2017 (8) TMI 170 - AT - Income Tax

Eligibility to exemption u/s 11 - charitable purpose u/s 2(15) - whether assessee does not conduct any formal educational courses nor is affiliated or registered with any authority - Held that - The assessee has not shown to have the capacity for educational activity in regular manner i.e. as a principal activity the essence of which is scholastic instruction howsoever executed imparted in a systematic manner. As pointed out by the Revenue there is no income or expenditure with reference to this activity in its statement. This is only understandable as the academic institutions are only one among the various stake-holders with which the assessee engages so that even a receipt from this activity during the year would have no material impact. In fact as we observe the engagement with the educational institutions is on the fringe though as it appears is slated to be expanded in future. Its operations as aforesaid are primarily as that carried out by the industrial/professional association/body. Commissioner of Income-tax (Appeals) has in our view misguided himself to construe the word education as occurring in section 2(15) in its widest sense. It is only the actual conduct of educational courses where accredited conducted under the auspices of a formal set up so as to be recognised in the field of education which would stand to be regarded as so. The assessee s objects and activity thus only fall within the purview of the residuary category of section 2(15) i.e. advancement of any other object of general public utility so that the first proviso thereto shall apply clearly debarring the assessee on account of its receipt for the year for being subject to exemption under section 11 of the Act. - Decided against assessee.

Summary

Issues Involved:
1. Delay in filing the appeal.
2. Exigibility to exemption under section 11 of the Income-tax Act, 1961.
3. Determination of the assessee's object as "education" or "advancement of any other object of general public utility."

Detailed Analysis:

1. Delay in Filing the Appeal:
At the outset, the Bench observed a delay of 229 days in filing the appeal. The Revenue filed a condonation petition in the form of an affidavit, explaining that the delay was due to the dislocation of the file, which had been mixed up with other files and was finally traced at the Trichy Exemptions Office. The appeal was filed immediately thereafter. The assessee did not contest the facts, and no serious objections were raised against the condonation of delay. The Bench was satisfied that there was a reasonable cause for the delay and thus condoned it, admitting the appeal for hearing.

2. Exigibility to Exemption Under Section 11:
The primary issue in the appeal was whether the assessee's income was eligible for exemption under section 11 of the Income-tax Act, 1961. The Revenue had denied this exemption, which was allowed by the first appellate authority. The controversy centered on whether the assessee-society, registered as a charitable institution, was pursuing the object of "education" or "advancement of any other object of general public utility." The assessee's receipts for the relevant year mainly consisted of stall charges, which exceeded ?25 lakhs, potentially disqualifying it under the first proviso to section 2(15).

3. Determination of the Assessee's Object:
The Assessing Officer (AO) argued that the term "education" in section 2(15) denotes systematic instruction, schooling, or training given to the young in preparation for the work of life. The AO noted that the assessee did not conduct any formal educational courses nor was it affiliated or registered with any authority. The AO referenced the case of DIT (Exemptions) v. Institute of Chartered Accountants of India, where the court noted that formal education involves systematic and organized instruction. Conversely, the Commissioner of Income-tax (Appeals) believed that the scope of education should not be confined to formal schooling alone and that the trust's activities in disseminating useful knowledge through conferences, publications, etc., should be considered educational.

Analysis/Findings:
The Tribunal reviewed the objects of the assessee society, which included advancing the art, science, technology, and engineering of fibre reinforced plastics (FRP) and other composites. The Tribunal noted that the assessee's activities, such as organizing conferences and exhibitions, were aimed at promoting the Indian composites industry rather than providing systematic educational instruction. The Tribunal referenced the Supreme Court's decision in Sole Trustee, Loka Shikshana Trust v. CIT, which clarified that "education" in section 2(15) connotes the process of training and developing knowledge, skill, and character through normal schooling. The Tribunal concluded that the assessee's activities did not meet this definition and were more aligned with the advancement of an object of general public utility.

The Tribunal also examined the assessee's financial statements, noting that the principal receipts were from stall charges and sponsorships related to an International Conference and Exhibition on Reinforced Plastics. The Tribunal observed that the assessee's engagement with educational institutions was limited and aimed at promoting FRP technology rather than providing formal education.

Conclusion:
The Tribunal concluded that the assessee's objects and activities fell within the purview of the residuary category of section 2(15), i.e., the advancement of any other object of general public utility. Consequently, the first proviso to section 2(15) applied, disqualifying the assessee from exemption under section 11 due to its receipts exceeding ?25 lakhs. The Tribunal allowed the Revenue's appeal, reversing the decision of the Commissioner of Income-tax (Appeals).

Order:
The appeal of the Revenue was allowed, and the order was pronounced on March 20, 2017, at Chennai.