M/S. R K EDUCATIONAL TRUST,NEW DELHI vs. DIT(EXEMPTIONS), NEW DELHI

order of the DIT(E), Delhi dated 30.4.2014. The grounds of appeal are as under :-

1. “That on the facts and circumstances of the case and in law, the Learned Director Income Tax Fit For Publication (AM) Sd/- (JM) Sd/- (Exemptions) erred in not granting registration u/s 12A of the Income-tax Act, 1961 to the Trust.

2. That the Learned Director of Income Tax (Exemptions) having observed that R K Convent School Educational Society had entered into a MOU with the Delhi University, to provide training to the students enrolled for various degree courses under University of Delhi, in the field of Annimation, Radio & TV Broadcasting Arts, Theatre Art etc., as well as observing that the applicant Trust was imparting certain courses (stated in the order),grossly erred in holding that the activities of the Trust do not fall under the definition of education and the Trust is not imparting education.

3. That the Learned Director of Income Tax (Exemptions) erred in holding that the MOU between R K Convent School Educational Society and the applicant Trust is in the nature of division of assets of a family unit. 3.1 That the above and other observations of the Learned Director of Income Tax (Exemptions), in the order dated 30.04.2014, are not only erroneous and vague but are also not supported with any finding to the effect that the activities of the Trust are in the nature of family business.

4. That the observations of the Learned Director of Income Tax (Exemptions) that R K Convent School Educational Society was not legally entitled to part with its assets without seeking necessary approvals! sanctions from the Competent Authority, without citing the exact default, if any, is not relevant in disposing the applicant Trusts' request for registration u/s 12A of the Income-tax Act, 1961.

5. That the observations of the Learned Director of Income Tax (Exemptions) are contradictory, based Fit For Publication (AM) Sd/- (JM) Sd/- ITA No. 3748/Del/2014 on surmises and conjectures and are not supported with any evidence.”

are against the order of the Ld. DIT(E) refusing to grant registration u/s 12AA r.w.s. 12A of I.T. Act. For the sake of convenience the grounds of appeal are taken up together. The appellant trust was created by way of trust deed on 18th March, 2013 by Mr. Deepak Bansal. There are four trustees of the appellant trust namely Mr. R.K. Goel, Mr. Gagan Gautam, Mr. Sanjay Agarwal, & Mrs. Neha Bansal. The corpus of the appellant trust, totalling Rs. 95,000/- consists of Rs. 11,000/- received from each of the four trustees and Rs. 51,000/- received from Mr. Deepak Bansal, author of the trust on different dates. The appellant trust applied for registration u/s 12AA/ 12A of I.T. Act vide application dated 18.10.2013. The Ld. DIT(E) called for certain information on 17 different points vide letter dated 28.10.2013 (page 11 of paper book filed by the appellant). The appellant submitted reply vide letter dated 18.11.2013 (pages 12 to 18 of paper book submitted by appellant). Further details were also submitted by the appellant vide letters dated 3.2.2014 (pages 19 to 24 of 3. Fit For Publication (AM) Sd/- (JM) Sd/- paper book submitted by appellant) and letter dated 12.2.2104 (pages 25 to 29 of paper book submitted by appellant). Ld. DIT(E) vide impugned order dated 30.4.2014 rejected the application filed by the appellant trust for grant of registration u/s 12AA / 12A of I.T. Act. The Ld. DIT(E) rejected the application for grant of registration on the following grounds :- a) The Ld. DIT(E) held that the activities of the applicant trust were non genuine. The Ld. DIT(E) came to this conclusion on the basis of following grounds : i) The trust has been created by Shri Deepak

Bansal primarily to take over part of the activities of R.K. Convent School Education Society being run under the presidentship of Shri N.C. Bansal father of Shri Deepak Bansal. The whole transaction, Ld.

