M/S. CALICUT EDUCATIONAL TRUST CORPORATE COLLEGE OF ARTS AND SCIENCE vs. THE DEPUTY COMMISSIONER OF INCOME TAX

ITA/3/2021HC KeralaKLHC01060085202006 July 2022Author: HONOURABLE MR.JUSTICE S.V.BHATTI,HONOURABLE MR.JUSTICE BASANT BALAJI20 pages
AI SummaryDismissed

What were the facts?

The appellant, M/s. Calicut Educational Trust Corporate College of Arts and Science, is a registered charitable Trust with an exemption under Section 12AA of the Income Tax Act. For assessment years 2003-04, 2007-08, and 2010-11, the Assessing Officer held that the Trust was running a parallel college/tuition center for profit, disallowing deductions under Section 11. The total amounts payable were Rs. 51,483/-, Rs. 1,11,180/-, and Rs. 1,65,570/- respectively. The Commissioner of Income Tax (Appeals) dismissed the Trust's appeals. The Income Tax Appellate Tribunal (ITAT) also dismissed the appeals, relying on Supreme Court and High Court judgments, holding the Trust was not an educational trust under Section 2(15) and thus not entitled to exemption. These High Court appeals challenge the ITAT's orders.

What did the High Court hold?

The High Court dismissed the appeals. On issue (ii), the Court held that the Tribunal was justified in holding that the appellant cannot be considered an educational trust within the meaning of Section 2(15) of the Act. The Court reasoned that while education is included in the definition of 'charitable purpose', each Trust's purpose and object must be examined on a case-by-case basis. Mere coaching given to students, as found by the authorities, does not fall within the meaning of 'education' as provided under Section 2(15) when it is coupled with profit-making. The Court cited the Apex Court's dictum in Sole Trustee (supra) that education connotes systematic instruction, schooling, or training for the work of life, and the whole course of scholastic instruction. The Court found that the Assessing Officer and appellate authorities correctly determined that the appellant's activities of giving coaching to students were not charitable. The Court also noted that the Section 12AA registration certificate explicitly stated it was not a finding regarding the charitable nature of the fund. The judgment in W.A. No. 750 of 2006 was in respect of service tax and its findings regarding the charitable nature of the Trust could not be imported into the Income Tax Act. As issue (ii) was answered against the appellant, all other questions of law were also answered against the appellant as they flowed from the answer to issue (ii). The Court did not expressly leave any issue undecided.

What were the issues?

The High Court had to decide the following questions of law: 1. Whether the Tribunal was justified in confirming the denial of exemption under Section 11 of the Act for the relevant assessment years. 2. Whether the Tribunal was justified in holding that the appellant cannot be considered an educational trust within the meaning of Section 2(15) of the Act and therefore not entitled to exemption under Section 11. 3. Whether the Tribunal's finding that the appellant is not an educational/charitable trust under Section 2(15) is perverse, unsustainable, and contrary to the High Court's judgment in the appellant's own case (W.A. No. 750 of 2006), the Deed of Trust, and the Section 12AA registration certificate. 4. Whether the Tribunal was justified in approving the Assessing Officer's conclusion that the appellant's activities are not charitable, thereby denying exemption, and if this finding is contrary to facts, incorrect, and perverse. 5. Whether the Tribunal was justified in holding that the appellant is hit by Section 13(1)(c)(ii) of the Act. 6. Whether Section 13(1)(c)(ii) is applicable when expenditures like interest and salaries were incidental to carrying out the Trust's objects. 7. Whether the Tribunal was justified in confirming the applicability of Section 13(1)(c)(ii) when expenditures were necessary and incidental to the Trust's objects. 8. Whether the Tribunal was justified in ignoring and not adjudicating upon the alternate claim for exemption under Section 10(23C)(iii ad) of the Act. Assessee's Contentions: The assessee argued that the Tribunal's finding was perverse and contrary to the High Court's judgment in their own case (W.A. No. 750 of 2006), the Deed of Trust, and the Section 12AA registration. They also contended that expenditures were incidental and necessary, and that Section 13(1)(c)(ii) was wrongly applied. An alternate claim under Section 10(23C)(iii ad) was also raised. Revenue's Contentions: The revenue contended that the Trust was running a parallel college for profit, not engaging in charitable activities as defined under Section 2(15). They relied on judgments from the Apex Court in Sole Trustee, Lok Shikshana Trust v. CIT, Mysore and High Courts in Bihar Institute of Mining and Mine Surveying v. CIT and Saurashtra Education Foundation v. C.I.T. The revenue also pointed out that the Section 12AA certificate explicitly stated it was not a finding regarding the charitable nature of the fund.

Which sections of the Income-tax Act were involved?

Section 11,Section 12AA,Section 2(15),Section 13(1)(c)(ii),Section 10(23C)(iii ad),Section 143(2),Section 260A

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR.JUSTICE BASANT BALAJI WEDNE AY, THE 6TH DAY OF JULY 2022 / 15TH ASHADHA, 1944 ITA NO. 3 OF 2021 ITA 28/COCH/2020 OF I.T.A.TRIBUNAL,COCHIN BENCH APPELLANT/S: M/S. CALICUT EDUCATIONAL TRUST CORPORATE COLLEGE OF ARTS AND SCIENCE CORPORATE COLLEGE OF ARTS AND SCIENCE, EMAS COMPLEX, YMCA ROAD, KOZHIKODE-673001 NOW AT T P BUILDING, MUTHALAKULAM, KOZHIKODE-673001. BY ADV RAMESH CHERIAN JOHN RESPONDENT/S: 1 THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 2(1), OFFICE OF THE DEPUTY COMMISSIONER OF INCOME TAX, AAYAKAR BHAVAN, NORTH BLOCK, KOZHIKODE-673001. 2 THE COMMISSIONER OF INCOME TAX OFFICE OF THE COMMISSIONER OF INCOME TAX, AAYAKAR BHAVAN, NORTH BLOCK. KOZHIKODE-673001. BY SC.SHRI CHRISTOPHER ABRAHAM THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 06.07.2022, ALONG WITH ITA.74/2019, 4/2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

ITA Nos.3/2021,74/2019 & 4/2021 -2- IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR.JUSTICE BASANT BALAJI WEDNE AY

The order continues below.

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