2014 (1) TMI 186 - AT - Income Tax

Application for registration u/s 12AA - Held that - Following Sole Trustee, Loka Shikshana Trust vs Commissioner of Income-tax 1975 (8) TMI 1 - SUPREME Court - All kinds of acquiring knowledge will not come within the meaning of education . What education connotes in section 2(15) is the processing of training and developing the knowledge, skill, mind and character of students by normal schooling - 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 is preparation for the work of life - It also connotes the whole course of scholastic instruction which a person has received - The word education has not been used in that wide and extended sense, according to which every acquisition of further knowledge constitutes education - Mere coaching classes may provide some kind of knowledge to the students. But that kind of acquisition of knowledge through coaching classes cannot fall within the meaning of education as provided in section 2(15) of the Act - There should be a normal schooling by way of regular and systematic instruction - Following Bihar Institute of Mining And Mine Surveying vs C.I.T. 1993 (12) TMI 50 - PATNA High Court - The word charitable prefixing the word institution has to be given its full effect - It appears that one of the principal projects of the petitioner s institution has the object of coaching and preparing the students for appearing in various examinations conducted by the Board of Mining Examination and / or MI (1) section (a)(b) and the said coaching of students in an institute is not, an imparting of education which can be said to be a process of training and developing knowledge and character of students by normal schooling - A coaching institute cannot be said to be an institution where normal schooling is done - The assessee cannot be considered to be an educational trust within the meaning of section 2(15) of the Act - It is not entitled for registration u/s 12AA of the Act - Decided against assessee.

Summary

Issues Involved:

1. Whether the activities conducted by the assessee trust qualify as "education" under section 2(15) of the Income Tax Act.
2. Whether the assessee trust is eligible for registration under section 12AA of the Income Tax Act.
3. The relevance of the loan received by the assessee from the managing trustee and the trust's lack of property ownership in the context of registration eligibility.

Detailed Analysis:

Issue 1: Qualification of Activities as "Education" under Section 2(15)
- The primary contention revolves around whether the activities conducted by the assessee trust, specifically running coaching classes for Bharat Sevak Samaj and Kerala University Distance Education, qualify as "education" under section 2(15) of the Income Tax Act.
- The Tribunal referred to the judgment of the Apex Court in Sole Trustee, Loka Shikshana Trust vs Commissioner of Income-tax, which clarified that "education" in section 2(15) connotes systematic instruction, schooling, or training given to the young in preparation for the work of life. It does not include every acquisition of knowledge.
- The Tribunal concluded that the assessee's activities of conducting coaching classes do not constitute "education" as they do not involve systematic instruction or normal schooling. This conclusion was supported by the Patna High Court's judgment in Bihar Institute of Mining And Mine Surveying vs CIT, which held that coaching classes for distance education do not qualify as charitable activities under section 2(15).

Issue 2: Eligibility for Registration under Section 12AA
- The Tribunal examined whether the assessee trust is eligible for registration under section 12AA, which requires the trust to conduct regular and systematic education.
- The Tribunal noted that the assessee trust only conducted coaching classes for courses managed by Bharat Sevak Samaj and Kerala University Distance Education, without having the right to admit students or issue identity cards.
- Given that the activities were limited to coaching classes and did not involve systematic instruction or normal schooling, the Tribunal held that the trust does not qualify as an educational institution under section 2(15) and, therefore, is not eligible for registration under section 12AA.

Issue 3: Loan from Managing Trustee and Lack of Property Ownership
- The Commissioner rejected the application partly on the grounds that the trust received a loan of Rs. 4,83,051 from the managing trustee, which was misconstrued as a corpus donation, and that the trust did not own any property.
- The Tribunal clarified that owning property is not a pre-condition for registration under section 12AA. However, it emphasized that the core issue was whether the activities of the trust qualify as "education."
- The Tribunal found that the Commissioner's rejection based on the trust's association with the business of Bethsaida Hermitage & Tourism (P) Ltd. and the financial transactions was secondary to the primary issue of whether the trust's activities constituted "education."

Conclusion:
- The Tribunal upheld the Commissioner's decision to reject the application for registration under section 12AA, primarily on the grounds that the activities conducted by the assessee trust do not qualify as "education" under section 2(15) of the Income Tax Act.
- The Tribunal emphasized that remanding the matter back to the Commissioner would not serve any purpose, as the issue had already been elaborately examined in a previous case (M. Star Charitable Society), which concluded that conducting coaching classes does not constitute "education."
- The Tribunal confirmed the Commissioner's order, reinforcing the interpretation of "education" as requiring systematic instruction and normal schooling, which was not met by the assessee trust's activities.