2019 (9) TMI 809 - AT - Income Tax

Exemption u/s 11 - charitable activity u/s 2(15) - carrying on the activities of establishment of educational institute for strengthening the cause of education by providing the didactical (designed or intended to teach) facilities etc. - HELD THAT - The assessee is carrying on object of establishing and helping universities, colleges, schools and other institutions for strengthening the cause of education by providing didactical facilities provide consultancy support in the area of educational planning and administration for opening, diversifying and developing the existing or new institutions. It also provides mutual and technical cooperation for implementing and supplementing for establishment of universities. It has entered into an MOU with the Global Open University, Nagaland for helping the university in the areas of instructional material and resource development, research design, publications and collaborative programme development. As assigned duty of preparation and publication of study material including its distribution to the students from time to time. It was also helping in coordinating the development activities of the universities. The trust has appointed 200 teachers who guide the students in studying course material and their queries of study material. It also helps the students in preparation for examination. Such facts are stated before the ld AO per letter dated 08.06.2016. The assessee also submitted the details of course material expenses of ₹ 72.37 lakhs, which was for the course material, it can be said to be an educational activity or not. Admittedly, in the earlier years the claim of the assessee is accepted. The issue is discussed in case of DIT Vs. The Delhi Public School Society 2018 (4) TMI 714 - DELHI HIGH COURT , wherein, the issue is examined that when the assessee is carrying out opening and running around 120 schools through franchise agreement and franchise charges received with the assessee for using the name of Delhi Public School by the satellite schools in and outside India and assessee earned franchisee fees is an educational activity or business activity. The memorandum of association of DPS society as well as the joint venture agreement entered by DPS society with the satellite schools is having motive of an educational purpose. It is an educational activity which qualifies as a charitable purpose within the meaning of section 2(15) of the Act. It further held that the objected activity were an activity incidental to the dominant educational purposes. Further, in ITO (E), TRUST WARD II, DELHI VERSUS SOCIETY FOR ESSENTIAL HEALTH ACTION TRAINING 2014 (3) TMI 101 - ITAT DELHI for Assessment Year 2009-10, the coordinate bench also held that when a trust entered into an agreement with the assessee society in providing research services is also engaged in charitable purpose even if it incidentally involves the carrying on of commercial activity. Admittedly, the assessee is also receiving examination fees, conducting such examination, providing help to the university, and incurring expenses on them. Admittedly, it is not shown by the ld AO that the revenue surplus generated by the assessee is not utilized for the purposes of educational activities. Thus, prima facie assessee is carrying on the educational activities and not the business as facilitator. Accordingly, orders of the lower authorities are reversed and appeal of the assessee is allowed.

Issues Involved:
1. Whether the appellant's activities qualify as "education" under Section 2(15) of the Income Tax Act.
2. Whether the appellant's activities qualify as "charitable" under Section 2(15) of the Income Tax Act.
3. Consistency in tax treatment for the appellant's activities in previous assessment years.
4. Validity of indirect revocation of registration under Sections 12A/12AA.
5. Reduction of interest accrued but not received.

Issue-Wise Detailed Analysis:

1. Qualification as "Education" under Section 2(15):

The appellant argued that its activities should be considered as educational under Section 2(15) of the Income Tax Act, referencing various court rulings. The Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] found the appellant's activities to be business in nature, not education. The AO noted that the appellant entered into an MOU with Global Open University, Nagaland, sharing 67% of the fees collected by the university. The AO and CIT(A) concluded that the appellant was merely a facilitator, procuring study materials and engaging part-time teachers without having its own educational infrastructure. They relied on the Supreme Court's decision in Sole Trustee Lok Shikshana Trust Vs. CIT, which held that the appellant's activities did not constitute "education."

2. Qualification as "Charitable" under Section 2(15):

The appellant contended that even if its activities did not qualify as "education," they should be considered as "charitable" under the "general public utility" clause of Section 2(15). The CIT(A) rejected this argument, stating that the appellant's activities were non-charitable and commercial in nature. The appellant's role was limited to procuring study materials and engaging part-time teachers, without conducting classes or awarding certificates.

3. Consistency in Tax Treatment:

The appellant argued that its activities were accepted as educational in nature in previous assessment years (2012-13 and 2013-14) under Section 143(3) and that the revenue should maintain consistency. The CIT(A) dismissed this argument, stating that the principle of res judicata does not apply to income tax proceedings, and a wrong view taken in the past cannot be perpetuated based on consistency.

4. Validity of Indirect Revocation of Registration:

The appellant claimed that the AO and CIT(A) indirectly attempted to revoke its valid registration under Sections 12A/12AA by reviewing its activities, which is not permissible in law. The CIT(A) did not directly address this issue but upheld the AO's findings that the appellant's activities were non-charitable.

5. Reduction of Interest Accrued but Not Received:

The appellant sought a reduction of interest accrued but not received, amounting to ?61,75,292, which was already included in the gross receipt. The CIT(A) did not explicitly address this issue in the detailed analysis.

Tribunal's Decision:

The Tribunal held that the appellant's activities qualify as educational and charitable under Section 2(15) of the Income Tax Act. The Tribunal noted that the appellant's activities were accepted in previous assessment years, and there was no change in the facts and circumstances. The Tribunal cited various judicial precedents, including the Delhi High Court's decision in Delhi Bureau of Textbooks Vs. Director Income Tax, which held that preparation and distribution of textbooks contribute to the training and development of students. The Tribunal concluded that the appellant's activities are educational and eligible for exemption under Sections 11 and 12 of the Act. The Tribunal reversed the orders of the lower authorities and allowed the appellant's appeal.

Conclusion:

The appeal was allowed, and the appellant's activities were recognized as educational and charitable, qualifying for exemption under Sections 11 and 12 of the Income Tax Act. The Tribunal emphasized the principle of consistency and the educational nature of the appellant's activities.

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