2013 (11) TMI 1332 - AT - Income Tax

Eligibility of exemption u/s 11(1) of the Income tax act - Activity of the assessee falls under the field of education Held that - It was observed by Hon'ble Apex Court in the case Sole Trustee, Loka Shikshana Trust 1975 (8) TMI 1 - SUPREME Court that the word education has not been used in the wide and extended sense according to which every action of further knowledge constitute education. Hon'ble Apex Court observed that according to this wide and extended sense, traveling is education, because as a result of traveling you acquire fresh knowledge but this is not the sense in which the word education is used in clause 15 of Section 2 - Hon'ble Gujarat high court in the case of Gujarat State Cooperative Union 1992 (2) TMI 74 - GUJARAT High Court observed that the observation of Hon'ble Apex Court was not intended to give a narrow or pedantic sense to the word education The present case is not the objection of the revenue that the activity of the present assessee is like of an activity which are noted by Hon'ble Apex Court such as traveler gaining knowledge, victim of swindler and thieves becoming wiser and visitor of night club adding to the knowledge of hidden mysteries of life etc. In the instant case, assessee is granting diploma also and as has been noted by the A.O. himself in the assessment order, more than 80% of the receipts are on account of continuing education, diploma and certificate programmes. All the four activities noted by the A.O. on this page of the assessment order are not like those activities which were noted by Hon'ble Apex Court to say that those activities cannot be covered by the term education in Section 2(15) - Issue involved in the present case is squarely covered in favour of the assessee by the judgement of Hon'ble Gujarat High court cited by the Ld. A.R. having been rendered in the case of Gujarat State Cooperative Union - Issue in dispute is decided in favour of the assessee and the activities of the assessee are in the field of education and the assessee is eligible for exemption u/s 11(1) Decided in favor of assessee.

Summary

Issues Involved:
1. Whether the CIT(A) erred in dismissing the appeal ex-parte.
2. Whether the CIT(A) erred in confirming the AO's assessment of total income.
3. Whether the CIT(A) erred in confirming the AO's denial of the appellant's activities as charitable.

Issue 1: Ex-parte Dismissal of Appeal

The appellant contended that the CIT(A) dismissed their appeal ex-parte, alleging non-compliance despite multiple opportunities. The appellant argued that this charge was unjustified, as highlighted in their letter dated 07/01/2013. The tribunal noted that the CIT(A) dismissed the appeal due to the appellant's non-appearance, but decided to proceed with the appeal on merit rather than remanding it back, considering the facts and legal precedents presented.

Issue 2: Assessment of Total Income

The AO assessed the appellant's total income at Rs.1,68,49,629 against the returned income of Rs.62,523, denying the exemption under Section 11 of the Income Tax Act, 1961. The AO categorized the appellant's activities into four types and concluded that these activities were not educational as defined by the Supreme Court in Sole Trustee, Loka Shikshana Trust v. CIT. The tribunal, however, found that the appellant's activities, including diploma programs, management development programs, and workshops, constituted education. The tribunal relied on the Gujarat High Court's interpretation in Gujarat State Co-operative Union v. CIT, which provided a broader understanding of 'education' beyond formal schooling. Consequently, the tribunal held that the appellant's activities were educational and eligible for exemption under Section 11.

Issue 3: Charitable Nature of Activities

The AO and CIT(A) held that the appellant's activities did not qualify as charitable under the amended definition of Section 2(15) of the Income Tax Act. The tribunal examined the nature of the appellant's activities and the legal precedents. It concluded that the appellant's activities were indeed educational, thus falling within the scope of charitable purposes under Section 2(15). The tribunal emphasized that the appellant's systematic instruction and training activities met the educational criteria, distinguishing them from non-educational activities cited in the Sole Trustee, Loka Shikshana Trust case.

Additional Considerations:

- Corpus Donation Addition: The AO added Rs.26,38,500 as corpus donation to the appellant's income, arguing that exemption denial necessitated this addition. Since the tribunal held that the appellant was eligible for exemption under Section 11, the addition of corpus donation was invalidated.

Conclusion:

The tribunal allowed the appeal, holding that the appellant's activities were educational and eligible for exemption under Section 11. The ex-parte dismissal by the CIT(A) was set aside, and the assessment of total income and addition of corpus donation were reversed. The tribunal's decision was pronounced in open court.