TaxTMI 
TaxTMI 
2019 (6) TMI 701
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....That the Ld. CIT(A) has erred in law and on facts in treating the hostel/transport facility provided to the students of institution as a business undertaking and thus upholding the action of AO as to the requirement of maintenance of separate books of accounts as required as required by Sec. 11(4A) of the Income Tax Act, 1961. 3. That the Ld. CIT(A) has erred in law and on facts in upholding the action of Assessing Officer to disallow depreciation claimed by the appellant society by debiting the same in Income & Expenditure Account which amounted to Rs. 2,52,75,353/-. 3.1 That the Ld. CIT(A) has erred in law and on facts in upholding the claim of Assessing Officer that the appellant society has availed 100% application of the value of the capital expenditure in the year of purchase of fixed assets out of gross receipts. 4. That the appellant craves leave to add, alter, amend, substitute, delete and modify any or all the grounds of appeal, which are without prejudice to one another, before or at the time of hearing of the appeal." 3. The assessee is a society registered with the Registrar of Societies and enjoys registration u/s 12AA of the Income Tax Act, 1961. The assessee ....
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....condition that hostel and transport facilities are available in the campus. Since the college is located on the outskirts of the town on the Meerut Delhi Highway where regular transport is not available, it is for this reason that this facility is provided as a prerequisite to the admission so as to fulfill the objective of the society to provide education to the students. It is the responsibility of the assessee to provide transport facility to the students for attending the school and for sending the students back to their respective homes with proper security and attachments. The Ld. AR further submitted that these facilities were provided only to those students who were studying in Institute and were interested to avail the facility. The assessee is having only a small area build up for the use of hostel. The students are mostly accommodated in the rented buildings for which rent is paid by the society. The society owns only two buses which are run by the staff on the payroll of the college. The remaining buses are hired from the market and payment is made by the Society. Majority of the students commute through public transport system. The Ld. AR submitted that hostel and tra....
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....n the same cannot be treated as business itself. Even after insertion of proviso to section 2(15) of the Act, various courts have held that merely charging a fee for some of the activities, which may result in surplus, does not ipso-facto means that the activities of the Society are commercial in nature. The trade or commerce in the normal course is different then what is required u/s 2(15) of the Act. The Ld. AR relied upon the Hon'ble Apex Court decision in the case of Addl. CIT vs. Surat Art Silk Cloth Manufacturers Association (1978) 121 ITR 1 (SC). The Ld. AR also relied upon the decision of American Hotel and Lodging Association, Educational Institute vs. CBDT (2008) 301 ITR 86 (SC). The Ld.AR relied upon the decision of the SC in the case of Aditanar Educational Institute vs. Addl.CIT (1997) 224 ITR 310. 6. As regards disallowance of mess expenses, the Ld. AR submitted that the Assessing Officer estimated the mess expenses at Rs. 1,275/- per student per month as against the expenses of Rs. 2,401/- per student per month incurred by the assessee. The Ld. AR submitted that the Assessing Officer failed to appreciate the facts that the nature of foods and facilities provided by ....
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....of the charitable funds in the charitable activities in the form of development infrastructure, to be used for the fulfillment of the main object of the trust. Computation of income is separate and distinct and has to be made on commercial basis by applying the provision of the Act. The depreciation is a charge on the wear and tear and use of the capital asset which suffers like that gets reduced year after year and with the passage of time. The depreciation has been provided in the income and expenditure in conformity with the Income Tax Rules applicable to the allowance of depreciation of fixed assets. The proposition that depreciation should be allowed, even if, the purchase of assets have been claimed by the trust towards application of income has been dealt by the various decisions by the Apex Court and the various High Courts. The Ld. AR relied upon following decisions: 1) CIT vs. Rajasthan and Gujarati Charitable Foundation Poona (2018) 402 ITR 441 (SC) 2) DIT (Exemption) vs. Indraprastha Cancer Society (2015) 53 taxmann.com 463 (Del.) 8. The Ld. DR relied upon the assessment order as well as the order of the CIT(A). The Ld. DR also relied upon the following decision....
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....ves around the question whether or not the acidity of running school buses exclusively for the facility of the students and staff, is an intrinsic part of the activity of running a school. Such a question is no longer res Integra. In the case of Krishna Charitable Society vs. Addl. CIT in ITA No. 4639/Del/2015 for AY 2011-12 dated 15.09.2017, a similar question had arisen. Vide para no. 11, a coordinate bench of this Tribunal held that transport and hostel facility surplus cannot be considered as business income of the society as these activities are incidental to the main object of the assessee society of education. Relevant observations on this aspect are as under: "11. We have carefully considered the rival contentions and perused the orders of the lower authorities and other judicial pronouncement placed before us. In the grounds no. 1 to 3 assessee is contesting that addition made by the Ld. AO treating hostel places provided to college student as business of the society and text the alleged surplus of Rs. 98,87,873/- as business income of the assessee. It was not the case of the revenue that assessee has rented out these hostels to the students who are not parted education ....
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....nd 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. 11. In Kanha Charitable Trust vs. ACIT ITA Nos. 3297 & 5987/Del/2015, while placing reliance on its earlier decision in the case of Krishna Charitable Society vs. ACIT it was held that in the absence of any clinching evidence to show that the hostel facilities and transport facilities were provided to anybody other than students and staff of the trust. The transport and Hostel facilities provided by the educational institution shall be construed to be the intrinsic part of the 'educational activities' of the assessee and they cannot be considered different than activities of the society of 'education'. The hostel and transport facilities are incidental to achieve the object of providing education as per object of the trust. 12. Further, in Mallikarjun School Society vs. CCIT (2018) 90 taxmann.com 160 (Uttarakhand), the H....