M/S. THE INSTITUTE OF CHARTERED SHIPBROKERS,CHENNAI vs. ITO, EXEMPTIONS WARD-3,, CHENNAI

It is maintaining a library for the benefit of the students. It subscribes to various international magazines and in a way it is the only academic centre where registered students can prepare for the examination conducted by ICS, London.

During the course of assessment proceedings, the AO has observed that the assessee society filed its return of income for AY 2007-08 on 31.10.2007 admitting a taxable income of Rs. Nil. The Gross Receipts foe the year is Rs.43,39,260/- and on application of income in excess of 85% of the total income by claim of exemption u/s.11(1)(a), the taxable income was reduced to Rs.Nil. On examination of the final accounts, it surfaced that the assessee had to 1931/Chny/2025 The Institute of Chartered Shipbrokers :- 5 -: remitted a sum of Rs.25,21,404/- to ICS, London. The application is outside the taxable territory of India, and hence the same cannot be exempt u/s11(1)(a). Pursuant to the said examination, a notice u/s.148 was issued to the assessee on 06.06.2011. The AO in the assessment order disallowed Rs.25,21,405/- remitted to ICS, London, being DLC registration fee & exam exemption fees payments as the same does not qualify as application of income in India u/s.11(1)(a) of the Act.

On further appeal to CIT(A), who confirmed the order of the AO.

Now assessee is in appeal before us.

Income Tax (Exemptions), Chennai dated 30.07.2012.

The ld. Counsel further highlighted that the payments made by the Assessee Society to ICS, London, pertain to Purchase of books, Exam and exemption fees, Distance Learning Centre Licence Fee. He further contended that books are tangible assets that are physically imported into India, exclusively for the use of Indian students preparing for professional exams in shipping and logistics. He furthermore submitted that this represents a direct and measurable application of funds within India. The exams are conducted and written in India exclusively by Indian students, and the amounts remitted towards exam and exemption fees are collected from these students and passed on without any margin or benefit to the Assessee Society. He argued that these payments are not made in connection with any foreign operations or benefit derived outside India. The goal of these expenditures is the empowerment of Indian students through an internationally recognised professional qualification in shipping. This aligns completely with the charitable objective of advancement of education, falling squarely under Section 2(15) of the Act. He distinguished the judgment in the case of NASSCOM (2012) 21 to 1931/Chny/2025 The Institute of Chartered Shipbrokers :- 7 -:

Taxmann.com 213 (Del), relied upon by the AO. The ld. AR submitted that in NASSCOM judgment, the payments were made for activities conducted abroad and no tangible or intangible benefit accrued to India. In the present case, both the end-use and the benefit of the expenditure are rooted within India, for Indian students, in Indian centres, under a recognised curriculum. Further, the Hon’ble Delhi High Court in Director of Income Tax (Exemption) vs National Association of Software and Services Companies (NASSCOM) was considering events conducted abroad, not a case where imported educational material or professional qualifications for Indian students was involved. During the assessment proceedings, the AO accepted that payment for books constitutes an allowable application of income as it brings a tangible asset into India. However, he disallowed the payment towards exam and exemption fees, on the grounds that no asset flows into India. He further submitted that the view of AO is flawed because the purpose of the books, licence fee and exam fee is interlinked and inseparable from the broader goal of educating and certifying Indian students. The qualification achieved is the intangible benefit and final outcome of the process, which serves the educational objects of the charitable trust. The coordinate bench of Tribunal to 1931/Chny/2025 The Institute of Chartered Shipbrokers :- 8 -: referred supra has already held that the activities of the Assessee Society qualify as “education” under Section 2(15). The matter has only been taken to the High Court at the instance of the Department, and until reversed, the Tribunal’s ruling stands binding. Section 11(1)(a) merely requires that the income is applied to charitable or religious purposes in India. In the present case, the expenditure is in furtherance of education (a charitable object) and is made for the benefit of Indian students and results in both tangible (books) and intangible (qualification, skill enhancement) benefits within India.

Therefore, the payments clearly qualify as application of income in India. Hence, the ld.AR in light of the facts, circumstances, and legal position discussed above, submitted that the Assessing Officer has erred in disallowing the legitimate application of income by the Assessee Society. The payments made to ICS, London are in conformity with the objectives of the Society, result in tangible and intangible benefits within India, and are thus fully allowable as application of income under Section 11.

7. Per contra, the Ld. Departmental Representative (DR) submitted that payments made outside India do not qualify as "Application of Income in India". The AO has disallowed the payments made to the to 1931/Chny/2025 The Institute of Chartered Shipbrokers :- 9 -:

Institute of Chartered Shipbrokers (ICS), London, on the grounds that such payments constitute application of funds outside India, and thus do not qualify for exemption under Section 11 of the Income Tax Act.

