2023 (1) TMI 265 - AT - Income Tax

Exemption claimed u/s. 11 - assessee is into mixed objects which consists of education, relief of the poor, medical and also some objects are in the nature of any other objects of general public utility - Charitable activity u/s 2(15) - The assessee is running the tuition centres for all these assessment years - according to the Ld. CIT(A) the activities carried out by the assessee neither comes under definition of education nor in the nature of relief to the poor - As argued by assessee running tuition centres comes under the definition of charitable purpose, because it is in the nature of imparting education - HELD THAT - In this case, the appellant trust came into existence by way of trust deed dated 04.02.2008 and as per said trust deed, the main objects of the trust are mixed in nature which includes relief of the poor, medical relief, education and any other object of general public utility - to ascertain whether the assessee falls in any of specific clauses of the term charitable purpose, one has to see the activities conducted by the appellant trust for the relevant assessment years. In this case, the appellant trust is running a coaching/tuition centre under the name and style of Shiksha in various places. The assessee claims that conducting coaching classes comes under the term education as defined u/s. 2(15) of the Act. We do not find merit in the argument of assessee, because the term education has been defined by the Hon ble Supreme Court in the case of Sole Trustee, Loka Shikshana Trust 1975 (8) TMI 1 - SUPREME COURT where it has been explained the term education as defined u/s. 2(15) of the Act and as per Hon ble Supreme Court, it is the systematic instruction, schooling or training given to the young in preparation for the work of life and further, when education connotes in that clause is the process of training and developing the knowledge, skill, mind and character and students by normal schooling. This legal position has been affirmed by the Hon ble Supreme Court in the case of New Noble Educational Society vs Chief Commissioner of Income-tax, 2022 (10) TMI 855 - SUPREME COURT where it has been affirmed the definition of education as held in Sole Trustee, Loka Shikshana Trust vs CIT, (supra). In other words, the term education only includes a formal school education which provides education in the field of knowledge, skill and character of students to prepare for the work of life. Therefore, in our considered view, running tuition centres does not come under the definition of education as defined u/s. 2(15). Arguments of the counsel for the assessee that the objects and activities of the trust is in the nature of relief of the poor as defined u/s. 2(15) - Relief of the poor means providing essential needs to the poor, without charging any fees or by charging a nominal fee. Therefore, entities who have those objects will continue to be eligible for exemption in the category of relief of the poor. If at all, the activity of the assessee i.e., running tuition centres can be considered under relief of the poor, then the assessee should prove with necessary evidence that it is giving admission to poor and eligible students of weaker section and also not charged fees in commercial lines. However, fact remains that lower authorities have categorically held that neither the assessee proved admission given to poor and weaker section nor charging nominal fee without any profit motive. Although, the assessee claims that it has given admission to poor and needy students by charging nominal fees, the said claim was not substantiated. CIT(A) has recorded a categorical finding that no evidence have been placed on record to prove that the appellant had given admission to poor students and also charged nominal fee.The issue needs to go back to the file of the Assessing Officer for further verification with regard to activities of the assessee to ascertain correct facts that it has provided admission to poor and weaker section students and also not charged any fee in commercial lines. In case, the assessee is able to prove the claim with necessary evidences, then the AO may consider the case of the assessee under the head relief of the poor. Appeals filed for all three assessment years are allowed for statistical purposes.

Summary

Issues Involved:

1. Whether the tuition centers run by the Trust qualify as "education" under Section 2(15) of the Income Tax Act, 1961.
2. Whether the activities of the Trust fall under "relief of the poor" as per Section 2(15) of the Income Tax Act, 1961.
3. Applicability of the proviso to Section 2(15) of the Income Tax Act, 1961, and its impact on the exemption claimed under Sections 11 and 12 of the Act.

Detailed Analysis:

1. Education under Section 2(15):

The appellant Trust argued that its activities of running tuition centers fall under the definition of "education" as per Section 2(15) of the Income Tax Act, 1961. The Trust contended that it provides tuition classes to poor students at concessional fees, which should be considered as imparting education.

However, the Assessing Officer (AO) and the Commissioner of Income-tax (Appeals) (CIT(A)) rejected this claim. They relied on the Supreme Court's decision in Sole Trustee, Loka Shikshana Trust vs CIT, which defined "education" as systematic instruction, schooling, or training given to the young in preparation for the work of life. The CIT(A) further cited the Patna High Court's decision in Bihar Institute of Mining and Mine Surveying vs CIT, which held that coaching of students does not amount to providing education.

The Tribunal upheld these findings, stating that running tuition centers does not come under the definition of "education" as per Section 2(15) of the Act.

2. Relief of the Poor:

The appellant Trust also claimed that its activities fall under "relief of the poor" since it provides tuition classes to poor students at nominal fees. The AO and CIT(A) rejected this claim, stating that the Trust did not provide sufficient evidence to demonstrate that the students were poor and that the fees charged were nominal.

The Tribunal noted that "relief of the poor" encompasses a wide range of activities for the welfare of economically and socially disadvantaged individuals. However, the Trust failed to substantiate its claim with necessary evidence. The Tribunal directed the AO to re-examine the case and verify whether the Trust provided admission to poor and weaker section students and charged nominal fees. If the Trust can prove these claims, the AO may consider the activities under "relief of the poor."

3. Applicability of Proviso to Section 2(15):

The AO invoked the proviso to Section 2(15), which states that the advancement of any other object of general public utility shall not be considered a charitable purpose if it involves carrying on any activity in the nature of trade, commerce, or business. The AO concluded that the Trust's activities were commercial in nature and thus not eligible for exemption under Sections 11 and 12.

The CIT(A) upheld this view, stating that the Trust's activities fell within the ambit of "advancement of any other object of general public utility" and were hit by the proviso to Section 2(15). The Tribunal agreed with this interpretation but allowed the appeal for statistical purposes, directing the AO to verify the Trust's claims regarding relief of the poor.

Conclusion:

The Tribunal concluded that the Trust's activities of running tuition centers do not qualify as "education" under Section 2(15) of the Income Tax Act, 1961. The Trust also failed to substantiate its claim of providing "relief of the poor." The case was remanded to the AO for further verification of the Trust's claims regarding relief of the poor. The applicability of the proviso to Section 2(15) was upheld, impacting the exemption claimed under Sections 11 and 12 of the Act.