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TMI Blog2019 (10) TMI 289X X X X Extracts X X X X X X X X Extracts X X X X ..... For the Respondent : Shri Robin Chowdhury, DR ORDER PER DR. A. L. SAINI: The captioned cross appeals filed by the Assessee and Revenue, pertaining to assessment year 2014-15, are directed against the order passed by the Commissioner of Income Tax (Appeal)-25, Kolkata, in appeal No.CIT(A),Kol 25/10250/2016-17, dated 21.06.2017, which in turn arises out of anassessment order passed by the Assessing Officer u/s 143(3)/11 of the Income Tax Act, 1961 (in short the Act ) dated 30.11.2016. 2. Since these appeals relate to the same assessee, identical and common issues are involved, therefore these have been clubbed and heard together and a consolidated order is being passed for the sake of convenience and brevity. 3. First we shall take assessee s case in I.T.A. No. 1841/Kol/2017,for A.Y. 2014- 15.The grounds of appeal raised by the assessee is as follows: 1. For that the disallowance of claim of capital receipts on account of Admission Fee of ₹ 4,49,180/-, Re-admission Fees ₹ 1,00,00,000/-, Term Charges ₹ 21,70,700/- have been wrongly made witho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f receipts, the AO noticed that it is pretty evident that these receipts were in fact fees, collected from students and was not voluntary in nature and is definitely to be routed through Income and expenditure account. The assessee on being asked that why the above stated amounts were not routed through the Income Expenditure account. Then the assessee admitted that what he has done is wrong and furnished a revised computation on 14.10.2016 incorporating the income of ₹ 1,26,19,880/- (₹ 1,00,00,000 + ₹ 21,70,700 + ₹ 4,49,180) that was directly charged to Balance sheet as its income during the relevant AY 2014-15.Therefore, the general fund attributable to Re-admission fees, admission fees Term charges, received during the year to the tune of ₹ 1,26,19,880/-, was added back to its total income. 6. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A) who has confirmed the addition made by the Assessing Officer. Aggrieved by the order of the ld. CIT(A) the assessee is in appeal before us. 7. We heard both the parties and carefully gone throu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Under the generally accepted accounting principles, expense is different from expenditure. All operational expenses for the current accounting year like salary and allowances payable to employees, rent for the premises, payment of property taxes are current revenue expenses. These expenses entail benefits during the current accounting period. Expenditure, on the other hand, is for acquisition of an asset of an enduring nature which gives benefits spread over many accounting periods, like purchase of plant and machinery, building etc. Therefore, there is a difference between revenue expenses and capital expenditure. We must keep in mind that accounting has a linkage with law. Accounting operates within legal framework. Therefore, banking, insurance, and electricity companies have their own form of balance sheets unlike balance sheets prescribed for companies under the Companies Act, 1956. Therefore, we have to look at the accounts of non-business organizations like schools, hospitals etc. in the light of the statute in question.We note that on account of increased cost due to inflation, the management is entitled to create Development fund account. For creating su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipt and therefore we delete the addition made by the Assessing Officer and confirmed by the ld. CIT(A) at ₹ 1,26,19,880/- (consisting admission fee 4,49,180/- , readmission fee 1,00,00,000/- Term charges ₹ 21,70,000/-). 9. Now we shall take Revenue s appeal in I.T.A. No. 1994/Kol/2017, for A.Y. 2014-15, wherein the revenue has raised following grounds of appeal: 1. That on the facts and circumstances of the case as well as law, the ld. CIT(A) has erred in granting relief to the assessee on account of depreciation amounting to ₹ 1,03,74,724/-. 2. That on the facts and circumstances of the case as well as law, claim of depreciation on assets for which the acquisition cost to the assessee is nil, allows the assessee to enjoy double deduction. 