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Tax on rental income of education trust exempted - High Court

Posted Date : 04-Jul-2015 , 10:37:45 pm | Posted By CASANSAAR print Print
In a relief to Shri Vile Parle Kelavani Mandal (SVKM), an educational trust that runs Narsee Monjee Institute of Management Studies, the Bombay High Court has clarified that if the trust generates the income by giving hall and premises on rental, the income is not taxable income, if it is used for the institutional.

In the case, the Mumbai-based educational trust was giving its various halls and properties of the institution on rent during the holidays or on the days when they were not required by the educational purpose.

The revenue officer had raised a tax demand on the income generated through rental activities. The department claimed that the assessee (SVKM) is not fulfilling the requirements of section 11 (4A) of the Income Tax Act under which they gets such waiver.

The question of law was whether Income from letting out of property of educational institution is taxable even if same was used for educational purposes.

However, the Bombay High Court, setting aside the tribunal order clarified that the income generated from giving various halls and properties of the institution on rental on weekend and on public holidays when they are not required for educational activities.

According to the court, this cannot be said to be a business which is not incidental to attain the objects of the trust. This being merely an incidental activity and the income derived from it is used for the educational institute and not for any particular person.

This order will bring cheer to many such educational institutions that are giving their premises on rent when it is lying unutilised. (Economic Times)
 
 
 

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