The AO has relied upon the judgment of the Hon’ble Delhi High Court in the case of Director of Income Tax (Exemptions) vs. National Association of Software and Services Companies (NASSCOM) [2012] 21 taxmann.com 213 (Delhi).

London and the Indian Institute. He has relied on a number of decisions in support of his arguments to hold that the assessee is a charitable institution engaged in educational activities, e.g.:

1. CIT vs. Red Rose School, 212 CTR (All) 394

2. Gujarat State Co-operative Union vs CIT, 195 ITR 279 (Guj.)

The learned counsel has also placed heavy reliance on the judgment of the Hon’ble Madras High Court rendered in the case of The Director of Income- tax(Exemptions) vs. The Chartered Accountants Study Circle (judgment dated 13-2-2012 in Tax Case(Appeal) No.593 of 2011). He explained that the activities of the assessee institute are exactly the same as the activities of the Chartered Accountants Study Circle and, therefore, the judgment of the jurisdictional High Court squarely applies to the assessee’s case. Therefore, the order of the Director of Incometax(Exemptions) cancelling the registration, passed under section 12AA(3) needs to be quashed.

5. Shri Shji P Jacob, the learned commissioner of Income-tax appearing for the Revenue, on the other hand, contended that the assessee is rendering professional and other commercial services and is engaged only in coaching the students preparing for ICS examination and it is not carrying on any charitable activities in the nature of educational activities. The learned Commissioner of Income-tax argued that the assessee Institute is sharing the fees collected from the students with its mother Institute in London and at every stage the income received by the assessee Institute needs to be shared with its counterpart in London. Referring to the Memorandum of association of the assessee trust, the learned Commissioner of Income-tax contended that in the event of dissolution of the assessee institution, all the assets will bestow upon the London Institute and therefore it is necessary to see that the assessee is basically an agent of a foreign institute and therefore cannot be construed as carrying on charitable activities in India. The learned Commissioner of Income-tax contended that the registration under section 12AA is granted only for institutions carrying on charitable activities within the territories of India.

6. In support of his arguments the learned Commissioner of Income-tax has relied on the following decisions:-

2. Indian Chamber of Commerce vs. CIT, 101 ITR 796 (S.C.)

to 1931/Chny/2025 The Institute of Chartered Shipbrokers :- 11 -:

4. Bihar Institute of Mining and Mine Surveying vs. CIT, 208 ITR 608 (Patna).

5. CIT vs. National Institute of aeronautical Engineering Educational Society, 315 ITR 428 (Uttarakhand).

6. Director of Income-tax vs. Maruti Center for Excellence, 2012- TIOL-411-HC-DEL-IT.

7. Gurship Education Trust vs. Director of IT(Exemption), 2011-TIOL- 635-ITAT-MUM.

8. The programme of professional education imparted by the assessee Institute in India is not in the nature of coaching or tuition. The Institute at London is an Institute established by a Royal Charter and recognized world- wide as the nodal agency of design, improving and controlling the profession of ship-broking. Ship-broking is recognised world over as the only profession engaged in dealing with all aspects of shipping industry. The examinations conducted by the Institute to enable the registered students to enroll as members of the Institute require continuous study for a period of three to four years. What is imparted by the assessee Institute in India is professional education like chartered accountancy, law, architecture, etc. The syllabus prescribed for the examination covers almost all areas of shipping industry including maritime laws. It includes management of logistics of shipping industry. It is not that the members who qualify the examination are just acting as brokers for good/ships. The members who qualify the examinations are working in different fields of shipping industry including port-trust. Therefore, it is not possible to hold a view that the assessee is running a coaching centre for a particular to 1931/Chny/2025 The Institute of Chartered Shipbrokers :- 12 -:

examination. On the other hand, the assessee is an Institute imparting professional education in the field of shipping industry.

9. There is nothing on record to show that the assessee is engaged in any commercial or professional activities in India by way of consultancy or professional advices and they are not earning any income by way of carrying on any trade or commerce. The income of the assessee is the fees collected from the students and the expenses are incurred for running the Institute for imparting professional education to its registered students. The income of the assessee Institute is not utilized for any private initiation or for the benefit of any interested person. The expenditure is incurred only for the purpose for which the Institute is established.

9. In the facts and circumstances of the case we find that the decision of the Hon’ble Madras High Court rendered in the case of Director of Income- tax(Exemptions) vs. The Chartered Accountants Study Circle, Tax Case(Appeal) No.593 of 2011, is applicable to the present case. In the above judgment, their Lordships have held in paragraphs 8 and 9 as follows:-

“8. The objects of the assessee-trust, as referred to above, are among other things to conduct periodical meetings on professional subjects and to achieve the said objects, the assessee is publishing books, booklets, etc. on professional subjects, and selling the same only on the subjects related to audit and not on any other subject. Consequently, those books are primarily sold only to the members of the society. Of course, the books are also made available for sale to the general public aiming to help the society to get better, well- equipped and skilled set of Chartered Accountants for maintaining audit quality.

section 12AA(3) of the Income-tax Act, 1961 is not sustainable in law. Accordingly, the said order is set aside. The assessee continues to enjoy the registration under section 12AA, as if there was no interruption. 12. In result, this appeal filed by the assessee is allowed.”

