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Income Tax Appellate Tribunal, CUTTACK ‘SMC’ BENCH,
Before: SHRI N.S SAINI
This is an appeal filed by the assessee against the order of CIT(A)-
Berhampur, camp-Bhubaneswar, dated 27.10.14, for the assessment year
2007-08.
The sole issue involved in this appeal is that the CIT(A) erred in
upholding the action of the Assessing Officer for treating the income from sale
of laptops as business not incidental to the carrying out the objectives of the
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assessee trust although the sale of laptops has been made to the students of
the college run by the assessee and not to outside parties.
I have heard the rival submissions and perused the orders of lower
authorities and materials available on record. The brief facts of the case are
that the assessee is a trust registered under section 12A of the Act. It runs
various educational institutions including two engineering colleges at
Bhubaneswar. In the return of income filed for the impugned assessment year
on 31.10.2007, the assessee disclosed Nil income. During the assessment
proceedings, on verification of financial statement, the Assessing Officer
observed that the assessee has sold laptops worth Rs.33,27,500/-, which was
purchased by it for Rs.27,87,000/-. The Assessing Officer held that purchase
and sale of laptops is a business activity not incidental to the main objectives
of the assessee and, accordingly, held it as business transaction and brought
the same to tax.
On appeal, the CIT(A) confirmed the action of the Assessing Officer
observing as under:
“5.3 I have carefully considered the matter. As mentioned by the AO in his report, the average purchase price of a laptop was Rs.3 5,540/- whereas the average sale price was Rs.46,215/-. In other words, the profit on each laptop is more than 30%. This can hardly be called a charitable activity, incidental to the objective of the appellant to run an educational institution. By taking advantage of its captive student community, the appellant, in a pure and simple business transaction, has procured laptops in bulk and sold the same to the students at a handsome
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profit. I, therefore, find no reason to differ from the finding of the AO that the above transaction is a pure and simple business transaction and, accordingly, confirm the action of the AO in bringing to tax the surplus from this transaction u/s. 11(4A). The grounds are, accordingly, dismissed.”
Before me, ld A.R. reiterated the submissions made before the lower
authorities and submitted that the profit from sale of laptops to the students
of the college was incidental to the charitable activities carried on by the
assessee trust and, therefore, was exempt u/s.11 of the Act.
On the other hand, ld D.R. supported the orders of lower authorities.
On a query by the Bench to the ld A.R. of the assessee that why the
laptops were sold to the students at a higher price than the cost price thereby
making profit of Rs.5,48,500/-, ld A.R. of the assessee submitted that the
assessee purchased laptops in bulk and, therefore, got a higher discount from
the dealer of the laptops. The laptops were sold to the students at the retail
price of the laptops in the market. When questioned by the Bench that why
charity was not done to the students by selling the laptops at the cost price
by the assessee, as the assessee is a charitable trust, ld A.R. had no answer
for the same. As no material has been brought on record by ld A.R. of the
assessee to show that the profit of Rs.5,48,500/- earned by the assessee was
incidental to the carrying on the charitable activity of the assessee trust, I find
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no good reason to interfere with the order of ld CIT(A), which is hereby
confirmed. Hence, grounds of appeal of the assessee are dismissed.
In the result, the appeal filed by the assessee is dismissed.
Order pronounced in the open court on 24/01/2017 in the presence of parties.
(N.S Saini) ACCOUNTANT MEMBER
Cuttack; Dated 24/01 /2017 B.K.Parida, SPS Copy of the Order forwarded to : 1. The Appellant : M/s. Nabadigant Educational Trust, Plot No.No 2/17, IRC Village, Bhubaneswar. 2. The Respondent. ITO, Ward 2(1), Bhubaneswar 3. The CIT(A),Bhubaneswar 4. Pr.CIT, Bhubaneswar. 5. DR, ITAT, Cuttack 6. Guard file. //True Copy// BY ORDER,
ASST.REGISTRAR, ITAT, Cuttack Date Initial 1. Draft dictated on 24/01/17 Sr.PS 2. Draft placed before author 24/01/11 (dictation pad has Sr.PS been enclosed along with original file) 3. Draft proposed & placed before the AM second member 4. Draft discussed/approved by Second AM Member. 5. Approved Draft comes to the Sr.PS/P Sr.PS/PS S 6. Kept for pronouncement on Sr.PS 7. File sent to the Bench Clerk Sr.PS 8. Date on which file goes to the H.C. 9. Date on which file goes to the AR 10. Date of dispatch of Order.
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