TaxTMI 
TaxTMI 
2016 (5) TMI 1567
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....on. 3. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in allowing the claim of depreciation to the assessee on the fixed assets which were claimed as application of income in earlier years. 4. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in allowing the claim of depreciation of Rs. 33,34,307/- to the assessee ignoring the recent judgement of the jurisdictional High Court in the case of Charanjiv Charitable Trust vs DIT(E) in ITA No.321, 322 and 323/2013 dated 18.03.2014 wherein the Hon'ble Court has held that the Tribunal was not justified in directing the allowance of depreciation in respect of such assets. 5. The appellant craves leave to add, to alter or amend any ground of appeal raised above at the time of hearing." 2. Right at the outset, it was submitted by the ld.AR that the point at issue is fully covered in favour of the assessee as the CIT(A) has followed the order of the ITAT passed in the immediately preceding assessment year on identical facts and circumstances. The position was not disputed by the Revenue. Accordingly the Ld.AR was required to show how it is ....
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....aimed u/s 11 of the Act was to be allowed. 3. The Ld. Sr. DR, Sh. K.K.Jaiswal considering the order of the ITAT merely placed reliance on the assessment order. No distinguishing facts or circumstance was brought to the notice of the Bench in order to canvass a contrary view. 4. We have heard the rival submissions and perused the material available on record. It is seen that the AO in the year under consideration as in the earlier year formed the view that the assessee fell in the scope of "general utility" as per section 2(15) of the Income Tax Act, 1961. It is an admitted fact that the facts and circumstances in the year under consideration continue to remain the same as in the earlier years and that there is no change in the Memorandum of Association and the activities of the assessee as compared to the earlier years. The AO took into consideration the fact that the assessee is registered u/s 12A of the Income Tax Act, 1961 vide registration dated 15.05.1971. The Trust also received order u/s 80G(5)(vi) vide DIT (Exemption) Delhi order dated 02.12.2009 applicable for period commencing from A.Y.2010-11 to A.Y.2012-13. The objects of the Society the AO noticed was claimed to ....
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....stitution. 4.3. The issue travelled in appeal before the CIT(A) where relying upon the order of the ITAT for 2009-10 A.Y. and taking note of the fact that there was a similar denial in 2010-11 A.Y. also on identical fact which issue also stood concluded in favour of the assessee, the appeal of the assessee was allowed by the CIT(A) holding as under:- 4. "The facts emanating from the order of the AO and the submissions of the assessee is that the assessee is charitable Trust and is registered as per Trust Deed dated 10.08.1961. The Trust is registered u/s 12AA(1) dated 15.05.11974 and also u/s 80G dated 02.12.2009. The Trust was founded with the object of charitable work of promoting the welfare with youth etc. The Trust was founded by the World Assembly of Youth, India and the following trustees were appointed:- i) Shri Morari Desai (Chairman) ii) Smt. Indira Gandhi iii) Shri Naval H.tata iv) Shri Ravindra Verma v) Shri Viren J.Shah vi) Shri Ram Krishna Bajaj (Managing Trustee) 4.5. "I have considered the order of the AO and the submissions of the assessee and I find considerable merit in the submissions of ....
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....ix Laboratories Limited 07.10.2008 3700 C/o SPC Management Services Pvt. Ltd. 05.11.2008 80850 C/o Microcosm Integrated Solutions (P) Ltd. 19.11.2008 273500 M/s Fair Trade Forum-India 24.11.2008 120690 C/o Asianet 13.03.2009 7300 4.5. In the facts of the present case also a similar inference has been drawn by the AO on the basis of the following entries in Form 26AS:- Form 26AS Entry Amount Paid (Rs.) Janvikas 329782 Centre for Science and Environment 382758 Indira Gandhi National Centre for the Arts 1146263 NASSCOM 880658 National School of Drama 3891667 4.6. The inference drawn on those facts for concluding that there was commercial activity was dispelled by the ITAT in the aforesaid order concurring with the following conclusion of the CIT(A):- 4.1. "The CIT(A) further elaborated the finding arrived at in para 6.2 by holding that the AO has not been able to appreciate the nature of the hostel and canteen activities and the AO had also not appreciated that the receipt on account of the auditorium and Conference Hall of Rs. 1.43 crore odd included the sum of Rs. 1.02 cr....
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.... the premises and have the meal and pay for the same without any effort to check whether the customer was a resident of the hostel or not. It was submitted that there was no control to ensure that outsiders do not utlize the services of the canteen/cafeteria. Accordingly the general and vague answer of the assessee have rightly been rejected by the AO who has held that the hostel/canteen facility were utilized by the assessee and run on commercial lines. Inviting attention to Section 2(15) of the Income Tax Act, it was her submission that the activities which were in the nature of trade, commerce, business as per the proviso cannot termed to be coming under the umbrella of "other charitable activities" as envisaged by the statute and the claim of the assessee has rightly been rejected by the AO. The AO it was her submission has identified the features which distinguish an activity which is in the nature of trade and business and all the requirements are fulfilled by the assessee. The judgements relied upon by the AO it was her submission have been distinguished on frivolous reasons by the assessee. Inviting attention to the list of sponsors as were available in the 26AS information....
