Running school buses for fees by Trust is not a commercial activity if same is incident to achieve main object of proving education

Delhi Public School Ghaziabad Vs ACIT (ITAT Delhi)

The assessee did not provide transport facility to the outsiders and was providing the same only to the students and the staff working for the society. Since transport facility was incidental to achieve the object of providing education, i.e., the object of the society, therefore, the transport activities of the assessee trust could not be considered as business activity and provision of section 11(4A) had no applicability, so as to deny the exemption.

FULL TEXT OF THE ITAT JUDGMENT

Challenging the order dated 02.03.2015 in Appeal No 98/13-14/GZN/63 for the assessment year 2010-11 passed by the learned Commissioner of Income-tax (Appeals), Muzaffarnagar (for short hereinafter called as “the learned CIT(A)’), the assessee preferred this appeal.

2. Assessee is running a school and providing transport facility for its student for which separate fees charged. During the scrutiny of the return of income of the assessee for the assessment year 2010-11, Ld. AO disallowed a sum of rupees 1,73,20,960/-in relation to the activity of the assessee running the school buses, on the premises that the said activity amounts to a business in view of the proviso to Section 2(15) of the Act, as such the assessee is not entitled for exemption under section 11(4A) of the Act. To reach this conclusion, Ld. AO noted that surpluses generated from running of transport business, the surplus generated is not distributed to the students nor was reduced from the fee of the next year, the institution can run without the transport facility, the education fee structure is different from transport fee structure etc. He also disallowed the claim of the assessee on account of depreciation by placing reliance on the decision of the Hon’ble Apex court in the case of Escorts Ltd versus union of India and the decision of the Hon’ble Kerala High Court in the case of Lissie Medical Institutions.

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