2021 (8) TMI 871 - AT - Income Tax

Assessment of trust - Addition on account of excess fees - AO brought on record sufficient material to show that assessee had collected excess fees, in addition to the fees fixed by State Government - CIT(A) held that the assessee has applied more than 85% of total receipt for its object. Thus, the predominant object of the assessee has been fulfilled - HELD THAT - Considering the facts the assessee has applied more than 85% of the total receipt on charitable purpose and there is no expressed finding of AO that assessee is not carrying the charitable activities. Therefore, we do not find any merit in the grounds of appeal raised by the revenue. Thus we have heard the order of Ld. CIT(A). Disallowance of depreciation - AO disallowed the depreciation on fixed assets by holding that it amounts to double deduction as the assessee has already obtained the benefit under section 11 - CIT-A allowed the depreciation claim - HELD THAT - Considering the decision of Hon ble Bombay High Court INSTITUTE OF BANKING PERSONNEL SELECTION 2003 (7) TMI 52 - BOMBAY HIGH COURT which has been affirmed by Hon ble Apex Court in CIT Vs Rajasthan and Gujarati Charitable Foundation Poona 2017 (12) TMI 1067 - SUPREME COURT we do not find any merit in the ground of appeal raised by the revenue. Addition u/s 68 - anonymous donations u/s 115BBC - HELD THAT - As decided in own case 2019 (11) TMI 1657 - ITAT DELHI the appellant has discharged the primary onus casted upon it to prove the identity of depositors, genuineness of transactions and credit worthiness of the depositors and therefore the unsecured loans accepted by the appellant from 5 persons during the year under appeal are treated as explained and substantiated - non production of the depositors by the' appellant Has wrongly been made a ground to make addition to make, addition u/s 68 of the Act. Further the action of the A.O. to treat the deposits under reference as anonymous donations u/s 115BBC is completely unlawful since all the loan creditors had opening balances and had also filed copies of ITRs, Thus, by no stretch of imagination could the AO treat these loans as anonymous donation u/s 115BBC. Now coming u the failure to produce the depositor for the personal deposition the same cannot be treated as a ground so as to make the addition of the loans accepted from them. Decided against revenue.

Summary

Issues Involved:
1. Deletion of addition of ?1,36,83,100/- made by the AO against excess fees charged from students.
2. Deletion of addition of ?1,79,42,159/- made by the AO regarding depreciation.
3. Deletion of addition of ?47,00,850/- made by the AO regarding cash credits.

Issue-wise Detailed Analysis:

1. Deletion of Addition of ?1,36,83,100/- Against Excess Fees Charged:
The AO noted that the assessee, a registered society running an educational institution, charged excess fees beyond the prescribed amount by the State Government, treating it as capitation fee and thus as a business receipt. The AO added this amount to the income of the assessee. On appeal, the Ld. CIT(A) deleted the addition, considering that the assessee utilized the excess fees for charitable purposes, including the creation of fixed assets. The CIT(A) referenced the decision of the Hon'ble Supreme Court in Queen’s Educational Society vs. CIT, which held that surplus arising incidentally from educational activities does not imply a profit motive if the predominant objective is education. The Tribunal upheld the CIT(A)'s decision, noting that the assessee applied more than 85% of its total receipts for charitable purposes, fulfilling its predominant object.

2. Deletion of Addition of ?1,79,42,159/- Regarding Depreciation:
The AO disallowed the depreciation claimed by the assessee on fixed assets, arguing it amounted to double deduction since the assessee had already benefited from the application of funds under section 11 in previous years. The Ld. CIT(A) deleted the addition, and the Tribunal affirmed this decision. The Tribunal referenced the decision in CIT Vs Rajasthan and Gujarati Charitable Foundation Poona, where the Hon'ble Supreme Court upheld that depreciation on assets used for charitable purposes is allowable even if the cost of such assets had been fully allowed as application of income in earlier years. The Tribunal found no merit in the revenue's appeal, as the issue was covered in favor of the assessee by precedent.

3. Deletion of Addition of ?47,00,850/- Regarding Cash Credits:
The AO added ?47,00,850/- as unexplained cash credits under section 68, treating the loans as accommodation entries. The Ld. CIT(A) deleted the addition, noting that the assessee had provided sufficient evidence to establish the identity, genuineness, and creditworthiness of the creditors. The Tribunal upheld the CIT(A)'s decision, referencing its own earlier decision in the assessee's case for AY 2013-14, where similar additions were deleted. The Tribunal found that the AO had not conducted further inquiries or issued summons to the creditors, and thus, the addition was unjustified.

Conclusion:
The Tribunal dismissed the revenue's appeal, affirming the CIT(A)'s order in all respects. The Tribunal found that the assessee had applied more than 85% of its receipts for charitable purposes, justified the depreciation claim, and adequately explained the cash credits, thus fulfilling its charitable objectives. The revenue's grounds of appeal lacked merit, and the CIT(A)'s order was upheld.