M/s. Ideal Education Society, Ghaziabad V. Addl. CIT, Ghaziabad

ITA 3550/DEL/2015

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 2744 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2010-2011
• Appeal Filed On: 02-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Business income; Depreciation; Charitable institution; Capital expenditure
• Section: 142(1); 12AA; 32

Judgement Text

1 ITA NO. 3550/DEL/2015 IDEAL EDUCATION SOCIETY IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: BENCH C, NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SMT. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NO. 3550/DEL/2015 AY: 2010-11 IDEAL EDUCATION SOCIETY SD- 522, SHASTRI NAGAR GHAZIABAD, PIN: 201206 VS. ADDL. CIT RANGE- 1 GHAZIABAD PAN NO: AAABI0038E APPELLANT RESPONDENT ASSESSEE BY : SHRI AJAY WADHWA, ADV. REVENUE BY : SHRI AMIT KATOCH, SR. DR DATE OF HEARING : 29/05/2019 DATE OF PRONOUNCEMENT : 12/06/2019 ORDER PER SUCHITRA KAMBLE, JUDICIAL MEMBER THIS APPEAL IS FILED AGAINST THE ORDER DATED 23.02. 2015 PASSED BY CIT(APPEALS)-MUZAFFARNAGAR FOR AY 2010-11. 2. GROUNDS OF APPEAL READ AS UNDER: 1. THAT THE ORDER OF THE LD. COMMISSIONER OF INCOM E TAX (APPEALS), NEW DELHI, ['THE LD. CIT(A)], DATED 23.02.2015 IS BAD IN LAW AND ON FACTS. 2. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACT S IN NOT APPRECIATING THE FACT THAT THE HOSTEL/TRANSPORT FACILITIES PROVIDED TO THE STUDENTS BY THE APPELLANT SOCIETY IS AN ACTIVITY INCIDENTAL TO THE ATTAINMENT OF THE MAIN OBJECTIVE OF THE SOCIETY. 2 ITA NO. 3550/DEL/2015 IDEAL EDUCATION SOCIETY 2.1. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FA CTS IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER OF MAKING AN ADDITION/DISA LLOWANCE OF RS. 29,25,986/- OUT OF THE EXPENSES INCURRED ON RUNNING OF THE HOSTEL/TRANSPORT FACILITY. 2.2. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FA CTS IN TREATING THE HOSTEL/TRANSPORT FACILITY PROVIDED TO THE STUDENTS OF INSTITUTION AS A BUSINESS UNDERTAKING AND THUS UPHOLDING THE ACTION OF AO AS TO THE REQUIREMENT OF MAINTENANCE OF SEPARATE BOOKS OF ACCOUNTS AS REQUIR ED AS REQUIRED BY SEC. 11(4A) OF THE INCOME TAX ACT, 1961. 3. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACT S IN UPHOLDING THE ACTION OF ASSESSING OFFICER TO DISALLOW DEPRECIATION CLAIMED BY THE APPELLANT SOCIETY BY DEBITING THE SAME IN INCOME & EXPENDITURE ACCOUNT W HICH AMOUNTED TO RS. 2,52,75,353/-. 3.1 THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FAC TS IN UPHOLDING THE CLAIM OF ASSESSING OFFICER THAT THE APPELLANT SOCIETY HAS AV AILED 100% APPLICATION OF THE VALUE OF THE CAPITAL EXPENDITURE IN THE YEAR OF PURCHASE OF FIXED ASSETS OUT OF GROSS RECEIPTS. 4. