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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
AadoSa / O R D E R महावीर स ुंह, न्याययक दस्य/ PER MAHAVIR SINGH, JM:
In these four cross appeals, two appeals by the assessee and two by the Revenue are arising out of the orders of Commissioner of Income Tax (Appeals)-1, Mumbai [in short CIT(A)], in appeal No. CIT(A)-I/E- 1(3)/42/2015-16 & CIT(A)-I/E-II (106)/2014-15 dated 24.08.2016 & 11.02.2016. The Assessments were framed by the Income Tax Officer (Exemption), Ward-1(3) & II(1), Mumbai (in short ITO/ AO) for the A.Ys. 2012-13, 2011-12 vide dated 18.03.2015, 28.03.2014 under section 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).
At the outset, it is noticed that the appeal for AY 2012-13 in 03 days. The assessee has filed condonation petition, which contains the following reasons: - “1. We have filed the above appeal on December 05,2016 (Appeal No 7106/Mum/2016) whereas the same was required to be file don December 02.2016, resulting in delay of 3 days. The delay is on account of unavailability of the of our client’s President, since he was on official tour for ITAs No.6629,7106,3414&3103/Mum/2016 the whole week and despite the best efforts, the President was unable to authenticate the appeal documents for the purpose of filing within the stipulated time. Hence, the present appeal could not be filed in view of the President’s prior commitments. As soon as, he resumed his duties, the appeal documents were arranged in order, without further any loss of time.”
3. When this was pointed out by the learned Counsel that the delay is small and assessee could not file the appeal for a reasonable cause. The learned Departmental Representative has not objected the assertion made in the affidavit. Hence, we condone the delay and admit the appeal.
4. The first common issue in these appeals of Revenue in ITAs No. 3103 & 6629/Mum/2016 for AYs 2011-12 and 2012-13 respectively, is as regards to the order of CIT(A) holding that the assessee’s activity of running educational courses is not relating to trade and commerce and industry and that this activity constitutes ‘education’. The Revenue has contended that the department has not accepted the CIT(A)’s order for AY 2009-10 and filed appeal before ITAT. The grounds raised
in both the years i.e. AYs 2011-12 and 2012-13 are identical and the facts and circumstances are also identical. The grounds as raised in AY 2012-13 read as under: - “1. On the facts and in the circumstances of the case, and in law, the Ld. CIT(A), Mumbai erred in holding that the assessee’s activity of running private commercial courses is not related to trade & commerce industry and that this activity constitutes ‘education’ which is clearly against the decision of ITAs No.6629,7106,3414&3103/Mum/2016 Hon’ble Supreme Court in the case of Lok Shikshan Trust vs. CIT (1975) 101 ITR 234.
2. Whether, on the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in relying upon the order of his predecessor in assessee’s own case for AY 2009-10 & 2011-12, without appreciating the fact that Department has not accepted the decision of Ld. CIT(A) on merit and filed appeal before Hon’ble ITAT which is pending.
3. The appellant prays that the order of the Commissioner of Income Tax (Appeals)-I, Mumbai be set aside and that of the Assessing Officer be restored.”
5. At the outset, the learned Counsel for the assessee drew our attention to Para 5.2 (i) and (ii), wherein the CIT(A) following his predecessor’s order for AY 2009-10 and 2011-12 allowed the claim of exemption under section 11 of the Act by observing as under: - “5.2 I have considered the facts and circumstances of the case, gone through the assessment order of the AO and the submissions of the appellant and also discussed the case with the AR of the appellant. The contentions and submissions of the appellant are being discussed and decided here in under:
Ground No 1. of appeal is general in nature and hence needs no adjudication. Ground No 2(A) of appeal relates to the rejection of ITAs No.6629,7106,3414&3103/Mum/2016 exemption claimed by the appellant under section 11 and Ground No 2(B) relates to rejection of exemption under section 10(23A) of the Income Tax Act. ii. An amount of ₹ 3,02,04,139/- was claimed by the appellant u/s 11. The Assessing Officer in his order has relied upon the additional facts on record. On perusal it is noted that against the rejection of exemption under section 11 the appellant had preferred the appeal on this issue which was decided by my Ld. Predecessor vide his order dated 29.05.2014 observing as under:
4.7 I have considered the facts and circumstances of the case, submission of the appellant and findings of the AO in the assessment order. The AO has very specifically discussed the activities and resulting income of the appellant during the year from such activities.
