2021 (4) TMI 153 - AT - Income Tax

Exemption u/s 10 (23C)(iiiab) - CIT (A) held that the assessee is a society engaged in improvement of standard of vocational training under public private partnership scheme but do not fulfill the primary conditions for claim u/ s 10 (23C)(iiiab) - HELD THAT - The interpretation of the word education by Hon ble Supreme Court in the case of Sole Trustee, Loka Sikshana Trust v CIT 1975 (8) TMI 1 - SUPREME COURT - the word education has been used to denote systematic instruction, schooling or training given to the young in preparation for the work of life and it also connotes the whole course of scholastic instruction which a person has received, which led to the understanding that only institutions affiliated to boards and universities providing schooling which resulted in a degree or diploma. The education also included primary education as such education was a backward integration to normal schooling. The case of Sole Trustee, Loka Sikshana Trust v CIT 1975 (8) TMI 1 - SUPREME COURT has been the yardstick for interpretation of the word education . The ratio basically boils down to (i) institutes affiliated to boards and universities providing schooling which resulted in a degree or diploma. (ii) primary education as was a backward integration to normal schooling. The Hon ble Gujarat High Court considered identical issue in the case of Saurashtra Education Foundation v. CIT 2004 (2) TMI 11 - GUJARAT HIGH COURT and held that all kinds of education would not fall within the meaning of section 2(15) of the Act, unless the training, instruction, etc. results in grant of a diploma or degree by a university or a governmental agency. Various Courts have held that institutions allied to educational institutions which were providing normal schooling were also educational in nature. Institution conducting exams for diploma and degree courses were also treated as educational in nature. It has also been held that additional training or courses shall also be held as education provided such courses are conducting some primary educational activity whereas standalone such courses cannot be treated as education for the purpose of Income Tax Act. The society has not been registered or affiliated to any board or university or any organization imparting education as defined by the Hon ble Supreme Court. There is a sweeping difference in according the any assessee to the provisions of Section 12AA and Section 10(23C)(iiiab). The conditions and requirements of registration under Section 12 AA and the conditions and prerequisites for the claiming the benefit u/ s 10(23C)(iiiab) differs. We also find that the assessee has been granted registration u/s 12 AA from the provisions of the Act and on going through the various judgments, we hereby hold that the assessee is not entitled to the benefit of Section 10(23C)(iiiab). Appeal of assessee dismissed.

Summary

Issues Involved:
1. Whether the assessee was given a reasonable opportunity to present their case.
2. Whether the assessee qualifies for exemption under Section 10(23C)(iiiab) of the Income Tax Act, 1961.
3. Whether the assessee is an educational institution as defined by the Income Tax Act.
4. Whether the assessee is wholly or substantially financed by the Government.

Issue-wise Detailed Analysis:

1. Reasonable Opportunity to Present the Case:
The assessee contended that they were not given a reasonable opportunity to present their case before the Assessing Officer and the Commissioner of Income Tax (Appeals) [CIT(A)]. They argued that the authorities relied on the bare language of the Act without considering a broader view that might benefit the assessee. The appeal also requested the appellate authority to entertain the appeal without the payment of the disputed demand, citing the lack of a reasonable opportunity to be heard.

2. Qualification for Exemption under Section 10(23C)(iiiab):
The core issue revolved around whether the assessee qualifies for exemption under Section 10(23C)(iiiab) of the Income Tax Act, 1961. The assessee, a registered society, claimed exemption on the interest income earned from fixed deposits, arguing that they existed solely for educational purposes and were substantially financed by the Government. The CIT(A) held that the assessee did not fulfill the primary conditions for the claim under Section 10(23C)(iiiab), as they were engaged in improving vocational training standards but did not qualify as an educational institution per the Act.

3. Definition of Educational Institution:
The assessee argued that the term 'education' should be interpreted broadly to include any improvement in intellectual and analytical abilities. They claimed that their activities in upgrading Industrial Training Institutes (ITIs) under a Central Government scheme should qualify them for the exemption. However, the Tribunal examined the definition of 'education' as interpreted by the Hon'ble Supreme Court in the case of Sole Trustee, Loka Sikshana Trust v CIT [1975] 101 ITR 234, which defined education as systematic instruction or training resulting in a degree or diploma. The Tribunal found that the assessee was not affiliated with any board or university and did not provide such systematic instruction.

4. Financing by the Government:
The Tribunal also examined whether the assessee was wholly or substantially financed by the Government. The assessee had received an interest-free loan from the Ministry of Labour & Employment, repayable after ten years, but no grants, grants-in-aid, or financial assistance. The Tribunal concluded that receiving a repayable loan did not constitute substantial financing by the Government, as required under Section 10(23C)(iiiab).

Conclusion:
The Tribunal found that the assessee did not qualify as an educational institution under Section 10(23C)(iiiab) and was not substantially financed by the Government. Therefore, the assessee was not entitled to the claimed exemption. The appeal was dismissed, and the order was pronounced in the open court on 10/03/2021.