2021 (1) TMI 351 - AT - Income Tax

Exemption u/s 11 - whether providing hostel facility to the needy students by appellant-trust is to be considered as imparting education within the meaning of section 2(15) or it would fall within the clause advancement of any other object of general public utility provided in the proviso appended to section 2(15)? - HELD THAT - As decided in own case 2018 (7) TMI 1084 - ITAT AHMEDABAD no hesitation to find the assessee activities towards providing hostel facilities to the student is purely an educational activities and, therefore, not coming under the proviso to Sec. 2(15) of the Act. Hence, the Ld. AO is directed to give relief to the assessee on this issue. Assessee's appeal is allowed

Summary

Issues Involved:
1. Applicability of the proviso to Section 2(15) of the Income Tax Act, 1961 to the assessee trust.
2. Whether providing hostel facilities to needy students constitutes educational activities.
3. Determination of taxable income and entitlement to benefits under Sections 11 and 12 of the Income Tax Act.
4. Procedural issue regarding the pronouncement of the order beyond the 90-day period due to the Covid-19 pandemic.

Issue-wise Detailed Analysis:

1. Applicability of the Proviso to Section 2(15) of the Income Tax Act, 1961:
The assessee challenged the findings of the Commissioner of Income Tax (Appeals) [CIT(A)] and the Assessing Officer (AO) regarding the application of the last limb of the proviso to Section 2(15) of the Income Tax Act. The AO had considered the activities of the assessee trust as falling under the "advancement of general public utility" in the nature of trade, commerce, or business. The main contention was whether providing hostel facilities to needy students falls under educational activities, thereby making the proviso to Section 2(15) inapplicable.

2. Whether Providing Hostel Facilities to Needy Students Constitutes Educational Activities:
The Tribunal examined whether providing hostel facilities could be considered as imparting education within the meaning of Section 2(15) of the Act. The AO opined that hostel facilities are not akin to education and thus fall under "advancement of any other object of general public utility." The Tribunal referenced the Co-ordinate Bench's decision in ITA No. 993/Ahd/2017, which determined that hostel facilities are integral to education. The Tribunal emphasized that hostels provide residential opportunities for students to continue their education, contribute to character building, and are essential components of educational institutions. The assessee trust, established in 1947, had consistently been treated as a charitable institution, and its activities were aligned with its educational objectives.

3. Determination of Taxable Income and Entitlement to Benefits under Sections 11 and 12:
The AO had questioned the charitable status of the trust based on the surplus generated from hostel activities. The Tribunal noted that the surplus was primarily used for maintaining the building and other capital expenditures. The Tribunal clarified that if the main activity of providing hostel facilities falls within the ambit of "education," then the generation of surplus is immaterial. The surplus should be used for fulfilling the trust's objectives or accumulated as per the scheme. The Tribunal directed the AO to re-determine the taxable income of the assessee after providing benefits under Sections 11 and 12.

4. Procedural Issue Regarding Pronouncement of the Order Beyond the 90-day Period Due to the Covid-19 Pandemic:
The Tribunal addressed the delay in pronouncing the order due to the Covid-19 pandemic. The hearing was concluded on 04.03.2020, but the order was pronounced on 30.06.2020. The Tribunal referenced the Co-ordinate Bench's decision in DCIT vs. JSW Ltd., which discussed the extension of the pronouncement period under Rule 34(5) of the Appellate Tribunal Rules, 1963, due to exceptional circumstances. The Tribunal noted that the nationwide lockdown imposed to prevent the spread of Covid-19 constituted extraordinary circumstances, justifying the delay. The Tribunal excluded the lockdown period while computing the limitation period for pronouncement.

Conclusion:
The Tribunal allowed the assessee's appeal, concluding that providing hostel facilities to students is an educational activity and does not fall under the proviso to Section 2(15) of the Act. The AO was directed to give relief to the assessee and re-determine the taxable income after providing benefits under Sections 11 and 12. The procedural delay in pronouncing the order was justified due to the Covid-19 pandemic.