CT EDUCATIONAL SOCIETY,JALANDHAR vs. DCIT, CHANDIGARH

आयकर अपीलीय अिधकरण,चǷीगढ़ Ɋायपीठ “ए” , चǷीगढ़
IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “A”, CHANDIGARH

HEARING THROUGH: HYBRID MODE

ŵी लिलत कुमार, Ɋाियक सद˟ एवं ŵी कृणवȶ सहाय, लेखा सद˟
BEFORE: SHRI. LALIET KUMAR, JM &SHRI. KRINWANT SAHAY, AM

आयकर अपील सं./ ITA No. 396 /Chd/ 2024
िनधाŊरण वषŊ / Assessment Year : 2016-17

C T Educational Society,
Maqsudan, Greater Kailash,
Jalandhar, Punjab-144002
बनाम

The DCIT
Chandigarh
˕ायीलेखासं./PAN NO: AAATC4867F
अपीलाथŎ/Appellant
ŮȑथŎ/Respondent

िनधाŊįरती की ओरसे/Assessee by :
Shri Ashray Sarna, CA(Virtual Mode)
राजˢकी ओर से/ Revenue by :
Shri Manav Bansal, CIT, DR

सुनवाई की तारीख/Date of Hearing :
08/12/2025
उदघोषणा की तारीख/Date of Pronouncement : 10/12/2025

आदेश/Order

PER LALIET KUMAR, J.M:

The Assessee has preferred this appeal challenging the Order of the Ld.
CIT(A) / NFAC, Delhi, dated 19.02.2024, passed under Section 250 of the Income
Tax Act, 1961, for the Assessment Year 2016-17. 2. In the present appeal Assessee has raised the following grounds:
1. That the order passed by the Hon'ble CIT(A) dated 19'02'2024 is against the law and facts of the case.
2. That having regard to the facts and circumstances of the case Hon'ble
CIT(A) has erred in law and on facts in confirming the action of Ld AO in denying benefit of exemption u/s 11 of the-Act and assessing the trust as AOP and making an addition of Rs 10,20,01,948/-, without considering the facts of the case and without observing the principles of natural justice.
3. That having regard to the facts and circumstances of the case, Hon'ble
CIT(A) has erred in law and on facts in allowing the appeal for statistical purpose on the ground of addition made by Ld AO amounting to Rs. 10,61,466/- by disallowing interest 12% p.a ignoring the facts that these advances were made for purchase of property which is necessary for the attainment of object of society.

ASSTT. YEAR 2016-17

GROUND:3
That having regard to the facts and circumstances of the case, Hon’ble CIT(A) has erred in law and on facts in allowing the appeal for statistical purpose on the ground of addition made by Ld. AO amounting to Rs.10,61,466/- by disallowing interest 12% p.a ignoring the facts that these advances were made for purchase of property which is necessary for the attainment of object of society.

In this regard it is submitted that Hon’ble CIT(A) allowed this ground of appeal for statistical purpose for the reason that assessee submitted documents which were not filed with Ld. AO.
Sir, it is incorrect that assessee did not file documents with Ld. AO. In order to prove and justify this, the copy of notices issued by Ld. AO dated 19.11.2018 and its reply dated 23.11.2018 filed to Ld. AO is enclosed in paper book . this reply shows that each and every fact was before the Ld.AO and no new documents were filed during appellate proceedings. Even Hon’ble CIT(A) did not mention which documents were not filed during assessment proceedings which were filed during appellate proceedings.

Sir, during appellate proceedings assessee also submitted that similar addition considering advance as diversion of funds has been made by the LD. AO in the preceding year and Worthy CIT(A)-II, Jalandhar has deleted the addition made on this ground, copy of appellate order was filed during appellate proceedings.
Thereafter Department preferred appeal before Hon’ble ITAT Chandigarh which was decided in favour of assessee and revenue appeal was dismissed. The copy of Hon’ble ITAT Chandigarh order for AY 2015-16 and AY 2014-15 dated
04.10.2021 in ITA no.700/CHD/2019 and ITA no. 1135/CHD/2017 respectively are enclosed in paper book.
Thus, this ground may kindly be decided on merits and also following the decision of Hon’ble ITAT in the preceding years, addition made by Ld. AO may kindly be deleted.
GROUND:4

(a)That having regard to the facts and circumstances of the case, Hon’ble CIT(A) has erred in law and on facts in allowing the appeal for statistical purpose on the ground of addition made by Ld. AO amounting to Rs. 41,31,404/- on account of depreciation being restricted to the opening balance of assets.

(b) That having regard to the facts and circumstances of the case, Hon’ble
CIT(A) has erred in law and on facts in allowing the appeal for statistical purpose without considering the fact that all the documents w.r.t addition of fixed assets were filed during the assessment proceedings and Ld. AO completely ignored the documents filed before him.
In this regard it is submitted that Hon’ble CIT(A) allowed this ground of appeal for statistical purpose for the reason that assessee submitted documents which were not filed with Ld. AO.
Sir, it is incorrect that assessee did not file documents with Ld. AO. In order to prove and justify this, the copy of notices issued by Ld. AO dated 19.11.2018 and its reply dated 23.11.2018 filed to Ld. AO is enclosed in paper book .
Sir, assessee filed all the details through reply and email dated 23.11.2018 where it was specifically stated by the assessee as under:
“Respected madam, following are enclosed herewith

1)
Depreciation
/
addition chart of CT
Society,
Greater
Kailash,Maqsudan,Jalandhar
2) Ledger Accounts

3) Copy of bills

Madam, since bills of addition in fixed assets are voluminous only few bills are enclosed herewith.
Madam, if they all required by your good self then they can be at the time of personal hearing.”

