Income Tax Appellate Tribunal

Income Tax Appellate Tribunal (ITAT): Coram of Anil Chaturvedi (Accountant Member) and Suchitra Kamble (Judicial Member) allowed the appeal filed by the assessee challenging the assessment order made by the Income Tax authorities.

The assessee society was duly registered, and the renewal was granted for the period of 5 years. Society was granted registration under Section 12AA of the Income-tax Act, 1961. The society was granted an exemption under Section 10(23C) (vi) of the Income Tax Act. The return of income filed was filed declaring NIL income.

Assessing Officer made addition of Rs 93,88,000 towards net surplus from hostel activity and also disallowed Rs 3,26,11,455 regarding the claim of depreciation made by the assessee.

Being aggrieved by the assessment order the appeal of the assessee was partly allowed.

Analysis, Law and Decision

Tribunal stated that it was undisputed that the assessee was carrying educational activity.

Income from these activities declared by the assessee was NIL and the assessee earned gross receipt of Rs 16,26,69,407 on account of educational activity whereas the assessee was also running hostels for the students as per the UGC Guidelines which is an ancillary activity.

Tribunal further expressed that, in the absence of any evidence to show that the hostel facilities were provided to anybody other than students and staff of the trust, the 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’.

Hence, the addition amounting to Rs 93,00,088 made by the AO and sustained by the CIT(A) was not correct.

CIT(A) and the Assessing Officer failed to consider that the hostel facility is incidental to achieve the object of providing education as per object of the society and hence comes under the charitable purpose which is exempt under Section 11 of the Income Tax Act, 1961. 

In light of the decision of Supreme Court in CIT v. Rajsthani & Gujarati Charitable Foundation Poona, wherein it was held that the depreciation in respect of cost of the assets allowed to the assessee as expenditure is allowable, the issue regarding the depreciation in respect of hostel facilities was squarely covered in favour of the assessee.

In view of the above discussion, the appeal of the assessee was allowed. [Ideal Institute of Technology Society v. JCIT, 2021 SCC OnLine ITAT 662, decided on 3-11-2021]

Advocates before the Tribunal:

Appellant by: Sh. C. S. Aggarwal, Sr. Adv, Sh. Ravi Pratap Mall, Adv

Respondent by: Ms Sunita Singh, CIT DR

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