Conducting coaching classes and campus placements for a fee by the Institute of Chartered Accountants of India cannot be held as business

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)