TaxTMI 
TaxTMI 
2021 (11) TMI 876
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....s to be quashed. 1.1. In law and in the facts and circumstances of the case of appellant, the Ld. CIT(A) erred in rejecting the ground taken with regards to the impugned order passed u/s 143(3) r.w.s.147 of the Act ITO (Exemption)-Ward-2, Ahmedabad is void and deserves to be quashed as there is not income which has escaped assessment. 2. In law and in the facts and circumstances of the case of appellant, the Ld. CIT(A) erred in confirming the action of Assessing Officer (ITO Ward 2, Ahmedabad) who erred both in law and in facts in holding that the net receipts of Rs. 3,10,343/- was to be treated as business receipts and that exemption u/s. 11 as claimed was not allowable to the appellant charitable trust. The ld. A.O. erred in law and on facts in applying proviso to section 2(15) which is not at all applicable on the facts of the appellant's case. 3. In law and in the facts and circumstances of the case of appellant, the Ld. CIT(A) erred in confirming the action of Assessing officer who has applied Section 2(15) considering activities of the Appellant in nature of Trade and commerce without appreciating the fact that they are educational activities. ....
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.... under section 12A and 80G of the Act. The trust was engaged in providing basic and necessary facilities to the students in order to expedite them in getting the education. Thus the assessee constructed a building which was used as hostel under the name and style of 'Shree Deshi Lohana Vidharthi Bhavan' in the premises located at Kankaria Area, Ahmedabad. In the hostel, certain facilities were provided to the students for living, food and other educational help. The capacity of the hostel was to accommodate approximately 100 students. 7. The assessee, in the hostel building, has also created a facility by constructing a hall which was being provided for social and other activities to the members and the public. The assessee claimed that it was not charging any consideration against the use of the hall facility by the members and the public except for the recovery of electricity, gas and cleaning charges. However, any person using the hall facility, if desires, was allowed to give the donation to the trust. But the same was not compulsory. Rather it was the wish of the person, using the hall facility, to donate the money to the trust. The assessee has received a sum of Rs.32.6....
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....liance on the judgement of Hon'ble Supreme Court in the case of Sole Trustee, Loka Shikshana Trust vs. CIT reported in 101 ITR 234. 11. The AO further observed that the activity of the assessee can be categorized as advancement of any other object of general public utility but the same should not be in the nature of trade commerce and business as provided in the proviso to section 2(15) of the Act. As per the AO, the percentage of income over expenditure was increasing every year as evident from the income and expenditure account of various years (AYs 2011-12 to 2015-16). Thus, the AO held that the activity of hostel facility and renting out of the hall is nothing but a commercial activity therefore the same cannot be allowed exemption under section 11 of the Act. As such, the assessee has shown the rent charged from the parties in the garb of donation in order to claim the benefit of exemption. Thus the ultimate use of the money received by the assessee from letting out activity is of no relevance as provided in the proviso to section 2(15) of the Act. In view of the above the AO denied the exemption claimed under section 11 of the Act and treated the amount of surplus of incom....
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....refore the same cannot be treated as the activity in the nature of trade or commerce. Thus the proviso attached to section 2(15) of the Act cannot be applied the present case. Furthermore, the receipt from the activity of renting of the hall has been utilized for the educational activity only. 19. On the other hand the learned DR before us submitted that the activity of renting out of the hostel facility is not educational in nature. Moreover such activity is also not emanating from the objects for which the trust was registered. Accordingly, there was no nexus between the activity carried out by the assessee viz a viz the objects of the trust. 19.1 It was mandatory for the assessee to maintain separate books of accounts for the activity of renting out the hall for social functions. But the assessee has not done so which is violation of the provisions of section 11(4A) of the Act. 19.2 The learned DR also pointed out that sufficient details have not been furnished by the assessee in support of the corpus donation received by it. The learned DR vehemently supported the order of the authorities below. 20 We have heard the rival contentions of both the parties and perused ....
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.... understand the meaning and objects of this facility. It is pertinent to note that human personality is shaped by the experiences of life. When a child is born, family provides a protective environment for the child. At the beginning, interactions are limited latter social interactions increase, and the process of socialization starts. Education is a part of child development. Though it started with the birth and lasted till the time of death, but formal education of language and others are being imparted in the school and colleges. Hostel is an essential institution for the students to stay in big cities and hostel plays an important role in education and training of these students. They provide residential opportunities for the students to continue the process of education. It is a place where students stay for pursuing formal education away from their homes. The concept of hostel is not only limited to place of residence, rather it is a human practical laboratory for development of students. It is a center of education. Students learn as much as from their teachers as well as fellows during hostel stay. It enriches understanding of the curriculum through analytical discussion am....
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....all percentage of surplus is being generated then how all of a sudden the "charitable activity" would become "trade, commerce or business" ? If the main activity of the assessee i.e. providing hostel facilities to the students fall within the ambit of expression "education" employed in the main provision of section 2(15) then generation of surplus would be immaterial because ultimately is to be ascertained whether surplus is being used for the purpose of fulfilling all the objects of the trust or not. If the surplus is being applied on the objects of the trust or being accumulated as provided in the scheme, then nothing is to be taxable. On due analysis of record, we are of the view that the AO has unnecessarily created an artificial distinction. The assessee is not admitting other persons in the building. It is providing facility only to the students, and there are lots of rules and regulations, bye-laws for admitting students, according to their merits in education. Thus, taking into account overall facts and circumstances, we are of the view that the assessee is entitled for benefit of sections 11 and 12 of the Income Tax Act. If the assessee is entitled for benefit of sections ....
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....ation. Further, as regards applicability of the aforesaid proviso to the assessee, it is very much clear that the said proviso would be applicable to the lastlimb of 'charitable purpose' as defined under section2(15) of the Act, i.e. any other activity or object of general public utility. As per the main object, the assessee is engaged in educational activity. Therefore, strictly speaking, the proviso to section2(15) of the Act would not apply to the assessee. 26. Now the 2nd controversy revolves whether the income generated by the assessee from renting out the hall can be classified as educational activity in the manner provided under section 2(15) of the Act. In this regard, we note that the activity of renting out the hall cannot be categorized as educational activity but the status of the assessee will not change being a charitable organization. It is for the reason that this activity is the ancillary activity which is supporting the assessee to achieve its goals of primary activities. Furthermore, there is no prohibition under the Act that the assessee being a charitable organization cannot carry on the business which is incidental to the attainment of the objective....
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....inues. That being the case, even applying the rule of consistency, assessee's claim of exemption under section 11 of the Act has to be allowed. The decisions relied upon by the learned counsel for the assessee clearly supports this view. 28. It was also argued by the learned DR that assuming that the activity of renting out the hall is incidental activity but the assessee has not maintained separate books of accounts as required under the provisions of section 11(4A) of the Act. Thus, the assessee is not eligible for exemption for the income generated from the renting out of the hall. In this regard, we note that none of the authority below has touched upon the issue whether the assessee is maintaining separate books of accounts or not for the activity of renting out the hall. Accordingly, we are not inclined to entertain such contention of the learned DR for the Revenue. 29. We are also conscious to the fact that at the time of hearing the learned DR and the AR has cited many judgements but we do not find necessary to incorporate all of them as well as deal with them individually but suffice to hold that those judgements were rendered in the different context. Thus the p....