2014 (9) TMI 513 - AT - Income Tax

Nature of activity Scope of education u/s 2(15) exemption u/s 11 & 12 - Services provided to government agencies to educate people in the areas of Urban Housing Development for poor and for their upliftment Held that - CIT(A) has rightly observed that the activities of the assessee are identical and it was found that assessee was involved in helping various Government Agencies or foreign Government Agencies under SARC in providing training to the persons in the field of housing for poor sections of the society and advising the Government for their upliftment and no work is undertaken for any profit motive - CIT(A) has observed that various assignments undertaken have been mentioned which clearly reveal the fact that appellant s activities are in the nature of education as it is providing the training to various persons of the Indian Government and overseas Governments and these training programs are in the nature of education and education programs have been organized by the Institute are mainly for the Government of India which are not of a commercial nature - The issue of charging the fees and number of students to participate in the course are decided by Government of India - the assessee has submitted some additional facts to substantiate its claim regarding the Trust is a charitable institution. The society is not engaged in any trade, commerce or business it simply providing the services to various Government Agencies both Indian & Overseas to hold seminars, to educate people in the areas of Urban Hosing Development for poor and for their upliftment - There is no element of profit involved in our activity and the entire amount received is spent either for meeting expenditure or the balance / surplus kept in the Bank as per the norms for future utilizations - CIT(A) has rightly held that the assessee s activities fall under the 2nd limb of the Section 2(15) - as the activities of the assessee has been found to be in the nature of education within the meaning of Section 2(15), benefit of section 11 and 12 given by the CIT(A) is upheld Decided against revenue.

Summary

Issues Involved:
1. Whether the activities of the assessee qualify as "education" under Section 2(15) of the Income Tax Act, 1961.
2. Whether the assessee is entitled to the benefits under Sections 11 and 12 of the Income Tax Act, 1961.
3. Whether the activities of the assessee are of a commercial nature and thus disqualify it from being considered a charitable institution.

Issue-wise Detailed Analysis:

1. Qualification of Activities as "Education" under Section 2(15):
The Revenue contended that the activities of the assessee, which included providing services to various government agencies to hold seminars and educate people in the areas of Urban Housing Development for the poor, do not constitute "scholastic education" and thus do not fall under the definition of "education" as per Section 2(15). The Revenue cited the Supreme Court judgment in Sole Trustee, Lok Shikshana Trust vs. Commissioner of Income Tax, which defined "education" as systematic instruction, schooling, or training given to the young in preparation for the work of life. The CIT(A) disagreed, finding that the assessee's activities, which involved training and advisory services to government agencies, did indeed fall under the second limb of Section 2(15) and were educational in nature. The Tribunal upheld the CIT(A)'s decision, noting that the activities were in the nature of education, as they provided training programs for government officials, which were not of a commercial nature.

2. Entitlement to Benefits under Sections 11 and 12:
The AO had denied the benefits of Sections 11 and 12 to the assessee, arguing that its activities did not qualify as charitable. The CIT(A) reversed this decision, allowing the benefits on the grounds that the activities were educational and charitable. The Tribunal agreed, emphasizing that the assessee's activities were conducted without a profit motive and primarily involved advisory services to government agencies, which were educational and charitable in nature. The Tribunal also referenced the CBDT Circular No. 11/2008, which clarified that activities in the nature of trade, commerce, or business would disqualify an entity from being considered charitable, but found that the assessee's activities did not fall into this category.

3. Commercial Nature of Activities:
The Revenue argued that the assessee's activities were commercial in nature, as they involved contractual payments and reimbursements from government agencies. The assessee countered that the activities were advisory services provided without commercial interest, with more than 95% of payments being reimbursements and fees being of a token nature. The CIT(A) found that the activities were not commercial, as they were conducted without a profit motive and were primarily educational. The Tribunal upheld this finding, noting that the activities were conducted for the public good and were not in the nature of trade, commerce, or business. The Tribunal also referenced the Delhi High Court judgment in Bureau of Indian Standards vs. DG (E), which held that activities conducted without a profit motive and for public benefit did not constitute trade, commerce, or business.

Conclusion:
The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision that the assessee's activities qualified as educational under Section 2(15), entitled the assessee to benefits under Sections 11 and 12, and were not of a commercial nature. The Tribunal emphasized that the assessee's activities were conducted without a profit motive and were primarily educational and charitable in nature.