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TMI Blog2021 (10) TMI 413X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA. No. 6051/Del/2017 - - - Dated:- 6-10-2021 - Shri Kul Bharat, Judicial Member And Shri Prashant Maharishi, Accountant Member For the Assessee : Shri Ved Jain, C. A.; And Shri Ashish Goel, C. A.; For the Department : Shri Govind Singhal, Sr. D.R.; ORDER PER PRASHANT MAHARISHI, A. M. 1. These five appeals are filed by the assessee for assessment years 2007-08, 2009-10 and 2011-12 to 2013-14 passed by the ld. Commissioner of Income Tax (Appeals) I, Noida, dated 30th March, 2017 wherein the ld. CIT (Appeals) enhanced the income of the assessee under Section 251(1A) of the Income Tax Act, 1961 (the Act) and also confirmed the assessment orders. 2. Common grounds of appeals (except in ITA. No. 6051/Del/2017) raised in these four appeals are as under:- ITA. Nos. 165 TO 168/Del/2018: 1. That on the factsand circumstances of the case the Combined Appeal Order dated 30.03,2017 passed by Sh. S.K. Srivastava, the CIT (A)-l, Noida, for four Asstt. years is bad in law, facts and equity. 2. That on the facts and circumstances of the case the Ld. CIT (A), Noida, has erred in law, facts equity in passing the Appeal Order dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... educational institute and universities are covered u/s 10 (23C) (iv) and (vi) and not u/s 11 and 12 and thus no exemption can be claimed u/s 11 and 12 by such Appellant, (para 44 to 49 and 59 to 62). b) That the Appellant could not charge/ recover any fee from the students in case the Appellant is to carry out a charitable activity u/s 2(15) of the Act of providing education to students, (para 51 to 54). c) That the learned CIT (A) has wrongly interpreted the judgment of Five judge Bench of the Hon'ble Supreme Court in the case of Isamic Academy of Education Anr Vs. State of Karnataka Ors and interpreted that no Charitable Society can charge fee from its students in the course of providing education. (73 to 75 and 84 to 85). d) That the Appellant is running a college and thus doing a charity in providing education and thus cannot charge/recover any fee from students to be set off against the cost of doing charity by imparting education, (para 76 to 77). e) The income of the Appellant by way of collection of fee from students is not an income derived from property held under Trust, (para 78 to 83 and 87, 88). f) The Corpu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d income is highly excessive and much beyond the requirements of the case. 13. That the appellant reserves its right to alter, add vary any ground(s). ITA. No. 6051/Del/2017 : 1. That on the facts and circumstances of the case the Appeal Order dated 30.06.2017 passed by Smt. Renuka Jain Gupta C.I.T. (A)- Ghaziabad, is bad in law, facts equity. 2. That on the facts and circumstances of the case the Ld. CIT (A), has erred in law, facts equity in not allowing the relief to the Appellant against the heavy additions on account of disallowing the claim of depreciation made to the returned Income by the A.O. without cogent reasons basis. 3. That on the facts and circumstances of the case the Ld. CIT (A) erred in making a disallowance of entire Depreciation of ₹ 6,84,73,391/- without any basis treating it as double deduction in view of section 11(6) of the IT Act, 1961 inserted w.e.f 01.04.2015. 4. That on the facts and circumstances of the case the Ld. CIT (A), New Delhi, has erred in law, facts equity in not allowing the relief to the Appellant by giving reasons that the said amendment in Section 11(6) of the Income Tax Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal before the ld. CIT (Appeals). The ld. CIT (Appeals) came to the conclusion that assessee is wrongly claiming deduction of exemption under Section 11 and 12 of the Act. He held that to claim exemption under Section 11 and 12 of the Act the assessee must cross over thresh-hold under Section 2(15) of the Act. Therefore, he issued notice under Section 2(15) of the Act holding that assessee is charging fees from students studying in its school over and above different charges , loan and sports and sundry income. It has also received corpus donation. He also referred that the Assessing Officer in the assessment orders for assessment years 2009-10, 2010-11 and 2013-14 has already held that in the light of the activities carried out by it, it cannot be doing any charitable activity, but its activities are tainted with profit motive. Accordingly, he denied exemption under Section 11 and 12 of the Act and enhanced the income of the assessee by ₹ 19.69 crores for assessment year 2007-08 by ₹ 55.19 crores, for assessment year 2009-10 by ₹ 62.37 crores for assessment year 2011-12 and by ₹ 69.19 crores for assessment year 2012- 13. He held that as assessee is not enti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mption u/s 10 (23C) (iiiab) to that society. With respect to the issue of depreciation claimed by the assessee and disallowed by the learned assessing officer invoking the provisions of Section 11 (6) of the act, he submitted that the above amendment has come into effect from 1/4/2015 and therefore it do not apply to the impugned assessment years. He submitted that such an amendment is prospective in nature. He submitted that the issue is that the assessee has claimed application of income when fixed assets were purchased and further claimed depreciation thereon on commercial principle however, the revenue authorities thought that this amounts to double deduction. He submitted that this issue is squarely covered in favour of the assessee by the decision of the honourable Supreme Court in case of CIT versus Rajasthan and Gujarat the charitable foundation (89 taxmann.com 127) wherein it is held that the amendment to Section 11 (6) is prospective in nature and applies with effect from 1 April 2015. He therefore submitted that all the issues involved in this appeal are covered in favour of the assessee. 