3. That on the facts and circumstances of the case, the ld. CIT(A) has erred in accepting administrative and establishment expenses amounting to ₹ 28,22,647/- as application of income without considering the same as expenses for running office only. 4. That on the facts and circumstances of the case, the ld. CIT(A) has erred in ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b section (6) to section 11 of the Act is prospective in nature and applicable from 01.04.2015. That is, the amendment in sub-section (6) to section 11 of the Act, the does not applicable to the assessee under consideration. We note that the decision of the Hon`ble jurisdictional High Court of Calcutta in the case of CIT vs. Siliguri Regulated Market Committee (2014) 366 ITR 51,is applicable to the assessee, wherein the Hon ble High Court has held that depreciation claim is allowable even if asset had been claimed as application by assessee trust . Findings of the court is given below: Court had considered the submissions and perused the judgments of the Punjab and Haryana High Court and the Bombay High Court as also the judgment of this court in the case of Jayashree Charity Trust and in the case of Bheruka Public Welfare Trust. It was opinioned that the views expressed in the case of Jayashree Charity Trust (supra) are logical and in consonance with common sense. The object of section 11 of the Income-tax Act, 1961, was to feed the public charity. By permitting computation of income in a commercial manner, the object of feeding the public charity was achieved. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to construe a statute conferring a benefit, in the context of it to be given a retrospective operation. The same doctrine of fairness, to hold that a statute was retrospective in nature, was applied in the case of Vijay v. State of Maharashtra. It was held that where a law is enacted for the benefit of community as a whole, even in the absence of a provision the statute may be held to be retrospective in nature. However, we are confronted with any such situation here. 34. In such cases, retrospectively is attached to benefit the persons in contradistinction to the provision imposing some burden or liability where the presumption attaches towards prospectivity. In the instant case, the proviso added to Section 11 of the Act is not beneficial to the assessee. On the contrary, it is a provision which is onerous to the assessee. Therefore, in a case like this, we have to proceed with the normal rule of presumption against retrospective operation. Thus, the rule against retrospective operation is a fundamental rule of law that no statute shall be construed to have a retrospective operation unless such a construction appears very clearly in the terms of the Act, or ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n No. 2 which is as follows: Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the net dividend should be considered for the purpose of section 11 of the Income-tax Act and that the adjustment of establishment expenses should not be done to arrive at the figure of 75 per cent of the income to be applied for charitable purpose? The second question relates to the administrative expenses to the tune of ₹ 13,459 deducted by the ITO from the gross income of the assessee. The ITO took the balance as the income of the trust and applied the rate of 75 per cent to this balance in order to determine the amount that should be spent to enable the assessee to claim exemption under section 11 of the Act. The assessee filed an appeal to the AAC contending that the administrative expenses should not have been deducted from the gross income. The AAC accepted the claim of the assessee and directed the ITO to consider the administrative expenses as an amount spent for charitable purposes. 3. Being aggrieved, the revenue filed an appeal to the Tribunal. The Tribunal has observed that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In CIT v. Estate of V.L. Ethiraj [1982] 136 ITR 12 (Mad.), it was held that income from properties would have to be arrived at in the normal commercial manner without reference to the provisions which were attracted by section 14 of the Act. 8. In CIT v. Janaki AmmalAyya Nadar Trust [1985] 153 ITR 159 (Mad.), it was held that payment of tax is necessary to preserve the property of the trust when a demand is lawfully made. Therefore, the expenditure incurred by way of payment of tax out of the current year's income has to be considered as application for charitable purposes. 9. In CIT v. Jayashree Charity Trust [1986] 159 ITR 280 , this Court held that the income to be considered will be that which is arrived at in the context of what is available in the hands of the assessee subject to an adjustment of any expenses extraneous to the trust. 10. In our view, income applied to meet expenses, such as normal expenses of management which may not, strictly speaking, be charitable but they are termed as incidental to the carrying out of charitable purposes. Such expenses should not be excluded from exemption. In Jayashree Chari ..... X X X X Extracts X X X X X X X X Extracts X X X X
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