M/s Durga Charitable Society, Ghaziabad V. JCIT, Ghaziabad

ITA 4440/DEL/2015

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 0183 (ITAT-DELHI)
• Duration Of Justice: 6 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2010-2011
• Appeal Filed On: 07-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AGAINST DATED PASSED
• Keywords: Business income; Charitable institution
• Section: 80G; 12AA; 22; 11

Judgement Text

1 ITA NO. 4440/DEL/2015 IN THE INCOME TAX APPE LLATE TRIBUNAL DELHI BENCH: G NEW DELHI BEFORE MS SUCHITRA KAMBLE, JUDICIAL ME MBER AND SHRI PRASHANT MAHARISHI, ACCO UNTANT MEMBER I.T.A. NO. 4440/DEL/20 15 (A.Y 2010-11) (THROUGH VIDEO CON FERENCING) DURGA CHARITABLE SOCIETY GOODWILL BUILDING, G. T. ROAD, MOHAN NAGAR GHAZIABAD AAATD0730C (APPELLANT) VS JCIT RANGE-2 GHAZIABAD (RESPONDENT) ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE ASSESSEE AGAINST ORDER DATED 16/02/2015 PASSED BY CIT(A)-MUZAFFARNAGAR, FOR ASSESSMENT YEAR 2010-11. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- 1. WHEREAS LD. COMMISSIONER (APPEAL) ERRED IN LAW AS ALSO IN FACTS AND CIRCUMSTANCES OF THE CASE TO CONFIRM THE ADDITION O F RS. 3,92,25,432/- MADE BY THE JCIT, RANGE-2 GHAZIABAD BY ASSESSING HOSTEL SURPLUS AS BUSINESS INCOME OF THE ASSESSEE, COMPLETELY IGNORING THE FAC T THAT THE ASSESSEE IS AN EDUCATIONAL SOCIETY PROVIDING EDUCATION BY RUNNING VARIOUS EDUCATIONAL INSTITUTES AND HOSTEL FACILITY IS PROVIDED TO THE S TUDENTS AS PER ACITE NORMS AND IT IS AN INSEPARABLE AND INTEGRAL PART OF THE M AIN PURPOSE OF SOCIETY FOR APPELLANT BY SH. AMAL SINHA, ADV RESPONDENT BY SH. PRAKASH DUBEY, SR. DR DATE OF HEARING 30.06.2021 DATE OF PRONOUNCEMENT 22.07.2021 2 ITA NO. 4440/DEL/2015 WHICH IT HAS BEEN ESTABLISHED I.E. TO PROVIDE EDUCA TION TO THE STUDENTS, WHICH IS NOT A BUSINESS ACTIVITY. 2. WHEREAS LD. COMMISSIONER (APPEAL) ERRED IN LAW AS ALSO IN FACTS AND CIRCUMSTANCES OF THE CASE TO CONFIRM THE FINDINGS O F THE AO WHICH ARE LARGELY BASED ON THE INFORMATION GIVEN ON A WEBSITE, WHICH IS TOTALLY IRRELEVANT TO THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE ASSESSEE . IT IS CLEAR FROM THE EXTRACT QUOTED BY THE AO THAT THE SAID WEBSITE TALK S OF PRIVATELY RUN PGS (PAYING GUEST HOSTELS) IN THE GHAZIABAD AREA AND NO T RELATE TO THE HOSTEL FACILITIES PROVIDED TO ITS STUDENTS BY THE COLLEGES . 