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Income Tax Appellate Tribunal, “B” BENCH, AHMEDABAD
Before: SHRI WASEEM AHMED&
PER Ms. MADHUMITA ROY - JM:
The instant appeal filed by the assessee is directed against the order dated 02.03.2020 passed by the Commissioner of Income Tax (Appeals)-9, Ahmedabad arising out of the order dated 26.12.2017 passed by the ITO(Exemptions), Ward-1, Ahmedabad under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for A.Y. 2015-16 whereby and whereunder the claim made under Sections 11 & 12.
There is a delay of 60 days in preferring the appeal before us. As per the Ld. Advocate appearing for the assessee the said delay is due to unavoidable situation cropped up due to Covid pandemic. In view of the judgment passed by the Hon’ble Apex Court the delay is, therefore, to be condoned as prayed by the Ld. A.R. which has not been controverted by the Ld. D.R. with all his fairness. Having regard to the facts and circumstances of
ITA No. 388/Ahd/2020 Bhandari Charitable Trust vs. ITO(E) Asst.Year –2015-16 - 2 - the case and the order passed by the Hon’ble Apex Court we condone the delay.
Ground Nos. 1&2:- 3. The appellant is a public charitable trust established under the deed executed on 15.09.1987 and registered under the Bombay Public Trust Act by and under the Registration No. E-6844/Ahd. It is further registered under Section 12AA of the Act on 03.11.2021 as granted by the Ld. CIT(Exemption), Ahmedabad w.e.f. 29.03.2014 i.e. F.Y. 2013-14 relevant to A.Y. 2014-15. The assessee claimed that it was originally registered under Section 12A of the Act on 02.03.1988.
The Trust has been established primarily with the object of carrying on educational activities by running educational institution and hostel facilities. It is also a fact that during the F.Y. 2012-13 the assessee trust transferred all its educational activities to a private university namely Indus University constituted under the Gujarat Private University Act, 2009. The building and other assets were let out to the said university and it continued to run hostels for the students.
Since the only activity remained of running of a hostel and renting of building and vehicles, a fresh application for registration under Section 12AA was made which was rejected on 19.09.2014 and the claim of exemption under Sections 11 & 12 consequentially was disallowed. In appeal the assessee was granted relief by the Coordinate Bench on 23.09.2021 whereby and whereunder the activity of running the hostel to be held educational under Section 2(15) of the Act and the AO was directed to compute the income
ITA No. 388/Ahd/2020 Bhandari Charitable Trust vs. ITO(E) Asst.Year –2015-16 - 3 - accordingly. The same issue also arose in the A.Y. 2015-16 which stood rejected by the Ld. CIT(A). Hence, the instant appeal before us.
At the time of hearing of the instant appeal the Ld. Counsel appearing for the assessee submitted before us that in view of the fact as narrated hereinabove the issue is squarely covered in favour of the assessee by the judgment passed by the Coordinate Bench on 23.09.2021 a copy whereof has also been duly submitted before us.
The Ld. DR relied upon the order passed by the authorities below.
We have heard the Ld. Counsel appearing for the parties, and we have also perused the relevant materials available on record including the order passed by the Coordinate Bench in assessee’s own case in ITA No. 643/Ahd/2018 for A.Y. 2014-15. After disposal of the appeal by the Coordinate Bench for A.Y. 2014-15 on 23.09.2021 the appeal has been allowed by the DCIT(Exemption) w.e.f. 2014-15 by and under the order dated 03.11.2021.
It is relevant to mention that the Ld. CIT(A) while rejecting the claim of the assessee relied upon the order passed by his predecessor passed on 04.12.2017 for A.Y. 2014-15 which has been quashed by the Coordinate Bench on 23.09.2021 in ITA No. 643/Ahd/2018.