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, A MEND, SUBSTITUTE, DELETE AND MODIFY ANY OR ALL THE GROUNDS OF APPEAL, WHICH ARE WITHOUT PREJUDICE TO ONE ANOTHER, BEFORE OR AT THE TIME OF HEARING OF THE AP PEAL. 3. THE ASSESSEE IS A SOCIETY REGISTERED WITH THE RE GISTRAR OF SOCIETIES AND ENJOYS REGISTRATION U/S 12AA OF THE INCOME TAX ACT, 1961. THE ASSESSEE IS RUNNING AN INSTITUTE FOR PROFESSIONAL COURSES. THE ASSESSEE IS ALSO RUNNING HOSTEL AND TRANSPORT FACILITY FOR ITS STUDENTS FOR WHICH SEPARATE FEE IS CHARGED. THE ASSESSING OFFICER HELD THAT HOSTEL AND TRANSPOR T FACILITY PROVIDED TO THE STUDENTS ARE SEPARATE BUSINESSES AND ARE NOT COVERE D IN THE DEFINITION OF CHARITABLE PURPOSE U/S 2(15) OF THE ACT. THE ASSES SING OFFICER FURTHER HELD THAT SINCE NO SEPARATE BOOKS OF ACCOUNTS ARE MAINTAINED FOR THIS BUSINESS, THE ASSESSEE IS NOT ENTITLED FOR EXEMPTION U/S 11(4A) O F THE ACT AND INCOME GENERATED FROM SURPLUS OF THE ABOVE ACTIVITIES ARE TAXABLE. THE ASSESSING OFFICER ALSO DISALLOWED DEPRECIATION OF RS. 252,75, 253/- BY OBSERVING THAT ALLOWANCE WILL AMOUNT TO DOUBLE DEDUCTION SINCE 100 % APPLICATION OF VALUE OF 3 ITA NO. 3550/DEL/2015 IDEAL EDUCATION SOCIETY CAPITAL EXPENDITURE HAD ALREADY BEEN AVAILED BY THE ASSESSEE IN THE YEAR OF INVESTMENT AND ON THE SAME VALUE THE ASSESSEE HAS C LAIMED DEPRECIATION. 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE. 5. THE LD. AR SUBMITTED THAT AS REGARDS GROUND NOS. 2, 2.1 & 2.2 RELATING TO HOSTEL AND TRANSPORTATION FEES, THERE WAS NO PRO FIT MOTIVE IN CARRYING OUT THESE ACTIVITIES. THE LD. AR SUBMITTED THAT THE FA CILITIES IN THE COLLEGE/INSTITUTE ARE NOT CARRIED WITH THE PROFIT M OTIVE. THERE WERE MEANT FOR PROMOTING THE MAIN OBJECT OF THE INSTITUTE. IN FAC T THE ASSESSEE SUFFERED A NET LOSS OF RS. 1,64,023/- ON ACCOUNT OF PROVIDING HOST EL AND TRANSPORT FACILITIES AND IT CANNOT BE SAID THAT THE INSTITUTE IS ENGAGED IN THE ACTIVITIES OF EARNING PROFIT. THE LD. AR FURTHER SUBMITTED THAT THE HOST EL/TRANSPORT FACILITY 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 FUL FILL THE MAIN OBJECTIVE OF THE SOCIETY. THE LD. AR FURTHER SUBMITTED THAT THE ASS ESSING OFFICER FAILED TO BRING ANY MATERIAL EVIDENCE ON RECORD TO PROVE THAT THE S OCIETY ACTED IN A MANNER WITH A MOTIVE TO EARN PROFIT OUT OF THE TRANSPORT O R HOSTEL FACILITY PROVIDED TO ITS STUDENTS. THE LD. AR RELIED UPON THE DECISION OF T HE HONBLE DELHI HIGH COURT IN THE CASE OF INSTITUTE OF CHARTERED ACCOUNTANTS O F INDIA 358 ITR 91. THE LD. AR FURTHER SUBMITTED THAT THE COLLEGE GIVES ADMISSI ON FROM FAR OFF PLACES/TOWNS ON THE PRECONDITION THAT HOSTEL AND TRANSPORT FACIL ITIES ARE AVAILABLE IN THE CAMPUS. SINCE THE COLLEGE IS LOCATED ON THE OUTSKI RTS OF THE TOWN ON THE MEERUT DELHI HIGHWAY WHERE REGULAR TRANSPORT IS NOT AVAILA BLE, IT IS FOR THIS REASON THAT THIS FACILITY IS PROVIDED AS A PREREQUISITE TO THE ADMISSION SO AS TO FULFILL THE OBJECTIVE OF THE SOCIETY TO PROVIDE EDUCATION TO TH E STUDENTS. IT IS THE RESPONSIBILITY OF THE ASSESSEE TO PROVIDE TRANSPORT FACILITY TO THE STUDENTS FOR ATTENDING THE SCHOOL AND FOR SENDING THE STUDENTS B ACK TO THEIR RESPECTIVE HOMES WITH PROPER SECURITY AND ATTACHMENTS. THE LD . AR FURTHER SUBMITTED 4 ITA NO. 3550/DEL/2015 IDEAL EDUCATION SOCIETY THAT THESE FACILITIES WERE PROVIDED ONLY TO THOSE S TUDENTS WHO WERE STUDYING IN INSTITUTE AND WERE INTERESTED TO AVAIL THE FACILITY . THE ASSESSEE IS HAVING ONLY A