2019 (2) TMI 1129 - AT - Income Tax

Charitable activity - claim of exemption U/S 10(23C)(iiiab) - whether the appellant educational institution is not existing solely for educational purposes? - CIT (A) declined the exemption to the assessee society on the ground that the assessee society does not exist solely for educational purposes - HELD THAT - Though the main objects of the assessee society are divided into 8 objects but all are interconnected with each other so as to impart the best available trainings to the students to develop new products / business of sport goods and leisure time equipments - when the training imparted to the students is not to produce goods of world standard by making necessary marketing research and by identifying products for domestic and export market, such training would be of no use and the students who have been given training would not be in a position to get placement in the sport goods and leisure time equipments industry. Moreover the entire emphasis is laid by our Government on skill development by departing from age old system of imparting academic education and training not as per requirement of the industry. When the assessee society is admittedly getting raw material from the various industries to produce the sport goods for them and the job charges paid by them are again used for running the training institute it can not be said by any stretch of imagination that assessee society is not being run for education / training purpose. Particularly, there is no case of the Revenue that the main objects of the assessee society is profit making rather declining the exemption on the sole ground that the assessee institution is not existing solely for educational purposes. So, we are constrained to record that the word education is to be given wide interpretation which includes training and developing the knowledge, skill, mind and character of the students by normal schooling. So, we are of the considered view that assessee society is engaged in imparting training to the students in manufacturing the sport goods and leisure equipments without any profit motive. Thus the assessee society, substantially financed by the Government of India, is engaged only in imparting research based education/ skill training to the students in manufacturing of sports goods and leisure equipments without any profit motive, to enable them to get placement falls within the definition of education u/s 2(15) of the Act, hence entitled for exemption under section 10(23C)(iiiab) - Decided in favour of assessee.

Summary

Issues:
- Eligibility for exemption under section 10(23C)(iiib) of the Income-tax Act
- Interpretation of the term "education" for exemption purposes
- Relevance of registration under section 12AA of the Act for claiming exemption under section 10(23C)(iiiab)

Analysis:
1. Eligibility for exemption under section 10(23C)(iiib): The appellant, an educational institution, sought to set aside an order denying exemption under section 10(23C)(iiiab) of the Income-tax Act. The Assessing Officer disallowed the exemption, stating the institution did not exist solely for educational purposes. The Tribunal found that the society was substantially financed by the Government and engaged in various training programs related to sports goods and leisure equipment. The Tribunal held that the society's activities fell within the definition of education, making it eligible for exemption under section 10(23C)(iiiab).

2. Interpretation of the term "education": The Tribunal analyzed the main objectives of the society, which included developing new technologies for sports goods, providing training to craftsmen, and conducting market research. The Tribunal referred to a Supreme Court decision that defined "education" as the process of training and developing knowledge, skills, and character. It concluded that the society's training activities aligned with this definition, emphasizing skill development for industry requirements.

3. Relevance of registration under section 12AA: The Tribunal addressed the issue of registration under section 12AA of the Act. While the CIT (A) had initially rejected the exemption based on lack of registration, the Tribunal noted previous cases where similar institutions were granted registration under section 12AA. The Tribunal highlighted that the claim for exemption under section 10(23C)(iiiab) was independent of registration under section 12AA. Therefore, the Tribunal allowed the appeals, emphasizing that the society's training activities qualified as education under the Act, warranting exemption under section 10(23C)(iiiab).

In conclusion, the Tribunal granted the appellant exemption under section 10(23C)(iiiab) based on the society's substantial government financing and its training programs aligning with the definition of education. The Tribunal's decision underscored the importance of interpreting the term "education" broadly and clarified that registration under section 12AA was not a prerequisite for claiming exemption under section 10(23C)(iiiab).