2022 (7) TMI 1011 - AT - Income Tax

Tribunal upholds CIT(A) decisions for assessee, allows exemption for development fees, permits deficit carry forward.

ACIT, CC-7 (1), Mumbai Versus Padmshree Dr. D.Y. Patil University

The Tribunal upheld the Ld. CIT(A)'s decisions in favor of the assessee, allowing exemption for development fees collected from students and permitting ... Assessment u/s 153A - Exemption u/s 11 - developer fees collected from students by assessee as revenue in nature - HELD THAT:- As following binding decision of CIT Vs. Continental Ware housing Ltd. [2015 (5) TMI 656 - BOMBAY HIGH COURT] as well as relying upon the decision of CIT Vs. Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT] and other judicial precedents on this issue, we confirm the impugned order of the Ld. CIT(A) and dismiss the revenue appeal. Carry forward the deficit being excess expenditure of receipt to subsequent years and holding the same as eligible to be set off with the income of the subsequent years - Since we find the facts to be similar and no change in law, we respectfully following the ratio of the Co--ordinate Bench decision on this issue in assessee’s sister trust case DCIT vs Dr. DY Patil Educational Academy (2022 (2) TMI 590 - ITAT MUMBAI] and further we find that there was no incriminating material found during search qua assessee qua this issue qua the relevant AYs, the AO ought not to have disturbed the assessment for the relevant year as held by the Hon’ble jurisdictional High Court in the case of CIT Vs. Continental Ware housing Ltd. Vs. DCIT (supra) as well as relying upon the decision in the case CIT Vs. Kabul Chawla (supra) and other judicial precedents on this issue, we confirm the impugned order of the Ld. CIT(A) and dismiss the revenue appeal. Issues Involved:1. Exemption of development fees collected from students.2. Carry forward of deficit (excess expenditure over receipts) to subsequent years.Issue 1: Exemption of Development Fees Collected from StudentsThe Revenue challenged the Ld. CIT(A)'s decision to allow exemption for development fees collected by the assessee from students, arguing that these fees should be treated as revenue in nature and not as corpus donations under Section 11(1)(d) of the Income Tax Act, 1961. The Assessing Officer (AO) contended that the development fees were mandatorily collected and thus not voluntarily given, disqualifying them from being treated as corpus donations.The Tribunal noted that the search and seizure operation conducted on 27.07.2016 did not yield any incriminating material specifically related to the development fees for the assessment years 2011-12 and 2012-13, which were unabated assessments. The Ld. CIT(A) had relied on the precedent set by the Hon'ble Delhi High Court in CIT Vs. Kabul Chawla, which held that additions in reassessment under Section 153A could only be made if incriminating material was found. Since no such material was found, the Tribunal upheld the Ld. CIT(A)'s decision to delete the additions made by the AO.Furthermore, the Tribunal referenced a similar case involving the sister trust (DY Patil Educational Academy), where the AO's similar additions were deleted by the CIT(A) and upheld by the Tribunal, citing the same legal principles. The Tribunal concluded that the development fees included in the fee receipt could not be considered incriminating material, as they were publicly known and accounted for in the books.Issue 2: Carry Forward of Deficit to Subsequent YearsThe Revenue also contested the Ld. CIT(A)'s decision to allow the assessee to carry forward the deficit of Rs.11,14,00,030/- to subsequent years. The Tribunal noted that this issue had been settled in favor of the assessee in previous cases involving the sister trust (DCIT vs Dr. DY Patil Educational Academy), where similar deficits were allowed to be carried forward.The Tribunal cited multiple judicial precedents, including decisions by the Hon'ble Bombay High Court and the Hon'ble Supreme Court, which held that excess expenditure in earlier years could be set off against income in subsequent years, treating it as application of income for charitable purposes. The Tribunal emphasized that the AO did not rely on any incriminating material found during the search to disallow the set-off of brought forward deficits.The Tribunal concluded that, based on the binding judicial precedents and the absence of incriminating material, the Ld. CIT(A) correctly allowed the carry forward of the deficit. The Tribunal dismissed the Revenue's appeals, affirming the Ld. CIT(A)'s decisions on both issues.Conclusion:The Tribunal dismissed the appeals filed by the Revenue, upholding the Ld. CIT(A)'s decisions to allow exemption for development fees collected from students and to permit the carry forward of the deficit to subsequent years. The Tribunal's decision was based on the absence of incriminating material and the application of binding judicial precedents.