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Income Tax Appellate Tribunal, DELHI BENCHES: “G” New Delhi
Before: SHRI J.SUDHAKAR REDDY & SHRI SUDHANSHU SRIVASTAVA
PER SUDHANSHU SRIVASTAVA JUDICIAL MEMBER
This appeal of the Department is directed against order dated 13.6.2013
passed by the Ld. CIT (A)-XXI, New Delhi. The grounds of appeal are as under:-
On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the activities of the assessee are charitable in nature and not in the nature of trade, business or commerce specifically when the assessee is charging fee on account of different courses and training conducted during the period under consideration. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in applying the ratio of judgment of Hon'ble High Court in the case of Bureau of Indian Standard and allowing the relief to the assessee by holding that the activities of the
ITA No.5110/Del/2013 ITO vs Society for Driver Training Institute
assessee are charitable in nature within the meaning of section 2(15) of the Act. 3. In the facts and circumstances of the case and in law the Ld. CIT (A) erred in holding that the activity carried out by the assessee falls under the limb ‘education as the assessee’s case is squarely covered by the decision given in the case of Addl. CIT vs. Association of Southern India (1981) 127 ITR 730 (Mad.) where it has been held that the imparting lessons and instructions for automobile driving cannot be an educational object but can only be considered as general public utility. ”
The assessee society is registered u/s 12AA of the Income Tax Act, 1961 vide
order dated 28.07.2006. Return for the assessment year under consideration was
earlier processed u/s 143(1) of the Act at NIL income and the case was later
selected for scrutiny. During the assessment proceedings u/s 143(3), the AO while
denying the assessee’s claim of exemption u/s 11 observed on pages 6 & 7 of the
Assessment Order as under:
“In the instant case, during the period under consideration the Society was involved to impart training to drivers of buses & trucks including DTC buses and in lieu thereof charging fees from the participants, the receipts shown by the assessee are in the nature of fees for rendering services. As discussed above the activity carried out by the assessee is commercial in nature and squarely falls under the limb 'advancement of any other object of general public utility' with reference to definition of 'charitable purpose' u/s. 2(15) of the IT Act, 1961. The aggregate value of receipts are more than 10 lacs, hence conditions stipulated in both the above mentioned provisions to section 2(15) stand satisfied and assessee is hit by the proviso to section 2(15).
It is evident that the dominant activities carried on by the assessee have to be considered under 'advancement of any other object of general public
ITA No.5110/Del/2013 ITO vs Society for Driver Training Institute
utility' as per the definition of 'charitable purpose' contained u/s. 2(15) of the IT Act, 1961. From the fact mentioned above, it is gathered that the assessee is in receipt of fees from rendering services. In view of above discussion, irrespective of use of fee, charging of fee for rendering services will lead to invocation of proviso to section 2(15). Such activities are in nature activity of rendering any services in relation to any trade, commerce or business, for a cess or fee. Such business cannot be incidental to the objects as provided in section 2(15) since assessee is hit by the proviso to section 2(15).
In view of the above, it is inferred that the activity, carried out by the assessee during the period under consideration is not charitable, therefore, the assessee would not be entitle for exemption of income u/s. 11 & 12 of the IT act and the whole of the surplus generated from business activities of the assessee is liable to tax under section 164 at MMR (Minimum Marginal Rate) only depreciation on the fixed assets purchases during the year will be allowed.”
However, the Ld. CIT (A allowed the assessee’s appeal by observing as under:
“In this regard I have gone through the written submission of the Id. AR of the appellant and finding of the AO in the assessment order. The reliance on the case of Bureau of Indian Standards vs. DGIT (Exemption), 212 Taxman 210 (Del) is appreciated, because in the case of Bureau of Indian Standards Hon'ble Delhi High Court has held that by prescribing of standards of goods/articles and enforcing those standards through accreditation and continuing supervision through inspection, etc. cannot be considered as trade, business or commercial, merely because testing procedure involves charging of fees. The ratio of the above mentioned judgment is clearly attracted on the facts of the case, because the appellant is charging the fee for training the Drivers of different categories. So, it does not involve trade, commerce
ITA No.5110/Del/2013 ITO vs Society for Driver Training Institute
or business as assessee is in receipt of fee from rendering services for training the drivers of Buses and Trucks and it falls under the last limb of the Sec. 2(15) which is advancement of any other object of general public utility. In this regard while deciding the issue, the reliance is placed on the C.B.D.T. Circular No. 1112008 dated 19-11-2008, wherein, in the relevant paragraph it has been mentioned under:- "3.2 In the final analysis" however, whether the assessee has for its object 'the advancement of any other object of general public utility' is a question of fact. If such assessee is engaged in any activity in the nature of trade, commerce or business or renders any service in relation to trade commerce or business, it would not be entitled to claim that its object is charitable purpose. In such a case, the object of 'general public utility' will be only a mask or a device to hide the true purpose which is trade, commerce or business or the rendering of any service in relation to trade, commerce or business. Each case would, therefore, be decided on its own facts and no generalization is possible. Assesees, who claim that their object is 'charitable purpose’ within the meaning of Section 2(15) would be well advised to enchew any activity which is in the nature of trade, commerce or business or the rendering of any service in relation to any trade, commerce or business. "
As no generalization is possible and each case has to be decided on its own merit, so, it is held that activities fall under the last limb, i.e., any other object of general public utility, but, relying on the ratio of the judgment in the case of Bureau of Indian Standards, as discussed above, it is held that its activity do not have element of trade, commerce or business. Accordingly, grounds No. 1,2 and 6 are allowed.
