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Facts
The assessee, an educational institute, claimed exemption under Section 11 of the Income-tax Act for AY 2009-10. The Assessing Officer (AO) treated the assessee as a business entity and denied the exemption, treating its income as taxable. This denial was upheld by the CIT(A).
Held
The Tribunal held that the assessee is an educational institution existing solely for educational purposes, and its activities are integrally connected with imparting structured maritime education and training. The mere generation of surplus, wholly applied towards educational objects, does not render the activities commercial. Consequently, the impugned order was set aside, and the AO was directed to allow the exemption.
Key Issues
Whether the assessee institution, engaged in maritime education and training, qualifies as a charitable institution for exemption under Section 11 and Section 2(15) of the Income-tax Act, or if its activities are commercial in nature.
Sections Cited
11, 10(23C), 2(15), 143(3), 250, 254
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “C”, MUMBAI
Before: SHRI VIKRAM SINGH YADAV & SHRI ANIKESH BANERJEE
O R D E R Per: Anikesh Banerjee (JM): The instant appeal of the assessee filed against the order of the National Faceless Appeal Centre(NFAC), Delhi [hereinafter, ‘Ld.CIT(A)] passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’) for the Assessment Year 2009-10, date of order 17/07/2025. The impugned order was emanated from the order of the Learned Income-tax Officer (E)-2(4), Mumbai (in short, ‘Ld.AO’) passed under section 143(3) read with section 254 of the Act, date of order 29/09/2017.
The Institute of Marine Engineers India 2. The assessee has taken the following grounds of appeal:- “Being aggrieved by the order passed w/s 250 of the Income-tax Act, 1961 (the Act) dated July 17, 2025, for the AY 2009
10. ('the order) by the Hon'ble Commissioner of Income-tax (Appeal) - National Faceless Appeal Centre, Delhi [ the "L. CIT(A)], your appellant presents the following grounds of appeal, which are without prejudice to each other:
1. In the facts of the case and under the circumstances and in law, the Ld. CIT(A) has erred in upholding the denial of your appellant's claim of exemption u/s 11 of the Income-tax Act, 1961, by the Lit. Income-tax Officer Exemptions), 2141, Mumbai (The Ld. Assessing Officer) while passing the assessment order.
2. In the facts and circumstances of the case and in law, the le CIT(A) has erred in t appreciating your appellant's plea that the order passed by the id. AD in bod in law since it had ignored the directions of the Hon'ble income tax Appellate Tribunal, Mumbai
3. In the facts of the case and under the circumstances and in law, the Ld. CITA) has erred in not appreciating your appellant's plea that the order passed by the Id. AD bad in law since it had not considered the submissions made and evidences find on record by Your Appellant
4. In the facts of the case and under the circumstances and in ise, the L. CIT(A) has grossly erred in remarking that it was not necessary for the id. Ad to put each and every submission made by Your Appellant in the body of the order to prove that he was considering them, whereas the fact remained that id. AO had merely redacted from the earlier assessment order passed in the original round of litigation and did not establish on record that the dominant object of tour Appellant was earn profit try engaging itself in business. commercial activity and that it was not a charitable institution, in the present impugned assessment order
5. In the facts of the case and under the circumstances and in law, the LD. CITEA) has grossly erred in deducting that the objects of your appellant were not intended for educational purposes and that the activities of your appellant during the impugned Assessment year were purely commercial in nature and not for educational purposes.
The Institute of Marine Engineers India 6. In the facts of the cave and under the circumstances and in law, the Ld. CIT(A) erred in not considering the judicial precedents cited by your appellant whereas the judicial precedents relied upon by the Ld. CTT(A) were distinguishable in Your Appellant's facts.
7. Your appellant craves leave to add, amend, modify alter and/or delete any of the above grounds of appeal on or before the date of hearing.”
