2019 (1) TMI 794 - AT - Income Tax

Hostel & transport surplus not business income per ITAT. Integral to education mission.

The ITAT ruled in favor of the assessee, determining that surplus from hostel and transport activities should not be classified as business income. The ... Charitable activities - provision of hostel facilities and transport facilities - exemption u/s 11 - Held that:- In the case of Delhi Public School Ghaziabad Society vs. ACIT [2018 (5) TMI 1482 - ITAT DELHI] we are of the considered view that hostel activities and transport activities of the assessee society are not in nature of business inasmuch as these two activities are incidental to the attainment of the main object of education. Accordingly, we allow the grounds of appeal raised by the assessee. Issues:Assessment of surplus from hostel and transport facilities as business income.Analysis:The case involved an appeal by the assessee against an order passed by the Ld. CIT (Appeals) for the assessment year 2010-11. The assessee, a society running educational institutions, declared nil income in its return. However, during scrutiny, the Assessing Officer (AO) observed that the total receipts were substantial, including hostel and conveyance receipts. The AO treated the surplus from hostel and transport activities as business income, leading to an assessment of income at a certain amount. The assessee contended that hostel and transport facilities were integral to its main objective of providing education and not separate business activities. The Ld. CIT (Appeals) upheld the AO's decision, prompting the assessee to approach the ITAT.The Ld. Authorised Representative cited a similar case before the ITAT Delhi Bench, where it was held that hostel and transport facilities were intrinsic to the educational activities of the society and not separate business activities. The Ld. Sr. Departmental Representative, however, supported the lower authorities' findings, arguing that the surplus generated from these facilities was not distributed to students or reduced from fees, indicating a business activity. After considering the arguments and perusing relevant orders, the ITAT found that the assessee's case was covered by the Delhi Public School Ghaziabad Society judgment. The ITAT referenced specific paragraphs from the judgment, emphasizing that hostel and transport facilities provided by educational institutions were not business activities but incidental to the main objective of education.The ITAT rejected the Ld. Sr. Departmental Representative's arguments, noting the absence of contrary judgments from the jurisdictional Bench or High Court. Following the precedent set by the Delhi Public School Ghaziabad Society case, the ITAT concluded that the provision of hostel and transport facilities by the assessee society was not a business activity but integral to the pursuit of education. Consequently, the ITAT allowed the grounds of appeal raised by the assessee, leading to the appeal being allowed in favor of the assessee.In summary, the judgment revolved around the classification of surplus from hostel and transport activities as business income. The ITAT ruled in favor of the assessee, stating that these activities were not standalone business operations but essential components of the educational institution's objective of imparting education. The decision was based on precedent cases and established principles that highlighted the incidental nature of hostel and transport facilities in the context of educational activities.