3. WHEREAS LD. COMMISSIONER (APPEAL) ERRED IN LAW AS ALSO IN FACTS AND CIRCUMSTANCES OF THE CASE TO CONFIRM THE ADDITION O F RS. 3,92,25,432/- MADE BY THE AO TO UNJUSTIFIABLY AND ARBITRARILY INVOKE P ROVISIONS OF SECTION 11(4A) OF THE I.T. ACT, 1961 IN THE CASE OF THE ASSESSEE 3. THE ASSESSEE SOCIETY IS DULY REGISTERED UNDER SO CIETY REGISTRATION ACT, 1860. THE SOCIETY HAS BEEN GRANTED REGISTRATION U/ S 12AA OF THE INCOME TAX ACT, 1961 VIDE ORDER DATED 15/6/1995. THE SOCIETY HAS ALSO BEEN GRANTED EXEMPTION U/S 80G OF THE ACT VIDE ORDER DATED 18/6/ 2010 FOR THE PERIOD FROM 1/4/2010. THE SOCIETY IS RUNNING VARIOUS EDUCATION AL INSTITUTIONS. THE RETURN OF INCOME WAS FILED ON 17/8/2010 FOR ASSESSMENT YEA R 2010-11 DECLARING NIL INCOME. THE ASSESSING OFFICER MADE ASSESSMENT OF SURPLUS OF HOSTEL AS BUSINESS INCOME U/S 114(A) OF THE ACT AND DISALLOWE D HOSTEL EXPENSES AMOUNTING TO RS. 3,92,25,432/- AND MADE ADDITION UN DER THE HEAD INCOME FROM BUSINESS AND PROFESSION. 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) DISMISSED THE APPEAL OF TH E ASSESSEE. 5. THE LD. AR SUBMITTED THAT THE ASSESSEE IS A CHAR ITABLE SOCIETY REGISTERED U/S 12AA OF THE ACT AND U/S 80G. THE ORIGINAL ASSE SSMENT ORDER WAS COMPLETED U/S 133(3) OF THE ACT VIDE ORDER DATED 7/ 3/2013. THE ASSESSEE 3 ITA NO. 4440/DEL/2015 RUNS VARIOUS EDUCATIONAL INSTITUTIONS, COLLEGES AND VARIOUS COURSES ARE MAINTAINED BY THE ASSESSEE WHICH ARE GOVERN BY RULE S AND REGULATIONS, ALL INDIA COUNSEL FOR TECHNICAL EDUCATION (AICTE), GAUT AM BUDH TECHNICAL UNIVERSITY(GBTU), APART FROM RUNNING EDUCATIONAL IN STITUTES, MEDICAL COLLEGES AND CHARITABLE HOSPITALS. THE ASSESSEE IS ALSO MAI NTAINING HOSTEL FROM THE IN HOUSE STUDENT WHICH IS AN INTEGRAL PART/INTEGRAL AC TIVITY FOR THE FUNCTIONALITY OF EDUCATIONAL INSTITUTE. THE LD. AR SUBMITTED THAT I F ANY SURPLUS IS GENERATED, THE SAME IS APPLIED FOR RUNNING AND MAINTAINING VAR IOUS CHARITABLE ACTIVITIES CARRIED ON BY ASSESSEE SOCIETY TO WHICH THE ASSESSI NG OFFICER HAS WRONGLY TREATED RUNNING AND MAINTAIN HOSTEL ACTIVITY AS INC IDENTAL AND BUSINESS ACTIVITY. THERE WAS NO SURPLUS IN CONSOLIDATION OF THE INSTITUTE, RECEIPTS AND EXPENDITURE, HOSTEL ACTIVITY MAINTAIN BY AN EDUCATI ONAL INSTITUTE UNDER STATUTORY REQUIREMENT IS AN INTEGRAL ACTIVITY. AS PER LIST OF UNIVERSITY GRANT COMMISSION (UGC) IT HAS MORE THAN 600 UNIVERSITIES AND OUT OF THOSE UNIVERSITIES, WE ARE ENCLOSING HERE WITH. DETAILS OF HOSTEL FACILITIES ENUMERATED BY EACH U. P UNIVERSITY ON THEIR WEB SIT ES WHICH CLEARLY INDICATES THAT HOSTEL ACTIVITY IS NOT A INCIDENTAL OR ANCILL ARY ACTIVITY OR BUSINESS ACTIVITY BUT AN INTEGRAL ACTIVITY REQUIRED TO REQUIRED TO RE GULARIZE THE FUNCTIONALITY OF EDUCATIONAL INSTITUTE. THEREFORE, IT WAS BECAUSE O F THE AFORESAID GUIDELINES, THE ASSESSEE SOCIETY WAS OBLIGED TO MAINTAIN HOSTEL AND ASSESSEE HAS FULFILLED THE REQUIREMENT OF IMPARTING FORMAL EDUCATION BY A SYSTEMATIC INSTRUCTIONS. THE LD. AR RELIED UPON THE CBDT CIRCULAR NO. 11/200 