Sir, it is submitted thatassessee filed the depreciation chart, all the ledger accounts of all the details as stated in the reply and bills in respect of addition to fixed assets. Sir, since it was voluminous data, assessee asked Ld. AO to provide the date when the entire documents/evidences could be produced, but Ld. AO failed to provide any opportunity and discharge his duty of replying to the assessee in this regard and providing a specific date for producing the relevant documents.
Sir, assessee participated in e-proceedings, then why Ld. AO is saying that no one appeared or did not produce any books of accounts. Then what is the purpose of e-proceedings.Further if any clarification or more complete bills were required, it should have been informed to the assessee rather than making adhoc, illogical and baseless addition.
Sir, Ld. AO on page 6 para 6 of assessment order states that “………nor it gave any justification w.r.t. reasonableness of payments made to specified persons…….”, Sir, it is submitted that Ld. AO has not pointed any instance or which payment Ld. AO is pointing towards or to which specified person any payment is being made. Further all assets purchased are utilized to achieve the objects of the society and no benefit has been derived by any other person than assessee society.
Thus, this ground may kindly be decided on merits and addition made by Ld. AO on account of disallowance of depreciation may kindly be deleted.
GROUND:2
That having regard to the facts and circumstances of the case, Hon’ble CIT(A) has erred in law and on facts in confirming the action of Ld. AO in denying benefit of exemption u/s 11 of the Act and assessing the trust as AOP and making an addition of Rs. Rs.10,20,01,948/-, without considering the facts of the case and without observing the principles of natural justice.
That the Ld. Assessing Officer disallowed exemption u/s 11 & 12 in para 17 page 9
of the assessment order, on the ground that assessee diverted funds by giving unjustified salaries as well as loans to specified persons and also while disallowing deduction all together Ld. AO ignored the principle of natural justice by disallowing exemption on the ground that assessee is selling books, stationery, uniform, swimming accessories and running student hostel which is incidental to main object of the society.

Sir, your attention is drawn to the fact that addition w.r.t. salaries have already been deleted by Hon’ble CIT(A) itself and issue of advances given to specified personshave already been resolved by Hon’ble ITAT Chandigarh for AY
2015-16 and AY 2014-15 vide order dated 04.10.2021 in ITA no.700/CHD/2019 and ITA no. 1135/CHD/2017 respectively. The copy of order is enclosed in paper book.
Sir it is submitted that the assessee society is running school and colleges at different places in the name & style of CT Group of Institutions. The assessee society is established to provide education to the society and impart knowledge in the field of science, commerce, computer, nursing, arts, sports, language and in the area of teaching & evaluation. Assessee society was established to impart education which itself a charitable purpose as defined in Section 2(15) of the Income Tax Act. The assessee society is affiliated with Central Board of Secondary
Education (CBSE), Punjab Technical University (PTU), All India Council of Technical
Education (AICTE), Council of Architecture. All of these are Governmental Bodies promoting and imparting education, and assessee society is affiliated and associated with them. All these facts prove beyond any doubt that assessee society is carrying educational activities without any profit motive. Any surplus, if any, arising in the hands of the society is fully utilized for achieving the objects of the society i.e. for provide education and impart knowledge in various fields.
Sir, it is submitted that Ld. AO on page 6 para 7 and para 8 of assessment order states as under:
“7. From the Income & Expenditure account of the assessee, it is observed that the assessee has earned huge income from fees under various heads such as tuition fee, admission fee, membership fee, annual charges, aluminee fee, hostel charges, conference charges, enrolment fee, interaction fee, annual charges, library admission fee, examination fee, laboratory admission fee, student activity fund, registration fee, uniform fee, affiliation fee, examination fee, other fee, sale of prospectus and admission forms, registration fee for workshops.
Besides, the assessee has received income from sale of books, stationery, uniform and swimming accessories, income from investments, interest income, transportation income and other misc. receipts. The assessee is showing total receipts of Rs. 56,99,41,359/-. It is noted that the assessee is charging fees under several heads other than the tuition fee and admission fee. The assessee has not submitted any proof to justify the huge amount of fee that it is collecting from students under different heads. Educational institutes are allowed to charge fee as tuition fee and admission fee. To charge any fee over and above that, the assessee has to justify what additional benefit it was giving its students for the same and how these funds were being used for the advancement of education.
In the present case, the assessee has failed to do the same. Therefore, huge fee collected under multiple heads created by the assessee itself is not justified.
8. Further, it is seen that the assessee is engaged in the selling of books, stationery, uniform and swimming accessories. Moreover, the assessee is running a hostel as it has hostel receipts. All these activities are in the nature of business.
The assessee has not proved if these business are incidental to the main object of the assessee. Also, the assessee has not produced books of accounts and has failed to show if it has maintained separate books of accounts w.r.t. these business. Therefore, even if the assessee claims that these business are incidental to the main object of running educational institutes, the assessee shall not to entitled to exemption u/s 11(4A) of the Act.”
Sir, it is submitted that Ld. AO considering the above observation disallowed the exemption u/s 11(4A) of the Act. In this regard it is submitted as under:
1. The assessee society is established to provide education to the society and impart knowledge in the field of science, commerce, computer, nursing, arts, sports, language and in the area of teaching & evaluation. Assessee society was established to impart education which itself a charitable purpose as defined in Section 2(15) of the Income Tax Act.
2. The assessee society is affiliated with Central Board of Secondary
Education (CBSE), Punjab Technical University (PTU), All India Council of Technical

