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Income Tax Appellate Tribunal, 2 Memorandum of Association
I.T.A No.41/2017
1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 8TH DAY OF JULY, 2022 PRESENT THE HON’BLE MR. JUSTICE P.S. DINESH KUMAR
AND THE HON’BLE MR. JUSTICE C.M. POONACHA
I.T.A No.41 OF 2017
BETWEEN :
M/s. SOUTHERN INDIA BANKS STAFF TRAINING COLLEGE NO.9, SHANKARAMATH ROAD SHANKARAPURAM BANGALORE - 560 004 REPRESENTED BY ITS PRINCIPAL & MEMBER SECRETARY SRI. K.L. SHANKARA NARAYANA RAO AGED ABOUT 61 YEARS SON OF LATE LAKSHMI NARASIMHAIAH ... APPELLANT
(BY SHRI. S. PARTHASARATHI, ADVOCATE)
AND :
THE INCOME-TAX OFFICER WARD-14(2) BANGALORE.
... RESPONDENT
(BY SHRI. K.V. ARAVIND, ADVOCATE)
THIS ITA IS FILED UNDER SECTION 260-A OF THE INCOME TAX ACT, 1961 ARISING OUT OF ORDER DATED:26/08/2016 PASSED IN ITA NO.1408/BANG/2015, FOR THE ASSESSMENT YEAR 2014-2015,
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2 PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW AND ETC.
THIS ITA, HAVING BEEN HEARD AND RESERVED FOR JUDGMENT ON 27/06/2022 COMING ON FOR PRONOUNCEMENT OF JUDGMENT, THIS DAY, P.S.DINESH KUMAR J, PRONOUNCED THE FOLLOWING:-
JUDGMENT
This appeal has been admitted to consider the following question of law: Whether in law, the Tribunal was right in rejecting the application for exemption under Section 10(23C)(vi) of the Act without considering the vast definition that the word "education" embraces although there being no specific definition for "education" under the Income Tax Act of 1961?
Heard Shri. S. Parthasarathi, learned Advocate for assessee and Shri. K.V. Aravind, learned Advocate for the Revenue.
Brief facts of the case are, assessee, a Staff Training College submitted an application seeking exemption under Section 10(23C)(vi) of the Income Tax Act, 1961 ('Act' for short) for the A.Y. 2014-15. The Chief
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3 Commissioner of Income Tax, Bengaluru rejected the application. Assessee challenged the said order in ITA No.1408(Bang)2015. The ITAT1, by the impugned order has dismissed the appeal.
Shri. Parthasarathi, for the assessee, submitted that the Commissioner has rejected the application, holding that the applicant should be solely for educational purpose. According to the commissioner, in view of objects No.4 and 7 of the MoA2 and Rules of the Southern India Banks' Staff Training College, assessee's activities cannot be construed as activities for educational purposes because, object No.4 provides for assisting Banking Institutions in the matters such as appraisal programmes, conducting morale and productivity studies etc and object No.7 provides for giving consultancy services.
1 Income Tax Appellate Tribunal 2 Memorandum of Association
I.T.A No.41/2017
He further submitted that the assessee has written to the DDIT3 as back as August 16, 2008 stating that objects No.7 and 10 of the MoA were deleted and a copy of the amended Memorandum was furnished and approval was sought to amend the MoA. But the Income Tax Department has not granted the approval sought.
He urged that the assessee mainly runs the Staff Training College. It has not involved itself with any other activity. He relied upon Commissioner of Income Tax Vs. Vidya Vikas Vihar4, Aditanadar Educational Institution ETC. Vs. Additional Commissioner of Income Tax5 and Ecumenical Christian Centre Vs. Commissioner of Income Tax6 in support of his contention.
Shri. Aravind, learned Senior Standing Counsel submitted that the application has been filed in the year 2014. If objects No. 4 and 7 were deleted, they should not
3 The Deputy Director of Income-tax (Exemptions) Circle 17(2), Bangalore 4 (2004)265 ITR 489 (para 9) 5 (1997)224 ITR 310(paras 6 and 7) 6 (1983)139 ITR 226 (para 10)
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5 have found place in the copy of the Memorandum submitted along with the application. Objects No.4 and 7 clearly show that assessee is not an Educational Institution. Therefore, the order passed by the Commissioner and confirmed by the ITAT, do not call for any interference.
We have carefully considered rival contentions and perused the records.
Objects No.4 and 7 read as follows: "4. to assist banking institutions in matters such as
appraisal programmes, conducting morale and
productivity studies, streamlining organisational structure and to review, from time to time, the
the impact of educational training and research
activities and offer suggestions for filling the
gaps in the banking system;
to provide consultancy services under its auspices or through its faculty to banks or any other institutions or individuals on matters having a bearing on production in Banking services, optimum use of financial resources or any other matter conducive to economic
betterment;"
A copy of the letter dated August 16, 2008, written by the assessee to the DDIT seeking approval to amend the MoA and to delete Objects No. 7 and 10, is
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6 produced as Annexure-J. We have carefully perused it. The said letter has been received in the Office of DDIT, in 2008. The application in Form No.56B has been submitted on September 26, 2014 seeking exemption under Section 10(23C)(vi) of the IT Act.
The Commissioner has held that in order to qualify for exemption, applicant institution must be solely for educational purposes but objects No. 7 and 10 are not strictly for educational purposes. The ITAT has reiterated Commissioner's view in para 7 of its order. It has distinguished the Judgment in Vidya Vikas Vihar, on the ground that one of the objects in that case namely to construct houses for weaker Sections was not implemented whereas, in this case, the objects included rendering of Consultancy services to Bank. It has further held that assessee's case before Commissioner was not that such activities were not undertaken by the assessee.
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In Vidya Vikas Vihar, Nagpur Bench of Bombay High Court, while upholding Tribunal's order granting exemption, has held that the incidental object of constructing houses for weaker sections, was never implemented.
In Adithanar, the Hon'ble Supreme Court of India has held that an Educational Institution, solely for educational purposes and not for any profit, could be regarded as 'Other Educational Institutions'.
In the case on hand, it is not in dispute that assessee has written to the DDIT to permit deletion of Objects No. 7 and 10. According to the Commissioner, Objects No. 4 and 7 disentitle the assessee from exemption. Shri. Parthasarathi is right in his submission that the Department not having granted permission to delete Objects 7 and 10, cannot record a finding against the assessee. So far as Object No.4 is concerned, we are of the view that assisting Banking Institutions in the matters such
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8 as appraisal programmes, conducting morale and productivity studies etc., also fall within the category of education. It is not in dispute that the assessee is a Staff Training College for Bank employees. Therefore, in our considered view, assessee must be construed as an Educational Institution because the main object is to train the Bank Officials.
In view of the above, this appeal merits consideration. Hence, the following:
ORDER
(a) Appeal is allowed;
(b) The question of law raised by the assessee is answered in its favour and against the Revenue;
(c) Order dated 21.07.2016 passed by ITAT, Bengaluru Bench (A) in ITA No.1408(Bang)2015 is set- aside; and
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(d) Respondent is directed to consider assessee's application and grant the prayer within an outer limit of three months from the date of receipt of a copy of this order.
No costs.
Sd/- JUDGE
Sd/- JUDGE
SPS