TaxTMI 
TaxTMI 
2025 (3) TMI 80
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the Act ignoring the facts that activity of keeping children below 6 years in hostels is not permissible as per 'Regulatory guidelines for hostel of educational institutions for children' issued by National Commission for Protection of Children Rights. 2. Whether, on the facts and circumstances of the case, Ld. CIT(A) has erred in allowing the exemption under section 10(23C)(vi) of the Income tax Act, 1961 when one of the objectives as per Trust Deed is. "The establisher of the institute Swami Shri Hariprasaddasji is one of the great saints, who has given up his life for social services. His main aim of life is to prepare group of saint and social workers, so the students and saint-gentleman who wants to join this group, their liability should be taken over by the institute." is not solely for the purpose of education and as per details of activities filed by the assessee before Assessing Officer during assessment proceedings it is clear that assessee is also involved in other charitable activities." 2. The brief facts of the case are that the Assessee is a Trust stated to be engaged in carrying out educational activities. The Assessee filed its Retur....
X X X X Extracts X X X X
X X X X Extracts X X X X
....charged by the inmates of the hostels who are not the students of the assessee constitute a separate entity and it involves carrying of activity in the nature of business. The Ld. DR argued that providing facilities of hostel to the students of their own schools can be treated as one integrated part as established by the various judicial orders but running hostels separately for other students has to be considered as a separate activity in the nature of business outside the purview of section 10(23C)(vi) of the Act. 6. On the other hand, Ld. Counsel for the assessee submitted that the assessee-trust is carrying on activity of providing education as per its objectives, and it is still holding a valid certificate u/s 10(23C)(vi) of the Act. He also submitted that the trust is also holding Registration Certificate u/s 12A of the Act. He argued that the education activities are charitable activities which includes providing, promotion, propagation, disbursement of knowledge and all such activities which aids or supports such activity. He also submitted that the income earned from the student hostels are spent for or applied for promotion of education which fact was not even disputed....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in the nature to any trade, commerce or business. Therefore, the question of bringing the assessee trust's case under the ambit of the amended provisions of s. 2(15) of the Act doesn't arise. 6.1 On the factual aspect, the Ld. AR submitted that the assessee has also provided free education and free hostel facility to adivasi tribal and poor students (girls and boys) during the year under consideration. He also submitted a comparative chart of the fees for providing hostel facilities which are lower than market rates charged by Hotels or commercial establishments, as under:- Rates of Hostel: Assessee Trust Average Rate charged Per Day Per Month (a) For Girls Hostel Rs. 370 Rs. 11,167 (b) Boys Hostel Rs. 430 Rs. 13,000 Rates charged by others : Fountain Grand Rs. 990 Rs. 30,000 Vishram Hotel Rs. 900 Rs. 27,000 Shreenath Hotel Rs. 950 Rs. 28,500 6.2 From the other table it will be noticed that Hostel fees charged by the Assessee Trust is very reasonable and is charitable as compared to charges of Commercial entities. Thus, the Hostel fees received by the Trust being very low, the activities carried on by the As....
X X X X Extracts X X X X
X X X X Extracts X X X X
....see-trust. * The assessee has been receiving food/breakfast/hostel fee from the students to the tune of Rs. 13.23 crores. In addition, the fee charged on account of school fee and admission fee was of Rs. 1.84 Crores. * The Assessing Officer clearly proved that as per Right of Children to Free and Compulsory Education Act, 2009, the pre-primary education involves education to children of 3.5 to 6 years of age and hostels can admit only children of 6 years and above. Hence the hostellers are different from the pre-primary children. * The assessee submitted that the Assessing Officer has assessed total income of Rs. 6.21 crores being surplus of income and expenditure account which is not in dispute. * It is not in dispute that assessee provides free education to tribal children. It is also not in dispute that the assessee is providing hostel accommodation to the non-students, i.e. the students of other institutes. * Hence, it can be clearly held that the assessee is not providing the facility of education and integrated hostel to their students. * The rates charged by the assessee for girls hostel was Rs. 370/- per day and boys ho....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... as profit and gains of a separate business or commercial activity of trust. 8.5 Ld. CIT(A) has also relied upon the order of the Hon'ble Karnataka High Court in the case of CIT Vs Karnataka Lingayat Education Society (2015) (59 taxmann.com 87) (Karnataka), wherein it was held that where voluntary donations received by assessee-society were genuine and it was providing hostel to staff/students which was incidental to main object of providing education, assessee's registration could not be cancelled. The Ld. CIT(A) has also relied on the judgement of Hon'ble Supreme Court in the case of CCIT Vs St Peter's Educational Society (2016) (70 taxmann.com 171)(SC), wherein it was held that where a surplus was made by educational institution which was ploughed back for educational purposes, said institution was to be held to be existed solely for educational purpose and not for purpose of profit. 8.6 We have gone through the recent judgment of the Hon'ble Apex Court in case of ACIT (Exemption) vs. Ahmedabad Urban Development Authority [2022] 144 taxmann.com 78 (SC) on the issue of General Public Utility, Charitable Purpose along with the provisions of Section 10(23C)(vi) of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... vs. CIT [2022] 18 S.C.R. 1082, dealt with the issue of whether educational institutions can be engaged in other activities. In the case of AUDA, the Hon'ble Apex Court held that a charitable organisation cannot be engaged in any trade, commerce or business, or provide services in relation thereto for any consideration unless such commercial activity is incidental to the main object of GPU and is also within the monetary threshold of up to 20% of its total receipts, as prescribed under section 2(15) of the IT Act. To ascertain whether an activity would constitute "trade, commerce or business", the Hon'ble Apex Court clarified that it would depend on the cost at which the services are availed and the price at which they are provided by the institution to its beneficiaries. 8.8 Section 2(15) of the Income-Tax Act defines charitable purpose to include, the advancement of any other object of GPU. The proviso to section 2(15) of the Act provides that such advancement of object of GPU would not be considered charitable, if an institution is engaged in trade, commerce or business, or provides any service relating to trade, commerce or business for which a cess or fee or any other consi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of American Hotel and Lodging Association v. CBDT (2008) 10 SCC 509, Queens Education Society vs. CIT 2015 (8) SCC 47, Surat Art Silk Cloth Mfg. Association (supra), which was decided in the context of charities engaged in advancing objects of GPU and not in a case dealing with educational institutions. Hence, the reasoning of the two cases relied upon is incorrect and accordingly, the application of the predominant object test cannot be used in the case involving educational institutions. The Hon'ble Apex Court also analysed the section 10(23C)(vi) of the Act, which permits the educational institution to record profits and gains of business, which is incidental to the attainment of its objectives. Since the educational institution solely exists for the purpose of education, the activity must be interpreted as related to education and educational activities. The Hon'ble Apex Court observed that activities incidental to providing education could include providing textbooks, hostel, bus facilities for their students, or organising educational camps. However, activities like renting out the premises for external events would not qualify as activities incidental to education. Hence,....