Education (AICTE), Council of Architecture and many other recognized bodies.
Copy of affiliations were filed during assessment and appellate proceedings. All of these are Governmental Bodies promoting and imparting education, and assessee society is affiliated and associated with them. Sir, it is submitted that one gets affiliated to these bodies only once it is proved that a society is imparting education without any profit motive.
3. That assessee had receipts during the year under various heads. All the heads as stated by Ld. AO are related to activity of education provided by the assessee and are incidental to it. The facilities are provided and money is received from the students who are studying in the institute.The assessee is providing education and is charging for the services provided to the students. The amount charged is not the commercial rates but as per the uniform practice in the education department.
Also separate books along with proper documentation/evidences are maintained for each amount received under different heads.It is pertinent to mention that receipts under these heads are applied for the benefit of the society and for achieving the objects of the society.
4. That it is not the first year in which assessee is charging under multiple heads. Assessee society had receipts under different heads since its inception and the same are accepted by the department every year because these amount charged are directly related to activity of education provided by the assessee.
5. That for the AY 2006-07 assessee society was denied exemption claimed u/s 11 of the Act on the similar instances as the basis on which exemption is denied in the current year. The Hon’ble ITAT Amritsar in ITA No. 537/ASR/2009
decided the appeal in favour of the assessee society and allowed the exemption claimed u/s 11 of the Actwhich included the amount charged by assessee society under different heads considering these amount related to activity of education provided by the assessee and are incidental to it, thereby holding the assessee society as a charitable trust imparting education.The copy of ITAT
Amritsar Order for the AY 2006-07 is enclosed herewith in paper book. The copies of previous years assessment orders are also enclosed herewith in paper book reflecting no such disallowance being made in the previous years.
6. That amount charged by the assessee society under multiple heads is not at all excessive as stated by the Ld. AO. The amount charged is reasonable, rational and is as per the uniform practice in the education department and the same is charged since long and the same stands accepted by the department.The copy of ledger accounts of multiple heads under which amount charged by the assessee society were filed before lower authorities. Also opening and closing stock details for books, stationary, uniform etc. including purchase and sale details were filed before lower authorities.

formed wholly and solely for the benefit of the students studying in the institutes running under the society. So it is beyond any doubt that the benefit arising of the amount received is utilized for the benefit of the society and for achieving its objects.
8. That Ld. AO states that “….how these funds were being used for the advancement of education…” in this regard it is stated that there are 20
Institutions and assessee society is still expanding in the remote areas where education is not accessible to children.Assessee society is fully determined/focused to its objects and spending its each penny for the benefit of the society and for imparting education. Except from imparting education no other activity is carried by the society. So this proves beyond any doubt that funds are being used for the advancement of education.
9. That the assessee is engaged in the selling of books, stationery, uniform and swimming accessories to its students. The assessee is running a hostel providing accommodation facilities to its students and also providing transport facilities to its students. Ld. AO states that “…….Further, it is seen that the assessee is engaged in the selling of books, stationery, uniform and swimming accessories.
Moreover, the assessee is running a hostel as it has hostel receipts. All these activities are in the nature of business. The assessee has not proved if these business are incidental to the main object of the assessee. Also, the assessee has not produced books of accounts and has failed to show if it has maintained separate books of accounts w.r.t. these business. Therefore, even if the assessee claims that these business are incidental to the main object of running educational institutes, the assessee shall not to entitled to exemption u/s 11(4A) of the Act………” in this regard it is submitted as under:-

A.
That all these facilities are for the students only, who are studying in the institutes run by the assessee society and these facilities are given as an integral part of the assessee society required to achieve the objects of the society. Also separate books of account are maintained by such trust or institution in respect of each such facility. These facilities cannot be availed by the public at large at their will.The copies of all the ledger accounts of all the facilities provided by the assessee society before lower authorities.The copy of notices issued by Ld. AO dated 19.11.2018 and its reply dated 23.11.2018 filed to Ld. AO is enclosed in paper book .
B.
That Hon’ble CIT(A) in para 5.3 page 36 of the Appellate Order stated that “The appellant was asked specifically whether they maintain separate books of account, but they did not reply in affirmative nor they produced the same before the ld AO. However, before me claimed that they have maintained separate books of accounts for the same. Thus, the ld AO had no occasion to verify the same and now producing the same before is an additional evidence without submitting any application under rule 46A of the I.T.Rule 1962 cannot be accepted.” In this regard it is stated that the copy of notices issued by Ld. AO dated 19.11.2018 and its reply dated 23.11.2018 filed to Ld. AO is enclosed in paper book which shows that assessee duly submitted that proper ledgers are maintained and were filed also.
C.
That the hostel/transport facility and selling books/stationary & other essential commodities 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.
D.
That the college/institute running under the society gives admission from far off places/towns with hostel and transport facilities available in the campus.
Since the college is located on the outskirts of the town where regular transport is 10

