2016 (5) TMI 875 - AT - Income Tax

Denial of exemption u/s 11 & 12 - activities of the assessee institution questioned - whether activities carried out by the assessee fell outside the purview of charitable purpose as per section 2(15)? - Held that - AO is found to have referred to the activities in the assessment order. However, he has not cared to factually examine the same. Satisfied by enumerating the activities, he has failed to examine the supporting facts and requirements qua the specific courses; duration of the course; the course fee and the assessee s explanation and instead of examining and considering the same which evidently was filed and made available he has instead jumped to the conclusion based on decisions whose facts also he failed to consider. The specific courses conducted by the assessee admittedly pertaining to travel and tourism industry were having the approval of Director General, Civil Aviation Department of the Government of India and meeting specific requirements and following a course program as approved and recognized A perusal of the finding arrived at by the CIT(A) makes it clear that the details of the various courses conducted by the assessee alongwith rules and regulations adhered to by it depicting its operating procedures were all considered and examined in extenso and neither these findings have been upset in the present proceedings nor anything upsetting these has been referred to by the Revenue in the Remand Report filed by the AO before the CIT(A). We further find that the objections of the AO that the courses conducted by the assessee do not have recognition from the Govt. and further that there is no regulatory Authority to exercise check on its fee structure is no longer a valid objection as not only considering the aforesaid decision but also considering the approvals/recognition of sector specific competent Authority like DGCA at the national level and IATA at the global level who are presumed to have given their giving approvals as per industry standard requirements by way of their Agreements/approvals etc on a year to year basis after due care and diligence, considering the adherence of standards and requirements to be met in the industry specific skill/qualification requirements. Considering the peculiar facts and circumstances of the case and the position of the law which is further found supported by the decision of the Hon ble Bombay High Court in the case of DIT vs. Women s India Trust (2015 (4) TMI 976 - BOMBAY HIGH COURT ) the challenge posed by the revenue that exemption u/s 11 & 12 of the Act was not warranted is found to be not sustainable. - Decided in favour of assessee

Summary

Issues Involved:
1. Whether the activities of the assessee fell outside the purview of "charitable purpose" as per section 2(15) of the Income Tax Act, 1961.
2. Whether the activities of the assessee institution align with the principles laid down by the Hon'ble Apex Court while interpreting the expression "education" in section 2(15) of the Act.

Issue-Wise Detailed Analysis:

1. Charitable Purpose under Section 2(15):
The primary issue was whether the assessee's activities fell within the definition of "charitable purpose" under Section 2(15) of the Income Tax Act, 1961. The assessee, a society registered under Section 12A, provided vocational training in travel and tourism. The Assessing Officer (AO) contended that the courses offered by the assessee were not recognized by UGC or any other government body and were conducted on commercial lines with a profit motive. Consequently, the AO denied the exemption under Sections 11 and 12, concluding that the activities did not qualify as "charitable" and assessed the income at ?2,30,71,122.

The CIT(A) overturned the AO's decision, noting that the activities had been recognized as charitable in previous years and were aimed at providing vocational training. The CIT(A) emphasized that the assessee's courses, though not formally recognized by UGC, were approved by relevant industry bodies like IATA and DGCA, and were conducted at subsidized fees in collaboration with reputed institutions. The Tribunal upheld the CIT(A)'s decision, stating that the AO had misinterpreted the term "education" and failed to consider the broader context of vocational training and industry-specific approvals.

2. Interpretation of "Education" under Section 2(15):
The second issue was whether the activities aligned with the principles laid down by the Supreme Court in the case of Sole Trustee, Loka Shikshan Trust vs. CIT, which defined "education" in a narrow sense. The AO relied on this precedent to argue that the assessee's activities did not constitute "education" as they were not part of a formal schooling system.

However, the Tribunal referred to the Gujarat High Court's interpretation in Gujarat State Co-operative Union vs. CIT, which clarified that "education" under Section 2(15) is not limited to formal schooling but includes systematic instruction and training. The Tribunal also cited the Delhi High Court's decision in Delhi Music Society, which recognized non-formal educational activities as qualifying for charitable status.

The Tribunal found that the assessee's courses had a structured curriculum, mandatory attendance, examinations, and certifications, akin to formal education. The courses were approved by industry-specific bodies like IATA and DGCA, which provided a level of regulation and standardization. The Tribunal concluded that the assessee's activities met the broader definition of "education" and thus qualified as charitable under Section 2(15).

Conclusion:
The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision that the assessee's activities were charitable and eligible for exemption under Sections 11 and 12. The Tribunal emphasized that the AO had misinterpreted the term "education" and failed to consider the broader context of vocational training and industry-specific approvals. The Tribunal's decision was based on a detailed examination of the facts, legal precedents, and the broader interpretation of "education" under Section 2(15).