We have carefully considered the judgment passed by the Coordinate Bench. We find that while directing the DIT(E) to issue registration certificate under Section 12AA in favour of the assessee the Bench has been pleased to observe as follows:
ITA No. 388/Ahd/2020 Bhandari Charitable Trust vs. ITO(E) Asst.Year –2015-16 - 4 -
“6. We have considered rival contentions and gone through the record carefully. We find that identical issue was considered by us in the case of Shree Ahmedabad Lohana Vidyapith Bhavan (supra). The relevant part of discussion made by the Tribunal reads as under: “6. Short question required to be adjudicated by the Tribunal is, whether providing hostel facility to the students by appellant-trust is to be considered as imparting education within the meaning of section 2(15) of the Act or it would fall within the clause “advancement of any other object of general public utility” provided in the proviso appended to section 2(15) of the Act. The AO was of the opinion that providing hostel facility is not an activity akin to education. Hence, the activity performed by the assessee would not fall within the meaning of clause 2(15) giving meaning of expression “charitable purpose”. He construed “advancement of any other object of general public utility” falling within the ambit of proviso appended to section 2(15). For harbouring this plea, basically the ld.AO has not assigned any reason, rather simply observed that hostel facility cannot be construed as imparting education. Before considering reasons assigned by the Revenue authorities below, we deem it appropriate to understand the meaning and objects of this facility. It is pertinent to note that human personality is shaped by the experiences of life. When a child is born, family provides a protective environment for the child. At the beginning, interactions are limited latter social interactions increase, and the process of socialization starts. Education is a part of child development. Though it started with the birth and lasted till the time of death, but formal education of language and others are being imparted in the school and colleges. Hostel is an essential institution for the students to stay in big cities and hostel plays an important role in education and training of these students. They provide residential opportunities for the students to continue the process of education. It is a place where students stay for pursuing formal education away from their homes. The concept of hostel is not only limited to place of residence, rather it is a human practical laboratory for development of students. It is a center of education. Students learn as much as from their teachers as well as fellows during hostel stay. It enriches understanding of the curriculum through analytical discussion amongst the students living in the hostels, and may contribute to character building as well. Students in hostel not only learn the theoretical material, they also learn how to enhance their personal abilities and learn to live independently. Hostel life has an impact upon the behavioral as well as personality development of students. It is one of the essential components of an educational institution. Some of the institutions like IITs, Medical Colleges provide compulsory stay in the hostel. Thus, how the AO can segregate this component from the concept of education provided in the main provision of section 2(15)? If it is accepted that hostel is just an essential part of educational institution, then all that discussions made by the AO would be irrelevant. The simple reason is that assessee-trust came into existence in the year 1947. It has been providing hostel facilities for more than 60 years. It has always been treated as a charitable institution. In the assessment year 2010-11 a scrutiny assessment was made. Its status of
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“charitable institution” was accepted even after introduction of section 2(15) in the statute book. Not only it has been treated as “charitable institution” by giving registration under section 12AA of the Act, but under section 80G(5) it has again been recognized as “charitable institution”. 7. Let us take note of reasons assigned by the AO. When the assessee has pointed out that it has been granted registration under section 12AA and 80G(5) of the Act, then the AO has observed that such registration was granted after looking into the objects of the trust. The AO observed that the assessee failed to submit any evidence showing that it is actually imparting education by conducting classes. The ld.AO failed to note that the stand of the assessee was always to the effect that, to run hostel particularly for the students is an activity according to the object of the trust, and it is an aid for attaining educational objects. The AO thereafter made an analysis of alleged profit earned by the assessee. He looked into gross receipts minus expenditure, and surplus generated during the year. It is pertinent to note that surplus in the assessment year 2013-14 is Rs.13.82 crores. Otherwise, in all other years, it is in between Rs.2 to 4 lakhs. The assessee has to maintain building. It has to incur expenditure in capital field. If a small percentage of surplus is being generated then how all of a sudden the “charitable activity” would become “trade, commerce or business” ? If the main activity of the assessee i.e. providing hostel facilities to the students fall within the ambit of expression “education” employed in the main provision of section 2(15) then generation of surplus would be immaterial because ultimately is to be ascertained whether surplus is being used for the purpose of fulfilling all the objects of the trust or not. If the surplus is being applied on the objects of the trust or being accumulated as provided in the scheme, then nothing is to be taxable. On due analysis of record, we are of the view that the AO has unnecessarily created an artificial distinction. The assessee is not admitting other persons in the building. It is providing facility only to the students, and there are lots of rules and regulations, bye-laws for admitting students, according to their merits in education. Thus, taking into account overall facts and circumstances, we are of the view that the assessee is entitled for benefit of sections 11 and 12 of the Income Tax Act. If the assessee is entitled for benefit of sections 11 and 12, then the amount spent from the corpus fund for construction of building is also to be looked into with that angle. We set aside both the orders of the Revenue authorities and restore this issue to the file of the AO. The ld.AO shall redetermine taxable income of the assessee and after providing benefit under sections 11 and 12.” 7. There is no disparity on the facts. The assessee-trust came into existence in 1987. In the past, it has been treated as trust engaged in providing education. According to the assessee, it was granted registration under section 12AA also. The department should have verified from its record whether registration number referred by the assessee in its reply i.e. HQ-III/179 dated 2.3.1988 is a correct reference or not. If it was a correct reference then they should have continued with registration unless it is cancelled. Since registration certificate was not possessed by the assessee, therefore, it was applied afresh. This fact could be verified by the department with record
ITA No. 388/Ahd/2020 Bhandari Charitable Trust vs. ITO(E) Asst.Year –2015-16 - 6 - maintained by it. Leaving apart this controversy, we are of the view that there is no disparity in the ratio of law between one we have discussed in the case of Shree Ahmedabad Lohana Vidyapith Bhavan (supra) vis-à-vis present one in our hand. We have held that running a hostel is akin to a running educational institution which falls within the provision of section 2(15) of the Act. In other words, this activity is to be considered per se charitable as contemplated in section 2(15) of the Act. Therefore, the assessee is entitled for the registration under section 12AA of the Act. Accordingly, we reverse order of the ld.DIT(Exemption) and allow the application of the assessee for grant of registration under section 12AA of the Act. The ld.DIT is directed to issue registration certificate in favour of the assessee. 8. In the result, appeal of the assessee is allowed.” 9. In the absence of any change in facts and circumstances of the matter, respectfully relying upon the order passed by the Coordinate Bench, we allow this ground of appeal preferred by the assessee by quashing the order passed by the Ld. CIT(A). We further direct the Ld. ITO(E) to grant exemption under Sections 11 & 12 to the assessee accordingly for the year under consideration.
