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TMI Blog2018 (3) TMI 1079X X X X Extracts X X X X X X X X Extracts X X X X ..... e based on incriminating material. - Decided in favour of assessee Determination of alleged surplus on account of hostel and mess facilities treated as business income of the assessee - provisions of section 11(4A)applicability - Held that:- The hostel, mess facility and transport facility etc carried out by the society are incidental to the main object of the assessee trust of education and therefore, provisions of section 11(4A) of the Act do not apply to the assessee as it cannot be said that by running the hostels or transport facility for student its educational activities is a separate business altogether. In view of this ground No. 1 to 3 of the appeal of the assessee are allowed and consequently, the ld AO is directed to grant the assessee benefit of section 11 and 12 of the Income Tax Act with respect to the all income of the trust including hostel and transportation receipts. Claim of the deprecation disallowed to assessee trust - double deduction - Held that:- The above issue has already been decided by Hon'ble Supreme Court in case of CIT Vs. Rajasthan and Gujarati Charitable Foundation [2017 (12) TMI 1067 - SUPREME COURT] wherein it has been held that up to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1961 and eligible for exemption u/s 11 of the Act. The ld AO held that the assessee trust is carrying on certain activities such as hostel activities wherein total revenue of ₹ 3.12 crores was earned and certain expenses were also incurred. According to the ld AO the assessee is carrying on the business and also the hostel activities are falls under the object of general public utility and therefore, the assessee should have maintained separate books of account of hostel activities. The ld AO therefore consequently disallowed various expenses incurred by the assessee holding that only certain percentage of the expenses are allowable. Further, he also disallowed depreciation of ₹ 10866975/- being 50% of the total amount of deprecation relying on the decision of Hon'ble Supreme Court in case of Escorts Ltd and Hon‟ble Kerala High Court in case of Lilssie Medical Institution. Consequently the total income of the assessee was assessed at ₹ 23860740/- against the returned income of the assessee of Nil filed on 30.04.2015 u/s 153A of the Act pursuant to search undertaken u/s 132 of the Act on 31.07.2013. Assessee preferred appeal before the ld CIT(A), who dism ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rora T20141 52 taxmann.com 172 (Allahabad)/r2014l 367 ITR 517 (Allahabad) i. CIT Vs Kesarwani Zarda Bhandar Sahson Alld. NTA No. 270 of 20141 (Allahabad) j. Smt Davawanti Vs CIT T20161 75 taxmann.com 308 (Delhi)/(2017) 245 Taxman 293 (Delhi)/(2017) 390 ITR 496 (Delhi)/(2016) 290 CTR 361 (Delhi) (Copy Enclosed) 7. On the issue of hotel activities he submitted the following decisions:- a. Dava Nand Pushpa Devi Charitable Trust Vs Addl. CIT (2016- TIQL-1810- ITAT-DEL (Copy Enclosed) b. Young Women's Christian Association of Madras Vs. JDIT (2014) 41 taxmann.com 142 (Chennai - Trib.)/(2014) 62 SOT 65 (Chennai - Trib.HURO.) (Copy Enclosed) c. CIT Vs. Mehta Charitable Prajnalav Trust T20121 28 taxmann.com 73 (Delhn/ (2013) 214 Taxman 88 (Delhi)/ 2013) 357ITR560(Delhi)/ (2013) 255 CTR 232 (Delhi) (Copy Enclosed) 8. We have carefully considered the rival contentions and also perused the orders of the lower authorities. Apparently in this case the search took place at the premises of the assessee society on 31.07.2013. As on that dated for impugned assessment year 2008-09 the return of income was filed by the assessee on 12.03.2009 and time limit for issue of notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated from hostel is exempted u / s . 11 of the income Tax Act, 1961 . 4 . The Ld . CIT ( A ) has erred in law and on facts by not appreciating that the addition of Rs . 2,90,25,290 /- made by the Assessing Officer without any cogent reasons and facts . 5 . That the impugned appellate order is arbitrary, illegal, bad in law and in violation of rudimentary principles of contemporary jurisprudence . 13. For the year the assessee filed its return of income on 30.04.2015 declaring Nil income in pursuance of notice u/s 153A of the Income Tax Act pursuant to search u/s 132 of the Act on 31.07.2013. The claim of the assessee vide ground No. 2 of the appeal was that the additions have been made by the ld AO in the completed assessment without having any incriminating material unearth during the course of search. The brief facts shows that the similar addition to Assessment Year 2008-09 were made to the total income of the assessee holding that the hostel activities of the assessee is not educational activities. 14. The ld Authorised Representative submitted the similar arguments as were made in appeal of the assessee for AY 2008-09. 15. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommissioner of Income - tax ( Appeals ) has grossly erred in confirming the additions made by A . O . holding that hostel / mess facility for students is separate business activity in terms of section 11 ( 4A ) merely on irrelevant consideration like surplus should have been reimbursed to students or used to reduce fee or giving contents of some website about fall in demand for rooms at Meerut etc, even after accepting that maintenance of such hostel is mandatory as per the concerned controlling Authority and it was an integral and inalienable part of educational activity . Thus finding is perverse . 