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TMI Blog2014 (11) TMI 256X X X X Extracts X X X X X X X X Extracts X X X X ..... atnagar, Chairman of the Society and his family members. The CIT (A) confirmed the action of the Assessing Officer by holding that the society has not been used solely for the purpose of education. Various expenses claimed have not been proved and there has also been diversion of funds which should have been used for the purpose of education and also has not fulfilled the conditions as prescribed u/s 13 of the Act. 3. The grounds in assessee's appeal read as under :- "1. The Learned Commissioner of Income Tax (Appeals) has erred in facts and in law in confirming the action of assessing officer in denying exemption u/s 10(23C)(vi) of IT Act, 1961 to the assessee. 2. The Learned Commissioner of Income Tax (Appeals) has erred in facts and in law in confirming the action of assessing officer in denying exemption u/s 11 of the Act, 1961. 3. The Learned Commissioner of Income Tax (Appeals) has erred in facts and in law in confirming the disallowance of Rs. 7,44,802/- by treating the expenditure incurred on dismantling of huts as capital expenditure. 4. The Learned Commissioner of Income Tax (Appeals) has erred in facts and in law in confirming the disallowance of Rs. 70,000/- on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... havlal Genda Trust, cited supra, has held that if such report is filed, even after the return had been filed but within the period permitted by law, it would be against the spirit of the Act to deny exemption and the requirement of the report was held to be directory. Similarly, the Hon'ble Calcutta High Court in the case of CIT vs. Hardeodas Agarwalla Trust, cited supra, has held that a procedural provision, ordinarily, should not be construed as mandatory, if the defect in the act done in pursuance of it can be cured by permitting appropriate rectification to be carried out at a subsequent stage and having regard to the object of section 12A, it cannot be said that the legislature intended that even where the trust has got its accounts audited and the certificate obtained in Form No.10B before the assessment is completed, merely because such report could not be filed in the course of assessment proceedings, it would deprive a trust from getting the exemption if it is otherwise entitled to it in law. In view of these facts, we hold that the CIT (A) was not justified in confirming the denial of exemption u/s 11 of the Act only for the reason that the audited report was not subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed exemption u/s 11 and the relevant order is placed at pages 74 - 75 of the paper book. Ld. AR submitted that when the revenue has accepted allowance of exemption u/s 11 in subsequent years on the same facts, the same should not be denied to the assessee for the year under consideration, i.e. Assessment Year 2000-01. He further submitted that ITAT in the Assessment Years 2001-02 and 2002-03 has upheld the finding of CIT (A) granting exemption u/s 11. Ld. AR further submitted that on the similar facts, ITAT has allowed the exemption in the case of Laxmi Bai Foundation in ITA No.2496/Del/2006 dated 12.03.2010, Nav Manav Sansthan in ITA No.2001/Del/2009 dated 16.11.2009 and Aryabhatt Vidya Sansthan in ITA No.2002/Del/2009 dated 20.11.2010 and ld. AR provided the copies of these orders. Considering all these facts, we find that the assessee deserves to exemption u/s 11 in the year under consideration also. We order accordingly. 9. In the ground no.3, the issue is regarding disallowance of Rs. 7,44,802/- by treating the expenditure incurred on dismantling of huts as capital expenditure. The assessee claimed expenditure on account of dismantling of huts amounting to Rs. 8,27,558/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance of Rs. 2,58,905/- under the various heads claimed by the assessee. The Assessing Officer issued notices u/s 133 (6) of the Act to the following parties :- (i) Surya National Rs.2,14,545/- (ii) Pragati Tours Rs. 44,360/- (iii) Achal Tours Rs. 61,000/- (iv) J.K. Travels Rs. 96,450/- Total Rs.4,16,355/- The notices were received back with the postal remarks "there was no such person at the address". The Assessing Officer made the disallowance of Rs. 4,16,355/-. The CIT (A) confirmed the disallowance in respect of payments made to Surya National and Pragati Tours of Rs. 2,14,545/- and Rs. 44,360/- respectively. Ld. AR submitted that in the case of Surya National, it was confirmed by the CIT (A) only for the reason that the amount was not mentioned in the confirmations. He submitted that the amount paid to Surya National was recorded in the books of account and the same was paid by cheque and confirmation was also filed. Similarly, in the case of Pragati Tours, the assessee could not furnish the confirmations due to the death of proprietor, however, the payment was made by cheque. 17. Ld. DR relied on the orders of the authorities below. 18. We have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the sides on the issue. We find that similar claim has been allowed in the case of St. Vaswani Educational Society, cited supra, by ITAT. The relevant portion of the order read as under :- "4. First, I take up the departmental appeal. After hearing both the parties, Id o not find any infirmity in the order of the CIT (A) in as much as the assets in the form of building were used for educational purposes. The AO has stated that assessee carries no business other than school. That means, it has been admitted by him that running of school was a business activity and, therefore, the assessee is entitled to depreciation on the assets used for the purpose of running of school. I have gone through the statement of accounts furnished before me and found that income and expenditure account as well as balance sheet of school is separately prepared while, on the other hand, the income and expenditure account and balance sheet of the society is also separately prepared. The buildings were shown in the balance sheet of the society while the other assets are shown in the balance sheet of the school. The A.O. himself has allowed depreciation in respect of the assets which have been shown in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the liability of caution money to be paid back to students and the company which has taken over the assets of the school continued to run the school and he submitted that Assessing Officer's allegation that by transferring the caution money liability, the same has ceased to exist is without any basis. The asset and liability of caution money has been transferred by entering into written agreement between the assessee and the company. The Assessing Officer accepted the transfer of asset of the company but at the same time he assumed that caution money has not been transferred and thus ceased to exist. He submitted that the CIT (A) has rightly deleted the addition as the company continued to run the school after taking over land & building and other assets from the society and also discharged the liability of caution money as and when demanded by the students. He pleaded to uphold the order of the CIT (A) on this issue. 26. We have heard both the sides on this issue. We have perused the documents placed at pages 37 to 39 of the paper book which is the sale agreement of the sale of the assets, list of the same is given in Annexure-A placed at page 39, which is reproduced as under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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