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Income Tax Appellate Tribunal, “B” Bench, Mumbai
All the appeals filed by the Revenue relate to A.Y. 2009-10 to 2011-12 and 2013-14 to 2017-18. All these appeals are directed against the orders passed by learned CIT(A), National Faceless Appeal Centre, Delhi. All these appeals were heard together and are being disposed of by this common order, for the sake of convenience.
None appeared on behalf of the assessee and the notice sent by the registry by registered post has been returned back with noting ‘left’. We notice that the issue contested in these appeals has been decided in favour of the assessee by the Coordinate Bench in assessee’s own case in A.Y. 2012-13
2 Maharashtra State Road Transport Corporation and learned CIT(A) has followed the said decision in granting relief to the assessee in all these years. Since the issue urged in these appeals is covered by the decision of the Tribunal, we proceed to dispose of the appeals ex- parte, without presence of the assessee.
We have heard learned DR and perused the record. The only issue urged in these appeals by the Revenue is whether learned CIT(A) was justified in allowing exemption under section 11 of the Act to the assessee, even though the assessee would be hit by the proviso to section 2(15) of the Act.
The assessee is a road transport corporation and it is registered as a charitable organization under section 12A of the Act. Accordingly, the assessee filed its return of income for all the years under consideration declaring nil income, after claiming exemption under section 11 of the Act. The Assessing Officer took the view that the activities carried on by the assessee falls under the category of “object of public general utility” mentioned in sec.2(15) of the Act. Since the operation of transport buses are commercial in nature, the Assessing Officer took the view that the activities of the assessee are commercial activities and hence the assessee would lose exemption under section 11 of the Act in view of the proviso to section 2(15) of the Act. Accordingly the Assessing Officer rejected the claim for exemption under section 11 of the Act in all the years under consideration.
The learned CIT(A) noticed that an identical issue has been adjudicated by the Tribunal in assessee’s own case in A.Y. 2012-13 in in favour of the assessee. Accordingly following the above said decision, the learned CIT(A) held that the assessee would be eligible under section 11 of the Act in all these years. The revenue is aggrieved.
We have heard learned DR and perused the record. We noticed that the learned CIT(A) has followed the decision rendered by the Tribunal in assessee’s own case in A.Y. 2012-13 in ITA No.5577/Mum/2017. The 3 Maharashtra State Road Transport Corporation operative portion of the Tribunal order has been extracted by the learned CIT(A) as under :-
“29. We have carefully considered the submissions and perused the records. As noted above the assessee is a State Corporation engaged in the business of public transportation. The objects of the corporation are development and growth of public, trade and industry of the development of road transport, facilities of road transport in any area and providing an efficient economical system of road transport services and coordination between any form and road transport or any other form of road transport. Surplus of receipts over expenses after payment of interest/dividend on capital as provided by Central/State Government and providing for depreciation and reserves etc. is to be applied for amenities to the passenger, welfare of labour employed, financing the expansion programme etc., as approved by the Government and remainder, if any, is to be handed over to the State Government for the purpose of development. It is noted that there is no change in the activity of the assessee since beginning and it is all along providing road transportation facility to the general public for a ticket as a token contribution. Prior to introduction of proviso to section 2(15), there was no dispute that the assessee was established for charitable purpose and assessee has all along been granted relief u/s. 2(15) and exemption under section 11 of the Act. Now the Revenue's plea is that amendment to section 2(15) of the Act shall take assessee's activity subject to denial of exemption u/s. 11 of the Act. In this regard we note that such a plea of the Revenue that introduction of proviso to section 2(15) shall lead to denial of exemption to Karnataka State Road Transport Corporation has been rejected by Hon'ble Karnataka High Court in the case of Karnataka State Road Transport Corporation in of 2015 vide order dated 12.2.2015. We further note that import of incorporation of proviso to section 2(15) was considered by Hon'ble Kerala High Court in the case of Info Parks (supra) and Hon'ble Court have expounded as under:-
"15. Yet another important aspect to be noted in this context is that, after the amendment by incorporating proviso to section 2(15), the 4th limb as to the advancement of "any other object of general public utility" will no longer remain as charitable purpose, if it involves carrying on of :-
(a) any activity in the nature of trade, commerce or business.
