Society for Creative and Intellectual Development, Ghaziabad V. JCIT, Ghaziabad

ITA 3620/DEL/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6564 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-12-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 1
• Next Hearing Date: 25-10-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 04-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution
• Section: 143(3); 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC-1, NEW DELHI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER ITA NO.3620/DEL/2015 ASSESSMENT YEAR : 2010-11 SOCIETY FOR CREATIVE AND INTELLECTUAL DEVELOPMENT, 363-365, BSR ROAD, NH-24, PANDAV NAGAR INDUSTRIAL AREA, GHAZIABAD. VS. JCIT, RANGE-2, GHAZIABAD PAN : AAAAS 1480 M (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SANJEEV JAIN, CA RESPONDENT BY : SHRI S. K. JAIN, SR. DR DATE OF HEARING : 25-10-2016 DATE OF PRONOUNCEMENT : 01-12-2016 O R D E R PER S.V. MEHROTRA, A.M : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 27.03.2015 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS), GHAZIABAD, U/S 143(3) OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT) RELATING TO A.Y. 2010-11. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEES SOCIETY WAS REGISTERED WITH THE REGISTRAR OF SOCIETY, DELHI VIDE NO.S-2875 2 OF 2005 ON 15.12.2005. IT WAS GRANTED REGISTRATION U/S 12AA O F THE ACT BY LD. COMMISSIONER OF INCOME TAX, MEERUT VIDE ORDER 2 ITA NO.3620/DEL/2015 C.NO.40(27)/REGN/GZB/1997-98/19097 DATED 31.12.1997 . THE ASSESSEE WAS RUNNING AN INSTITUTION IN THE NAME & STYLE OF SHIVA INSTITUTE OF MANAGEMENT STUDIES AT 365-365, PANDAV NAGAR, INDUS TRIAL AREA, NH-24, BSR ROAD, GHAZIABAD. THE ASSESSEE HAD FILED RETURN OF INCOME DECLARING NIL INCOME. THE ASSESSING OFFICER MADE AN ADDITION OF RS.33,28,825/- ON ACCOUNT OF SURPLUS OF HOSTEL TREATING THE SAME AS B USINESS INCOME U/S 11(4A) OF THE ACT. HE REJECTED THE ASSESSEES CLAIM THAT ACTIVITY OF RUNNING HOSTEL WAS NOT A BUSINESS BECAUSE SURPLUS WAS UTILIZED FOR CHARITABLE PURPOSES AND IT WAS AS PER REQUIREMENT OF AICTE NORMS AND HOSTEL WAS NOT ISOLATED UNIT AND WAS INCLUSIVE OF THE MAIN OBJECT OF THE SOCIETY I.E. EDUCATION. THE ASSESSING OFFICER ALSO POINTED OUT THAT NO SEPARATE BOOKS OF ACCOUNT HAD BEEN MAINTAINED. AT THE OUTSET, LD. COUNSEL POINTE D OUT THAT IN ASSESSEES OWN CASE FOR SUBSEQUENT YEARS AND EARLIER YEARS NO ADDITION HAD BEEN MADE BY ASSESSING OFFICER. IN THIS REGARD, HE REFERRED TO FOLLOWING ASSESSMENT ORDERS :- ASSESSMENT YEAR PAGE NO. OF PAPER BOOK 2006-07 15 2007-08 61 2008-09 74 2009-10 86 2011-12 122 3 ITA NO.3620/DEL/2015 3. HE POINTED OUT THAT THESE ASSESSMENTS, EXCEPT FO R ASSESSMENT YEAR 2008-09, WERE U/S 143(3) OF THE ACT AND IN NONE OF THE YEAR, ADDITION HAD BEEN MADE ON THIS COUNT. HE POINTED OUT AICTE NORM S REQUIRED MAINTAINING HOSTEL WHICH IS NOT MEANT FOR OUTSIDER. LD. COUNSEL REFERRED TO THE DECISION IN THE CASE OF NIGHTINGALE EDUCATION S OCIETY VS. JCIT IN ITA NO.3323/DEL/2015 FOR ASSESSMENT YEAR 2010-11, ORDER DATED 10.11.2015 AND POINTED OUT THAT SIMILAR OBSERVATION