2016 (7) TMI 1014 - AT - Income Tax

Tribunal partially allows appeal, remits issues back to AO for review.

M/s. Moogambigai Charitable and Educational Trust Versus The Addl. Director of Income Tax (Exemptions), Range 17, Bangalore

M/s. Moogambigai Charitable and Educational Trust Versus The Addl. Director of Income Tax (Exemptions), Range 17, Bangalore - TMI Issues Involved:1. Condonation of delay in filing the appeal.2. Claim of depreciation.3. Addition of advance fee received as income.4. Addition on account of retention money.5. Addition of income from pharmacy.6. Allowing 15% accumulation on net income.7. Set off of excess application of income from previous year.8. Deduction of liability for capital expenditure.Detailed Analysis:1. Condonation of Delay in Filing the Appeal:The assessee filed the appeal 17 days late due to a search and seizure action under Section 132 of the Act, which involved the accounts section in post-search proceedings. The Tribunal found the delay justified and condoned it, noting no ulterior motive behind the delay.2. Claim of Depreciation:The assessee claimed depreciation of Rs. 10,73,00,124, which the Assessing Officer disallowed, citing it as a double deduction. The CIT (Appeals) upheld this view, referencing the amended Section 11(6) effective from 1.4.2015. However, the Tribunal sided with the assessee, referencing previous Tribunal decisions and the prospective nature of the amendment, allowing the depreciation claim.3. Addition of Advance Fee Received as Income:The Assessing Officer added Rs. 1,27,67,530 as income, considering it advance fees. The assessee argued that part of this amount was an opening balance and not income for the current year. The Tribunal found that the authorities did not dispute the recording of this amount as advance fees and remitted the issue back to the Assessing Officer for re-examination with the provided records.4. Addition on Account of Retention Money:The Assessing Officer added Rs. 1,10,25,800 as income, arguing the retention money was used for expenses. The Tribunal held that retention money is a liability and not income but directed the Assessing Officer to verify if the assessee had sufficient funds to cover this amount and adjust the application of income accordingly.5. Addition of Income from Pharmacy:The Assessing Officer treated Rs. 50,66,973 from the pharmacy as business income, which the CIT (Appeals) upheld. The Tribunal, referencing a similar case, concluded that the pharmacy, being part of the hospital, should not be treated as a separate business unit. The Tribunal ruled in favor of the assessee, recognizing the pharmacy as integral to the hospital.6. Allowing 15% Accumulation on Net Income:The Tribunal decided in favor of the assessee, allowing the 15% accumulation on gross receipts, referencing a previous Tribunal decision which supported the assessee's claim.7. Set Off of Excess Application of Income from Previous Year:The assessee did not press this ground, and the Tribunal dismissed it accordingly.8. Deduction of Liability for Capital Expenditure:The Assessing Officer disallowed Rs. 7,58,82,285 claimed for capital expenditure, doubting its genuineness due to lack of details. The Tribunal acknowledged the need for proper verification and remitted the issue back to the Assessing Officer for examination of the relevant records and details to be produced by the assessee.Conclusion:The appeal was partly allowed, with several issues remitted back to the Assessing Officer for further examination and verification. The Tribunal emphasized the need for detailed scrutiny of the records and upheld the principles of fair application of income and proper accounting practices.