DIT(E) held was in the nature of division of the assets of a family unit – father giving a share in his property to his son. For coming to his conclusion

Ld. DIT(E) noted as under :-

“5.1 The applicant trust, as per its objects, has been formed to establish, maintain, 4 Fit For Publication (AM) Sd/- (JM) Sd/- support and run school colleges, social service centre, industrial training centre, skill development centres, coaching institutes, etc. The author of the trust, Shri Deepak Bansal is son of the President of the Society, R. K. Convent School Educational Society, Shri N. C. Bansal. The said society is registered u/s. 12AA of the Income Tax Act, 1961 and has been carrying out its educational activities since many years. The society has parted with its some of the activities since many years. The society has parted with its some of the activities – R.K. Films and Media Academy and R. K. College of Systems and Management and authorized the applicant trust to carry out the same. Further, some of the assets of the society too have been transferred to the trust at its book value. In this regard, a reference is made to a document submitted by the applicant during the course of proceedings which states as under: "The Secretary submitted that Mr. Deepak Bansal, the Administrative In-charge of the Society's unit 'R. K. Films & Media Academy' at New Delhi, has conveyed to him that he is inclined to start an Educational Trust by himself AND as he has been long associated with the society in a successful & responsible administrative capacity to manage the affairs of the Society's unit viz. R. K. Films & Media Academy at New Delhi, is willing to take over the entire said unit to be run under the banner of his proposed Educational Trust to be duly registered as a social & charitable trust. After negotiating on the issue it was resolved that if the aim and objects of the proposed Educational Trust to be authorized by Sh. Deepak Bansal, are the same and if the society can legally transfer its assets of the 5 Fit For Publication (AM) Sd/- (JM) Sd/- ITA No. 3748/Del/2014 unit to the said newly created Educational Trust of Shri Deepak Bansal, then believing the credibility of Sh. Deepak Bansal to responsively run the unit in future with the same name and with a view to shred the responsibilities of existing already established units to enable the society to concentrate on future expansions, the proposed offer of Sh. Deepak Bansal be accepted & and modalities of the assets transfer be worked out and be written through a Memorandum of Understanding. Rather the affair and Assets of the other unit of the society at New Delhi i.e. R. K. College of Systems & Management, at Punjabi Bagh, be also wasted with the proposed Educational Trust of Shri Deepak Bansal, if so mutually agreed That the chairman & the President of the Society Sh. N. C. Bansal be and is hereby authorized to finalize the Memorandum of Understanding with the proposed Educational Trust of Shri Deepak Bansal after its due registration & to give effect to the mutually agreed terms. "

5.2 It is thus clear that the trust has actually been created/formed by Shri Deepak Bansal, primarily to takeover part of the activities of the Society named R. K. Convent School " Educational Society, being run under the President-ship of Shri N. C Bansal, father of Shri Deepak Bansal, as already mentioned. The whole transaction is in fact in the nature of division of the assets of a family unit - father giving a share in his property to his son. The parent society, R. K. Convent School Educational Society is already successfulIy running the various courses for which it has already got the necessary affiliation.. The courses are being run from the same premises with the same faculty and the same 6 Fit For Publication (AM) Sd/- (JM) Sd/- infrastructure. In fact, the activities already being run by the society are being passed off as the activity of the applicant trust. The reasons can be many – the society wishes to keep its turnover below a threshold limit to escape the requirement of law/scrutiny of returns which is linked to the turnover, or a father in his low for his son wants to settle his son in business as happens in any other business family. 5.3. It needs to be noted that Shri Deepak Bansal is already Administrative In-charge of society’s unit which has been transferred to the trust settled by him. Thus the society has not apparent gain of better management or control by passing/ transferring the control of some of the activities to another trust which happens to be settled by the same person i.e. Sh. Deepak Bansal, who is already running the same while being in the society.” ii) Ld. DIT(E) held that the whole arrangement not being genuine, it was in the interest of Revenue that such transactions are not allowed to be passed off as genuine charitable activities so that the tax benefit meant for true charitable institute is not usurped by scheming / opportunist entrepreneurs iii) The Ld. DIT(E) held that R.K. Convent School

Education Society being registered under Societies Fit For Publication (AM) Sd/- (JM) Sd/- Registration Act and also under section 12AA of I.T.

Act was not legally allowed to part with its assets

(to the applicant trust) without seeking necessary approvals / sanctions from competent authority in terms of societies registration act and also from Directorate of Income Tax (Exemptions). Ld. DIT(E) also held that R.K. Convent School Education

Society was not authorised to run courses under its banner without having necessary permission / affiliation in this regard from the competent authority. Thus the Ld. DIT(E) held that a trust (the appellant) which was running its activities out of an illegal / unauthorised arrangement (with R.K.

Convent School Education Society) cannot be held to be carrying out genuine activities. iv) The Ld. DIT (E) observed that the courses run by the trust (the appellant) are neither recognised nor a part of regular curriculum of any university / education programme; and further, that these were just skill development / enhancement courses / programme which cannot be termed as education. 8 Fit For Publication (AM) Sd/- (JM) Sd/- The Ld. DIT(E) made a reference to the decision of Hon’ble Supreme Court in the case of Sole Trustee

Lok Shikshana Trust vs. Commissioner of Income

Tax (1975) 10 ITR 234 (SC) and quoted the following from this decision:

“The sense in which the word “education” has been used in section 2(15) is the systematic instruction, schooling or training given to young in preparation for the work of life. It also connotes the whole course of scholastic instruction which a person has received. The word “education” has not been used in that wide and extended sense according to which every acquisition of further knowledge constitutes education.”

Ld. AR of the appellant contended that the impugned order dated 30.04.2014 of the Ld. DIT(E) was bad in law being based on irrelevant considerations, and exceeded the Fit For Publication (AM) Sd/- (JM) Sd/- authority vested in her in deciding the issue of registration u/s 12AA/ 12A of I.T. Act. In support of this contention, he argued that seeking information on as many as 17 issues vide notice dated 28.10.2013 was beyond the authority vested in her in deciding the issue of registration. He argued that the Ld. DIT(E) was only required to satisfy herself about the objects of the trust and about the genuineness of the activity. For this preposition he relied on numerous judicial decisions namely : Director of Income Tax (Exemptions) v Meenakshi Amma Endowment Trust (2011) 50 DTR (Kar) 243 / (2013) 354 ITR 219, CIT vs. Spring Dale Education Society 204 Taxman 11 (P&H) (HC) (Mag.)(2012), CIT vs. Baba Deep Singh Educational Society (2012) 206 Taxman 131 (P &H) (HC)

(MAg.), CIT vs. Red Rose School (2007) 162 Taxman 19 (All.), Prayer for India v. ITO (2011) 7 ITR (Trib.) 201 (Chennai), Director of Income Tax v. Foundation of Opthalmic & Optometry Research Education Centre (2013) 355 ITR 361 (Delhi), CIT (E) v. Sai Ashish Charitable Trust , Jaipal Singh Sharma Trust vs. CIT Ghaziabad I.T. No. 6475/Del/2014 , Shriram Education Foundation vs. DIT(E) & ITA No. , Jaipal Singh Sharma Trust vs. CIT Fit For Publication (AM) Sd/- (JM) Sd/- ITA No. 3748/Del/2014 Ghaziabad I.T. No. 6475/Del/2014 and Shriram Education Foundation vs. DIT(E) ITA No. 1399/Del/2011 & ITA No. 3011/Del/2011. The Ld. AR of the appellant further argued that the observation of the Ld. DIT(E) that the transfer of Appellant trust amounted to transfer of family assets was totally unconceivable and beyond imagination. Ld. AR of the appellant also contended that the observation of Ld. DIT(E) that the activities carried out by the appellant trust did not amount to education was contradictory in itself ; the Ld. DIT(E) having herself stated in paragraph 3 of her order that (which was earlier carrying out these activities) were educational activities. Ld. AR of the appellant further relied on decisions of Delhi Bench of ITAT in Divya Yog Mandir Trust, Haridwar ITA No. 387/Del/2013 B Bench order dated 27.8.2013 and Sivananda Yoga Vedanta Natraj Society vs. ITO(E) ITA No. 311/Del/2015 order dated 29.7.2015. Ld. DR, however strongly supported the order of the Ld. DIT(E) and relied on the order passed by Ld. DIT(E).

