Sale of Uniforms and Books to Students at Cheaper Rate by Society is Charitable Activity: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT) has held that the sale of uniforms and books to the students by a society which is an educational activity as per the Memorandum of Association cannot be treated as a commercial activity.

The assessee is engaged in providing primary and higher education to the poor students and working under the aims and objects of the society. It also engaged in sale and purchase of books and uniform to the students of the assessee school only, at cheaper rate than market prices, which is also a part of educational activity. Also, the assessee buys and sells only those books and uniforms which are related to the students only. It is entirely for the education of the students which is not beyond the aim and objective of the society.

The Tribunal observed that there is no need to specifically mentioned about the sale of uniforms and books in the memorandum of association as it is incidental to the educational activities which is object of the assessee.

“From the plain reading of Section 10(23C)(iiiad) of the Income Tax Act, it is apparent that any income of any university or other educational institution existing solely for educational purposes and not for the purpose of profit is totally exempt if the aggregate annual receipts of such university or educational institution do not exceed the amount of annual receipt as may be prescribed. This means that there is no restriction on the generation of surplus u/s 10(23C)(iiiad). It can be said that any university or other educational institution can generate a surplus. Therefore, so long as the purpose of the institution does not involve carrying on of an educational activity for profit, the requirement of condition given under section 10(23C)(iiiad) could be met if the activity of the educational institution is carried out not for the purpose of profit,” the Tribunal observed.

Allowing the deduction to the assessee, the Tribunal observed that the exemption u/s 10(23)(iiiad) of the Income Tax Act, 1961 should not be denied to the assessee as the selling of books and uniform to the students of the assessee is part of educational activity only.