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2019 (6) TMI 653

depreciation - HELD THAT:- Reasoning of the AO to held that fees received for hostel facilities and transportation charges is a separate and distinct activities from education cannot be sustained, because these activities are incidental to the main objects of the trust, i.e., carrying out educational activities and it cannot be reckoned as a separate business activities for which separate books of accounts is required to be maintained. The hostel facility and transportation of students is inextricably linked with the running of school and is part of overall educational activity. In the case of Karnataka Lingayat Education Society [2015 (5) TMI 260 - KARNATAKA HIGH COURT] held that providing the hostel to the students and the staff working for the society is incidental to achieve the object of providing education which is object of the society. This issue has also been considered by the Tribunal in assessee’s own case [2019 (1) TMI 794 - ITAT DELHI] . Respectfully following the same we decide in this issue in favour of the assessee and hold that these activities are incidental to the attainment of the main object of the trust of the education and consequently assessee is entit .....

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ly as business income, now stands covered in favour of the assessee by the order of the Tribunal in assessee s own case for the assessment year 2010-11 in ITA No. 3629/Del/2015 vide order dated 9.1.2019. In so far as claim of allowability of depreciation is concerned, he submitted that, same stands covered by the decision of Hon ble Allahabad High Court in assessee s own case, reported in 394 ITR 712. 6. On the other hand, Ld. CIT(DR) submitted that in so far as first issue is concerned i.e., charging of hostel facilities and transportation charges the same are are separate activities for which assessee was required to maintain separate books of accounts as laid down in section 11(4A). He thus strongly relied upon the order of the AO and Ld. CIT (A). 7. After considering the aforesaid submissions and on perusal of the relevant finding in the impugned orders, we find that it is not in dispute that assessee was granted registration u/s 12AA for carrying out educational activities and is entitled for benefit u/s 11. Ld. AO has held that fees received for hostel facilities and transportation charges is a separate and distinct activities from education and therefore, in view of the sect .....

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ully considered the rival contentions and perused the orders of the lower authorities and other judicial pronouncement placed before us. In the grounds No. 1-3 assessee is contesting that addition made by the Ld. Assessing officer treating hostel places provided to college student as business of the society and text the alleged surplus of ₹ 9887873/- as business income of the appellant. It was not the case of the revenue that assessee has rented out these hostels to the students who are not parted education in the above institutes. It was also not the case of revenue that assessee is primarily engaged in the business of providing hostel facilities to the students. The above issue is no more res Integra in view of the decision of the Hon'ble Karnataka High Court in CIT versus Karnataka Lingayat education society in ITA No. 5004/2012 dated 15/10/2014 wherein it has been held that -providing hostel to the students/staff working for the society's incidental to achieve the object of providing education, namely the object of the society. In view of this we are of the opinion that providing of hostel facilities and transport facilities to the student and staff member of the .....

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s were provided to anybody other than students and staff of the trust. The transport and Hostel facilities provided by the educational institution shall be construed to be the intrinsic part of the 'educational activities' of the assessee and they cannot be considered different than activities of the society of 'education'. The hostel and transport facilities are incidental to achieve the object of providing education as per object of the trust. 12. Further, in Mallikarjun School Society vs.CCIT (2018) 90 taxmann.com 160 (Uttarakhand), the Hon'ble High Court held that an educational institution will not cease to be one existing solely for educational purposes since the object is not to make profit and the decisive or as a test as observed by the Hon'ble Apex court is whether on an overall view of the matter the object is to make profit and one should bear in mind the distinction between the corpus, the objects and the powers of the concerned entity. 13. In the present case also, it is not the case of the revenue that the transport facility is also provided to the outsider. Hon'ble Karnataka High Court in the case of Karnataka Lingayat Education Society i .....

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such purposes the income shall be determined without any deduction or allowance by way of depreciation or otherwise in respect of any asset, acquisition of which has been claimed us an application of income under this section in the Same or any other previous year. Memorandum explaining the provision made in Finance Bill for the aforesaid amendment shows that in order to exclude deduction, specific declaration was made by insertion of aforesaid sub-section in Section 11. The aforesaid amendment is effective from 1-4-2015 and, therefore, will not help revenue in the circumstances of case in hand. Even this aspect has been considered by Karnataka High Court in DIT (Exemptions) v. Al-Ameen Charitable Fund Trust [2016] 383 ITR 517/67 taxmann.com 160/238 Taxman 148 and following CIT vs. Vatika Township (P.) Ltd. [2014] 367 ITR 466/49 taxmann.com 249/227 Taxman 121 (SC) Court has held that the aforesaid amendment is prospective and operative from 1-4-2015. [Para 14] There are divergent views expressed by Kerala High Court in Lissie Medical Institutions v. CIT [2012] 348 ITR 344/24 taxmann.com 9/209 Taxman 19 (Mag.) wherein it has placed reliance on Supreme Court's judgment in Escorts .....

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