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TMI Blog2018 (7) TMI 1477X X X X Extracts X X X X X X X X Extracts X X X X ..... a, Accountant Member And Shri Kuldip Singh, Judicial Member Assessee by : Dr. Rakesh Gupta, Adv. Sh. Lakshay Goyal, Adv. Revenue by : Sh. Amit Jain, Sr. DR ORDER Per : Kuldip Singh, JM The Appellant, M/s Friends Charitable Society (hereinafter referred to as the Assessee ) by filing the present appeal, sought to set aside the impugned order dated 26.02.2015 passed by Ld. CIT(A),Muzaffar Nagar, qua Assessment Year 2010-11, on the grounds that:- 1. That on the facts and circumstances of the case and in the law the learned commissioner of income-tax (Appeals) has grossly erred in confirming the additions made by Assessing Officer treating Hostel facility provided to college students as business of the appellant society considering the alleged surplus of ₹ 2,35,43,997/- as business income in the hand of appellant society. The observation made and basis adopted are erroneous, unjustified, unwarranted, bad in law and are without sufficient material on records. 2. That the Learned Commissioner of Income-tax ( Appeals) has grossly erred in confirming the additions made by A.O. holding that hostel/ mess facility for students is separate business acti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Briefly stated the facts necessary for adjudication of the controversy at hand are: the assessee society is running engineering and professional college in the name of Krishna Engineering College (KEC) for B.Tech and M.C.A courses, being a society registered under the registration of society Act and has also been granted registration u/s 12AA and exemption u/s 80G of the Income Tax Act, 1961 (for short the Act ). The Assessing Officer on the basis of his enquiry in assessment proceedings came to the conclusion that running of hostel facilities by the assessee for its students in which separate fee is charged does not fall under the definition of charitable purpose u/s 2(15) of the Income Tax Act, and as such held to be a separate business. Consequently, AO made addition of ₹ 2,35,43,997/- generated by the assessee as surplus by charging fee for hostel accommodation and mess charges as a business income. The Assessing Officer also disallowed an amount of ₹ 4,04,17,438/- claimed by the assessee as depreciation by debiting the same to the Income Expenditure Account of the society for the purposes of working out the surplus in the hands of the society. 3. The Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15.2.2017, by passing order dated 15.3.2018 u/s 254/143(3) of the Act and found the total income of the assessee society at nil. 10. So, in view of the matter, we are of the considered view that the addition made by the AO on account of hostel surplus fee received by assessee by treating the same as business income in the hands of assessee u/s 11(4)/11(4A) of the Act and confirmed by Ld. CIT(A) is not sustainable in the eyes of law, hence ordered to be deleted. 11. So far as question of making addition of ₹ 4,04,17,438/- by the AO by disallowing the depreciation claimed by the assessee by debiting the same to the Income and Expenditure Account of the assessee for the purposes of working out the surplus in the hands of the society, is concerned, this issue has already been dealt with by the Co-ordinate Bench of Tribunal in the case of Krishna Charitable Society (supra) by following the decision rendered by Hon ble Supreme Court of India in the case cited as CIT vs. Rajasthan and Gujarati Charitable Foundation Poona, Civil Appeal No. 7186/2014, date of order 13.12.2017, (Supreme Court of India) and decision rendered by Hon ble High Court of Delhi in the case cited as DIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chargeability of income from profits and gains of business and section 29 provides that income from profits and gains of business ahll be computed in accordance with section 30 to section 43C. That, section 32(1) of the Act provides for depreciation in respect of building, plant and machinery owned by the assessee and used for business purposes. It further provides for deduction subject to section 34. In that matter also, a similar argument, as in the present case, was advanced on behalf of the revenue, namely, that depreciation can be allowed as deduction only under section 32 of the Income Tax Act and not under general principles. The Court rejected this argument. It was held that normal depreciation can be considered as a legitimate deduction in computing the real income of the assessee on general principles or under section 11 (1) (a) of the Income Tax Act The Court rejected the argument on behalf of the revenue that section 32 of the Income Tax Act was the only section granting benefit of deduction on account of depreciation. It was held that income of a Charitable Trust derived from building, plant and machinery and furniture was liable to be computed in normal commercial ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from 1.4.2015 by returning the following findings as under:- 11. By Finance (No.2) Act of 2014, sub-section (6) to Section 11 stands inserted with effect from 1st April, 2015 to the effect that where any income is required to be applied, accumulated or set apart for application, then for such purposes the income shall be determined without any deduction or allowance by way of depreciation or otherwise in respect of an asset, the acquisition of which has been claimed as application of income under this section in the same or any other previous year. The legal position, therefore, would undergo a change in terms of Section 11(6), which has been inserted and applicable with effect from 1st April, 2015 and not to be assessment years in question. The newly enacted sub-section relates to application of income. 14. Hon ble Delhi High Court has also allowed the depreciation claimed by the assessee by debiting the same to the income and expenditure account of the society for the purpose of working the surplus in the hands of the society. So, following the decision rendered by Hon ble Supreme Court of India and Hon ble High Court as discussed in the preceding paras, we are of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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