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12-06-2019, Ideal Education Society, Section 11(4), 2(15), 12AA, Tribunal Delhi

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3 months 1 week ago #9724 by amit
Section - 11(4), 2(15), 12AA, 32
Order Date - 12-06-2019
Favouring - Assessee
Court - Tribunal Delhi
Appellant - Ideal Education Society
Respondent - ACIT
Citation - 619Taxpundit140
Appeal No. - ITA No. 3550/Del/2015
Asstt. Year - 2010-11



This appeal is filed against the order dated 23.02.2015 passed by CIT(Appeals)-Muzaffarnagar for AY 2010-11.

2. Grounds of appeal read as under:

“1. That the order of the Ld. Commissioner of Income Tax (Appeals), New Delhi, ["the Ld. CIT(A)”], dated 23.02.2015 is bad in law and on facts.

2. That the Ld. CIT(A) has erred in law and on facts in not appreciating the fact that the hostel/transport facilities provided to the students by the appellant society is an activity incidental to the attainment of the main objective of the society.

2.1. That the Ld. CIT(A) has erred in law and on facts in upholding the action of the Assessing Officer of making an addition/disallowance of Rs. 29,25,986/- out of the expenses incurred on running of the hostel/transport facility.

2.2. That the Ld. CIT(A) has erred in law and on facts in treating the hostel/transport facility provided to the students of institution as a business undertaking and thus upholding the action of AO as to the requirement of maintenance of separate books of accounts as required as required by Sec. 11(4A) of the Income Tax Act, 1961.

3. That the Ld. CIT(A) has erred in law and on facts in upholding the action of Assessing Officer to disallow depreciation claimed by the appellant society by debiting the same in Income & Expenditure Account which amounted to Rs. 2,52,75,353/-.

3.1 That the Ld. CIT(A) has erred in law and on facts in upholding the claim of Assessing Officer that the appellant society has availed 100% application of the value of the capital expenditure in the year of purchase of fixed assets out of gross receipts.

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 oneanother, 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 Rs. 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 year of investment and on the same value the assessee has claimed depreciation.

4. Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.

5. The Ld. AR submitted that as regards Ground nos. 2, 2.1 & 2.2 relating to hostel and transportation fees, there was no profit motive in carrying out these activities. The Ld. AR submitted that the facilities in the College/Institute are not carried with the profit motive. There were meant for promoting the main object of the Institute. In fact the assessee suffered a net loss of Rs. 1,64,023/- on account of providing hostel and transport facilities and it cannot be said that the Institute is engaged in the activities of earning profit. The Ld. AR further submitted that the hostel/transport facility is neither a luxury nor a means to earn profit by the society, rather the Society would travel extra mile to provide such facilities, even if, it has to suffer some loss on providing such desired facilities so to fulfill the main objective of the society. The Ld. AR further submitted that the Assessing Officer failed to bring any material evidence on record to prove that the society acted in a manner with a motive to earn pro it out of the transport or hostel facility provided to its students. The Ld AR relied upon the decision of the Hon’ble Delhi High Court in the case of Institute of Chartered Accountants of India 358 ITR 91. The Ld. AR further submitted that the college gives admission from far off places/towns on the precondition that hostel and transport facilities are available in the campus. Since the college is located on the outskirts of the town on the Meerut Delhi Highway where regular transport is not available, it is for this reason that this facility is provided as a prerequisite to the admission so as to fulfill the objective of the society to provide education to the students. It is the responsibility of the assessee to provide transport facility to the students for attending the school and for sending the students back to their respective homes with proper security and attachments. The Ld. AR further submitted that these facilities were provided only to those students who were studying in Institute and were interested to avail the facility. The assessee is having only a small area build up for the use of hostel. The students 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 essentia ly related to the realization of the primary charitable objective of education itself. The Ld. AR further submitted that although no surplus is generated out of the facilities provided to the students in the form of hostel/transport, however, even if there is any surplus, it is used by the assessee for providing education to students. It is not the case that the surplus is drawn out by the trustees for their personal benefit. The Ld. AR submitted that the facility provided by the college is restricted only to the college students and cannot be availed by the public at large at their will and at any given hour of time. The provisions of section 11(4) of the Act are not applicable because the college is not running any business undertaking but is simply providing facility out of the assets owned by the college itself. The facility is being provided to a definite set of students connected with the institute and is open at specific timings on the specific routes and to specified student directly connected with the college and is not a commercial basis. The

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