2018 (6) TMI 226 - AT - Income Tax

Exemption u/s 10(23C)(vi) - Advances given to staff members and others - entitled to exemption u/s.11 - Held that - Assessee is running minority education institution and the advances given by it to staff and others are in the normal course of activities of the society and there is no enquiry made by the AO to establish that these advances have been given for purpose other than purpose of the society i.e. education - thus assessee is entitled to exemption u/s.10(23C)(vi) the addition made under this head is difficult to be sustained and hence deleted - we do not find any good reason to interfere with the order of the CIT(A), which is hereby confirmed and ground of appeal of the revenue is dismissed. Additions under the head depreciation - whether claiming of depreciation in case of trust is amount to double deduction? - Held that - The amount of depreciation debited to the accounts of a charitable trust has to be deducted to arrive at the income available for application to charitable and religious purposes - books of accounts of assessee were duly audited and assessee is running educational institution and had spent money under the head of maintenance of buildings - there is no enquiry to establish that these expenses were incurred for any other purpose - considering this CIT(A) deleted the addition made by AO - we find that no specific error in the order of the CIT(A) - thus appeal of the revenue is dismissed. Advance payment - Whether advances paid to Shri Durlabh Mahto application of income for educational purposes - Held that - For the purpose of legal matter payment was made to Mr. Durlabh Mahto during the year - income and expenditure shown in the income and expenditure account related to the educational institution and the assessee neither received any income from any other source nor any amount was spent on any other objects - conditions u/s 10(22) is fulfilled - addition is deleted - appeal filed by the revenue is dismissed.

Summary

Issues Involved:
1. Deletion of addition under the head "Loans and advances" of ?2,28,41,789/-.
2. Deletion of addition under the head "depreciation".
3. Deletion of addition under the head "advance payment to Shri Durlabh Mahto" of ?4,66,000/-.

Detailed Analysis:

1. Deletion of Addition under the Head "Loans and Advances" of ?2,28,41,789/-

Facts and Arguments:
The Assessing Officer (AO) found that the assessee had given advances totaling ?2,28,41,789/- during the financial year 2008-09. The AO required the assessee to justify these advances and provide details of recovery, which the assessee failed to produce due to lost documents. Consequently, the AO added the amount to the assessee's income, assuming it was not used for educational purposes as per section 10(23C)(vi) of the Act.

CIT(A) Decision:
The CIT(A) deleted the addition, noting that the assessee had applied 85% of its income towards its educational objectives and was entitled to exemptions under sections 10(23C)(vi) and 11 of the Act. The CIT(A) emphasized that the AO did not establish that the advances were used for non-educational purposes.

Tribunal's Conclusion:
The Tribunal upheld the CIT(A)'s decision, noting no error or contrary evidence provided by the revenue. The Tribunal confirmed that the assessee's exemptions under sections 10(23C)(vi) and 12AA were valid and not withdrawn by the department.

2. Deletion of Addition under the Head "Depreciation"

Facts and Arguments:
The AO observed that the assessee claimed depreciation and maintenance expenses totaling ?1,02,98,103.15 but failed to produce supporting bills and vouchers. The AO disallowed this amount, adding it to the assessee's income, arguing that it was not incurred for educational purposes.

CIT(A) Decision:
The CIT(A) deleted the addition, referencing the Gujarat High Court's decision in CIT Vs. Sheth Manilal Ramchordas Vishram Bhawan Trust, which held that depreciation should be deducted to determine the income available for charitable purposes. The CIT(A) noted that the expenses were incurred for the assessee's educational activities and were duly audited.

Tribunal's Conclusion:
The Tribunal found no specific error in the CIT(A)'s decision and noted no contrary decisions were presented by the revenue. The Tribunal confirmed the CIT(A)'s order, dismissing the revenue's appeal.

3. Deletion of Addition under the Head "Advance Payment to Shri Durlabh Mahto" of ?4,66,000/-

Facts and Arguments:
The AO added ?4,66,000/- to the assessee's income, arguing that the advance payment to Shri Durlabh Mahto was not for educational purposes due to the lack of details provided by the assessee.

CIT(A) Decision:
The CIT(A) deleted the addition, noting that the payment was made to Shri Durlabh Mahto for legal services related to the assessee's educational activities. The CIT(A) referenced the Patna Bench Tribunal's decision in the assessee's case for A.Y. 1977-78, which supported the view that the expenses were related to educational purposes.

Tribunal's Conclusion:
The Tribunal upheld the CIT(A)'s decision, noting no specific error or contrary evidence provided by the revenue. The Tribunal confirmed that the payment to Shri Durlabh Mahto was for legal assistance related to the assessee's educational activities.

Final Order:
The appeal filed by the revenue was dismissed, and the CIT(A)'s order was confirmed in all the issues. The order was pronounced in the open court on 30/05/2018.