THE DY. COMMISSIONER OF INCOME TAX (EXEMPTIONS), CIRCLE-1,, AHMEDABAD vs. MUDRA FOUNDATION FOR COMMUNICATION RESEARCH & EDUCATION,, AHMEDABAD

Per Pramod Kumar, Vice President:

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assessee’s claim that the assessee trust is carrying out activities of providing education and training in the field of communication and that the assessee trust is duly registered under section 12AA but rejected these submissions by relying upon the findings in the assessment year 2008-09 and holding that the assessee is not carrying out an education activity but “any other activity of general public utility” purely with a commercial motive. It was held that the provisions of section 13(8) come into play, and, accordingly the benefit of exemptions under section 11 and 12 were declined. The accumulations under section 11(1)(a) and 11(2) were declined to the assessee. The capital expenditure was also not treated as application for objects of the assessee-trust. Aggrieved, assessee carried the matter in appeal before the CIT(A). Learned CIT(A), relying upon his own decision for the assessment year 2012-13, reversed the action of the CIT(A) and held that “the appellant is covered by the clause of education under section 2(15) and not the last limb of ‘advancement of general public utility’ ” and “thus, the provisions of section 2(15) would not be applicable to the appellant”. He thus concluded that “the appellant would be eligible for benefit of section 11(1)(a) and 11(2) of the Act”. As regards the treatment of capital expenditure as application of funds for objects of the trust, he allowed the same as a corollary for the earlier findings. The Assessing Officer is aggrieved and is in appeal before us.

ITA No. 2424/Ahd/2017 & CO No.11/Ahd/2019 DCIT Vs. Mudra Foundation for Comn Rsrch & Edn Assessment year: 2014-15 Page 3 of 7 Institute of Communications (MICA). MICA is engaged in providing higher education in the field of communications and advertising. MICA provides training to students in the field of communications and advertising and conducts flagship 2 year course called PGDM which is approved by the AICTE. The course is considered to be one of the best management courses in communications and advertising in India. Apart from that, there are other short-term courses for qualified professionals and mid-term practitioners. The courses being conducted by MICA are in nature of systematic instruction with defined course contents, classroom training, etc. The appellant is primarily existing for the purpose of providing education and training in the field of Communication and advertising. 5.4 I therefore do not agree with the observation of the Assessing Officer that the activities of the assessee is not education but any other activity of general public interest. The word 'education' has to be given its natural meaning which encompasses within itself systematic training, schooling and instruction. As apparent from the facts of the case, the appellant is providing systematic training in the field of communication. The training is in nature of class room training with defined course contents and objectives and at the end of each course, the recognition is conferred by the appellant upon the participant of the respective course. Further, the flagship course of the appellant being PGDM programme is being regulated by the AICTE. Accordingly, the activity carried out by the appellant can be classified under 'education' under Section 2(15) of the l.T.Act and cannot be considered to be 'any other object of advancement of general public utility'. In this regard, the ratio of the decision of the Hon' ble Gujarat High Court Gujarat Co-operative (supra) and Hon'ble Supreme Court in Loka Sikshana (supra) is relevant.) 5.5 Further, it is also observed that, the Ahmedabad Bench of the Hon'ble ITAT in the case of Ahmedabad Management Association, which conducts short management courses which are not even recognized by AICTE, has held that mere earning of surplus cannot be considered as reason for considering educational activity under 'any other object of advancement of general public utility' and apply proviso to Section 2(15) of the l.T. Act. The appellant has also submitted that the DlT(exemption), based on the finding of the impugned assessment order had initiated proceeding u/s 12AA(3) , but has dropped the proceedings vide order No DlT(E)/12AA/Mudra?12-13/1077 dated 03/03/2014. 5.6 Accordingly, it is held that, the activity of the appellant is in nature of 'education' which is included in definition of 'charitable purpose' as per Section 2(15) of the l.T. Act and hence income of the appellant is to be computed as per the provisions of Section 11(1) of the Act. Therefore, the addition of Rs. 2,72,17,916/- is hereby deleted.