3. The brief facts of the case are that the original assessment was duly completed u/s 143(3) on 28/12/2011. In the assessment, the Ld.AO rejected the assessee’s claim under section 11 of the Act. The aggrieved assessee filed an appeal before the Ld.CIT(A) and the Ld.CIT(A) upheld the original assessment order. Finally the assessee filed an appeal before the ITAT, Mumbai Bench and the coordinate bench passed the order dated 29/04/2016 bearing restored the matter to the file of Ld.AO and directed the Ld.AO to verify the approval of Director General of DG(S), course conducted, faculty employed, hostel and training facilities, etc. The assessee is an educational institute and trust and claimed deductions u/s 11 and 10(23C) of the Act. During the assessment proceedings, the Ld.AO treated the assessee as a business entity. Accordingly, the claim of deduction u/s 11 of the Act was rejected and taxable income was determined amount to Rs.2,05,82,310/- by an order passed u/s 143(3) r.w.s. 254 of the Act. Aggrieved assessee has challenged the order before the Ld.CIT(A). The Ld.CIT(A) upheld the impugned assessment order. Being aggrieved, the assessee filed an appeal before us.
The Ld.AR argued and filed the paper book containing pages 1 to 499, which is kept on record. The Ld.AR argued that the claim made by the assessee The Institute of Marine Engineers India trust is duly denied by the Ld.AO. The Ld. AO has noted the the activities of the assessee in impugned assessment order on pages 2 & 3, which is extracted as below:- “The main objects of the Assessee Trust are as under:- The object and purposes for which the Institute is constituted are a) To promote the scientific development of Marine Engineering in all its branches and in the furtherance of such knowledge; b) To enable Marine Engineers to meet and correspond to facilitate the inter change of ides respecting improvements and improved methods of working machinery, and to publish and communicate information on such objects; c) To uphold the status of members of the Institute by prescribing or holding examination for candidates for election or by requiring standards of knowledge and experience which can be approved; d) To Co-operate with Universities, other educational intuitions and public educational bodies for the furtherance of education in engineering science; e) To Constitute and maintain a benevolence fund, for affording relief to indigent members of the Institute and the families of deceased members. This fund, being solely devoted to granting financial assistance after defraying expenses, to be known as the "Benevolence Fund" and to operate as per specific guidelines formulate by the Institute;”
The Ld.AR further argued that the Ld.AO considered the assessee as a professional body and rendering beneficial serves to its members and not as an educational institution. The fee charged by the assessee is in the nature of commercial activity. He further stated that the assessee is not a university or institution affiliated, so the assessee cannot award any degree or enroll members as in statutory universities. So the assessee is considered by the revenue as a business entity. The Ld.AR in argument further stated that the assessee is bringing out the education as per provision of section 2(15) of the Act and activities, which are “education” connected by providing world recognized curriculum for all hospitality education programme in India by making the test course material and other software process programmes in India apart from excepting these activities The Institute of Marine Engineers India to be the realm of education.The profit arise to the assessee from such activities would not disrupt from holding such entity, so existing solely for educational purpose. In argument, the assessee stated that the assessee submitted the details before the Ld.CIT(A) by letter dated 13/01/2021, but for explaining the activities which is inter-alia related with the deduction u/s 2(15) of the Act. The relevant part of the submission is reproduced as below:- “1. What is 'charitable purpose' under the Act & where do IMEI's objects fit in 1.1 Section 2(15) of the Act defines charitable purpose' in an inclusive manner. It reads as follows: ‘Charitable purpose' includes (1) relief of the poor, (ii) education, (ii) yoga, (iv) medical relief, (v) preservation of environment (including water-sheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest. and (vi) the advancement of any other object of general public utility." (the numbering has been done for ease of reference and highlighting the segregation of object clauses) 1.2 At the outset, guided by our objects, we would like to state that our activities and actual conduct are ushered keeping Maritime Education as the fulcrum of our efforts, which we shall demonstrate 'how' in the ensuing paragraphs. Our activities also cover relief of the needy. But before doing so, it would be apposite, at this juncture, to review and discern the scheme of Maritime Education in India-its overall framework, its various stakeholders, how is Maritime Education regulated and its peculiar features and other nuances. This understanding bears vital notice to appreciate and connect the yeoman efforts of IMEI in the field of Maritime Education, fulfilling the definition of 'charitable purpose' for income-tax.”