not available, it is for this reason that this facility is provided so as to fulfill the objective of the society to provide education to the students. Further selling books/stationary & other essential commodities is essential for the society so that everything is easily available to the students at their door steps.
E.
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.
F.
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.
G.
That these facilities were provided only to those students who were studying in Institute and were interested to avail the facility. There is no compulsion/pressure on the students to avail such facilities from the assessee society. Students can commute through their own vehicles, stay wherever they want to and purchase books etc. from any vendor they want to.
H.
The there is nothing material evidence on record to show that the society acted in a manner with a motive to earn profit out of the transport or hostel facility provided to its students or by selling books/stationary & other essential commodities.
I.
That the hostel and transport facilities and selling books/stationary etc 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.
J.
That 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, selling books/stationary etc. is so that everything is easily available to the students at their door steps, it has to be construed as essentially related to the realization of the primary charitable objective of education itself.
K.
That the facilities provided to the students in the form of hostel/transport/tuck shop is an a integral part of imparting education, however, even for argument sake 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.
L.
That the latest legal developments too is to be considered where in the recently introduced new legislation of Goods and service tax it is provided that no GST would be chargeable on the hostel fees etc. recovered from the students, faculties and other staff for lodging and boarding as they are engaged in education activities. Therefore, transport and hostel facilities surplus, tuck shop surplus cannot be considered as business income of the assessee society as these activities are subservient to the main object of education of the trust.
M.
That Hon’ble CIT(A) has relied on the decision of ACIT(Exemptions) v/s
Ahmedabad Urban Development and thereafter confirmed addition in the hands of assessee whereas the ratio of this decision is not applicable in the present case as assessee society is not undertaking any commercial activity.All these facilities are for the students only, who are studying in the institutes run by the assessee society and these facilities are given as an integral part of the assessee society required to achieve the objects of the society. Also separate books of account are maintained by such trust or institution in respect of each such facility. These facilities cannot be availed by the public at large at their will.

N.
That Ld. AO is stating that documents were not filed which is incorrect as all the documents filed during assessment proceedings but Ld. AO did not consider them. Thus the entire addition is based on incorrect facts.
O.
That your attention is drawn to the fact that assessment proceedings were initiated for the AY 2022-23 in which one of the reasons was “Large receipts from incidental objects” and this issue was decided on favour of assessee on 22.03.2024. The relevant part of order reproduced in page 6 of assessment order is as under:

“From ITR Sch AI it appears that the assessee has declared receipts from incidental objects amounting to Rs 10,03,59,979 for which no details were furnished . A show cause notice dated 09/03/2024 was issued to furnish the details of such receipts and how the same is utilized for attainment of the objective of the trust and as to why the exemption will be allowed for failure to submit proper justification/documents in support of its claim. The assessee was required to reply by 11/03/2024. In response to show cause notice assessee submits its reply giving details of suchreceipts along with ledger and also expenditures incurred with ledger uploaded through portal The assessee has also given justification for utilization of such receipts for attainment of the objective of the trust which has been perused along with the documents furnished.”

Thus, this issue is already decided on favour of assessee for AY 2022-23. Therefore, it is requested that exemption u/s 11 & 12 may kindly be restored for year under consideration also.

Sir, further your kind attention is drawn to section 11(4A) of Income Tax Act which states as under:

“(4A) 6 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.]”

Sir, it is submitted that providing of hostel facilities and transport facilities to the student and staff member of the educational Institute, running tuck shop cannot be considered as business activity but is subservient to the object of educational activities performed by the society. Further separate books of account are maintained by such trust or institution in respect of such activity. Thus receipts from these facilities are eligible for exemption u/s 11 & 12 of the Act.The copies of all the ledger accounts of all the facilities provided by the assessee society were provided before lower authorities.
CIT in ITA No. 4639/Del/2015 for AY 2011-12 dated 15.09.2017, in which a similar question had arisen. Vide para No.11, Tribunal held that transport and hostel facility surplus cannot be considered as business income of the society as these activities are incidental to the main object of the assessee society of education.
Relevant observations on this aspect are as under:-

"11. We have carefully 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 Rs. 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 educational Institute cannot be considered as business activity but is subservient to the object of educational activities performed by the society.
We are also supported by our view by the decision of the Hon'ble Allahabad High
Court in IIT versus State of UP, (1976) 38 STC 428 (All) wherein question arose in Indian Institute of Technology v. State of U.P. (1976) 38 STC 428 (All) with respect to the visitors' hostel maintained by the Indian Institute of Technology where lodging and boarding facilities were provided to persons who would come to the Institute in connection with education and the academic activities of the Institute. It was observed that the statutory obligation of maintenance of the hostel, which involved supply, and sale of food was an integral part of the objects of the Institute nor could the running of the hostel be treated as the principal activity of the Institute. The Institute could not be held to be doing business. Further meals being supplied in a hostel to the scholars, visitors, guest faculty etc. can not be exigible to sales tax where main activity is academics as held in Scholars home
Senior Secondary School 42 VST 530. Further, the reliance placed by the lower authorities on the decision of the Hon'ble Madras High Court in case of DCIT versus Wellington charitable trust is also misplaced because in that case, the only activity of that particular trust was renting out of the property and not education.
We are also not averse to considering the latest legal developments too where in the recently introduced new legislation of Goods and service tax it is provided that no GST would be chargeable on the hostel fees etc recovered from the Students, faculties and other staff for lodging and boarding as they are engaged in education activities. Therefore we reverse the finding of the lower authorities and held that transport and hostel facilities surplus cannot be considered as business income of the assessee society which is mainly engaged in business activities and these activities are subservient to the main object of education of the trust.
Sir, it is submitted that Ld.AO has placed reliance on the decision of ITAT Delhi
Bench Decision in the case of Daya Nand Pushpa Devi Charitable Trust v/s ACIT in which it was held that assessee is not entitled to exemption u/s 11(4A) where running of Hostel activities is incidental to the main activity of imparting education and no separate books of accounts for hostel activities were undertaken by the assessee.
Sir, the facts of the present case are entirely different from the facts of the aforesaid case, as in the present case assessee is maintaining separate books of accounts for all the activities undertaken by it and amount so generated from these activities are utilized for the benefit of the society and for achieving the 13

objects of the society and were filed vide reply dated 23.11.2018 in response to notice dated 19.11.2018

