TaxTMI 
TaxTMI 
2012 (1) TMI 436
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....in upholding that assessee has not applied 85% of its income which is factually incorrect and such the order passed is arbitrary and unjustified. 3. That the ld. Commissioner of Income Tax (Appeals) has further erred in law as well as on facts in holding that the assessee has failed to fulfill the requirements laid down under section 11(2)(a) of the Act which is arbitrary and unjustified. 4. That the ld. Commissioner of Income Tax (Appeals) has further erred in upholding that investment in FDRs does not qualify for deduction under section 11(1) of the Act while the assessee has treated it be application of income which is arbitrary & unjustified. 5. That the ld. Commissioner of Income Tax (Appeals) has further erred in upholding that depreciation claimed of Rs. 2,16,39,334/- is not application of income in utter disregard of the case law cited before her which illegal, is arbitrary and unjustified. 6. That the ld. Commissioner of Income Tax (Appeals) has erred in not adjudicating upon the Ground no. 4 which reads as under: That without prejudice to above, the learned Assessing Authority has further erred in not allowing credit, as applic....
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....ot allowable to the assessee, since the entire cost of the fixed assets on which depreciation has been claimed, had already been fully allowed as application of income u/s 11 in the past years and the current year. The AO made a disallowance of Rs. 2,16,39,334/- on account of wrong claim of depreciation. Total disallowance on account of shortfall in application of income and wrong claim of depreciation was made at Rs. 3,03,34,569/- (86,95,235 + 2,16,39,334). 6. The CIT (Appeals) held as under : "6.6 Keeping in view the failure of the appellant to apply 85% of its income for charitable purposes and failure to accumulate as per provisions of section 11(2) it is held that the entire surplus created by the appellant at Rs. 8,62,41,666/- (15,52, 33,648-6,89,91,982) is assessed to tax as under: - - Total receipts as income & exp. Account Rs.15,52,33,648/- Less: - Expenditure excluding Depreciation Rs. 6,89,91,982/- Surplus income Rs. 8,62,41,666/- This results in enhancement of income by Rs. 5,59,07,096 i.e. (8,62,41,666 -3,03,34,570) computed as under: - Surplus income(supra)assessable Rs. 8,62, 41,666/- Less: - Addition made by the A.O. ....
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....s that in the preceding years, while completing the assessment under section 143(3) of the Act the aforesaid application of income by way of investment in FDRs has been accepted. The copies of the assessment orders relating to assessment years 2005-06 to 2007-08 were referred to by the assessee. A plea was raised by the learned A.R. for the assessee that in view of the settled position, principle of consistency should be applied. Reliance was placed in CIT Vs. Porrits & Spencer (Asia) Ltd. [324 ITR 257 (P&H)] and in CIT Vs. Prakash Industries Ltd. [ 324 ITR 391 (P&H)]. Ground No. 6 raised by the assessee was claimed to be an alternate ground. 8. The learned D.R. for the Revenue placed reliance on the order of CIT (Appeals). 9. We have heard the rival contentions and perused the record. The assessee-society is an education society and is running Seth Jai Prakash Mukand Lal Institute & Technology for B.Tech., MBA, MCA and M.Tech. degrees in affiliation with Kurukshetra University. During the year under consideration the assessee had filed return of income in which gross receipts were declared at Rs. 15,52,33,648/-. Against the said receipts, the assessee had claimed expenditure....
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.... Rs. 6,00,42,237/-. The assessee claimed that in view of the provisions of section 11(5) of the Act it was entitled to the benefit of such investment made in FDRs. We find that under the provisions of section 11(5) of the Act, the modes of investment for claiming exemption under section 11 are provided. Sub-clause (iii) to sub-section (5) of the Act is in respect of deposits with scheduled bank of cooperative society carrying on the business of banking. As per the Memorandum of Association of the assessee-society, copy of which is placed at pages 21 to 29 of the Paper Book, the objects of the assessee- society in addition to running Educational and Technology Institution, as per clause (vii) is "to invest the money of the society in a manner as provided under section 11(5) of the Act from time to time be determined, and from time to time transferred such investment". The assessee during the financial year claimed that there was net additions to FDRs i.e. at the beginning of the year total investment in the FDRs was Rs.5,53,90,856/- and at the close of the year was Rs. 11,84,33,093/- i.e. net addition of Rs. 6,30,42,237/-. After set off of loan against the FDRs the aforesaid investm....