TMI Blog2021 (7) TMI 124X X X X Extracts X X X X X X X X Extracts X X X X ..... e namely the Income Tax Act to find out as to whether the activity of the assessee in maintaining the hostel would be exempted under Section 11(1) of the Act and whether the provisions of Section 11(4A) would be attracted in the facts and circumstances of the case. Having held that the activity of running the hostel is not a separate business activity and surplus income from the hostel fee cannot be treated as profit and gains of a separate business or commercial activity of the trust, it is held that the exemption under Section 11(1) of the Act cannot be disallowed to the assessee. - Decided in favour of the assessee. - INCOME TAX APPEAL No. 103 of 2017 - - - Dated:- 23-6-2021 - Hon'ble Mrs. Sunita Agarwal And Hon'ble Deepak Verma, JJ. For the Appellant : Abhinav Mehrotra,Vivek Pratap Singh For the Respondent : Praveen Kumar,SC ORDER Heard Sri Abhinav Mehrotra learned counsel for the appellant and Sri Praveen Kumar learned Advocate for the revenue. This is an Income Tax Appeal arising out of the order dated 21.09.2016 passed by the Income Tax Tribunal, Delhi Bench, Delhi in I.T.A No.4238/DEL/2015 whereby the appellate order of CIT(A) and the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were issued to the assessee. The assessment order records that the books of account, bills and vouchers etc. maintained by the assessee had been produced in reply to the notice and the questionnaire issued by the department/revenue. After providing due opportunity to the assessee, the Assessing Officer concluded that the hostel activities of the trust is separable from its educational activities and the way the hostel and mess activities are being carried on they would fall within the meaning of business under section 2(13) and can not be treated as ''Charitable purposes' under Section 2(15) of the Income Tax Act. The benefit of Section 11 of the Act cannot be given to the assessee, in as much as, it has not maintained separate books of accounts which is one of the pre-conditions mentioned in Section 11(4A) for grant of such benefits. It was concluded in the assessment order that the total hostel receipt of the trust was excessively high and the receipt and payment details furnished by the assessee showing net deficit of 68,198/- was nothing but a cooked up story. It was concluded that the expenditures towards generator, electricity and security were also excessively ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the hostel by charging hostel fees is an integral part of the objects of the trust, which is essentially charitable in nature being education. Even if the collected hostel fees has created some surplus as per the analysis of the Assessing Officer but that surplus by itself cannot be said to be profit and gains of a business within the meaning of Section 11(4A) of the Act, as the hostel activity is not independent to the main object of imparting education (Dental education). The benefit of Section 11 of the Act, therefore, has to be granted to the assessee for exemption of the income from liability of the Income Tax under the Act. The Assessing Officer on irrelevant considerations had rejected the details of receipt and payment account furnished by the assessee in the form of a ledger. The findings returned by the Assessing Officer of the hostel fees charged by the assessee being excessive is based on the comparison of the expenditures claimed by some other society namely Laksh Educational Society located in Ghaziabad. The Assessing Officer had erred in holding that the hostel fee charged by the assessee is more than the market rate or the fee charged by other institutions, priva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attention of the Court to a decision of this Court in Swadeshi Cotton Mills Vs. Sales Tax Officer AIR 1965 All 86 to urge that in the similar situation, sale of food and refreshments in the dining hall of the Aligarh Muslim University which was subjected to sales tax, was held to be a non-commercial activity. It was held therein that the supply of food to students in the dining hall was incidental to the main academic activity of the University as the dining hall service was an integral part of the hostel facility while imparting education to the students. He further placed the Division Bench judgement of this Court in Mahatma Gandhi Kashi Vidyapeeth Vs. State of U.P. others 2013 (5) ADJ 85 wherein question was as to whether the petitioner therein was a dealer within the meaning of U.P. Vat Act' 2008 and was carrying on business. The term business in the context of Section 2(h) of the U.P. Vat Act' 2008 was examined by the Division Bench and taking note of the decisions of the Apex Court in the University of Delhi and another Vs. Ram Nath and others AIR 1963 SC 1873, Commissioner of Sales Tax Vs. Sai Publication Fund 2002 (4) SCC 57, it was held that if the main activi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eipt is erroneous. The exemption under Section 11 of the Act was available to the assessee in view of the Section 2(15) of the Act which include education within the meaning of charitable purposes . Sri Praveen Kumar learned counsel for the revenue, on the other hand, argued that the word business in Section 11(4A) of the Act has been used in the context of any activity which is undertaken by a trust or an institution, such activity is covered under the definition of the word business in Section 2(13) of the Act as the definition being inclusive, the expression business has to be interpreted it its widest amplitude. The Webster Encyclopedic Unabridged Dictionary of the English Language defines business as an occupation, profession or trade and, thus, any kind of occupation which may or may not be profitable in nature is a business . The Apex Court in the case of T.M.A. Pai Foundation others Vs. State of Karnataka others AIR 2003 SC 355 has held that education falls within the expression occupation employed under Article19(1)(g).The private educational institutions' right to establish and administer its institutions has thus been recognised as a fundamental righ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncluding watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility: Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity, unless (i) such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility; and (ii) the aggregate receipts from such activity or activities during the previous year, do not exceed twenty per cent. of the total receipts, of the trust or institution undertaking such activity or activities, of that previous year; Section 2(13) defines that business includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture; Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undertaking so held, and where a claim is made that the income of any such undertaking shall not be included in the total income of the persons in receipt thereof, the Assessing Officer shall have power to determine the income of such undertaking in accordance with the provisions of this Act relating to assessment; and where