M/s. Seth Anandram Jaipuria Educational Society, Ghaziabad V. JCIT, Ghaziabad

ITA 3629/DEL/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 7387 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 7 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 04-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G JOHNSON
• Keywords: Business income; Charitable institution
• Section: 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: A NEW DELHI BEFORE SHRI G.D.AGRAWAL, HONBLE VICE PRES IDENT & SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO.-3629/DEL/2015 ( ASSESSMENT YEAR: 2010-11) M/S. SETH ANANDRAM JAIPURIA EDUCATIONAL SOCIETY VASHUNDHRA SECTOR 14C, GHAZIABAD, (U.P.) PAN : AAAAS0860P VS . JOINT COMMISSIONER OF INCOME TAX RANGE-2, C.G.O. COMPLEX-2, KAMLA NEHRU NAGAR GHAZIABAD (U.P.) APPELLANT RESPONDENT ASSESSEE BY: SH. SATYAJEET GOEL , CA REVENUE BY: SHRI G JOHNSON, SR.DR ORDER PER SUDHANSHU SRIVASTAVA, J.M.: THIS ASSESSEES APPEAL PREFERRED AGAINST ORDER DAT ED 27.02.2015 PASSED BY THE LD. CIT (APPEALS), MUZAFFA RNAGAR FOR ASSESSMENT YEAR 2010-11. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A SOCIETY WHICH ENJOYS REGISTRATION U/S 12AA OF THE INCOME TA X ACT, 1961 (HERE IN AFTER CALLED AS THE ACT). THE ASSESSEE S OCIETY IS RUNNING EDUCATIONAL INSTITUTIONS/SCHOOLS IMPARTING EDUCATIO N IN VARIOUS DATE OF HEARING 11 .10.2018 DATE OF PRONOUNCEMENT 09 . 01 .201 9 2 ITA N O. 3629/DEL/2015 ( M/S. SETH ANANDRAM JAIPURIA EDUCATIONAL SOCIETY) COURSES LIKE BBA, MBA, PGDBM ETC. THE RETURN OF INC OME WAS FILED FOR THE INSTITUTION DECLARING NIL INCOME. SUBSEQUEN TLY, THE CASE WAS SELECTED FOR SCRUTINY. DURING THE COURSE OF SCRUTIN Y PROCEEDINGS, THE AO OBSERVED THAT THE TOTAL RECEIPTS WERE SHOWN AT RS. 22,07,39,653/-. THIS WAS EXCLUDING HOSTEL RECEIPTS OF RS. 39,37,067/- AND CONVEYANCE OF RECEIPTS OF RS. 1,26, 54,025/-. THE AO FURTHER OBSERVED THAT AGAINST THE HOSTEL RECEIPT S OF RS. 39,37,067/-, THE ASSESSEE HAD INCURRED EXPENDITURE OF RS. 12,26,998/- AS HOSTEL EXPENSES AND FURTHER AS AGA INST THE CONVEYANCE RECEIPTS OF RS. 1,26,54,025/- EXPENDITUR E OF RS. 66,94,175/- WAS SHOWN AS BUS HIRE CHARGES AND A F URTHER EXPENDITURE OF RS. 15,35,201/- UNDER VEHICLE EXPEN DITURE WAS DISCLOSED. THE AO ALSO OBSERVED THAT NO SEPARATE BO OKS OF ACCOUNTS WERE MAINTAINED FOR THE RUNNING OF HOSTEL AS WELL AS FOR RUNNING OF BUSES. ON A QUERY FROM THE AO, THE ASSES SEE SUBMITTED THAT THE HOSTEL AND TRANSPORTATION ACTIVITY WERE CO MPOSITE ACTIVITY AND PART OF THE MAIN OBJECT OF THE SOCIETY OF PROVI DING