2021 (10) TMI 957 - AT - Income Tax

Depreciation on account of application of income for charitable purposes - Double deduction - CIT(A) has given a factual finding that assessee has not claimed investment in fixed asset as application of the income in the year of purchase of fixed assets - HELD THAT - CIT(DR) has not brought anything on record which could controvert the finding of the Ld. CIT(A), despite the impugned order which has been passed by the Ld. CIT(A) on 30/03/2017 - assessee has also referred to audited balance sheets and income and expenditure accounts of earlier years and submitted that investment in fixed assets was not claimed as application of the income in the year of investment. This fact has also not been controverted by the Learned Departmental Representative. In the circumstances, the assessee has claimed depreciation for the first time as application of the income and, therefore, claim of double deduction of the Assessing Officer is baseless and without any evidences, hence not justified. Also as per Rajasthan and Gujarati Charitable Foundation, Poona 2017 (12) TMI 1067 - SUPREME COURT even if investment in capital asset has been claimed as application of the income, the assessee is entitled for depreciation as application of the income in subsequent years, prior to insertion of section 11(6) of the Act with effect from assessment year 2015-16. The instant case being of assessment year 2010-11, the assessee is eligible for depreciation as application of the income irrespective of the fact whether investment in fixed assets was claimed as application of the income or not. - Decided against revenue. Addition u/s 68 - AO found the donation in dispute as anonymous observing that donor companies are only paper companies - CIT-A deleted the addition - HELD THAT - As the assessee has maintained name and address and other details, which have been made available to the Assessing Officer. In such circumstances, following the decision of the Tribunal in the case of Jai Maa Savitri Education Society 2021 (2) TMI 707 - ITAT DELHI entioned above and the finding of the Assessing Officer in remand proceeding, we do not find any error in the order of the Ld. CIT(A) on the issue in dispute and accordingly, we uphold the same. The ground No. 2 of the appeal of the Revenue is accordingly dismissed Addition on account of transport activities - CIT(A) deleted the disallowance - HELD THAT - We find that the Assessing Officer has made disallowance purely on estimate and on ad-hoc basis without pointing out any specific defects in vouchers of expenses maintained by the assessee, which is not permitted in law. Accordingly, we uphold the finding of the Ld. CIT(A) on the issue in dispute and dismiss the ground No. 3 of the appeal of the Revenue. Addition on account of surplus from hostel activity - CIT-A deleted the addition - as per assessee he was maintaining hostel facility for the college student studying with the assessee, which is mandatory requirement under Rules and Regulation of AICTE (i.e. regulatory authority for technical education) - HELD THAT - As the assessee submitted that it has maintained separate books of account as required under the provisions of the Act and further the hostel facilities maintained for the students of the college belonging to the assessee society and the facility is not been extended to any student not studying in the college by the assessee. In such circumstances, the hostel activity has been maintained as part of the education activity. Further, after apportioning the common expenses, there is no surplus from hostel activity. DR could not controvert above submission of the learned Counsel of the assessee. In such circumstances, we do not find any error in the order of the learned CIT(A) - Decided against revenue.

Summary

Issues Involved:
1. Disallowance of depreciation.
2. Addition of anonymous donations under section 68.
3. Addition on account of transport activities.
4. Addition on account of surplus from hostel activities.

Issue-wise Detailed Analysis:

1. Disallowance of Depreciation:
The first issue pertains to the disallowance of depreciation amounting to ?76,96,372/-. The Assessing Officer (AO) disallowed the depreciation claim on the grounds that allowing it would result in a double deduction, as the capital expenditure on acquiring fixed assets had already been allowed in the respective years. However, the CIT(A) observed that the assessee had not claimed any amount for the investment made in fixed assets as an application of income. The CIT(A) relied on the Delhi High Court decision in the case of Director of Income Tax Vs. Indraprastha Cancer Society, which allowed depreciation even if the capital expenditure was treated as an application of income. The Tribunal upheld the CIT(A)'s finding, noting that the assessee had not claimed the investment in fixed assets as an application of income in the year of purchase, and thus, there was no double deduction. Additionally, the Supreme Court's decision in CIT Vs. Rajasthan and Gujarati Charitable Foundation, Poona, supported the view that depreciation is allowable as an application of income even if the capital expenditure is treated as such. Therefore, the Tribunal dismissed the Revenue's appeal on this ground.

2. Addition of Anonymous Donations under Section 68:
The second issue concerns the addition of ?1,69,00,000/- on account of anonymous donations. The AO treated certain donations as anonymous due to incomplete compliance and untraceable donors. However, the CIT(A) deleted the addition after verifying the complete details of the donors, including names, addresses, PAN, donation amounts, and confirmation letters. The CIT(A) noted that the assessee had maintained complete records of the donors' identities, and the provision of section 115BBC, which deals with anonymous donations, was not applicable. The Tribunal upheld the CIT(A)'s decision, observing that the AO had verified the documents in the remand proceedings and did not dispute their genuineness. The Tribunal also referred to similar cases where the maintenance of donor records was sufficient to avoid the application of section 115BBC. Consequently, the Tribunal dismissed the Revenue's appeal on this ground.

3. Addition on Account of Transport Activities:
The third issue involves the addition of ?2,21,250/- related to transport activities. The AO disallowed 30% of the bus expenses due to the assessee's failure to furnish details of the logbook. The CIT(A) deleted the disallowance, stating that the AO made the addition without any specific findings or basis. The CIT(A) noted that even after the disallowance, there was a loss from running the buses. The Tribunal upheld the CIT(A)'s decision, emphasizing that the AO's disallowance was purely on an ad-hoc basis without pointing out specific defects in the vouchers. Therefore, the Tribunal dismissed the Revenue's appeal on this ground.

4. Addition on Account of Surplus from Hostel Activities:
The fourth issue relates to the addition of ?3,99,984/- as surplus from hostel activities. The AO made the addition under section 11(4A) due to the lack of separate books of account for hostel activities. The CIT(A) deleted the addition, noting that the assessee maintained separate books of account for hostel receipts and expenses, and the hostel facility was mandatory as per AICTE regulations. The CIT(A) observed that the AO only considered direct expenses and ignored indirect expenses, resulting in a net loss from hostel activities. The Tribunal upheld the CIT(A)'s decision, agreeing that the hostel facility was intertwined with the educational activity and that the assessee maintained separate books of account. The Tribunal dismissed the Revenue's appeal on this ground.

Conclusion:
The Tribunal dismissed the Revenue's appeal on all grounds, upholding the CIT(A)'s decisions on the disallowance of depreciation, addition of anonymous donations, addition on account of transport activities, and addition on account of surplus from hostel activities. The Tribunal emphasized the importance of maintaining proper records and the applicability of relevant legal precedents in its judgment.