Sir, reliance is further placed on the following decisions:-

Delhi Public School Ghaziabad Society v/s ACIT, Delhi ITAT, (2018) 53 CCH 0703
DelTrib in which it was held as under:

Charitable Trusts—Business income of Trust—Incidental to object of Trust—
Assessee filed return of income which was selected for scrutiny—During assessment proceeding, AO noted that surpluses generated from running of transport business were neither distributed among students nor was reduced from fee of next year—Institution could run without transport facility, education fee structure was different from transport fee structure—Thus, AO made disallowance on account of assessee’s activity which amounted a business as per proviso to s.
2(15) and thus, assessee was not entitled for exemption u/s 11(4A)—AO also disallowed assessee’s claim on account of depreciation—No relief was granted by CIT(A)—Held, it was not Revenue’s case that transport facility was also provided to outsider—Providing hostel to students and staff working for society was incidental to achieve object of providing education and i.e., object of society—Therefore, transport activities of assessee were not in nature of business, inasmuch as transport was also incidental to attainment of main object of trust of education—Therefore, provisions of s. 11(4A) would not be applicable—
Assessee’s appeal allowed.

M/S. Ideal Education Society v/s ACIT, dated 12 June, 2019, ITA No.
3550/Del/2015, Delhi ITAT in which it was held under:-
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 the society. Therefore, in view of the above decision of the Hon'ble
Karnataka High Court as well as the decision of a coordinate bench of this Tribunal in ITA No. 4639/Del/2015, we are of the view that the transport activities of the assessee trust are not in the nature of business, inasmuch as the transport is also incidental to the attainment of the main object of the trust of the education.
Therefore, the provisions of section 11(4A) of the Act do not apply to the assessee. With this view of the matter, we allow the grounds of appeal.
14. In the result, the appeal of the assessee is allowed."
Society for Educational Excellence v/s DCIT, Delhi ITAT, (2018) 52 CCH 0197 DelTrib in which it was held as under:

Charitable trusts—Income from property held for charitable or religious purposes—Addition—Validity—Assessee challenged order of CIT (A) confirming additions made by AO holding that hostel/ mess facility for students was separate business activity in terms of section 11(4A)—CIT (A) confirmed additions considering alleged surplus as business income in hand of assessee—Assessee prayed that hostel was integral part of business and income generated from hostel was exempted u/s 11—Held, provision of section 11(4A) to (3A) should not apply in relation to any income of trust being profits and gains of business unless business was incidental to attainment of objectives of trust and separate books of accounts were maintained in respect of such business—It was not case of revenue that hostel was rented out to outsider or transport facility was also provided to outsider—Providing hostel to students and staff working for society was incidental to achieve object of providing education and i.e. object of society—Hostel and transport activities of assessee trust were not in nature of business—Activity of hostel and transport was also incidental to attainment of main object of trust of education—Therefore, provisions of section 11(4A) did not apply to assessee—It could not be said that by running hostels or transport facility for student its educational activities was separate business altogether—AO directed to grant assessee benefit of section 11 and 12 with respect to all income of trust including hostel and transportation receipts—Assessee’s ground allowed.

Reliance is further placed on the decision of Hon’ble Apex Court in the case of Queen Educational Society v/s CIT, (2015) 275 CTR (SC) 449 : (2015) 117 DTR (SC) 1
: (2015) 372 ITR 699 (SC) : (2015) 231 Taxman 286 (SC) in which it was held as under:
Exemption under ss. 10(23C)(iiiad) and 10(23C)(vi)—Educational institution—Profit motive—Where an educational institution carries on the activity of education primarily for educating persons, the fact that it makes a surplus does not lead to the conclusion that it has ceased to exist solely for educational purposes and has become an institution for the purpose of making profit—In such case, the predominant object test must be applied—A distinction must be drawn between making of a surplus and the object of carrying on the institution "for profit"—
Merely because imparting of education results in making a profit, no inference arises that it has become an activity for profit—Ultimate test is whether on an overall view of the matter in the relevant assessment year the object is to make profit as opposed to educating persons—When a surplus is ploughed back for educational purposes, the educational institution exists solely for educational purposes and not for purposes of profit—13th proviso to s. 10(23C) is of great importance in that assessing authorities must continuously monitor from assessment year to assessment year whether such institutions continue to apply their income and invest or deposit their funds in accordance with the law laid down
Sir, in the present case also surplus is ploughed back for educational purposes, which proves the fact that the educational institution exists solely for educational purposes and not for purposes of profit. Where an educational institution carries on the activity of education primarily for educating persons, the fact that it makes a surplus does not lead to the conclusion that it has ceased to exist solely for educational purposes and has become an institution for the purpose of making profit. Merely because imparting of education results in making a profit, no inference arises that it has become an activity for profit.
Reliance is further placed on the decision of Hon’ble Punjab & Haryana High
Court in the case of Pinegrove International Charitable Trust V/s Union of India
&Ors(2010) 327 ITR 73 (P&H) : (2010) 230 CTR (P&H) 477 : (2010) 188 TAXMAN 402
(P&H) : (2010) 37 DTR (P&H) 105 in which it was held as under:
Exemption under s. 10(23C)(vi)—Educational institution, university, etc.—Profit motive—Assessee society’s application of income is undisputedly more than 100
per cent for the attainment and achievement of its objects in the last three years—Therefore, by no stretch of imagination it could by to be an educational institution existing for the purposes of making profit so as to be not entitled to exemption in under s. 10(23C)(vi)—Chief CIT failed to keep in view the third proviso while wrongly holding that since the substantial profits are being earned year after year it could not be said that the surplus is arising incidentally and, therefore, the society was not entitled to exemption
Reliance is further placed on the decision of Hon’ble Amritsar Bench in the case of Lord Shiva Educational Welfare Society v/s CIT, (2018) 172 ITD 429 (Asr)in which it was held as under:
Charitable trust—Registration under s. 12AA—Validity of refusal—Profit-making per se cannot be regarded as detrimental as long as it feeds a charitable purpose (of education)—Assessee running a school as a franchise of corporate entity "Zee
Learn Limited", and registration under s. 12AA having been rejected by CIT(E) on ground that assessee, as franchise of corporate entity was carrying on business for profit; matter remanded to CIT(E) to allow the assessee an opportunity to exhibit its’ activities as being undertaken toward and in satisfaction of its stated object/s, which no doubt constitute a charitable purpose under the Act

