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Income Tax Appellate Tribunal, DELHI BENCHES (CAMP AT MEERUT
Before: SHRI N.S. SAINI & SHRI KULDIP SINGH
PER KULDIP SINGH, JUDICIAL MEMBER : Since common questions of facts and law have been raised
in the aforesaid appeals, the same are being disposed off by way of consolidated order to avoid repetition of discussion.
2 ITA No.3401, 3402 & 3403/Del./2017
The appellant, Process-cum-Product Development Centre
(hereinafter referred to as ‘the assessee’) by filing the present
appeals, sought to set aside the impugned order all dated
06.03.2017 passed by the ld. CIT (Appeals), Aligarh qua the
assessment years 2010-11, 2011-12 & 2013-14 on the identical
grounds inter alia that :-
“1. That the Ld. Commissioner of Income- Tax( Appeals) erred in observing that the appellant educational institution is not existing solely for educational purposes and thus, dismissing the claim of exemption U/S 10(23C)(iiiab) of the Income-Tax Act. The observation is unwarranted and against facts of the case.
That the appellant institution is solely engaged in imparting education and in the same process train students by sending them to sports industries etc. That the Ld Commissioner of Income-Tax(Appeals) is admitted this facts, that the society is engaged in education/training given to the young in preparation of work in life and its activities were without any profit motive. After that Commissioner of Income- Tax Appeals is not justified to allow the claim of the assessee U/S 10(23C)(iiiab) of the Income-Tax Act, 1961.
That the Ld Commissioner of Income- Tax (Appeals) is arbitrary and unjust, for not considering this facts, that the society is substantially financed b the Government and functioning under the administrative control of Micro Small and Medium Enterprises(MSME), Government of India.
That the appellant has claimed exemption of its income U/S 1O(23C)(iiiab) irrespective of provisions contained in Section 12AA of the Income-Tax Act, the rejection of the same is bed in law.”
3 ITA No.3401, 3402 & 3403/Del./2017
Briefly stated the identical facts necessary for adjudication
of all the aforesaid three appeals of assessee pertaining to
Assessment Years 2010-11, 2011-12 & 2013-14 are : Assessee
society is engaged in conducting various short duration training
programs of computer training, Doner, CAD/CAM/D.L.G. Tech,
DST, Mech. Web Designing, audit CAD, Linus & C++, training in
Computer Accounting System (TCAS), Tally 9, Leg guards &
Gloves (STST) Hand Gloves Manufacturing, Shuttle Cock
Manufacturing, cricket bat manufacturing, carom board
manufacturing, Leg guard manufacturing, batting gloves
manufacturing, football manufacturing, Cricket ball manufacturing
(Jalandhar) and leather workshop, training in R/P workshop, wood
work shop etc.. Assessee society claimed exemption under section
10(23C)(iiib) of the Income-tax Act, 1961 (for short ‘the act’).
Declining the explanation furnished by the assessee society to
prove its eligibility for claiming exemption under section
10(23C)(iiiab), Assessing Officer proceeded to disallow the
exemption on the ground that the assessee society is not running an
institution to provide systematic education by relying upon the
decision rendered by the Hon’ble Supreme Court in the case cited as Solo Trustee Loka Shikshak Trust vs. CIT – 101 ITR 234 and
thereby assessed the net taxable income at Rs.56,48,582/-, (-)
4 ITA No.3401, 3402 & 3403/Del./2017
Rs.18,23,401/- and (-) Rs.5,48,829/- for AYs 2010-11, 2011-12
and 2013-14 respectively.
Assessee carried the matter by way of an appeal before the
ld. CIT (Appeals) who has dismissed the appeals. Feeling
aggrieved, the assessee has come up in appeals before the Tribunal.
We have heard the ld. Authorized Representatives of the
parties to the appeal, gone through the documents relied upon and
orders passed by the revenue authorities below in the light of the
facts and circumstances of the case.
Short question to be decided in all the aforesaid appeals is as
to whether assessee society is eligible for claiming exemption
under section 10(23C)(iiib). AO as well as ld. CIT (A) have
declined the exemption to the assessee society on the ground that
the assessee society does not exist solely for educational purposes.
