Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, DELHI BENCHES “B”: DELHI
Before: SHRI BHAVNESH SAINI & SHRI N.K. BILLAIYA
PER BHAVNESH SAINI, J.M.
Both the cross-appeals are directed against the different Orders of the Ld. CIT(A), Ghaziabad, Dated 23.03.2015, for the A.Y. 2010-2011.
We have heard the Learned Representatives of both the parties and perused the Orders of the authorities below.
Briefly the facts of the case are that assessee society is registered with the Registrar of Societies, U.P. and has also been granted Registration under section 12AA of the I.T. Act, 1961. Presently, the assessee society is running Educational Institution in the name & style "Graduate School of Business & Administration at Greater Noida”. The institute is running PGDM courses. The assessee filed return of income declaring NIL income claiming exemption under section 11 of the I.T. Act, 1961. The A.O. disallowed claim of depreciation of Rs.1,41,86,961/- considering it to be double deduction/notional application because
3 ITA.No.5466 & 3666/Del./2015 Graduate School of Busines Administration Society, Ghaziabad. acquisition of asset is taken as applicable for charitable purposes, the value of the assets stands written-off fully and therefore, no depreciation is allowable. The A.O. further noted that assessee has surplus out of hostel which was considered as business income under section 11(4A) of the I.T. Act. The A.O. accordingly noted that assessee has not maintained separate books of account for hostel business, therefore, surplus on account of hostel receipt at Rs.53,10,000/- was treated as income from business and profession and addition of the same was made.
3. The Ld. CIT(A) confirmed the addition on account of claim of depreciation. The Ld. CIT(A) in principle also confirmed the addition on account of surplus arising out of the hostel business, but, allowed certain deductions of the expenditure. The addition was, therefore, sustained of Rs.24,98,275/- and balance addition of Rs.25,24,959/- was deleted.
Both the parties are in appeal on separate grounds of appeals. The appeals are decided as under :
4 ITA.No.5466 & 3666/Del./2015 Graduate School of Busines Administration Society, Ghaziabad. ITA.No.5466/Del./2015 – (Assessee’s Appeal) :
On Ground Nos. 1 to 4, assessee challenged the Orders of the authorities below in confirming the disallowance of depreciation of Rs.1,41,86,961/-. Learned Counsel for the Assessee submitted that issue is covered by the Judgment of the Hon’ble Supreme Court in the case of CIT vs. Rajasthan and Gujarat Charitable Foundation 402 ITR 441 (SC).
On the other hand, Ld. D.R. relied upon the Orders of the authorities below and submitted that since the acquisition of asset is taken as application for charitable purposes, therefore, claim of depreciation would amount to double deduction.
After considering the rival submissions, we are of the view that issue is covered in favour of the assessee by the Judgment of the Hon’ble Supreme Court in the case of CIT vs. Rajasthan and Gujarat Charitable Foundation (supra), in which it was held that “the assessee is entitled to depreciation under section 32 of the I.T. Act on assets whose
5 ITA.No.5466 & 3666/Del./2015 Graduate School of Busines Administration Society, Ghaziabad. cost has been allowed as application to charitable purposes under section 11(1)(a) of the I.T. Act”. We may also note that the Amendment in Section 11(6) of the I.T. Act has been brought by Finance Act, 2014, which becomes effective from A.Y. 2015-2016. Therefore, it is not applicable to assessment year under appeal i.e., 2010-2011. In view of the above, we set aside the Orders of the authorities below and delete the addition on account of depreciation. These grounds of appeals of the assessee are allowed.
8. On Ground Nos. 5 and 6, the assessee challenged the addition of Rs.24,98,271/-. Learned Counsel for the Assessee reiterated the submissions made before the authorities below. He has submitted that hostel/ transportation is composite activity of the main object of the society. It is not separate and cannot be treated as business. The maintenance of the books of account is thus, not mandatory. The assessee carried on only educational activities. The maintaining of hostel is as per AICTE guidelines. The assessee charged reasonable rate as compared to other Institutes for hostel purposes, details of 6 ITA.No.5466 & 3666/Del./2015 Graduate School of Busines Administration Society, Ghaziabad. which are mentioned in the written submissions reproduced in the appellate order. The assessee has been providing hostel facility to its students for the last 10 years and the assessment of the assessee has been made under section 143(3) and hostel activity was never treated as business activity. Providing of hostel facility to the students is incidental to the attainment of the objectives of the Assessee-Institution, therefore, income is exempt. There is no necessity for assessee to maintain separate books of account. The A.O. forgot to note that education by itself is a charitable activity, which cannot be treated as business activities. In his written submissions, he has relied upon the decisions of the ITAT, Delhi G-Bench, Delhi in the case of Society for Educational Excellence, Ghaziabad. vs. DCIT, Central Circle, Ghaziabad in ITA.No.6957, 6960 and 3606/ Del/2017 (Assessment Years 2008-2009, 2009-2010 and 2010-2011), Dated 19.03.2018, in which it was held as under :
“32. In view of this we are of the view that the hostel, mess facility and transport facility etc carried out
7 ITA.No.5466 & 3666/Del./2015 Graduate School of Busines Administration Society, Ghaziabad. by the society are incidental to the main object of the assessee trust of education and therefore, provisions of section 11(4A) of the Act do not apply to the assessee as it cannot be said that by running the hostels or transport facility for student its educational activities is a separate business altogether. In view of this ground No. 1 to 3 of the appeal of the assessee are allowed and consequently, the ld AO is directed to grant the assessee benefit of section 11 and 12 of the Income Tax Act with respect to the all income of the trust including hostel and transportation receipts”.