ITA No. 2424/Ahd/2017 & CO No.11/Ahd/2019 DCIT Vs. Mudra Foundation for Comn Rsrch & Edn Assessment year: 2014-15 Page 4 of 7 11. We further observe that Hon’ble Jurisdictional High Court in their orders dated 28-29/07/2015 vide special leave application no.6086/2015 has held that the institution run by the assessee’s Trust is established for the sole purpose of imparting education in the specialized field and the activities are covered under the provisions of section 2(15) of the Act and accordingly is eligible for exemption u/s.11(1)(a) of the Act. We further find that Revenue’s SLP filed before the Hon’ble Apex Court against the judgment of Hon’ble Jurisdictional High Court referred above also stands dismissed by the order dated 10/05/2016 in Supreme Court in Civil Appeal no.5040 of 2016. 12. We therefore respectfully following the judgment of Jurisdictional High Court and in the given facts and circumstances of the case are of the considered view that assessee activities of imparting education are charitable in nature as provided in section 2(15) of the Act. We therefore find no reason to interfere with the findings of Ld.CIT(A) and upheld the same. Accordingly ground no.1, 2 and 3 of the Revenue’s appeal are dismissed. 13. Now we take up second issue raised by the Revenue in ground no.4 against the order of Ld.CIT(A) deleting disallowance of capital expenditure of Rs.1,34,89,333/- incurred by the assessee and claimed to have been applied for charitable purpose u/s.11(1)(a) of the Act. 14. Learned Departmental Representative supported the order of Ld.AO and Ld. AR reiterated the submission made before Ld.CIT(A) and the finding of Ld.CIT(A) thereof. 15. We have heard the rival contentions and perused the records placed before us. We have dismissed the Revenue’s ground no.1,2 and 3 by following the judgment of Jurisdictional High Court in assessee’s own case and accepted that its activities of providing education are of charitable in nature and are covered under the provision of section 2(15) of the Act and therefore the expenditure incurred by the assessee towards attainment of the objectives of providing education are to be considered to have been applied for charitable purpose. 16. We further observe that provision of section 11(1)(a) contemplates that, income derived from property (which in this case is from running educational institution) held under trust wholly for charitable or religious purpose to the extent, which such income is applied to such purposes in India and whether any such income is accumulated or set apart for application to such purposes in India to the extent to which the income so accumulated or set apart would not in excess of the 15% of the income from such property than such income is not to be included in the total income of the previous year of the person in respect of such income. 17. In light of above provision, let us examine the issue that, whether the capital expenditure of Rs.1,34,89,333/- incurred by the assessee is eligible for exemption u/s.11(1)(a) of the Act. We find that assessee incurred capital expenditure of Rs.1,34,89,333/- and claimed it as an expenditure against the

ITA No. 2424/Ahd/2017 & CO No.11/Ahd/2019 DCIT Vs. Mudra Foundation for Comn Rsrch & Edn Assessment year: 2014-15 Page 5 of 7 income. We further find that assessee has added back the depreciation of Rs.61,07,021/- debited to the profit and loss account to the income in the computation of income. There is no dispute to the facts that assessee is not carrying any other activities other than providing education. It is also not disputed that the capital expenditure of Rs.1,34,89,333/- has been made for purchasing asset to be used for the purpose of providing education. We are therefore of the view that the capital expenditure incurred at Rs.1,34,89,333/- squarely falls in the provision of section 11(1)(a) of the Act which provides for deduction against the income. Our view further find support from the judgment of Jurisdictional High Court in the case of Satya Vijay Patel Hindu Dharamshala Trust Vs. CIT 86 ITR 683 wherein Hon’ble Court observed as follows: “As regards the contention whether the whole of the net surplus income of the trust properties applied in constructing the new Dharamshala or only equivalent to 25 per cent of the net income would be exempt from tax, the dominant object of creating the trust being to establish Dharamshala for the benefit of Hindus, the utilisation of net surplus income of the trust properties in the construction of the new Dharamshala, even if it exceeded twenty-five per cent of the net income of the trust properties, could not be said to be application to purposes other than the charitable purposes of the trust. So long as the application of the net surplus income of the trust properties to the construction of the new Dharamshala could not be said to be outside the purposes of the trust, and indeed it could not be, for, otherwise it would amount to breach of trust which it was clearly not, and which even the revenue did not allege, it must be held that the application was to the charitable purposes of the trust. The whole of the new surplus income of the trust properties was, therefore, clearly applied to the charitable purposes for which the trust ^properties were held by the trustees and was accordingly exempt from tax under section 11, sub- section (1), clause (a)." 18. We therefore respectfully following the judgment of Jurisdictional High Court and in the given facts and circumstances of the case find no reason to interfere in the findings of Ld.CIT(A) who has deleted disallowance by observing as follows: “6.2 I have considered the assessment order and the submissions made by the appellant. Since the appellant was claiming exemption under Section 11 of the Act in respect of income applied for charitable purposes, in the return of income, the appellant had claimed the exemption in respect of capital expenditure of Rs.1,34,89,333/- as application of income for charitable purposes. The AO has held that as per normal accounting principles the expenses have to be spread over the useful life of the fixed assets or expenses of capital in nature to arrive at true and correct of any institution. The Hon'ble Supreme Court in the case of S.RM.M.CT.M. Tiruppani Trust 96 taxman 635 whereby expenditure incurred for construction of building was considered as

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having been applied for charitable purposes and such income applied was held to be exempt. Further, the Hon'ble Gujarat High Court in the case of Satya Vijay Patel Hindu Dharamshala Trust(supra) has also held that income applied for construction of new dharmashalas was application of income for charitable purposes and accordingly, income so applied was exempt under Section 11[1] (a) of the Act. Accordingly, considering the fact that the appellant is eligible to exemption under Section 11 to 13 of the Act and following the ratio laid down by Hon'ble Supreme Court and the Gujarat High Court, the addition of Rs.1,34,89,333/- being capital expenditure incurred by appellant during the year is hereby deleted. However, since net addition made by the AO after granting depreciation to the appellant is of the order of Rs.73,82,312/- the same is directed to be deleted.” 19. Accordingly ground no.4 of the Revenue is dismissed. Ground no.5 is general in nature which needs no adjudication.”

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Justice P P Bhatt Pramod Kumar (President) (Vice President) Ahmedabad, dated the 10th day of June, 2019 bt Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) DR (6) Guard File By order etc True Copy Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad