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TMI Blog2017 (11) TMI 366X X X X Extracts X X X X X X X X Extracts X X X X ..... f the income tax act, which was also confirmed by the Ld. CIT (A). b. ITA No. 910/Del/ 2016 for AY 2011-12 against the order of CIT(A)-Ghaziabad dated 21.12.2015 in Assessment order u/s 143(3) of the Income Tax Act passed by the Additional Commissioner of Income Tax, Range-1, Ghaziabad on 28.02.2014 wherein it has been held that the assessee is engaged in the transport business and therefore, provisions of section 11(4A) of the Act are applicable and hence, surplus income of Rs. 2474260/- was chargeable to tax without having the benefit of section 11 and 12 of the income tax act and further depreciation on the assets which are allowed as application fully was decided by the Ld. CIT appeal by confirming the addition on account of transportation business and deleting the disallowance of depreciation. c. ITA No. 2500/del/2017 for assessment year 2010- 11 and ITA number 2501/Del/2017 for assessment year 2011-12 against the order of the Commissioner of income tax (Appeals), Ghaziabad dated 01/03/2017 for both the years wherein the penalty of Rs. 5170420/- & Rs. 1388394/- under section 271 (1) (c) of the income tax act 1961 and levied by the Ld. additional Commissioner of income tax, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenditure incurred against transportation and games/sports activity respectively and conforming the resultant addition of Rs. Rs. 1,58,79,183/- by recording a wrong finding that assessee could not controvert the findings of AO merely on surmises and conjectures. 6. Because, in addition to above , the learned lower authority has erred in upholding the above disallowances/additions even without appreciating the basic facts like accounts are accepted, example of other school is neither reliable nor confronted to assessee, there is no material against the assessee, past history and AO‟s computation is giving absurd results etc. hence order is without any application of mind . 7. Because, the learned lower authority has grossly erred in upholding disallowance expenses of Rs. 15,03,344/- being payment of interest etc. to PF without even writing a single word or giving any finding on the issue. 8. Because, without prejudice to above but only as an alternative , the learned lower authority also erred in not appreciating the fact that in any eventuality admittedly assessee has already utilized more than 85% of its income for „charitable purposes‟ and so any surpl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee has already utilized more than 85% of its income for 'charitable purposes' and so any surplus will also be exempt u/s 11-12." 4. The Revenue has raised the following grounds in ITA No. 1387/Del/2016:- "1. Ld. CIT(A) has erred in law and on facts in deleting the disallowance on account of depreciation of Rs. 1.89,18,933/- ignoring the facts that depreciation on account of application of income for charitable purposes is not allowable as the capital expenditure on acquiring fixed assets has already been allowed in respective years. 2. Ld. CIT(A) erred in law and on facts in deleting the addition of Rs. 12,32,699/- on account of sports activities ignoring the facts that the expenses have been claimed on estimated basis and assessee has tried to segregate these expenses from the combined income & expenditure account of the society without maintaining separate set of books of account as required in the law as per section I 1(4A) of the l.T. Act. 3. Ld. C1T(A) erred in law and on facts in deleting the addition of Rs. 13,19,605/- on account of transport activities ignoring the facts that the expenses have been claimed on estimated basis and assessee has tried to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n properly considered and judicially interpreted and the same do not justify the penalty imposed U/s 271 (l)(c) at Rs. 51,70,422.00. 8. That the information filed and the material available on record are not properly considered and as such the order imposing penalty u/s 271 (1) (c) is illegal and bad in law. 9. The Assessing Officer/CIT(A) has erred in not providing proper and adequate opportunity of hearing to the Appellant to place the evidence/details on record to substantiate its claim during the assessment proceedings. 10. That, the penalty proceedings have been initiated and imposed without any specific charges, hence, the same are liable to be deleted. 11. That in any case the penalty imposed is unjust, arbitrary and highly excessive 12. That, the appellant reserves its right to add, amend/modify the grounds of appeal. All of the above grounds of appeal are without prejudice and are mutually exclusive to each other." 6. The assessee has raised the following grounds in ITA No. 2501/Del/2017:- "1. That, the notice issued U/s 271 (1) (c) and order imposing penalty at Rs. 1388394/- under said section are illegal, bad in law, and without jurisdiction. 2. Tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tails on record to substantiate its claim during the assessment proceedings. 10. That, the penalty proceedings have been initiated and imposed without any specific charges, hence, the same are liable to be deleted. 11. That in any case the penalty imposed is unjust, arbitrary and highly excessive 12. That, the appellant reserves its right to add, amend/modify the grounds of appeal. All of the above grounds of appeal are without prejudice and are mutually exclusive to each other." 