6. With respect to the enhancement made by the learned CIT A, he submitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tute of Banking Personnel Selection (IBPS)'[2003] 131 Taxman 386. In the said judgment, the contention of the Department predicated on double benefit was turned down in the following manner: 3. As stated above, the first question which requires consideration by this Court is: whether depreciation was allowable on the assets, the cost of which has been fully allowed as application of income under section 11 in the past years? In the case of CIT v. Munisuvrat Jain 1994 Tax Law Reporter, 1084 the facts were as follows. The assessee was a Charitable Trust. It was registered as a Public Charitable Trust. It was also registered with the Commissioner of Income Tax, Pune. The assessee derived income from the temple property which was a Trust property. During the course of assessment proceedings for assessment years 1977-78, 1978-79 and 1979-80, the assessee claimed depreciation on the value of the building @ 2 % and they also claimed depreciation on furniture @ 5%. The question which arose before the Court for determination was : whether depreciation could be denied to the assessee, as expenditure on acquisition of the assets had been treated as application of income in the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Institute [1993] 109 CTR 463. In that case, the facts were as follows: The assessee was the Trust. It derived its income from depreciable assets. The assessee took into account depreciation on those assets in computing the income of the Trust. The ITO held that depreciation could not be taken into account because, full capital expenditure had been allowed in the year of acquisition of the assets. The assessee went in appeal before the Assistant Appellate Commissioner. The Appeal was rejected. The Tribunal, however, took the view that when the ITO stated that full expenditure had been allowed in the year of acquisition of the assets, what he really meant was that the amount spent on acquiring those assets had been treated as 'application of income' of the Trust in the year in which the income was spent in acquiring those assets. This did not mean that in computing income from those assets in subsequent years, depreciation in respect of those assets cannot be taken into account. This view of the Tribunal has been confirmed by the Bombay High Court in the above judgment. Hence, Question No. 2 is covered by the decision of the Bombay High Court in the above Judgment. Consequen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /DEL/2017 Dated.- January 31, 2018 wherein the coordinate bench has taken following view on identical facts and circumstances:- 11. We have heard the rival submissions and perused the relevant finding given in the impugned order as well as the material referred to before us. We have already discussed in brief various facets of the observations made by the ld. CIT(A) while exercising his power of enhancement u/s.251(2) and taxing the entire receipts of ₹ 1,04,85,689/- as income from other sources. It is an admitted fact that assessee society has been formed and registered under the Registration of Societies Act, 1860 , with the sole object of providing education and in pursuance of such an object it has set up an infrastructure in the form of school which is named as Adarsh Public School , from where it is providing education upto Senior Secondary level. Looking to its object which is for charitable purpose in terms of section 2(15) and is solely for imparting education, it has been granted registration u/s.12A by the competent authority, i.e., Ld. CIT Ghaziabad. Once registration u/s.12A is granted, then it is fait accompli and accordingly, all its receipts / income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut operated under different circumstances, that section 11 was relatively wider in its scope and ambit, that while section 10(23A) granted absolute exemption in respect of particular types of income, section 11 imposed certain conditions for the exemption but such exemption was available for all sources, and that there was nothing inherently improbable or inconceivable about the two provisions operating simultaneously and as such the claim for exemption under section 11 was available to the assessee-Council provided it satisfied 11 the requirements of that provision. We may point out that there are other allied provisions like for instance clause (23C) in section 10 which clearly indicate that the Legislature did not intend to rule out section 11 when exemption was claimable under such specific provisions of section 10. It was after negativing the contention in this manner that the Tribunal went on to consider the claim for exemption made by the assessee-Council under section 11 but on merits found that there was no material or evidence on record to show whether or not the securities were held by the assessee- Council for any of the charitable purposes and, therefore, it remanded t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n'ble Punjab and Haryana High Court in the case of CIT vs. Mahasabha Gurukul Vidhyapeeth (2010) 2 Taxmann.com 283 (P H) too have upheld the same proposition that once all the requisite conditions for exemption u/s.11 have been met and even if condition u/s. 10(23C) have not been complied with, then there should be no bar to seek exemption u/s.11. In view of the aforesaid binding judicial precedents, we reject the observation and finding of the ld. CIT (A) that assessee cannot claim exemption/benefit of Section 11 or is not entitled for benefit u/s 11 as assessee was eligible for such an exemption u/s. 10(23C). 