The assessee institute was constituted under the ICAI Act, to regulate the profession of Chartered
Accountants in India. Its activities included imparting education in the field of accountancy and
conducting coaching classes. Assessee also charged fees for holding interviews with respect to
campus placements. The assessee applied for registration u/s. 10(23C)(vi), which was rejected by the
DGIT (Exemption) on ground that assessee was charging fees for holding coaching classes and
campus placements, which amounted to carrying on business. As the assessee had not maintained
separate books of account with respect to the activity of coaching students, the AO denied
assessee's claim u/s. 11 of the Act. On appeal, the matter was remanded back to the DGIT
(Exemptions) to consider the submissions of the assessee that its expenses were greater than the
income from providing coaching to the students. The DGIT (Exemptions) once again rejected
assessee's claim.
On a writ petition to the High Court it was inter-alia held that –
a. Indisputably, substantial activity of the assessee revolves around providing education to
students for the purposes of feeding the profession of Chartered Accountancy in India.
b. The conduct of the courses by the assessee cannot be equated or categorized as coaching classes
conducted by private institutions for students to appear in entrance examination or for pre-admission
in examinations being conducted by universities and other Institutions.
c. The reasoning of the DGIT(E) that holding interviews for a fee for the purposes of campus
placement of its students amount to carrying on a business, is not acceptable. Campus placement is
only a small incidental activity carried on by the assessee institute like several other universities for
placement of their students in gainful employment. This too is an activity ancillary to the educational
programme being conducted by the assessee institute and cannot be considered as a business being
carried on by a placement agency. The object of the assessee institute is not to carry on such business,
but to assist its students in securing employment. In this case, the object with which the activity of
campus placement is carried on would determine its nature and the same is not business, trade or
commerce.
d. Although, it is not essential that an activity be carried on for profit motive in order to be considered
as business, but existence of profit motive would be a vital indicator in determining whether an
organisation is carrying on business or not. The functions performed by the assessee institute are in
the nature of public welfare and not for any private gain or profit and in this view, it cannot be said
that the assessee is involved in carrying on any business, trade or commerce.
Accordingly, the High Court allowing the Writ Petitions directed the DGIT(E) to recognize the
assessee as eligible u/s. 10(23C)(iv) as an institution established for charitable purposes having
regard to its object. (A.Ys. 2006-07 to 2011-12)
Institute Of Chartered Accountants Of India v. DGIT (2013) 217 Taxman 152/260 CTR 1 (Delhi.)(HC)
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