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TMI Blog2021 (11) TMI 223X X X X Extracts X X X X X X X X Extracts X X X X ..... r providing hostel facility but is only an integral part of activity of providing education is also part of education and is not an independent source of an income. 3. That the learned CIT(A) has further failed to appreciate that the assessee institution came into existence in the AY 1998-99 and till the AY 2009-10 such an income was not included in the total income of the assessee, it being integral part of the total income of the society running an educational institution. 4. That the learned CIT(A) has failed to appreciate that the AO has grossly erred in holding that the assessee had not produced the books of accounts despite the fact they were duly produced before him on 20.02.2014 and 04.03.2014, as is evident from the submissions made and is on record. 5. The learned CIT(A) has further failed to appreciate that despite the remand made by him to the AO, the AO had failed to provide any opportunity (before submitting the report) and CIT(A) has also erred in not considering such books of accounts which were also produced before him on 20/08/2015. 5.1 That the learned CIT(A) has failed to appreciate that the assessee by way of abundant precaution and to comply with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ranted vide letter dated 6/2/2012 for the period from 4/1/2012 to five years. The Society has been grated registration u/s 12AA of the Income Tax Act, 1961 on 23/6/1998. The Society was granted exemption u/s 10(23C) (vi) of Income Tax Act, 1961 on 20/7/2005. The Society is running an Engineering College under the name and style of M/s Ideal Institute of Technology, situated at Govindpuram, Ghaziabad for which courses of Be.tech and MCA are being provided. The return of income was filed on 30/9/2011 declaring NIL income. The Assessing Officer made addition of Rs. 93,88,000/- towards net surplus from hostel activity and also disallowed Rs. 3,26,11,455/- as regards claim of depreciation made by the assessee. 4. Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee. 5. The Ld. AR submitted that the income derived from the hostel facility, a property held under the trust, had been wholly utilised for charitable purposes for imparting education and hence the same has to be excluded from the total income. It is submitted that the providing hostel provided to the students being subservient to the main ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roviding the hostel facility to the students as business is against the principles of consistency, and hence the disallowance unsustainable in law. The Ld. AR relied upon the judgment of the Hon'ble Apex Court in the case of Commissioner of Income-tax v. Excel Industries Ltd. [2013] 358 ITR 295 (SC) has held that revenue cannot be allowed to flip-flop on the issue. The Ld. AR submitted that revenue having accepted that hostel receipts is not includible in the total income in preceding years as well as subsequent assessment years, revenue cannot be allowed to take a contrary view in this assessment year. Further, Constitution bench of the Hon'ble Apex Court in the case of CIT vs. J.K. Charitable Trust reported in 308 ITR 161(SC), wherein it has been held that, if the facts for the year under assessment are identical to the facts of the immediately preceding year then in such a situation, the revenue would not be permitted to deviate from the position it had accepted in the preceding assessment year. The Hon'ble Apex Court has reiterated the principles of consistency in a very recent decision. It has been consistently decided time and again by the Hon'ble Apex Court and the Hon'ble H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of income for charitable purposes under section 11(1 )(a), yet depreciation would be allowed on assets so purchased. The relevant para of the aforesaid judgment is reproduced hereunder: "1. These are the petitions and appeals filed by the Income Tax Department against the orders passed by various High Courts granting benefit of depreciation on the assets acquired by the respondents- assessees. It is a matter of record that all the assessees are charitable institutions registered under Section 12A of the Income Tax Act (hereinafter referred to as 'Act'). For this reason, in the previous year to the year with which we are concerned and in which year the depreciation was claimed, the entire expenditure incurred for acquisition of capital assets was treated as application of income for charitable purposes under Section 1 l(l)(a) of the Act. The view taken by the Assessing Officer in disallowing the depreciation which was claimed under Section 32 of the Act was that once the capital expenditure is treated as application of income for charitable purposes, the assessees had virtually enjoyed a 100 per cent write off of the cost of assets and, therefore, the grant of depreciat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. In that matter also, a similar argument, as in the present case, was advanced on behalf of the revenue, namely, that depreciation can be allowed as deduction only under section 32 of the Income-tax Act and not under general principles. The Court rejected this argument. It was held that normal depreciation can be considered as a legitimate deduction in computing the real income of the assessee on general principles or under section ll(l)(a) of the Income-tax Act. The Court rejected the argument on behalf of the revenue that section 32 of the Income-tax Act was the only section granting benefit of deduction on account of depreciation. It was held that income of a Charitable Trust derived from building, plant and machinery and furniture was liable to be computed in normal commercial manner although the Trust may not be carrying on any business and the assets in respect whereof depreciation is claimed may not be business assets. In all such cases, section 32 of the Income-tax Act providing for depreciation for computation of income derived from business or profession is not applicable. However, the income of the Trust is required to be computed under section 11 on commercial princip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee was eligible to the claim of deduction as had been allowed in the preceding assessment years. It be further held that the assessee does not carry any business activity and is only engaged in an activity which is charitable in nature. It is well settled rule of law that any excess over expenditure in the course of providing education is not an income from the business. In fact, it would be seen that there have been no excess of receipts over expenditure. Needless to repeat here that even for the preceding assessment years, the assessee had been allowed an exemption when no adverse observation had been made by the Assessing Officer in respect of returns filed by it. 7. The Ld. DR relied upon the assessment order and the order of the CIT(A). 8. We have heard both the parties and perused the material available on record. The assessee is a Society running Engineering college. It is also undisputed that assessee is carrying educational activity. The income from these activities declared by the assessee was NIL and the assessee earned gross receipt of Rs. 16,26,69,407/- on account of educational activity whereas the assessee is also running hostels for the students as per t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 Hon'ble Madras High Court in case of DCIT vs. 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 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, faculties and other staff for lodging and boarding as they are engaged in education activities. 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 are subservient to the main object of education of the trust." In the absence of any evidence to show that the hostel facilities were provided to anybody other than students and staff of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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