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2019 (12) TMI 490 - AT - Income TaxExpenditure incurred for charitable purpose u/s. 11 - Addition on capital expenditure incurred by the appellant on the asset of Pandit Deendayal Petroleum University (PDPU) - expenditure disallowed for charitable purposes - assessee submitted the details with the explanation that the assessee is bound to incur expenses time to time towards the set-up and expansion of the university in terms of Provision of Sec. 25 of the Pandit Deendayal Petroleum University Act, 2007 - HELD THAT - In SARLADEVI SARABHAI TRUST 1988 (3) TMI 53 - GUJARAT HIGH COURT issue decided in favour of the assessee in the identical facts and circumstances of the case as aforesaid, we do not find irregularities in allowing the exemption by the CIT(A) as claimed by the assessee since the expenditure has been incurred as per the object of the society and in terms of a statutory provision of another trust having similar object so as to warrant interference. Hence the order is passed in affirmative i.e. in favour of the assessee and against the Revenue. The appeal preferred by the Revenue is, thus, found to be devoid of any merit and hence dismissed.
Issues Involved:
1. Deletion of addition of ?46,49,38,848/- made by the AO on capital expenditure incurred by the appellant on the asset of Pandit Deendayal Petroleum University (PDPU). Issue-wise Detailed Analysis: 1. Deletion of Addition on Capital Expenditure: The Revenue challenged the deletion of the addition of ?46,49,38,848/- made by the AO on capital expenditure incurred by the appellant on the asset of Pandit Deendayal Petroleum University (PDPU). The AO had issued a show-cause notice during the assessment proceedings, questioning why the said expenditure should not be disallowed for charitable purposes. The assessee responded by providing details and explanations, stating that the expenses were incurred for the setup and expansion of the university in accordance with Section 25 of the Pandit Deendayal Petroleum University Act, 2007. The assessee argued that although both entities are separate with different PAN numbers, they share the same objective of improving education, training, and research in the energy sector, which is a charitable cause for the public at large. The relevant documents, including meeting minutes, policy decisions on non-recurring expenditure, and details of bills and vouchers, were submitted to the AO. However, the AO found the explanation unsatisfactory and made an addition, which was subsequently reversed by the First Appellate Authority, leading to the current appeal. The Revenue's representative relied on the AO's order, arguing that the asset created with the appellant's funding is used solely by the university and not by the appellant, thus benefiting only the university. Therefore, the expenditure was not incurred for the appellant trust's objectives and should not be allowable. The assessee's counsel supported the CIT(A)'s order and referred to Section 25 of the Pandit Deendayal Petroleum University Act, 2007, which mandates the appellant to invest funds periodically for the university's development. The counsel also cited the jurisdictional High Court's judgment in CIT vs. Sarladevi Sarabhai Trust No. 2, which held that donations to another charitable trust for its charitable objects are considered a proper application of income for charitable purposes under Section 11 of the Income Tax Act, 1961. The tribunal reviewed the materials and found that the assessee, a society registered under Section 12AA of the Act, had claimed capital expenditure of ?46,86,14,891/- as expenditure incurred for charitable purposes under Section 11 of the Act. The assessee, promoted by Gujarat State Petroleum Corporation Ltd., had established PDPU under the Gujarat Act No. 14 of 2007. The appellant was authorized to appoint key positions in the university and had a common agenda with the university for education, training, and research in the energy sector. The appellant had made payments directly for constructing a hostel building, which was transferred to the appellant upon completion. The tribunal found that the expenditure was incurred in accordance with a statutory provision and for a charitable purpose, thus not violating Section 11 of the Act. The tribunal concluded that the withdrawal of exemption under Section 11 on this ground was not sustainable. The tribunal also considered the jurisdictional High Court's judgment in CIT vs. Sarladevi Sarabhai Trust No. 2, which supported the assessee's claim that donations to another charitable trust for its objects do not violate Section 11(1)(a) of the Act. The High Court had held that the donor trust's application of income for charitable purposes is complete upon making the donation to another charitable trust with similar objects. The tribunal agreed with this view and found no irregularities in the CIT(A)'s decision to allow the exemption claimed by the assessee. In conclusion, the tribunal affirmed the CIT(A)'s order, finding no merit in the Revenue's appeal, and dismissed the appeal. Judgment: The Revenue's appeal is dismissed. The tribunal upheld the CIT(A)'s decision, allowing the exemption claimed by the assessee for the capital expenditure incurred on the asset of PDPU, as it was in accordance with the statutory provisions and for a charitable purpose. The order was pronounced in open court on 02/12/2019.
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