addition on account of concession given to students.
3. Addition on account of depreciation on capital assets.
4. Addition on account of capital expenditure.

Detailed Analysis:

1. Addition of ad hoc disallowance out of administrative expenses:
The Assessing Officer (AO) disallowed ?2,71,20,688/- out of administrative expenses, which was 30% of the total expenses claimed, due to the assessee's failure to produce books of accounts and supporting documents. During remand proceedings, the assessee submitted copies of ledger accounts and some bills/vouchers. The CIT(A) found that the books of accounts and bills/vouchers were duly maintained and audited, and no adverse inference was drawn by the AO in the remand report. Therefore, the disallowance of administrative expenses was deleted by the CIT(A).

2. Addition on account of concession given to students:
The AO disallowed ?63,45,086/- claimed as fee concessions due to lack of documentation. During remand proceedings, the assessee provided ledger accounts and supporting documents for the fee concessions. The CIT(A) noted that the practice of giving fee concessions was consistent with prior years, where exemptions were granted under section 11. The AO did not draw any adverse inference in the remand report. Hence, the addition on account of fee concessions was deleted by the CIT(A).

3. Addition on account of depreciation on capital assets:
The AO disallowed ?2,65,36,922/- claimed as depreciation, arguing it would amount to double deduction since the capital expenditure was already allowed in previous years. The CIT(A) referred to various judicial precedents, including a judgment from the Hon'ble ITAT Jaipur in the case of M/s Santokbha Durlabhji Trust, which allowed depreciation on assets acquired from applied income. The CIT(A) noted that section 11(6) of the Act, which disallows such depreciation, applies prospectively from 01/04/2015. Since the assessment year in question was 2011-12, the CIT(A) allowed the depreciation claim and deleted the addition.

4. Addition on account of capital expenditure:
The AO disallowed ?8,14,18,262/- claimed as application of income towards capital assets due to lack of documentary evidence. During remand proceedings, the assessee provided details and ledger accounts of additions to fixed assets. The CIT(A) found that the capital expenditure was consistent with prior years' activities, where exemptions under section 11 were granted. The AO did not draw any adverse inference in the remand report. Therefore, the CIT(A) allowed the capital expenditure as application of income and deleted the addition.

Conclusion:
The appellate tribunal upheld the CIT(A)'s decision to delete the additions made by the AO on all counts, including administrative expenses, fee concessions, depreciation on capital assets, and capital expenditure. The appeal of the Revenue was dismissed.

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