7. Briefly stated the facts for assessment year 2010 - 11, that the assessee is a trust carrying on the educational activities for about 30 years. It is also registered under section 12A of the income tax act. The assessee has earned income from fees, income from games and transportation. The Ld. assessing officer enquired that games income, transportation income and other incomes, why the provisions of section 11 (4A) of the income tax act should not be applied to that as according to him these are in the nature of business. The assessee replied to the Ld. assessing officer that these are the activities provided by the Society for the purpose of furtherance of the education activity and is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also of the view that assessee has claimed depreciation of Rs. 151682 29/-which is not allowable as the original cost of the asset has been allowed as application out of total income earlier. Therefore according to him the allowance of depreciation amounts to double deduction. 11. Aggrieved by the same the assessee preferred an appeal before the Ld. CIT (A). The Ld. CIT (Appeal) passed an order on 24/02/2015 wherein he held that appellant has not forwarded any argument as to why separate fees is charged for transportation and sports activity. He further held that there is no dispute that merely getting admission to the course will not make a student eligible to get transport facility and huge fees charging that they most forceful which no justification has been given by the appellant. He further held that when getting of transport activities not linked to getting admission in the College it has no force in the argument of the appellant that the transportation activity should be termed as education.Therefore aggrieved by the order of the lower authorities. The assessee is in appeal before us. 12. The ground No. 1 is general in nature and therefore same is dismissed. 13. Ground No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acility but has to pay some more fees towards them. We are of the opinion that for the students who are studying in the colleges if they want to avail such facilities then they are charged such fees, which is nothing but providing an additional facility to the students. Therefore it cannot be said that it is not incidental to the education. None of the instances were found by the ld AO or appellate Authorities where the student is not studying in the school and is providing transport or games facility. It is also not the case of the revenue that surplus generated by the assessee in transportation activity is not used for the educational activities. Further the provisions of section 11 (4A) does not apply in case the activity generating profit is incidental to the attainment of the objectives of the trust. In the present case it is not disputed that activities of the games and transportation is for the students of the society and hence both these activities are incidental to the main objects of the trust. Hence the lower authorities erroneously applied the above provisions and taxed the surplus as the separate income of the assessee denying benefit of section 11 and 12 of the act. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where the Hon‟ble Delhi High Court after considering all the cases relied upon by the revenue has allowed the depreciation also . In view of this ground No. 9 of the appeal of the assessee is allowed. 18. In the result appeal of the assessee in ITA No. 2733/del/2015 for assessment year 2010 - 11 is partly allowed. 19. Now we come to the appeal of the assessee in ITA No. 910/Del/2016 for assessment year 2011 - 12. 20. The ground No. 1 of the appeal of the assessee is general in nature and therefore dismissed. 21. Ground No. 2 - 5 of the appeal of the assessee is pertaining to treatment of Transportation facility, sports activity of the school provided exclusively to the students of the society which are held by the Ld. assessing officer as separate business activities and therefore applied section 11 (4A) and denied the deduction/exemption under section 11 and 12 of the income tax act. Both the parties confirmed before us that the facts and circumstances of the case in the present appeal is identical to the facts and circumstances of the case of the assessee in ITA No. 2733 del 2015 for assessment year 2010 - 11. 22. We have carefully considered the rival contentions and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from that cannot be segregated when there is no evidence that these expenditure have been incurred for purposes other than the object of the trust. In view of this we dismiss ground No. 2 and 3 of the appeal of the revenue. 27. In the result ITA No. 1387/del/2016 for assessment year 2011 - 12 filed by the revenue is dismissed. 28. ITA No. 2500/Del/2016 for assessment year 2010 - 11 and ITA number 02501/Del/2017 for assessment year 2011 - 12 filed by the assessee are against the order of the Ld assessing officer levying penalty under section 271 (1) (c) of Rs. 1388394/- and Rs. 5170422/- for respective years, by order dated 21/03/2016 on addition on account of transportation activity and games activity of the assessee held by the Ld. assessing officer as business income. The Ld. CIT appeal confirmed the penalty levied by the assessing officer. Therefore, assessee is in appeal before us. 29. As we have already directed the Ld. assessing officer to consider the transportation activity and games activity of the assessee as activities incidental to the main object of the society of education and allow benefit of section 11 and 12 of the act on profits generated by these activities. I ..... 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