2020 (12) TMI 680 - HC - Income Tax

Denying exemption u/s 10(23C)(vi), 11 and 12 - certain advances received from another charitable trust during the financial year 2003-04 - amount was repaid to the other trust and in the course of repayment, the assessee paid excessively a sum which was recoverable from the other institution/trust - assessee contended that the amount had been given to another charitable institution for educational purposes to enable them to construct a building as part of their college and that the same could not be considered as investment and hence, the provisions of Sections 11, 12 and 13 had not been violated - HELD THAT - There are several factual aspects, which have been missed out by the Assessing Officer to be taken into consideration and we cannot be called upon to take a decision in the abstract without examining the foundation facts for their correctness. Considering all the aspects, we deem it appropriate that the matter should be remanded to the Assessing Officer for a fresh consideration. For all the above reasons, the tax case appeal filed by the assessee is allowed, the impugned order passed by the Tribunal and the orders passed by both the Assessing Officer and the CIT(A) are set aside so far as substantial questions of law 1, 3 and 4 are concerned and the matter is remanded to the Assessing Officer for a fresh consideration

Summary

Issues:
1. Interpretation of judgment in Queens Educational Trust case and CBDT circular
2. Disallowance of depreciation
3. Entitlement to deduction under Section 11 of the Act
4. Consideration of advances received from another charitable trust
5. Violation of provisions of Sections 13(1)(c) and 13(1)(d) read with Section 11(5)

Interpretation of Judgment and Circular:
The case involved an appeal under Section 260A of the Income Tax Act, 1961 against an order of the Income Tax Appellate Tribunal. The appellant raised substantial questions of law regarding the Tribunal's decision not to follow the judgment in Queens Educational Trust case and a CBDT circular. The appellant argued that the institution was existing for educational purposes and not for profit. The High Court analyzed the facts and legal provisions but ultimately remanded the matter to the Assessing Officer for fresh consideration.

Disallowance of Depreciation:
The Court addressed the issue of disallowance of depreciation, noting that the issue was covered in favor of the assessee by a Supreme Court decision. The Court held that normal depreciation could be considered as a legitimate deduction. Consequently, the substantial question of law related to depreciation was answered in favor of the assessee.

Entitlement to Deduction under Section 11:
The Court examined whether the appellant was entitled to a deduction under Section 11 of the Act. The appellant contended that the amount given to another charitable trust was not a violation of Sections 11, 12, and 13. However, the Assessing Officer and the CIT(A) disagreed. The High Court, after considering various arguments, set aside the orders and remanded the matter for fresh consideration.

Consideration of Advances Received:
The issue revolved around advances received from another charitable trust. The appellant argued that the amount given for constructing a building for educational purposes should not be considered as an investment. The Court analyzed the contentions of both parties and found that certain factual aspects were not adequately considered by the Assessing Officer. Consequently, the matter was remanded for fresh assessment.

Violation of Provisions of Sections 13(1)(c) and 13(1)(d) read with Section 11(5):
The Court addressed the violation of provisions related to advances made to another trust. The appellant argued that the loan given for similar charitable purposes should not be considered as an investment or parking of funds. The Court considered relevant case law and remanded the matter for further assessment by the Assessing Officer.

In conclusion, the High Court allowed the appeal, set aside previous orders, and remanded the matter for fresh consideration on specific issues, while also providing a favorable ruling on the issue of depreciation.