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TMI Blog2019 (3) TMI 1930X X X X Extracts X X X X X X X X Extracts X X X X ..... Disallowance of depreciation - assessee claimed depreciation which was rejected by the AO on the ground that the capital expenditure incurred during the accounting year was allowed as deduction form the income of the assessee, the deduction of depreciation was not allowed on the ground that full deduction had been allowed in respect of capital cost of the asset and if the depreciation was allowed, as claimed by the assessee, it would result in double deduction - HELD THAT:- On a reference, the Hon'ble Bombay High Court confirmed the view taken by the Tribunal by holding that the Tribunal was right in law in directing the AO to allow depreciation on the assets, the cost of which had been fully allowed as application of income under section 11 in the past year. We, therefore, keeping in view the ratio laid down in the aforesaid referred to case of Institute of Banking [ 2003 (7) TMI 52 - BOMBAY HIGH COURT ] set aside the order passed by the learned CIT(A) and direct the Assessing Officer to allow the depreciation on the written Dawn Value of the assets. Anonymous donation - As per sub Section (3) of 115BBC, anonymous donation mean voluntary contribution where a pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the same was allowable as utilization as capital expenditure is also allowed for the purpose of calculating exemption u/s 11 of the Act. The entire capital as well as revenue expenditure has to be taken into account as utilization of funds. - ITA No. 557/LKW/2017 - - - Dated:- 8-3-2019 - SHRI A.D JAIN, VICE PRESIDENT AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER For the Appellant : Shri Adhir Kumar Bar, CIT DR For the Respondent : Shri K.R. Rastogi, FCA ORDER PER: T.S. KAPOOR, A.M.: This is an appeal filed by the Revenue against the order of ld. CIT(A)-4, Lucknow dated 04.07.2017. The grounds of appeal taken by the Revenue are reproduced as below: 1. Ld. Commissioner of Income Tax (A) has erred in law and facts by allowing the benefit of section 11 thereby deleting the addition of surplus of ₹ 8,66,26,577/- ignoring the fact that the assessee charged extra fees from the students in excess of the stipulated fees approved by the Statutory Body, resulting in capitation fees which is against the provisions of Section 11 12 of the I.T. Act; 2. Ld. Commissioner of Income Tax (A) has erred in law and on facts by deleting the addition made on ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d therefore, the depreciation could not have been claimed assets. 5. Arguing Ground No.3, the ld. DR stated that the addition was made u/s 68 of the Act as the assessee was not able to explain the unexplained credit. It was further argued that against the addition of ₹ 8,57,31,152/- the assessee could produce ledger account and vouchers for ₹ 7,69,08,761/- only. 6. As regards Ground No.4, the ld. DR stated that the Assessing Officer had made the disallowance on account of personal expenses as the assessee was not able to produce proper vouchers during the assessment proceeding. 7. Arguing Ground No.5, the ld. DR submitted that this addition was made on account of increase in administrative expenses as the assessee was not able to substantiate the increase in expenditure and did not furnish any justification and explanation. 8. Arguing Ground No.6, ld. DR submitted that the assessee had claimed interest on term loan which was obtained for the purpose of construction of building and therefore, the expenditure was a capital in nature, therefore, the Assessing Officer had rightly made the addition. 9. The ld. AR, on the other hand, relying Ground No.1 submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al expenses taken by the Department vide Ground No.4, the ld. AR submitted that the expenses incurred under personal expenses related to salary, medical expenses, staff welfare and payment to labour department and these expenses were directly linked with fee income and intake of students. He submitted that the percentage of personal expenses as compare to gross receipt was lower and therefore there was no justification of adhoc disallowances. It was further submitted that Assessing Officer had made adhoc disallowances without appreciating the fact that TDS was duly deducted on the expenditure wherever it was applicable. The ld. AR in this respect invited our attention to Paper Book, Pages 135 to 147 where the details of salary and payment made to labour department, medical expenses and staff welfare expenses was placed. 13. Arguing next ground of appeal, the ld. AR submitted that the Assessing Officer had made adhoc disallowance of ₹ 2,03,53,745/- out of various expenses debited in the profit and loss account. It was further submitted that AO has arbitrarily disallowed 25% of the expenses without appreciating that during the year volume of educational work had increased an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant. I find that the appellant is a deemed university established by Special Ordinance of U. P. Government dated 04.07.2012 as per the clause-(29) of the Extra Ordinarily Gazette the appellant through its Executive Council is empowered to fix fee for admission to University as stated in clause-(e) of the Power to make ordinance. The appellant furnished the minutes of the Fee Fixation Committee through which the appellant has fixed the fee structure for session 201213 for courses run by the University. The contention of the appellant is that the appellant is charging fee as per the said order and it is not governed by the Admission and Fee Regulation Committee, Department of Technical Education, Government of Uttar Pradesh as it is a deemed university and has its own norms for fixation of Fee as set out in the Ordinance. The fees have been charged from the students on the basis of Fee fixed by the Fee Fixation Committee and no excess fee has been charged beyond the fee specified in the said order. Further Hon'ble Madras High Court in case of CJ.T. Vs. Balaji Educational and