EDUCATION AND WAS NOT SEPARABLE AND, THEREFORE, THE SAME COUL D NOT BE TREATED AS BUSINESS. IT WAS ALSO SUBMITTED THAT THE MAINTENANCE OF SEPARATE BOOKS OF ACCOUNTS WAS NOT MANDATORY AS THE ENTIRE SURPLUS OF THE SOCIETY WAS USED FOR THE ATTAINMENT OF THE OBJECT OF THE SOCIETY I.E. IMPARTING OF EDUCATION. HOWEVER, T HE AO DID NOT 3 ITA N O. 3629/DEL/2015 ( M/S. SETH ANANDRAM JAIPURIA EDUCATIONAL SOCIETY) ACCEPT THE ASSESSEES CONTENTION AND TREATED THE SU RPLUS FROM HOSTEL AMOUNTING TO RS. 27,10,069/- AS BUSINESS INC OME. SIMILARLY, THE SURPLUS FROM CONVEYANCE AMOUNTING TO RS. 37,91,948/- WAS ALSO TREATED AS BUSINESS INCOME. BO TH THESE AMOUNTS WERE ADDED TO THE INCOME OF THE ASSESSEES SOCIETY. THE ASSESSMENT WAS COMPLETED AT AN INCOME OF RS. 65,02, 017/-. AGGRIEVED, THE ASSESSEE APPROACHED THE LD. CIT (APP EALS) WHO UPHELD THE ASSESSMENT ORDER AND NOW THE ASSESSEE IS BEFORE THE ITAT AND HAS CHALLENGED THE ACTION OF THE LD. CIT ( APPEALS) IN HOLDING THAT THE PROVISION OF HOSTEL FACILITIES AND CONVEYANCE FACILITIES WAS A BUSINESS ACTIVITY. 3. THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY ORDER OF ITAT DELHI BENCH IN THE CASE OF DELHI PUBLIC SCHOOL GHAZIABAD SOCIETY V S. ACIT IN ITA NO. 3593/DEL/2015 VIDE ORDER DATED 08.05.2018 WHERE IN IT HAS BEEN HELD THAT HOSTEL FACILITIES AND TRANSPORT FACI LITIES WERE INTRINSIC PART OF THE ACTIVITY OF THE SOCIETY AND WERE VERY M UCH INCIDENTAL TO THE ATTAINMENT TO THE MAIN OBJECT OF IMPARTING OF E DUCATION. A COPY OF THE SAID ORDER WAS FILED BY THE LD. AUTHORISED R EPRESENTATIVE. 4. IN RESPONSE THE LD. SR. DEPARTMENTAL REPRESENTAT IVE PLACED RELIANCE ON THE CONCURRENT FINDINGS OF BOTH THE LOW ER AUTHORITIES. IT WAS SUBMITTED BY THE LD. SR. DEPARTMENTAL REPRESENT ATIVE THAT BY 4 ITA N O. 3629/DEL/2015 ( M/S. SETH ANANDRAM JAIPURIA EDUCATIONAL SOCIETY) RUNNING THE BUSES AND THE HOSTEL THE ASSESSEE WAS G ENERATING SURPLUS WHICH WAS NOT BEING DISTRIBUTED TO THE STUD ENTS AND WAS ALSO NOT BEING REDUCED FROM THE FEES AND, THUS, THE SE FACILITIES WERE EARNING SURPLUS WHICH REMAINED WITH THE ASSESSEES SOCIETY. IT WAS VEHEMENTLY ARGUED THAT THE LOWER AUTHORITIES HAD CO RRECTLY HELD THE TWO ACTIVITIES TO BE BUSINESS ACTIVITIES. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALS O PERUSED THE MATERIAL ON RECORD. WE HAVE ALSO PERUSED THE OR DER OF THE CO- ORDINATE BENCH IN THE CASE OF DELHI PUBLIC SCHOOL G HAZIABAD SOCIETY VS. ACIT (SUPRA) AND WE FIND THAT THE AVERM ENT OF THE LD. AUTHORISED REPRESENTATIVE THAT THE ASSESSEES CASE IS COVERED IN FAVOUR OF THE ASSESSEE BY THIS ORDER IN THE CASE OF DELHI PUBLIC SCHOOL GHAZIABAD SOCIETY IS CORRECT. THE RELEVANT P ARAGRAPHS OF THE CO-ORDINATE BENCH IN THE CASE OF DELHI PUBLIC SCHOO L GHAZIABAD SOCIETY ARE PARAGRAPHS 10, 11, 12 AND 13 AND THE SA ME ARE BEING REPRODUCED HEREIN UNDER FOR A READY REFERENCE :- 10. IT IS, THEREFORE, CLEAR THAT THE ENTIRE DISPUT E IN THIS MATTER REVOLVES AROUND THE QUESTION WHETHER OR NOT THE ACTIVITY OF RUNNING SCHOOL BUSES EXCLUSIVELY FOR TH E FACILITY OF THE STUDENTS AND STAFF, IS AN INTRINSIC PART OF THE ACTIVITY OF RUNNING A SCHOOL. SUCH A QUESTION IS NO LONGER R ES INTEGRA. IN THE CASE OF KRISHNA CHARITABLE SOCIETY VS. ADDL CIT IN ITA NO. 4639/DEL/2015 FOR AY 2011-12 DATED 5 ITA N O. 3629/DEL/2015 ( M/S. SETH ANANDRAM JAIPURIA EDUCATIONAL SOCIETY) 15.09.2017, A SIMILAR QUESTION HAD ARISEN. VIDE PAR A NO.11, A COORDINATE BENCH OF THIS TRIBUNAL HELD THA T TRANSPORT AND HOSTEL FACILITY SURPLUS CANNOT BE CON SIDERED AS BUSINESS INCOME OF THE SOCIETY AS THESE ACTIVITI ES ARE INCIDENTAL TO THE MAIN OBJECT OF THE ASSESSEE SOCIE TY OF EDUCATION. RELEVANT OBSERVATIONS ON THIS ASPECT ARE AS UNDER:- '11. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND OTHER JUDICIAL PRONOUNCEMENT PLACED BEFORE US. IN THE GROUNDS NO. 1-3 ASSESSEE IS CONTESTING THAT ADDITION MADE BY THE LD. ASSESSING OFFICER TREATING HOSTEL PLACES PROVIDED TO COLLEGE STUDENT AS BUSINESS OF THE SOCIETY AND TEXT THE ALLEGED SURPLUS OF RS. 9887873/- AS BUSINESS INCOME OF THE APPELLANT. IT WAS NOT THE CASE OF THE REVENU E THAT ASSESSEE HAS RENTED OUT THESE HOSTELS TO THE STUDENTS WHO ARE NOT PARTED EDUCATION IN THE ABOVE INSTITUTES. IT WAS ALSO NOT THE CASE OF REVENUE THA T ASSESSEE IS PRIMARILY ENGAGED IN THE BUSINESS OF PROVIDING HOSTEL FACILITIES TO THE STUDENTS. THE AB OVE ISSUE IS NO MORE RES INTEGRA IN VIEW OF THE DECISIO N OF THE HON'BLE KARNATAKA HIGH COURT IN CIT VERSUS KARNATAKA LINGAYAT EDUCATION SOCIETY IN ITA NO. 5004/2012 DATED 15/10/2014 WHEREIN IT HAS BEEN HELD THAT -PROVIDING HOSTEL TO THE STUDENTS/STAFF WORKING FOR THE SOCIETY'S INCIDENTAL TO ACHIEVE THE OBJECT OF PROVIDING EDUCATION, NAMELY THE OBJECT OF THE SOCIETY. IN VIEW OF THIS WE ARE OF THE OPINION THAT PROVIDING OF HOSTEL FACILITIES AND TRANSPORT FACILI TIES TO THE STUDENT AND STAFF MEMBER OF THE EDUCATIONAL INSTITUTE CANNOT BE CONSIDERED AS BUSINESS ACTIVITY BUT IS SUBSERVIENT TO THE OBJECT OF EDUCATIONAL ACTIVITIES PERFORMED BY THE SOCIETY. WE ARE ALSO SUPPORTED BY OUR VIEW BY THE DECISION OF THE HON'BL E 6 ITA N O. 3629/DEL/2015 ( M/S. SETH