The ITAT Delhi, in a recent ruling, held that the transport & hostel facilities surplus cannot be considered as business income of the society if the same was an integral part of its objects. While quashing an order withdrawing exemption under section 12AA of the Income Tax Act, 1961 against the assessee, the bench considered the fact that under the new Goods and Services Tax (GST) regime also, no tax was chargeable on the hostel fees etc recovered from the Students , faculties and other staff for lodging and boarding as they are engaged in education activities.
In the instant case, Assessee society is running and engineering college it is registered with registrar of societies as well as under section 12AA of the Income Tax Act. It also engaged in the business of providing hostel facilities to the students.
For the year under consideration, the assessing officer observed that the hostel places provided to college students must be treated as the business income of the society.
Assessee maintained that it rented out these hostels to the students who are not parted education in its institutes.
The bench noticed the decision of the Karnataka High Court in the case of CIT v. Karnataka lingayat education society, wherein it has been held that providing hostel to the students/staff working for the society’s incidental to achieve the object of providing education, namely the object of the society.
Citing a plethora of decisions, the bench held that providing of hostel facilities and transport facilities to the student and staff member of the educational Institute cannot be considered as business activity but is subservient to the object of educational activities performed by the society.
Before concluding, the bench added that “We are also not averse to considering the latest legal developments too where in the recently introduced new legislation of Goods and service tax it is provided that no GST would be chargeable on the hostel fees etc recovered from the Students , faculties and other staff for lodging and 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. In the result 1 – 3 of the appeal of the assessee are allowed.”
Read the full text of the Order below.