(b) any activity of rendering any service in relation to any trade, commerce or business for a cess or a fee or any other consideration, irrespective of the nature of use or application-or retention of the income from such activity.
The first limb of exclusion from charitable purpose under clause (a) will be attracted, if the activity pursued by the institution involves any trade, commerce or business. But the situation contemplated under the second
4 Maharashtra State Road Transport Corporation Limb [clause (b)l stands entirely on a different pedestal, with regard to the service in relation to the trade, commerce or business mentioned therein. To out it more clear, when the matter comes to the service in relation to the trade, commerce or business, it has to be examined whether the words "any trade, commerce or business" as they appear in the second limb of clause (b) are in connection with the service referred to the trade, commerce or business pursued by the institutions to which the service is given by the assessee. If the said words are actually in respect of the trade, commerce or business of the assessee itself, the said clause (second limb of the stipulation under clause (b) is rather otiose. Since the activity of the assessee involving any trade, commerce or business, is already excluded from the charitable purpose by virtue of the first limb [clause (a) itself, there is no necessity to stipulate further, by way of clause (b), adding the words 'or any activity of rendering any service in relation to any trade, commerce or business...". As it stands so, giving a purposive interpretation to the statute, it may have to be read and understood that the second limb of exclusion under clause (b) in relation to the service rendered by the assessee the terms "any trade, commerce or business" refer to the trade, commerce or business pursued by the recipient to whom the service is rendered (as there may be a situation involving letting out the premise for purposes other than involving trade, commerce or business as well). Since the petitioners have not chosen to implead the Union Government in the party array, to consider and finalise the scope and amendment in this regard, this Court is not in a position to lay down the law on this aspect for the time being and hence it is left open. "[Emphasis Supplied."
This view of Hon'ble Kerala High Court was endorsed by Hon'ble Andhra Pradesh High Court in the Judgment dated 17.12.2012 in the case of Andhra Pradesh State Seed Certification Agency (28 Taxman.com 218). From the above decision it is amply clear that adverse view taken by the authorities below that the assessee should be denied exemption u/s. 11 simply because of amendment to section 2(15) is not sustainable.
In this regard, we also note that this Tribunal in the case of National Institute of Bank Management Vs. ACIT in & Others vide order dated 25.1.2018 has elaborately considered the significance of the provision of section 2(15) in similar case of denial of exemption by invoking provision of section 2(15) of the Act. We may gainfully refer to the Tribunal's adjudication in this case as under :-
We have carefully considered the rival submissions. Sec. 2(15) of the Act defines the expression 'charitable purpose'. So far as it is relevant for our purpose, the expression 'charitable purpose' seeks to include 'education'. The case of the assessee is that its activities fall within the scope of the expression 'education' and, therefore, it is covered within the meaning of 'charitable purpose' contained in Sec. 2(15) of the Act. The stand of the Revenue is to the contrary as, according to it, the activities of the assessee are merely to carry out training, seminars, post-graduate training and, that too, against
5 Maharashtra State Road Transport Corporation collection of fees and, therefore, cannot be considered as 'education'. Further, the expression 'charitable purpose' also includes the activity of 'advancement of any other object of general public utility'. According to the Revenue, even if the activities are to be considered as falling within the scope of Sec. 2(15) of the Act, it fits into the said expression 'advancement of any other object of general public utility'. The proviso to Sec. 2(15) of the Act was added w.e.f. 01.04.2009, which 9 National Institute of Bank Management to 2915/M/16, 2506/M/14 & CO 182/M/15 prescribes that the activity of 'advancement of any other object of general public utility' shall not be construed to be for 'charitable purpose' if it involves carrying on of any activity in the nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business for a cess or fee or any other consideration irrespective of the nature of use or application or retention of the income from such activity. By relying on such proviso, the Revenue contends that since assessee is carrying out its programme of training, etc. against charging of fee, therefore, its activities lose the character of being for 'charitable purpose'.
