2022 (7) TMI 177 - AT - Income Tax

Exemption u/s 11 - Claim denied as coaching classes do not serve the purpose of education as a charitable activity within the meaning of Section 2(15) - scope of charitable activity - assessee is running various study centres as per its agreement with Yashwantrao Chavhan Maharashtra Open University, Nashik as per the duly approved programmes - HELD THAT - We note first of all from a perusal of the assessee s detailed paper book that it has been running various study centres as per its agreement with Yashwantrao Chavhan Maharashtra Open University, Nashik as per the duly approved programmes. The said agreement suggests that the assessee is supposed to offer and carry out various study programmes for the university s registered students by way of correspondence classes, evaluation and as evolving course material as well other allied activities. That being the case, we are of the opinion that the CIT(A) has rightly held the assessee is eligible for the impugned exemption since it is carrying out education activities only. We draw support from Lok Shikshan Trust 1975 (8) TMI 1 - SUPREME COURT , Saurashtra Education Foundation decisions 2004 (2) TMI 11 - GUJARAT HIGH COURT that such educational activities resulting in university degrees in various courses indeed make it eligible for Section 11 exemption. Section 11 exemption proceedings very much empower the Assessing Officer to verify the nature of the assessee s activity(ies) as to whether they are in line with its objects or not. Learned counsel lastly sought to pin-point the fact that all its foregoing classes are very much in tune with the university s approval only. He could hardly rebut the fact that a university is set up after its approval from the University Grants Commission UGC , a statutory body set up under the University Grants Commission Act, 1956 which makes provision for coordination of and determination of standards in universities. We fail to understand as to how any university, which has been set up under the UGC Act could grant affiliation for coaching classes which are nowhere part of commission s standards. Faced with this situation, we are of the opinion that the learned Assessing Officer needs to factually verify all the assessee s evidence(s) afresh and treat it as eligible for Section 11 exemption only for those courses which are run by the university strictly in tune with the UGC s guidelines and if it is found that the coaching classes herein violate the same, the latter s would be held as not entitled for the impugned exemption in light of the cited case laws. The assessee is directed to file all the relevant details within three effective opportunities failing which the learned Assessing Officer shall be at liberty to proceed as per law.

Summary

Issues Involved:
1. Definition and scope of "education" under Section 2(15) of the Income Tax Act.
2. Eligibility of the assessee for exemption under Section 11 of the Income Tax Act.
3. Applicability of the proviso to Section 2(15) concerning commercial activities.
4. Treatment of coaching classes as "education" for charitable purposes.
5. Assessing Officer's rejection of the application and accumulation under Section 11(1)(a) of the Act.

Detailed Analysis:

1. Definition and Scope of "Education" under Section 2(15):
The Revenue contended that the term "education" under Section 2(15) should be interpreted narrowly, as per the Supreme Court's decision in Sole Trustee, Lok Shikshan Trust Vs. CIT, which defines education as systematic instruction, schooling, or training given to the young in preparation for the work of life. The CIT(A), however, held that the term "education" has been used in a wider sense and in its widest amplitude, allowing the activities of the assessee to be treated as "education" under Section 2(15).

2. Eligibility for Exemption under Section 11:
The CIT(A) found that the assessee's activities qualify as "education" and thus are eligible for exemption under Section 11. The CIT(A) noted that the assessee is registered under the Bombay Trust Act, 1950, and has been granted registration under Section 12A, indicating its charitable nature. The CIT(A) also emphasized that the assessee's activities are under the control and regular monitoring of the charity commissioner.

3. Applicability of the Proviso to Section 2(15):
The proviso to Section 2(15) states that the advancement of any other object of general public utility shall not be considered a charitable purpose if it involves carrying out any activity in the nature of trade, commerce, or business. The CIT(A) concluded that this proviso does not apply to the assessee's activities, as the predominant object of the trust is education, which falls within the main limb of Section 2(15). The CIT(A) further noted that the collection of fees by the assessee is not with the intention to earn surplus but to plough back for educational purposes.

4. Treatment of Coaching Classes as "Education":
The CIT(A) differentiated the assessee's activities from those in the Bihar Institute of Mining and Mine Surveying case, where running a private coaching institute was not considered "education." The CIT(A) highlighted that the assessee is not running a private coaching class but is conducting training programs approved by Yashwantrao Chavhan Maharashtra Open University, Nashik. The CIT(A) held that the assessee's coaching classes for UPSC/MPSC examinations and other educational programs qualify as "education" under Section 2(15).

5. Assessing Officer's Rejection of Application and Accumulation under Section 11(1)(a):
The assessee's cross-objection argued that the Assessing Officer erred in rejecting the application and accumulation under Section 11(1)(a) by holding that the amount transferred to a specific reserve fund is not utilization or expenditure on the objects of the trust. The CIT(A) did not adjudicate this ground, and the Tribunal remitted the issue back to the Assessing Officer for fresh verification.

Conclusion:
The Tribunal upheld the CIT(A)'s decision that the assessee's activities qualify as "education" under Section 2(15) and are eligible for exemption under Section 11. However, it directed the Assessing Officer to verify whether the assessee's coaching classes comply with the UGC's guidelines and to grant exemption only for those courses run by the university in accordance with the UGC's standards. The Tribunal also remitted the assessee's cross-objection regarding the application and accumulation under Section 11(1)(a) back to the Assessing Officer for fresh consideration.

Order:
The Revenue's appeal and the assessee's cross-objection are allowed for statistical purposes, with directions for further verification by the Assessing Officer. The order was pronounced in the open court on 1st July, 2022.