2018 (2) TMI 1593 - AT - Income Tax

Appellate tribunal upholds CIT(A)'s decision deleting AO's additions on various counts. Revenue's appeal dismissed.

Income Tax Officer (Exemption) Lucknow Versus Surya Bux Pal Charitable Trust

Income Tax Officer (Exemption) Lucknow Versus Surya Bux Pal Charitable Trust - TMI Issues Involved:1. Addition of ad hoc disallowance out of administrative expenses.2. Addition on account of concession given to students.3. Addition on account of depreciation on capital assets.4. Addition on account of capital expenditure.Detailed Analysis:1. Addition of ad hoc disallowance out of administrative expenses:The Assessing Officer (AO) disallowed Rs. 2,71,20,688/- out of administrative expenses, which was 30% of the total expenses claimed, due to the assessee's failure to produce books of accounts and supporting documents. During remand proceedings, the assessee submitted copies of ledger accounts and some bills/vouchers. The CIT(A) found that the books of accounts and bills/vouchers were duly maintained and audited, and no adverse inference was drawn by the AO in the remand report. Therefore, the disallowance of administrative expenses was deleted by the CIT(A).2. Addition on account of concession given to students:The AO disallowed Rs. 63,45,086/- claimed as fee concessions due to lack of documentation. During remand proceedings, the assessee provided ledger accounts and supporting documents for the fee concessions. The CIT(A) noted that the practice of giving fee concessions was consistent with prior years, where exemptions were granted under section 11. The AO did not draw any adverse inference in the remand report. Hence, the addition on account of fee concessions was deleted by the CIT(A).3. Addition on account of depreciation on capital assets:The AO disallowed Rs. 2,65,36,922/- claimed as depreciation, arguing it would amount to double deduction since the capital expenditure was already allowed in previous years. The CIT(A) referred to various judicial precedents, including a judgment from the Hon'ble ITAT Jaipur in the case of M/s Santokbha Durlabhji Trust, which allowed depreciation on assets acquired from applied income. The CIT(A) noted that section 11(6) of the Act, which disallows such depreciation, applies prospectively from 01/04/2015. Since the assessment year in question was 2011-12, the CIT(A) allowed the depreciation claim and deleted the addition.4. Addition on account of capital expenditure:The AO disallowed Rs. 8,14,18,262/- claimed as application of income towards capital assets due to lack of documentary evidence. During remand proceedings, the assessee provided details and ledger accounts of additions to fixed assets. The CIT(A) found that the capital expenditure was consistent with prior years' activities, where exemptions under section 11 were granted. The AO did not draw any adverse inference in the remand report. Therefore, the CIT(A) allowed the capital expenditure as application of income and deleted the addition.Conclusion:The appellate tribunal upheld the CIT(A)'s decision to delete the additions made by the AO on all counts, including administrative expenses, fee concessions, depreciation on capital assets, and capital expenditure. The appeal of the Revenue was dismissed.