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Income Tax Appellate Tribunal, “I” BENCH, MUMBAI
Before: S/SHRI SANJAY ARORA & AMARJIT SINGH
Assessee by: Shri Nitesh Joshi Department by: Dr. Suman Ratnam Darsi सुनवाई क" तार"ख / Date of Hearing: 04.08.2016 घोषणा क" तार"ख /Date of Pronouncement: 24.10.2016 आदेश / O R D E R PER AMARJIT SINGH, JM:
The revenue has filed the present appeal against the order dated 29.05.2014 passed by the Commissioner of Income Tax (Appeals)-1, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2009-10. 2. The revenue has raised the following grounds:-
“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 Assessment Year: 2009-10 to trade and commerce industry and that this activity constitute ‘education’ which is clearly against the decision of Hon’ble Supreme Court in the case of Lok Shikshan Trust Vs. CIT (1975) 101 ITR 234.
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.
The brief facts of the case are that the assessee filed the return of income for the assessment year 2009-10 on 30.09.2009 along with Audited Income & Expenditure Account and Balance Sheet declaring total income to the tune of Rs.Nil/-. The return was accompanied by computation of total income and audit report u/s.12A(b) of the Income Tax Act, 1961( in short “the Act”) in Form No.10B. The assessment proceedings were initiated by issuance of notice u/s.143(2) and 142(1) of the Act. The assessee is a trust and registered u/s. 12A of the Act with the Director of Income Tax (Exemption) (DIT(E)). The Assessing Officer rejected the claim of the assessee u/s.11 of the Act on the ground of that the assessee is a mutual association and non charitable institution for primary purpose for benefiting themselves, while in a charitable institution people subscribe for charitable object without any expectation in return. The assessee contributed only for the purpose of its own benefit and for acquiring certain amenities. Therefore, the assessee was being treated as mutual association and not as charitable institution. Infact the Assessing Officer was of the view that the education courses running by the assessee are not for the charitable purpose, therefore denied the exemption u/s.11 of the Act. Being not satisfied filed, the appeal was filed before the CIT(A) who allowed the 2 Assessment Year: 2009-10 appeal of the assessee but on being unsatisfied with the finding of the CIT(A) the revenue has filed the present appeal before us.
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 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 3 Assessment Year: 2009-10 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 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 non- members, 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 4 Assessment Year: 2009-10 A.O. in the assessment order. The A.O. 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 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.
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 5 Assessment Year: 2009-10 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 Co- operative Union Vs. CIT (1992) 195 ITR (Guj.), the assessee was conducting courses for Higher Diploma in co- operation – (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 6 Assessment Year: 2009-10 junior basic courses of 24 weeks duration for Diploma in co-operation, special courses for employees for urban co- operative 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 recognised by Ministry of HRD and Institute is also recognised 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 International Trade 7. IPSCM International Diploma in Purchasing & Supply Chain Management 8. CPM Certified Purchasing Manager
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 recognised 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 7 Assessment Year: 2009-10 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 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, 8 Assessment Year: 2009-10 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.
In the result, the appeal of the revenue is hereby dismissed.
Order pronounced in the open court on 24th October, 2016 (AMARJIT SINGH) (SANJAY ARORA) लेखा सद"य / ACCOUNTANT MEMBER "या"यक सद"य/JUDICIAL MEMBER मुंबई Mumbai; "दनांक Dated : 24th October, 2016 MP MP MP MP