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TMI Blog2012 (6) TMI 602X X X X Extracts X X X X X X X X Extracts X X X X ..... sity under its authority, was also an educational institution. Whether the substantial surplus generated by the assessee for the relevant previous year would make it a commercial entity - Held that:- Merely because the education activity had resulted in a surplus, would not be a ground to hold that assessee was not carrying on charitable activity. There is no case for the Revenue that surplus generated by the assessee on account of its activities were divided among the trustees or taken by the trustees but, for certain violation allegedly falling under Section 13(1)(c). Therefore, assessee could not have been denied the eligible exemption u/s 11 and 12 for a reason that it was not doing charitable activity as defined u/s 2(15). Violation u/s 13(1)(c) - sum of ₹ 30 lakhs withdrawn from the assessee-Trust and held by one of the trustees for two days - Held that:- It will not be reasonable to take a view that any benefit could have been derived by trustee in such a short period of two days. No violation could be established. Further, A.O. is directed to verify the explanations given by the assessee insofar as alleged violation u/s 13(1)(c) was concerned. If these are e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further, assessee was not affiliated to the Government nor recognized by UGC or any other authority for the purpose of education. Assessing Officer also noted that assessee indeed was given deemed registration under Section 12A of the Act by the Tribunal, but, however, according to him, such grant of registration under Section 12A of the Act would not mean that assessee was a charitable Trust. The Income and Expenditure of the assessee, as per the A.O., showed that it was receiving fees from Annamalai University for students enrolled and also derived income on bank deposits and had also received discounts. A.O. thus came to a conclusion that assessee was not doing any charitable activity. He also relied on the TDS certificate issued by the Annamalai University which mentioned that fees were paid by the University to the assessee for professional and technical services. As per the A.O., if education was to be considered charitable, there should be an element of public benefit or philanthropy. But, the assessee was running on commercial lines, hence, exemption could not be granted. He thus denied the claim of exemption under Section 11 of the Act. Reliance was placed on the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Shikshana Trust v. CIT [1975] 101 ITR 234 (SC) ( f ) Gujarat State Co-operative Union v. CIT [1992] 103 CTR 195 IR 279 (Guj) ( g ) CIT v. Sri Thyaga Brahma Gana Sabha (Regd) [1991] 188 ITR 160 (Mad) 6. However, the CIT(Appeals) was not impressed. According to him, assessee's role was limited to carrying out the instructions of Annamalai University and it could not deviate from such instructions. It could not admit even a single student and could not reject any students admitted by the said University. Assessee could not conduct any examination nor could award any certificate or degrees. Activities of the assessee were nothing but providing infrastructure and technical manpower. Assessee, according to CIT(Appeals), was working on commercial principles and solely aimed at earning profits. The MOU with Annamalai University clearly showed that assessee was being remunerated for rendering professional services and providing infrastructure. The surplus generated in the relevant previous year came to Rs. 1,13,55,617/- which was quite substantial and the claim of charity was unsubstantiated. Relying on the decision of Hon'ble jurisdictional High Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... party. As for sum of Rs. 7,25,000/- advanced to Sri Ramachandra Educational Trust, submission of the assessee was that such Trust was also having educational objectives and it was given as an interest-free advance for education purpose only. However, none of these submissions found any positive response from the CIT(Appeals). According to him, these were all clear and undisputed violation of the nature mentioned in Section 13(1)(c) of the Act. Relying on the decision of Hon'ble jurisdictional High Court in the case of Ramalingam Charities v. CIT (56 DTR 328) and that of Hon'ble Delhi High Court in the case of P.T. Kanahya Lal Punj Charitable Trust v. DIT(E) (297 ITR 66), CIT(Appeals) observed that advancing loan to the members of the Trust resulted in violation of the nature mentioned in Section 13(1)(c) of the Act. Thus, he confirmed the order of A.O. denying the assessee benefit of exemption under Section 11 of the Act, on account of this reason also. 8. Now before us, learned A.R., strongly assailing the orders of authorities below, took us through the Memorandum of Understanding (MOU) entered between the assessee and Annamalai University, placed at paper-book pages ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness of making money by selling education. Relying on the decision of Hon'ble Delhi High Court in the case of Institute of Chartered Accountants of India v. The Director General of Income Tax (Exemptions) in Writ Petition (Civil) N.1927 of 2010, placed at