8. THE LD. AR RELIED UPON THE FOLLOWING DECISIONS:- I) KRISHNA CHARITABLE SOCIETY VS. ADDL. CIT, RANGE- 1, GHAZIABAD (ITA N. 4639/DEL/2015) II) SOCIETY FOR EDUCATIONAL EXCELLENCE VS. DCIT (IT A NO. 6957,6960 & 3606/DEL/2017) III) DY. DIT VS. THE YOUNG WOMENS CHRISTIAN ASSOCI ATION OF INDIA (ITA NO. 2408/DEL/2013) 4 ITA NO. 4440/DEL/2015 IV) DEHRADUN PUBLIC SCHOOL VS. ADDL. CIT (2017) 167 ITD 305 V) ADARSH PUBLIC SCHOOL VS. JCIT (2018) 169 ITD 255 VI) HAMDARD LABORATORIES INDIA VS. ASSISTANT DIRECT OR OF INCOME TAX (EXEMPTION) (2015) 379 ITR 393 6. THE LD. DR RELIED UPON THE ASSESSMENT ORDER AND THE ORDER OF THE CIT(A). 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL T HE RELEVANT MATERIAL AVAILABLE ON RECORD. THERE IS DELAY OF 32 DAYS IN F ILING THE PRESENT APPEAL WHICH WAS EXPLAINED BY THE LD. AR AT THE TIME OF HEARING, THE SAME IS GENUINE, HENCE THE DELAY IS CONDONED. THE ASSESSEE IS A SOCIETY RU NNING EDUCATIONAL INSTITUTES, MEDICAL COLLEGES AND CHARITABLE HOSPITA LS WHICH IS AFFILIATED WITH ALL INDIA COUNSEL FOR TECHNICAL EDUCATION. IT IS ALSO UNDISPUTED THAT ASSESSEE IS CARRYING EDUCATIONAL ACTIVITY AND RUNNING VARIOUS C OLLEGES ESPECIALLY MEDICAL COLLEGES AND CHARITABLE HOSPITALS. THE INCOME FROM CHARITABLE ACTIVITIES DECLARED BY THE ASSESSEE WAS NIL AND THE ASSESSEE E ARNED GROSS RECEIPT OF RS. 61,62,60,476/- ON ACCOUNT OF EDUCATIONAL ACTIVITY W HEREAS THE ASSESSEE IS ALSO RUNNING HOSTELS FOR THE STUDENTS AS PER THE UGC GUI DELINES WHICH IS AN ANCILLARY ACTIVITY. IN CASE OF KRISHNA CHARITABLE S OCIETY VS. ADDL. CIT IN ITA NO. 4639/DEL/2015 FOR AY 2011-12 DATED 15.09.2017, THE TRIBUNAL HELD 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 - 3 ASSESSEE IS CONTESTIN G THAT ADDITION MADE BY THE LD. AO TREATING HOSTEL PLACES PROVIDED TO COLLEGE S TUDENT AS BUSINESS OF THE SOCIETY AND TEXT THE ALLEGED SURPLUS OF RS. 98,87,8 73/- AS BUSINESS INCOME OF THE ASSESSEE. IT WAS NOT THE CASE OF THE REVENUE T HAT ASSESSEE HAS RENTED OUT THESE HOSTELS TO THE STUDENTS WHO ARE NOT PARTED ED UCATION IN THE ABOVE INSTITUTES. IT WAS ALSO NOT THE CASE OF REVENUE TH AT ASSESSEE IS PRIMARILY ENGAGED IN THE BUSINESS OF PROVIDING HOSTEL FACILIT IES TO THE STUDENTS. THE ABOVE ISSUE IS NO MORE RES INTEGRA IN VIEW OF THE D ECISION OF THE HONBLE KARNATAKA HIGH COURT IN CIT VS. 