WAS MADE B Y THE ASSESSING OFFICER AS IS EVIDENT FROM PARA 3 4 OF TRIBUNALS ORDER. HE POINTED OUT THAT THE TRIBUNAL ALLOWED THE ASSESSEES APPEAL, INTER-ALIA, OBSERVING THAT RUNNING OF HOSTEL WAS NOT A SEPARATE BUSINESS ACTIVITY BUT INT EGRAL AND INTERCONNECTED TO RUNNING A NURSING COLLEGE. HE POINTED OUT THAT THI S DECISION IS APPLICABLE TO THE FACTS OF THE PRESENT CASE. 4. I HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PA RTIES AND HAD PERUSED THE RECORD OF THE CASE. I FIND THAT ASSESSING OFFI CER HAS INTER-ALIA OBSERVED AS UNDER :- PERUSAL OF RECORD SHOWS THAT THE ASSESSEE IS RUNNI NG HOSTEL. NO SEPARATE BOOKS OF ACCOUNTS HAVE BEEN MAINTAINED. THE ASSESSEE HAS CLAIMED THAT ACTIVITY OF RUNNING HOSTEL IS NOT A BUSINESS BECAUSE IT IS UTIL IZED FOR CHARITABLE PURPOSE AND IT IS AS PER REQUIREMENT OF ACITE NORMS AND HOSTEL IS NOT AN ISOLATED UNIT, IT IS INCLUSIVE OF THE MAIN OBJECT OF SOCIETY I.E. EDUCAT ION. IN THIS REGARD IT IS TO SUBMIT THAT UNDOUBTEDLY CERTAIN CONDITION HAS BEEN FIXED F OR MAINTAINING HOSTEL TO CERTAIN EXTENT BY AICTE BUT NOWHERE CONDITION OF GE NERATING SURPLUS HAS BEEN MENTIONED. HAD IT NOT BEEN BUSINESS THE ASSESSEE CO ULD HAVE REIMBURSED ITS SURPLUS TO THE BENEFICIARIES OR THE MEMBERS OF THE HOSTEL, ELSE COULD HAVE REDUCED THE COST OF SUBSEQUENT YEAR TO THE FEES CHARGED FRO M PER STUDENT. IT IS FURTHER TO 4 ITA NO.3620/DEL/2015 POINT OUT THAT THE CHARGE OF FEES PER STUDENT IS AL SO COMPARABLE WITH MARKET PRICE WHICH RANGES BETWEEN RS. 3,000/- TO RS. 4,000/-; PE R STUDENT. DURING THE COURSE OF ASSESSMENT ASSESSEE HAS SUBMIT TED ITS REPLY WHICH IS PERUSED AND FOUND THAT ASSESSEE HAS RELIED UPON THE CLAIM OF EXEMPTION ON THE HOSTEL RECEIPT ON FOLLOWING TWO SCORES. I) HOSTEL, TRANSPORTATION IS A COMPOSITE ACTIVITY O F THE MAIN OBJECT OF THE SOCIETY, IT IS NON SEPARABLE AND CANNOT BE TREA TED AS BUSINESS. II) THE MAINTENANCE OF SEPARATE BOOKS OF ACCOUNTS I S NOT MANDATORY AND IT IS NOT REQUIRED AS THE WHOLE SURPLUS OF ORGA NIZATION IS USED FOR ATTAINMENT OF OBJECT OF THE SOCIETY I.E. EDUCAT ION. 5. IDENTICAL OBSERVATIONS WERE MADE IN THE CASE OF NIGHTINGALE EDUCATION SOCIETY (SUPRA) BY ASSESSING OFFICER WHIC H IS EVIDENT FROM PARA 2 OF TRIBUNALS ORDER WHEREIN TRIBUNAL HAS, INTER-ALIA, REPRODUCED FOLLOWING OBSERVATIONS OF ASSESSING OFFICER :- 3. ASSESSMENT OF SURPLUS OF MESS/HOSTEL AS BUSINES S INCOME U/S 114(A) OF THE ACT AND DISALLOWANCE OF HOSTEL EXPENSES AS APPLICAT ION. PERUSAL OF RECORD SHOWS THAT THE ASSESSEE IS RUNNIN G HOSTEL AND RECEIVED RS. 71,87,825/- ON ACCOUNT OF HOSTEL MESS. NO SEPARATE BOOKS OF ACCOUNTS HAVE BEEN MAINTAINED. THE ASSESSEE HAS CLAIMED THAT ACTIVITY OF RUNNING HOSTEL NOT A BUSINESS BECAUSE IT IS UTILIZED FOR CHARITABLE PURPOSE AND IT IS AS PER REQUIREMENT OF ACITE NORMS AND HOSTEL IS NOT AN ISO LATED UNIT, IT IS INCLUSIVE OF THE MAIN OBJECT OF THE SOCIETY I.E. EDUCATION. IN T HIS REGARD IT IS TO SUBMIT THAT UNFORTUNATELY CERTAIN CONDITION HAS BEEN FIXED FOR MAINTAINING HOSTEL TO CERTAIN EXTENT BY AICTE BUT NOWHERE CONDITION OF GEN ERATING SURPLUS HAS BEEN MENTIONED. HAD IT NOT BEEN BUSINESS THE ASSESSEE C OULD HAVE REIMBURSED ITS SURPLUS TO THE BENEFICIARIES OR THE MEMBERS O F THE HOSTEL, ELSE COULD HAVE REDUCED THE COST OF SUBSEQUENT YEAR TO THE FEES CHA RGED FROM PER STUDENT, IT IS FURTHER TO POINT OUT THAT THE CHARGE OF FEES PER STUDENT IS ALSO COMPARABLE WITH MARKET PRICE WHICH RANGES BETWEEN RS. 3,000/- TO 4, 000/- PER STUDENT. DURING THE COURSE OF ASSESSMENT ASSESSEE HAS SUBMITTED US REPLY WHICH IS PERUSED AND FOUND THAT ASSESSEE HAS RELIED UPO N THE CLAIM OF EXEMPTION ON THE HOSTEL RECEIPT ON FOLLOWING TWO SCORES. (I) HOSTEL, TRANSPORTATION IS A COMPOSITE ACT IVITY OF THE MAIN OBJECT OF THE SOCIETY IT IS NON-SEPARABLE AND CANNOT BE TREAT ED AS BUSINESS; 5 ITA NO.3620/DEL/2015 (II) THE MAINTENANCE OF SEPARATE BOOKS OF ACC OUNTS IS NOT MANDATORY AND IT IS NOT REQUIRED AS THE WHOLE SURPLUS OF ORGANIZATION IS USED OR ATTAINMENT OF OBJECT OF THE SOCIETY I.E. EDUCATION; (III) THE SOCIETY IS RUNNING A NURSING COLLEGE AND STUDENTS ARE MAINLY GIRLS TO PROVE THEM SAFE AND SECURE ENVIRONMENT HOSTEL IS MU ST FOR THE INSTITUTE; (IV) HOSTEL IS NOT MEANT FOR OUTSIDERS. 6. LD. COUNSEL HAS POINTED OUT THAT THE HOSTEL IS N OT FOR OUTSIDER. THUS, THE FACTS OF THE PRESENT CASE ARE IDENTICAL TO THE FACTS IN THE CASE OF NIGHTINGALE EDUCATION SOCIETY (SUPRA) WHEREIN IT HA S BEEN HELD IN PARA 7 AND 7.1 AS UNDER :- 7. IN MY CONSIDERED VIEW, RUNNING OF A HOSTEL, WHI CH INCLUDED A MESS FOR THE IN HOUSE STUDENTS, IS AN INCIDENTAL ACTIVITY, ESSEN TIAL FOR RUNNING A NURSING COLLEGE. THUS IT IS NOT A SEPARATE BUSINESS ACTIVI TY AS HELD BY THE REVENUE AUTHORITIES. IT IS NOT ONLY INCIDENTAL, BUT IT IS ALSO INTEGRAL AND INTERCONNECTED TO RUNNING A NURSING COLLEGE. HENCE THE QUESTION OF M AINTAINING SEPARATE BOOKS OF ACCOUNTS DOES NOT ARISE. THUS THE ORDER OF THE A.O . TO THE EXTENT CONFIRMED BY THE FIRST APPELLATE AUTHORITY IS HEREBY VACATED. 7.1 EVEN OTHERWISE THE A.O. WAS ABLE TO ARRIVE AT T HE REVENUES AND EXPENSES CONNECTED AND RELATABLE TO THE ACTIVITY OF RUNNING HOSTELS AND MESS BY THE ASSESSEE. HE HAD BROUGHT THE SURPLUS TO TAX BY SEP ARATELY COMPUTED THE INCOME FROM THESE ACTIVITIES. THIS DEMONSTRATES THAT THE CLAIM OF THE REVENUE THAT NO SEPARATE BOOKS OF ACCOUNTS ARE MAINTAINED IS TO BE DISMISSED FOR THE REASON THAT, THE OBJECT OF MAINTENANCE OF SEPARATE BOOKS OF ACCO UNTS IS ONLY FOR THE PURPOSE OF ASCERTAINING THE FINANCIAL RESULTS OF THAT PARTICUL AR ACTIVITY. AND THIS OBJECT IS ACHIEVED, THE QUESTION OF HOLDING THAT THERE IS VIO LATION OF S.11(4A) OF THE ACT DOES NOT ARISE. 7. RESPECTFULLY, FOLLOWING THE DECISION OF THE TRIB UNAL IN THE CASE OF NIGHTINGALE EDUCATION SOCIETY (SUPRA), THE ASSESSEE S APPEAL IS ALLOWED. 6 ITA NO.3620/DEL/2015 8. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 01 ST DAY OF DECEMBER, 2016. SD/- SD/- (SUDHANSHU SRIVASTAVA) (S.V. MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 01-12-2016. SUJEET COPY OF ORDER TO: - 1) THE APPELLANT; 2) THE RESPONDENT; 3) THE CIT; 4) THE CIT(A)-, NEW DELHI; 5) THE DR, I.T.A.T., NEW DELHI; BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, NEW DELHI