any income so determined is in excess of the income as shown in the accounts of the undertaking, such excess shall be deemed to be applied to purposes other than charitable or religious purposes. Sub-section (4-A) provides as under:- (4-A) Sub-section (1) or sub-section (2) or sub-section (3) or sub-section (3A) shall not apply in relation to any income of a trust or an institution, being profits and gains of business, unless the business is incidental to the attainment of the objectives of the trust or, as the case may be, institution, and separate books of account are maintained by such trust or institution in respect of such business. A careful reading of the above provisions shows that under the Act the business means to include any adventure or concern in the nature of trade, commerce or manufacture whereas the words charitable purposes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness which has to be understood as per the meaning provided under Section 2(13) of the Act. The business in sub-section (4A) can mean any activity including any trade, commerce, or manufacture or any adventure or concern in the nature of trade, commerce, or manufacture. A business undertaking of the trust may also be included as property held under the trust in view of the sub-section (4) of Section 11. But for getting the benefit of sub-section (1) of Section 11, the income derived from property held under the trust whether wholly or in part, must be used for charitable or religious purposes. Under sub-section (4A) of Section 11, income of any business of the trust in the nature of profit and gains of such business can be exempted under sub-section (1) of Section 11 only if two pre-conditions mentioned in the said sub-section are fulfilled. The first condition is that the business must be incidental to the attainment of objectives of the trust. While considering the scope of sub-section (4A) of Section 11 which came into effect by the Finance (No.2) Act 1991 w.e.f. 01.04.1992, in Assistant Commissioner of Income Tax Vs. Thanthi Trust 2001 (247) ITR 785, the Apex Court had n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or it is an activity which is an integral and inseparable part of the main activity(education) carried on by the assessee. The determinative test shall be the theory of dominant purpose which has all through the years, been upheld to be the determining factor laying down whether the Institution is Charitable in nature or not. In the instant case, however, there is no dispute about the nature of the institution/trust being charitable in nature. The main activity of the trust being education is covered within the meaning of 'Charitable purposes' defined under Section 2(15) and it has been registered under Section 12-A of the Income Tax Act. In our considered opinion, running of hostel constitutes an integral and inseparable part of the academic activities carried on by the assessee and it is not possible to isolate or insulate it from the main activity and treat as business within the meaning of Section11(4A). It has to be noticed that the hostel is being run in discharge of a statutory obligation as institution in question cannot impart dental education without providing for the hostel. There is no dispute about the fact that the assessee has provided hostel and mess f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bench of this Court in Swadeshi Cotton Mills AIR 1965 All 86 wherein this Court was dealing with the batch of cases where different bodies were running canteens. One of the cases was concerned with the Aligarh Muslim University which was maintaining dining halls where it was serving food and refreshments to its resident students. Referring to the observations of the Apex Court in University of Delhi AIR 1963 SC 1873 It was held therein that it was incongruous to call educational activities of the University same as carrying on business . The activity of serving food in the dining hall was a minor part of the overall activity of the University. The dining hall service was held to be an integral part of the university while imparting education to the students. It was observed that the dining hall service is indissolubly blended with, and is an inseparable component of educational activity of the university. On the said reason, it was held that the activity of the Aligarh Muslim University of providing food to its residential students is such a minor, subordinate and insignificant part that it would be unreasonable to allow this work to lend a business colour to the university so as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee therein amounted to business as defined under the U.P. Vat Tax Act' 2003. While interpreting the term business which includes any trade, commerce, or manufacture etc.in the definition under the said Act, the Court had held therein that if the main activity was not business then any transaction incidental or ancillary would not normally amount to business unless an independent intention to carry on the business activity, incidental or ancillary, was established. It was held that emphasis has to be laid on the main activity of the person to fall within the definition of business. The inclusion of incidental or ancillary activity in the definition of business presupposes the existence of trade, commerce etc. In the light of the above discussion, considering the definition of business under Section 2(13) of the Act ; Charitable purposes under Section 2(15) as also the provisions of Section 11, 11(4A) and 12-AA of the Act, in the fact and circumstances of the case, it is apparent that the principal activity of the petitioner is pre-dominantly academic and charging of fees for the accommodation provided to the students admitted in the dental education course, is min ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible from the total income of the trust (person in receipt of the income) by granting exemption under Section 11 of the Act. The argument of the assessee further is that the balance as shown in the ledger of income and expenditure account of the hostel fees was in negative. There was no surplus over receipt. The assessee had not gained any profit out of the hostel activity. To prove the said point, the assessee had filed the balance sheet showing loss in the said activity. As regards, the contention of Sri Praveen Kumar learned Advocate for the revenue that the profit motive or profit earning is not an element of any activity to be termed as business. He contends that in the literal parlance, business means any occupation and education being an industry or occupation as held in T.M.A Pai Foundation others AIR 2003 SC 355, even an activity relating to or incidental to education has to be treated as business. This contention of learned counsel for the revenue does not impress the Court, in as much as, it is settled that the taxing statute cannot be interpreted on any presumption or assumption. The Court must look squarely at the words of the statute and interpret them. I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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