Ground No. 3:-The appellant has taken the ground that its activity falls under the category of education. For this appellant has relied on the
ITA No.5110/Del/2013 ITO vs Society for Driver Training Institute
judgment of Hon’ble Gujarat High Court in the case of Gujarat State Co-operative Union vs. CIT, 195 ITR 279.,(Guj), wherein, judgment of Hon'ble Supreme Court in the case of Sole Trustee, Loka Shikshana Trust vs. CIT I01-ITR-234 has been relied. In the above mentioned judgment the Hon'ble Supreme Court has observed that that the word 'education' also connotes the whole course of scholastic instruction which a person has received. This clearly indicates that the observations of Hon'ble Supreme Court were not intended to give a arrow or pedantic sense to the word 'education'. In the instant case, the appellant is giving training to Drivers to drive the vehicles in a very systematic manner to increase the skill which is in the nature of increasing the capability and perfection. This activity falls under the purview of 'education', as has been contended by the appellant and reliance on the judgment of the Hon'ble Gujarat High Court and Hon'ble Supreme Court, as discussed above, is appreciated. In view of the above, ground No. 3 of the appeal is also allowed.”
Now, in this present appeal, the Department has challenged the finding of the
Ld. CIT (A). The Ld. DR drew our attention to pages 2 & 3 of the assessment order
and pointed out that for the period under consideration the gross receipts of the
assessee amounted to Rs. 1,17,07,050/- and the surplus generated for the last three
assessment years was as under :-
AY Surplus 2010 – 11 Rs. 50,82,846/- 2009 – 10 Rs. 45,92,661/- 2008 - 09 Rs. 43,29,681/-
ITA No.5110/Del/2013 ITO vs Society for Driver Training Institute
The Ld. DR emphasised that these figure prove that the assessee was generating
huge profits / surplus every year and hence it cannot be said that there is no profit
motive. The Ld. DR further emphasised that after the amendment to the proviso to
Section 2(15) of the Income Tax Act, 1961 w.e.f. 01.04.2009, the profit motive was
no more important. The Ld. DR further submitted that charitable trusts with general
object of public utility are required to eschew any activity which is in the nature of
trade, commerce or business or the rendering of any service in relation to any trade,
commerce or business to remain charitable to continue registration u/s 12A of the
Income Tax Act, 1961. He submitted that the end use of business profit for
charitable purposes is of no relevance due to amendment in section 2 (15). He
submitted that the order of the Ld. CIT (A) should be set aside.
The Ld. AR on the other hand submitted that the concept of education has
undergone a complete change. He emphasised that the case of assessee falls under
‘education’ and not under ‘object of general public utility’. He submitted that the
proviso to section 2(15) is not applicable to the assesseee’s case at all. He placed
reliance on the decision of the Hon’ble High Court of Gujarat in Gujarat State Co-
operative Union vs. CIT 195 ITR 279 (Guj). He submitted that in view of the
judgment of the Hon’ble High Court of Gujarat the assessee society is a purely
educational society and the proviso to section 2(15) is not applicable to the assesee
society.
We have heard the rival submissions and have also perused the records. A
reference may be made at this juncture to the decision of Hon’ble High Court of
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Gujarat in the case of Gujarat State Co-operative Union vs. CIT (supra) wherein the
Hon’ble High Court has dealt with the judgment of Sole Trustee, Loka Shikshana
Trust v. CIT (1975) 101 ITR 234 in which the Hon’ble Apex Court, while dealing with
the provisions of section 11 read with section 2(15) of the Act which defines
'charitable purpose' observed as under (at page 241):-
"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 knowledge...... But that is not the sense 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 students by normal schooling.
The Supreme Court, in the above observations, by referring to the systematic instruction, schooling or training given to the young has only cited an instance in 'Order to indicate as to what the Word 'education' appearing in section 2(15) of the Act which defines 'charitable purposes' is intended to mean. We are certain that these observations were not intended to keep out of the meaning of the word 'education', persons other than 'young'. The expression 'schooling' also means 'that schools, instructs or educates' (The Oxford English Dictionary, Vol. IX, page 217).