Charitable Public Trust repeated in 374 lTR 274 at page 290 held as under:- 4.9 The find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the fee structure of the colleges is within the range of ₹ 61500/- to ₹ 65000/- per student. The A.0. has not appreciated the fee structure given by the appellant, which is approved by the Fee Fixation Committee of the Universe as stated above. The A. O. has not established profit motive out of fee collected by the appellant trust. He has not examined whether the activities of the appellant trust was solely to generate profit or whether the activities undertaken was for the benefit of the students. Merely relying on the fee structure of the Stat Government for Educational Institute and drawing a comparison with the fee structure of a deemed university does not constitute that the Appellant is working on commercial line and for profit motive and even when the registration u/s 12A has been restored by the Hon'ble I.T.A.T. There is no change in the activities of the current year as compared to earlier years where in the A. O. has granted benefit of Section 11 of the I.T. Act on similar activities. More so registration u/s 12AA of I. T. Act has been restored by the Hon'ble I.T.A.T. There is no new fact or situation that was brought on record to deny the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction since the benefit of addition to the fixed assets was being allowed to the assessee in the last many years. On a similar issue the Hon'ble Bombay High Court in the case of CIT vs. Institute of Banking [2003] 264 ITR 110 has held as under:- 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, 1961. Income of a charitable trust derived from building, plant and machinery and furniture is liable to be computed in a normal commercial manner although the trust may not be carrying on any business and the assets in respect whereof depreciation is claimed may not be business assets. In all such cases, section 32 of the Act providing for depreciation, for computation, of income derived from business or profession is not applicable. However, the income of the trust is required to be computed under section 11 on commercial principles after providing for allowance for normal depreciation and deduction thereof from the gross income of the trust. 8. In our opinion, the ration laid down-by the Hon ble Bombay High Court in the aforesaid referred to case is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich the assessee had maintained. We further find that the assessee had declared entire receipt of donations in the total income as is apparent for computation placed at page 43 which had already been made part of this order and had utilized the entire amount for charitable purposes as the total application of funds is more than fee receipt and voluntarily contribution. The ld. CIT(A) has rightly allowed relief to the assessee by holding as under: 6.1.2 After examining the assessment order and written submission of the appellant, the following facts emerge. During the year under consideration the appellant trust received donations of ₹ 16,18,36,650/-. The AO allowed donations to the extent of ₹ 7,69,08,761/- and made addition of the balance donations of ₹ 8,49,27,592/- u/s 68 of the Act. Donations were received through three modes namely Cheque/RTGS/Cash Books of accounts with supporting records were produced before the AO. The AO has not doubted the identity of donor, the genuineness of transaction or the capacity of donor. However, an addition of ₹ 8,49,27,592/- was made U/s 68 of the Act. These donations had already been shown ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in case of Hans Raj Samarak Society Vs. ADIT 16 Taxman 103. As per the decision the receiver has the obligation to maintain the identity indicating the name and address only and nothing more. No other particular has been prescribed under the provision. No other word can be read in Sec-115BBC(3) other than words finding place therein. Reliance is also placed on decision of Hon'ble Delhi High Court which confirmed the decision of Hon'ble ITAT in case of DIT(E) Delhi Vs. Hans Raj Samarak Society{2013) 35 Taxman642(Delhi). 6.1.6 The registration u/s 12A of the Act of the Trust has been restored by the Hon'ble ITAT Lucknow Bench in I.T.A. No. 44 45/LKW/2016 vide order dated 07.04.2017. There is no dispute that the appellant has shown entire donation of ₹ 84927592/- as income for educational purpose in the computation chart. The Income so disclosed has been applied for charitable purpose as per provisions of Section 11 of the Act. The appellant in the course of assessment proceeding has submitted the complete details of donors giving their name and address. The appellant trust has duly discharged its onus as cast upon it by furnishing the name and address of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Investigation Wing of the Department and were also recorded in the books produced by the assessee before the A. 0. - Hence, such donations cannot be classified as 'anonymous donations' as per the provisions of section 115BBC (3) only requirement under s. 115 BBC(3) is that the names and addresses of the donors are to be recorded (CIT(A) has wrongly applied the provisions of section 68 in the case of the Assessee by stating that the recipient society should also be in a position to identity the donors and establish the capacity to give a donation of the amount mentioned against their names - Hans Raj Samarak Society Vs. Assistant Director of Income Tax (2012) 69 DTR (Del) 123 2011)133 ITD 530(Del) relied on, 3. [2014] 42 Taxmann.com 361 (Allahabad), High Court of Allahabad, in the case of Commissioner of Income Tax, Ghaziabad Vs. Uttaranchal Welfare Society. Shri Nikhil Agarwal, appearing for the respondent-assessee has relied on DIT (Exemption) v. Keshav Social Charitable Foundation [2005] 278 ITR 152/146 Taxman 569 (Delhi) in which following S. RM. M. CT. M.Tiruppani Trust v. CIT [1998] 230 ITR 636/96 Taxman 635 (SC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t had also submitted a list of donors. The fact that the