Reliance is placed on the decision of Karnataka High Court in the case of CIT v/s
Karnataka Lingavat Educational Society (2015) 126 DTR (Kar) 122 : (2015) 371 ITR
249 (Kar) in which it was held that - Charitable trust—Registration under s. 12A—
Cancellation under s. 12AA(3)—Donations received by assessee could not be construed as capitation fee for admission—Providing hostel facility to students/staff was incidental to the object of education of assessee—Though the chairman and few members of assessee society were chairman and members of KLE University, they are separate legal entities—There was no violation of the provision of IT Act—Tribunal rightly restored registration of assessee cancelled by CIT under s. 12AA(3)
Thus considering the above submissions and case laws cited above it is requested that benefit of exemption u/s 11 of the Act may kindly be allowed and assessee be considered as Trust and not AOP.
6.1
Ld. AR argued that the findings of the AO and Ld. CIT(A) were without basis, as they failed to record the correct facts. It was submitted that the Assessee had filed a reply to the Show Cause Notice dated 19.11.2018 on 23.11.2018, providing details and producing documents and for that he had drawn our attention to pages 42 to 45 of the paper book which are to the following effect:
To Deputy Commissioner of Income Tax,

Circle-I(Exemptions),

Chandigarh

SUB:
ASSESSMENT PROCEEDINGS IN THE CASE OF M/S CT EDUCATIONAL
SOCIETY, GREATER KAILASH, MAQSUDAN, JALANDHAR FOR THE ASSTT YEAR 2016-
17. PAN: AAATC-4867-F
Madam,

In response to notice no/ ITBA/AST/F/142(1)/2018-19/1013692171(1) dated
19.11.2018, para wise reply is submitted as follows:
1. Madam, the assessee society is running school and colleges at different places in the name & style of CT Group of Institutions. The assessee society is established to provide education to the society and impart knowledge in the field of science, commerce, computer, nursing, arts, sports, language and in the area of teaching & evaluation. Assessee society was established to impart education which itself an charitable purpose as defined in Section 2(15) of the Income Tax Act.The assessee society is affiliated with Central Board of Secondary
Education (CBSE), Punjab Technical University (PTU), All India Council of Technical
Education (AICTE), Council of Architecture. All of these are Governmental Bodies promoting and imparting education, and assessee society is affiliated and associated with them. All these facts prove beyond any doubt that assessee society is carrying educational activities without any profit motive.Any surplus, if any, arising in the hands of the society is fully utilized for achieving the objects of the society i.e. for provide education and impart knowledge in various fields.

The detail of salary paid to specified persons are as under:-

S. Charanjit Singh is a Chairman: He drewsalary of Rs. 3,60,000/-. He is handling all the day to day affair of the colleges and trust. He is highly experienced to perform his duties. All his timings and energy had been utilized for trust and its colleges having total receipts of more than 50 Crores of rupees. The salary paid is lesser than the market rates prevailing at that time for person of his experience.
He looks after all the matters related to the trust like financial matters and administration matters related to the colleges and institutions of the trust. The amount of salary paid to him is fully justified.

S. Manbir Singh is a General Secretary: He drew salary of Rs. 3,60,000/-. He is handling all the day to day affair of the colleges and trust. He is primary responsible for Financial matters of the colleges and the Trust. He is highly experienced and qualified to perform his duties. All his timings and energy had been utilized for trust and its colleges having total receipts of more than 50 Crores of rupees. The salary paid is lesser than the market rates prevailing at that time for person of his experience. The amount of salary paid to him is fully justified.

Smt. Parminder Kaur is a President: no salary was paid by the trust during the year.

S. Harpreet Singh is a Vice-Chairman: He drew salaryof Rs. 2,48,000/-.He looks after the infrastructure of the colleges and institutions. He has to take all decisions related to construction of building. There are around 20 colleges and institutions run by the trust and he looks after the infrastructure development of all the institutions. The amount of salary paid to him is for the services renedered by him for the society and its colleges. The salary paid is lesser than the market rates prevailing at that time for person of his experience. The amount of salary paid to him is fully justified.