SMALL AREA BUILD UP FOR THE USE OF HOSTEL. THE STU DENTS ARE MOSTLY ACCOMMODATED IN THE RENTED BUILDINGS FOR WHICH RENT IS PAID BY THE SOCIETY. THE SOCIETY OWNS ONLY TWO BUSES WHICH ARE RUN BY TH E STAFF ON THE PAYROLL OF THE COLLEGE. THE REMAINING BUSES ARE HIRED FROM TH E MARKET AND PAYMENT IS MADE BY THE SOCIETY. MAJORITY OF THE STUDENTS COMM UTE THROUGH PUBLIC TRANSPORT SYSTEM. THE LD. AR SUBMITTED THAT HOSTEL AND TRANSPORT FACILITIES ARE AN INTEGRAL PART OF EDUCATION ACTIVITY. PROVISION FOR HOSTEL FACILITY WAS ONLY INCIDENTAL TO AIMS AND OBJECTS OF THE SOCIETY AND T HERE WAS NO MATERIAL ON RECORD SHOWING THAT ASSESSEE WAS RUNNING HOSTEL FOR BUSINESS PURPOSE. SINCE THE TASK OF PROVIDING EDUCATION ESSENTIALLY INVOLVE S INSTITUTION AND ADMINISTRATION OF FACILITIES FOR HOUSING THE STUDEN TS IN HOSTEL, PROVISION OF TIMELY FOOD FROM THE MESS, PROVISION OF SPORTS FACI LITIES FOR MENTAL RELAXATION AND RECREATION OF THE STUDENTS AND BUS SERVICE FACI LITIES FOR PICKING UP AND DROPPING OF THE STUDENTS TO THE INSTITUTE FOR THE P URPOSE OF SECURING EDUCATION, IT HAS TO BE CONSTRUED AS ESSENTIALLY RELATED TO TH E REALIZATION OF THE PRIMARY CHARITABLE OBJECTIVE OF EDUCATION ITSELF. THE LD. AR FURTHER SUBMITTED THAT ALTHOUGH NO SURPLUS IS GENERATED OUT OF THE FACILIT IES PROVIDED TO THE STUDENTS IN THE FORM OF HOSTEL/TRANSPORT, HOWEVER, EVEN IF T HERE 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 PERS ONAL BENEFIT. THE LD. AR SUBMITTED THAT THE FACILITY PROVIDED BY THE COLLEGE IS RESTRICTED ONLY TO THE COLLEGE STUDENTS AND CANNOT BE AVAILED BY THE PUBLI C AT LARGE AT THEIR WILL AND AT ANY GIVEN HOUR OF TIME. THE PROVISIONS OF SECTION 11(4) OF THE ACT ARE NOT APPLICABLE BECAUSE THE COLLEGE IS NOT RUNNING ANY B USINESS UNDERTAKING BUT IS SIMPLY PROVIDING FACILITY OUT OF THE ASSETS OWNED B Y THE COLLEGE ITSELF. THE FACILITY IS BEING PROVIDED TO A DEFINITE SET OF STU DENTS CONNECTED WITH THE INSTITUTE AND IS OPEN AT SPECIFIC TIMINGS ON THE SP ECIFIC ROUTES AND TO SPECIFIED STUDENT DIRECTLY CONNECTED WITH THE COLLEGE AND IS NOT A COMMERCIAL BASIS. THE 5 ITA NO. 3550/DEL/2015 IDEAL EDUCATION SOCIETY LD. AR FURTHER SUBMITTED THAT THE ASSESSEE HAS MAIN TAINED A SEPARATE LEDGER ACCOUNT UNDER THE HEAD HOSTEL RECEIPTS AND EXPENSE S. REQUIREMENT OF MAINTAINING SEPARATE BOOKS OF ACCOUNTS SHALL ARISE ONLY IF THERE IS A BUSINESS UNDERTAKING AND THE TRUST IS ENGAGED IN THE ACTIVIT Y OF EARNING PROFITS. THE ASSESSING OFFICER HAS TREATED THE HOSTEL FACILITY A S BUSINESS ALLEGING THAT SURPLUS HAS BEEN GENERATED OUT OF HOSTEL FACILITY. THE ASSESSING OFFICER HAS TAKEN COMPARABLE MARKET PRICE OF RS. 36,000/- TO RS . 