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Income Tax Appellate Tribunal, MUMBAI BENCH “G” MUMBAI
Before: SHRI C.N. PRASAD & SHRI N.K. PRADHAN
ORDER
PER N.K. PRADHAN, AM
This is an appeal filed by the assessee. The relevant assessment year is 2008-09. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-1, Mumbai [in short ‘CIT(A)’] and arises out of the assessment completed u/s 143 of the Income Tax Act 1961, (the ‘Act’).
The grounds of appeal
raised by the assessee read as under:
1. The Ld. CIT(A) has failed to appreciate that the receipt on hiring of premises is not the business income of the appellant.
2. The Ld. CIT(A) has failed to appreciate that at the most the receipts are in the nature of Income House Property and hence Section 11(4A) does not apply.
The Ld. CIT(A) has failed to appreciate that the appellant is running a school and is not in the business of hiring its premises. 3. Briefly stated, the facts of the case are that the assessee filed its return of income for the assessment year (AY) 2008-09 on 30.09.2008 declaring total income at Rs. Nil. The Assessing Officer (AO) noticed during the course of assessment proceedings that the assessee-trust had received Rs.9,39,600/- on account of ‘Hall Hiring Charges’. He came to a finding that income from ‘Hall Hiring Charges’ is a systematic regular activity of the assessee and has all the characteristics of a business. As per him, it is a separate organized activity for exploitation of trust premises which were constructed in pursuance to the objects of the trust and it has no relation to providing education which is the main object of the trust for which it was granted registration u/s 12A of the Act. The AO further noticed that no separate books of accounts were maintained by the assessee-trust for the above activities and therefore, there is no question of allowing deduction u/s 11(4A) of the Act. Thus the AO made an addition of Rs.8,45,640/- (after reducing estimated expenses @ 10% i.e. Rs.93,960/- from receipt of hiring premises of Rs.9,39,600/-). 4. Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) agreed with the reasons given by the AO and held : I. The AO has applied the provisions of section 11(4A) observing that hall renting activity is a regular systematic activity having all characteristics of Nikunj Education business and no separate books of account have been maintained by the assessee. In its submission the appellant has agreed that no separate books of accounts have been maintained by it for this purpose. Thus, admittedly the appellant is hit by the provisions of section 11(4A). II. The appellant has, however, mentioned that it may be allowed to rectify the lacunae by segregating the books and treating the rent received as separate books of accounts. It is also argued that the minor technical breach may be condoned. In this regard, it is mentioned that under the Income Tax Act, 1961 there is no provision for any such condonation of breach and hence this request of the appellant cannot be considered. III. In view of the facts and legal position as discussed above, I am of the considered opinion that the Assessing Officer has rightly applied the provisions of section 11(4A). Accordingly, findings of the Assessing Officer are upheld.
Before us, the Ld. counsel of the assessee relies on the order dated 23.06.2017 of the ITAT ‘I’ Bench Mumbai in assessee’s own case for the AY 2010-11 in ITA No. 5075/Mum/2016. On the other hand, the Ld. DR relies on the order of the Ld. CIT(A).
We have heard the rival submissions and perused the relevant materials on record. The same issue arose before the ITAT ‘I’ Bench Mumbai in assessee’s own case for the AY 2010-11 in ITA No. 5075/Mum/2016. The Tribunal held as under: “9. We have considered the rival contentions and perused the material on record keeping in view the ratio laid down in the decisions relied upon. Undoubtedly, the assessee has been granted registration as a Charitable Trust Under Section 12A of the Act. The main object of the assessee as found from the trust deed, a copy of which was placed before us, assessee is to promote; Nikunj Education advance; diffuse and propagate education; knowledge and research in all branches and field whatsoever. It is also a fact on record, to achieve this object the assessee has established a school, namely, Nikunj Vidya Mandir for running the primary classes from standard one to four. The object also provides for expansion of the school for running secondary or higher classes. From the trust deed it is clear that the dominant object of the assessee is imparting education. In fact, both the Assessing Officer as well as the CIT(A) have accepted the fact that the assessee is an educational trust. The only reason why the departmental authorities have treated the hire charges received from the hiring of hall to outsiders as a business income of the assessee is, it is a separate business activity of the assessee and the assessee has not maintained separate books of accounts as provided Under Section 11(4A) of the Act. We do not find the aforesaid reasoning of the departmental authorities valid. When there is no dispute to the fact that the dominant object of the assessee is education, it is to be held that the hiring of hall to outsiders on some days on receipt of hire charges is only ancillary and incidental to its dominant object, hence, cannot be considered as a separate activity. It is not disputed that the hall is part of the educational institution. Further it is not the case of the Departmental Authorities that the hall is given on hire to outsiders on all days of the year. On the contrary, the Ld.AR submitted before us that the hall is primarily used for the activities of the institution and only on some occasions when the hall is not required for use of the institution it is given on hire to outsiders on receipt of hire charges. On a query made by the bench, the Ld. AR has submitted before us in the relevant previous year the hall was given on rent for 52 days. The aforesaid fact clearly establishes that the allegation of the Assessing Officer that the assessee by giving on hire the hall the assessee has indulged in a systematic and regular business activity is without any basis. Further, since the dominant object of the assessee is education and the hiring of hall is ancillary and incidental to achieve the dominant object, it cannot be considered as Nikunj Education separate activity on standalone basis. Therefore, there is no need to maintain separate books of accounts for availing exemption Under Section 11(4A) of the Act. Moreover, the Departmental Authorities have accepted the assessee as an educational trust, therefore, the proviso to sec.2(15) of the Act would not be applicable to the assessee as it applies only to the 4th limb of section 2(15) viz, “advancement of any other object of general public utility”. Therefore, where a trust is established for providing education it will constitute charitable purpose, even if it is incidentally involved in carrying on some commercial activity. In this context we rely upon the decision of the Hon’ble Jurisdictional High Court in case of Director of Income-tax (exemptions) v. Lala Lajpatrai Memorial Trust [2016] 383 ITR 345 (Bom). In case of Commissioner of Income-tax v. Sri Rao Baghadur ADK Dharmaraja Educational Charity trust [2008] 300 ITR 365 (madras), the Hon’ble Madras High Court has held that when object of the trust is education, the activities of the assessee in letting out properties and receiving lease rental is an activity carried on to further the object of the trust, hence, it will be eligible for exemption Under Section 11 of the Act.” 6.1 Facts being identical, we follow the above order of the Co-ordinate Bench and set aside the order of the Ld. CIT(A).