ANANDRAM JAIPURIA EDUCATIONAL SOCIETY) ALLAHABAD HIGH COURT IN IIT VERSUS STATE OF UP, (1976) 38 STC 428 (ALL) WHEREIN QUESTION AROSE IN INDIAN INSTITUTE OF TECHNOLOGY V. STATE OF U.P. (19 76) 38 STC 428 (ALL) WITH RESPECT TO THE VISITORS' HOSTEL MAINTAINED BY THE INDIAN INSTITUTE 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 T HE STATUTORY OBLIGATION OF MAINTENANCE OF THE HOSTEL, WHICH INVOLVED SUPPLY, AND SALE OF FOOD WASAN INTEGRAL PART OF THE OBJECTS OF THE INSTITUTE NOR C OULD THE RUNNING OF THE HOSTEL BE TREATED AS THE PRINCIP AL ACTIVITY OF THE INSTITUTE. THE INSTITUTE COULD NOT BE HELD TO BE DOING BUSINESS. FURTHER MEALS BEING SUPPLIED IN A HOSTEL TO THE SCHOLARS, VISITORS, GUE ST FACULTY ETC. CANNOT BE EXIGIBLE TO SALES TAX WHERE MAIN ACTIVITY IS ACADEMICS AS HELD IN SCHOLARS HOME SENIOR SECONDARY SCHOOL 42 VST 530. FURTHER, THE RELIANCE PLACED BY THE LOWER AUTHORITIES ON THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN CASE O F DCIT VERSUS WELLINGTON CHARITABLE TRUST IS ALSO MISPLACED BECAUSE IN THAT CASE, THE ONLY ACTIVITY O F THAT PARTICULAR TRUST WAS RENTING OUT OF THE PROPER TY 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 TH E STUDENTS , FACULTIES AND OTHER STAFF FOR LODGING AN D BOARDING AS THEY ARE ENGAGED IN EDUCATION ACTIVITIE S . THEREFORE WE REVERSE THE FINDING OF THE LOWER AUTHORITIES AND HELD THAT TRANSPORT AND HOSTEL FACILITIES SURPLUS CANNOT BE CONSIDERED AS BUSINESS INCOME OF THE ASSESSEE SOCIETY WHICH IS MAINLY ENGAGED IN BUSINESS ACTIVITIES AND THESE ACTIVITIES 7 ITA N O. 3629/DEL/2015 ( M/S. SETH ANANDRAM JAIPURIA EDUCATIONAL SOCIETY) ARE SUBSERVIENT TO THE MAIN OBJECT OF EDUCATION OF THE TRUST. 11. IN KANHA CHARITABLE TRUST VS. ACIT ITA NOS.3297 & 5987/DEL/2015, WHILE PLACING RELIANCE ON ITS EARLIE R DECISION IN THE CASE OF KRISHNA CHARITABLE SOCIETY VS. ACIT IT WAS HELD THAT IN THE ABSENCE OF ANY CLINCHING EV IDENCE TO SHOW THAT THE HOSTEL FACILITIES AND TRANSPORT FACIL ITIES WERE PROVIDED TO ANYBODY OTHER THAN STUDENTS AND STAFF O F THE TRUST. THE TRANSPORT AND HOSTEL FACILITIES PROVIDED BY THE EDUCATIONAL INSTITUTION SHALL BE CONSTRUED TO BE TH E INTRINSIC PART OF THE 'EDUCATIONAL ACTIVITIES' OF THE ASSESSE E AND THEY CANNOT BE CONSIDERED DIFFERENT THAN ACTIVITIES OF T HE SOCIETY OF 'EDUCATION'. THE HOSTEL AND TRANSPORT FACILITIES ARE INCIDENTAL TO ACHIEVE THE OBJECT OF PROVIDING EDUCA TION AS PER OBJECT OF THE TRUST. 