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2019 (6) TMI 701

..... are not covered in the definition of charitable purpose u/s 2(15) - since no separate books of accounts are maintained for this business, the assessee is not entitled for exemption u/s 11(4A) - HELD THAT:- The Hon’ble High Court in case of Mallikarjun School Society [2018 (2) TMI 1347 - UTTARAKHAND HIGH COURT] held that an educational institute will not cease to be one existing solely for educational purposes since the object is not to make profit. In present case also the assessee society will not ceased to exist as educational institute because it is providing hostel facility or transportation facility or mess facility, as it is an incidental to the education purpose of the assessee society. Therefore, in view of the Hon’ble Uttarakhand High Court decision in case of Mallikarjun School Society (supra) and orders of the co-ordinate bench in case of Delhi Public School Gaziabad [2018 (5) TMI 1482 - ITAT DELHI] the hostel facility provided by the assessee society is not in the nature of business and is incidental to the attainment of the main object of the providing education to students. Therefore, provisions of Section 11(4A) will not be applicable to the assessee - de .....

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..... . 4. That the appellant craves leave to add, alter, amend, substitute, delete and modify any or all the grounds of appeal, which are without prejudice to one another, before or at the time of hearing of the appeal. 3. The assessee is a society registered with the Registrar of Societies and enjoys registration u/s 12AA of the Income Tax Act, 1961. The assessee is running an Institute for professional courses. The assessee is also running hostel and transport facility for its students for which separate fee is charged. The Assessing Officer held that hostel and transport facility provided to the students are separate businesses and are not covered in the definition of charitable purpose u/s 2(15) of the Act. The Assessing Officer further held that since no separate books of accounts are maintained for this business, the assessee is not entitled for exemption u/s 11(4A) of the Act and income generated from surplus of the above activities are taxable. The Assessing Officer also disallowed depreciation of ₹ 252,75,253/- by observing that allowance will amount to double deduction since 100% application of value of capital expenditure had already been availed by the assessee in the .....

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..... ents are mostly accommodated in the rented buildings for which rent is paid by the society. The society owns only two buses which are run by the staff on the payroll of the college. The remaining buses are hired from the market and payment is made by the Society. Majority of the students commute through public transport system. The Ld. AR submitted that hostel and transport facilities are an integral part of education activity. Provision for hostel facility was only incidental to aims and objects of the society and there was no material on record showing that assessee was running hostel for business purpose. Since the task of providing education essentially involves institution and administration of facilities for housing the students in hostel, provision of timely food from the mess, provision of sports facilities for mental relaxation and recreation of the students and bus service facilities for picking up and dropping of the students to the institute for the purpose of securing education, it has to be construed as essentially related to the realization of the primary charitable objective of education itself. The Ld. AR further submitted that although no surplus is generated out .....

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..... 6. As regards disallowance of mess expenses, the Ld. AR submitted that the Assessing Officer estimated the mess expenses at ₹ 1,275/- per student per month as against the expenses of ₹ 2,401/- per student per month incurred by the assessee. The Ld. AR submitted that the Assessing Officer failed to appreciate the facts that the nature of foods and facilities provided by the assessee to its students is not the same in other Institute. The number of students at a given time availing the mess facility provided by the assessee, since, if there are large number of students, the per head expense would be on the lower side while if there are less number of students, the per head expense would be on a higher side. No detail of the breakup of the food items provided, number of meals given, nature of foods such as vegetarian and non-vegetarian, nature of morning breakfast, evening tea, etc. The Ld. AR further submitted that the Assessing Officer ignored the fact that the risk and responsibility attached in providing hostel and transport facility to the students. The assessee society has provided tough security and staff. It is, thus, stated by the Ld. AR that apart from making pay .....

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..... t and the various High Courts. The Ld. AR relied upon following decisions: 1) CIT vs. Rajasthan and Gujarati Charitable Foundation Poona (2018) 402 ITR 441 (SC) 2) DIT (Exemption) vs. Indraprastha Cancer Society (2015) 53 taxmann.com 463 (Del.) 8. The Ld. DR relied upon the assessment order as well as the order of the CIT(A). The Ld. DR also relied upon the following decisions: 1) Indian Machine Tools and Manufacturers Associations vs. DIT (2018) 91 taxmann.com 465 (Bom.) 2) Dayanand Pushpadevi vs. Addl. CIT (2016)-TIOL-1810-ITAT-DELHI 3) Young Women Christian Association of Madras vs. JDIT (2014) 41 taxmann.com 142. But the Ld. DR could not distinguish the ratio laid down by the Hon ble Apex Court as well as various High Courts and Tribunal s decisions relied upon by the Ld. AR during the hearing. 9. We have heard both the parties and perused all the relevant material available on record. Ground No. 1 is general in nature hence dismissed. As regards to Ground No. 2, 2.1 and 2.2, the issues contested herein have been decided by the Tribunal in case of Delhi Public School, Ghaziabad vs. ACIT (ITA No. 3593/Del/2015, AY 2010-11 order dated 08.05.2018). The Tribunal held as under: 8. W .....

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..... n the grounds no. 1 to 3 assessee is contesting that addition made by the Ld. AO treating hostel places provided to college student as business of the society and text the alleged surplus of ₹ 98,87,873/- as business income of the assessee. 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 vs. 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 educational Institute cannot be considered as business activity but is subservient to the object of educational activities performed by the society. We are also .....

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..... rinsic 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 power 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 in ITA No. 5004/2012 dated 15.10.2014 has held that providing the hostel to the students and the staff working for the society is incidental to achieve the object of providing education and i.e. the object of th .....

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