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 SOCIET YS INCIDENTAL TO ACHIEVE THE OBJECT OF PROVIDING EDUCATION, NAMELY THE OBJECT OF THE SOCIETY. IN VIEW OF THIS 5 ITA NO. 4440/DEL/2015 WE ARE OF THE OPINION THAT PROVIDING OF HOSTEL FACI LITIES AND TRANSPORT FACILITIES 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 S UPPORTED BY OUR VIEW BY THE DECISION OF THE HONBLE ALLAHABAD HIGH COURT IN IT VS. STATE OF UP (1976) 38 STC 428 (ALL) WHEREIN QUESTION AROSE IN INDIAN INST ITUTE OF TECHNOLOGY VS. STATE OF UP (1976) 38 STC 428 (ALL) WITH RESPECT TO THE VISITORS HOSTEL MAINTAINED BY THE INDIAN INSTITUTE OF TECHNOLOGY WH ERE LODGING AND BOARDING FACILITIES WERE PROVIDED TO PERSONS WHO WOULD COME TO THE INSTITUTE IN CONNECTION WITH EDUCATION AND THE ACADEMIC ACTIVITI ES OF THE INSTITUTE. IT WAS OBSERVED THAT THE STATUTORY OBLIGATION OF MAINTENAN CE OF THE HOSTEL, WHICH INVOLVED SUPPLY, AND SALE OF FOOD WAS AN INTEGRAL P ART OF THE OBJECTS OF THE INSTITUTE NOR COULD THE RUNNING OF THE HOSTEL BE TR EATED AS THE PRINCIPAL ACTIVITY OF THE INSTITUTE. THE INSTITUTE COULD NOT BE HELD TO BE DOING BUSINESS. FURTHER MEANS BEING SUPPLIED IN A HOSTEL TO THE SCHOLARS, V ISITORS, GUEST FACULTY ETC. CANNOT BE ELIGIBLE 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 HONBLE MADRAS HIGH COURT IN CASE OF DCIT VS. WELLINGTON CHARITABLE TRU ST IS ALSO MISPLACED BECAUSE IN THAT CASE, THE ONLY ACTIVITY OF THAT PAR TICULAR TRUST WAS 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 THE STUDENTS, F ACULTIES AND OTHER STAFF FOR LODGING AND BOARDING AS THEY ARE ENGAGED IN EDUCATI ON ACTIVITIES. THEREFORE, WE REVERSE THE FINDING OF THE LOWER AUTHORITIES AND HELD THAT TRANSPORT AND HOSTEL FACILITIES SURPLUS CANNOT BE CONSIDERED AS B USINESS INCOME OF THE ASSESSEE SOCIETY WHICH IS MAINLY ENGAGED IN BUSINES S ACTIVITIES AND THESE ACTIVITIES ARE SUBSERVIENT TO THE MAIN OBJECT OF ED UCATION OF THE TRUST. IN THE ABSENCE OF ANY EVIDENCE TO SHOW THAT THE HOS TEL FACILITIES WERE PROVIDED TO ANYBODY OTHER THAN STUDENTS AND STAFF OF THE TRU ST, THE HOSTEL FACILITIES PROVIDED BY THE EDUCATIONAL INSTITUTION SHALL BE CO NSTRUED TO BE THE INTRINSIC PART OF THE EDUCATIONAL ACTIVITIES OF THE ASSESSE E AND THEY CANNOT BE CONSIDERED DIFFERENT THAN ACTIVITIES OF THE SOCIETY OF EDUCATION. THUS, THE ADDITION AMOUNTING TO RS. 3,92,25,432/- MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE CIT(A) IS NOT CORRECT. THE CIT(A) AND THE ASSESSING OFFICER FAILED TO CONSIDER THAT THE HOSTEL FACILITY IS INC IDENTAL TO ACHIEVE THE OBJECT OF PROVIDING EDUCATION AS PER OBJECT OF THE TRUST AND HENCE COMES UNDER THE CHARITABLE PURPOSE WHICH IS EXEMPT UNDER SECTION 11 OF THE INCOME TAX ACT, 1961. THUS, THE APPEAL OF THE ASSESSEE IS ALLOWED. 6 ITA NO. 4440/DEL/2015 8. IN RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 22 ND DAY OF JULY, 2021. SD/- SD/- (PRASHANT MAHARISHI) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 22/07/2021 R. NAHEED * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI