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2019 (3) TMI 212 - AT - Income TaxBenefits of section 10(23C)(iiiad) - selling of books and uniform to the students of assessee - Not mentioned in the memorandum of association as it is incidental to the educational activities - Charitable activity - income of any university or other educational institutional - CIT(A) has held that the assessee did not work solely for educational purposes but for profit, on the basis that the assessee generated surplus - HELD THAT:- From the plain reading of section 10(23C)(iiiad) of the Act, it is apparent that any income of any university or other educational institutional existing solely for educational purposes and not for the purpose of profit is totally exempt if the aggregate annual receipts of such university or educational institution do not exceed the amount of annual receipt as may be prescribed. This means that there is no restriction on the generation of surplus u/s 10(23C)(iiiad). It can be said that any university or other educational institution can generate surplus. It is also noted that buying and selling of uniform and books to students of assessee, for educational purpose is not commercial activity. Because the assessee is engaged in providing primary and higher education to the poor students and working under the aims and objects of the society. It also engaged in sale and purchase of books and uniform to the students of the assessee school only, at cheaper rate than market prices, which is also a part of educational activity. Also, the assessee buys and sells only those books and uniforms which are related to the students only. It is entirely for the education of the students which is not beyond the aim and objective of the society. There is no need to specifically mentioned about the sale of uniforms and books in the memorandum of association as it is incidental to the educational activities which is object of the assessee. The purchase and sale of text books, stationery items and uniforms exclusively to the students studying in the school are not in the nature of commercialization since all these activities are essential requirements of the students. The sale and purchase of books and uniform to the students are not commercialized activities. It actually benefits the entire student community as it not only provides convenience but also promotes equality by ensuring that there is uniformity in the products being sold and used by the children. Therefore, it can be said that these activities are undertaken for the educational purposes only. The exemption u/s 10(23)(iiiad) of the Income Tax Act, 1961 should not be denied to the assessee as selling of books and uniform to the students of assessee is part of educational activity only. Impugned addition was made merely on the basis that surplus arises to the assessee during the year under consideration without appreciating that the surplus is merely 12% which is considered as legitimate for charitable purposes. Thus, the addition of ₹ 12,01,906/- is not tenable, hence, the same is deleted as such and accordingly the grounds raised by the assessee stand allowed. Since, quantum addition in dispute has been deleted, penalty in dispute does not survive in the eyes of law u/s. 271(1)(c) - Decided in favour of assessee
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