Undisputedly, the affairs of the assessee society are
managed, administered, directed and controlled by the Governing
Council on orders / directives received from Government of India
through Government Council. It is also not in dispute that the
accounts of the assessee society are audited by Comptroller and
Auditor General of India (CAG). It is also not in dispute that
assessee society gets raw material from industries and after
manufacturing the goods through its trainee returns the finished
5 ITA No.3401, 3402 & 3403/Del./2017
goods after receiving its job charges. It is also not in dispute that
as per Memorandum of Association, assessee society is
managed/run by Ministry of Small Scale Industries, Ministry of
Industry, Department of Industrial Development through its
Governing Council and the element of profit making is not there.
Before proceeding further, it is imperative to examine the
aims and objects of the assessee society which are extracted for
ready perusal as under :-
“III. The main objectives for which the Society is established are:
To develop new technologies and upgrade the existing level of technology of sports goods and leisure time equipment.
To develop new products/design of sports goods and leisure time equipments
To identify export-worthy sports goods product and leisure time equipments, develop and establish technologies for their manufacture.
To improve the quality of these products through quality control and standardization to meet national and international standards and also make this industry competitive.
To impart training to craftsmen and supervisors from the industry in the field of manufacture and development of sports goods.
6 ITA No.3401, 3402 & 3403/Del./2017
To collect, collate and disseminate technical information and know-how to the user industry by providing documentation services and coordinate with research and development institutions.
To render technical support services through the Centre's common facility work-shop/laboratories in the above areas.
To conduct market research and identify products for domestic and export markets.”
The conjoint reading of the main objects of the assessee
society goes to prove that it is engaged in multifarious activities
related to education and training for production of sports goods and
leisure time equipments.
Perusal of the audited income and expenditure account for
the year ending 31.03.2018 available at page 4 of the paper book,
for the year ending 31.03.2009 available at page 20 of the paper
book, for the year ending 31.03.2010 available at page 39 of the
paper book, for the year ending 31.03.2011 available at page 56 of
the paper book, for the year ending 3103.2012 available at page 73
of the paper book and for the year ending 31.03.2013 available at
page 92 of the paper book, go to prove that the substantive income
/ receipt of the assessee society is from training courses being
imparted to the students.
7 ITA No.3401, 3402 & 3403/Del./2017
Ld. CIT(A) proceeded to decline the exemption under
section 10(23C)(iiiab) to the assessee on the sole ground that
assessee society is running process-cum-product development
centre and involved in multifarious activities and all the activities
cannot be considered to be educational in nature.
Under section 10(23C)(iiiab), any income received by a
person on behalf of any university or any educational institution
existing solely for educational purposes and not for purposes of
profit and which is wholly or substantially financed by the
Government, is entitled for exemption.
AO relied upon the decision rendered by Hon’ble Supreme Court in the case of Solo Trustee Loka Shikshak Trust (supra)
wherein the word ‘education’ as referred in section 2(15) of the Act
is explained as under :-
“The word “education” in section 2(15) of the Income- tax Act, 1961, connotes the process of training and developing the knowledge, skill, mind and character of students by normal schooling, and has not been used in the wide and extensive sense according to which every acquisition of further knowledge constitutes education.”
Now, we are to examine main objects of the assessee society
whether imparting training by it, falls within the definition of education. Hon’ble Supreme Court in the case of Solo Trustee
8 ITA No.3401, 3402 & 3403/Del./2017
Loka Shikshak Trust (supra) has categorically held that
‘education’ connotes process of training and developing the
knowledge, skill, mind and character of students by normal
schooling.
Though the main objects of the assessee society are divided
into 8 objects but all are interconnected with each other so as to
impart the best available trainings to the students to develop new
products / business of sport goods and leisure time equipments.
We are of the considered view that when the training imparted to
the students is not to produce goods of world standard by making
necessary marketing research and by identifying products for
domestic and export market, such training would be of no use and
the students who have been given training would not be in a
position to get placement in the sport goods and leisure time
equipments industry. Moreover the entire emphasis is laid by our
Government on “skill development” by departing from age old
system of imparting academic education and training not as per
requirement of the industry.
