2012 (10) TMI 212 - AT - Income Tax

Cancel the registration granted u/s 12AA - as per Memorandum of Association assessee s activities have not been found to be genuine - Held that - On going through the MOA and other Bye-laws it is an institution registered in India for all purposes of law. The assessee, The Institute of Chartered Shipbrokers (ICS) having its headquarters at London cannot be construed as an agent of a foreign institution. The foreign institution, ICS of London, is a world professional body controlling the profession of shipbrokers around the world and granting professional affiliations. The programme of professional education imparted by the assessee Institute in India is not in the nature of coaching or tuition. The Institute at London is an Institute established by a Royal Charter and recognized world-wide as the nodal agency of design, improving and controlling the profession of ship-broking. The examinations conducted by the Institute to enable the registered students to enroll as members of the Institute require continuous study for a period of three to four years. What is imparted by the assessee Institute in India is professional education like chartered accountancy, law, architecture, etc. The syllabus prescribed for the examination covers almost all areas of shipping industry including maritime laws. Thus here is nothing on record to show that the assessee is engaged in any commercial or professional activities in India by way of consultancy or professional advices and they are not earning any income by way of carrying on any trade or commerce. The income of the assessee is the fees collected from the students and the expenses are incurred for running the Institute for imparting professional education to its registered students. The income of the assessee Institute is not utilized for any private initiation or for the benefit of any interested person. The expenditure is incurred only for the purpose for which the Institute is established - Thus the assessee continues to enjoy the registration under section 12AA, as if there was no interruption - in favour of assessee.

Summary

Issues:
1. Cancellation of registration under section 12AA of the Income-tax Act, 1961.
2. Determination of whether the assessee institute is engaged in charitable activities.
3. Interpretation of the nature of activities carried out by the assessee institute.
4. Assessment of the relationship between the Indian institute and the foreign institution.
5. Application of legal precedents to support the arguments presented by both parties.

The judgment pertains to an appeal filed by an assessee institute, registered as a public charitable trust under section 12AA of the Income-tax Act, 1961. The institute, established in India, is affiliated with a foreign institution in London for educational purposes related to shipbroking. The Director of Income-tax(Exemptions) at Chennai cancelled the institute's registration citing that its activities were not genuine and were commercial in nature. The Director considered the institute as an agent of the foreign institution, running a coaching center for commercial gain. The assessee contended that it was engaged in charitable activities and relied on legal precedents to support its argument.

The learned counsel for the assessee highlighted that the institute's activities were akin to those of other charitable institutions engaged in educational endeavors. The counsel referenced legal judgments to emphasize the charitable nature of the institute's activities. On the other hand, the Commissioner of Income-tax argued that the institute was providing commercial services and sharing fees with the foreign institution, indicating a lack of charitable intent. The Commissioner relied on legal precedents to support this stance.

After careful consideration, the tribunal found that the institute was not merely a coaching center but an entity imparting professional education in the field of shipbroking. The tribunal noted that the institute's activities were not commercial in nature and that its income was derived from student fees for educational purposes. The tribunal distinguished between commercial activities and educational endeavors, emphasizing the charitable nature of the institute's operations.

The tribunal further clarified that the institute's affiliation with the foreign institution was for educational purposes and did not constitute a commercial relationship. Drawing parallels with international academic collaborations, the tribunal underscored the importance of global affiliations in modern professions. The tribunal highlighted the rigorous professional education provided by the institute, akin to other professional fields like chartered accountancy or law.

In light of the arguments presented and the examination of the institute's activities, the tribunal concluded that the cancellation of registration by the Director of Income-tax(Exemptions) was not legally sustainable. The tribunal allowed the appeal, reinstating the institute's registration under section 12AA without interruption. The judgment reaffirmed the charitable nature of the institute's educational activities and emphasized the importance of global affiliations in professional education.

This detailed analysis covers the issues raised in the legal judgment, providing a comprehensive overview of the arguments presented by both parties and the tribunal's decision based on the interpretation of relevant legal provisions and precedents.