The first and the foremost point that is required to be addressed is whether the assessee is an institution involved in education or not? In order to address this controversy, we may briefly touch upon the objects of the assessee as appearing in the Memorandum of Association and also the activities that are being carried out by the assessee over the years. The main objects of the assessee have been reproduced by us in the earlier part of this order and a perusal thereof clearly shows that the main object of the assessee is to promote and provide training in operation and management of banking and financial institutions, besides organising and facilitating seminars, study courses, lectures and similar other activities for the said purpose. Considering the stated objects, we are not inclined to accept the plea of the Revenue that the main objects of the assessee is not 'education'. Besides the stated objects, the written submissions which have been filed by the assessee before the lower authorities also give an insight to the activities being actually pursued by the assessee. It emerges that the assessee is recognised by the University of Pune as an approved centre for post-graduate research and also by the Department of Scientific and Industrial Research, Ministry of Science and Technology, Government of India. It is pointed out that assessee is conducting post- graduate Diploma courses and many Ph.D students are also registered with it for their Doctorial dissertation under the supervision of assessee's faculty members. It has also been pointed out that assessee has thirty full-time faculty of academicians from a wide range of disciplines, viz., Economics, Finance, Commerce, Business Management, Computer Science, Agricultural Science, etc. At the time of hearing, the learned representative has also emphasised that assessee has class rooms
6 Maharashtra State Road Transport Corporation to conduct regular classes and the library in the educational campus has more than 60,000 books. It was also pointed out that assessee offers programmes in collaboration with Kellogg School of Management, Northwestern University USA, The London School of Economics and Political (LSC), UK and CME Group, Chicago, etc. All these assertions of the assessee have not found any negation by the assessing authority or even by the Revenue before us.
Before us, it was argued by the ld. DR that fee is being charged and subscriptions are received from the member-banks which generates surplus in the course of activities, and thus, the activities are not for education. It is well understood that educational institutions are also required to generate funds for carrying out its activities, and the fact that assessee is collecting fees, by itself, will not make it a non-educational activity so as to go out of the definition of 'education' contained in Sec. 2(15) of the Act. In this context, we may refer to the judgment of the Hon'ble Supreme Court in the case of T.M.A. Pai Foundation vs State of Karnataka, (2002) 8 SCC 481, wherein the Hon'ble Supreme Court has also recognised the necessity for the educational institution to generate funds for its betterment and growth. In the case of American Hotel & Lodging Association, 301 ITR 86 (SC), the Hon'ble Supreme Court was dealing with an entity engaged in providing world-recognised curriculum for all hospitality education programs in India by making them available through text, course material and other software programmes in India. Apart from accepting this activity to be in the realm of education, the Hon'ble Court also observed that merely because some profit was arising from such activity, it would not distract from holding that such an entity was existing solely for education purposes. The Hon'ble Court also explained that in order to ascertain whether an entity is being run with the object of making profit or not, the existence of profit is not paramount, but what is of importance is whether or not the resultant income is being applied wholly and exclusively for the objects for which the entity has been set-up. In the context of the assessee before us, there is no repudiation to the fact-situation that the surplus, if any, is being applied only in furtherance of its stated objects.
The learned representative before us referred to the judgment of the Hon'ble Supreme Court in the case of text books was also held to be an activity falling within the scope of 'education'. Similarly, the judgment of the Hon'ble Gujarat High Court in the case of Gujarat State Co-operative Union vs CIT, 195 ITR 279 (Guj.) has also been relied upon. In the case of Gujarat State Co-operative Union (supra), assessee was engaged in conducting courses for Higher Diploma in Co-operation, Diploma in Land Development Banking, Certificate Course in Co-operative Credit and Banking and Specialised Short-term Courses/ Orientation Courses. The assessee therein was also conducting seminars and running training centres for employees of Urban Co-operative Banks, District Co-operative
7 Maharashtra State Road Transport Corporation Banks, etc. The Hon'ble Gujarat High Court understood such activities to be falling within the expression 'education'. In coming to such a conclusion, the Hon'ble Court referred to the judgment of the Hon'ble Supreme Court in the case of Sole Trustee, Loka Shikshana Trust vs. CIT, 101 ITR 234 (SC) to contend that the word 'education' should not be confined only to scholastic instructions, but other forms of education are also included in the expression 'education'. Though the decision of the Hon'ble Gujarat High Court is in the context of Sec. 10(22) of the Act, yet, it is of relevance for us since it has explained the meaning of the expression 'education' which, in our view, is germane to decide the controversy before us. The assessee before us is indisputably engaged in conducting higher education training, coaching and research in the field of banking and finance, and the ratio of the judgment of the Hon'ble Gujarat High Court certainly goes to show that its activities are in the field of 'education' for the purposes of Sec. 2(15) of the Act.
