TaxTMI 
TaxTMI 
2019 (3) TMI 1930
X X X X Extracts X X X X
X X X X Extracts X X X X
....- ignoring the fact that the appellant had already claimed deduction of full value of fixed assets in earlier years resulting in WDV being zero on which depreciations cannot be claimed, allowing depreciation u/s 32 of the Act would amount to double deduction which is not permissible; 3. Ld. Commissioner of Income Tax (A] has erred in law and facts by deleting the addition of Rs. 8,57,31,152/- ignoring the fact that the assessee could produce ledger accounts and vouchers for Rs. 7,69,08,761/- only during the assessment proceedings, hence this amount was added to the total income of the assessee, as unexplained credits u/s 68 of the I.T. Act; 4. Ld. Commissioner of Income Tax (A) has erred in law and facts by deleting the addition of Rs. 1,65,66,693/- made by the AO on account of personal expenses ignoring the fact that the assessee could not produce proper vouchers during the assessment proceedings; 5. Ld. Commissioner of Income Tax (A) has erred in law and facts by deleting the addition of Rs. 2,03,53,745/- made by the AO on account of administrative expenses ignoring the fact that the assessee could not substantiate the increase in expenditure and did no....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the directions regarding fee from the student in excess of stipulated fees approved by the statutory body did not apply to the assessee and our attention was invited to paper book where the written submission filed before us were placed. Our specific attention was invited to Clause 29 of Extra Ordinarily Gazette of U.P. State Government, where the Act had given power to Executive Council to make ordinances. Our specific attention was invited in Para (e) Clause 29 where the Executive Council was authorized to pass ordinance to charge fee for various courses being studied in the university. It was submitted that the ld. CIT(A) has appreciated the facts of the case and has rightly allowed the relief. 10. Arguing Ground No.2 regarding claim of depreciation, the ld. AR submitted that it is correct that the assessee had claimed full value of purchase of fixed assets in earlier years and in fact the assessee had not claimed any depreciation on these assets and in this respect our attention was invited to computation of income placed at P.B. Page 43. Our attention was invited to the fact that assessee itself had reduced the amount of depreciation from the total expenditure debited in t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed on the expenditure wherever it was applicable. Our attention was invited to Paper Book, Pages 148-197 where the copies of the ledger account of such expenditure was placed. 14. Arguing next ground of appeal, the ld. AR submitted that assessee had obtained a term loan for construction of building on which assessee had paid interest and such interest was disallowed by Assessing Officer holding same to the capital expenditure. It was submitted that the building stood completed during the year and assessee had claimed depreciation on such building also and our attention was invited to paper book Pages 46 where the copy of schedule of fixed assets was placed. Without prejudice, it was argued that even if it was to be considered as capital expenditure then also the same was allowable as for the purpose of computation of exemption u/s 11 entire revenue as well as capital expenditure is considered as application of funds. 15. We have heard the rival parties and have gone through the material placed on record. We find that in Ground No.1, the Revenue is aggrieved with the action of ld. CIT(A) by which he has allowed relief to the assessee u/s 11 of the Act which the Assessing Offic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tablished a case that the assessee had in this case not utilized the donations or income for charitable purpose. The clear finding of the Tribunal is that if the assessee had not utilized the amount for charitable purpose, it would automatically become taxable and the assessee would not be entitled to exemption. But, on the contrary, without there being a finding of violation of Section 13 of the Act, an inference is drawn on an alleged receipt of donation and consequently, the allegation is made that there is a violation of Section 13(1)(d) of the Act. A hypothetical finding is given that because capitation fee is charged, it is not an income in terms of Section 11 of the Act and, therefore, there is a violation of Section 13(l)(d) of the Act. The Tribunal held that such a reasoning cannot be accepted because if the donations are offered for income and if the department wants to disprove the nature of income on the basis of material, as has been pointed out by the Commissioner of Income Tax (Appeals), it should be borne out by records based on investigation, which the Assessing Officer failed to do, except falling back on a statement which is not supported by materials. 4....
X X X X Extracts X X X X
X X X X Extracts X X X X
....11 of I.T. Act to the appellant in the current year nor has the A.O. establish the fact of profiteering directly or indirectly by appellant. In view of the above and respectfully following the decision of Hon'ble I.T.A.T. A-Bench, Lucknow in I.T.A. No. 44 &45/LKW/2016 (where registration u/s 12A has been restored) the appellant is eligible for exemption u/s 11 of the I.T. Act. The A.O. is directed to allow the exemption u/s 11 of the I.T. Act claimed by the appellant. The ground of appeal No.1 is therefore allowed." 16. The above finding do not require any interference as we do not find any infirmity in the same, therefore, the Ground No.1 of appeal of the Revenue is dismissed. 17. Now coming to Ground No.2, regarding disallowance of depreciation, we find that the assessee itself had not claimed depreciation as application of funds as is apparent from the copy of computation of income placed at Paper Book, Page 43. For the sake of completeness Paper Book, Page 43 showing computation of income has been made part of this order is reproduced as under: 18. In this computation of income, we find the assessee had not claimed any depreciation and has itself ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... case is squarely applicable to the facts of the present case, therefore, we are of the view that the assessee was entitled to depreciation and deduction thereof from the gross income even when the income of the assessee was required to be computed u/s 11 of the Act. In the aforesaid referred to case also the assessee was a trust, registered under the Bombay Public Trust Act and section 12A of the I.T. Act, the income of the assessee was exempt u/s 11 of the Act. The assessee claimed depreciation which was rejected by the Assessing Officer on the ground that the capital expenditure incurred during the accounting year was allowed as deduction form the income of the assessee, the deduction of depreciation was not allowed on the ground that full deduction had been allowed in respect of capital cost of the asset and if the depreciation was allowed, as claimed by the assessee, it would result in double deduction. On a reference, the Hon'ble Bombay High Court confirmed the view taken by the Tribunal by holding that the Tribunal was right in law in directing the Assessing Officer to allow depreciation on the assets, the cost of which had been fully allowed as application of income und....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... had already been shown as income of the appellant. * The appellant produced books of accounts like ledger accounts, bank statements etc to explain the details of donors. Anonymous donations are covered u/s 115BBC of the Act discussed in following paragraphs of this order. The AO has made addition u/s 68 of the Act. 6.1.3 In order to prevent channelization of unaccounted money to these institutions by way of anonymous donations, a new section 115BBC has been inserted to provide that any income of a wholly charitable trust or institution by way of any anonymous donation shall be included in its total income and taxed at the rate of 30%. Anonymous donation to wholly religious trusts or institutions will not be taxed. 6.1.4 Anonymous donation has been defined in the new section to mean any voluntary contribution referred to in section 2(24) (iia) of the Act, where a person receiving such contribution does not maintain a record of the identity indicating the name and address of the person making such contribution and such other particulars as may be prescribed. To be excluded from the definition of anonymous donations the person receiving the donation is requ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s cast upon it by furnishing the name and address of the donors. The A.0. has not doubted the identity of the donor and genuineness of the transaction. The Provisions of Section 115BBC with regard to anonymous donation are also not violated by the appellant trust as details of donors with their name and address were duly furnished before the Ld. A. 0. Anonymous Donation has been defined in Section 2(24)(iia) of the Act to mean any voluntary contribution where a person receiving such contribution does not maintain a record of the identity indicating the name and address of the person making such contribution and such other particulars as may be prescribed. The assessee has submitted the complete particulars of the Donor giving their name and address and it can be held that the appellant has established the identity of the donors as required u/s 115 BBC of the Act and donation cannot be categorized as anonymous donation. Further, Section 68 has no application to the facts of the instant case because the assessee has disclosed the donation as its income and applied the same for charitable purpose. In my considered opinion addrng part of the donation as Cash Credit u/....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ble or religious trust is entitled to deduction of certain income from its total income of the previous year. The income so exempt is the income which is applied by the charitable or religious trust to its charitable or religious purposes in India. This is, of course, subject to accumulation up to a specified maximum which was 25 per cent. In that case it was found, as in the present case that the assessee had applied more than 75% of the donations for charitable purposes as per its objects. The Delhi High Court further held that Section 68 of the Act has no application in such case where the assessee had disclosed donations as its income. It was also not disputed that all receipts, other than corpus donations, would be income in the hands of the assessee. If there is Full disclosure of the donation for whatever purpose and that the registration under Section 12-A is continuing and valid, exemptions cannot be denied. 4. [2005] 278 ITR 152 (Delhi) In the Delhi High Court in the case of Director of Income Tax (Exemption) Vs. Keshav Social and Charitable Foundation. The assessee, a charitable trust, was .engaged in the activity of providing medical advise to the poor and need....