THE INDIAN INSTITUTE OF BANKING & FINANCE ( FORMERLY KNOWN AS THE INDIAN INSITUTE OF BANKERS),MUMBAI vs. ADIT (E) RG II(1), MUMBAI

The brief facts of the case are that the assessee is an Indian Company incorporated u/s.25 of the Indian Companies Act. Initially, the company was an association called the Indian Institute of Bankers and subsequently the assessee’s name was changed to Indian Institute of Banking and Finance. The principle objects of the assessee as per the Memorandum of Association are as under:- i) To encourage the study of the theory of banking and for that purpose to Institute a scheme of examinations and to give certificates, scholarship and prizes. A.Y. 2009-10 ii) To promote information on banking and kindred subjects by lectures, discussions, books, correspondence with public bodies and individuals or otherwise. iii) To collect and circulate statistics and other information relating to the business of banking in India. iv) To acquire by purchase, donation or otherwise and to maintain extend and improve a library consisting of works on banking, commerce, finance, political economy and kindred subjects.

Issue no.1 is formal in nature which does not require any adjudication at all.

At the very outset the learned representative of the assessee has argued that the Hon’ble Income Tax Appellate Tribunal, Mumbai A.Y. 2009-10 Bench in in assessee’s own case for A.Y.2008-09 dated 11.02.2015 has decided this issue in his favour, therefore present issue is liable to be decide in favour of the assessee being there is no change in circumstances at all. However, on the other hand the learned representative has strongly relied upon the order passed by the learned CIT(A). The order dated 11.02.2015 passed by the ITAT in assessee’s own case for A.Y.2008-09 perused. The Hon’ble ITAT on seeing object and activity of the appellant company has decided this issue in the favour of the assessee. The relevant para 9 to 21 are hereby reproduced below for ready reference:-

With respect to the reasoning given by the AO that the assessee is not pursuing an educational activity, the assessee placed reliance upon the decision of the coordinate bench of the ITAT in its own case in assessment years 1996-97 to 1998-99 (APB 205 to 219). In these decisions the Tribunal after considering the facts pertaining to its objects as per its Memorandum of Association, the courses conducted by it and its manner of functioning, concluded that the assessee was pursuing educational activities. The AR therefore, submitted that, in so far the issue pertaining to conduct of educational activities is concerned, the same is covered and concluded in its favour by the ITAT.

With respect to the above, the AR drew our attention to the detailed submissions filed by It before the CIT(A), wherein specific reference were made in paragraphs (APB 22 to 29). The AR also placed reliance on the following decisions:

The primary reason for denial of exemption u/ s 11 are, that the Institute has generated huge surplus and the Institute is not open to public at large.

The Memorandum of Association when read out, we find that the Institute had been brought up only for the purpose of development of baking personnel for/in the banking industry. The institute imparts education to the candidates who are connected with the banking industry. It has library facility, organizes lectures, seminars and undertake examinations for promoting bank officers.

In so far as its investments are concerned it was explained, the surplus, if. any; arising out of the activities of the Institute is not distributed by way of dividend, bonus or by way of profits to the Members of the Institute. This is evident from Clause 4 of the MOA, which is reproduced herein below for your Honor's ready perusal.

For advancement in banking industry, the number of students enrolling for various courses offered by the Institute increased steadily over the years, thereby reflecting the growing popularity of the Institute's courses in the banking arena. The list of the various courses offered by the Institute is on record.

Reverting our attention to the reasoning given by the revenue authorities, that the assessee was generating huge A.Y. 2009-10 surplus, it was submitted that as per section 11 of the Act the assessee could spend 85% of its income towards charitable objects. It was submitted that if there was a surplus, it could be legally accumulated under section 11 (2) of the Act The AR submitted that the assessee has always complied with the said requirement in each of the years. The accumulation of the corpus, if any, has been spent in accordance with the provisions of section 11(2) of the Act. Accept for this fact, the AR submitted, the revenue authorities, did not have any argument, which could render the benefit of section 11 unavailable to the assessee.

The AR further submitted that looking from the point of view of disposal of its funds, i.e. the entire expenses incurred towards the educational activity has been done out of the educational receipts only, which resulted in a. deficit in financial years 1999-2000t~'2007-08 (APB 72). Any interest and/or write back has been excluded from the gross receipt, meaning that receipts as shown are pure, out of the educational activity .

Since the assessee has also provided details of the courses being run by it, along with the fee structure in respect of each of the courses, this fees, by no stretch of imagination, could be regarded on the higher side. Hence the argument of the A.Y. 2009-10 revenue authorities that the assessee had accumulated huge funds, also stands demolished.

On the issue of "educational institution", we are also benefitted by the decision of Hon’ble Gujarat High Court, besides the decisions referred to by us earlier in the order, to come to a fair conclusion that the assessee was an educational association. The decisions as referred 'earlier were not agitated against by the DR, which are City Montessori School vs UOl (supra), DIT(E) vs Ahmedabad Management Association (supra) and DIT vs Samudra Institute of Meritime Studies Trust (supra). Also placing reliance on the decision of Ahmedabad Rana Caste Association vs CIT, reported in 82 ITR 704, wherein it was held, "It is well-settled that an object beneficial to a section of the public is an object of general public utility. To serve a charitable purpose it is not necessary that the object should be to benefit the whole of mankind or all persons in a country or State. It is sufficient if the intention to benefit a section of the public as distinguished from a specified individual is present. The section of the community sought to be benefitted must be sufficiently definite and identifiable by some common quality of a public or impersonal nature". The AR submitted that since the assessee was giving benefit to A.Y. 2009-10 persons perusing banking industry, is not only education but by not making any profit, it was charitable in nature.

Since the Institute does not undertake any other activities other than what is stated above. The activities as seen are educational in nature, which leaves no apprehensions. In our view the activities would squarely be covered by the definition of "charitable purpose", as defined in Section 2(15) of the Act, as these activities are meant for general public utility, i.e. whoever wants to advance his/her qualifications in the banking industry. From the above details and description, we are of the opinion that the assessee is a charitable organization and eligible for deduction u/s 11 of the Act.

In view of our decision on Ground no.2 above, whereby assessee has been held to be eligible for exemption u/s.11 & 12 of the Act, the other Grounds do not arise for separate consideration. Therefore, the matter is set aside to the file of Assessing Officer to recomputed the total income after allowing the benefits of section 11 and 12 of the Act.

Issue no.6 has not been pressed at the time of hearing and is accordingly dismissed as not pressed.

Accordingly, appeal of the assessee is hereby partly allowed. A.Y. 2009-10