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TMI Blog2014 (6) TMI 361X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee is applied for charitable purposes or religious purposes, the same is entitled for exemption u/s 11 of the Act provided that the money accumulated or set apart is invested or deposited in the forms or modes specified u/s 11(5) of the Act - Concession given the above persons falls foul of section 13(1)(c) of the Act - When the assessee has violated the provisions of section 11 and 13 of the Act by giving concession to the above persons, who are specified persons u/s 13(3) of the Act, being so, the assessee cannot be granted exemption u/s 11 of the Act - CIT(A) was not justified in bringing only the benefit given to the specified persons as income liable to tax - Relying upon T. Bapanaiah Vidyadharma Trust Vs. CIT, [1987 (1) TMI 52 - ANDHRA PRADESH High Court] - the only remedy is to disentitle the assessee in getting exemption u/s 11 of the Act – thus, the order of the CIT(A) is set aside and the AO is directed not to grant exemption u/s 11 of the Act to the assessee – Decided in favour of Revenue. Disallowance of depreciation – Held that:- Following Income-tax (Exemption) Versus M/s. Exhibition Society, Hyderabad [2014 (6) TMI 357 - ITAT HYDERABAD] – its claim u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to allow exemption u/s 11 of the IT Act, 1961, to the assessee in this case. 6. On the facts and in circumstances of the case and when as per the statement of computation of total income dt. 24-9- 2010, signed by its General Secretary, filed by the assessee during the assessment proceedings, it has claimed depreciation, the CIT(A) is not justified in deleting the disallowance of depreciation made by the AO in the assessment. 2. Briefly the facts of the case are that the assessee is a society registered u/s 12A and had claimed exemption u/s 11. The AO noted that the assessee had provided fee concessions to persons specified u/s 13(3) in violation of section 13. The AO also held that since the assessee was engaged in running an educational institution, it was eligible for exemption u/s 10(23C)(vi) and not u/s 11, and that it had not obtained the requisite approval under that provision. The AO also disallowed the depreciation and assessed the total income at Rs. 10,54,46,998/-. 3. On appeal, as regards ground Nos. 2 to 4, the CIT(A) observed that to get exemption u/s 11 of the Act, the assessee should have registration u/s 12A of the Act. For this proposition, the CIT(A) rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laimed that fees concession had been provided to the children of staff and teachers to boost their moral and also to ensure that they gave their best to the organization and continued with the organization in the long run. With regard to the fees concessions to children of persons specified u/s 13(3), the assessee submitted that it was not an unreasonable benefit since they were not drawing any remuneration from the assessee. The assessee relied on the decision in the case of DIT v Pariwar Sewa Sansthan 118 Taxman 587(Del). 7.1 The Assessing Officer rejected the assessee's claim and observed that as per sec.13(1)(c), the assessee was not permitted to apply its income directly or indirectly for the benefit of any person specified in sec.13(3) and that the fees concession to the children of such persons violated sec. 13(1)(c) r.w.s. 13(2)(d). The Assessing Officer held that the assessee could not avail the benefit of sec.13(6) since the assessee had not merely provided educational facilities to such persons but had done so free of cost. The Assessing Officer held that the decision in the case of Pariwar Sewa Sansthan was distinguishable on facts and rejected the claim of exemp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act, who are children of teachers and staff those who have completed continuous service. There is no dispute on this issue. Being so, the AO denied the exemption u/s 11 to the assessee. Whereas the CIT(A) observed that the assessee cannot be denied exemption u/s 11 on this reason as the total fees concession granted to the persons specified u/s 13(3) has to be considered as income of the assessee. He, therefore, directed the AO to bring to tax the sum of Rs. 4,08,000/- as the income of the trust. Section 13 stipulates that section 11 shall not apply in certain cases. Under section 13(1)(v)(ii), nothing contained in section 11 shall operate so as to exclude from the total income of the previous year of the person, in the case of a trust for charitable purposes, if any part of such income or any property of the trust or the institution is, during the previous year, used or applied directly or indirectly for the benefit of any person referred to in sub-section (3). Under section 13(3)(a) to (c) the persons, referred to in section 13(1)(c), are the author of the trust or the founder of the institution and any of the trustees, as mentioned in section 13(3) of the IT Act. Section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the assessee had debited depreciation to its Income Expenditure account but had not claimed any depreciation in its computation of income. The Assessing Officer relied on the decision in the cases of Escorts Ltd v Union of India 199 ITR 43 (SC) and of the jurisdictional ITAT in the case of Exhibition Society (ITA No.1195/Hyd/09, dt.22.3.2012 and held that since the assessee had claimed the total value of the assets as applied for charitable purposes in the year of acquisition, the claim of depreciation could not be allowed. 13. In the course of the appellate proceedings, before the CIT(A) the AR submitted that the assessee had not claimed any double deduction on this count since it had not claimed any depreciation in its computation of income. 14. After considering the submissions of the assessee, the CIT(A) observed that though depreciation was debited by the assessee to the Income Expenditure etc, the assessee's claim, that depreciation had not been claimed as a deduction while computing the income, is factually correct. Therefore, as far as the income tax provisions are concerned, the assessee did not claim a double deduction in the form of application of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) is not allowable as the trust is not undertaking any business activity. In view of the above, the Assessing Officer is directed to verify in respect of each asset on which depreciation claimed, whether the value of such asset was in fact allowed under S.11, and if it was so allowed, the depreciation would not be allowed in respect of such asset. Only if the value of the asset was not allowed as expenditure under S.11, the Assessing Officer is required to allow depreciation thereon, as per the rate applicable to those assets, as held in the case of Mahila Sidh Nirman Yojna, cited supra. This issue raised by the Revenue is set aside to the file of the Assessing Officer for fresh consideration, in the light of the above observations. The Assessing Officer shall accordingly redecide the issue in accordance with law and after giving reasonable opportunity of hearing to the assessee. Since the issue under consideration is identical to that of the said case decided by the coordinate bench, respectfully following the same we remit the issue to the file of the AO to decide the same in the light of the said decision of the coordinate bench. This ground is allowed for statistical purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X
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