The Ld.AR further argued that the entire assessee’s course are affiliated by the Ministry of Shipping, Road Transport and Highways, i.e. Director General of Shipping, Government of India [in short, DG(S)] and assessee is holding certificate bearing No.ENG/EXAM-17(9)/99-II dated 25/02/2010. The said certificate is enclosed at APB pages 94 to 95. He further stated that the curriculum is duly guided by the DG(S) and the assessee is following the same. He further invited The Institute of Marine Engineers India our attention to APB page 38 where the curriculum are duly depicted and the nature of curriculum is duly reproduced below:- “5.4 DG(S) authorized IMEI to conduct the following courses from its educational campuses, as tabulated below:-
Sr. Course, Title, Intended for & Duration DG(S) Approval to No. IMEI, enclosed as 1 Marine Engineer Officer Class IV Near Coastal Voyage Annexure 24 (for lower grades such as oilers/filters, etc) – 4 Months course 2 Marine Engineer Officer Class III Near Coastal Voyage Annexure 25 (Second Engineer Officer) – 4 Months course 3 Marine Engineer Class III Near Coastal Voyage Annexure 26 (Chief Engineer officer class) – 4 Months course 4 Marine Engineer Officer Second Engineers Foreign Annexure 27 Going – 4 months 5 Revalidation Course for Engineer Officer (Every 5 years Annexure 28 students have to renew their Certificate of Competency and for that these students must undergo this course without which the students cannot practice in the Maritime Field.)
The members of the Trust are open to all qualified sea-farers. The course mentioning in TAR books are statutory educational requirement under DG(S) controlled exams are conducted and the monthly technical meetings, the cost of which is Rs.27/- is distributed free of cost to even non members. The assessee has totally a non profit motive and beneficial to the non individual members. The Ld.AR respectfully relied on the order of CIT vs Vijay Wani Educational Trust reported in 349 ITR 280 (AP) held that :- “15. In the case on hand, running M/s. Vijaya Vani Printers, Maabadi and Patasala, etc., cannot be said to be commercial ventures as held by the Commissioner of Income-tax. To argue that the trust exists for the benefit of a few members cannot be accepted as there has been an amendment in the memorandum of association as noticed supra. The assessee herein was running educational institutions and to aid spreading of the education and update the syllabus The Institute of Marine Engineers India and other related educational aspects, two magazines were started by the assessee or their sister concern. They are incidental and ancillary to the main activities of the trust and, therefore, the ratio in Yogiraj Charity Trust (supra) is not applicable. Question No. 4, therefore, has to be answered in the negative in favour of the assessee and against the Revenue and question No. 5 is answered in the affirmative against the Revenue and in favour of the assessee.” where the incidental educational activity aiding maritime learning, in fact, TAR books and MCB exams are statutory functional deleted by the DG(S). These activities are regular education and not trade or commerce.
8. The Ld. DR argued and relied on the order of the revenue authorities. He further stated that the assessee is not an educational trust, but a commercial entity. He also stated that during this impugned assessment year, the assessee earned Rs.3,03,23,473/- by organizing ‘The World Maritime Technical Conference’ in 2009 (WMTC). The said amount is duly reflected in the assessee’s income APB page 139. So the assessee itself is a profit making organization. He further stated that there is no proper teacher and taught or any degree is awarded by any university. So in any case, it cannot be accepted as an educational institution. The Ld. DR argued that the Ld.CIT(A) relied on the order in the case of New Noble Educational Society vs CCIT-1 and Anr reported in [2022] 143 taxmann.com 276 (SC), held that requirement for educational charitable institution, society or trust seeking approval under section 10(23C) is to ‘solely’ engage itself in education or educational activities and not engage in any activity of profit which are unrelated to education. Where the Hon’ble Apex Court laid down that the institution must exist solely for the purpose of education and that solely means ‘exclusive’ and not ‘primarily’. Hence, if any educational object exists, the exemption cannot be granted u/s 10(23C)(vi) or (xi) of the Act. The Ld.CIT(A) further concluded that the The Institute of Marine Engineers India object of the assessee is not charitable since the claim of providing education as per section 2(15) is not met. It appears that the activities appear commercial.
