2016 (3) TMI 545 - AT - Income Tax

Entitlement to claim exemption u/s. 11 - examination for the course of certified information system auditor and also collected as seminar fees from the participants - Held that - The course conducted by the assessee may be a source of acquisition of some knowledge by the respective students/persons. But such a course or acquisition of knowledge by the students at the class conducted by the assessee for conducting review and courses for helping aspiring members/members in preparing for CISA and CISM certification conducted by the parent body, ISACA, USA and also conducting monthly professional education meetings wherein professionals address the participants for sharing knowledge and experience on methodologies, emerging concepts, skills updation etc., cannot be considered to be education within the meaning of section 2(15) of the Act. We are of the opinion that the assessee cannot be considered to be an educational trust within the meaning of section 2(15) of the Act. Therefore, it is not entitled for exemption u/s.11 of the Act and this income of the assessee is to be assessed as business income under the head AOP and it is to be assessed after giving all deduction available o the assessee under the head Business income . However, we make it clear that if the cost of fixed assets has been claimed as application of income while claiming exemption u/s.11 of the Act under Chapter-III of the Act in earlier assessment years, the assessee cannot claim depreciation on the same asset u/s.32 of the Act as the cost of fixed asset was already allowed as application of income and its cost has already become Nil . - Decided against assessee

Issues Involved:
1. Jurisdiction of the Assessing Officer.
2. Entitlement to claim exemption under Section 11.
3. Applicability of amended provisions of Section 2(15).
4. Nature of activities carried out by the assessee trust.
5. Depreciation claim as an application of income.

Analysis of Judgment:

1. Jurisdiction of the Assessing Officer:
The appellant contended that the Assessing Officer (AO) lacked jurisdiction. However, the judgment did not provide specific details on this issue, implying that the primary focus was on the substantive issues related to tax exemptions and the nature of activities.

2. Entitlement to Claim Exemption under Section 11:
The assessee trust, registered under Section 12A(a), claimed exemption under Section 11 for the assessment year 2009-10. The AO denied this exemption, arguing that the trust's activities were commercial in nature, involving trade, business, and commerce. The AO concluded that the trust was engaged in commercial activity by collecting fees for services, thus not entitled to exemption under Section 11. The Commissioner of Income Tax (Appeals) upheld this view, and the Tribunal confirmed that the trust's activities did not qualify as charitable under Section 2(15).

3. Applicability of Amended Provisions of Section 2(15):
The AO and CIT(A) held that the trust's activities fell under the amended provisions of Section 2(15), which exclude "advancement of any other object of general public utility" from charitable purposes if it involves trade, commerce, or business. The Tribunal supported this interpretation, noting that the trust's activities, such as conducting courses and seminars, were commercial and not charitable. The Tribunal emphasized that the amendment aimed to exclude entities carrying on regular trade or business from claiming charitable status.

4. Nature of Activities Carried Out by the Assessee Trust:
The trust conducted courses and seminars related to information system auditing and security, charging fees for these services. The Tribunal determined that these activities were commercial and did not constitute "education" within the meaning of Section 2(15). Citing the Supreme Court's definition of education, the Tribunal noted that the trust's activities did not involve systematic instruction or schooling. The Tribunal also referenced the Patna High Court's ruling that coaching classes do not qualify as charitable education.

5. Depreciation Claim as an Application of Income:
The Tribunal addressed the issue of depreciation on fixed assets, stating that if the cost of fixed assets had been claimed as an application of income in previous years, the assessee could not claim depreciation on the same assets under Section 32. This is because the cost of the assets would have already been accounted for, making their cost 'Nil'.

Conclusion:
The Tribunal dismissed the appeal, confirming that the trust's activities were commercial and not charitable, thus not qualifying for exemption under Section 11. The Tribunal also upheld the denial of the depreciation claim on fixed assets, reinforcing that the trust's income should be assessed as business income under the head 'AOP'.

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