Charitable Society eligible for Income Tax Exemption for providing Hostel facilities to Staff and Students, being integral part of ‘Educational Activities’: ITAT [Read Order]

Charitable Society - Income Tax Exemption - Hostel facilities to Staff and Students, - Educational Activities- ITAT - Taxscan

The Delhi bench of the Income Tax Appellate Tribunal (ITAT), has recently held that the charitable trusts shall be eligible for income tax exemption for providing hostel facilities to its staff and students since such activities shall be treated as part of “educational activities”.

The assessee is a Society running Educational Institutes, Medical Colleges and Charitable Hospitals which is affiliated with All India Counsel for Technical Education. It is also undisputed that assessee is carrying educational activity and running various Colleges especially Medical Colleges and Charitable Hospitals. While filing the income tax returns for the relevant year, the assessee disclosed the income from charitable activities declared by the assessee as NIL and the assessee earned gross receipt of Rs. 61,62,60,476/- on account of educational activity whereas the assessee is also running hostels for the students as per the UGC Guidelines which is an ancillary activity.

The Assessing Officer made assessment of surplus of Hostel as business income u/s 114(A) of the Act and disallowed hostel expenses amounting to Rs. 3,92,25,432/- and made addition under the head income from business and profession.

Allowing relief to the assessee, Accountant Member Mr. Prashanth Maharishi and Judicial Member Ms. Suchitra Kamble held thatin 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’.

“Thus, the addition amounting to Rs. 3,92,25,432/- made by the Assessing Officer and sustained by the CIT(A) is not correct. The 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 trust and hence comes under the charitable purpose which is exempt under Section 11 of the Income Tax Act, 1961,” the bench said.

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