2016 (1) TMI 42 - HC - Income Tax

Certificate under Section 10(23C)(vi) refused - certificate under Section 12A already issued - Held that - It is an admitted position that a certificate under Section 12A of the Act has already been issued in favour of the petitioner and the same has continued till date. Therefore, it is etablished that the petitioner-institution is a charitable trust as far as applicability of the Income Tax Act is concerned. As far as object 3(i) which has been relied upon by Mr Bhatt, learned Senior Counsel, we are of the opinion that by providing training to the individuals as well as those persons who have been sent by the companies to meet the needs of the Indian industry and Commerce and introducing them with new products and informing them about market conditions, etc. would not establish that the petitioner is carrying on such activity which would treat the same as service provided in relation to any trade, commerce and industry. Education does not mean teaching the students only, in the manner and method, the regular schools or colleges adopt to teach. In the progressive world, it is expected from certain institutions that they educate, teach and train persons so that those persons can compete similar experts worldwide. Therefore, we are not in agreement with the submissions made by Mr Bhatt, learned Senior Counsel that the sole object of the institution is not to impart education. By providing latest information and thereafter training to those persons who are already in the field of advertising communication, etc. and in such process if certain persons become super-specialists in particular field and for which the institution is charging fee, we are of the opinion that the case would not fall under proviso to Section 2(15) as submitted by Mr Bhatt, learned Senior Counsel appearing for the respondent. Considering the object of the petitioner institution, we are of the opinion that the petitioner institution is established for the sole purpose of imparting education in a specialised field. Hence, the petition is allowed. Certificate under Section 10(23C)(vi) to be allowed - Decided in favour of assessee

Issues Involved:
1. Whether the petitioner institution exists solely for educational purposes.
2. Whether the petitioner institution is engaged in activities related to trade, commerce, or business.
3. Whether the fees charged by the petitioner institution indicate a profit motive.
4. Whether the petitioner institution is entitled to an exemption certificate under Section 10(23C)(vi) of the Income-tax Act, 1961.

Issue-wise Detailed Analysis:

1. Solely for Educational Purposes:
The petitioner challenged the denial of an exemption certificate under Section 10(23C)(vi) of the Income-tax Act, 1961, arguing that it exists solely for educational purposes. The petitioner institution is registered under the Societies Registration Act, 1860, and the Bombay Public Trusts Act, 1950, and has been granted registration under Section 12A of the Act. The institution specializes in imparting education in communication, including advertising and related subjects. The court noted that the institution awards diplomas and certificates and provides training in communication, advertising, and related subjects, equipping individuals to practice these professions. The court concluded that the institution's primary purpose is educational, as it aims to prepare individuals for careers in communication and advertising.

2. Activities Related to Trade, Commerce, or Business:
The respondent argued that the petitioner institution is engaged in activities related to trade, commerce, or business, as it provides training for industry, trade, and commercial organizations. The petitioner countered that it provides education to individuals, including those working in companies, to improve their skills. The court observed that education does not only mean teaching in a traditional school or college setting but also includes specialized training to help individuals compete globally. The court found that the institution's activities, such as providing up-to-date market information and training, do not constitute services related to trade, commerce, or business.

3. Fees Indicating Profit Motive:
The respondent contended that the fees charged by the petitioner institution are exorbitant and benefit only affluent individuals, indicating a profit motive. The petitioner argued that the fees cover the cost of training and hostel expenses and that any surplus is incidental to the educational activities. The court referred to the Supreme Court's decision in Queen's Educational Society v. Commissioner of Income-tax, which held that an educational institution making a surplus does not necessarily indicate a profit motive. The court found that the petitioner's fees are reasonable and that the institution's primary purpose is educational, not profit-making.

4. Entitlement to Exemption Certificate:
The court considered the petitioner's entitlement to an exemption certificate under Section 10(23C)(vi) of the Act. The court noted that the petitioner has been granted a certificate under Section 12A of the Act, indicating its status as a charitable trust. The court referred to the Supreme Court's criteria for determining whether an institution exists solely for educational purposes, including the predominant object test and the distinction between making a surplus and being carried on for profit. The court concluded that the petitioner institution meets these criteria and is entitled to the exemption certificate.

Conclusion:
The court allowed the petition, setting aside the respondent's order denying the exemption certificate. The court ruled that the petitioner institution is established for the sole purpose of imparting education in a specialized field and is entitled to the exemption certificate under Section 10(23C)(vi) of the Income-tax Act, 1961.

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