Kandukuri Educational And Charitable ... vs Department Of Income Tax

M/s Kandukuri Educational and The Income Tax Officer (OSD), Charitable Trust, (Exemptions)-IV), v. No.175-A, Jai Hindi Apartments, Chennai - 600 034. Velachery Main Road, Gowrivakkam, Chennai - 600 073.

PAN : AAATK 4945 N (अपीलाथ,/Appellant) (-.यथ,/Respondent)

अपीलाथ, क/ ओर से/Appellant by : Shri N. Madhavan, JCIT -.यथ, क/ ओर से/Respondent by : Shri R. Ganesan, FCA

सन ु वाई क/ तार ख/Date of Hearing : 19.05.2015 घोषणा क/ तार ख/Date of Pronouncement : 29.05.2015

आदे श /O R D E R

PER N.R.S. GANESAN, JUDICIAL MEMBER:

This appeal of the Revenue is directed against the order of

the Commissioner of Income Tax (Appeals)-VII, Chennai, dated

23.06.2014 and pertains to assessment year 2010-11.

2. Shri N. Madhavan, the Ld. Departmental Representative,

submitted that there was a delay of 130 days in filing the appeal 2 I.T.A. No.409/Mds/15

before this Tribunal. The Revenue has filed an application

requesting to condone the delay. According to the Ld. D.R., the

Assessing Officer wanted to verify the assessee's status of the

registration under Section 12AA of the Income-tax Act, 1961 (in

short 'the Act') before filing of the appeal before this Tribunal. Since

the file relating to registration was maintained in the office of the

Commissioner and it was mixed up with other files because of

restructuring, the file could not be traced out. Therefore, there was

a delay. We are of the considered opinion that the delay of 130

days was due to restructuring of the Department and mixing up of

the files. Therefore, there was a reasonable cause on the part of

the Revenue for not filing the appeal within the prescribed time.

Therefore, we condone the delay of 130 days in filing the appeal

and admit the appeal.

3. Now coming to the merit of the appeal, Shri N. Madhavan,

submitted that the assessee-trust is registered under Section 12AA

of the Income-tax Act, 1961 (in short "the Act"). The assessee is

managing two institutions, namely, Sailors Maritime Academy and

Sailors Maritime Education & Training Institute. However, the

assessee has not returned any income from Sailors Maritime

Education & Training Institute. According to the Ld. D.R., the 3 I.T.A. No.409/Mds/15

assessee has disclosed income only from Sailors Maritime

Academy. The Ld. D.R. further submitted that the gross receipt of

Sailors Maritime Education & Training Institute for the assessment

year 2010-11 was `2,22,05,277/-. During the course of examination,

the Assessing Officer found that the income from Sailors Maritime

Education & Training Institute has to be included in the income of

the assessee-trust. According to the Ld. D.R., however, the

CIT(Appeals) allowed the claim of the assessee to the extent of

`20,67,984/- which was incurred towards capital asset as

application of income. According to the Ld. D.R., there was no

claim made by the assessee as application of income. Therefore,

the CIT(Appeals) is not justified in allowing the claim of the

assessee. The Ld. D.R. further pointed out that the assessee's

claim of application of fund to the extent of `48,57,842/- in the return

of income was restricted to `40,79,975/- by the Assessing Officer.

The claim of the assessee with regard to Sailors Maritime Education

& Training Institute to the extent of `20,67,984/- was a fresh claim

which was not made during the course of the assessment

proceedings. Since the claim was not made in the return of income,

according to the Ld. D.R., it cannot be allowed. The Ld. D.R. further

submitted that the capital expenditure is not an allowable item as

application of income. According to the Ld. D.R., capital 4 I.T.A. No.409/Mds/15

expenditure was incurred out of borrowed funds, therefore, it cannot

be allowed in computing the total income.

4. Referring to the fees paid by the assessee as Direct Line

Programme (DLP) and DLP fees, the assessee could not produce

any material to show that the expenditures were incurred. Referring

to para 12 of the assessment order, the Ld. D.R. submitted that the

assessee has not produced any bills and vouchers towards the

payments. Therefore, the CIT(Appeals) is not justified in allowing

the claim of the assessee.

5. On the contrary, Shri R. Ganesan, the Ld. representative for

the assessee, submitted that the assessee had produced bills and

vouchers before the Assessing Officer and tax was also deducted.