Furthermore, when we examine the audited income and
expenditure account of the assessee society it shows that
substantial income is from training courses and there is a miniscule
income from job receipts. When the assessee society is admittedly
9 ITA No.3401, 3402 & 3403/Del./2017
getting raw material from the various industries to produce the
sport goods for them and the job charges paid by them are again
used for running the training institute it can not be said by any
stretch of imagination that assessee society is not being run for
education / training purpose. Particularly, there is no case of the
Revenue that the main objects of the assessee society is profit
making rather declining the exemption on the sole ground that the
assessee institution is not existing solely for educational purposes.
So, we are constrained to record that the word ‘education’ is to be
given wide interpretation which includes training and developing
the knowledge, skill, mind and character of the students by normal
schooling.
So, we are of the considered view that assessee society is
engaged in imparting training to the students in manufacturing the
sport goods and leisure equipments without any profit motive.
Ld. CIT(A) proceeded to record in the impugned order that
the issue of charitable activities of the assessee society being of
charitable nature is not relevant in this case as assessee society is
yet to be registered under section 12AA of the Act. However, in
the face of the admitted fact that the coordinate Bench of the
Tribunal in assessee’s own case vide order dated 13.02.2017 and
13.04.2018 vide ITA No.410/Del/2012 and 3837/Del/2013
10 ITA No.3401, 3402 & 3403/Del./2017
respectfully remanded the case back to CIT (A) to reconsider the
ground of registration under section 12AA by relying upon the
decision rendered by the Hon’ble Orissa High Court in case of
Orissa Trust of Technical Education and Training vs. CIT – 24 taxmann.com 202 (2012) (Orissa), wherein the trust engaged in
the identical activities has been granted registration under section
12AA of the Act. Coordinate Bench of the Tribunal in case cited
as Central Institute of Tool Design vs. DIT (E) in ITA
No.1563/Hyd/2014 vide order dated 08.07.2015 also directed the
DIT (E) to reconsider the ground of registration under section
12AA of the Act to Central institute of Delhi Design engaged in
imparting training facilities to technical personnel in designing and
in making tools, dies and moulds, which activities are identical to
the assessee society. So when the co-ordinate bench of the Tribunal
had already directed the CIT (E) to reconsider the grant of
registration under section 12AA of the Act in the light of the
numerous decisions referred at page 6 of the order passed in ITA
No.410/Del/2012, the claim of the assessee for exemption u/s
10(23C)(iiiab) cannot be rejected. Moreso exemption sought for by
assessee society u/s 10(23C) (iiiab) is independent of exemption
being sought for by the assessee u/s 12AA of the Act. So
11 ITA No.3401, 3402 & 3403/Del./2017
exemption u/s 10(23C) (iiiab) can not be declined on the ground
that registration u/s 12A has been rejected.
Hon’ble High Court of Allahabad in case of City Montessori School vs. UOI – (2009) 315 ITR 48 (All.) decided the identical
issue defining the word systematic research based “education and
training” as under :-
“The assessee was not only providing traditional education, but was also preparing students by providing guidelines to get admissions in the professional institutions to pursue their higher studies. The sense, in which the word 'education' has been used in section 2(15), is the systematic instruction, schooling or training given to the young in preparation for the work of life. Similarly, extending financial assistance/scholarship, etc., to the students for their educational purpose would squarely fall within the connotation of 'education I as per the ratio laid down in the case of CIT v. Saraswath Poor Students Fund [1984] 150 ITR 142, 147 / [1985] 20 taxman 211 (Kar.). Thus, the assessee was engaged in ‘educational activities’ which fell under charitable purpose.”
In view of what has been discussed above, we are of the
considered view that the assessee society, substantially financed by
the Government of India, is engaged only in imparting research
based education/ skill training to the students in manufacturing of
sports goods and leisure equipments without any profit motive, to
12 ITA No.3401, 3402 & 3403/Del./2017
enable them to get placement falls within the definition of
education u/s 2(15) of the Act, hence entitled for exemption under
section 10(23C)(iiiab) of the Act. Consequently, all the three appeals filed by the assessee are allowed. Order pronounced in open court on this 4th day of February, 2019.
Sd/- sd/- (N.S. SAINI) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated the 4th day of February, 2019 TS