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Income Tax Appellate Tribunal, “C” BENCH, CHENNAI
Before: SHRI A. MOHAN ALANKAMONY & SHRI VIKAS AWASTHY
आदेश /O R D E R
PER VIKAS AWASTHY, JUDICIAL MEMBER
The appeals have been filed by the Revenue for the assessment years 2009-10 and 2010-11 against the order of the - - 2 ITA 1059 & 1060/14 Commissioner of Income-tax(Appeals)-VII, Chennai dated 18.12.2013 common for both the impugned assessment years.
The appeals have been filed with the delay of 6 days. An affidavit citing reasons for delay in filing of the appeals has been filed. We have perused the same. The reasons for delay in filing of the appeals have been sufficiently explained.
Accordingly, the delay of 6 days in filing of the appeals is condoned and the appeals are admitted to be heard on merit.
The facts as emanating from the records are: The assessee is a trust registered u/s.12A(a) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) since 1980. The Assessing Officer while completing the scrutiny assessment for the assessment year 2009-10 held that since the assessee is not imparting formal education it is not covered by the provisions of Section 2(15) of the Act. The A.O. thus held that the assessee is not eligible to claim the benefit of sec.11 of the Act. In the assessment year 2010-11, the Assessing Officer vide order dated 21.1.2013, held that objects of the assessee fall within the ambit of “general public utility”. Since the assessee has ventured in the nature of trade, commerce or business during the - - 3 ITA 1059 & 1060/14 relevant year and has received fees as consideration for services rendered in excess of ` 10 lakhs, the proviso to Sec.2(15) are invoked.
Aggrieved by the assessment orders in the respective assessment years, the assessee preferred appeals before the Commissioner of Income-tax(Appeals). The Commissioner of Income-tax(Appeals) after examining the objects, the activities being carried out by the assessee and the decision of the Ahmedabad Bench of the Tribunal in the case of Ahmedabad Management Association vs. JDIT 28 ITR(Trib.) 349, held that the activities of the assessee are covered by one of the main limbs of “charitable purpose”, i.e. education. He further held that the assessee is eligible for claiming exemption u/s.11 of the Act and allowed the appeals of the assessee for both the assessment years.
Against these findings of the First Appellate Authority, the Revenue has filed appeals for both the assessment years before the Tribunal.
Shri A.V.Sreekanth, representing the Department, submitted that the assessee is not engaged in providing
- - 4 ITA 1059 & 1060/14 structured education programme. To fall within the first limb of definition of ‘charitable purpose’ u/s.2(15), the assessee is required to provide formal education. Whereas, in the present case, the assessee is neither providing formal education nor is instrumental in awarding degrees or certificates from any recognized universities/institutions. The ld. DR, in order to support his submissions draws our attention to page Nos. 100, 106 and 117 of the paper book filed by the assessee to show that the assessee is only collecting fees by organizing some seminars, workshops and short courses. The courses/ workshops/seminars are open for public at large. The only benefit extended by assessee to its members is concessional or discounted fees for attending/participating in such programmes.
The ld. DR vehemently defended the assessment order and prayed for setting aside the impugned order.
Ms. Pushya Sitaraman and Ms. J. Sree Vidya, appearing on behalf of the assessee, strongly supported the impugned order. The ld. Counsel for the assessee submitted that the assessee is receiving grants from overseas in order to achieve its objectives. The objects of the assessee-society are to - - 5 ITA 1059 & 1060/14 promote research and development of higher education in professional management on scientific lines. The assessee is organizing lectures, conferences, seminars etc. The ld. Counsel for the assessee submitted that the assessee is affiliated to All India Management Association (AIMA). There are more than 60 religion affiliates of AIMA in India. One of the AIMA’s Western Region affiliate is Ahmedabad Management Association. The co-ordinate Bench of the Tribunal in the case of Ahmedabad Management Association has held that the activities of the assessee fall within the definition of “charitable purpose” in terms of Section 2(15) and thus, the assessee is entitled to exemption under Section 11. The Hon’ble Gujarat High Court has affirmed the said decision of the Tribunal.