40,000/- WITHOUT EVEN MENTIONING ANY BASE FROM WHERE SUCH MARKET PRICE WA S TAKEN BY HIM. IF SOME SURPLUS WAS GENERATED OUT OF HOSTEL FACILITY, EVEN THEN THE SAME CANNOT BE TREATED AS BUSINESS ITSELF. EVEN AFTER INSERTION O F PROVISO TO SECTION 2(15) OF THE ACT, VARIOUS COURTS HAVE HELD THAT MERELY CHARGING A FEE FOR SOME OF THE ACTIVITIES, WHICH MAY RESULT IN SURPLUS, DOES NOT IPSO-FACTO MEANS THAT THE ACTIVITIES OF THE SOCIETY ARE COMMERCIAL IN NATURE. THE TRADE OR COMMERCE IN THE NORMAL COURSE IS DIFFERENT THEN WHAT IS REQUIRE D U/S 2(15) OF THE ACT. THE LD. AR RELIED UPON THE HONBLE APEX COURT DECISION IN THE CASE OF ADDL. CIT VS. SURAT ART SILK CLOTH MANUFACTURERS ASSOCIATION (197 8) 121 ITR 1 (SC). THE LD. AR ALSO RELIED UPON THE DECISION OF AMERICAN HOTEL AND LODGING ASSOCIATION, EDUCATIONAL INSTITUTE VS. CBDT (2008) 301 ITR 86 (S C). THE LD.AR RELIED UPON THE DECISION OF THE SC IN THE CASE OF ADITANAR EDUC ATIONAL INSTITUTE VS. ADDL.CIT (1997) 224 ITR 310. 6. AS REGARDS DISALLOWANCE OF MESS EXPENSES, THE LD . AR SUBMITTED THAT THE ASSESSING OFFICER ESTIMATED THE MESS EXPENSES AT RS. 1,275/- PER STUDENT PER MONTH AS AGAINST THE EXPENSES OF RS. 2,401/- PER ST UDENT PER MONTH INCURRED BY THE ASSESSEE. THE LD. AR SUBMITTED THAT THE ASS ESSING OFFICER FAILED TO APPRECIATE THE FACTS THAT THE NATURE OF FOODS AND F ACILITIES PROVIDED BY THE ASSESSEE TO ITS STUDENTS IS NOT THE SAME IN OTHER I NSTITUTE. THE NUMBER OF STUDENTS AT A GIVEN TIME AVAILING THE MESS FACILITY PROVIDED BY THE ASSESSEE, SINCE, IF THERE ARE LARGE NUMBER OF STUDENTS, THE P ER HEAD EXPENSE WOULD BE ON THE LOWER SIDE WHILE IF THERE ARE LESS NUMBER OF ST UDENTS, THE PER HEAD EXPENSE 6 ITA NO. 3550/DEL/2015 IDEAL EDUCATION SOCIETY WOULD BE ON A HIGHER SIDE. NO DETAIL OF THE BREAKU P OF THE FOOD ITEMS PROVIDED, NUMBER OF MEALS GIVEN, NATURE OF FOODS SUCH AS VEGE TARIAN AND NON-VEGETARIAN, NATURE OF MORNING BREAKFAST, EVENING TEA, ETC. THE LD. AR FURTHER SUBMITTED THAT THE ASSESSING OFFICER IGNORED THE FACT THAT TH E RISK AND RESPONSIBILITY ATTACHED IN PROVIDING HOSTEL AND TRANSPORT FACILITY TO THE STUDENTS. THE ASSESSEE SOCIETY HAS PROVIDED TOUGH SECURITY AND ST AFF. IT IS, THUS, STATED BY THE LD. AR THAT APART FROM MAKING PAYMENTS TO THE C ONTRACTOR FOR HIRING BUSES AND FOR RENT EXPENSES, ASSESSEE SOCIETY INCURRED OT HER CONNECTED EXPENDITURE SUCH AS PROVIDING ATTENDANTS FOR SAFETY. ALL SUCH EXPENSES ARE MERGED WITH THE EXPENSES DEBITED UNDER DIFFERENT HEADS AND THEY HAV E NOT BEEN CONSIDERED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER HAS P ROCEEDED TO COMPLETE THE ASSESSMENT BY ESTIMATING THE MESS EXPENSES WITHOUT GIVING SPECIFIC NOTICE U/S 142(1) OF THE ACT. THE ASSESSING OFFICER ACTED IN A MOST ARBITRARY MANNER TO DEVICE ITS OWN FORMULA SO AS TO WORK OUT THE DISALL OWANCE OF MESS CHARGES. SUCH DISALLOWANCE MADE BY THE ASSESSING OFFICER WIT HOUT PROVIDING THE COMPARABLE CASES TO THE ASSESSEE IS NOT ONLY ARBITR ARY AND ILLEGAL BUT THE SAME IS BASED ON SURMISES, CONJECTURES AND ON HYPOTHETIC AL OBSERVATION. THE TWO CASES REFERRED TO BY THE ASSESSING OFFICER HAVE NO RELEVANCE TO MAKE DISALLOWANCE OF EXPENSES SINCE EVERY INSTITUTE HAS ITS OWN SYSTEM OF PROVIDING FOOD IN THE MESS. THE LD. AR SUBMITTED THAT THIS I SSUE IS SQUARELY COVERED BY THE DECISION OF THE TRIBUNAL IN THE CASE OF LAKSH E DUCATIONAL SOCIETY VS. ADDL. CIT (ITA NO. 3549/DEL/2015). 