ITAT allows Depreciation on Cost of the Assets as Expenditure is allowable [Read Order]

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) allowed the depreciation in respect of cost of the assets as expenditure is allowable.

The assessee society, Ideal Institute of Technology Society is registered with Registrar of Society Pradesh and the renewal was granted for the period of five years. The Society has been granted registration u/s 12AA of the Income Tax Act, 1961. The Society was granted exemption u/s 10(23C) (vi) of Income Tax Act, 1961. The Society is running an Engineering College under the name and style of M/s Ideal Institute of Technology, situated at Govindpuram, Ghaziabad for which courses of Be.tech and MCA are being provided. The return of income was filed declaring NIL income. The Assessing Officer made an addition towards net surplus from hostel activity and also disallowed as regards claim of depreciation made by the assessee.

The assessee submitted that the income derived from the hostel facility, a property held under the trust, had been wholly utilised for charitable purposes for imparting education and hence the same has to be excluded from the total income. It is submitted that the providing hostel provided to the students being subservient to the main object of the education, the Assessing Officer has gravely erred in treating the same as business.

The issue of whether providing hostel facilities to the students is in the nature of business u/s 11 (4A) of the Act has been decided by the coordinate Benches of the Tribunal, and it was held that hostel fee income is subservient to the main object of the education and not a business income. It was held that providing the hostel to the students and the staff working for the society is incidental to achieve the object of providing education.

The coram of Accountant Member, Anil Chaturvedi and Judicial Member Suchitra Kamble held that as regards depreciation in respect of hostel facilities the same was granted to the assessee and was never disputed by the Revenue since 2009-10 till 2014-15 except for these years i.e. 2011-12. “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’. Thus, the addition amounting to Rs. 93,00,088/- 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 society and hence comes under the charitable purpose which is exempt under Section 11 of the Income Tax Act, 1961. Thus, Ground Nos. 1 to 9 are allowed,” the ITAT noted.

Support our journalism by subscribing to Taxscan AdFree. Follow us on Telegram for quick updates.