Case Law Details
Harish Chand Ram Kali Charitable Trust Vs ACIT (ITAT Delhi)
The issue under consideration is whether the CIT(A) is correct in concluding that the hostel running activity is a business activity?
The assessee society was established with the aim to impart education and other charitable activities covered under section 2(15) of The Income Tax Act. The trust is imparting education for bachelor degree in the field of engineering, pharmacy, business administration and hotel management etc. and running engineering and professional college. In scrutiny, A.O. asked assessee to explain as to why hostel receipt should not be treated as business income of the trust?
Assessee stated that for the educational activities of the assessee, large number of students comes from other cities and states and in the absence of hostel facility; they shall be deprived of the education. Therefore running of hostel is not a business activity and in fact, it is a mandatory requirement of educational Institute.
ITAT observed that, It is not the case of the revenue that assessee has provided the hostel and mess facilities to the students who are not attached with the educational Institute of the assessee trust. It is also not the case of the revenue that income generated out of the hostel fees is not used for educational purposes. As hostel fee income is subservient to the main object of the education and therefore A.O. is directed to treat the same as not a business income but income derived from the charitable activities of education. Accordingly, ITAT allowed the appeal.
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