9. We have also gone through the Judgment of the Hon’ble Karnataka High Court in the case of CIT(E), Bangalore Vs. Ohio University Christ College [2018] 408 ITR 352/[2018] 99 taxmann.com 377.

10. This appeal has been preferred by the assessee Society against the order of the Assessing Officer (AO) and Ld. CIT(A), wherein disallowance was made in respect of payments remitted to the Institute of Chartered Shipbrokers (ICS), London, towards purchase of books, examination and exemption fees, and Distance Learning Centre Licence Fee. During the course of hearing, the ld. Authorised Representative (AR) submitted that the books were physically imported into India for exclusive use by Indian students enrolled in shipping and logistics courses, forming an integral part of the Society's educational initiative. It was further contended that the examinations were conducted entirely within India, and the fees for such examinations and exemptions were collected from Indian students and to 1931/Chny/2025 The Institute of Chartered Shipbrokers :- 14 -: remitted without any profit element to ICS, London. The ld. AR emphasised that these expenditures directly further the charitable object of “advancement of education” as defined under Section 2(15) of the Income Tax Act, 1961, and qualify as application of income within India under Section 11(1)(a). It was also argued that the purchase of books had been accepted by the AO as allowable application of income, and the denial of exemption in respect of exam and exemption fees was without basis, as these are inseparable parts of the same educational process.

We find merit in the submissions of the ld. AR. It is undisputed that the Assessee Society is engaged in imparting education in the field of shipping and logistics and that the materials and services sourced from ICS, London, are used exclusively for Indian students in India. The books constitute tangible assets brought into India, while the examination and exemption fees facilitate the award of internationally recognised qualifications to Indian students. The benefit both tangible and intangible, clearly accrues within India. The reliance placed by the AO on the decision of the Hon’ble Delhi High Court in NASSCOM (2012) 21 taxmann.com 213 (Del) is misplaced, as that case dealt with payments made for activities conducted abroad. In to 1931/Chny/2025 The Institute of Chartered Shipbrokers :- 15 -: contrast, the present case involves educational activities fully carried out in India. The payments in question are integral to achieving the educational objectives of the Assessee Society and are, therefore, distinguishable on facts and legal grounds. We also note that the coordinate bench of the Tribunal, in earlier proceedings u/s12AA (as referred supra) involving the same Assessee, has already held that the Society’s activities qualify as “education” within the meaning of Section 2(15). That ruling has not been reversed by any higher forum and continues to be binding. In view of the foregoing, we hold that the payments made to ICS, London including for examination and exemption fees and licence fees are in furtherance of the charitable purpose of education, and constitute valid application of income within India under Section 11(1)(a) of the Act. Accordingly, we find that the Assessing Officer erred in disallowing the said expenditure, and we direct that the disallowance be deleted. In the result, the ground of the Assessee is allowed. for AY 2007-08 are identical to the facts of the cases in 1929, 1930 and 1931/Chny/2025 for AY 2008-09, 2010-11, 2012-13 and 2013-14 hence, our above order in for AY 2007-08 to 1931/Chny/2025 The Institute of Chartered Shipbrokers :- 16 -: with regard to the issue mentioned at para 3 supra, will apply mutatis 1929, 1930 and 1931/Chny/2025 for AY 2008-09, 2010-11, 2012-13 and 2013-14 also. transactions integral to the educational activities of the trust’ and ‘claim for carry forward under Explanation (2) to Section 11(1)’:

We have heard the rival submissions on the above two issues.

Since we have adjudicated the issue of payments made to ICS, London in favour of the assessee hence, we hold that foreign exchange loss incurred on transactions integral to the educational activities of the trust hence is allowable.

With respect to the carry over to the income of Rs.21,54,378/- to the next year, the ld.CIT(A) has directed AO to verify the claim if such claim is found to be correct.

In this respect, we only modify the order of the ld.CIT(A) that if carry over is not claimed originally, then we direct the AO to entertain and consider such claim in terms of the judgment of the Hon’ble to 1931/Chny/2025 The Institute of Chartered Shipbrokers :- 17 -: jurisdictional High Court in the case of CIT Vs Abhinitha Foundation (P.) Ltd [2017] 396 ITR 251 (Mad).

Order pronounced on 29th day of September, 2025 at Chennai.