7. AS REGARDS GROUND NO. 3 AND 3.1 RELATING TO DISA LLOWANCE OF DEPRECIATION OF RS. 2,52,75,253/-, THE LD. AR SUBMITTED THAT DEP RECIATION IS ALLOWABLE AS SEPARATE DEDUCTION APART FROM APPLICATION OF INCOME . DEPRECIATION HAS TO BE DEBITED TO DETERMINE THE EXTENT AND USAGE OF THE CA PITAL ASSET IN THE COURSE OF CONDUCT OF ACTIVITIES AND IS AVAILABLE U/S 32 OF TH E ACT. HOWEVER, THE INVESTMENT IS CONSIDERED AS A SYSTEM TO MEASURE THE UTILIZATION OF THE CHARITABLE FUNDS IN THE CHARITABLE ACTIVITIES IN TH E FORM OF DEVELOPMENT 7 ITA NO. 3550/DEL/2015 IDEAL EDUCATION SOCIETY INFRASTRUCTURE, TO BE USED FOR THE FULFILLMENT OF T HE MAIN OBJECT OF THE TRUST. COMPUTATION OF INCOME IS SEPARATE AND DISTINCT AND HAS TO BE MADE ON COMMERCIAL BASIS BY APPLYING THE PROVISION OF THE A CT. THE DEPRECIATION IS A CHARGE ON THE WEAR AND TEAR AND USE OF THE CAPITAL ASSET WHICH SUFFERS LIKE THAT GETS REDUCED YEAR AFTER YEAR AND WITH THE PASSAGE O F TIME. THE DEPRECIATION HAS BEEN PROVIDED IN THE INCOME AND EXPENDITURE IN CONFORMITY WITH THE INCOME TAX RULES APPLICABLE TO THE ALLOWANCE OF DEP RECIATION OF FIXED ASSETS. THE PROPOSITION THAT DEPRECIATION SHOULD BE ALLOWED , EVEN IF, THE PURCHASE OF ASSETS HAVE BEEN CLAIMED BY THE TRUST TOWARDS APPLI CATION OF INCOME HAS BEEN DEALT BY THE VARIOUS DECISIONS BY THE APEX COURT AN D THE VARIOUS HIGH COURTS. THE LD. AR RELIED UPON FOLLOWING DECISIONS: 1) CIT VS. RAJASTHAN AND GUJARATI CHARITABLE FOUNDATIO N POONA (2018) 402 ITR 441 (SC) 2) DIT (EXEMPTION) VS. INDRAPRASTHA CANCER SOCIETY (20 15) 53 TAXMANN.COM 463 (DEL.) 8. THE LD. DR RELIED UPON THE ASSESSMENT ORDER AS W ELL AS THE ORDER OF THE CIT(A). THE LD. DR ALSO RELIED UPON THE FOLLOWING DECISIONS: 1) INDIAN MACHINE TOOLS AND MANUFACTURERS ASSOCIATIONS VS. DIT (2018) 91 TAXMANN.COM 465 (BOM.) 2) DAYANAND PUSHPADEVI VS. ADDL. CIT (2016)-TIOL-1810- ITAT-DELHI 3) YOUNG WOMEN CHRISTIAN ASSOCIATION OF MADRAS VS. JDI T (2014) 41 TAXMANN.COM 142. BUT THE LD. DR COULD NOT DISTINGUISH THE RATIO LAID DOWN BY THE HONBLE APEX COURT AS WELL AS VARIOUS HIGH COURTS AND TRIBU NALS DECISIONS RELIED UPON BY THE LD. AR DURING THE HEARING. 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL T HE RELEVANT MATERIAL AVAILABLE ON RECORD. GROUND NO. 1 IS GENERAL IN NAT URE HENCE DISMISSED. AS REGARDS TO GROUND NO. 2, 2.1 AND 2.2, THE ISSUES CO NTESTED HEREIN HAVE BEEN DECIDED BY THE TRIBUNAL IN CASE OF DELHI PUBLIC SCH OOL, GHAZIABAD VS. ACIT (ITA 8 ITA NO. 3550/DEL/2015 IDEAL EDUCATION SOCIETY NO. 3593/DEL/2015, AY 2010-11 ORDER DATED 08.05.201 8). THE TRIBUNAL HELD AS UNDER: 8. WE HAVE GONE THROUGH THE RECORD IN THE LIGHT O F THE SUBMISSIONS ON EITHER SIDE. AT PAGE NO. 4 OF THE ASSESSMENT ORDER , THE LD. AO RECORDED THAT THE ASSESSEE SOCIETY HAS CHARGED RS. 3,00,42,296/- TOWARDS TRANSPORT FEE WHICH IS INCLUDED IN THE INCOME AND EXPENDITURE ACC OUNT AND CORRESPONDING EXPENSES WAS DEBITED TO RS. 3,09,33,029/-FOR PROVID ING TRANSPORT FACILITY TO STUDENTS. THERE IS NO DISPUTE THAT THE ASSESSEE HA S BEEN RUNNING 37 SCHOOL BUSES. THE LD. AO ALLOWED THE SALARY OF 7 DRIVERS. THE CONTENTION OF THE ASSESSEE THAT 37 BUSES CANNOT BE RUN BY 7 DRIVERS G OES