DEEP FOUNDATIONS INSTITUTE OF INDIA,VELACHERY, CHENNAI vs. CIT (EXEMPTIONS), NUNGAMBAKKAM, CHENNAI

The assessee was granted original approval u/s.80G of the Act vide order dated 27.05.2021, which was subsequently renewed for a period of five years vide order dated 23.03.2023. As the said period of approval was due to expire, the assessee filed an application in Form No.10AB on 30.09.2024 under clause (ii) of the first proviso to section 80G(5) of the Act, seeking renewal of approval. In compliance with the notices issued by the Ld.CIT(E), the assessee furnished detailed replies and supporting documents on 02.03.2025 in response to the questionnaire dated 05.02.2025, and thereafter on 18.03.2025 and 26.03.2025 in response to the Show Cause Notice dated 10.03.2025. Additionally, on 29.03.2025, the assessee's Authorized Representative addressed a detailed email to the Ld.CIT(E) enclosing letters from three sponsors confirming the absence of any formal MoU with the Company, a copy of the application filed before the Registrar of Companies (ROC), Chennai, for amendment of the Memorandum of Association (MoA) to delete the reference to activities "outside India", and a copy of the judgment of the Hon'ble Madras High Court in M/s.Investor Financial Education Academy v. Income Tax Officer (Exemption)-4 [T.C.A. No.900

The Ld.CIT(E) has rejected the application of the assessee on four broad grounds. First, the Ld.CIT(E) held that the activities of the assessee do not constitute 'education' within the meaning of section 2(15) of the Act, placing reliance on the judgment of the Hon'ble Supreme Court in Sole Trustee, Loka Shikshana Trust v.CIT [(1975) 101 ITR 234 (SC)] and New Noble Educational Society v.CCIT [(2022) 143 taxmann.com 276 (SC)], and held that the term 'education' has a narrow and specific connotation under the Act, confined to systematic schooling and formal instruction, which the Company's activities of organizing conferences and workshops do not satisfy. Second, the Ld.CIT(E) held that the principle of mutuality is applicable to the assessee, on the basis that the objects and activities of the Company are directed towards persons engaged in the deep foundation industry and not towards the public at large, and that the Company's activities amount to promotion of the business interests of its members rather than charity as envisaged u/s.2(15) of the Act. Third, the Ld.CIT(E) held that the receipts of the assessee in the nature of conference sponsorship fees, delegate fees, membership fees, and workshop and training programme fees are not voluntary contributions but are received on a 'quid pro quo' basis, inasmuch as the Company charges differential rates for members and non-members, and the members receive identifiable benefits in exchange for their contributions. Fourth, the Ld.CIT(E) held that the objects of the Company, as reflected in its Memorandum of Association, extend to activities outside India, which is contrary to the requirement u/s.11(1)(a) of the Act that income must be applied for charitable

The Ld.AR of the assessee vehemently challenged the impugned order and submitted that the rejection is erroneous both in law and on facts. On the question of whether the activities of the assessee constitute 'education', the Ld.AR submitted that the Ld.CIT(E) went wrong in applying a restrictive interpretation of the said term. It was submitted that the activities of the Assessee which include systematic conduct of seminars, conferences, workshops and technical training programs in the specialized discipline of geotechnical and deep foundation engineering squarely constitute 'education' within the meaning of section 2(15) of the Act.

The Ld.AR submitted that the additional submissions filed by the assessee on 29.03.2025 which were not considered by the ld.CIT(E) while passing the impugned order and further placed reliance on the judgment of the Hon'ble Madras High Court in M/s.Investor Financial Education Academy v. Income Tax Officer (Exemption)-4 [T.C.A. No.900 of 2018, dated 04.09.2020], wherein a Division Bench of this Court, while following the decision of the Gujarat High Court in Gujarat State Co- operative Union v. CIT [(1992) 195 ITR 279 (Guj.)], held that the term 'education' as used in section 2(15) of the Act is not limited to formal schooling in schools and colleges, but encompasses systematic dissemination of knowledge and training in specialized subjects.

The Ld.DR supported the impugned order of the Ld.CIT(E) and contended that the rejection of the application was well-founded. It was submitted that the activities of the assessee are primarily oriented towards the deep foundation industry and its members, and the receipts

We have heard the rival submissions perused the material available on record and gone through the impugned order of the Ld.CIT(E) dated 29.03.2025 along with the paperbook filed on behalf of the assessee comprising the Memorandum of Association, the history of registrations and approvals, the financial statements for the relevant years, the replies submitted before the Ld.CIT(E), and the judicial pronouncements cited before us.

The main issue before us is on the scope of the ld.CIT(E), to examine the renewal of registration u/s.80G of the Act. From the plain reading of the impugned order, we note that one of the findings rendered by the ld.CIT(E) is on the applicability of the provisions of Section 2(15) of the Act and in this regard, we are of the view that the applicability of the provisions of Section 2(15) of the Act can be tested at the point of assessment and not at the time of registration. With respect to the findings rendered on the activities falling within the ambit of ‘education’, it was vehemently argued that the term education should be understood to have broader scope by placing reliance on the judgment of the Madras High Court and Co-ordinate Bench of the Tribunal. We have perused the activities carried out by the assessee which is in the context of skill development by imparting education through training and seminars. The Ld. AR appearing for the assessee had placed reliance on the decision

Eventhough we find force in the arguments of the Assessee in establishing a prima-facie case, we note that the email sent on 29.03.2025 by the assessee by placing on record the additional submissions / documents and further placing reliance on the judgment of the Madras High Court in the case of M/s. Investor Financial Education Academy v. Income Tax Officer (Exemption)-4 were not considered while passing the impugned order. The non-consideration of the above submissions would tantamount to violation of principles of natural justice and hence, we are of the opinion that the assessee should be granted another opportunity of hearing to substantiate his case before the Ld.CIT(E) especially keeping in mind the principles of natural justice.

In the result, the appeal filed by the assessee is allowed for statistical purposes.