8.1. The Learned Counsel for the Assessee further relied upon the decision of ITAT, Delhi B-Bench, Delhi in the case of Krishna Charitable Society, Ghaziabad vs. Addl. CIT, Range-1, Ghaziabad in ITA.No.4639/Del./2015, Dated 15.09.2017 for the Assessment Year 2011-2012 in which it was held as under :
“11. We have carefully considered the rival contentions and perused the orders of the lower authorities and other judicial pronouncement placed
8 ITA.No.5466 & 3666/Del./2015 Graduate School of Busines Administration Society, Ghaziabad. 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 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 9 ITA.No.5466 & 3666/Del./2015 Graduate School of Busines Administration Society, Ghaziabad. 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
10 ITA.No.5466 & 3666/Del./2015 Graduate School of Busines Administration Society, Ghaziabad. 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. In the result 1 - 3 of the appeal of the assessee are allowed.”
11 ITA.No.5466 & 3666/Del./2015 Graduate School of Busines Administration Society, Ghaziabad. 9. On the other hand, Ld. D.R. relied upon the Orders of the authorities below.
We have considered the rival submissions. Section 2(15) provides the definition of “Charitable Purposes” which includes relief of the poor, education, medical relief etc., Thus, ‘Education’ itself is considered as charitable activity. The assessee is admittedly granted registration under section 12AA of the I.T. Act and assessee is carrying on only educational activities. The assessee pleaded before the Ld. CIT(A) that assessee is providing hostel facility as per AICTE guidelines and that in preceding assessment years assessment has been completed under section 143(3) and surplus from the hostel facility have been considered as educational activity and no addition have been made on this account and it was not treated as business activity of the assessee. The Ld. CIT(A) did not rebut the submission of the assessee in the appellate order. The assessee also pleaded before the Ld. CIT(A) that as regards other hostels, assessee has been charging a reasonable amount. This fact is also not rebutted by the Ld.
12 ITA.No.5466 & 3666/Del./2015 Graduate School of Busines Administration Society, Ghaziabad. CIT(A) in his findings. It was, therefore, proved that hostel facility provided by the assessee society is incidental to the main objectives of the assessee society of ‘Education’. Therefore, it could not be treated as business activity. Thus, there is no requirement to maintain separate books of account for the same. By providing hostel facility, the assessee is providing a conducive atmosphere for study and various opportunities for educational experience, which a day scholar or a commuter is always deprived. The hostel facility is provided only to the students of the assessee and not to general public, meaning thereby, the assessee is not providing accommodation service for charges rather it is providing hostel facility to the students who have been admitted to the educational course offered by the assessee society. Thus, there cannot be any profit motive out of providing the same facility to the students. The authorities below have not pointed out that on providing hostel facility to the students of the assessee society, what business activity have been carried out by the assessee. The decisions relied upon by the Learned Counsel for the Assessee,
13 ITA.No.5466 & 3666/Del./2015 Graduate School of Busines Administration Society, Ghaziabad. squarely apply to the facts and circumstances of the case. Considering the history of the assessee as noted above, in the light of facts considered above, we are of the view that since assessee exist for educational purpose only and hostel facility provided by the assessee society is incidental to the main objectives of the assessee society for education only, therefore, the authorities below were not justified in considering it to be activity of business in nature. Thus, the surplus out of hostel facility shall have to be considered as for educational purpose only which have to be applied for educational purposes only. Therefore, the addition made by the authorities below cannot be sustained. We, accordingly, set aside the Orders of the authorities below and delete the entire addition. Ground Nos.5 and 6 of the appeal of assessee are allowed.
In the result, appeal of Assessee is allowed.
ITA.No.3666/Del./2015 – Revenue Appeal :
The Revenue in the Departmental Appeal challenged the deletion of addition of Rs.25,24,959/-.
14 ITA.No.5466 & 3666/Del./2015 Graduate School of Busines Administration Society, Ghaziabad.
Admittedly, the tax effect in the Departmental appeal is less than Rs.20 lakhs. Vide Circular No.3/2018Dated 11thJuly, 2018 issued by CBDT, it has been directed that the Department shall not file appeal before the Tribunal in case where the tax effect does not exceed the monetary limit of Rs.20 lakhs. It is also directed that this instruction will apply retrospectively to pending appeals and appeals to be filed henceforth in Tribunals. Pending appeals below the specified tax limit may be withdrawn/not pressed. The Ld. D.R. in view of the Board’s Circular above did not press the Departmental Appeal. The case of the Department would not fall in the exceptions provided in the above Board Circular. In the result, the Departmental appeal is not maintainable as the appeal is filed against the Board instructions referred to above and therefore, the appeal of the Department is liable to be dismissed.
In the result, appeal of the Department dismissed.
15 ITA.No.5466 & 3666/Del./2015 Graduate School of Busines Administration Society, Ghaziabad. 15. To sum-up, Appeal of the Assessee allowed and Appeal of the Revenue dismissed.
Order pronounced in the open Court.