paper-book pages 65 to 121, learned A.R. submitted that conduct of courses in which degrees were awarded by a recognized University could not be equated or categorized with a coaching class conducted by private institutes, for preparing students to appear for entrance examination or for pre-admission or examinations or for other professional examinations. The courses conducted by the assessee could not be equated with that of a private coaching institute. A.R. pointed out that Hon'ble Delhi High Court had considered the decision of Hon'ble Apex Court in the case of Sole Trustee, Loka Shikshana Trust (supra) relied on by the A.O. for denying the benefit of exemption under Section 11 of the Act to the assessee. According to him, what education connoted was the process of training and developing knowledge, skill, mind and character of students by formal schooling and formal education and thus required an organized and systematic trai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ucational Trust was concerned, A.R. submitted that the said Trust was an institution registered under Section 12A and a copy of certificate of such registration was also filed. 10. Per contra, learned D.R. submitted that assessee was nothing but a coaching institute and was only rendering professional services as per the MOU with Annamalai University. The said agreement clearly indicated that assessee was entitled to a part of the fees remitted by the students, as professional fees for the services rendered by it. Even TDS certificate issued by Annamalai University clearly showed it as professional fees. Conducting coaching class will not be an education. Decision of Hon'ble Apex Court in the case of Sole Trustee, Loka Shikshana Trust (supra) clearly laid down that formal schooling and formal education alone could be considered as education and the term "education" could not be given a wide meaning so as to encompass any type of coaching, so as to be eligible for exemption provided under the Act. Insofar as violation under Section 13(1)(c) of the Act was concerned, learned D.R. submitted that it was an admitted position that one of the trustees had enjoyed benefit of Rs. 30 lak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting specialized education in Hotel Management, Tourism Catering Technology offered by the Party No.1 and Party No.2. The Annamalai University will be represented by the Registrar while Soorya Educational Trust will be represented by its Managing Trustee. ( a ) Resolved that the Party No.2 is to offer the programmes approved by Party No.1 jointly with the Party No.2 through Distance Education mode of Annamalai University 50% cost of the first advertisement will be borne by the Party No.1 (any one of leading dailies) and subsequent advertisement charges will be met by the Party No.2. The Party No.2 shall at its own cost give advertisement in dailies and other Media with due approval of the Party No.1 ( b ) The development of curricula and conduct of the programmes will be the responsibility of Soorya Educational Trust. The syllabi, regulations and scheme of examinations will be approved by the Academic Council of Annamalai University. ( c ) Annamalai University is responsible for confirming the admission and for the conduct of examination, evaluation and award of Diploma/Degree to the enrolled students. ( d ) The conduct of Personal Contact Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment will be in force from the academic year 2004-05 for the Degree, P.G. Diploma, Diploma and Craft programmes for a period of ten years and in continuance thereafter. If there is breach of any terms and conditions, the agreement can be terminated by giving three months notice in writing by either party ending with the end of any academic year. Thereafter, the programme should be conducted for another two years to enable the registered candidates to complete the programme and also the examination will be conducted for another five years. ( n ) Both the parties agree not to have tie-up for the said programmes with any other institutions. In case the Soorya Educational Trust has got already tie up with any other University or Institution with reference to any Diploma, Degree or Craft programme, the tie up should be terminated with effect from today i.e. 11th February 2004. In this matter, if there be any legal dispute it should be settled by the Soorya Educational Trust only and Annamalai University will not be having any binding in any way. ( o ) The Party No.1 and the Party No.2 agree for all the above said terms and conditions. ( p ) In this agreement t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Party No.2 shall print and issue Part - III study materials of B.Sc. in Hotel Management and Tourism, Diploma in Hotel Management and Catering Technology, P.G. Diploma in Hotel Management and Craft Programmes. 8. The Party No.1 shall decide hours for the Personal Contact Programme at Soorya Institute of Management Studies, Pondicherry and arrange examination centres, conduct the examination as per the rules and regulations of the Directorate of Distance Education, Annamalai University, Annamalai Nagar, Chidambaram, Tamil Nadu and coordinate all affairs related with the examinations including the issue of marks list at the end of the year "Degree / Diploma" certificate at the end of the programme. 9. The Party No.2 shall provide a premises to establish an institute with all infrastructure and shall bear all the expenditure in the establishment of centres anywhere in India. The Party No.2 shall appoint Principal / Director to the institute with the approval of Party 1 to manage day to day affairs of the institute. Also shall manage all the expenses including salary to the staff, rent for the premises, electricity bill, water bill, etc. incurred in the day-to-day ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n favour of the Controller of Examinations, Annamalai University, payable at Chennai will be sent by the students to the Party No.1. The theory and practical examinations shall be conducted by the Annamalai University in the selected Examination centres. The Party No.2 will be paid Rs.20/- per candidate for every practical examination wherever they hold. 16. The University will have the right to inspect the Soorya Educational Trust centres and the ongoing programmes." What we can discern from the above agreement is that the degrees and diplomas were awarded by Annamalai University. The curricula and conduct of programmes were the responsibility of the assessee. The curricula had to be in accordance with the syllabus prescribed by Academic Council of Annamalai University. Assessee was to conduct theory and practical classes. The programmes were to be conducted in a full-fledged manner. Scheme of the examinations were to be sorted out jointly. Resource persons were to be recruited by the assessee and panel of such resource persons had to be approved by Annamalai University. Attendance register was required to be maintained by the assessee for both theory and practicals and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urpose to impart education, training, research and development. 2. The areas of interest shall be, ( a ) Arts ( b ) Science ( c ) Medical ( d ) Engineering ( e ) Commerce ( f ) Hotel Management Catering Technology ( g ) Finance ( h ) Physical ( i ) Computer Science ( j ) Information Technology ( k ) Agriculture ( l ) Marine Science ( m ) Horticulture and kindered disciplines Now existing or to be invented/discovered in the future. 4. To provide a conducive atmosphere, adequate facility and/or patronage for research work. 5. To provide and arrange to publish the result of research periodically or otherwise. 6. To provide adequate infrastructure such as hostels, library, playground, gymnasium, auditorium, laboratory, research centre, hospital, transport, means of communications, physiotherapy and such equipped and furnished facilities. 7. To arrange for exchange of scholars and students and also employees for the Furtherance and adv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in a surplus, would not be a ground to hold that assessee was not carrying on charitable activity. There is no case for the Revenue that surplus generated by the assessee on account of its activities were divided among the trustees or taken by the trustees but, for certain violation allegedly falling under Section 13(1)(c) of the Act. A look at the Income and Expenditure and balance-sheet of the assessee placed at paper-book page 8 clearly shows that excess of income generated Rs. 1,13,97,056.73 was utilized in making investment in various assets of the Trust. Hon'ble Gujarat High Court in the case of Gujarat State Co-operative Union v. CIT (195 ITR 279), after considering the judgment of Hon'ble Apex Court in the case of Sole Trustee, Loka Shikshana Trust ( supra ), had held as under:- "The Supreme Court, in the above observations, by referring to the systematic instruction, schooling or training given o the young has only cited an instance in order to indicate as to what the word "education" appearing in Section 2(15) of the Act which defines "charitable purposes" is intended to mean. We are certain that these observations were not intended to keep out of the meani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o nail down the concept of education to a particular formula or to flow it only through a defined channel. Its progress lies in the acceptance of new ideas and development of appropriate means to reach them to the recipients." Assessee here, in our opinion, did fall within the concept of rendering a formal education and could not be equated with a coaching institute. We are, therefore, of the opinion that assessee could not have been denied the eligible exemption under Sections 11 and 12 of the Act for a reason that it was not doing charitable activity as defined under Section 2(15) of the Act. 13. Coming to the aspect of violation under Section 13(1)(c) of the Act, it is an admitted position that a sum of Rs. 30 lakhs was withdrawn from the assessee-Trust on 4.3.2008 and held by one of the trustees Shri Victor Vijayaraj for two days and returned on 6.3.2008. The period for which the amount was held by the trustee came to two days only and it will not be reasonable to take a view that any benefit could have been derived by Shri Victor Vijayaraj in such a short period of two days. Assessee's contention that the money was returned as soon as the mistake was recognized, app ..... 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