Daya Nand Pushpa Devi Vs ACIT (Allahabad High Court)
Any interpretation or meaning given to the word ‘business’ in the literal parlance cannot be read into the Income Tax Act as the word ‘business’ has been defined in the Act itself. The Court has to read the statute namely the Income Tax Act to find out as to whether the activity of the assessee in maintaining the hostel would be exempted under Section 11(1) of the Act and whether the provisions of Section 11(4A) would be attracted in the facts and circumstances of the case.
Having held that the activity of running the hostel is not a separate business activity and surplus income from the hostel fee cannot be treated as profit and gains of a separate business or commercial activity of the trust, it is held that the exemption under Section 11(1) of the Act cannot be disallowed to the assessee.
FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT
Heard Sri Abhinav Mehrotra learned counsel for the appellant and Sri Praveen Kumar learned Advocate for the revenue.
This is an Income Tax Appeal arising out of the order dated 21.09.2016 passed by the Income Tax Tribunal, Delhi Bench, Delhi in I.T.A No.4238/DEL/2015 whereby the appellate order of CIT(A) and the assessment order dated 12.03.2013 passed by the Additional Commissioner of Income Tax, Range-1, Ghaziabad had been affirmed. The appellant Daya Nand Pushpa Devi Charitable Trust, Ghaziabad, U.P. (hereinafter referred as “Assessee”) is a registered trust created by the trust deed dated 05.09.1988. As per the objects of the trust, it was created for carrying out the cause of public charity within India; few of the objects stated in the trust deed are as under:-
(ii)“ To promote education in commerce, Science, Art, Engineering, Technical subjects, Management Studies, Vocational or Professional subjects and to Establish and Maintain or give aid to Institution or Institutions:-
(a) For giving training in commerce, Trade and Industry and vocational lines and other professions of General Importance.
(b) For imparting education to children boys, Girls and to Men and Women.”
(ix) To form, assist, support, establish and maintain libraries and reading Room and to establish and maintain Boarding Houses and Hostels and assist such institutions.”
The trust is running a Dental College in the name & style of Harsharan Dass Dental College at Ghaziabad. The hostel for residence of the students admitted in the said college is also being run and managed by the trust. The trust claimed that all its activities are covered under Section 2 (15) of the Income Tax Act’ 196 1(In short referred to as the “Act”); and had applied for the registration under Section 12-A of the Income Tax Act, which had been duly granted by the Commissioner, Income Tax, Meerut vide order C No. 40(40)/Registration/GZB/9902000/CIB/1 960 dated 02.05.2000.
It has been brought on the record that under the directives of the Dental Council of India by the Gazette notification dated 25.07.2007, it is mandatory for the institutions admitting students in the dental education course (BDS) to provide hostel accommodation, based on the number of admissions, to all the boys and girls in the dental college campus itself. A copy of the said notification is appended with the memo of appeal and the same had also been filed before the Tribunal along with other papers. The issue herein is with regard to the return of income filed by the trust for the assessment year 2010-11 wherein the assessee had declared its net income as’’NIL’. The case was selected under compulsory scrutiny and notices were issued to the assessee. The assessment order records that the books of account, bills and vouchers etc. maintained by the assessee had been produced in reply to the notice and the questionnaire issued by the department/revenue. After providing due opportunity to the assessee, the Assessing Officer concluded that the hostel activities of the trust is separable from its educational activities and the way the hostel and mess activities are being carried on they would fall within the meaning of “business”under section 2(13) and can not be treated as ‘Charitable purposes’ under Section 2(15) of the Income Tax Act. The benefit of Section 11 of the Act cannot be given to the assessee, in as much as, it has not maintained separate books of accounts which is one of the preconditions mentioned in Section 11 (4A) for grant of such benefits. It was concluded in the assessment order that the total hostel receipt of the trust was excessively high and the receipt and payment details furnished by the assessee showing net deficit of 68,198/- was nothing but a cooked up story. It was concluded that the expenditures towards generator, electricity and security were also excessively high. As per the covered area of the hostel building as compared to the whole campus only 10% of total expenses could be allowed. The assessing officer,thus, held that all the figures in the ledger filed by the assessee were presumptive, without any justification and unsupported by evidence. As regards the expenses towards salary, the Assessing Officer did not accept the figures shown in the ledger observing that the work of a Hostel Warden is only a part time job. While concluding that only special allowance is to be given to a warden, the amount shown as expenditure for salary of four wardens of the hostel was disallowed.
Similarly, the expenditures shown towards the payment of salary to the caretaker, driver were also disallowed. Income from the hostel activity in view of the section 11 (4A) of the Income Tax Act was, thus, computed as under:-
