I-T - Major relief for DPS; Transport facility provided by schools to their students only, are incidental to educational activity, and hence exempted: ITAT
By TIOL News Service
NEW DELHI, MAY 22, 2018: THE ISSUE BEFORE THE TRIBUNAL IS - Whether collection of fees by a school from the students for their transport facility, will not render it a commercial organization, and hence entitled for exemption u/s 11(4A). YES IS THE ANSWER.
Facts of the case:
The assessee under present case is running a private school. Apart from the tution fees and other administrative expenses, the assessee used to charge seperate fees from its students for providing transport facility to them. During the course of its scrutiny assessment, the AO disallowed a sum of Rs.1,73,20,960/- in relation to the activity of assessee running the school buses, on the premises that the said activity amounts to business in view of the proviso to Section 2(15), and as such the assessee was not entitled for exemption u/s 11(4A). To reach this conclusion, he noted that surpluses generated from running of transport business was not reduced from the fee of the next year.
On appeal, the FAA found that the fee charged from the students was on commercial basis and not on charitable basis, as such the assessee was engaged in commercial activity and could not be termed as education as covered u/s 2(15). The FAA further observed that transport running for the children of school was not an advancement of general public utility and the assessee was not charging as per market rate but had charged more from the students which shows the commercial motive of the assessee. Thus, as per the FAA, the AO had correctly denied exemption u/s 11(4A) of the act.
Tribunal held that,
++ the AO has recorded that the assessee society has charged Rs.3,00,42,296/- towards transport fee which is included in the income and expenditure account and corresponding expenses was debited to Rs.3,09,33,029/- for providing transport facility to students. There is no dispute that the assessee has been running 37 school buses and the AO has allowed the salary of 7 drivers. The contention of the assessee that 37 buses cannot be run by 7 drivers, goes uncontradicted. Further, the AO did not bring on record as to the use of the vehicles for any other purpose than the conveyance of the children and further its repair and periodical maintenance. It is not the case of Revenue also that the assessee has been deriving any income from the use of these vehicles other than collecting the fees from the students for their transport facility. It is, therefore, clear that the material on record suggests that all the buses are being used only for providing facility to the students and staff that also only for transport to and from the school to the respective houses of the children in the given routes;
++ it clear that the entire dispute in this matter revolves around the question whether or not the activity of running school buses exclusively for the facility of the students and staff, is an intrinsic part of the activity of running a school. Such a question is no longer res Integra by the decision in the case of Krishna Charitable Society Vs. Addl CIT - 2017-TIOL-1321-ITAT-DEL, wherein it was held that transport and hostel facility surplus cannot be considered as business income of the society as these activities are incidental to the main object of the assessee society of education. Similarly, in case of Kanha Charitable Trust Vs. ACIT, it was held that in the absence of any clinching evidence to show that the hostel facilities and transport facilities were provided to anybody other than students and staff of the trust, they 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'. In the present case also, it is not the case of Revenue that the transport facility is also provided to the outsider. Therefore, the transport activities of the assessee trust are not in the nature of business, inasmuch as the transport is also incidental to the attainment of the main object of the trust of the education. Therefore, the provisions of Section 11(4A) do not apply to the assessee.
(See 2018-TIOL-741-ITAT-DEL)
