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TMI Blog2015 (11) TMI 988X X X X Extracts X X X X X X X X Extracts X X X X ..... n for taxation purposes. So, Ld. CIT(A) has rightly deleted the addition of ₹ 70,395/- - Decided in favour of assessee. Addition made u/s 68 in respect of corpus donation - Held that:- When the assessee has provided the complete details of corpus donors in the form of individual confirmations from such donors, their names and addresses as well as PAN, it was for the A.O. to confirm the same. Merely issuance of notices by the A.O. to the corpus donors u/s 133(6) of the Act is not enough to discharge the onus. The A.O. has not even disputed the existence, genuineness and creditworthiness of the said donors nor he has disputed the individual confirmations filed by them. It appears that the A.O. has not made any effort whatsoever to verify the genuineness of the corpus donors as per letters filed by the assessee and arbitrarily proceeded to add the corpus donation to the income of the assessee. So, consequently, the amount spent by the assessee towards charitable cause, during the year under consideration, is more than the income earned if the allegation of the A.O. is taken as correct. So, under these circumstances, no addition can be made u/s 11(1A) of the Act. Even other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Assessee ignoring the fact that the same were not considered as revenue receipts but as capital receipts by the Assessee and hence not accounted for in the Income Expenditure Account for A. Y. 06-07. 2. Briefly stated, the facts of this case are: during the processing of return of income filed by the assessee qua the Assessment Year 2006-07, the case was subjected to scrutiny and notices along with questionnaire u/s 143(2) and 142(1) were served upon the assessee who put appearance through Shri Sunil Gupta, CA who has attended the proceedings, filed details and discussed the case. 3. The assessee is a trust registered u/s 12A (a) of the Act w.e.f. 27.02.1996 to avail exemption u/s 80G valid up to 31.03.2005. The trust is running a school in the name and style of Delhi Public School at Ahmedabad for providing education, research, relief to poor, medical relief and advancement of any other objects of general public utility, also to open, run and continuous schools for the education of children to promote human welfare and to support institution such as orphanage, old age home etc. The assessee claimed depreciation to the extent of ₹ 2,07,88,207/- and claimed u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not brought out any evidence to support this fact till date and as such an amount of ₹ 25,32,000/- amounted to undisclosed income and consequently made the addition. 6. The assessee challenged the assessment order before Ld. CIT(A) by way of appeal which has been allowed vide impugned order dated 24.03.2010. Feeling aggrieved, the Revenue has come up before the Tribunal by way of filing the present appeal. 7. The Ld. D.R. challenging the appellate order, contended that this is a case of double deduction claimed by the assessee and relied upon the order passed by A.O. 8. On the other hand, Ld. A.R. repelled the argument addressed by Ld. D.R. and relied upon the order passed by Ld. CIT(A) by contending inter alia that the assessee s case is duly covered by the judgement delivered by Hon'ble Jurisdictional High Court cited as Director of Income Tax Vs Vishwa Jagriti Mission, 73 DTR (Del.) 195 and the judgement delivered by Hon'ble Punjab Haryana High Court entitled as ACIT Vs Tiny Tots Education Society in I.T.A.No. 3182/Del/2008 and prayed for dismissal of the appeal. 9. Grounds No.1 2: Grounds No.1 and 2 are interlinked and more so, ground No.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is one of the deductions recognized under law there is no reason for not allowing the same to the appellant. The case of Escorts Ltd Vs. Union of India, relied upon by the AO, is in respect of section 35(2)(iv), which specifically disallows the deduction u/s.32, whereas, there is no such explicit provision in respect of exemption claims u/s. 11 and 12. 11.1 On the other hand, the A.O. decided the matter by relying upon the judgement of Hon'ble Supreme Court cited as Escorts Limited Vs Union of India 199 ITR 43. 