TaxTMI 
TaxTMI 
TaxTMI 
2016 (7) TMI 1014
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....ver, a search and seizure action under Section 132 of the Act was carried out in the premises of the assessee's trust on 6.8.2015. Therefore all the persons in-charge of the accounts section were completely involved in the post search proceedings. Since they were attending the income tax office every day to furnish verification and other details called for, the assessee could not take the necessary steps to file the appeal within the period of limitation. Therefore it is pleaded that the delay of 17 days was neither intentional nor wanton but due to circumstances which were beyond the control of the assessee. 4. The learned Departmental Representative has vehemently opposed the condonation of delay. 5. Having considered the rival submissions and the cause of delay explained by the assessee in the Affidavit, we find that the assessee had a reasonable cause for not presenting the present appeal within the period of limitation. We further note that there is nothing on record to suggest that by filing the appeal belatedly by 17 days, the assessee would have achieved any ulterior object or purpose. Accordingly, we are satisfied that the assessee has explained sufficient reason for....
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....uthorities ought to have seen that advance fee is only a liability of the appellants trust and they cannot considered as income of the appellant as long as the advance was taken to the fees accov-t in the subsequent years. 5. The Commissioner of Income-tax (Appeals) erred in sustaining the addition of RS.1,10,25,8001- representing the retention money as income of the appellants- trust. 6. The lower authorities ought to have seen that amount standing to the retention money account represent only opening balance and only a sum of Rs. 30.42.402 relate to the current assessment year and therefore the assessing officer was not justified in adding the entire sum of Rs. 1,10,25,8001- as income of the appellants-trust. 7. The Commissioner of Income-tax (Appeals) erred in sustaining the addition of Rs. 50,66,973/- as income from pharmacy as business income of the appellants- trust. 8. The lower authorities ought to have seen tl~at the running of the pharmacy was incidental to the running of the medical college and hospital and therefore the income from pharmacy cannot be considered as business undertaking of the appellants-trust. 9. The Commissioner of Income-tax (Appeals) erred in sus....
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....58,82,285 as application of income for capital expenditure; h) To direct the assessing officer to allow deduction of the fees receivable while computing the income of the appellants for application of income as the income was not received during the year". 7. Ground No.1 is general in nature and does not require any adjudication. 8. Ground No.2 is regarding claim of depreciation. 8.1 The assessee claimed depreciation of Rs. 10,73,00,124. The Assessing Officer held that the assessee has claimed double deduction by first showing the outlay for capital asset as application of income and thereafter claiming depreciation on the capital asset as well. The Assessing Officer relied upon the decision of Hon'ble Supreme Court in the case of Escorts & Another Vs. UOI & Others 199 ITR 43 (SC). The CIT (Appeals) confirmed the disallowance of depreciation made by the Assessing Officer by holding that the claim of depreciation along with application of money of capital expenditure amounts double deduction which is not envisaged under the Income Tax Act, 1961. The CIT (Appeals) has also referred to the amended provisions of Section 11(6) by Finance Act, 2014 w.e.f. 1.4.2015. 9. Before us....
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.... obsolescence. Since income for the purposes of section 11(1) has to be computed in normal commercial manner, the amount of depreciation debited in the books is deductible while computing such income. It was so held by the Hon'ble Karnataka High Court in the case of CIT Vs. Society of Sisters of St. Anne 146 ITR 28 (Kar). It was held in CIT vs. Tiny Tots Education Society (2011) 330 ITR 21 (P&H) , following CIT vs. Market Committee, Pipli (2011) 330 ITR 16 (P&H) : (2011) 238 CTR (P&H) 103 that depreciation can be claimed by a charitable institution in determining percentage of funds applied for the purpose of charitable objects. Claim for depreciation will not amount to double benefit. The decision of the Hon'ble Supreme Court in the case of Escorts Ltd. 199 ITR 43 (SC) have been referred to and distinguished by the Hon'ble Court in the aforesaid decisions. 21. The issue raised by the revenue in the ground of appeal is thus no longer res integra and has been decided by the Hon'ble Punjab & Haryana High Court in the case of CIT v. Market Committee, Pipli, 330 ITR 16 (P&H). The Hon'ble Punjab & Haryana High Court after considering several decisions on that issue and also the decisio....
