` NIHARIKA EDUCATION SOCIETY,GHAZIABAD vs. ADDL. CIT, GHAZIABAD

In compliance to the above queries, the assessee replied as under :-

The Assessing Officer did not accept the assessee’s contentions for the following reasons :-

Relying on the decision of Hon’ble Supreme Court in the case of Sole Trustee, Loka Shikshana Trust vs. CIT, 101 ITR 234 (SC), he pointed out that it has been held in this case as under :-

The Assessing Officer, therefore, observed that education means systematic education which results into degree or qualification. The decision in the case of Sole Trustee, Loka Shikshana Trust (supra) was followed by Hon’ble Gujarat High Court and by Hon’ble Patna High Court in the case of Saurashtra Education Foundation vs. CIT, 273 ITR 139 (Guj) and Bihar Institute of Mining and Mines Surveying vs. CIT, 208 ITR 608 (Pat) respectively. The Assessing Officer pointed out that the activities of the society could not be said to be covered u/s 2(15) of the Act. As regards the assessee’s claim of exemption u/s 10(23C)(iiiad), the Assessing Officer pointed out that the expression ‘educational institution’ would take colour from the word ‘university’, hence the expression ‘other educational institution’ would mean an institution imparting formal education in an organized and systematic training where the institution would be accountable to some authority and where there would be teachers and taught, the former having some degree of control over the latter. He, accordingly, stated that the activities of society could not be accepted to be covered u/s 2(15) or section 10(23C)(iiiab) of the Act and since neither the society was registered u/s 12AA nor approved u/s 80G of the Act, therefore, the claim of the assessee for exemption was not acceptable and he made an addition of Rs.7,17,913/-.

The Assessing Officer also disallowed a sum of Rs.2,17,800/-, inter- alia, observing that since the society had enjoyed its surplus profits generated in previous years which had been used in creation of fixed assets, therefore, depreciation of Rs.2,47,756/- as claimed in the income and expenditure account of the current year could not be allowed. Since, the assessee made an addition in the fixed assets of Rs.1,99,768/- out of the current year profit and, therefore, allowed depreciation of Rs.29,965/- being 15% of the cost of fixed asset and disallowed the balance of Rs.2,17,800/-.

Ld. CIT(A) partly allowed the assessee’s appeal. Being aggrieved, the assessee is in appeal before the Tribunal.

Ld. counsel referred to page 14 of the Paper Book to submit that IMT-CDL has been recognized by Distance Education Council, Government of India, vide their letter No.DEC/Recog/IMT/07/5966 dated 04.10.2007 for offering Distance Education Programme. He pointed out that this is almost similar to IGNOU. Ld. counsel referred to page 45 of the Paper Book wherein the assessment order in the case of K. S. Memorial For Education and Research is contained which is a society engaged in running of study centre at Hargovind Enclave, Vikas Marg, New Delhi which is a unit of IGNOU which is a Central University for providing higher education through distance learning programmes. The assessee’s case is almost similar to that case of K. S. Memorial For Education and Research and in that society exemption has been granted u/s 12AA and the income has been determined at Nil. Ld. counsel, further, submitted that fee is structured by foreign organization viz. IMT-CDL as per the schedule contained at page 42 of the Paper Book. The portion of fees collected is given to foreign organization. Ld. counsel, further, referred to page 44 of the Paper Book wherein the schedule of network of study centre of the assessee academy has been detailed as under :-

Ld. counsel referred to page 1 of the assessment order and pointed out that in para 3, the Assessing Officer has himself noticed the assessee as an institute. Further, he referred to page 2 of assessment order wherein in para 6 again the Assessing Officer has noted that the assessee as an institution.

From these averments, ld. counsel submitted that assessee was primarily providing additional support services to Study Centre. He pointed out that Assessing Officer’s main objection was in regard to sharing of fees.

Ld. DR submitted that principles of res-judicata are not applicable to income tax proceedings and, therefore, the assessment order in the case of K. S. Memorial For Education and Research (supra) is not applicable to the facts of the present case. He further submitted that as far as the assessee’s plea for following the principles of consistency is concerned, the same is not applicable. He referred to section 10(23C)(iiiad) and pointed out that the educational institution should be like university and the study centre will not be covered under this section. He, further, pointed out that AICTE has no control over the assessee and relied upon the order of CIT(A). He relied on the orders of authorities below.