UNCONTRADICTED. FURTHER AO DID NOT BRING ON RECORD AS TO THE USE OF THE VEHICLES FOR ANY OTHER PURPOSE THAN THE CONVEYANCE OF THE CHILDREN AND FUR THER ITS REPAIR AND PERIODICAL MAINTENANCE. IT IS NOT THE CASE OF THE REVENUE ALSO THAT THE ASSESSEE HAS BEEN DERIVING ANY INCOME FROM THE USE OF THESE VEHICLES OTHER THAN COLLECTING THE FEES FROM THE STUDENTS FOR THEI R TRANSPORT FACILITY. IT IS, THEREFORE, CLEAR THAT THE MATERIAL ON RECORD SUGGES T THAT ALL THE BUSES ARE BEING USED ONLY FOR PROVIDING FACILITY TO THE STUDE NTS AND STAFF THAT ALSO ONLY FOR TRANSPORT TO AND FROM THE SCHOOL TO THE RESPECT IVE HOUSES OF THE CHILDREN IN THE GIVEN ROUTES. 9. LD. AR BROUGHT TO OUR NOTICE THE GUIDELINES AND THE BYLAWS WHICH REGULATE THE RUNNING OF SCHOOL BUSES ISSUED FROM TIME TO TIM E BY CBSE AND NCPCR MANUAL OF SAFETY STANDARDS IN SCHOOLS WITH REFERENC E TO THE STAFF, ATTENDANTS, DUTY OF SCHOOL BY WAY OF A BUS OFFICER ETC. 10. IT IS, THEREFORE, CLEAR THAT THE ENTIRE DISPUTE IN THIS MATTER REVOLVES AROUND THE QUESTION WHETHER OR NOT THE ACIDITY OF R UNNING SCHOOL BUSES EXCLUSIVELY FOR THE FACILITY OF THE STUDENTS AND ST AFF, IS AN INTRINSIC PART OF THE ACTIVITY OF RUNNING A SCHOOL. SUCH A QUESTION IS N O LONGER RES INTEGRA. IN THE CASE OF KRISHNA CHARITABLE SOCIETY VS. ADDL. CIT IN ITA NO. 4639/DEL/2015 FOR AY 2011-12 DATED 15.09.2017, A SIMILAR QUESTION HAD ARISEN. VIDE PARA NO. 11, A COORDINATE BENCH OF THIS TRIBUNAL HELD TH AT TRANSPORT AND HOSTEL FACILITY SURPLUS CANNOT BE CONSIDERED AS BUSINESS I NCOME OF THE SOCIETY AS THESE ACTIVITIES ARE INCIDENTAL TO THE MAIN OBJECT OF THE ASSESSEE SOCIETY OF EDUCATION. RELEVANT OBSERVATIONS ON THIS ASPECT AR E AS UNDER: 11. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENT IONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND OTHER JUDICIAL PRONOUNCEMENT PLACED BEFORE US. IN THE GROUNDS NO. 1 TO 3 ASSESSEE IS C ONTESTING THAT ADDITION MADE BY THE LD. AO TREATING HOSTEL PLACES PROVIDED TO COLLEGE STUDENT AS BUSINESS OF THE SOCIETY AND TEXT THE ALLEGED SURPLU S OF RS. 98,87,873/- AS BUSINESS INCOME OF THE ASSESSEE. IT WAS NOT THE CA SE OF THE REVENUE THAT ASSESSEE HAS RENTED OUT THESE HOSTELS TO THE STUDEN TS WHO ARE NOT PARTED 9 ITA NO. 3550/DEL/2015 IDEAL EDUCATION SOCIETY EDUCATION IN THE ABOVE INSTITUTES. IT WAS ALSO NOT THE CASE OF REVENUE THAT ASSESSEE IS PRIMARILY ENGAGED IN THE BUSINESS OF PR OVIDING HOSTEL FACILITIES TO THE STUDENTS. THE ABOVE ISSUE IS NO MORE RES IN TEGRA IN VIEW OF THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN CIT VS. KARNATAKA LINGAYAT EDUCATION SOCIETY IN ITA NO. 5004/2012 DAT ED 15/10/2014 WHEREIN IT HAS BEEN HELD THAT PROVIDING HOSTEL TO T HE STUDENTS/STAFF WORKING FOR THE SOCIETYS INCIDENTAL TO ACHIEVE THE OBJECT OF PROVIDING EDUCATION, NAMELY THE OBJECT OF THE SOCIETY. IN VI EW OF THIS WE ARE OF THE OPINION THAT PROVIDING OF HOSTEL FACILITIES AND TRA NSPORT FACILITIES TO THE STUDENT AND STAFF MEMBER OF THE EDUCATIONAL INSTITU TE CANNOT BE CONSIDERED AS BUSINESS ACTIVITY BUT IS SUBSERVIENT TO THE OBJECT OF EDUCATIONAL