2017 (1) TMI 616 - AT - Income Tax

Exemption u/s 11 - Treatment to tour expenses and fashion show expenses - assessee is a charitable society registered u/s 12A - Held that - We find that there is no material brought on record by the ld AO to suggest discrimination of the students who get selected to participate in the tour. In view of these findings we have no hesitation in holding that the incurrence of tour expenses would definitely form part of the application of income of the assessee society and is part and parcel of the activity of imparting education. It is not in dispute that the vocational training department of the assessee society conducts annual fashion shows and Mr & Mrs University competition. We hold that these shows admittedly provides a platform for the students to display their talents and also to exhibit what they had learnt in the classroom. This also creates lot of employment opportunities for the students. We hold that these events help in students shedding their inhibitions and come out of stage fear which in turn enables the students to meet the society at large with greater confidence. This is similar to institutes like National Institute of Fashion Technology set up by Government of India who are also holding fashion shows for similar purposes as rightly pointed out by the ld CITA. We hold that this also forms an integral part of education learning and training of students. We find that the ld AO treated these expenditures to be in the nature of advertisement for the institution which in turn would again have to be construed as application of income in pursuance of the objects of the assessee society. Hence in any case this would only fall under the ambit of application of income. Thus we hold that both the tour expenses and fashion show and Mr & Mrs University expenses incurred by the assessee society would have to be construed as application of income in pursuance of objects of the assessee society. - Decided in favour of assessee.

Summary

Issues Involved:
1. Whether the CIT(A) was justified in treating the tour expenses of ?29,43,011/- as application of income.
2. Whether the CIT(A) was justified in treating the fashion show expenses of ?36,53,054/- as application of income.

Issue-wise Detailed Analysis:

1. Tour Expenses of ?29,43,011/-:
The primary issue was whether the tour expenses incurred by the assessee, a charitable society registered under section 12A of the Income Tax Act, 1961, could be considered as application of income for charitable purposes. The assessee argued that these foreign tours were part of the educational activities aimed at providing students with hands-on experience and exposure to different cultures, which would enhance their learning and competence. The Assessing Officer (AO) disallowed these expenses, arguing that they were not relevant to the educational objectives of the society and only benefited a select group of students.

The CIT(A) countered this by noting that the tours were conducted annually and were part of the co-curricular activities aimed at the holistic development of students. The CIT(A) emphasized that these tours were integral to the educational experience, fostering better student-teacher relationships and enhancing students' communication skills. The tours were open to all eligible students, and there was no evidence of discrimination in the selection process. The Tribunal upheld the CIT(A)’s view, stating that such tours are essential for imparting education and should be considered as application of income.

2. Fashion Show Expenses of ?36,53,054/-:
The second issue revolved around the expenses incurred for organizing an annual fashion show and Mr. & Mrs. University competition. The AO disallowed these expenses, claiming they were not related to the educational programs and served more as advertisement for the college. The assessee contended that the fashion show was a platform for students of the vocational training department to showcase their skills, which is crucial for their learning and future employment opportunities.

The CIT(A) supported the assessee's claim, noting that the vocational training department earned significant fees and that the fashion show was an essential part of the curriculum, providing students with practical exposure and helping them overcome stage fear. The Tribunal agreed with the CIT(A), stating that such events are integral to the educational process and contribute to the overall development of students. The expenses were deemed as application of income for the charitable purposes of the society.

Conclusion:
The Tribunal dismissed the revenue's appeal, affirming that both the tour expenses and the fashion show expenses were rightly considered as application of income in pursuance of the charitable objectives of the assessee society. The judgment emphasized that modern educational activities often extend beyond conventional classroom learning and include practical experiences that are crucial for comprehensive student development.