SRI PALANIAPPA CHARIGABLE,SALEM vs. ITO,NEAC, DELHI

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ITA 377/CHNY/2023Status: DisposedITAT Chennai23 June 2023AY 2018-194 pages

In favour of the Revenue: the assessee's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that receipts from providing uniforms, books, and transport services are incidental to the main object of education and are commercial in nature. Therefore, the surplus from these activities is taxable.

What were the facts?

The assessee, a charitable trust running an educational institution, claimed exemption under Section 11 for its surplus income. The Assessing Officer (AO) disallowed exemption on receipts from incidental activities like bus fees, uniform fees, and interest, treating them as commercial in nature.

What were the issues?

Whether income derived from activities incidental to the main charitable object, such as providing uniforms, books, and transport, is eligible for exemption under Section 11 of the Income Tax Act.

Which sections of the Income-tax Act were involved?

Section 11,Section 12AA

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, ‘B’ (SMC

Before: SHRI MAHAVIR SINGH

Hearing: 20.06.2023Pronounced: 23.06.2023

आदेश /O R D E R This appeal by the assessee is arising out of the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi in Appeal No.NFAC/2017-18/10080818 dated 06.02.2023. The assessment was framed by the Addl/Joint /Deputy/Asst. Commissioner of Income Tax/Income-tax Officer, National e-Assessment Centre, Delhi for the assessment year 2018- 19 u/s.144 r.w.s. 143 r.w.s. 143(3A) & 143(3B) of the Income Tax Act, 1961 (hereinafter the ‘Act’) vide order dated 19.02.2021.

2.

At the outset, the ld.counsel for the assessee has not pursued the following Ground No.2 and hence, the same is dismissed as ‘not- pressed’.

1.

2. The learned CIT(A) erred in not considering the submissions filed by the appellant in proper perspective, besides not duly considering the decision by the SC reported in 329 CTR 137 with respect to “Activities Incidental to the main objects of the Trust”.

3.

The next issue on merits is as regards to the order of CIT(A) confirming the action of the AO in disallowing the claim of exemption on surplus income of Rs.3,19,173/- and taxing the total taxable income at Rs.3,55,373/- in regard to bus fee, uniform fee and interest etc. For this, assessee has raised following Ground No.3

3. While the gross receipts of the appellant for the impugned year was Rs.64,59,206/- consisting of term fees, book fees, bus fees, uniform fees and interest, term fees works out to 75 percent, while other receipts for activities incidental to the main object of the appellant trust, being education works out to 25 percent, the learned CIT(A) erred in not considering the same.

4.

I have heard rival contentions and gone through facts and circumstances of the case. The assessee trust is a charitable trust claiming exemption u/s.11 of the Act. Admittedly, the assessee’s trust was granted registration u/s.12AA of the Act by the CIT(E), Chennai vide UR No.AADTS7815G/05/16-17/T-0971 dated 17.08.2018. The main objects of the assessee trust as per the replies furnished and trust deed provided are to run and establish

- 3 - educational institution. The AO during the course of assessment proceedings noticed that the assessee has declared gross receipts on account of main object of the trust at Rs.48,11,650/- and a sum of Rs.16,03,040/- as receipts from incidental objects. The AO has not touched the receipts from main object of the trust i.e., education but he has not allowed the claim of exemption u/s.11 of the Act on the receipts from incidental objects i.e., Rs.16,03,040/- and accordingly, surplus arising out of the same was assessed as income of the trust by denying exemption and by computing the income as under:- Aggregate Income reflected : Rs.64,59,206/- Amount applied during the year : Rs.61,40,033/- Surplus Income : Rs.3,19,173/- Income from House Property : Rs.46,200/- Total Taxable Income : Rs.3,65,373/- Aggrieved, assessee preferred appeal before the CIT(A).

5.

The CIT(A) also confirmed the action of the AO by following the recent decision of Hon’ble Supreme Court in the case of New Noble Educational Society vs. CIT [2022] 143 taxmann.com 276 and by stating that providing uniforms, books or transport services to the students by the assessee trust are not its main objects and these been commercial in nature, he confirmed the action of the AO in assessing the surplus income from such activities, amounting to Rs.3,19,173/-. Aggrieved, now assessee is in appeal before me.

6.

After hearing both sides and going through the case records, I noticed that this issue is squarely covered by the decision of Hon’ble Supreme Court in the case of New Noble Educational Society, supra, and AO has rightly assessed the incidental business receipts ie., for providing books, uniforms and bus, i.e., net / surplus of Rs.3,19,173/-, I find no infirmity in the order of the AO or CIT(A) and hence, this issue of assessee’s appeal is dismissed.

7.

In the result, the appeal filed by the assessee is dismissed.

Order pronounced in the open court on 23rd June, 2023 at Chennai.

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