ACTIVITIES PERFORMED BY THE SOCIETY. W E ARE ALSO SUPPORTED BY OUR VIEW BY THE DECISION OF THE HONBLE ALLAHABAD H IGH COURT IN IT VS. STATE OF UP (1976) 38 STC 428 (ALL) WHEREIN QUESTIO N AROSE IN INDIAN INSTITUTE OF TECHNOLOGY VS. STATE OF UP (1976) 38 S TC 428 (ALL) WITH RESPECT TO THE VISITORS HOSTEL MAINTAINED BY THE INDIAN IN STITUTE 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, A ND SALE OF FOOD WAS AN INTEGRAL PART OF THE OBJECTS OF THE INSTITUTE NOR C OULD 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 ME ANS BEING SUPPLIED IN A HOSTEL TO THE SCHOLARS, VISITORS, GUEST FACULTY ETC . CANNOT BE ELIGIBLE TO SALES TAX WHERE MAIN ACTIVITY IS ACADEMICS AS HELD IN SCH OLARS HOME SENIOR SECONDARY SCHOOL 42 VST 530. FURTHER, THE RELIANCE PLACED BY THE LOWER AUTHORITIES ON THE DECISION OF THE HONBLE MADRAS H IGH COURT IN CASE OF DCIT VS. WELLINGTON CHARITABLE TRUST IS ALSO MISPLA CED BECAUSE IN THAT CASE, THE ONLY ACTIVITY OF THAT PARTICULAR TRUST WA S 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 T HE STUDENTS, FACULTIES AND OTHER STAFF FOR LODGING AND BOARDING AS THEY AR E ENGAGED IN EDUCATION ACTIVITIES. THEREFORE, WE REVERSE THE FINDING OF T HE LOWER AUTHORITIES AND HELD THAT TRANSPORT AND HOSTEL FACILITIES SURPLUS C ANNOT BE CONSIDERED AS BUSINESS INCOME OF THE ASSESSEE SOCIETY WHICH IS MA INLY ENGAGED IN BUSINESS ACTIVITIES AND THESE ACTIVITIES ARE SUBSER VIENT TO THE MAIN OBJECT OF EDUCATION OF THE TRUST. 11. IN KANHA CHARITABLE TRUST VS. ACIT ITA NOS. 329 7 & 5987/DEL/2015, WHILE PLACING RELIANCE ON ITS EARLIE R DECISION IN THE CASE OF KRISHNA CHARITABLE SOCIETY VS. ACIT IT WAS HELD THA T IN THE ABSENCE OF ANY CLINCHING EVIDENCE TO SHOW THAT THE HOSTEL FACILITI ES AND TRANSPORT FACILITIES 10 ITA NO. 3550/DEL/2015 IDEAL EDUCATION SOCIETY WERE PROVIDED TO ANYBODY OTHER THAN STUDENTS AND ST AFF OF THE TRUST. THE TRANSPORT AND HOSTEL FACILITIES PROVIDED BY THE EDU CATIONAL INSTITUTION SHALL BE CONSTRUED TO BE THE INTRINSIC PART OF THE EDUCATIO NAL ACTIVITIES OF THE ASSESSEE AND THEY CANNOT BE CONSIDERED DIFFERENT THAN ACTIVI TIES OF THE SOCIETY OF EDUCATION. THE HOSTEL AND TRANSPORT FACILITIES A RE INCIDENTAL TO ACHIEVE THE OBJECT OF PROVIDING EDUCATION AS PER OBJECT OF THE TRUST. 12. FURTHER, IN MALLIKARJUN SCHOOL SOCIETY VS. CCIT (2018) 90 TAXMANN.COM 160 (UTTARAKHAND), THE HONBLE HIGH COU RT HELD THAT AN EDUCATIONAL INSTITUTION WILL NOT CEASE TO BE ONE EX ISTING SOLELY FOR EDUCATIONAL PURPOSES SINCE THE OBJECT IS NOT TO MAKE PROFIT AND THE DECISIVE OR AS A TEST AS OBSERVED BY THE HONBLE APEX COURT IS WHETHER ON AN OVERALL VIEW OF THE MATTER THE OBJECT IS TO MAKE PROFIT AND ONE SHOULD BEAR IN MIND THE DISTINCTION BETWEEN THE CORPUS, THE OBJECTS AND THE POWER OF TH E CONCERNED ENTITY. 