Ld. counsel, in the rejoinder, referred to the decision in the case of ADIT vs. Hyderabad Study Circle (2015) 55 taxmann.com 379 (Hyd-Trib)

I have considered the submissions of both the parties and perused the record of the case. Admittedly, the society was neither registered u/s 12AA nor u/s 80G. The assessee only sought exemption u/s 10(23C)(iiiad). From the narration of facts by ld. counsel for the assessee, as noted earlier, it cannot be disputed that the assessee was running an educational institute where it was primarily imparting distance learning course under contract as study centre on behalf of an estimated organization viz. IMT. Study Centre run by assessee is primarily an extension/limb of IMT. As a matter of fact, the assessee is imparting education to various students of the study centre governed by IMT. There is no dispute that IMT was approved by AICTE and, therefore, the study centres of IMT stand governed by Regulations of AIECT. There is also no dispute that assessee was maintaining computer laboratories, classrooms, library and general student support services, etc. which were approved by the IMT. The institute was employing academic staff to teach students under the guidelines of IMT. Course material was designed and distributed to students and collection of tuition & other fees from the students was remitted to IMT. There is, further, no finding recorded by the lower authorities that the institute was existing for profit purposes. As a matter of fact, both the lower authorities have not disputed the various activities, as noted earlier, being carried out by assessee. In the course of his argument, ld. counsel drawn analogy from the various universities imparting education through affiliated colleges. He pointed out that certificates/degrees are not issued by schools/colleges but by universities does not mean that such colleges were not imparting education.

In the case of Delhi Music Society (supra) one of the reasons for denying registration u/s 10(23C)(iiiab) was that the society was not awarding in degree or certificate and was merely imparting coaching/ training in India as per norms of foreign colleges; that it was not an institution recognized by the UGC or by any Board constituted by Government of India for imparting formal education in the field of western music. The prescribed authority also observed that the assessee society could not be distinguished from any coaching or training institute preparing the students for appearing in any examination for obtaining a formal degree by a formally recognized institution. Negating all these objections, Hon’ble Delhi High Court, inter-alia, held as under :-

In the present case also it cannot be disputed that the study centre was like any school or educational institution imparting education in a systematic manner with regular classes and, therefore, clearly satisfied the conditions laid down in the judgement of the Hon’ble Supreme Court in the case of Sole Trustee, Loka Shikshana Trust (supra). It is not necessary for an institution to be recognized as imparting education that it should also award degrees. If, the degree is awarded by ultimate controlling body under Rules and Regulations then also it fulfills the conditions of educational institution.

In the case of Society For Participatory Research in Asia (supra), it was, inter-alia, held that the conclusion of Assessing Officer that activities of assessee were not in nature of education only on pretext that income from education was confined to Distance Learning Course fee of Rs.20.65 lakhs out of total receipts of Rs.21.45 crores was held to be incorrect.

In the case of Science Olympaid Foundation (supra), inter-alia, following two grounds read as under :-

The Tribunal, inter-alia, held as under :-

In the case of Hyderabad Study Circle (supra), the facts were that assessee was running a coaching institute giving coaching to students for various competitive examinations. The Assessing Officer held that assessee was not imparting a systematic education and, therefore, relying on the decision of the Hon’ble Supreme Court in the case of Sole Trustee, Loka Shikshana Trust (supra) held that the assessee was not imparting education.

In the case of Oxford Academy For Career Development (supra) held as under :-

In the case of Meritta Welfare Trust (supra), the Commissioner noticed that the assessee trust had entered into the franchise agreements with ‘Z’ Ltd., whereby it had given commercial. The Tribunal, inter-alia, held that the conditions of franchiser under franchisee agreement could not be a ground to assume that income of trust would not be applied for educational activity and, therefore, set-aside the Commissioner’s order. In the present case, the assessee was running study centre of IMT under a fee sharing agreement and, therefore, the facts of this case are similar to the present case.

In the case of Institute of Chartered Accountants of India (supra), the facts were that the Assessing Officer denied exemption u/s 11 mainly on the ground that ICAI was involved in commercial activities as it received coaching fees from students of CA while giving coaching to CA students. It was held that ICAI was an educational institution and its coaching activities fell within meaning of charitable purpose u/s 2(15), hence it was entitled to exemption u/s 11.

In view of the aforementioned case laws, I am of the considered opinion that the assessee comes within the ambit of section 10(23C)(iiiad) as educational institution existing solely for educational purposes and not for purposes of profit and, therefore, entitled for exemption u/s 10(23C)(iiiad) of the Act. In the result, the ground nos.2 and 3 are allowed.

As far as ground no.4 regarding disallowance of depreciation of Rs.2,17,800/- is concerned, I find that the said issue is covered by the decision of Hon’ble Delhi High Court in the case of Indraprastha Cancer Society (supra) wherein it has been held that a charitable institution which has purchased a capital asset and treated amount spent on purchase of capital asset as application of income is entitled to claim depreciation on said capital asset utilized for its objects. Respectfully following the aforementioned decision of Hon’ble Jurisdictional High Court, this ground is allowed.

In the result, the appeal of the assessee is allowed. Order pronounced in the open court on this 19th day of January, 2017.