2016 (6) TMI 933 - AT - Income Tax

Eligibility for exemption u/s. 11 - whether the assessee was involved in trade, commerce or business as the assessee was receiving fees from the students? - Held that - We find considerable cogency in the finding of the Ld. CIT(E) in reversing the action of the AO by relying on the judgment of the Tribunal in assessee s own case for the AY 2009-10 and also relying upon the judgment of the Hon ble Jurisdictional High Court in the case of India Trade Promotion Organisation vs. DGIT(E) (2015 (1) TMI 928 - DELHI HIGH COURT ) and has rightly held that the proviso to section 2(15) is not applicable to the assessee as the assessee is not involved in any trade, commerce or business. - Decided in favour of assessee.

Summary

Issues:
1. Whether the activities of the assessee are charitable in nature and qualify for exemption under section 11 of the Income Tax Act.
2. Whether the assessee can be considered an educational institution within the meaning of Section 2(15) of the Income Tax Act.

Analysis:
1. Issue 1 - Charitable Nature of Activities:
The Revenue contended that the activities of the assessee, which involved conducting examinations by charging fees, resembled business activities rather than charitable endeavors. The Assessing Officer (AO) had assessed the total income of the assessee at a specific amount, treating the entire surplus as taxable under section 13(8) of the Act and denying the benefits of Sections 11 & 12. However, the Ld. CIT(E) allowed the appeal of the assessee, stating that the assessee was not engaged in trade, commerce, or business, and thus, the proviso of Section 2(15) did not apply. The Ld. CIT(E) directed the AO to grant exemption under section 11(1) as a charitable institution. The Tribunal upheld this decision, citing previous judgments and the nature of the assessee's activities as educational and charitable, not commercial.

2. Issue 2 - Educational Institution Status:
The Ld. CIT(E) found that the assessee, despite not providing formal schooling, qualified as an educational institution under Section 2(15) of the Act. The Tribunal concurred with this assessment, referencing past judgments that clarified an entity could be considered an educational institution even without regular classes. The Tribunal emphasized that charging fees for services rendered by a charitable or educational institution was permissible, provided the surplus was utilized for charitable purposes and not distributed to shareholders or relatives. The Tribunal dismissed the Revenue's appeal, affirming the Ld. CIT(E)'s order and highlighting the binding judgments of the Supreme Court and the Delhi High Court supporting the decision.

In conclusion, the Tribunal upheld the Ld. CIT(E)'s order, emphasizing the charitable and educational nature of the assessee's activities and rejecting the Revenue's arguments against granting exemption under section 11(1) of the Income Tax Act.