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ITAT reversed CIT(A)'s decision and upheld AO's denial of exemption under section 10(23C)(vi). While providing education and integrated hostel facilities qualifies as charitable activity, operating hostels separately on commercial basis constitutes business activity. Following Supreme Court's precedent in Ahmedabad Urban Development Authority case, ITAT held that charging substantially higher fees over cost amounts to "trade, commerce or business." The Trust's hostel operations generating surplus of Rs. 6.21 crores exceeded mere cost recovery with nominal markup. Since commercial activities were not incidental to educational purposes and exceeded 20% threshold under section 2(15), the Trust failed to meet "solely educational purposes" requirement. Revenue's appeal allowed.
ITAT reversed CIT(A)'s decision and upheld AO's denial of exemption under section 10(23C)(vi). While providing education and integrated hostel facilities qualifies as charitable activity, operating hostels separately on commercial basis constitutes business activity. Following Supreme Court's precedent in Ahmedabad Urban Development Authority case, ITAT held that charging substantially higher fees over cost amounts to "trade, commerce or business." The Trust's hostel operations generating surplus of Rs. 6.21 crores exceeded mere cost recovery with nominal markup. Since commercial activities were not incidental to educational purposes and exceeded 20% threshold under section 2(15), the Trust failed to meet "solely educational purposes" requirement. Revenue's appeal allowed.
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