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2013 (7) TMI 205 - HC - Income TaxExemption u/s 10(23C)(iv) - Charitable Institution u/s 2(15) - Nature of education and the conduct of the courses by the ICAI - profit motive - Held that - Substantial activity of the petitioner institute revolves around providing education to students for the purposes of feeding the profession of Chartered Accountancy in India - Petitioner was providing education and the conduct of the courses by the petitioner could not 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 - Private coaching institute does not have any statutory or regulatory duty to perform and in this aspect, the case of the petitioner was different and the activities undertaken by the petitioner satisfied the term education - Decided in favour of Assessee. While construing the term business for the purpose of Section 2(15) of the Act the object and purpose of the Section must be kept in mind and a broad and extended definition of business would not be applicable for the purpose of interpreting and applying the first proviso to Section 2(15) - The activities being undertaken by the petitioner substantially involve imparting education in the field of accountancy in order to ensure that the standards or profession of accountancy are maintained - The petitioner institute is the sole body empowered to conduct or approve a course in the field of accountancy - The activity of petitioner in conducting coaching classes is integral to the activity of the petitioner institute in conducting the courses in accountancy - The coaching classes being conducted by the petitioner cannot be equated with private coaching classes being conducted by organisations on commercial basis for preparing students to undertake entrance or other examinations in various professional courses The comparison of the petitioner institute with UPSC (Union Public Service Commission) is also not apposite - The object of the study programme or post-qualification courses being conducted by the petitioner institute is to impart knowledge and skill in the field of accountancy and related subjects to students and the same is not similar to the function as performed by UPSC The impugned order completely ignores the nature of the educational programme being conducted by the petitioner which includes not only designing of the course, imparting of training, providing study material but also instructions by an expert faculty - Campus placement is only a small incidental activity carried on by the petitioner 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 petitioner institute and cannot be considered as a business being carried on by a placement agency - The object of the petitioner institute is not to carry on such business but to assist its students in securing employment. It is not necessary that a person should give something for free or at a concessional rate to qualify as being established for a charitable purpose - If the object or purpose of an institution is charitable, the fact that the institution collects certain charges does not alter the character of the institution - petitioner has submitted figures to indicate that expenditure on salaries and depreciation exceeds the surplus as generated from holding coaching classes. In addition, the petitioner institute provides study material and other academic support such as facilities of a library without any material additional costs. There is nothing on record to indicate the assertion of the petitioner that its activities are not fuelled by profit motive is incorrect - The functions performed by the petitioner institute are in the genre of public welfare and not for any private gain or profit and in this view, it cannot be said that the petitioner is involved in carrying on any business, trade or commerce - Following decisions of Khoday Distilleries Ltd. v. State of Karnataka 1994 (10) TMI 269 - SUPREME COURT , State of Andhra Pradesh v. H. Abdul Bakhi and Bros. 1964 (4) TMI 75 - SUPREME COURT OF INDIA , The State of Gujarat Versus Raipur Manufacturing Co. Ltd. 1966 (9) TMI 82 - SUPREME COURT OF INDIA , and Re Trustees of Tribune 1939 (6) TMI 7 - PRIVY COUNCIL - Decided in favour of Assessee. Violation of Section 13 - Held that - petitioner had submitted that it had not granted any loan or advance to ICAI Accounting Research Foundation and in any event the funds paid to the Jaipur Development Authority and Government of Rajasthan for establishing an institution by ICAI Accounting Research Foundation must be considered as application of funds towards the object of the petitioner institute since ICAI Accounting Research Foundation has been incorporated under Section 25 of the Companies Act,1956 as a company not for profit and for the purposes of carrying on research in the field of accountancy - ICAI Accountancy Research Foundation is also entitled to exemption under Section 10 (23C)(iv) read with Section 11 - No violation of Section 13 - Decided in favour of Assessee.
Issues Involved:
1. Whether the Institute of Chartered Accountants of India (ICAI) qualifies as an institution established for charitable purposes under Section 10(23C)(iv) of the Income Tax Act, 1961. 2. Whether the activities of ICAI, specifically conducting coaching classes and campus placements, amount to carrying on business, trade, or commerce. 3. Whether the funds provided by ICAI to ICAI Accounting Research Foundation violate Section 13 of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Charitable Purpose under Section 10(23C)(iv) of the Income Tax Act: - The ICAI has been recognized as a charitable institution by the Income Tax Authorities since its incorporation, with exemptions granted under Section 10(23C)(iv) until the assessment year 2005-2006. - The definition of "charitable purpose" under Section 2(15) includes relief of the poor, education, medical relief, preservation of the environment, preservation of monuments, and the advancement of any other object of general public utility. - The ICAI's primary purpose is to regulate the profession of Chartered Accountants in India, which includes providing education and training in accountancy. - The court held that the ICAI's activities fall within the definition of "charitable purpose" as it involves education and the advancement of an object of general public utility. 2. Activities Amounting to Business, Trade, or Commerce: - The DGIT(E) denied the exemption on the grounds that ICAI's coaching classes and campus placements were commercial activities. - The court disagreed, stating that the coaching classes are integral to the ICAI's educational programs and not akin to private coaching classes. The classes are conducted to maintain professional standards and are not for profit. - The campus placement services were also deemed ancillary to the educational activities and not a business activity. - The court emphasized that the dominant object of ICAI is educational and regulatory, not profit-making. The incidental activities do not transform the institution into a commercial entity. 3. Violation of Section 13 of the Income Tax Act: - The Assessing Officer initially denied exemption under Section 11, citing that ICAI had violated Section 13(1)(d) by having an outstanding balance against ICAI Accounting Research Foundation. - ICAI contended that the funds provided to the Research Foundation were for establishing a university in furtherance of its educational objectives and not an investment or deposit. - The CIT (Appeals) and the Tribunal accepted ICAI's contention, and the court found no evidence of violation of Section 13. - The court confirmed that the funds provided to the Research Foundation were in line with ICAI's charitable objectives and did not disqualify it from claiming exemptions. Conclusion: - The court allowed the writ petitions, setting aside the DGIT(E)'s orders and directing the recognition of ICAI as an institution established for charitable purposes under Section 10(23C)(iv) for the relevant assessment years. - The court reiterated that ICAI's activities, including coaching classes and campus placements, are in furtherance of its educational objectives and do not constitute business, trade, or commerce. - The funds provided to the ICAI Accounting Research Foundation were deemed compliant with the Act, confirming ICAI's entitlement to exemptions.
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