TaxTMI 
TaxTMI 
2014 (7) TMI 682
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....as it cannot be said to have been paid for charitable purposes. 2. That the order of the Ld. Commissioner of Income tax (Appeals)-II, Kanpur dated 30.03.2011 needs to be quashed and the order passed by the Assessing Officer dated 24.10.2008 be restored. 3. That the appellant craves leave to modify any of the grounds of appeal mentioned above and/or to add any fresh grounds as and when it is required to do so." 3. Learned D.R. of the Revenue supported the assessment order. He also submitted that CIT(A) has not addressed all the objections of the Assessing Officer and therefore, the order of CIT(A) should be reversed and that of the Assessing Officer should be restored. 4. As against this, Learned A.R. of the assessee supported the order of CIT(A). He also submitted that this issue is squarely covered in favour of the assessee by the Tribunal decision in assessee's own case for assessment year 2005-06 in I.T.A. No.423/Lkw/2009 dated 30/10/2009, copy of which is available on page No. 31 to 48 of the paper book. In particular, he drawn our attention to Para 12 of the Tribunal order as appearing on page No. 48 of the paper book. 5. We have considered the rival submiss....
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....e assessee by misrepresenting the facts before the Tribunal, this Tribunal order cannot be a binding precedence for us to decide the present issue in assessment year 2004-05, 2006-07 and 2007-08. 5.2 Now we proceed to decide the issue on merit independently of the Tribunal decision for assessment year 2005-06 because we have seen that the Tribunal order for assessment year 2005-06 cannot be considered as a binding precedence because the same was obtained by the assessee by misrepresenting the facts before the Tribunal. We find that the addition was made by the Assessing Officer by making various objections as per Para 7 of the assessment order in assessment year 2004-05 and for the sake of ready reference, this Para No. 7 of the assessment order for assessment year 2004- 05 is reproduced below: "7. On perusal of submissions made by the assessee, it is noticed that :- (i) That the President or Vice President has not produced as desired. (ii) The assessee has not given criteria fixed for selection of candidates for grant of scholarship for studying in Foreign Country. (iii) The assessee has not produced original records in support of receipt of application and its proc....
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....t of such scholarship which has intentionally not been looked into. It is pertinent to mention that even the clause (G) of the object of the society provides to award scholarship to deserving student for education in foreign country. The society should have well defined criteria for selecting deserving candidates which can only be based on the basis of financial status and merits of the candidates. Here neither the .financial status nor the merits of the candidates was considered nor the transparency in selecting and expending funds of the society to the extent of over Rs. 66 lakhs on one candidate has been considered. (xi) In order to examine the financial status of Mr. Adheesh Bhagat and his parents, a notice u/s 133(6) dated 27.11.2007 was issued to his father Shri Ashok V. Bhagat as under :- "To Shri Ashok V. Bhagat, 20, Paul Mansion, 6,Bishop Lefroy Road, Kolkotta-700020 Sub: Furnishing of information U/s 133(6) of the I.T.Act, 1961-Reg. During the course of scrutiny of the case of Seth Anandram Jaipuria Education Society, Seth Anandram Jaipuria School, 7-Cantonment, Kanpur for the assessment year 2005-06, it has come to my notice that the society has g....
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....9,399/- from sale of shares in A.Y. 2006-07. From perusal of bank accounts of these persons it appears that they are the persons having a very high financial status. In F.Y. 2003-04, the bank account of Shri Ashok V. Bhagat with I.N.G Vyas Bank Ltd. (A/c No.50401004749) shows deposits of over Rs. 51.58 lakhs. There are other bank accounts also. Thus, on perusal of the above details it is very much evident that Mr. Adheesh Bhagat and his parents belonged to a very high status of society and therefore, grant of scholarship to Adheesh Bhagat cannot be said to be made for charitable purposes. It has certainly been made for some other consideration but since the President avoided to appear in person, further probe could not be carried out. (xii) Even though the society intends to make payment of scholarship of over Rs. 66 lakhs, no advertisement or public notice were made and the 4 applications were received on the basis of their personal knowledge which shows that the whole affairs was manipulated by the management Committee. 7. In view of this, it is held that the payment of scholarship to Shri Adheesh Bhagat is not considered to have been made for charitable purposes and the....
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....d and recognized by the Department as charitable by virtue of registration of society u/s 12A which is continuing during the year. The other discussions made by AO on the process of selection of Shri Adheesh Bhagat do not lead to any situation / conclusion where provisions of section 13 of the I.T. Act could be applied. Admittedly, as submitted before me also and noted in para-10(g) above, Shri Adheesh Bhagat is not related to society or its members in any manner, making him "specified person". There is no suspicion on the transactions of the society also that is to say the fees has been duly paid towards the same person and directly to the "educational institution" in USA. There is no color in the trail of transaction. Therefore, nothing further can be interpreted to disallow the same under computation provision of Chapter-III (Section 11, 12 & 13 of the I.T. Act). The facts of the case show that amounts paid as scholarship have been utilised towards education of "deserving candidate" and same is well covered under the objective clauses of the society. If there is any shortcoming in the process of selection of "deserving candidate" by way of trivial procedural lapses, this in itse....