complete list of donors was not filed or that the donors were not produced; did not necessarily lead to the inference that the assessee was trying to introduce unaccounted money by way of donation receipts. That was more particularly so in the facts of the case where admittedly, more than 75 per cent of the donations were applied for charitable purposes. [Para 10] Further section 68 had no application to the facts of the instant case because the assessee had in fact disclosed the donations as its income and it could not be disputed that all receipts, other than corpus donations, would be income in the hands of the assessee. There was, therefore, full disclosure of income by the assessee and also application of the donations for charitable purposes. It was not in dispute that the objects and activities of the assessee were charitable in nature, since it was duly registered under the provisions of section 12A. [Para 11] For the aforesaid reasons, there was no merit in the appeal and no substantial question of law arose from order of the /Tribunal. Therefore, the appeal was to be dismissed. [Para 12] Further Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 1,00,52,500/- in the earlier year. AO held that appellant failed to produce proper vouchers, therefore, increase of 10% in expenditure as compared to earlier year was allowed and balance was disallowed. This disallowance worked out to ₹ 1,65,66,963/-. 8.3 I have examined the facts and circumstances of the case. I have considered the observations of the A. 0. in the assessment order and the submissions of the Appellant. The appellant has furnished the details of personal expenses and also submitted a comparative with respect to Receipts and Expenses in immediately preceding year. As per the said detail, the personal expenses in F. Y. 2011-12 were 40.20% of the Fee received as against 31.73% of the Fee received in F. Y. 2012-13. Further, Assessee has submitted that the number of students have increased in F.Y. 2012-13 which is visible in terms of increase in the Fee and accordingly, the staff cost and salary expenses are bound to increase. Further the Assessee has furnished before the A. 0. and also before me the copy of Ledger Account of all the expenses. The A.O. has not brought on record any specific instances of expenses not supported by vouchers and accordingly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT, SR-II, Lucknow 2006(7) MTC 339 held adhoc disallowance out of expenses. No specific disallowable item pointed out-Vague observation that some expenses were not verifiable Disallowance not justified The Hon'ble ITAT, Allahabad Bench in Dr. Mahendra Kr. Aggarwal Vs. ITO 2007(a) MTC 97 (Trib. Allahabad) held as under Adhoc 10% disallowance of expenses-No specific instances of unverifiable expenditure pointed out-Disallowance not justified. In the present case also the AO has disallowed expenses on adhoc basis without pinpointing any specific defect in bills/ vouchers produced. Due to the reasons outlined above and the Judgement of Hon'ble Apex Court in the case of J.J. Enterprises vs. CIT 254 ITR 216(SC) and the judgments of Hon'ble Jurisdictional ITAT as outlined above, the disallowance made by the AO cannot be sustained. Even otherwise if an addition has been made in the case of charitable trust the same would be treated as application for charitable purpose. Since the registration u/s 12A of the Act of the appellant trust is restored by Hon'ble I.T.A.T. and as already discussed above that the appellant is eligible for exemption u/s 11 of I.T. Act. Acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ptable that merely because the expenses were not claimed in previous year therefore, the same are not genuine. The appellant has submitted the copy of ledger account in the course of appellate proceeding and the expenses majorly pertains to advertisement made in newspapers etc. It is also stated that T,D.S. has been deducted on these expenses. The A. O. has not substantiated as how the expenses are not related to education 'and in absence of such finding the addition of ₹ 16511445/- and ₹ 3842300/- cannot be upheld. The AO has not specified as to which expenses could not be verified on account of non verification of vouchers. Just because there is increase in expenses as compared to earlier year the AO has made adhoc disallowances of expenses. In the present case proper books of accounts and bills/vouchers are maintained and produced before the AO. The auditor has not pointed out any adverse inference in respect of non-maintenance of bills/vouchers in the Audit report. Nor has the AO identified the specific bill or vouchers which could not be verified. The issue of adhoc disallowance of expenditure has been decided upon by Hon'ble jurisdictional ITAT in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rprises vs. CIT 254 ITR 216(SC) and the judgments of Hon'ble Jurisdictional ITAT as outlined above, the disallowance made by the AO cannot be sustained. Even otherwise if an addition has been made in the case of charitable trust the same would be treated as application for charitable purpose. Since the registration u/s 12A of the Act of the appellant trust is restored by Hon'ble I.T.A.T. and as already discussed above that the appellant is eligible for exemption u/s 11 of I.T. Act. Accordingly, since the income of the appellant is exempt, the addition made on account of disallowance from expenses will also amount to application of Income and will have no sanctity. Reliance is placed on the decision of Hon'ble I.T.A.T. Bench-A, Lucknow in the appeal of l.T.O. Vs. Virendra Singh Memorial Shiksha Samiti reported in IS DTR 502. The ground of appeal no. 11 is allowed. 25. In view of above facts and circumstances of the case, we do not find any infirmity in the order of the ld. CIT(A), therefore, Ground No.5 is dismissed. 26. Now coming to last ground of appeal regarding disallowance of interest paid on term loan, we find that the Assessing Officer had disallowed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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