2019 (5) TMI 1642 - AT - Income Tax

Exemption u/s 11 - charitable activity or not? - activities of the assessee is to facilitate accreditation and continuing supervision through inspection and charging inspection and accreditation fees from various organizations - why its receipt from fees subscription should not be hit by Proviso of section 2(15) ? - HELD THAT - The main objectives of assessee society for assessment and accreditation carried out by the assessee society, the same are to assess and grade colleges and/or institutions of technical and professional education, the courses and programs offered by them, their various units, faculty, department etc.; to stimulate the academic environment and quality of teaching and research in the institutions; to make contribution to the sphere of knowledge in its discipline; to motivate colleges and/or institutions of technical and professional education for research, and adopt teaching practices that groom their students for the innovation and development of leadership qualities; to encourage innovations, self evaluation and accountability in higher education; to promote necessary changes, innovations and reforms all aspects of the working of the colleges/ institutions of technical and professional education for the above purpose; and to help institutions realize their academic objectives; it leads to the conclusion that the assessee society is into charitable activities, the objectives being incidental to the education. Whether receipts of the assessee from fees/ subscription are hit by Proviso to section 2(15)? - HELD THAT - When the assessee society is receiving receipt of fees/ subscription as per norms laid down by Government of India, profit motive is not visible rather all the activities are centered around disciplining, promoting, improving and contributing to similar academic environment and quality of teaching and to enhance the knowledge and discipline of the educational institutions which are incidental to the education and cannot be kept under the objects of general public utility. Further examine the activities being carried out by the assessee society in the light of the fact that in the immediately preceding year i.e. AY 2012-13, assessee has been duly granted exemption u/s 11 by framing assessment u/s 143(3). Undisputedly, there is no change in the aims and objectives of the assessee society which are being carried out in accordance with the Memorandum of Association and Certificate of Registration under Societies Registration Act dated 07.01.2010. There is not an iota of material brought on record by AO if the facts of the year under assessment are distinguishable from AY 2012-13. In these circumstances, rule of consistency as laid down in Radhasoami Satsang vs. CIT 1991 (11) TMI 2 - SUPREME COURT is applicable in this case. AO without proving on record that the activities of the assessee society are in the nature of trade, commerce or business proceeded to deny the benefit of section 11 which is not sustainable in the eyes of law. Rather assessee is carrying out its activities of accreditation as per All India Council for Technical Education (AICTE) Act, 1987 and there is no element of profit and as such First Proviso to section 2(15) is not applicable. We are of the considered view that CIT (A) has rightly allowed the exemption u/s 11 to the assessee by allowing the appeal. - Decided against revenue.

Summary

Issues involved:
Interpretation of section 2(15) of the Income Tax Act regarding charitable activities and exemption under section 11 for an assessee society engaged in assessment and accreditation of educational institutions.

Analysis:

Issue 1: Interpretation of section 2(15) of the Act
The appeal sought to challenge the order passed by the Commissioner of Income-tax (Appeals) regarding the charitable nature of the assessee's activities and eligibility for exemption under section 11 of the Income Tax Act. The Revenue argued that the activities of the assessee, involving accreditation and supervision through fees, fell under the proviso to section 2(15) of the Act, thus disqualifying them from claiming exemption.

Issue 2: Assessment of the Assessee's Activities
The assessee society, registered under the Societies Registration Act, was engaged in assessing and grading technical and professional education institutions, stimulating academic environments, and contributing to knowledge in its discipline. The Assessing Officer (AO) questioned the exemption under section 11 due to the receipt of fees and subscriptions, leading to the computation of the assessee's income.

Issue 3: Application of Provisions and Precedents
The Tribunal analyzed the provisions of section 2(15) defining charitable purpose and the proviso restricting activities in the nature of trade or business. The Tribunal found that the assessee's activities were charitable in nature, focused on academic improvement, and not driven by profit motives. The Tribunal applied the rule of consistency, citing a previous assessment year where the assessee was granted exemption under section 11.

Conclusion:
The Tribunal upheld the order of the Commissioner of Income-tax (Appeals) granting exemption under section 11 to the assessee society. It emphasized the charitable nature of the activities, lack of profit motive, and consistency in objectives over the years. The appeal by the Revenue was dismissed, and the cross objection filed by the assessee was also dismissed as the appeal was already decided.