The bills were also produced before the CIT(Appeals). Therefore, it

is not correct to say that the bills and vouchers were not produced

before the Assessing Officer. Hence, the CIT(Appeals) has rightly

allowed the claim of the assessee. Coming to the disallowance of

`20,67,984/-, the Ld. representative submitted that the assessee

was running two institutions, namely, Sailors Maritime Academy and

Sailors Maritime Education & Training Institute. According to the

Ld. representative, the activities of Sailors Maritime Education &

Training Institute were managed by another trust, namely, 5 I.T.A. No.409/Mds/15

Kandukuri Bangaramma Education and Charitable Trust.

Therefore, income from Sailors Maritime Education & Training

Institute was not included in the income of the assessee-trust.

Since the Assessing Officer included the income of the Sailors

Maritime Education & Training Institute, the expenditure incurred by

the said Institute is also to be allowed. The assessee, in fact,

incurred the expenditure to the extent of `20,67,984/- for the capital

asset. Therefore, the expenditure incurred by the assessee has to

be allowed as application of income under Section 11 of the Act.

6. We have considered the rival submissions on either side and

perused the relevant material on record. Let's first take the

disallowance made by the Assessing Officer towards DLP

Programme fees and DLP fees. The Assessing Officer says that no

bills and vouchers were produced before her. However, the

assessee claimed before the CIT(Appeals) that bills and vouchers

were produced before the Assessing Officer also. The said bills

were produced before the CIT(Appeals) also. Therefore, the

CIT(Appeals) allowed the claim of the assessee. Since there was a

dispute whether the bills and vouchers were produced before the

Assessing Officer or not, this Tribunal is of the considered opinion

that giving one more opportunity to the Assessing Officer to 6 I.T.A. No.409/Mds/15

examine the bills and vouchers may not prejudice the interest of the

assessee in any way. Since the assessee submits that the bills

and vouchers were produced for the expenditure incurred by it

before the Assessing Officer as well as before the CIT(Appeals),

this Tribunal is of the considered opinion that examining the same

by the original assessment authority is necessary. Accordingly, we

set aside the orders of the lower authorities and the issue of

disallowance of DLP Programme fees and DLP fees is remitted

back to the file of the Assessing Officer. The Assessing Officer

shall re-examine the issue afresh in the light of the bills and

vouchers that would be filed by the assessee and thereafter decide

the issue by giving reasonable opportunity to the assessee.

7. Now coming to the disallowance of `20,67,984/-, admittedly,

income of the Sailors Maritime Education & Training Institute was

not included by the assessee in the total income. Though the

assessee claims that the said Institute was managed by another

trust, the Assessing Officer has taken the income of the said

Institute, namely, Sailors Maritime Education & Training Institute as

income of the assessee. Therefore, as observed by the

CIT(Appeals), the expenditure relating to that Institute has also to

be allowed while computing the income of the said Institute. Now 7 I.T.A. No.409/Mds/15

the assessee claims that a sum of `20,67,984/- was incurred in the

capital asset. If the said expenditure was incurred from the income

of the trust, then naturally it has to be allowed as application of

income under Section 11 of the Act. The Revenue now claims that

the expenditure was incurred out of borrowed funds and not from

the income of the assessee. If the borrowed funds were used for

acquisition of capital asset, then such borrowed funds cannot be

treated as income of the assessee for the year under consideration.

At the best, the repayment of borrowed funds in the respective year

can be considered as application of income. The details of the

borrowed funds are not available on the file of this Tribunal. This

Tribunal is of the considered opinion that the matter needs to be re-

considered by the Assessing Officer. Accordingly, the orders of the

lower authorities are set aside. The Assessing Officer shall

reconsider the matter afresh and find out the actual borrowal of loan

and its application and thereafter decide the issue in accordance

with law after giving reasonable opportunity to the assessee.

8. In the result, the appeal of the Revenue is allowed for

statistical purposes.

8 I.T.A. No.409/Mds/15

Order pronounced on 29th May, 2015 at Chennai.

sd/- sd/- (A.Mohan Alankamony) (N.R.S. Ganesan) (ए. मोहन अलंकामणी) (एन.आर.एस. गणेशन) लेखा सद य/Accountant Member या यक सद य/Judicial Member

चे नई/Chennai, th 5दनांक/Dated, the 29 May, 2015.

Kri.

आदे श क/ - त6ल7प अ8े7षत/Copy to: 1. अपीलाथ,/Appellant 2. -.यथ,/Respondent 3. आयकर आयु9त (अपील)/CIT(A)-VII, Chennai-34

4. Director of Income Tax (Exemptions), Chennai

5. 7वभागीय - त न ध/DR

6. गाड( फाईल/GF.