The Supreme Court has observed that the word 'education' also connotes the whole course of scholastic instruction which a person has received. This clearly indicates that the observations of the Supreme Court were not intended to give a narrow or pedantic sense to the word 'education'. By giving
ITA No.5110/Del/2013 ITO vs Society for Driver Training Institute
further illustrations of a traveller gaining knowledge, victims of swindlers and thieves becoming wiser, the visitors to night clubs adding to their knowledge of the hidden mysteries of life, the Supreme Court has indicated that the word 'education' is not used in a loose sense so as to include acquisition of even such knowledge. The observations of the Supreme Court only indicate the proper confines of the word 'education' in the context of the provisions of section 2(15) of the Act. It will not be proper to construe these observations in a manner in which they are construed by the Tribunal when it infers from these 'observations, in Para 17 of its judgment, that the word 'education’ is limited to schools, colleges and similar institutions and does not extend to any other media for such acquisition of knowledge. The observations of the Supreme Court do not confine the word 'education' only to scholastic instructions but other forms of education also are included in the word 'education'. As noticed above; the word 'schooling' also means instructing or educating. It, therefore, cannot be said that the word 'education' has been given an unduly restricted meaning by the Supreme Court in the said decision. Though, in the context of the provisions of section 10(22), the concept of education need not be given any wide or extended meaning, it surely would encompass systematic dissemination of knowledge and training in specialized subjects as is done by the assessee. The changing times and the ever widening horizons of knowledge may bring in changes in the methodology of teaching a shift for the better in the institution set up. Advancement of knowledge brings within its fold suitable methods of its dissemination and though the primary methods of sitting in classroom may remain ideal for most of the initial education, it may become necessary to have a different outlook for further education. It is not necessary, to nail down the concept of education to a particular formula or to flow it only through a defined channel. Its progress lies in the acceptance of new ideas and development of
ITA No.5110/Del/2013 ITO vs Society for Driver Training Institute
appropriate means to reach them to the recipients. (Emphasis supplied).
Even if it were to be held that the observations of the Supreme Court would apply only to the schools, colleges and similar institutions as held by the Tribunal, we are satisfied from the nature of the activities of the assess- Co- operative Union of running colleges and training centres for courses for the purposes of imparting training and / or awarding diplomas and certificates that the assessee is an educational institution existing solely for educational purposes and not for the purposes of profit.”
Similarly, The Institute of Chartered Accountants of India was denied
exemption by the Income-tax Authorities but the Hon’ble Delhi High Court in the
case of Institute of Chartered Accountants of India and Another v. DIT (Exemptions)
and Others (2013) 358 ITR 91 has held that the Institute was entitled to income-tax
exemption. It was held by the Hon’ble Delhi High Court that after going through the
provisions of the Chartered Accountants Act and the Regulations framed therein as
well as various activities carried on by the Institute, it was clear that the Institute did
not carry on any business, trade or commerce. The activity of imparting education
in the field of accountancy and conducting courses both at pre-qualification as well
as post-qualification level were activities in furtherance of the object for which the
Institute had been established.
It is seen that the assessee society was formed by Ashok Leyland Ltd., an
Automobile conglomerate, on the request of Govt. Of NCT of Delhi to impart training
to drivers of buses & trucks including DTC buses to make Delhi roads safe. The
various training courses are designed and prescribed by Government of India,
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Ministry of Shipping, Road-Transport & Highways. The course content comprises of
classroom instruction, training on simulator models, field instructions, practical
training and examination. The fee to be recovered for different courses is
determined and prescribed by the Transport Department. For each course certificate
is awarded to the successful candidates on completion of the course which is signed
by the Authorized Signatory of the Transport Department, Govt. Of NCT of Delhi, the
Instructor & the Principal of the Driving Institute. The certificate issued is the
Statutory basis on which driving license and PSV Badges are issued/renewed by the
Transport Authority. A major part of the activity of the society is training of DTC
drivers from grants received from Ministry of Shipping, Road Transport & Highways,
Govt. of India (MORTH). Indisputably, substantial activity of the assessee revolves
around providing training to drivers of buses and trucks. The training programmes
are designed/ approved by the Ministry of Shipping, Road Transport and Highways
which also gives grants to the assessee society from time to time. As such, the
assessee cannot be equated with a private drivers’ training institute. There is no
finding by the Department that any benefit of any kind has accrued to any individual
member involved in the activities or day to day running of the society. Therefore, in
our considered opinion and respectfully following the ratio of the judgments as laid
down by the Hon’ble High Court of Gujarat in Gujarat State Co-operative Union vs.
CIT (supra) and the Hon’ble High Court of Delhi in Institute of Chartered
Accountants of India and Another v. DIT (Exemptions) and Others (supra) we find
no reason to interfere with the impugned order of the Ld. CIT (A).
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In the result, the appeal of the Department is dismissed.
Order pronounced in the open court on 30th November, 2015.
sd/- sd/-
(J. SUDHAKAR REDDY) (SUDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: the 30 . 11. 2015 ‘veena’ Copy of the Order forwarded to:
Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR 6. Guard File By order Dy. Registrar
Sl. Description Date No.
Date of dictation by the Author 23.11.2015
Draft placed before the Dictating Member 23.11.2015
Draft placed before the Second Member 4. Draft approved by the Second Member
Date of approved order comes to the Sr. PS
Date of pronouncement of order
Date of file sent to the Bench Clerk 8. Date on which file goes to the Head Clerk
Date of dispatch of order