Monday 16 June 2014

Whether extending financial assistance or scholarship, to students for educational purpose would fall within connotation of 'education' - YES: ITAT

THE issues before the Bench are - Whether without bringing something positive on record to distinguish the facts of earlier year and current year, it can be argued that the assessee has changed its nature of charitable activities and Whether extending financial assistance or scholarship, to students for their educational purpose would fall within the connotation of "education". And the verdict goes in favour of the assessee.
Facts of the case

The assessee is a Section 25 company. As per the MOA, principle object of the assessee were the study of the theory of banking, to institute scheme of examination, to promote information on banking etc. DIT(E) received a proposal from the ADIT(E) for cancellation of registration granted to the assessee u/s. 12A. ADIT in its proposal stated that assessee was carrying on activities in the nature of trading, commerce or business, that gross receipts of the assessee were in excess of Rs. 10 lakhs, that provisions to proviso to section 2(15) were applicable in the case of the assessee from AY 2009-10. Vide, his letter, DIT(E) issued a show cause notice to the assessee asking it as to why the registration granted to it should not be withdrawn by invoking the provisions of section 12AA (3). It was stated in the show cause notice that the activities as carried out by the assessee were in nature of trade, commerce or business during the AY 2009-10, that the details of the income in the income and expenditure account showed that assessee had earned income of Rs. more than 10 lakhs, that proviso to section 2(15) were applicable in its case, that the objects were in nature of advancement of any other object of general public utility. Assessee had made submissions before the DIT(E). After which , it was held that if any trust/institution; whose main object was for advancement for any other object and general public utility was carrying out any activity that was in the nature of any trade, commerce or business than the covered activities carried out by it would be under the ambit of aforesaid proviso, that CCIT Mumbai had held that; institution was not imparting formal education; while deciding the application filed by it u/s. 10(23)(vi), that the activities carried out by it were not in the field of education, that activities of the institution squarely fell under the field of general public utility, that the receipt shown by the trust would come under the field of business income, that sums received by it included charges (Rs. 81.74 lakhs), examination fees (Rs. 1.44 Crores), income from investment (Rs. 8.52 Crores), educational income (Rs. 20.60 lakhs), tutorial class (Rs. 19.45 lakhs), royalty on publication (Rs. 57.06 lakhs), excess fees written back (Rs. 6.28 lakhs), miscellaneous income (Rs. 44.91 lakhs) that same were in the nature of business income, that the receipts were in excess of monitory limit of Rs. 10 lakhs as laid down in the proviso to section 2(15), that provisions of the proviso were effective from AY. 2009-10, that once a charitable trust/institution was hit by the aforesaid proviso than there was deeming provision to treat such entity as non-genuine, that the assessee trust was not carrying activities for charitable purposes. Finally, it was held that assessee trust had became non-genuine for the purpose of section 11, that the registration allowed to it in earlier years u/s. 12AA was to be cancelled/withdrawn w.e.f. AY 2009-10.
Before Tribunal, AR had submitted that there was no change in the objects of the trust, that it was carrying the same activities that were part of the activities of earlier years, that proviso to section 2(15) was not applicable, that institution was carrying out activities that were held to be educational by the Tribunal in the earlier years, that both the conditions for application of proviso were not existing. He relied the orders of Cotton Textiles Export (44 Taxmann.com 168), Khar Gymkhana (ITA 373/Mum/2012, AY. 2009-10, dated 10.07.2013, Tamil Nadu Cricket Association 2013-TIOL-1074-HC-MAD-IT, Vanita Samaj (ITA/1034/Mum/2012-AY. 2009-10, dtd. 26.02.2014). Referring to the orders of the Tribunal for the AY 1996-97 to 1998-99, it was contended that institution was carrying out educational activities. It was further argued that registration can be cancelled u/s 12AA(3), if the activities of trust were not genuine or activities were not carried out in accordance with the objections of the trust, that activities of the institution were genuine it was conducting examination besides supplying study material to participants and organising seminars etc. Departmental Representative argued that activities carried out by the assessee were for earning profit, that details of income and expenditure the activities taken by it were not genuine account proved the huge profit was earning by the assessee, that same was not coming out of charitable activities, that it was not carrying out any charitable activities, that institution was in the conducting exams, that it had collected Rs. more than 10 lakhs during the year under appeal, that it was hit by the provisions of proviso to section 2(15). On the other hand, AR had stated that DIT(E) had nowhere stated that assessee had made huge profit, that the assessee was in deficit, that as per the provisions of the Act it had to make investments, that if interest incomes and investments made according to the provisions of law were ignored there was no surplus during the year under consideration.