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.... Bhagat as per the minutes signed on 18 th May, 2003 at 11.30 a.m. The chronology and timing of these events support the case of the Assessing Officer that there was no genuine process of selection/interview and it was all manipulation made by the assessee society and the scholarship was granted to Mr. Adheesh Bhagat at the sole discretion of the Vice President / President who intentionally avoided to appear before the Assessing Officer for fear of interrogation. This vital objection of the Assessing Officer is as per clause (vii) of Para 7 of the assessment order reproduced above. We have also seen that even this vital objection of the Assessing Officer has not been controverted by CIT(A) in his order in the present year or in assessment year 2005-06. Considering all these facts, we are of the considered opinion that in the facts of the present case, it cannot be said that granting of scholarship to Mr. Adheesh Bhagat was after carrying out genuine process of selection/interview. Apart from this, we also find that no material has been brought on record to show that any advertisement was made by the assessee society for inviting applications for such scholarship. In the application....
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....n capital expenditure without appreciating the fact that entire cost of capital expenditure has already been allowed as deduction u/s 11 of the Income Tax Act, 1961, against the income of trust in respective years and therefore, allowance of revenue expenditure u/s 11 of the Act, on assets which had already been claimed and allowed as deduction on account of capital expenditure, tantamount double deduction. 2. That the Ld. Commissioner of Income tax (Appeals)-II, Kanpur has erred in Saw and on facts in deleting the addition of Rs. 17,66,435/- made by the Assessing Officer on account of expenditure incurred on account of Scholarship paid to one Mr. Adheesh Bhagat, as it cannot be said to have been paid for charitable purposes. 3. That the order of the Ld. Commissioner of Income tax (Appeals)-II, Kanpur dated 30.03.2011 needs to be quashed and the order passed by the Assessing Officer dated 24.10.2008 be restored. 4. That the appellant craves leave to modify any of the grounds of appeal mentioned above and/or to add any fresh grounds as and when it is required to do so." 8. It was agreed by both the sides that the issue raised by the Revenue as per ground No. 2 is identic....
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....n Society [2011] 330 ITR 21 (P&H) (viii) Sahara Arts Management Academy vs Income Tax Officer [I.T.A. No.16/Lkw/2012] (ix) ACIT-1, Kanpur vs. Seth Anandram Jaipuria Education Society [I.T.A. No.423/Lkw/2009] (x) The Director of Income Tax, New Delhi vs. All India Management Association, New Delhi, Income Tax Reference No. 36 of 1994 (xi) CIT vs. Bheruka Public Welfare Trust [1999] 240 ITR 513 (xii) Dy.Director of Income Tax (Exemption) vs. M/s G.K.R. Charities [2013] 32 Taxman 208 (Bombay) (xiii) Dy. Director of Income-tax-11(1), Mumbai vs. G.K.R. Charities [I.T.A. No.8210?Mum/2010] (xiv) ITO (exemption) vs. Sardar Public Charitable Trust [I.T.A. No.285 & 286/Ahd/2913] (xv) Director of Income-tax (Exemption) vs. Framjee Cawasjee Institute [1993] 109 CTR (Bom) 463 5. We have considered the rival submissions. We find that the case of the Revenue is that as per the judgment of Hon'ble Apex Court rendered in the case of Escorts Ltd. Vs Union of India (supra), double deduction is not allowable and as per Revenue, since exemption is allowed to the assessee in respect of investment in capital assets u/s 11 by holding that the same is application of income fo....
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....ation u/s 32 and by way of allowance u/s 35(1)(iv) as capital expenditure on scientific research. Under these facts, it was held that double deduction is not allowable. In the present case, we have already discussed that granting of exemption u/s 11(1) and granting of depreciation u/s 32 is not amounting to double deduction because it is held that by way of granting exemption u/s 11(1), no deduction is granted because the income is not reduced and only the income is held to be exempt and the deduction is only granted by way of depreciation when assets are used. 11.3 For one more reason, this judgment of Hon'ble Kerala High Court is not applicable in the present case. It is observed by Hon'ble Kerala High Court that all the charitable institutions will be generating unaccounted income equal to the depreciation amount claimed on year to year basis which is nothing but black money. We fail to understand as to how granting of depreciation will generate unaccounted income because by way of granting depreciation, no income is resulting and there is no increase in cash flow. The income is reduced to one side of the Balance Sheet and the asset is reduced on the other side and th....