On the other hand, the Ld.AR stated that the issue is only limited to the education and the registration u/s 12A has been granted, the benefit of the same cannot be withdrawn. The Ld.AR respectfully relied on the order of the Hon’ble Supreme Court in Queen’s Educational Society vs. CIT reported in [2015] 55 taxmann.com 255 (SC) reasonable surplus or if based on recovery of cost does not make the activity commercial. The Ld.AR distinguished the order of Hon’ble Supreme Court in New Noble Education Society (supra) which itself did not overrule with principle it employ emphasis that the dominant object should remain ‘education’ and not profit. The audit report received is duly submitted and the amount of surplus is fully applied for ‘educational infrastructure’ and training and development. The Ld.CIT(A) relied on the order of New Noble Education Society (supra) to equate with imparting education means the formally seeking with teacher and taught implying that the activities are the formal education. The Ld.AR on the other hand, relied on the order of Sole Trustee Loka Shikshana Trust vs Respondent reported in [1975] 101 ITR 234 (SC) which is formed by the order of New Noble Education Society (supra) and defines ‘education’ as systematic instruction, training and development to knowledge and school. The relevant observation of Hon’ble Apex Court in New Noble Education Society (supra) is reproduced as follows:- “33. The subject of education is vast, even sublime. Yet, it is not the broad meaning of the expression which is involved in this case. As was held in T.M.A Pai Foundation (supra), education in the narrower meaning of the term as scholastic structured learning is what is meant in Article 21-A, Articles 29-30 and Articles 45 - 46 of the Constitution. As to what is 'education' in the The Institute of Marine Engineers India context of the IT Act, was explained in Sole Trustee, Loka Shikshana Trust v. CIT [1975] 101 ITR 234 (SC)/[1976] 1 SCC 254 in the following terms: "5. The sense in which the word "education" has been used in section 2(15) is the instruction, schooling or training given to the young in preparation for the work of life. It also connotes the whole course of scholastic instruction which a person has received. The word "education" has not been used in that wide and extended sense, according to which every acquisition of further knowledge constitutes education. According to this wide and extended sense, travelling is education, because as a result of travelling you acquire fresh knowledge. Likewise, if you read newspapers and magazines, see pictures, visit art galleries, museums and zoos, you thereby add to your knowledge.…All this in a way is education in the great school of life. But that is not the sense in which the word "education" is used in clause (15) of section 2. What education connotes in that clause is the process of training and developing the knowledge, skill, mind and character of students by formal schooling." Thus, education i.e., imparting formal scholastic learning, is what the IT Act provides for under the head of "charitable" purposes, under section 2 (15).”
The assessee conducts the process of ‘education’ through DG(S) approved structured courses with faculty curriculum an examinations leading to mixed certificate. Thus, the teacher-taught” relationship exists in this case. The Ld.AR submitted a list of DG(S) approved maritime training institute of India, zone-wise and assessee is mentioned in certificate – 88 with Western Zone, the copy of duly enclosed APB pages 62–65. So, in the DG(S) notice the assessee is an educational institution and continuing the course approved by the DG(S).
We have heard the rival submissions and perused the material available on record. We note that the original assessment was completed under section 143(3) of the Act and, thereafter, the assessment order was set aside with directions to the Ld. AO for fresh verification of the requisite documents, particularly with regard to the approval granted by the DG(S) for the courses conducted and other aspects forming part of the assessee’s educational activities. On appreciation of the material on record, we find that the assessee is not a society with composite The Institute of Marine Engineers India or minimal objects. As per its Memorandum of Association, the primary objects of the assessee are the promotion and development of marine engineering education and training, in close coordination with the DG(S) and maritime academic bodies. All incidental activities, including seminars, research programmes, workshops, and technical publications, directly facilitate and advance the educational objects of the assessee. Accordingly, the requirement of the institution existing “solely for educational purposes” stands fully satisfied. We further observe that there are no independent or unrelated objects or activities. The activities undertaken by the assessee, such as technical publications, seminars, research, and training programmes, are incidental to education and form an integral continuum of professional maritime training. The subscriptions, donations, and income earned from events such as the WMPC conference are duly reflected in the assessee’s balance sheet and have been entirely utilised for educational purposes. Therefore, following the ratio laid down by the Hon’ble Supreme Court in Queen’s Educational Society (supra), the mere generation of surplus does not render the assessee’s activities commercial in nature, so long as the surplus is applied towards educational objects. We also find that the issue is no longer res integra, having already been considered and decided by the coordinate Bench of the ITAT, Mumbai in the case of Maritime Training & Research