12. FURTHER, IN MALLIKARJUN SCHOOL SOCIETY VS.CCIT (2018) 90 TAXMANN.COM 160 (UTTARAKHAND), THE HON'BLE HIGH COURT HELD THAT AN EDUCATIONAL INSTITUTION WILL NOT CEASE TO BE ONE EXISTING SOLELY FOR EDUCATIONAL PURPOSES SIN CE THE OBJECT IS NOT TO MAKE PROFIT AND THE DECISIVE OR AS A TEST AS OBSERVED BY THE HON'BLE APEX COURT IS WHETHER ON AN OVERALL VIEW OF THE MATTER THE OBJECT IS TO MAKE PR OFIT AND ONE SHOULD BEAR IN MIND THE DISTINCTION BETWEEN THE CORPUS, THE OBJECTS AND THE POWERS OF THE CONCERNED ENTITY. 13. IN THE PRESENT CASE ALSO, IT IS NOT THE CASE OF TH E REVENUE THAT THE TRANSPORT FACILITY IS ALSO PROVIDE D TO THE OUTSIDER. HON'BLE KARNATAKA HIGH COURT IN THE CASE OF KARNATAKA LINGAYAT EDUCATION SOCIETY IN ITA NO. 8 ITA N O. 3629/DEL/2015 ( M/S. SETH ANANDRAM JAIPURIA EDUCATIONAL SOCIETY) 5004/2012 DATED 15.10.2014 HAS HELD THAT PROVIDING THE HOSTEL TO THE STUDENTS AND THE STAFF WORKING FOR TH E SOCIETY IS INCIDENTAL TO ACHIEVE THE OBJECT OF PROVIDING ED UCATION AND I.E. THE OBJECT OF THE SOCIETY. THEREFORE, IN V IEW OF THE ABOVE DECISION OF THE HON'BLE 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 T HE TRANSPORT ACTIVITIES OF THE 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 EDUCATION. THEREFORE, THE PROVISIONS OF SECT ION 11(4A) OF THE ACT DO NOT APPLY TO THE ASSESSEE. WIT H THIS VIEW OF THE MATTER, WE ALLOW THE GROUNDS OF APPEAL. 5.1 ALTHOUGH THE LD. SR. DEPARTMENTAL REPRESENTATIV E HAS ARGUED VEHEMENTLY AGAINST THE LD. ARS CONTENTION THAT PRO VISION OF HOSTEL FACILITIES AND TRANSPORT FACILITIES IS NOT INTRINSI C TO THE ACTIVITY OF IMPARTING EDUCATION, HE COULD NOT POINT OUT ANY ORD ER OF THE JURISDICTIONAL BENCH OR THE HONBLE JURISDICTIONAL HIGH COURT TO THE CONTRARY. ACCORDINGLY, RESPECTFULLY FOLLOWING THE R ATIO AS LAID DOWN BY THE CO-ORDINATE BENCH OF THE ITAT IN THE CASE OF DELHI PUBLIC SCHOOL GHAZIABAD SOCIETY VS. ACIT IN ITA NO. 3593/D EL/2015, WE ARE OF THE CONSIDERED VIEW THAT HOSTEL ACTIVITIES A ND TRANSPORT ACTIVITIES OF THE ASSESSEE SOCIETY ARE NOT IN NATUR E OF BUSINESS 9 ITA N O. 3629/DEL/2015 ( M/S. SETH ANANDRAM JAIPURIA EDUCATIONAL SOCIETY) INASMUCH AS THESE TWO ACTIVITIES ARE INCIDENTAL TO THE ATTAINMENT OF THE MAIN OBJECT OF EDUCATION. ACCORDINGLY, WE ALLOW THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE. 6. IN THE FINAL RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 09.01.2019. SD/- SD/- (G.D.AGRAWAL) (SUDHANSHU SR IVASTAVA) VICE PRESIDENT JUDICIA L MEMBER DATED: 09.01.2019 *BR* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT TRUE COPY ASSISTANT REGISTRAR ITAT NEW DELHI 10 ITA NO. 3629/DEL/2015 ( M/S. SETH ANANDRAM JAIPURIA EDUCATIONAL SOCIETY)