Fit For Publication (AM) Sd/- (JM) Sd/-

Education Trust (the appellant) has been formed by Mr. Deepak Bansal, son of Mr. N.C. Bansal (President of R.K.

Convent School Education Society). R.K. Convent School Education Society was running its educational activities through, inter-alia, educational units named R.K. Films and Media Academy, Karol Bagh, New Delhi and R.K. College of Systems and Management, Punjabi Bagh, New Delhi. R.K.

Convent School Education Society entered into MOU with the appellant trust for take over of the said two units of R.K.

Fit For Publication (AM) Sd/- (JM) Sd/- Convent School Education Society by the appellant trust vide resolution passed by management committee of R.K. Convent School Education Society, in meeting held on 18.3.2013, whereby R.K. Convent School Education Society transferred the assets and affairs of the aforesaid two educational units of R.K. Convent School Education Society to the appellant trust. R.K. Convent School Education Trust was registered u/s 12AA r.w.s. 12A of I.T. Act and was carrying out its educational activities for many years before take over of the aforesaid two educational units by the appellant trust in accordance with aforesaid MOU and resolution. Mr. Deepak Bansal, author of the appellant trust, was administrative incharge in R.K. Convent School Education Society and was engaged in running of the aforesaid educational units of R.K.

Convent School Education Society while these units were being run by R.K. Convent School Education Society. The appellant trust, through the aforesaid educational units taken over from R.K. Convent School Education Society is imparting professional education and training through certain courses in the fields of Mass Communication & Journalism(6 months course), Mass Communication and Journalism (1 year Fit For Publication (AM) Sd/- (JM) Sd/- courses), Acting (2 months course), Acting (3 months course), Acting (6 months course) Radio Jockey and News Reading & Anchoring (Hindi) (3 months course), Radio Jockey and News Reading & Anchoring (English) (3 months course) and Advertising and Public Relations (6 months course). Ld. DIT(E) has noted the details of these courses in paragraph 4.2 of her order. She also had specifically asked the appellant trust whether it was affiliated to any university / Govt. Body / local body / education board , etc. for carrying out such courses ; to which, as noted by Ld. DIT(E) in her order ; the appellant trust, replied as under :-

“Our activities primarily consists of providing vocational education on ‘no profit no loss basis’. The nature of our educational courses is detailed out in Annexure 3. We have also enclosed two leaflets of the courses being imparted with the association of University of Delhi and Shyam Lal College. Our aforesaid educational activity is classified as ‘charitable’ within the meaning of section 2(15) of the Act”.

Fit For Publication (AM) Sd/- (JM) Sd/- The Ld. DIT(E), in her impugned order, has given her opinion on both these factors. As far as the objects of the appellant trust are concerned the Ld. DIT(E) has held that it cannot be termed as “education”. As far as genuineness of the activities of the appellant trust is concerned the Ld. DIT(E) has held that the activities are not genuine. We take up both these aspects one by one.

(emphasis added) through colleges / institutes which included the educational units taken over by the appellant trust. She has also noted in para 5.1 of her order that R.K.

Convent School Education Society was registered u/s 12AA of I.T. Act and had been carrying out its educational activities since many years. In the absence of any reasoning given by the Ld. DIT(E) in her order ; it is not clear why, the activities of R.K. Convent School Education Society have been termed 15 Fit For Publication (AM) Sd/- (JM) Sd/- by her as educational activity and why, on identical facts, the activities of appellant trust have not been termed as “education”. Also, it is not clear why R.K. Convent School Education Society was granted registration u/s 12AA r.w.s.

