2017 (3) TMI 190 - AT - Income Tax

Denying the exemption u/s 10(23C) (iiiad) - denal of claim as activity undertaken by the appellant was in the nature of commercial activity and not in furtherance of education - Held that - The activities of the trust are very much falls within the ambit of education activities. If surplus made by the assessee trust was utilized and consumed for the purposes of furtherance of its object of education , it would also be considered that the trust is existing for the purpose of educational purposes only and not otherwise. We are not in agreement with conclusion drawn by the ld CIT(A) which is not correct. Accordingly, we set aside the order of the ld. CIT(A) and direct the AO to allow the benefit u/s 10(23C)(iiiad) of the Act as the gross annual received is less than ₹ 1 crores as the activities of the trust are for the educational purposes. - Decided in favour of assessee

Summary

Issues:
1. Denial of exemption u/s 10(23C) (iiiad) on grounds of commercial activity.
2. Consideration of various judgments in support of exemption.
3. Adequacy of discussion in passing the order.

Analysis:

Issue 1: Denial of exemption u/s 10(23C) (iiiad) on grounds of commercial activity:
The Assessing Officer (AO) denied the exemption under section 10(23C) (iiiad) to the assessee, citing that the activity undertaken was commercial and not solely for educational purposes. The AO observed that the assessee charged fees on a commercial basis for five courses, leading to a surplus of &8377;2,93,527. The AO concluded that the activities were commercial in nature, thus denying the exemption and determining the total income at &8377;10,81,259. The First Appellate Authority (FAA) upheld this decision, emphasizing that the appellant did not meet the criteria of 'sole purpose of education' as required by section 10(23C) (iiiad). The FAA noted that the appellant charged commercial rates for courses and did not exist solely for educational purposes, leading to the denial of the exemption.

Issue 2: Consideration of various judgments in support of exemption:
The appellant argued that it had been claiming exemption under section 10(23C) (iiiad) since 1970, and the revenue had allowed it in previous and subsequent years. The appellant contended that its activities were primarily educational, as evidenced by its annual receipts and balance sheet. The appellant also referred to previous assessment orders and case laws to support its claim for exemption. The appellant highlighted decisions such as Deputy Director of Income Tax v. Shanti Devi Progressive Education Society and Vanita Vishram Trust v. CIT to strengthen its argument for exemption under section 10(23C) (iiiad).

Issue 3: Adequacy of discussion in passing the order:
The appellate tribunal reviewed the material and arguments presented by both parties. It noted that the appellant's gross annual receipts were primarily from recognized educational courses, with a small percentage from unrecognized courses. The tribunal found merit in the appellant's submissions that earning a surplus from educational activities was essential for the trust's growth and improvement. Considering the appellant's consistent claim for exemption in previous years and the educational nature of its activities, the tribunal disagreed with the FAA's conclusion. The tribunal directed the AO to allow the benefit under section 10(23C) (iiiad) as the gross annual receipts were below &8377;1 crore and the trust's activities aligned with educational purposes.

In conclusion, the appellate tribunal allowed the appeal filed by the assessee, overturning the denial of exemption under section 10(23C) (iiiad) and directing the AO to grant the benefit based on the educational nature of the trust's activities and the annual receipts falling below the prescribed limit.