2021 (12) TMI 1499 - AT - Income Tax

Exemption u/s 11 - lower authorities held that assessee s activities are commercial in nature - Assessee is charging handsome registration and subscription fees for providing its services - HELD THAT - The trust or education institute is running with a nominal fee to cover cost on account of its activities that cannot be held to be a commercial activity. Sometime trust or the other institution does not get complete donations either from public or from the government. In that case if those trusts or education institutes charging nominal amount of fee in order to carrying out its activities in a smoother way this cannot be called a part of commercial activities. Therefore as assessee is imparting education and training to students and public its activities have not been doubted by the lower authorities. Therefore in such circumstances benefit of Section 11 of the Act cannot be denied. Assessee appeal allowed.

Summary

Issues involved: Appeal against orders of Commissioner of Income Tax (Appeals) under s. 143(3) of the Income Tax Act, 1961 concerning AY 2014-15 & 2017-18.

Issue 1: Assessment Order Challenge (AY 2014-15)
The appellant challenged the assessment order as bad-in-law, void ab initio, and contrary to facts. The CIT(A) confirmed the disallowance u/s. 11 and taxed the entire income as business income, disregarding provisions of section 11. The appellant contended that its objects and activities should be considered as those of an educational institution. The appellant, registered under S.12AA, claimed exemption under S.11 for developing skilled manpower and running technical courses. The major receipts were from consultancy services to government, semi-government, and private organizations, indicating commercial activities. The AO held the activities were commercial and not charitable, leading to an addition of Rs. 1,50,21,153.

Issue 2: Appeal and Arguments (AY 2014-15)
The appellant argued that its activities were non-commercial and should benefit from Section 11, citing relevant case laws. Lower authorities deemed the activities commercial, but the appellant contended that nominal fees charged for activities essential for smoother operations did not constitute commercial activities. As the appellant was imparting education and training without doubt, the benefit of Section 11 should not be denied.

Issue 3: Decision and Conclusion
After reviewing the records and arguments, the Tribunal allowed both appeals filed by the assessee. The Tribunal found that the appellant's activities, aimed at enhancing technical competencies and providing consultancy services, were not purely commercial but aligned with educational objectives. Therefore, the benefit of Section 11 of the Act was granted to the appellant, overturning the CIT(A)'s decision.