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TMI Blog2019 (5) TMI 283X X X X Extracts X X X X X X X X Extracts X X X X ..... assessable under the provisions of the Act. 3. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the appellant that hostel and transport facilities being incidental to the education activities by way of running school, the AO was not justified in holding that these activities tantamount to business and as such not eligible for deduction under Section 11 of the Income Tax Act. 4(i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the action of the AO in disallowing exemption under Section 11 to the assessee in respect of activities related to running of hostel and providing transport to the students. (ii) That the learned CIT(A) has erred both on facts and in law in confirming the abovesaid action of the AO rejecting the contention of the assessee that hostel and transport facilities being part of activities of providing education only, the same are eligible for exemption under Section 11 of the Act. 5. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in holding the action of the AO tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confirmed the additions by dismissing the appeal. Feeling aggrieved, the assessee has come up before the Tribunal by way of filing the present appeal. 4. We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case. GROUND NO.1 5. Ground No.1 is general in nature, hence needs no adjudication. GROUNDS NO.2, 3, 4(i), 4(ii) & 5 6. Undisputedly, the assessee society is duly registered u/s 12A of the Act to avail of the exemption of income u/s 11 of the Act. It is also not in dispute that the assessee has been providing hostel as well as transport facilities to its own students. It is also not in dispute that the assessee has not maintained separate books of account for running transportation and hostel services. It is also not in dispute that all the vehicles engaged in providing transportation facilities to the students by the assessee are hired one except two vehicles owned by the assessee society. 7. AO as well as CIT (A) have made disallowance of exemption u/s 11 of the Act pertaining to running of hostels and pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in case in the subsequent period, assessee suffered some loss on account of providing these facilities. So, merely on the basis of the fact that the assessee society has generated surplus on account of running of transportation and hostel services, the same cannot be treated as an independent business. 11. This issue has been decided by the coordinate Bench of the Tribunal in case cited as Delhi Public School Ghaziabad vs. ACIT - 2018 (5) TMI 1482 - ITAT Delhi by relying upon the decision rendered by Hon'ble Karnataka High Court in Karnataka Lingayat Education Society in ITA No.5004/2012 dated 15.10.2014 wherein it is held that providing of the hostel to the students and staff working for the society is incidental to achieve the object of providing education. In Kanha Charitable Trust vs. ACIT in ITA Nos.3297 & 5987/Del/2015, the coordinate Bench of the Tribunal also held that when hostel and transport facilities are being provided to the students and staff of the society only it shall be construed to be intrinsic part of the educational activities. 12. So, in the case at hand, it is undisputed case of the assessee that hostel and transportation facilities are only being provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the eyes of law being intrinsic part of the educational activities of the assessee society. Consequently, grounds no.2, 3, 4(i), 4(ii) & 5 are determined in favour of the assessee. GROUND NO.6(i) & 6(ii) 18. AO/CIT (A) made disallowance of Rs. 4,35,23,067/- on account of depreciation on fixed assets while computing total amount utilized and applied towards charitable purposes by relying upon the decision rendered by Hon'ble Supreme Court in the case of Escorts Limited vs. UOI - 199 ITR 43. 19. Ld. AR for the assessee challenging the impugned order contended that the decision rendered by Hon'ble Supreme Court in case of Escorts Limited (supra) is not applicable having been distinguished by the Hon'ble Delhi High Court in case cited as Director of Income-tax vs. Vishwa Jagriti Mission 73 DTR (Del.) 195. 20. Undisputedly, assessee being a society registered u/s 12AA of the Act is entitled for exemption of its income u/s 11 of the Act. Now, the issue in controversy is :- "as to whether the assessee is entitled for depreciation on the fixed assets utilized for charitable purposes and as to whether income of assessee should be computed on commercial principle." 21. Hon'ble De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h no order as to costs." 22. Identical issue has also been decided by Hon'ble Supreme Court in case of CIT vs. Rajasthan and Gujarati Charitable Foundation Poona in Civil Appeal No.7186 of 2014 dated 13.12.2017 in favour of the assessee wherein view taken by Hon'ble Bombay High Court in case of Director of Income-tax (Exemption) vs. Framjee Cawasjee Institute (1993) 109 CTR 463 has been affirmed by returning following findings :- "4. Question No.2 herein is identical to the question / which was raised before the Bombay High Court in the case of Director of Income-tax (Exemption) v. Framjee Cawasjee Institute [1993] 109 CTR 463. In that case, the facts were as follows: The assessee was the Trust. It derived its income from depreciable assets. The assessee took into account depreciation on those assets in computing the income of the Trust. The ITO held that depreciation could not be taken into account because full capital expenditure had been allowed in the year of acquisition of the assets. The assessee went in appeal before the Assistant Appellate Commissioner. . The Appeal was rejected. The Tribunal, however, took the view that when the ITO stated that full expenditure had been ..... X X X X Extracts X X X X X X X X Extracts X X X X
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