15. Ld. CIT(A) while denying the exemption of Section 11 to assessee society has held that, since imparting of education is a matter of pure charity, therefore, the educational institution is not permitted to receive or recover the cost of charity from its beneficiary by way of fees, i.e., charging of fees itself would amount uncharitable activity. We are unable to subscribe to this proposition at all, because if fees is not charged from the students then how the activity of imparting education can be carried out. Fees collected from the students itself feeds the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely applied for that activity alone, therefore such a receipt by way of fees has to be seen as an application of income for charitable purpose. As regards another constitutional bench judgment of Hon'ble Apex Court in the case of TMA Pai Foundation and others (supra), it is seen that the Hon'ble Apex Court in the context of capitation fee and profiteering, itself culled out the exception in the following manner:- 66. In such professional unaided institutions, the Management will have the right to select teachers as per the qualifications and eligibility conditions laid down by the State/University subject to adoption of a rational procedure of selection. A rational fee structure should be adopted by the Management, which would not be entitled to charge a capitation fee. Appropriate machinery can be devised by the state or university to ensure that no capitation fee is charged and that there is no profiteering, though a reasonable surplus for the furtherance of education is permissible. Conditions granting recognition or affiliation can broadly cover academic and educational matters including the welfare of students and teachers. [Emphasis added is ours] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue and completely negates the view of the Ld. CIT (A). Thus, none of the judgments as referred to by the ld. CIT(A) have been analysed in proper prospective rather his interpretation of the principles laid down by the Apex Court are incorrect and out of context. Before us the learned counsel had submitted the total fees charged from various students during the year the details and bifurcation of which is as under:- [ This table is not reproduced for sake of simplicity ] 18. From the above details, it is quite evident that the assessee school has been charging fees only from its students and there is no capitation fee at all. Such fees have been charged from the students for the running of the school and has been applied for its dominant purpose/object of carrying out educational activity. If we apply the principle and ratio laid down by the Hon'ble Apex Court in the aforesaid cases, then the fees charged by the assessee is neither for profiteering nor for carrying any activity beyond its dominant object. Thus, allegation of the ld. CIT (A) on this score also is hereby rejected. 19. Now coming to the observation that assessee s income by way of fees cannot be he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority. It was not a trust. Its business was not held under a trust. Its property was not held under trust. Therefore, the Board was not entitled to be registered as a Charitable Institution. It was the case of the Department that the Board was performing statutory functions. Development of minor ports in the State of Gujarat cannot be termed as the work undertaking for charitable purposes and in the circumstances the Commissioner rejected the Board's application under section 12A of the 1961 Act in the light of the above case of the Department, we are required to consider the expression 'any other object of general public utility' in section 2(15) of the 1961 Act. 13. ....... 14. We have perused number of decisions of this Court which have interpreted the words, in section 2(15), namely, 'any other object of generally public utility'. From the said decisions it emerges that the said expression is of the widest connotation. The word 'general' in the said expression means pertaining to a whole class. Therefore, advancement of any object of benefit to the public or a section of the public as distinguished from benefit to an individual or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est it is clear, that Gujarat Maritime Board is under legal obligation to apply the income which arises directly and substantially from the business held under trust for the development of minor port in the State of Gujarat. Therefore, they are entitled to be registered as 'Charitable Trust' under section 12A of the 1961 Act. 20. This principle has been reiterated by the Hon'ble Delhi High Court in the case of Institute of Chartered Accountants of India-v-DGIT, 358 ITR 91 (Del). Thus, the assessee society which has been registered under Registration of Societies Act, 1860 with the sole object of providing education and has a legal obligation for applying its income for such charitable purpose, then for the purpose of Section 11 it has to be treated as trust and income derived from carrying out such obligation has to be reckoned as income derived from property under the trust and therefore, on the ground also as raked by the ld. CIT (A), exemption u/s.11 cannot be denied. Accordingly, in view of the finding given above and various legal principle as discussed above, we hold that none of the observations and the finding of the ld. CIT(A) are sustainable and the g ..... X X X X Extracts X X X X X X X X Extracts X X X X
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