S. Jasraj Singh is an Executive Member: He drewsalary of Rs. 3,84,000/-. He is engaged in supervision of all the schools, colleges and institutions run by the society. There are around 20 colleges, schools and institutions being run by the 17

trust. The salary paid is lesser than the market rates prevailing at that time for person of his experience. The amount of salary paid to him is fully justified.

S. Harvinder Singh is a Joint Secretary: He drew salary of Rs. 5,80,000/- . He is highly qualified and having sufficient knowledge relating to legal matters. He personally looks after legal matters relating to all colleges, institutions and schools run by the society. There are around 20 colleges, schools and institutions being run by the society. The salary paid is lesser than the market rates prevailing at that time for person of his experience and qualification. The amount of salary paid to him is fully justified.

Seerat Kaur is an Executive members: No salary paid to her by the trust. She undertakes supervision of girls hostel and take all decisions relating to the hostels.
The salary paid is lesser than the market rates prevailing at that time for person of his experience. The amount of salary paid to him is fully justified.

Tanika is a Treasurer: She drew salary of Rs.1,70,000/-. She had supervision of girls hostel and taking all decisions relating to the hostels. The salary paid is lesser than the market rates prevailing at that time for person of his experience. The amount of salary paid to him is fully justified

The payment is made for the services given by the respective trustees as per the prevailing market rates and no undue advantage has been paid to specified persons. The payments have been made for the services given by the respective persons to the trust or schools and colleges run by the trust. The recipients are fully capable and have the qualifications along with experience in the respective fields.
Madam, the remuneration paid to the persons specified under section 13(3) also does not seems to be unjustifiable as percentage of remuneration to members against the total revenue of the society is negligible and is paid for the services rendered by them towards achieving the object and goals of the society in the smooth and effective manner. Further, there are many employees in the society who are getting much higher salaries than these persons according to their professional skill and academic qualification. The tabular chart showing the percentage of salaries paid to specified persons is given below for your kind consideration:

PARTICULARS
A.Y 2015-16
A.Y 2016-17
Gross Receipts
59,44,09,380/-
56,99,41,358/-
Total Expenditures
45,47,37,911/-
46,79,39,410/-
Total Salaries
19,47,55,895/-
20,43,00,381/-
Salaries to Specified Persons
39,38,500/-
21,02,000/-
%age against Total Revenue
0.66%
0.37%
%age against
Total
Expenditure
0.87%
0.45%
%age against Total Salaries
2.02%
1.03%

From the above chart, it can be clearly analyzed that the amount of remuneration paid to six members of the society is on the very low side and quite reasonable keeping in view the volume and work involved in running almost twenty institutions under one umbrella of society. More so the salary paid in the year under consideration is far less than the salary paid in the previous year. The 18

remuneration received by the members is duly reflected in their respective ITR and due taxes are paid.

Madam, from the above stated facts and evidences placed on record it is quite clear that the salary paid in the current year is reasonable and further proves that no funds have been diverted to persons specified u/s 13(3) of the Act.
3. That as regard to query raised regarding advances given to persons covered u/s 13(3) of the I.T Act., it is submitted that asseessee society has given advance against purchase of property. The detail of advances given to persons covered u/s 13(3) is given below:

Name
Amount
Remarks
Parminder
Kaur
Rs.7,05,15,000/-
Assessee society has given advance against property situated at Greater
Kailash, Maqsudan, Jalandhar. Assessee society has duly deducted tax @ 1% on the said amount The sale was executed on06.06.2017
for a total sale consideration of Rs. 9,60,00,000/-, copy of ledger account of Smt. Parminder
Kaur, copy of agreement executed, copy of TDS receipt and Form 26QB are enclosed herewith.

Madam, it is to state that these advances are made for the purchase of Lands on which educational activities are carried on by the society. The main aim of assessee society is to provide education and to obtain its objective assessee society is running educational institutions at different places in the name & style of CT Group of Institutions.

Madam, from the past few years assessee society was in process of expansion and for the expansion and development of existing & new institutions society required land, which management of society decides to acquire from the members. In course of land purchase assessee society has paid advance to members according to the availability of funds with the society during the each year and executed full and final agreement in the year of final payment. The property has been purchased at the market rate and no direct & indirect benefit has been transferred to the members. The amount of consideration paid in parts as advance does not amount to providing any benefit to the members.
Moreover, society has not taken any loan from the bank so the funds have utilized as per the availability. Further it is submitted that there is no bar that the payment for purchase of property has to be paid one time only.