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....n, for such purposes the income shall be determined without any deduction or allowance by way of depreciation or otherwise in respect of any asset, acquisition of which has been claimed as an application of income under this section in the same or any other previous year." 17. As already stated, the aforesaid amendment is prospective and will apply only from A.Y. 2015-16. In view of the above legal position, we are of the view that the order of the CIT(A) has to be reversed. Consequently grounds No.4 & 5 raised by the Assessee are allowed." There is no dispute that the amendment of section 11(6) of the Act by the Finance Act, 2014 is prospective w.e.f. 1.4.2015 and therefore the said amended provision is not applicable for the assessment year under consideration. Following the earlier decisions of this Tribunal, we decide this issue in favour of the assessee and against the revenue. 12. Ground No.3 is regarding the addition on account of advance fee received treated as income of the assessee for the year under consideration. 12.1 The assessee has claimed advance receipt of Rs. 2,24,27,130 in its Balance Sheet in respect of collection from the students of medical college, dental....
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....n the other hand, the ld. D.R. has relied upon the orders of the authorities below and submitted that when the assessee has not maintained a separate bank account for the advance fees and it was also admitted during the survey that the assessee has received this amount as development fees from the students of the first year apart from the tuition fees fixed by the Government then the A.O. is justified to add this amount in the income of the assessee. 12.4 We have considered the rival submissions as well as the relevant material on record. The Assessing Officer has made the addition of this amount as income of the year on the ground that the assessee has used this amount for revenue as well as capital expenditure during the year. Further the Assessing Officer has placed reliance on the statement recorded under Section 133A of the Act. It is pertinent to note that neither the Assessing Officer nor the CIT (Appeals) has disputed this fact that this amount has been duly recorded in the books of accounts as advance tuition fees. The assessee filed the ledger account wherein the details of the opening balance, the advance tuition fees received during the year as well as closing balance ....
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.... of the Assessing Officer. 15.2 Before us, the learned Authorised Representative of the assessee has submitted that the retention money cannot be treated as income as held in various decisions of the Hon'ble High Courts. He has further contended that the retention money retained by the assessee was paid subsequently to the contractors in the subsequent year whenever the contract is completed and it is a clear liability of the assessee to repay the amount. Such amount due to others cannot be treated as income of the assessee. Alternatively the ld. AR has submitted that the amount of Rs. 1,10,25,800 standing in the retention money account and the assessed as income mainly represent the amount lying as opening balance of Rs. 79,83,398 in the said account and only a sum of Rs. 30,42,402 relates to the current assessment year. Thus the Assessing Officer was not justified in adding the entire amount of Rs. 1,10,25,800 even if the addition is warranted. 15.3 On the other hand, the learned Departmental Representative has submitted that the Assessing Officer as well as the CIT (Appeals) has given the finding that the assessee has claimed the use of said amount as application of money ....
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.... and observed that the assessee has not furnished any evidence regarding the break up of the medicines purchased from the pharmacy by different categories of the patients and outside public. Accordingly, the CIT (Appeals) has confirmed the action of the Assessing Officer. 16.2 Before us, the learned Authorised Representative of the assessee has submitted that the assessee is running a pharmacy from the hospital attached to the medical college which has not been disputed by the Assessing Officer however the addition is made by the Assessing Officer because of the reason that no separate books of accounts were maintained by the assessee. The learned Authorised Representative has submitted that it is having a separate trading account for the pharmacy wherein all the charges and sales are duly accounted for and separate stock register was also maintained. Once the pharmacy attached to the medical college/hospital is not a business undertaking, the provisions of section 11(4) and 11(4A) are not applicable. He has referred the trading account maintained in respect of the pharmacy at page 16 of the paper book and submitted that though separate books are not maintained however separate ac....
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....arrying on of activities in the nature of business. 8. When the matter was taken in first appeal before CIT(Appeals), he confirmed the order of the assessing authority and dismissed the appeal filed by the assessee. The assessee is aggrieved and therefore, the second appeal before the Tribunal. 9. The relevant grounds raised in the present appeal read as below:- "(1.1) The Commissioner of Income Tax (Appeals) erred in confirming the order of assessment denying exemption u/s.11 of the Income-tax Act. (1.2) The Commissioner of Income Tax (Appeals) erred in observing that the assessee does not deny the carrying on activities of typewriting institute, women's hostel, crèche and pharmacy on a profitable basis. (1.3) The finding of the Commissioner of Income Tax (Appeals) that the appellant did not deny selling of medicines to outsiders. Even assuming so, sale of medicines is only an object of providing medical relief to the poor virtually at cost and would not make it an object of profit. (1.4) The Commissioner of Income Tax (Appeals) went wrong in holding that the appellant runs dispensaries in two places in a commercial manner, which finding is perverse; and in any event ....