Held that,
++ as per the provisions of the Act registration of a trust can be cancelled in two eventualities only-first that the activities of the trust are not genuine and secondly the activities are not being carried out in accordance with the objects of the trust or institution. If these conditions are missing, registration cannot be withdrawn. In the case under consideration, DIT-E has not alleged that activities were not carried out in accordance with the objects of the trust. He has held that activities were not genuine and the basis for holding the view is that the trust had income more than 10 lakhs for the year under consideration and that the assessee was carrying out activities which were in the nature of general public utility. We find that activities carried out by the assessee in earlier years were continuing in the year under appeal. In the earlier years same were held to be educational activities. DIT-E has not brought on record any fact demonstrating the discontinuation of such activities. Like earlier years, assessee was conducting exams and was supplying study material to students. These very activities were held to be educational activities by the Tribunal on more than one occasions and the orders of the ITAT have become final. Therefore, without bringing something positive on record to distinguish the facts of earlier year and current year, view has to be taken that assessee was in the field of education;
++ we further find that in the case of Oxford Academy for Career Development Lucknow Bench of Allahabad High Court has dealt with almost similar issue. In that matter the assessee was granted registration on 01.04.1999. A survey was conducted at the business premises of the assessee u/s 133A, wherein documents were impounded. On the basis of the information, it was felt by the departmental authorities that the society was being run for the purposes of profit. Therefore, after serving a notice, the earlier registration granted under section 12A was cancelled for the reasons that the surplus was quite heavy. In the impugned order, it was mentioned by the Commissioner of Income-tax that there was an unusual huge margin and the petitioner was engaged in the commercial activities rather than charitable. As per the balance-sheet, huge amount from the student was charged. The profit margin embodied in the charges taken from the students was so huge and it proved the profit motive of the petitioner. Deciding the matter in favour of the assessee, HC held that the assessee is preparing students by providing coaching/guidelines to get admissions in professional institutions to pursue their studies. The sense in which the word "education" has been used in section 2(15) is the systematic instruction, schooling or training given to the young in preparation for the work of life. Similarly, extending financial assistance/scholarship, etc., to students for their educational purpose would squarely and fairly fall within the connotation of "education" as per the ratio laid down in the case of CIT v. Saraswath Poor Students Fund [1984] 150 ITR 142 (Karn). Thus, the assessee is engaged in "educational activities". In the instant case, the assessee is preparing students by providing coaching/guidelines to get admissions in professional institutions to pursue their studies. The sense in which the word education has been used in section 2(15) of the Act is the systematic instruction, schooling or training given to the young in preparation for the work of life. Similarly, extending financial assistance/scholarship, etc., to students for their educational purpose would squarely and fairly fall within the connotation of "education" as per the ratio laid down in the case of CIT v. Saraswath Poor Students Fund [1984] 150 ITR 142 (Karn). Thus, the assessee is engaged in "educational activities" (357 ITR 604);
++ we find that assessee is also carrying out similar kind of activities i.e. educational activities, so, in our opinion proviso to section 2(15) is not applicable to it. Said proviso is applicable to those institutions that are involved in the advancement of any other object of general public utility. In the case under appeal there is reason as why to not to treat it as educational institution. Secondly, issue of real surplus or deficit of the income and expenditure account has not been looked in to by the DIT-E, though he had considered various figures while deciding the issue against the assessee. In absence of a finding of fact that there was change the activities of the assessee during the year or that the assessee was not carrying out its activities as per the MOA, we are not inclined to endorse the views of the DIT-E. Considering the peculiar facts and circumstances of the case, we decide effective ground of appeal in favour of the assessee. As a result, appeal filed by the assessee stands allowed

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