It is stated that assessee shown advances to its member because assessee made payment in parts for purchase of land and it cannot be the part of corpus/capital, if it is paid to any person other than member of assessee society than it also be stand as advances for purchase of property. Assessee society has not violated any provision of law. Assessee society made payment as per its convenient and which resulted in getting the property in its favour.
It is incorrect to state that assessee society provided undue benefit to its members and made payment without any interest or security and object. Assessee society made payment for purchase of property and it is purchased for attainment of its 19

object to provide better education to public at large which is the main object of the society.
Madam, it is submitted that assessee society purchased 160 marlas (8 Kanals) of land situated at Greater Kailash, MaqsudanKhasra No. 32515/16543/246,
32516/251, 32517/247, 32518/247, 32519/279, 32520/280, 32522/354, 32521/314,
32523/354, 32524/340, 32525/377, 32526/347, 244, 245. Initially the society was situated at Greater kailash, MaqsudanKhasra no.32515/16543/246, 32516/251,
32517/247, 32518/247, 32519/279, 32520/280, 32522/354, 32521/314, 32523/354,
32524/340, 32525/377, 32526/347, 244, 245.Therefore, the land acquired by the society was adjacent to the area where society is actually situated. The society from the past few years was in process of expansion and for the expansion and development of existing & new institutions society required adjacent land, which management of society decides to acquire and this land happens to be the land in the name of the trustees. Thus, because of this reason assessee society purchased land from the trustees. Madam if such land was owned by some third person, then also assessee society would have purchased this land because this was required for the expansion of the society.
Madam, this land acquired by the assessee society is presently utilized for the benefit of the society. Assessee society is running its B. ED College, affiliated with GNDU University, Amritsar on this the land acquired from Sh. Harpreet Singh, Sh.
Manbir
Singh,
Smt,
Parminder
Kaur.Assessee society had surplus of Rs.43,13,423.86/- from this particular college and this has been included in the consolidated balance sheet of the assessee society.A copy of Location Site Plan along with its Satellite viewis enclosed herewith which shows entire area CT
Educational Society, wherein B. ED Block area belonging to Sh. Harpreet Singh,
Sh. Manbir Singh, Smt, Parminder Kauris also shown, which proves that this land is adjacent to the CT Educational Society area and this area is utilized for the benefit of the society is enclosed herewith.A copy of screenshot of entire campus of assessee society showing the pictures of the assessee society along with its B.
ED Block which is constructed on the land belonging to Sh. Harpreet Singh, Sh.
Manbir Singh, Smt, Parminder Kaurfor which assessee society has given advance is enclosed herewith..A copy of detail of Area, Khasra Nos., ownership showing the Khasra Number of the land belonging to CT Educational Society is the same as Khasra Number belonging to Parminder Kauralon with the copy of Fard jamabandi is enclosed herewith.
All these facts stated above proves the fact that assessee society purchased land adjacent to its own land, from Sh. Parminder Kaur for the benefit of society and for expansion of the assessee society and the land purchased is actually utilized for the benefit of the society because assessee society’s B. ED College Wing is situated on this land.
4. That as regards to the proof of additions to fixed assets, it is submitted that the bills are voluminous, so they are separately mailed to your registered ID dcit.exemption1@gmail.com.
5. That the assessee society while computing utilization, has not considered depreciation debited in Profit & Loss account. The chart showing Gross receipts and utilization of funds (Form 10B) is enclosed herewith.

Madam, the amount of depreciation of Rs. 6,93,68,150/- was not included while calculating utilization of amount on account of revenue expenditure and capital expenditure. Moreover, assessee society has utilized more funds then the 20

receipts of the society so it is therefore requested that no adverse inference may kindly be drawn against assessee society.

Kindly entertain the submission of assesssee and convey if any further information is required.

AO, the CIT(A) allowed the ground for statistical purpose, directing the AO to verify the documents.
15. We have heard the rival contention of the parties and perused the material on record. As the factual matrix leading to the disallowance was the Assessee's non-filing of proofs, and the documents have now been filed, the CIT(A)'s direction to the AO to verify instead of an outright deletion is just and proper. The Assessee is bound to cooperate with the AO to verify that the land was purchased at market rate and that no interest-bearing loan was used, as claimed.
16. Accordingly, Ground No. 3 is dismissed, confirming the direction of the Ld.
CIT(A) to the AO for verification of the respective claim.
17. Now coming to Ground No. 4 regarding Restriction of Depreciation of Rs.
41,31,404/-.
17.1 The AO restricted the depreciation to the opening balance of assets, leading to an addition of Rs. 41,31,404/-, because the Assessee failed to submit satisfactory proof for the additions to fixed assets, as noted in Para 10 of the Assessment Order.
18. The Ld. CIT(A), in Para 5.11, acknowledged the Assessee's failure to produce documents before the AO but, for the sake of natural justice, restored the issue to the AO for verification of the subsequently filed evidence.
19. We have heard the rival contention of the parties and perused the material on record. As the underlying reason for the addition was procedural non-compliance leading to a lack of verification, and not a substantive disallowance after examination, the direction of the Ld. CIT(A) to allow the ground for statistical purposes is warranted to enable the AO to verify the correctness of the fixed asset additions and corresponding depreciation claim.
Therefore we do not find any reason to interfere in the finding of the Ld. CIT(A).

No other ground or arguments have been addressed during the course of the hearing, and therefore, we have not adjudicated the same. If there is any other legal argument the same shall be considered by the Assessing Officer pursuant to our direction and also in accordance with the direction of the Ld. CIT(A).
20. In the result, the appeal filed by the Assessee is Partly Allowed for Statistical Purposes as per the directions above. The matter is remanded back to the file of the Assessing Officer for fresh adjudication subject to the payment of the cost of Rs. 50,000/-.
Order pronounced in the open Court on 10/12/2025 कृणवȶ सहाय

लिलत कुमार
(KRINWANT SAHAY)

(LALIET KUMAR)
लेखा सद˟/ ACCOUNTANT MEMBER
Ɋाियक सद˟/JUDICIAL MEMBER

AG

आदेशकीŮितिलिपअŤेिषत/ Copy of the order forwarded to :

आदेशानुसार/ By order,
सहायकपंजीकार/