Ground No.3:- Not allowing the earlier year deficit/loss/excess application of income of Rs. 3,33,33,101/- is under challenged before us.
During the course of assessment proceeding it was noticed that the assessee claimed amount applied to charitable purpose income for Rs. 7,40,46,807/- as expenses whereas only Rs. 4,07,13,706/- was shown in the income and expenditure statement. The details of expenses of Rs. 7,40,46,807/- though asked for the same was not submitted by the assessee and therefore, the excess application of income of Rs. 3,33,33,101/- was disallowed which was, in turn, confirmed by the Ld. CIT(A). Hence, the instant appeal before us.
Since no explanation has been forthcoming by the assessee before the authorities below we find it fit and proper to remit the issue to the file of the Ld. AO for adjudication of the same afresh and to pass a reasoned order upon
ITA No. 388/Ahd/2020 Bhandari Charitable Trust vs. ITO(E) Asst.Year –2015-16 - 7 - giving an opportunity of being heard to the assessee and upon considering evidences on record or any other evidence which the assessee may choose to file at the time of hearing of the matter. Hence, this ground of appeal is allowed for statistical purposes.
Ground No.4:- The claim of depreciation of Rs. 1,40,43,617/- has been disallowed by the Ld. AO which was further confirmed by the Ld. CIT(A). Hence, the instant appeal before us.
Before the Ld. AO the assessee stated that they have not claimed any capital expenditure of the purchase of fixed asset as an application of income in the current year of Rs. 5,06,76,404/- and any amount in the earlier years whereas in A.Y. 2014-15 addition on account of depreciation was made and assessee has not rebutted that particular fact before the Ld. AO. Assuming that the assessee has nothing to say in the matter and has accepted the contention of the Revenue the depreciation of Rs. 1,40,43,617/- was disallowed and added to the total income of the assessee by the Ld. AO.
The Ld. CIT(A) following the order passed by his predecessor confirmed such addition.
Before us the Ld. Counsel appearing for the assessee submitted that the case is duly covered by several judgments including the judgment passed by the Hon’ble Apex Court in the case of CIT vs. Rajasthan & Gujarat Foundation Poona, reported in (2018) 402 ITR 441. Since the assessee has not explained as to why the addition made by the Revenue on the similar count for A.Y. 2014-15 we find it fit and proper to give another chance to the assessee to get the issue decided by the Ld. AO. The Ld. AO is, therefore, directed to decide
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the issue afresh and to pass a reasoned order upon giving a reasonable opportunity of being heard to the assessee. This ground of appeal is, therefore, allowed for statistical purposes.
In the result, the appeal preferred by the assessee is allowed for statistical purposes. This Order pronounced in Open Court on 31/08/2022
Sd/- Sd/- (WASEEM AHMED) (Ms. MADHUMITA ROY) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 31/08/2022 TANMAY, Sr. PS TRUE COPY
आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)- 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील�य अ�धकरण, अहमदाबाद / ITAT, Ahmedabad
Date of dictation 24&30.08.2022 2. Date on which the typed draft is placed before the Dictating Member 24&31.08.2022 3. Other Member………………… 4. Date on which the approved draft comes to the Sr.P.S./P.S .08.2022 5. Date on which the fair order is placed before the Dictating Member for pronouncement .08.2022 6. Date on which the fair order comes back to the Sr.P.S./P.S 31 .08.2022 7. Date on which the file goes to the Bench Clerk 31 .08.2022 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Despatch of the Order……………………………………