12. However, Ld. CIT(A) relied upon the judgement cited as ACIT Vs Tiny Tots Education Society (supra) wherein, identical issue has arisen before Hon'ble Punjab Haryana High Court and the Hon'ble High Court has held as under:- Charitable purposes- Application of income to charitable objects- Depreciation- Assessee claiming depreciation be reduced from income for determining percentage of funds to be applied for purposes of trust permissible not a case of double benefit I. T. Act, 1961 Section 11. The assessee was a charitable institution registered u/s 12AA of the I. T. Act, 1961. In its accounts, the assessee calculated depreciation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a High Court. There the society was running a school in Bangalore and was allowed exemption under Section 11. The question arose as to how the income available for application to charitable and religious purposes should be computed. Jagannatha Setty, J. speaking for the Division Bench of the Court held that income derived from property held under trust cannot be the total income as defined in Section 2(45) of the Act and that the word income is a wider term than the expression profits and gains of business or profession . Reference was made to the nature of depreciation and it was pointed out that depreciation was nothing but decrease in the value of property through wear, deterioration or obsolescence. It was observed that depreciation, if not allowed as a necessary deduction for computing the income of charitable institutions, then there is no way to preserve the corpus of the trust for deriving the income. The circular No.5-P (LXX-6) of 1968, dated July 19, 1968 was reproduced in the judgment in which the Board has taken the view that the income of the trust should be understood in its commercial sense. The circular is as under:- Where the trust derives income from h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statutory computation provisions of Chapter IV-O of the Act were applicable. In the present case, we are not concerned with the applicability of these provisions. We are concerned only with the concept of commercial income as understood from the accounting point of view. Even under normal commercial accounting principles, there is authority for the proposition that depreciation is a necessary charge in computing the net income. Secondly, the Supreme Court was concerned with the case where the assessee had claimed deduction of the cost of the asset under Section 35(1) of the Act, which allowed deduction for capital expenditure incurred on scientific research. The question was whether after claiming deduction in respect of the cost of the asset under Section 35(1), can the assessee again claim deduction on account of depreciation in respect of the same asset. The Supreme Court ruled that, under general principles of taxation, double deduction in regard to the same business outgoing is not intended unless clearly expressed. The present case is not one of this type, as rightly distinguished by the CIT(Appeals). 14. Having regard to the consensus of judicial opinion on the precise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f income for charitable purposes, and the same has been sold, the income thereof has been disclosed, the addition cannot be made for the reason that the application of income is not computation of income and the provisions of calculating the income applied for charitable purpose is attracted only after the income eligible for exemption is determined. Since the entire amount of ₹ 70,395/- used for purchasing fixed assets, is application of income for charitable purpose, the income earned on the sale of such assets is part of income even for taxation purposes. So, Ld. CIT(A) has rightly deleted the addition of ₹ 70,395/-. Consequently, grounds No.1 2 are determined against the appellant. 17. Grounds No.3 4: Both the grounds are interlinked and the question arises for determination qua the aforesaid grounds is, as to whether Ld. CIT(A) has erred in holding that no addition can be made u/s 68 of the Act in respect of corpus donation amounting to ₹ 25,32,000/- despite failure of assessee to discharge the onus of proving the genuineness of the said donation. 18. The aforesaid issue is to be determined in the light of settled principle of law that in cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... donors lying in the paper book at pages 50-145 in the form of individual confirmations from such donors, their names and addresses as well as PAN, it was for the A.O. to confirm the same. Merely issuance of notices by the A.O. to the corpus donors u/s 133(6) of the Act is not enough to discharge the onus. The A.O. has not even disputed the existence, genuineness and creditworthiness of the said donors nor he has disputed the individual confirmations filed by them. It appears that the A.O. has not made any effort whatsoever to verify the genuineness of the corpus donors as per letters filed by the assessee and arbitrarily proceeded to add the corpus donation amount of ₹ 25,32,000/- to the income of the assessee. 22. Even otherwise, the total expenditure shown to have been incurred by the assessee during the year under assessment, ₹ 18,22,54,692/- (Rs.8,49,27,033/- as expenses +Rs.9,73,27,659/- towards fixed assets as per P L account) and under these circumstances, if the amount received towards corpus donation of ₹ 25,32,000/- is added, the total income of the assessee comes to ₹ 11,13,87,279/- (Rs.10,88,55,279/- + ₹ 25,32,000/-). So, consequently ..... X X X X Extracts X X X X X X X X Extracts X X X X
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