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....ning the hospital. The hospital cannot be run without a pharmacy attached to it. If an assessee wants to run a hospital, running of the pharmacy is also a must. Therefore, running of the pharmacy by the assessee-society is not an activity carried on by the assessee incidental to the running of the hospital; but, on the other hand, it is an integral part of the hospital run by the assessee. 13. In these circumstances, the assessing authority has erred both on facts and in law in holding that the pharmacy run by the assessee-society is a separate unit, running as a business. The Assessing Officer has observed that the assessee-society has maintained separate accounts for the pharmacy section. Maintaining accounts separately for pharmacy section does not decide the nature of the activities carried on by the assessee through running of the pharmacy. Separate accounts are maintained by the assessee for the purpose of proper accounting and internal control. Even in the case of charitable hospital, it is not possible to provide medicines to every patient, free of cost. It is only in very deserving cases, a charitable institution could provide medicines free of cost. Therefore, running of....
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..../2015. The relevant extract is reproduced below:- "15. The third issue that arises for consideration in this appeal is as to whether 15% accumulation for application in future has to be calculated on gross receipts or net receipts after deduction of revenue expenditure. The Assessee claimed accumulation of income for application for charitable purpose at 15% of the gross receipts. The AO was of the view that accumulation will be allowed only to the extent of 15% of the income after revenue expenditure. In other words income to be set apart u/s.1 1(1)(a) of the Act has to be computed at 15% of the net income i.e., gross receipts minus revenue expenditure and not on the gross receipts as claimed by the Assessee. Since in the case of the Assessee, the gross receipts after revenue expenditure was nil, the AO denied the benefit of accumulation to the Assessee. 16. On appeal by the Assessee, the CIT(A) confirmed the order of the AO. Hence ground No-4 raised by the Assessee before the Tribunal. 17. The issue to be decided is therefore as to whether for the purpose of computing accumulation of income of 15% under section 11(1)(a) of the Act, one has to take the gross receipts or gross ....
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....to be accumulated. Their Lordships, as noted earlier, affirmed the decision of Kerala High Court in (1997) 141 CTR (Ker) 502 : (1997) 228 ITR 620 (Ker) (supra) wherein it is held as under: "At the outset, the statutory language of s. u(i)(a) of the IT Act, 1961, relates to the income derived by the trust from property. The trust is required to be wholly for charitable or religious purposes, and the income is expected to have relation to the extent to which such income is applied to such purposes in India. It is thereafter the statutory provision proceeds further that such income is not to be understood to be in excess of 25 per cent of the income from such properties. In other words, the very language of the statutory provision under consideration sets apart 25 per cent of the income from the source of property with reference to the extent to which such income is applied for such purposes, charitable or religious. In other words, for the purpose of s. ii(i)(a) of the Act, the income in terms of relevance would be the income of the trust from and out of which 25 per cent is set apart in accordance with the spirit of the statutory provision." This means that, when it is established t....
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....y, the question referred to is answered in the affirmative and in favour of the assessee." 18. The aforesaid decision clearly supports the plea of the Assessee. Following the same, we hold that the accumulation u/s 11(1)(a) of the Act should be allowed as claimed by the Assessee. Ground No.4 raised by the Assessee is accordingly allowed." 11. Following the decision of the co-ordinate bench of the Tribunal, we set aside the order of the CIT(A)." Following the decision of the co-ordinate bench of this Tribunal, we decide this issue in favour of the assessee and direct the Assessing Officer to consider the allowable accumulation of income at 15% of the gross receipts. 18.1 Ground No.11 is regarding setting off excess application of income of assessment year 2010-11 against the income of the assessment year 2011-12. 18.2 At the time of hearing, the learned Authorised Representative stated that the assessee does not press this ground and the same may be dismissed. 18.3 On the other hand, the learned Departmental Representative has not objected to dismissal of the ground. 18.4 Accordingly, we dismiss the ground No.11 as not pressed. 19.1 Ground Nos.12 & 13 are regarding disallowa....