Similarly, the decision of the Mumbai Bench of the Tribunal in the case of Indian Institute of Bankers vs DCIT (Exemption), (2002) 74 TTJ 523 (Mum) was also relied upon. The assessee before the Mumbai Bench of the Tribunal, i.e. Indian Institute of Bankers, was engaged in the activity of promoting the study of theory of banking and, for that purpose, it was conducting exams, lectures, etc. Notably, the activities of the assessee before us are also on the same lines and the Tribunal in the case of Indian Institute of Bankers (supra) accepted those activities to be in the nature of 'education'.
In view of our aforesaid discussion, we do not find any merit in the stand of the Assessing Officer that the activities of the assessee are not in the field of 'education'. What has been emphasised by the Assessing Officer is that the assessee is conducting coaching classes in the field of banking and finance and, therefore, following the decision of the Hon'ble Patna High Court in the case of Bihar Institute of Mining & Mine Surveying vs CIT, 208 ITR 608 (Pat), it could not be said that the assessee was carrying out any 'education' activity. In this context, we may refer to the judgment of the Hon'ble Gujarat High Court in the case of DIT(E) vs Ahmedabad Management Association, [2014] 47 taxmann.com 162 (Gujarat), wherein the association undertook multifaceted activity, viz. conducting continuing education, Diploma & Certificate programme, Management Development programmes, public talks, seminars, workshops, etc. Such like activities were also held to be in the nature of 'education' eligible for the benefit of Sections 11 & 12 of the Act. In fact, the Hon'ble Delhi High Court in the case of Council for the Indian School Certificate Examinations vs DGIT(E), 362 ITR 436 (Delhi) was considering the activities of an assessee who was neither conducting any classes and nor was directly engaged in teaching students, but was only affiliating schools, prescribing syllabus and conducting examinations. The 8 Maharashtra State Road Transport Corporation institution carrying out such activities was also understood by the Hon'ble Court to be an educational institution.
When we apply the aforesaid principles to the admitted nature of activities in the present case, we have no hesitation in holding that assessee is an educational institution and, therefore, it falls within the scope of the expression 'charitable purpose' contained in Sec. 2(15) of the Act.
Now, we may deal with the reference to proviso to Sec. 2(15) of the Act made by the Assessing Officer. Pertinently, the proviso to Sec. 2(15) of the Act is relevant qua the activity of 'advancement of any other object of general public utility' contained in Sec. 2(15) of the Act and not in relation to other limbs of activities contained therein. While in the earlier paras we have already held that the assessee is engaged in 'education', therefore, on this basis, it will be in the fitness of things to deduce that assessee is not ousted from Sec. 2(15) of the Act because the proviso is not applicable to it. In any case, if one is to examine the applicability of the proviso on merit, even then we find that the same does not come into operation in the present case. Firstly, the CBDT in its Circular no. 11/2008 dated 19.12.2008 clarified that the proviso would apply only in situations where there is a profit motive in the activities undertaken. Secondly, the phraseology of the proviso itself lends credence to a premise that it comes into operation only in situations where profit is the motive in the activities undertaken. Pertinently, the proviso applies in a situation "if it involves carrying on of any activity in the nature of trade, commerce or business or any activity of rendering any services in relation to any trade, commerce or business..........". Ostensibly, the three expressions used therein, i.e., 'trade', 'commerce' or 'business' are to be understood as activities which are undertaken with a motive of earning profits. Therefore, the moot question to be examined is as to whether or not the activities of the assessee can be construed to be intended for a profit motive or for a commercial intent, as sought to be made out by the Assessing Officer. In order to address the said point, we may touch upon the manner and purport for which assessee has been set- up. As noted by us briefly in the earlier part of this order, assessee has been 15 National Institute of Bank Management to 2915/M/16, 2506/M/14 & CO 182/M/15 established by the Government of India through the Reserve Bank of India. In the Paper Book filed before us, apart from other things, a report of a Committee appointed by the RBI on "The Training and Development of Higher Banking Personnel" of 1969 has been placed. In 1969, nationalisation of banks undertaken by the Government of India brought in the policy of social control over banking which intended to provide a new direction to the banking industry in India. Since banking was made a more effective instrument of national development, it was recognised that appropriate personnel policies had to be evolved in order to encourage the right attitudes to 9 Maharashtra State Road Transport Corporation development of management skills, capabilities and also to impart new technological skills. The Committee appointed by the RBI in this direction made a major recommendation for establishment of the National Institute of Bank Management. This was a precursor to the establishment of the assessee by the RBI in consultation with the Government of India in 1969 as an autonomous non-profit institution in the area of banking and finance. The Committee on Training and Development of Higher Banking Personnel carved out the role of assessee as being an entity to "translate national policies relating to the banking sector into meaningful training programmes at the level of individual bank and help the implementation of those policies by creating a climate of intellectual appreciation and emotional dedication". Therefore, looking at the background of the formation of the assessee and its stated objects, which we have reproduced in the earlier part of this order, the assessee-institute was to act as a catalyst for the new banking policy of the Government of India towards evolving appropriate guidelines for banks in the areas of management capabilities and improving the technical expertise of banking and awareness of national priorities in the banking profession. The stated objects clearly bring out that the activities of the assessee are exclusively in the field of education and research in the field of banking and finance. Not elaborating further on this aspect, as we have already inferred earlier that assessee is in the field of education, at this stage it would suffice for us to note that there is no commercial intent behind setting-up of the assessee. In fact, the Assessing Officer has sought to draw a parallel with the case before the Hon'ble Patna High Court in Bihar Institute of Mining & Mine Surveying (supra) which, in our view, is wholly inappropriate. The Hon'ble Patna High Court was dealing with the claim of an entity for registration u/s 12A of the Act on the ground that its activity of coaching of students for particular examinations was to be viewed as imparting education. The Hon'ble Court noted that "the running of a private coaching institute for the purpose of training the students to appear at some specified examinations upon taking specified sum from the trainees would not bring the petitioner within the provisions of section 2(15) of the Act." The aforesaid observation of the Hon'ble Court clearly bring out the distinction between the entity before us and that was before the Hon'ble Patna High Court, which was a case of a private coaching institute whereas, as we have seen earlier, the complexion of the entity before us is on a completely different footing; the entity before us has been established by the Government of India through RBI as a means to further the national policy relating to banking sector consequent to nationalisation of banks in 1969. In our considered opinion, the objectives for which the assessee is set-up and the manner in which it is managed, i.e., through a Governing Board consisting, inter-alia, of nominees of the Government and member- nationalised banks, it can hardly be said that there is any profit motive in carrying out its activities. No doubt, there may remain some surplus in the course of carrying on activities since
10 Maharashtra State Road Transport Corporation assessee is undertaking programmes by charging fee and/or subscription from its member nationalised banks, etc., but that by itself will not mean that the motive is to earn profit. In fact, the Hon'ble Supreme Court in the case of American Hotel & Lodging Association (supra) noted that it may not be possible to carry on activities in such a way that the expenditure exactly matches the income and there is no resultant profit. As per the Hon'ble Supreme Court, such an objective is not only difficult to achieve for practical considerations, but also reflects unsound principles of management. To reiterate what we have noted earlier, in such a situation, the test to examine the existence or otherwise of profit motive is to find out the purpose for which the resultant surplus is being applied for. Factually speaking, in the present case, there is no allegation, much less any evidence, brought out by the Revenue to say that any amount has been applied by the assessee for purposes other than its stated objects, which ostensibly is in the field of education. Pertinently, upto Assessment Year 2008-09, assessee was accepted to be an entity engaged in education and in even in the captioned years there is no charge against the assessee that any of its activities have undergone any change. Therefore, merely because of insertion of the proviso, the nature of activities do not undergo a change unless it can be made out that profit motive is dominant all- pervading in the activities, an aspect which is absolutely absent in the present case. Therefore, even if we were to go along with the stand of the Assessing Officer that the activities of assessee fall within the expression 'advancement of any other object of general public utility' contained in Sec. 2(15) of the Act, even then, from Assessment Year 2009-10 onwards, the insertion of proviso does not take away the benefits of Sections 11 & 12 of the Act from the assessee inasmuch as the proviso does not disentitle the assessee's activities from being considered as for charitable purpose because of the above discussion. Thus, on this aspect also, we uphold the stand of the assessee.
The above precedent and case law are fully applicable in the present case. Upto A.Y. 2011-12, there was no dispute that the assessee was entitled to exemption u/s. 11 of the Act. The dispute has only arisen pursuant to introduction of proviso to section 2(15) of the Act. Considering the objects for which the assessee is set up and manner in which it is managed and the manner in which funds generated are utilized, there is no doubt that there is no profit motive in carrying out the activity of the assessee. No doubt there may remain some surplus but that by itself does not mean that the motive is to earn profit. Hon'ble Apex Court in the case of American Hotel and Lodging Association (supra) has expounded that it may not be possible to carrying on activities in such a way that expenditure exactly matches income and there is no resultant profit. There is no case made out by the Revenue that the surplus is not applied for the purpose of company stated objects. When the assessee was accepted to be entitled to exemption upto preceding assessment year there is no case that the activities of the assessee have undergone a change which warrant
11 Maharashtra State Road Transport Corporation denial of exemption. Hence, to quote from the aforesaid precedent even if we were to go along with the stand of the Assessing Officer that the activities of the assessee falls within the expression "advancement of any other object of general public utility" contained in section 2(15) then introduction of proviso does not disentitle the assessee's activities from being considered as for charitable purposes because the aforesaid discussion. Accordingly, in our considered opinion there is no merit in the orders of the authorities below denying the assessee's exemption on the plank that the assessee is not entitled to exemption in view of introduction of the proviso to section 2(15).
Yet another limb of Revenue's adverse inference in this case is that the assessee is engaged in commercial activity and that also in large scale. This so called large scale has been observed from the data of buses operated by the assessee. Out of 15500 buses, from the website data gathered by the Assessing Officer himself this includes Deluxe buses-48, air conditioned buses-46 and midi-10. From the above how can the Assessing Officer make a deduction that the assessee is running luxury buses in large scale defers all sense of proportionality. To state the obvious assumption of the Assessing Officer is absurd.
Another limb of Assessing Officer's inference that assessee is engaging into profit oriented activities is that the assessee is arranging tour and travel packages on commercial basis for fees/charges. For this he has noted eight trips from the website. How will these eight trips stand against thousands of trips undertaken by the assessee for transporting ordinary passengers is beyond comprehension. The Assessing Officer's inference is totally unjustified. Details of other income which has been considered by the Revenue to be of a large scale pale into absolute insignificance when the same is considered as percentage to the non-operative revenue to operating revenue, which bring them to be lesser than 1% to the operating revenue. The same is emanating from the following chart submitted by learned Counsel of the assessee.
Hence figures quoted by the Assessing Officer for inferring that the assessee is engaged in profit motive activity in large scale is totally absurd in light of the above said figures. Hence, in our considered opinion the finding given by the Assessing Officer that assessee is engaged commercial and profit motive activity is totally unsustainable.
It may not be out of place to mention here that to remove/prevent the mischief which can be caused to the assessee such as the present large State, the present proviso No. (ii) to section 2(15) provides that if the aggregate receipt from such activity or activities during the previous year do not exceed 25% of the total receipts of the entity, the exclusion provision will not apply.
In the background of the aforesaid precedent, we set aside the orders of the authorities below in which the assessee's exemption u/s. 11 has been denied. Since, we have already decided the issue in favour of the 12 Maharashtra State Road Transport Corporation assessee, other limb of the challenge by learned Counsel of the assessee is not being gone into as the same is only of academic significance.”
Since the learned CIT(A) has followed the decision rendered by the Coordinate Bench and since it is stated that there is no change in facts in all the years under consideration, we do not find any reason to interfere with the order passed by the learned CIT(A) in all the years under consideration.
8. In the result, all the appeals filed by the Revenue are dismissed.
Order pronounced in the open court on 20.09.2022.