Foundation v. DDIT(E)-1(1) in for A.Y. 2009- 10, vide order dated 22.08.2016. The relevant extract of the said order, appearing at pages 5 to 7, is reproduced hereunder:– “7. We have carefully considered the submissions of the parties, perused the material placed before us including the orders of authorities below and case laws relied upon by the parties. We find that the assessee was denied exemption under section 11 of the Act on the ground that the assessee was engaged in imparting training to cadets and not education within the meaning of section 2(15) of the Act The Institute of Marine Engineers India and motive of the assessee was earning profit from the said activities. We find that the similar issue has been considered by the Hon’ble Jurisdictional High Court in the case of Samudra Institute of Maritime Studies Trust,(supra)/ The operative part of the said judgment is reproduced below :
“3. We have perused the orders passed by the authorities including the Tribunal. We have also perused the two decisions, one of the Hon'ble Supreme Court and relied upon by both the counsel and equally a short judgment of the Division Bench of this Court in the case of DIT (Exemptions) v. National Safety Council [2008] 305 ITR 257 (Bom). We are of the opinion that the Tribunal has applied the correct test in concluding that the exemption under section 11 can be availed of by the Respondent - Assessee. In doing so, the Tribunal referred to the objects as set out in the Trust Deed of the Respondent - Assessee. They are to set up, administer and maintain technical training institution at various places in India for pre-sea and post-sea training for the ships and maritime industry as a Public Charitable Institute for education. That is to provide on-board and offshore training and continuing technical education for Officers, both on the deck and engine side. One of the object was to register with the Director General of Shipping and obtain other necessary approvals at the State and Central levels. We do not find that the ratio of the judgment of the Hon'ble Supreme Court or of this Court, which may be dealing with section 10(22), has been applied to such an extent as complained by Mr Malhotra. In the present case, the Tribunal in paragraph 9.6 of the impugned order concludes that the Assessee is giving training in the above area to seamen. All thecourses may not be approved by the Director General of Shipping but that by itself is no ground to hold that the purpose is not charitable. The exemption under section 11 can be claimed and bearing in mind the object of the Trust. We are of the opinion that the Tribunal and the CIT (Appeals) have approached the issue correctly and in the light of the definition so also the tests laid down came to a factual conclusion that the Respondent is entitled to exemption under section 11 of the Act. This is not a case where the purpose can be said to run a coaching class or a centre. This is an institution which imparts education in the area of pre-sea and post-sea training to seamen so as to prepare them for all duties. In such circumstances, we do not find that the concurrent findings of fact are vitiated by error of law apparent on the face of the record or perversity enabling us to entertain this Appeal. There is no substantial question of law. The Appeal is therefore dismissed with no order as to costs.”
On perusal of the above judgement it is revealed that the assessee trust was set up to administer and maintain technical training institution at various places in India for pre-sea and post-sea training for the ships and maritime industry and was engaged to provide on-board and offshore training and also seems to be education and accordingly, held that there is no substantial question of law and dismissed the appeal of the revenue. We find that the case of assessee is squarely covered by the ratio laid down by the jurisdictional High Court in the case of Samudra Institute of Maritime Studies Trust,(supra). Respectfully following the above mentioned judgment of Hon’ble High Court we set aside the order of the ld.CIT(A) and direct the AO to allow the benefit an enumerated under section 11 of the Act by deleting the addition 9. In the result, the appeal of the assessee is allowed.”
The Institute of Marine Engineers India 12. In view of the foregoing discussion, and respectfully following the binding judicial precedents, including the decision of the coordinate Bench of the ITAT, Mumbai in Maritime Training & Research Foundation (supra), as well as the judgment of the Hon’ble Jurisdictional High Court in Samudra Institute of Maritime Studies Trust (IT Appeal No. 465 of 2012 order dated 07/08/2014), we hold that the assessee is an educational institution existing solely for educational purposes within the meaning of section 2(15) of the Act. The activities carried on by the assessee are integrally connected with and incidental to imparting structured maritime education and training duly approved and regulated by the Director General of Shipping, Government of India. The mere generation of surplus, which has been wholly applied towards educational objects, does not render the assessee’s activities commercial in nature. We further find that the Ld. AO failed to comply with the specific directions issued by the Tribunal in the earlier round of litigation and that the Ld. CIT(A) erred in upholding the impugned assessment order without properly appreciating the factual matrix, evidences on record, and the applicable judicial principles. Accordingly, the impugned order passed by the Ld. CIT(A) is set aside, and the Ld. AO is directed to allow the assessee’s claim of exemption under section 11 of the Act. So, the appeal filed by the assessee is allowed.