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....ng Chicken in vegetarian food, Rs. 400/- for including Mutton in vegetarian food and for Rs. 500/- everything included. On enquiring about Hall charges, they stated that no charges will be there for Hall and it is included in food. They told that we should inform two days prior to them for making these arrangements personally or over phone. After enquiry we left the place. Sd/- Sushma Rani Inspector Trust Circle-II, New Delhi Witness 1. Omvir Singh, Sr. TA 2. Arun Kumar, TA 3. (emphasis provided) 4.8. The arguments of the Revenue were equally vehemently contested by the Ld.AR. For the sake of completeness these are reproduced hereunder:- 5.2. "Ld. AR on the other hand heavily relying upon the impugned order contended that the CIT(A) has met each and every argument/objections of the AO with cogent reasoning. It was his submission that the AO on the other hand has failed to appreciate that the activities of the trust were towards the aims and objects of the trust alone. It was also his contention that undue emphasis has been laid upon the Inspector's Report by the AO as apart from that this which has been explained ....
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....rate entities etc. and the receipts so generated are fully utilized only to meet the objects of the trust. The canteen/cafeteria facility is exclusively for the benefit of the students staying in the hostel facilities and considering the fact that the hostel cannot be in continuous use of more than 28 days the amounts vary. Looking at the sheer number of students who utilize the facilities it was submitted makes it impossible to monitor whether the person utilizing the facilities is actually a resident of the hostel or an outsider and if any stray person has utilized these facilities hoodwinking the serving staff than the assessee trust cannot penalized. Inviting attention to paper book page no-27 which contains the copy of the trust deed whose objects are enshrined at page 31, the said deed it was submitted underwent a change in regard to its name by way of a supplementary deed of trust copy placed at page 23-35 of the paper book. Addressing the same it was submitted that the name of the assessee trust was changed from "World Assembly of youth India" to "India Youth Centre". The objects continued to remain the same. Inviting attention to page 30 it was submitted that the trust was....
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....the name of the organization is given as "Shree Channappaswamy Vidyapeeth" and after recording of the relevant information of address, telephone no., no. of staff (here in being 217); source of funds herein donation, membership and State Government of Karnataka. In the information required under the heading "aims and objects" are described "as per the laws" copy Karnataka State. The target group is identified as under :- "Targget Group (e.g. children/Women/Youth etc.)-Schools, colleges, Technical Colleges students, SHG Groups, Hostel etc." The thrust area is "the State of Karnataka". The project undertaken is "State Government Grant Project, Aded School Grant, Watershed Grant, Zilla Panchayat Grant etc." 5.2.4. Herein also, it was submitted that the relevant documents are attached namely copy of Registration Certificate, copy of the trust deed, Annual Report, Audited statement of account, Memorandum of Association, etc. are attached along with this. Accordingly it was his submission that the suspicion raised by the Sr. DR by referring to the fact that there is no name recorded in the bill is incorrect and each and every bill will show that not only the na....
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....ng of the facilities (Buffet, Auditorium, Conference Hall etc.) of the Trust, officials of the trust designated for the said purposes (at the rank of Manager) are only authorized. Hence, as regard the remarks made by our Canteen staff they had merely given the information in regard to tariff rate both for vegetarian and non vegetarian buffets arrangement. There is nothing wrong in what has been stated by them and no where they had committed that it will be served also for the purposes other than the objectives of the activities for which it was intended. They had merely answered a query. Therefore, it would be inappropriate to conclude that what they had stated involve commercial activities." ............................... 4.9. Considering these arguments, it is seen that the order which has been followed by the CIT(A) proceeded to give a detailed finding on facts and rejecting the departmental grounds and upholding the impugned order. The same is reproduced hereunder for ready-reference:- 6. We have heard the rival submissions and perused the material available on record. The documents relied upon before us in the paper book and the case laws referred to and ....
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....ors, scholars etc attending seminars, conferences and then move on thereby making it difficult for canteen staff to ascertain whether the persons are staying in the hostel or not has not been accepted. The chances of stray incidents where unconnected person may avail of services has not been accepted as sufficient compliance. The argument that canteen staff may not be in a position to identify whether the person availing the services is staying in the hostel or is merely attending conference or is a rank outsider has not been accepted. On account of this lack of full control by the canteen staff on their facilities being used as is evidenced by Inspector's Report, the Revenue would want to argue that the assessee trust through its canteen facilities is functioning on commercial lines. Similarly the Revenue has also assailed the impugned order on the ground that information as per the 26 AS is that certain corporate entities have utilized the facilities thereby leading to the presumption that the hostel and canteen facilities are being used on commercial lines. On the other hand, on behalf of the assessee, the contention has been that the assessee maintains very strict checks for ma....