We have heard the submissions made by the representatives of both the sides and have perused the orders of the authorities below. It is an undisputed fact that the assessee is enjoying benefit of sec.12A(a) of the Act since 1980. The assessee is carrying on its charitable activities viz. providing education in accordance with its objects. The status of the assessee as charitable organization has been accepted by the - - 6 ITA 1059 & 1060/14 Department right from the beginning. For the first time in assessment year 2009-10, activities and the objects of the assessee were questioned.
7. The stand of the Revenue is that the assessee is not providing any charitable activity and if at all, the activities carried out by the assessee are charitable in nature, it is not for the purpose of education but fall within the ambit of “general public utility”. Since, the assessee has been receiving fees as consideration for the services rendered, which are in excess of `10 lakhs, the assessee is not eligible to claim benefit u/s.11 of the Act. Whereas, the case of the assessee is that charitable activities carried out by the assessee are in the nature of education. The ld. Counsel for the assessee draws support from the decision of the Hon’ble Gujarat High Court in the case of DIT(E) v. Ahmedabad Management Association, reported as 366 ITR 85.
The assessee has filed paper book containing Memorandum of Association of the assessee as well as Ahmedabad Management Association. A perusal of the object clause of both the Associations shows that both the associations
- - 7 ITA 1059 & 1060/14 have similar objects. Both the associations are affiliated to AIMA. The question, whether the assessee’s activities are in the field of education and that the assessee is eligible for exemption u/s.11 of the Act was raised before the Ahmedabad Bench of the Tribunal in the case of Ahmedabad Management Association.
The Tribunal decided the issue in favour of the assessee. The Revenue went in appeal before the Hon'ble High Court. The High Court affirmed the findings of the Tribunal and observed as under:-
5.4. Now, while considering whether the activities of the assessee can be said to be educational activities or not the decision of this court as well as the Hon'ble the Supreme Court is required to be referred to and considered. In the case of Gujarat State Co-operative Union (supra) it is held by the Division Bench of this court that mere existence of profit will not disqualify an institution for exemption under section 10(22) of the Act, if the sole purpose of its existence is not profit making but is educational activities. In the said decision the Division Bench also considered the decision of the Hon'ble the Supreme Court in the case of Loka Shikshana Trust (supra), which has been relied upon by the Assessing Officer as well as the learned counsel appearing on behalf of the Revenue. In the said decision, the Division Bench of this court has observed as under (page 286 of 195 ITR) : "It appears to us that the decision of the Tribunal which seeks to rest it on the observations made by the Supreme Court in Loka Shikshana Trust's (supra) for - - 8 ITA 1059 & 1060/14 holding that, the assessee is not entitled to exemption under section 10(22) of the Act is based on a complete misreading of the observations of the Supreme Court. In Loka Shikshana Trust's case [1975] 101 ITR 234 (SC) the Supreme Court, while dealing with the provisions of section 11 read with section 2(15) of the Act, which defines 'charitable purpose' observed as under (page 241 of 101 ITR) : 'The sense in which the word 'education' has been used in section 2(15) of the Act 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 travel ling you acquire fresh knowledge . . . but this 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 Volume 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
- - 9 ITA 1059 & 1060/14 or pedantic sense to the word 'education'. By giving further illustrations of a traveller gaining knowledge, victims of swindlers and thieves becoming wiser, the visitors to night clubs adding to their knowledge 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 paragraph 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 the 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 and a shift of the better in the institutional setup. Advancement of knowledge brings within its fold suit able methods of its dissemination and though the primary method of sitting in a 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
10 - - ITA 1059 & 1060/14 in the acceptance of new ideas and development of appropriate means to reach them to recipients." 5.5. Now, so far as reliance placed upon the decision of the Division Bench of this court in the case of Saurashtra Education Foundation (supra) by the learned advocate appearing on behalf of the Revenue is concerned, it is required to be noted that as such the Tribunal has considered the same in detail and has rightly held and observed that as such the said decision would assist the assessee rather than the Revenue. It is also required to be noted that as such in the said decision the Division Bench has not taken any contrary decision that of the decision of Gujarat State Co-operative Union (supra). It is to be noted that, on facts, it was held that the assessee cannot be said to be an educational institution and, therefore, the assessee would not be entitled to exemption as contemplated under section 10(22) of the Act. 5.6. Now, applying the ratio of the decision of the Division Bench of this court in the case of Gujarat State Co-operative Union (supra) reproduced hereinabove and the activities of the assessee such as continuing education diploma and certificate programme ; management development programme ; public talks and seminars and workshops and conferences, etc., we are in complete agreement with the view taken by the Tribunal that the activities of the assessee is educational activities and/or is in the field of education. 