12A on the basis of its aforesaid educational activities since was denied registration by Ld. DIT(E). It is seen that the Ld. DIT(E) has placed reliance on decision of Hon’ble Supreme Court in the case of Sole Trustee, Lok Shikshana Trust vs. CIT (supra). Though the Ld. DIT(E) has in paragraph 5.7 of her impugned order reproduced a portion of the relevant para of the aforesaid decision, it will be useful to peruse the entire paragraph of the Supreme Court decision. When the entire paragraph is reproduced, we find that in this case the Hon’ble Supreme Court has observed as under :-

“The sense in which the word “education” has been used in section 2 (15) in the systematic instruction, schooling or training given to the young is preparation for the work of life. It also connotes the whole course of scholastic instruction which a person has received. The word “education” has not been used in that wide and extended sense, according to which every acquisition of further knowledge constitutes education. According to this wide and extended sense, travelling is education, because as a result of travelling you acquire fresh 16 Fit For Publication (AM) Sd/- (JM) Sd/- knowledge. Likewise, if you read newspapers and magazines, see pictures, visit art galleries, museums and zoos, you thereby add to your knowledge. Again, when you grow up and have dealings with the people, some of whom are not straight, you learn by experience and thus add to your knowledge of the ways of the world. If you are not careful, your wallet is liable to be stolen or you are liable to be cheated by some unscrupulous person. The thief who removes your wallet and the swindler who cheats you teach you a lesson and in the process make you wiser though poorer. If you visit a night club, you get acquainted with and add to your knowledge about some of the not much revealed realities and mysteries of life. All this in a way is education in the great school of life. But that is not the senses in which the word “education” is used in clause (15) of section 2. What education connotes in that clause is the process of training and developing the knowledge, skill, mind and character of student by normal schooling.”

6.1. On careful reading, it is obvious that what the Hon’ble Supreme Court disapproved, was exaggerated and farfetched interpretation of the word “education”. If the ratio of the decision of Hon’ble Supreme Court is correctly understood, Hon’ble Apex Court has actually approved the interpretation of the word “education” in the sense of systematic instruction, schooling or training and in the sense of scholastic instruction which a person has received. In the case of the appellant trust, we find that it is providing 17 Fit For Publication (AM) Sd/- (JM) Sd/- professional education and training through courses of varying duration in the fields of mass communication, journalism, acting, radio jockey, news reading and anchoring, advertising and public relations etc. through their courses the duration of which varies from two months to one year. Further, these courses are imparted by the appellant trust with the association of University of Delhi and Shyam Lal College. The objects for which the trust was founded are stated in clause 3 of the trust deed (pages 4 & 5 of paper book filed by appellant). Besides other objects, the objects of the trust, include to establish, maintain, support and run schools, colleges, social service centres, industrial training centres, skill development centres, coaching institutes, boarding houses, day shelters, research and training centres and other institutions of education, having objects similar to those of this trust for imparting elementary and higher education, technical, industrial or commercial knowledge or training amongst public. Contrary to the conclusion arrived at by the Ld. DIT(E), when we correctly apply the ratio of the decision of Hon’ble Supreme Court in the case of Sole Trustee V Lok Shikshana Trust vs. CIT (supra) to the facts of Fit For Publication (AM) Sd/- (JM) Sd/- ITA No. 3748/Del/2014 the appellant trust we are of the view that the activities of the appellant trust are to be regarded as “education” ; and, decision of Hon’ble Supreme Court in the case of Sole Trustee vs. Lok Shikshana Trust vs. CIT(Supra) to not accept the activities as charitable was applicable to the facts of that case alone. The ratio of that case, when applied to the facts of the case before us advances the case of the appellant. Ld. DIT(E), by not referring to the entire paragraph from the order of Hon’ble Supreme Court in the case of Sole Trustee, Lok Shikshana Trust vs. CIT (supra) ; and by referring to only part of the paragraph, may have rendered herself prone to misinterpreting the ratio of Supreme Court decision in the case of Sole Trustee, Lok Shikshana Trust vs. CIT(supra). We further find that the Delhi Bench of ITAT in the case of Divya Yog Mandir Trust v. Jt. CIT (2013) 37 taxmann.com 227 / 60 SOT 154 (URO) Delhi has held that any form of educational activity involving imparting of systematic training in order to develop the knowledge, skill, mind and character of student is to be regarded as education and concluded that imparting of yoga yoga training through well structured yoga shivir/ camps fell under Fit For Publication (AM) Sd/- (JM) Sd/- the category of imparting education. It may be noted that when this decision was delivered, the word ‘yoga’ was not included in section 2 (15) of I.T. Act under which “charitable purpose” is defined. In a case decided by Hon’ble Jurisdictional High Court in the case of Delhi Music Society v.