On the issue of courses offered and activities carried on by the appellant, it was respoinded by stating that the income derived from above activites was applied solely for the promotion of the object of the institute and that the appellant has also furnished detail of course offered which are:
ITAs No.6629,7106,3414&3103/Mum/2016
1. GDP Graduate Diploma in Public Procurement
2. GDMM Graduate Diploma in Materials Management.
PGDMM Post Graduate Diploma in materials management
PGDLM Post Graduate Diploma in Logistics Management.
5. DSM Diploma in Stores Management.
DIT Diploma in International Trade.
7. IPSCM International Diploma in Purchasing & Supply chain management.
8. CPM Certified Purchasing Manager.
On further query, it was revealed that such courses are recognized by the Govt. of India “as a recognized qualification for the purpose of employment under the Central Govt. to the post and services for which a bacheler’s degree in the appropriate field is prescribed”, vide Annexure-II-(D) No. F.16/7/T7/T dated 29th July, 1999 of the Ministry of HRD.
ITAs No.6629,7106,3414&3103/Mum/2016 4.8 It is also on record that till AY 2008-09, the claim of exemption under section 11 of the IT Act has been accepted by the department as referred above. The applicability of amendment by way of proviso to section 2(15) is restricted to the fourth limb i.e. advancement of object of general public utility. It has been clarified vide circular No. 11/2008 dated 19.12.2008 that the newly inserted proviso to section 2(15) will not apply in respect of the first three limbs of section 2(15) i.e. relief of the poor, education or medical relief. Therefore, if the charitable trust is found to be carrying out charitable activities other than advancement of general public utility, the proviso will not apply as in the case of appellant which has claim of carrying out charitable activity in the field of education.”
6. The learned Counsel for the assessee before us filed copy of Tribunal’s order in for AY 2009-10 order dated 24.10.2016, wherein the Tribunal following the judgement of Hon’ble Supreme Court in the case of Sole Trustee, Loka Shikshana Trust vs. CIT [1975] 101 ITR 234 (SC) and considering the facts, allowed the claim of the assessee vide Para 4 to 6 as under: - “4. We have heard the arguments advanced by the learned representative of the parties and perused the record. The contention of the revenue is that the assessee’s activities for running private commercial courses related to trade and commerce industry are not required to be treated as education in view of the law settled in Loka Skikshana Trust Vs ITAs No.6629,7106,3414&3103/Mum/2016 Commissioner of Income Tax (1975) 101 ITR 234 (SC). However, on the other hand the learned representative of the assessee has strongly relied upon the order passed by the CIT(A) in question and argued that the courses running by the assessee cannot be said for the benefit of the members of the trust. Infact, the purpose of the trust is for the education, therefore in the said circumstances the CIT(A) has rightly allowed the appeal of the assessee. Hence the appeal filed by the revenue is liable to be rejected. Before going further it is necessary to advert the finding of the CIT(A) on record.
“4.7 The appellant had further submitted that – The contention of the learned Assessing Officer is based upon the incorrect Interpretation of the law in the regard : Circular No.11/2008, dated 19.12.2009 states that “there are industry and trade associations who claim exemption from tax under section 11 on the ground that their objects are for charitable purpose as these are covered under ‘any other object of general public utility’. Under the principle of mutuality, if trading takes place between persons who are associated together and contribute to a common fund for the financing of some venture or object and in this respect have no dealings or relations with any outside body, then any surplus returned to the ITAs No.6629,7106,3414&3103/Mum/2016 persons forming such association is not chargeable to tax. In such cases, there must be complete identity between the contributors and the participants. Therefore, where industry or trade association claim both to be charitable institutions as well as mutual organizations and their activities are restricted to contributions from participation of only their members, these would not fall under the purview of the proviso to section 2(15) owing to the principle of mutuality. However, if such organizations have dealings with nonmembers, their claim to be charitable organizations would now be governed by the additional conditions stipulated in the proviso to section 2(15).
The appellant provides educational facilities even to non-members. Hence, taking recourse to the above circular, the Appellant contends that it is not a mutual association.
Thus, on a combined reading of the counter arguments, the Appellant contends that it satisfies the definition of a charitable organization and thus eligible to claim relief under section 11. 4.8 The appellant had considered the facts and circumstances of the case, submissions of the appellant and findings of the A.O. in the assessment order. The A.O. has very ITAs No.6629,7106,3414&3103/Mum/2016 specifically discussed the activities and resulting income of the appellant during the year from such activities.
On the issue of courses offered and activities carried on by the appellant, it was responded by stating that the income derived from above activities was applied solely for the promotion of the object of the institute and that the appellant has also furnished detail of courses offered which are-
1. GDPP Graduate Diploma in Public Procurement 2. GDMM Graduate Diploma in Materials Management 3. PGDMM Post Graduate Diploma in Materials Management 4. PGDLM Post Graduate Diploma in Logistics Management 5. DSM Diploma in Stores Management 6. DIT Diploma in International Trade 7. IPSCM International Diploma in Purchasing & Supply Chain Management 8. CPM Certified Purchasing Manager On further query, it was revealed that such courses are recognized by the Govt. of India “as a recognised qualification for the purpose of employment under the Central Govt. to the post and services for which a bacheler’s degree in the appropriate field is prescribed”, vide Annexure-II-(D) No.F.1-6/7/T7/T dated 29th July, 1999 of the Ministry of HRD.
ITAs No.6629,7106,3414&3103/Mum/2016 4.8 It is also on record that till A.Y.2008-09, the claim of exemption u/s.11 of the IT Act has been accepted by the department as referred above. The applicability of amendment by way of proviso to section 2(15) is restricted to the fourth limb i.e. advancement of object of general public utility. It has been clarified vide circular No.11/2008 dated 19.12.2008 that the newly inserted proviso to section 2(15) i.e. relief of the poor, education or medical relief. Therefore, if the charitable trust is found to be carrying out charitable activities other than advancement of general public utility, the proviso will not apply as in the case of appellant which has claim of carrying out charitable activity in the field of education.
4.9 The doubts raised by the A.O. on the education activities of the appellant are misplaced in view of the fact that the appellant is imparting education in systematic and organized manner for the courses which are duly recognized by the HRD Ministry as referred above. it is further seen that the appellant is notified by the Central Govt. vide S.O. No.3081 dated 4.8.1978. Therefore, in view of the decision in the case of Gujarat State Cooperative Union Vs. CIT (1992) 195 ITR (Guj.), the assessee was conducting courses for Higher Diploma in cooperation – ITAs No.6629,7106,3414&3103/Mum/2016 (18 weeks) certificate course in co-operative credit and banking 10 weeks and specialised short term courses / orientation courses. The assessee also had been running four co- operative training centres which conducted junior basic courses of 24 weeks duration for Diploma in co-operation, special courses for employees for urban cooperative banks, district co-operative banks and also seminars. At these programmes run by assessee were deemed as educational activity.
4.10 Courses run by appellant are recognized by Ministry of HRD and Institute is also recognized u/s.10(23C). Therefore, it is engaged in education field of charity as in u/s.2(15) where course and business under proviso is not applicable as per circular no.11 of 2008. Hence, appeal is allowed.
On appraisal of the above mentioned order it came into the notice that the assessee is doing following eight courses
GDPP Graduate Diploma in Public Procurement 2. GDMM Graduate Diploma in Materials Management 3. PGDMM Post Graduate Diploma in Materials Management 4. PGDLM Post Graduate Diploma in Logistics Management 5. DSM Diploma in Stores Management 6. DIT Diploma in ITAs No.6629,7106,3414&3103/Mum/2016 International Trade 7. IPSCM International Diploma in Purchasing & Supply Chain Management 8. CPM Certified Purchasing Manager
6. The assessee was deriving income from the said course which was applied for the promotion of the objects of the institution. The courses run by the assessee are recognized by the Government of India vide Annexure II-D No.F.1-6/7/T7/T dated 29th July 1999 issued by the Ministry of HRD. It is not in dispute that the department has accepted the claim of the assessee for the A.Y.2008-09. The amendment in section 2(15) of the Act was restricted to the advancement of object of general public utility. Thereafter, It is the clarification in view of the circular no.11/2008 dated 19.12.2008 wherein it is specifically mentioned that the newly inserted proviso to section 2(15) of the Act would not apply in respect of the first three limbs of section 2(15) of the Act i.e. relief of the poor, education or medical relief. Accordingly, the charitable trust was found to be carrying out charitable activities other than advancement of general public utility, the proviso will not apply as in the case of appellant because the claim of the assessee was to carry out charitable activity in the field of education. The assessee is notified by the Central Government vide notification F.No.196/1/77-IT(AI) u/s.10(23A) of the Act in reference to course of material management recognized by the Central Govt. vide S.O. No.3081 ITAs No.6629,7106,3414&3103/Mum/2016 dated 04.08.1978. It is not in doubt that the assessee is during the relevant year imparting education in a systematic and organized manner, running courses which have been duly recognised by the HRD Ministry. The assessee’s income from educational activities would therefore fall to be regarded as from charitable purposes / objects. The decision in the case of Gujarat State Co-operative Union Vs. CIT (1992) 195 ITR (Guj.), would thus apply in the facts and circumstances of the case. Further, the decision in Loka Skikshana Trust Vs Commissioner of Income Tax (1975) 101 ITR 234 (SC) is distinguishable on facts. We, however, observe the assessee to be undertaking other activities as well, income from which has been recorded and worked out separately (refer para 5/ pages 2-4 of the assessment order). The order of the CIT(A) is silent on these activities, i.e., whether they qualify as charitable activities or a charitable purpose, or not. However, as the net income from these activities is in the negative (refer para 10 of the assessment order), the accuracy of which has not been doubted by the Assessing Officer, no useful purpose in our view shall be served by remanding the matter on this aspect of the matter (appeal) to the file of the learned CIT(A); the assessee having claim exemption u/s.11 only on the net income from all the activities, including educational (charitable) activity. The order of the CIT(A) is accordingly upheld.”
ITAs No.6629,7106,3414&3103/Mum/2016
When these facts were pointed out that this issue is already covered by the Tribunal’s decision in assessee’s own case and there is no distinction in facts in the present two years also, the learned Departmental Representative could not controvert the same.
After hearing both the sides and going through the facts, we noticed that this issue is squarely covered by Tribunals decision in assessee’s own case for AY 2009-10, respectfully following the same we dismiss both the appeals of Revenue.
Coming to assessee’s appeal in & 7106/Mum/2016 for AYs 2011-12 & 2012-13 respectively. The only common issue in these two appeals of assessee is as regards to the denial of deduction under section 10(23A) of the Act. As the issue in both the appeals i.e. AYs 2011-12 and 2012-13, are same and the facts are also same, we take the facts from ITA No. 3414/Mum/2016 and decide the issue. For this assessee for AY 2011-12, has raised the following ground: - “1. On facts and in circumstances of the case, and in law, the learned CIT(A), Mumbai erred in denying the claim of exemption of ₹ 4,83,18,491/- under section 10(23A) of the income Tax Act, 1961 merely on the grounds that notification dated 01.08.1978 for allowing exemption under section 10(23A) was issued in the name of Indian Association of Materials Management and subsequent change of name to Indian Institute of Material Management renders the said notification invalid for the purpose of claiming exemption. Further by holding that the assessee’s activity of providing educational service as commercial in ITAs No.6629,7106,3414&3103/Mum/2016 nature and related to trade, commerce and industry in bad in law.”
Brief facts are that the AO during the course of assessment proceedings noticed that the assessee has claimed exemption under section 10(23A) of the Act and claimed that the main object of the Trust is to promote the interest of management movement, especially material management and to improve the general and professional knowledge of management by organizing the lectures, conferences, seminars, exhibitions, consultancy, publication editing etc. The AO required the assessee to explain how it is eligible for exemption under section 10(23A) of the Act. The assessee explained the activities vide letter dated 14.02.2014 as under: - “U/s 10(23A) of the Act:
The activities in the notified profession of ‘Materials Management’ are carried out by the assessee. Moreover, the central government has also notified Material Management as a notified profession for the purpose of Section 10(23A) of the Act. As per the section 10(23A) of the Act sated above, any income earned from the notified profession is exempt from taxation, if the same is applied or accumulated solely to the objects for which it is established.
Thus, the activities, in the notified profession o material management, carried out by the assessee are eligible for claiming benefits of Section 10(23A) of the Act.”
ITAs No.6629,7106,3414&3103/Mum/2016 But the AO, has not accepted the contention of the assessee by observing that the notification was issue don 01.08.1978 in the name of, “Indian Association of Materials Management” but in 1983, the assessee changed its name to “Indian Institute of Materials Management” after getting permission from charity commissioner, Mumbai. It was noted by the AO that the assessee thereafter changed the Memorandum Of Association in 1998. According to him, the assessee is not eligible for the claim of exemption under section 10(23A) of the Act as the notification issued to the “Indian Association of Materials Management” is valid but claim is made in the name of “Indian Institute of Materials Management”. Aggrieved, assessee preferred the appeal before CIT(A).
The CIT(A) also confirmed the action of the AO by observing in Para 5.2 (iii) as under: - “iii. Assessing Officer noted that exemption u/s.10(23A) of ₹ 4,83,18,591/- was claimed by the appellant which was not allowable since the Notification issued on 01.08.1978 was in the name of Indian Association of Materials Management while in 1983 the assessee changed its name to the Indian Institute of Material Management and hence Notification issued was not valid. The appellant in its submission has not able to counter this argument of the assessing officer as to how the above mentioned Notification is valid in the year under consideration of claiming exemption u/s. 10(23A). Accordingly, I do not find any reason to deviate from the findings of the Assessing Officer contained in his order in this regard. Accordingly, rejection of the ITAs No.6629,7106,3414&3103/Mum/2016 claim under section 10(23A) of ₹ 4,83,18,591/- is upheld. Ground of appeal No. 2(B) is therefore dismissed.”
Aggrieved, now assessee is in appeal before Tribunal.
Before us, the learned Counsel for the assessee Shri Niraj Sheth, filed paper book containing correspondence amongst the assessee, Ministry of Finance (Central Board of Direct Taxes) and Chief Commissioner of Income Tax (Exemptions) and other officers of the Department and the details of the letters are as under: - Sr. Date Particulars No. 1. 20.01.2015 Copy of letter from the president of the Indian Institute of Material Management to the Secretary (Revenue), Ministry of Finance for amendment in the name of the Appellant from Indian Association of Material Management to Indian Institute of Material Management (IIMM) for the purpose of section 10(23A) of the Income Act, 1961 (“the Act”). 2. 13.07.2015 Copy of letter from the Government of India, Ministry of Finance (central Board of Direct Tax) to the Chief Commissioner of Income Tax (Exemptions) – New Delhi requesting note on whether IIMM fulfills the requisite conditions prescribed under section 10(23A) of the Act. 3. 09.08.2015 Copy of letter from the Government of India, Ministry of Finance (Central Board of Direct Tax) to the Chief Commissioner of Income Tax (Exemptions) – New Delhi requesting the report on whether IIMM fulfills the requisite conditions prescribed under section 10(23A) of the Act. (Reminder-I) 4. 23.09.2015 Copy Of Letter From The Office Of Commissioner Of Income Tax (Exemptions) – New Delhi To Additional Commissioner of Income Tax (Exemption), new Delhi requesting report in the above- mentioned matter. 5. 23.09.2015 Copy Of Letter From The Income Tax Officer (Exemption) – Ward 1(2), New Delhi Forwarding Details To the Additional Commissioner of Income Tax (Exemption), New Delhi 6. 09.12.2015 Copy of letter from the Government of India, Ministry of Finance (Central Board of Direct Tax) to the Chief Commissioner of income Tax (Exemptions) – New Delhi requesting the report on whether IIMM fulfills the requisite ITAs No.6629,7106,3414&3103/Mum/2016 conditions prescribed under section 10(23A) of the Act. (Reminder-II).
We have noticed from the above correspondence amongst the various departments of Finance Ministry including CBDT and Chief Commissioner of Income Tax, New Delhi. It seems that none of the authorities is interested in taking decision on the above subject of ammendment in name or change in name of the assessee association. Assessee has only made name change from “Indian Association of Material Management” to “Indian Institute of Material Management” vide letter dated 20.01.2015. Even otherwise, the assessee is consistently claiming exemption under section 10(23A) of the Act and Revenue is allowing the exemptions. Even though, the change has taken place vide CR No. 6852/82 dated 24.04.1983. The relevant certificate is enclosed in assessee’s paper book at page 1. From these facts it is clear that there is neither any change in the objects nor in the activities of the Institute but only name changed for which the AO has disallowed the exemption. We noted the facts that the assessee has claimed exemption under section 10(23A) of the Act with respect to course, Exam and other fees amounting to ₹ 4,83,18,591/- after claiming expenditure of ₹ 1,46,08,916/-. The AO has rejected the claim of the assessee under section 10(23A) of the Act that the notification was issued to “Indian Association of Materials Management” and subsequently the name was changed to “Indian Institute of Materials Management” in 1983. Also, the Memorandum of Association had undergone a change in 1998. Quoting the provisions of section 10(23A) of the Act and referring to the objectives contained in the memorandum of Association it was stated that income and property of the institute which is derived shall be applied solely towards the promotion of the objectives of the Institute and no portion thereof shall be paid or transferred directly or indirectly by way of profit to 20 ITAs No.6629,7106,3414&3103/Mum/2016 the persons who at any time are or have been members of the Institute or to any person claiming through any of them. It is provided that nothing herein contain shall prevent the payment in good faith of remuneration to any officers or servants of the Institute or to any other member thereof or any other person in return for any service actually rendered to the institute or the payment of interest on money borrowed from any members of the Institute. Thus, based on the above, activities in the notified profession of ‘Materials Management’ were carried out during the year. As there is no change in the activities, we are of the view that the assessee is entitled for the claim of exemption. Merely, change in name can be carried out by the Chief Commissioner of Income Tax (Exemption) or any other Revenue authority designated for that purpose because this is not a material thing, on the basis of which the exemption under section 10(23A) of the Act is to be disallowed. Accordingly, we direct the AO to allow this exemption. Necessary changes in the certificate i.e. change in name can be carried out by the concern authority.
In the result, both, the appeals of Revenue are dismissed and the appeals of assessee are allowed.
Order pronounced in the open court on 24.05.2019. (एन. के. प्रधान/ NK PRADHAN) (महावीर ससंह /MAHAVIR SINGH) (लेखा सदस्य / ACCOUNTANT MEMBER) (न्याययक सदस्य/ JUDICIAL MEMBER) मुंबई, ददनांक/ Mumbai, Dated: 24.05.2019. दीप रकार, व.यनजी धिव / Sudip Sarkar, Sr.PS