3 . That the learned assessing officer has failed to appreciate the fact that maintaining hostel / mess facility to students is an essential integral part of education u / s 2 ( 15 ) of the Act and not a separate business activity covered under section 11 ( 4A ) as also accepted in the past assessments and there is no change in law about the first three limbs of section 2 ( 15 ) even after 01 . 04 . 2009, , hence overall surplus of the society as worked out in Income Expenditure account of the society and consequen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of the educational activities of the assessee. It was therefore, stated that assessee is not carrying on any business activity in the form of hostel and transport facilities provided to the students of the society. 21. The ld Assessing Officer did not accept the explanation of the assessee and held that running hostel, mess and transport activities is in the form of business and therefore the assessee should have maintained separate books of accounts u/s 11(4A) of the Act. He held that running a hostel may be requirement of ACITE norms but it nowhere describes generation of surplus. He further held that assessee is charging fees per student at the market rate. He further referred to the website of the assessee trust and held that educational activity and hostel and transport activity of the assessee are separable and the activities of the hostel and transportation are business activities which requires maintenance of separate books of account u/s 11(4A) of the Act. Based on the above findings, out of the total hostel expenses of ₹ 44835456/- he disallowed ₹ 27703575/- and allowed ₹ 17131881/-. Consequently, out of the gross receipt of the hostel activity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. The assessee is a society running an engineering college in the name and style of M/s. Academy of Business and Engineering Sciences, assessee is affiliated with all India Council for Technical Education (AICTE). It is also undisputed that assessee is carrying on the educational activities and running certain colleges etc. During the year it is also undisputed that assessee has earned gross receipt of ₹ 16.71 crores on account of educational activities whereas assessee is also running a hostel for the students who are studying in the educational institutes of the assessee. The assessee has also earned hostel receipts of ₹ 3.02 crores. The issue involved here is that whether the hostel activities carried on by the assessee are business activities and therefore, the provisions of section 11(4A) of the Act are applicable so, assessee should maintain separate books of accounts. Otherwise, it loses exemption to that extent u/s 11 and 12 of the Act. section 11(4A) of the Act provides that provision of section 11() to (3A) shall not apply in relation to any income of the trust being profits and gains of the business, unless the business is incidental to the attainment of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the statutory obligation of maintenance of the hostel, which involved supply, and sale of food was an integral part of the objects of the Institute nor could 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 meals being supplied in a hostel to the scholars, visitors, guest faculty etc . can not 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 of DCIT versus Wellington charitable trust is also misplaced because in that case, the only activity of that particular trust was renting out of the property and not education . We are also not averse to considering the latest legal developments too where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dental to the attainment of the object of the trust. Therefore, the decision even after referring the decision of the Hon'ble Karnataka High Court it was so held. As decision of division bench, held otherwise, this decision cannot be relied upon. 29. The next decision relied upon in case of Young Women‟s Christian Association of Madras Vs. JDIT 41 Taxmann.com 142 the assessee was carrying on advancement any other object of general utility running orphanage, old age homes etc . The dominant part of the income was from running a working women hostel. Such hostel activities were not found to be incidental to the main object of the trust. Therefore, the facts of the case are distinguishable. 30. The third decision relied upon was with respect to CIT Vs. Mehta Charitable Prajnalaya Trust 357 ITR 560 where the trust was created for the object for education and where the separate business activity was carried out which was not incidental to the main object of the trust. 31. In view of this the decisions relied upon by the revenue are distinguishable on the facts. 32. In view of this we are of the view that the hostel, mess facility and transport facility etc carried ..... X X X X Extracts X X X X X X X X Extracts X X X X
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