Director General of Income-tax (2012) 17 Taxmann. Com 49/204 Taxman 231/(2013) 357 ITR 265 (Delhi) the Hon’ble High Court held that where any school or educational institution is being run in a systematic manner with regular classes, vacations, attendance requirements, enforcement of discipline and so on; it meets the requirement of an educational institution. The appellant’s reliance on Delhi ITAT decision in the case of Shivanand Yog Vedant Natraj Society v ITO (supra), copy whereof has been filed by the appellant trust, in which the Hon’ble ITAT considered the decision of Delhi ITAT in the case of Divya Yog Mandir Trust (supra) is also relevant, wherein also Delhi Bench of ITAT has held that imparting of yoga training fell under the category of imparting education which is one of the charitable objects defined u/s 2 (15) of I.T. Act.

Fit For Publication (AM) Sd/- (JM) Sd/-

Fit For Publication (AM) Sd/- (JM) Sd/-

The Ld. DIT(E) has not refuted this. She has neither highlighted any relevant consideration nor brought out any adverse material on the basis of which it can be reasonably held that the activities of the appellant trust cannot be termed as “education” considering that we have already held, after considering judicial precedents that the word “education” is to be interpreted widely and liberally. In the case before us, we have already noted earlier in paragraphs 4 and 6.1 of this order that the appellant trust is providing professional education and training through courses in the Fit For Publication (AM) Sd/- (JM) Sd/- fields of mass communication, journalism, acting, radio Jockey , news reading and anchoring, advertising and public relations. Though Ld. DIT(E) has stated in paragraph 5.5 of her impugned order that it (R.K. Convent School Education Society) was not authorised to run the courses under its banner without having necessary permission / affiliation in this regard from the competent authority ; this is quite contrary to her own finding in paragraph 5.2 of her impugned order, where she herself has noted that these courses were being successfully run by R.K. Convent School Educational Society before being taken over by the appellant trust. She has also noted in paragraph 4.3 of her impugned order that details regarding nature of courses run by appellant trust and about association with University of Delhi and Shyam Lal College were furnished. Be that as if may. There is no statutory requirement for the purpose of granting registration u/s 12AA / 12A of I.T. Act, that educational courses or programmes must be run in affiliation with a college or a university. Whether the educational courses or programmes being run by an applicant are recognised by or are in affiliation with a college / a university / a government Fit For Publication (AM) Sd/- (JM) Sd/- ITA No. 3748/Del/2014 authority is irrelant for the purpose of section 12AA / 12A of I.T. Act.

Revenue, representing public interest and assessee, representing private interest do many times present situations in matters relating to tax disputes in which the adjudication has to factor in the conflicting requirements of public interest and private interest. However in a situation like the one before us, in which an issue regarding registration u/s 12AA / 12A of I.T. Act is a subject matter, there is little conflict, if any, between public interest and private interest. The society does need charitable activities and in that sense charitable activities are in public interest.

Registration u/s 12AA/12A of I.T. Act is meant to facilitate charitable activities proposed to be carried out by the entities (private parties) applying for registration. When 24 Fit For Publication (AM) Sd/- (JM) Sd/- private parties (such as those who apply for registration u/s 12A / 12AA of I.T. Act) wish to carry out charitable activities for the larger benefit of society i.e. in public interest; there is little conflict between private interest and public interest.

In situations when there is little conflict between private interest and public interest, law should be interpreted liberally, subject to reasonable limits, in a way which advances public interest through charitable activities of private parties. The decision of Hon’ble Supreme Court in the case of Sole Trustee, lok Shikshana Trust vs. CIT (supra) provides us with a sense of reasonable limits of liberal interpretations in such situations, though ; and the words should not be so widely and liberally interpreted as to result in farfetched exaggeration.