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s considered a similar issue and has held as under :- "6. Though the Revenue has taken a plea that for anonymous donation, provisions of section 115BBC of the Act can be invoked but in the instant case where the assessee has filed various documents to prove the identity of the donors, these donations cannot be called to be anonymous. So far as applicability of provisions of section 68 of the Act is concerned, it has been held by various High Courts including the jurisdictional High Court that once donation received was taken as income of the assessee which was applied for charitable purposes, provisions of section 68 of the Act cannot be invoked. Since we do not find any infirmity in the order of the Id. CIT(A), we confirm the same as he has adjudicated the issue In the light of various judicial pronouncements. Accordingly we confirm his order. In the result, appeal of the Revenue stands dismissed. " ln view of the above, and respectfully following the decision of Hon'ble Jurisdictional High Court in the case of Uttaranchal Welfare Society (supra) and the. Order of Hon'ble Lucknow Bench in the appeal of Saraswati Educational Charitable Trust, the addition of Rs. 8,....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... on account of non verification of vouchers. Just because there is increase in expenses as compared to earlier year the AO has made adhoc disallowances of expenses. In the present case proper books of accounts and bills/vouchers are maintained and produced before the AO. The auditor has not pointed out any adverse inference in respect of non-maintenance of bills/vouchers in the Audit report. Nor has the AO identified the specific bill or vouchers which could not be verified. The issue of adhoc disallowance of expenditure has been decided upon by Hon'ble jurisdictional ITAT in the below mentioned judgements. The Hon'ble ITAT, Lucknow in M/s Vijay Infra Ltd. Vs. ACIT in appeal No. 254 of 2015 dated 30.10.2015 has held that general observation of AO that vouchers are self-made cannot be made issue for an addition. At best it can be starting point of enquiry. The Hon'ble ITAT Agra Bench in M/s Atul Construction Co. vs. ITO in ITA Appeal No. 361 of 2013 dated 31.01.2014 held that mere fact that some of the vouchers were self made cannot be a reason enough to disallow the expenses on adhoc basis. The Hon'ble ITAT, Lucknow Bench in U.P. Corporati....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sallowance from expenses will also amount to application of Income and will have no sanctity. Reliance is placed on the decision of Hon'ble I.T.A.T. Bench-A, Lucknow in the appeal of I.T.O. Vs. Virendra Singh Memorial Shiksha Samiti reported in 18 DTK 502. The ground of appeal No. 10 is allowed." 23. In view of above facts, we do not find any infirmity in the order of the ld. CIT(A), Ground No.4 is dismissed. 24. Next Ground No.5 is regarding disallowance of expenditure out of administrative expenses on adhoc basis. In this respect, also we find that the assessee had filed complete details of vouchers and books of accounts, which was not rejected by the Assessing Officer and he arbitrarily disallowed 25% of the expenditure without observing that TDS was duly deducted on some of the expenses wherever it was applicable. The details of said expenses are placed at Pages 148 to 197 of the paper book. The ld. CIT(A) has allowed this ground of appeal by holding as under: "9.2 AO noted that administrative expenses increased from 79,53,597/- to Rs. 3,77,55,127/- which includes advertisement expenses of Rs. 1,65,11,445/-. The AO held that in respect of expenses to....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... Vs. ACIT in appeal No. 254 of 2015 dated 30.10.2015 has held that general observation of AO that vouchers are self-made cannot be made issue for an addition. At best it can be starting point of enquiry. The Hon'ble ITAT Agra Bench in M/s Atul Construction Co. vs. ITO in ITA Appeal No. 361 of 2013 dated 31.01.2014 held that mere fact that some of the vouchers were self-made cannot be a reason enough to disallow the expenses on adhoc basis. The Hon'ble ITAT, Lucknow Bench in U.P. Corporative Federation Vs. Deptt. Of Income Tax in ITA No. 33/lkw/2011 dated 22.03.2011 held that there was no justification is suspecting the genuineness of entire claim and resorting to estimated disallowance. The AO has not given any reason for estimating the disallowance at 5% of the claim. The AO has not doubted the correctness of books of accounts regularly maintained by the assessee. None of the auditors have given any adverse comment in the report. The disallowance was made for sake of disallowance without giving any cogent reasons. The adhoc addition made by AO has been rightly deleted by Ld. CIT(A). The Hon'ble ITAT, Lucknow Bench in judgement dated 13.07.20....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... capital expenses where the fact remain that the expenditure was incurred for the building which was also put to use and assessee had claimed depreciation on the building also. We further find if expenditure was not allowable as revenue expenditure even then the same was allowable as utilization as capital expenditure is also allowed for the purpose of calculating exemption u/s 11 of the Act. The entire capital as well as revenue expenditure has to be taken into account as utilization of funds. The ld. CIT(A) has rightly deleted the addition by holding as under: "10.2 I have considered the facts of the case and arguments of the appellant that mere reason for disallowance of Interest expenses as per the AO's finding that the interest is the capital expenditure. The A. 0. has not given any finding as how the interest expenditure constitutes Capital Expenditure. On the other hand appellant submitted the copy of ledger account of the Building, and explained that the Term Loan for which interest has been paid were utilized for construction of Academic and Administrative Block and the same has been put to use during the year and accordingly capitalized in the books of accoun....