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....e from page 78 of paper book, the Note printed at the bottom of the Bill demonstrating the duration:- NAWO "Note:-This membership fee is valid for the next 28 days from the date of checkin 07 Sep 2008 and upto date 04 Oct 2008 for rooms only. Please retain copy of this bill to avoid the repayment of membership fees. This membership fees is valid for Room(s) only and cannot be adjusted against the other services. 6.2. A perusal of pages 79, 80 & 81 also demonstrate that specific no for rooms have been book by specified organizations on specified dates namely M/s Positive Women Network; Socio Legal Information Centre; and Indo- Global Social Service Society respectively and all these bills have a similar narration with regard to the membership fee that it is only for 28 days starting from the date of checkin which necessarily differs for each one of them. For ready-reference, we reproduce from pages 79-81 of the paper book as under :- M/s Positive Women Network Note:-This membership fees is valid for the next 28 days from the date of checkin 01-Oct-2008 and Upto 28-Oct-2008 for rooms only. Please retain copy of this bill to avoid the repay....
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.... Accumulation u/s 11(2) u/s 11(1) up to 15% 2004-05 16,83,695 Not required 16,83,695 2005-06 (54,52,886) Not required 0 2006-07 (50,03,098) Not required 0 2007-08 86,88,124 80,00,000 6,88,124 2008-09 1,85,47,381 1,25,00,000 60,47,381 2009-10 Case is under Process The above accumulation is started utilization from 2009-10 onwards for the construction of Building & renovation of old Building of the 2009-10 approx. Rs. 2.20 crores was utilized for said purposes. 6.4. We have also taken into consideration, the objections posed by the AO to the advertisement which was placed by the assessee in order to invite attention of the NGOs etc. to utilize the hostel facilities and auditorium and seminar facilities in order to promote leadership activities for the youth of the country and find ourselves in harmony with the findings of the CIT(A) as it does not lead to the conclusion that the activities are in the nature of commercial activity. Merely advertising the fact that facility of hostel, seminar halls, auditorium etc. can be used by organizations interested in having leadership programs ....
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....vs. Children Book Trust was also not applicable as it was rendered interpreting Municipal Corporation of Delhi Act for the purposes of house tax. 6.5. Accordingly on account of the arguments detailed reasoning on facts and law discussed at length in the earlier part of this order, we find no good reason to interfere with the finding arrived at in the impugned order. Being satisfied by the reasoning and finding of the CIT(A), Ground No-1 of the Revenue is rejected." (emphasis provided) 4.10. Accordingly, on a careful reading of the above detailed order, it is seen that identical claim of the Revenue has been considered by the ITAT. No change in fact or circumstance has either been referred to by the Ld. Sr. DR nor has been brought out in the assessment order. In the absence of any infirmity having been pointed out, we find no good reason to deviate from the view taken. Holding the conclusion of the CIT(A) in relying thereon justified on facts and law the departmental ground is dismissed. 5. Addressing the issue raised in Ground No.3 & 4 by the Revenue, the Ld.AR again placed reliance on the afore-said order on the ITAT and invited specific attention to pages ....
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....d. The Assessing Officer is not justified in not allowing depreciation because these assets have been claimed as application of income in earlier years. 8.3 Application of income and depreciation are two different aspects. This view has been upheld by Hon'ble Delhi High Court in the case or DIT vs. Vishwa Jagriti Mission reported at 2012-TlOL-271-HC-DEL-IT, wherein, Hon'ble Delhi High Court has observed as under:- "There is no dispute that the assessee has been granted registration under Section 12AA vide order dated 11th September, 2009 and, therefore, it was entitled to exemption of its income under Section 11. The only question is whether the income of/he assessee should be computed on commercial principles and in doing so whether depreciation on fixed assets utilized for the charitable purposes should he allowed. On this issue. there seems to be a consensus of judicial thinking as is seen from the authorities relied upon by the CIT(Appeals) as well as the Tribunal. In ClT vs. The Society of the Sisters of St. Anme (Supra), an identical question arose before the Karnataka High Court. There the society was running a school in Bangalore and was allowed ex....
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.... above, that in computing the income of a charitable institution/trust, depreciation of assets owned by the trust/institution is a necessary deduction on commercial principles. The Gujarat High Court, after referring to the judgements of the Karnataka, Maharashtra and Madhya Pradesh High Courts cited above, also came to the same conclusion and held that the amount of depreciation debited to the accounts of the charitable institution has to be deducted to arrive at the income available for application to charitable and religious purposes." 7.1. In the afore-mentioned facts where there is no infirmity pointed out by the Revenue nor any contrary decision has been referred to for our consideration we find no merit in the departmental ground. Being satisfied with the reasoning and finding of the CIT(A), the ground is dismissed. 6. We further find that the Hon'ble Delhi High Court in the case Indraprastha Cancer Society (cited supra) following the Vishwa Jagriti Missiion decided the issue as under:- 10. "The aforesaid paragraph refers to the decision in the case of Vishwa Jagriti Mission (supra) but ratio was distinguished on the ground that in the said case the Cour....