5.7. Now, in view of the aforesaid finding that the activities of the assessee is in the field of education, whether the assessee is entitled to exemption under section 11 of the Act or not and whether in the facts and circumstances of the case the assessee can be denied exemption under section 11 of the Act relying upon and/or considering the proviso to section 2(15) of the Act is concerned so far as the amendment in section 2(15) of the Act amended, vide the Finance Act, 2008, and the insertion of the proviso to section 2(15) of the act is 11 - - ITA 1059 & 1060/14 concerned, as such the same has been explained, vide Circular No. 11 of 2008, dated December 19, 2008. It is clarified that where industries or trade association claim both to be charitable institutions as well as mutual organizations and their activities are restricted to contributions from and participation of only their members, these would not fall under the purview of the proviso to section 2(15) of the Act owing to the principles of mutuality. From Circular No. 11 of 2008, dated December 19, 2008, it appears that the newly inserted proviso to section 2(15) of the Act will apply to entities whose purpose is advancement of any other object of general public utility, i.e., the fourth limb of the definition of "charitable purpose" contained in section 2(15) of the Act and, hence, such entities will not be eligible for exemption under section 11 or under section 10(23C) of the Act if they carry on commercial activities. Thus, on a fair reading of section 2(15) of the Act the newly inserted proviso to section 2(15) of the Act will not apply in respect of the first three limbs of section 2(15) of the Act, i.e., relief to the poor; education or medical relief. Thus, where the purpose of a trust or institution is relief of the poor; education or medical relief, it will constitute "charitable purpose" even if it incidentally involves the carrying on of the commercial activities. Thus, on a fair reading of section 2(15) of the Act read with Circular No. 11 of 2008, dated December 19, 2008, it appears that if the case of the assessee does not fall within the first three limbs of section 2(15) of the Act, i.e., relief to the poor ; education or medical relief and if it falls in the fourth limb, i.e., advancement of any other object of general public utility and it is found that such activity of advancement of any other object of general public utility involves carrying on of (a) any activity in the nature of trade, commerce or business ; or (b) any activity of rendering any service in relation to any trade, commerce or business ; for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention of the income from such activity, the same shall
12 - - ITA 1059 & 1060/14 not be considered for "charitable purpose" and shall not be entitled to exemption under section 11 of the Act. 5.7. In the present case, as observed hereinabove and rightly held by the Tribunal, the activities of the assessee would fall within the definition of "charitable purpose" as per section 2(15) of the Act and, therefore, would be entitled to exemption under section 11 of the Act.
6. In view of the above, we are in complete agreement with the view taken by the Tribunal that the activities of the assessee are related to education and, therefore, is entitled to exemption under section 11 of the Act. At this stage, it is required to be noted that right from the assessment year 1995-96 till 2008-09 the activities of the assessee has been considered by the Revenue as educational activities. Considering various activities of the assessee as narrated by the Assessing Officer in paragraphs 4 and 5 of the assessment order and considering the decision of the Division Bench of this court in the case of Gujarat State Co-operative Union (supra) we confirm the view taken by the Tribunal that the activities of the assessee— Ahmedabad Management Association— is related to education and, therefore, is entitled to exemption under section 11 of the Act as claimed.
Under the circumstances, the question raised in the present tax appeal is answered against the Revenue and in favour of the assessee. Consequently, the present tax appeal deserves to be dismissed and is, accordingly, dismissed. However, in the facts and in the circumstances of the case, there shall be no order as to costs.”
As we have observed earlier that the objects of the assessee are similar to the objects of Ahmedabad Management Association. Thus, we are of considered view that the judgment
13 - - ITA 1059 & 1060/14 rendered by the Hon’ble Gujarat High Court in the case of Ahmedabad Management Association (supra) squarely applies to the present case as well. Accordingly, we uphold the findings of the Commissioner of Income-tax(Appeals). The appeals of the Revenue are dismissed. Order pronounced on Friday, the 20th of March, 2015 at Chennai.