2016 (6) TMI 1389 - AT - Income Tax

Exemption u/s. 11 denied - assessee is involved in commercial activities as the assessee receives coaching fees from the students of CA while giving coaching to the CA students - HELD THAT - As decided in own case 2014 (4) TMI 962 - ITAT DELHI The Institute as such merely it is receiving coaching fee from students for imparting education, cannot be said to have been carrying on business and accordingly it is not required to maintain separate books of accounts as alleged by DIT(E). The income of the coaching classes earned by the assessee institute is within its objects and its Regulations and further these activities are educational activity within the definition of section 2(15) of the Income Tax Act, 1961, and consequently therefore cannot be activity of business for which separate books of accounts are required to be maintained. The order of the ld.DIT(E) is therefore, not sustainable as the income of the Institute is exempt not only u/s 10(23C)(iv) but also under section 11. The institute is an educational institute and hence its income will also be exempt under section 11 as education falls within the meaning of charitable purpose under section 2(15) of the Act. - Decided in favour of assessee.

Summary

Issues Involved:

1. Whether the activities of the assessee fall under the category of 'education' as defined under section 2(15) of the Income Tax Act, 1961.
2. Whether the assessee's activities are commercial in nature, thereby disqualifying it from exemption under sections 11 and 12 of the Income Tax Act.
3. Whether the assessee's activities fall under 'Advancement of any other object of general public utility' and if the first proviso to section 2(15) is applicable.

Issue-wise Detailed Analysis:

1. Definition of 'Education' under Section 2(15):

The Revenue argued that the assessee's predominant objectives are to conduct examinations for Chartered Accountants and regulate its members, which do not constitute 'education' as per section 2(15) of the Income Tax Act, 1961. They relied on the Supreme Court judgment in Sole Trustee, Lok Shikshana Trust vs. Commissioner of Income Tax (1975) 10 ITR 234 (SC), which defined 'education' as systematic instruction, schooling, or training given to the young in preparation for the work of life, and not in the wide sense of any acquisition of knowledge.

The Tribunal noted that the assessee's activities include enrolling CA students, providing study material, conducting classes and examinations, awarding degrees, regulating the profession, and issuing accounting standards. These activities are integral to imparting education and fall under the definition of 'education' under section 2(15). The Tribunal referred to various precedents where similar issues were decided in favor of the assessee, including judgments from the High Court and the Supreme Court.

2. Commercial Nature of Activities and Exemption under Sections 11 and 12:

The Assessing Officer denied the exemption under sections 11 and 12, arguing that the assessee was involved in commercial activities by receiving coaching fees from CA students. The Tribunal, however, found that the coaching classes were conducted to benefit CA students and were integral to imparting education. The Tribunal referred to previous decisions where it was held that merely generating income from such activities does not change the character of the institution as long as the surplus is used for the advancement of its objectives.

The Tribunal upheld the CIT(A)'s order, which allowed the exemption under sections 11 and 12, noting that the case was fully covered by earlier decisions in favor of the assessee for previous assessment years.

3. Advancement of General Public Utility and Applicability of Proviso to Section 2(15):

The Revenue contended that the assessee's activities fall under 'Advancement of any other object of general public utility' and that the first proviso to section 2(15) is applicable, making the income from coaching classes a business receipt. The Tribunal rejected this argument, stating that the activities of the assessee are educational in nature and do not fall under the category of 'general public utility.'

The Tribunal referred to previous decisions, including the ITAT order dated 17.4.2014 for AY 2009-10, where similar issues were decided in favor of the assessee. The Tribunal emphasized that the assessee's activities are educational and not commercial, and thus the proviso to section 2(15) does not apply.

Conclusion:

The Tribunal dismissed the appeal filed by the Revenue, upholding the CIT(A)'s order that allowed the exemption under sections 11 and 12. The Tribunal found that the assessee's activities constitute 'education' under section 2(15) and are not commercial in nature. The Tribunal also rejected the applicability of the proviso to section 2(15), affirming that the assessee's activities are educational and not for general public utility. The decision was based on consistent precedents from the ITAT, High Court, and Supreme Court in favor of the assessee for previous assessment years.