COMMISSIONER OF INCOME TAX RAJKOT I vs. VIVEKANAND RURAL DEVELOPMENT INSTITUTE

O/TAXAP/883/2014 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 883 of 2014

FOR APPROVAL AND SIGNATURE:

HONOURABLE MR.JUSTICE KS JHAVERI

and HONOURABLE MR.JUSTICE K.J.THAKER

================================================================ 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================================ COMMISSIONER OF INCOME TAX RAJKOT I....Appellant(s) Versus VIVEKANAND RURAL DEVELOPMENT INSTITUTE....Opponent(s) ================================================================ Appearance: MR PRANAV G DESAI, ADVOCATE for the Appellant(s) No. 1 MR RK PATEL, ADVOCATE for the Opponent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER Page 1 of 6

O/TAXAP/883/2014 JUDGMENT

Date : 18/11/2014

ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE K.J.THAKER) 1. This Appeal u/s.260A of the Income­tax Act, 1961 is filed against the judgment and order dated 11.04.2014 passed by the Income Tax Appellate Tribunal, Rajkot in ITA No. 461/RJT/2013 whereby, the appeal filed by the assessee is allowed. 2. The facts in brief are that on 19.03.2013 the assessee filed an application for registration u/s.12A of the Act. For verification, the authority issued Notice to the assessee asking to produce necessary evidence   in   support   of  its  application  along   with  the   books   of accounts. On examination of the documents, the CIT was of the opinion that the main activity of the assessee was of running a training institute for stitching and embroidery for women. 3. According to the CIT, the activity of the assessee was of an occupational   nature   and   could   not   be   termed   as   educational training.  The CIT, accordingly, held that the activity carried out by the assessee was a commercial activity and not of a charitable nature and therefore, rejected the application of the assessee for registration u/s.12A of the Act. Being aggrieved by the said order, the present appeal has been preferred. 4. The following questions of law are proposed in this appeal; Page 2 of 6

O/TAXAP/883/2014 JUDGMENT (A) Whether on the facts and in the circumstances of the case, ITAT is justified in law and on facts in holding that the imparting   of   occupational   training   of   stitching   and embroidery for women by charging fees can be considered as charitable activities as defined u/s.2(15) of the Act? (B) Whether on the facts and in the circumstances of the case, ITAT is justified in law and on facts in directing the grant of registration u/s.12(A) of the Act  to the assessee Trust? 5. We have heard learned counsel for both the sides. While considering the application filed by the assessee for registration u/s.12(A) of the Act, the Appellate Tribunal made the following observations in Para­9 of its judgment; “9. Have   heard   both   the   sides.   I   have   carefully   gone through the order of the authorities below. It is pertinent to note that the assessee­trust is giving sewing training class at Ramania, Taluka : Mundra, Kutch for women staying in rural areas to give them full training of preparing various clothes / garments so that they themselves can earn their own. The trust had provided raw materials like cloth, threads and other items free of charge to all the 80 mahils who had participated in the projects. By giving training in stitching and embroidery to rural women the sole purpose of the assessee­trust is to uplift them so that they can become independent. Though the assessee­trust is also charging meager fee, the Income and Page 3 of 6

O/TAXAP/883/2014 JUDGMENT Expenditure Account shows the stitching training income of Rs.1,92,668/­ whereas, expenses incurred for such activities amounts   to   Rs.2,31,756/­,   which   resulted   to   deficit   of Rs.39,088/­. The Hon’ble Delhi High Court in the case of Institute   of   Chartered   Accountants   of   India   v.   DGIT   (E) (supra) held that where dominant objective of ICAI was to regulate profession of Chartered Accountancy in India, it was a charitable institution and conducting coaching classes and campus placements  for a fee could not be held as business as per section 2(15) of the Income­tax Act. In view of the ratio of decision of Hon’ble Delhi High Court, just by charging nominal   fee   for   providing   training   in   stitching   and embroidery for rural women, the dominant purpose of the assessee­trust is to uplift the status of rural women, which, in my   opinion,   is   charitable   activity   within   the   meaning   of section 2(15) of the Income­tax Act. I, therefore, set aside the impugned   order   of   learned   Commissioner   of   Income­tax, Rajkot­1,   Rajkot   and   direct   him   to   grant   the   registration u/s.12A of the Income­tax Act, 1961.” 6. Learned   Standing   Counsel   Mr.   Desai   appearing   for   the Revenue placed reliance upon a decision of this Court in the case of Saurashtra Education Foundation v. Commissioner of Income­Tax, [2005] 273 ITR 139. In that case, the activities of the assessee were connected with formal education being given by other institutions running schools or colleges and it did not run any composite or integrated course of organized and systematic training and it was held   that   the   assessee   was   not   entitled   to   exemption   as Page 4 of 6

O/TAXAP/883/2014 JUDGMENT contemplated u/s.10(22) of the Act. In this case, the facts are different. Here, the assessee had applied for registration u/s.12A of the Act, which was not the case in the judgment relied upon by Mr. Desai. 7. This case essentially revolves around the scope and ambit of Section 12A of the Act where the assessee is engaged in the activity of imparting education to women staying in the rural areas. Hence, we are afraid to state that the said decision would not be of any help to the Revenue. 8. In our opinion, the judgment rendered by the Delhi High Court in the case of Institute of Chartered Accounts of India and Another   v.   Director­General   of   Income­Tax   (Exemption)  and Others, [2013] 358 ITR 91 (Delhi), which has been relied upon by the   Appellate   Tribunal,   would   govern   the   issue   on   hand. Accordingly, we concur with the view adopted by the Appellate Tribunal and therefore, find no reasons to entertain this appeal. 9. For   the   foregoing   reasons,   the   appeal   is   dismissed  as   no substantial questions of law arise for our consideration. (K.S.JHAVERI, J.) (K.J.THAKER, J) Page 5 of 6

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