13. IN THE PRESENT CASE ALSO, IT IS NOT THE CASE OF THE REVENUE THAT THE TRANSPORT FACILITY IS ALSO PROVIDED TO THE OUTSIDER . HONBLE KARNATAKA HIGH COURT IN THE CASE OF KARNATAKA LINGAYAT EDUCATION S OCIETY 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 I NCIDENTAL TO ACHIEVE THE OBJECT OF PROVIDING EDUCATION AND I.E. THE OBJECT O F THE SOCIETY. THEREFORE, IN VIEW OF THE ABOVE DECISION OF THE HONBLE 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 TH E ASSESSEE TRUST ARE NOT IN THE NATURE OF BUSINESS, INASMUCH AS THE TRANSPORT IS AL SO INCIDENTAL TO THE ATTAINMENT OF THE MAIN OBJECT OF THE TRUST OF THE E DUCATION. THEREFORE, THE PROVISIONS OF SECTION 11(4A) OF THE ACT DO NOT APPL Y 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 AL LOWED. THE HONBLE HIGH COURT IN CASE OF MALLIKARJUN SCHOO L SOCIETY (SUPRA) HELD THAT AN EDUCATIONAL INSTITUTE WILL NOT CEASE TO BE ONE EXISTING SOLELY FOR EDUCATIONAL PURPOSES SINCE THE OBJECT IS NOT TO MAK E PROFIT. IN PRESENT CASE ALSO THE ASSESSEE SOCIETY WILL NOT CEASED TO EXIST AS EDUCATIONAL INSTITUTE BECAUSE IT IS PROVIDING HOSTEL FACILITY OR TRANSPOR TATION FACILITY OR MESS FACILITY, AS IT IS AN INCIDENTAL TO THE EDUCATION PURPOSE OF THE ASSESSEE SOCIETY. THEREFORE, IN VIEW OF THE HONBLE UTTARAKHAND HIGH COURT DECISION IN CASE OF MALLIKARJUN SCHOOL SOCIETY (SUPRA) AND ORDERS OF TH E CO-ORDINATE BENCH IN CASE OF DELHI PUBLIC SCHOOL GAZIABAD, THE HOSTEL FACILIT Y PROVIDED BY THE ASSESSEE 11 ITA NO. 3550/DEL/2015 IDEAL EDUCATION SOCIETY SOCIETY IS NOT IN THE NATURE OF BUSINESS AND IS INC IDENTAL TO THE ATTAINMENT OF THE MAIN OBJECT OF THE PROVIDING EDUCATION TO STUDE NTS. THEREFORE, PROVISIONS OF SECTION 11(4A) WILL NOT BE APPLICABLE TO THE ASSESS EE. THUS, GROUND NOS. 2, 2.1 AND 2.2 ARE ALLOWED. 10. AS REGARDS TO GROUND NO. 3 AND 3.1, THE CONTENT ION OF THE LD. AR THAT DEPRECIATION IS ALLOWABLE AS SEPARATE DEDUCTION APA RT FROM APPLICATION OF INCOME IS ACCEPTABLE AS DEPRECIATION HAS TO BE DEB ITED TO DETERMINE THE EXTENT AND USAGE OF THE CAPITAL ASSET IN THE COURSE OF CON DUCT OF ACTIVITIES AND IS AVAILABLE U/S 32 OF THE ACT. THE ASSESSEE HAS PROV IDED THE DEPRECIATION IN THE INCOME AND EXPENDITURE IN CONFORMITY WITH THE INCOM E TAX RULES APPLICABLE TO THE ALLOWANCE OF DEPRECIATION OF FIXED ASSETS. VAR IOUS DECISION OF THE HONBLE APEX COURT AND HONBLE HIGH COURTS RELIED UPON BY T HE LD. AR HIGHLIGHTS THE PROPOSITION THAT DEPRECIATION SHOULD BE ALLOWED, EV EN IF, THE PURCHASE OF ASSETS HAVE BEEN CLAIMED BY THE TRUST TOWARDS APPLICATION OF INCOME. HENCE GROUND NO. 3 AND 3.1 ARE ALLOWED. 11. IN RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH JUNE, 2019 SD/- SD/- (G.D. AGRAWAL) (SUCHITRA KAMBLE) VICE PRESIDENT JUDICIAL MEMBER DATED: 12/06/2019 *KAVITA ARORA COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT 12 ITA NO. 3550/DEL/2015 IDEAL EDUCATION SOCIETY ASSISTANT REGISTRAR ITAT NEW DELHI DATE OF DICTATION 11.06.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 12.06.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS 12.6.2019 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 12.6.2019 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS 12.6.2019 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 12.6.2019 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 12.6 .2019 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER