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TMI Blog2015 (5) TMI 748X X X X Extracts X X X X X X X X Extracts X X X X ..... s no scope with the assessee to get into any charitable activity and this venture in education is purely commercial. He thus concluded that earning profit seems the main motive of the assessee trust; and the genuineness of the activities and charitable content of objectives is not ascertainable. Therefore the appellant trust has preferred the instant appeal before us. 3. The ld AR Shri Gautam Jain submitted that in the instant case, the ld CIT has admitted that the trust has been formed to set up schools which is an educational activity and therefore objective of the appellant trusts are charitable. He contended that the education per se is a charitable object u/s 2(15) of the Act. He placed reliance on the following judgement * Aryan Educational Society Vs. CIT 93 ITD 546, (Del) * Shavak Shiksha Samity Vs. CIT 104 TTJ 127(Del) * CIT Vs. Red Rose School 212 CTR 394 (All) * DIT Vs. Garden City Educational Trust 330 ITR 480 (Karn) * DDIT Vs. Shanti Devi Progressive Education Society 340 ITR 322 (Del) * OP Jindal Global University Vs. CIT 127 ITD 164 (Del) 4. He further submitted that mere entering into a franchise agreement with franchisor to set up school cannot be a ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the Trustees but the same shall be transferred to some other similar Trust/Organization, whose objects are similar to those of this Trust with the prior permission of the Charity Commissioner/ Court / any other law as may be applicable for the time being." 7. As such under the trust deed no part of the income and property of the trust either during the operational existence of the trust or on its dissolution shall be for benefit its trustees but all the receipts/ income shall be applied for the objects of the trust. The CIT has also further found as matter of fact that pursuant to the above objects the trust had entered into a franchisee agreement with the Zee Learn Ltd for setting up school. Further since the franchisee agreement provides that the school would be run under the guidelines and specification of the franchisor therefore he held that the venture in education is purely commercial. To appreciate the above we consider it appropriate to know the provisions contained in section 2(15) of the act which reproduced as under:- "2(15) "charitable purpose" includes relief of the poor, education, medical relief, [preservation of environment (including watersheds, forests and wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntained in Section 2(15). Hence, such entities will not be eligible for exemption under section 11 or under section 10(23C) of the Act if they carry on commercial activities. Whether such an entity is carrying on an activity in the nature of trade, commerce or business is a question of fact which will be decided based on the nature, scope, extent and frequency of the activity." 9. In view of the above we find force in the contention of the ld counsel for the appellant that commerciality is not a test to determine the genuineness of the charitable nature of education activities of a trust or institution under the amended provision of section 2(15) of the Act. The Apex Court in the case of American Hotel and Lodging Association education institution Vs. CBDT reported in 301 ITR 86 has held as under:- " 30. In deciding the character of the recipient, it is not necessary to look at the profits of each year, but to consider the nature of the activities undertaken in India. If the Indian activity has no co-relation to education, exemption has to be denied, (see judgment of this Court in Oxford University Press case (supra). Therefore, the character of the recipient of income must have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be seen, keeping in mind the objects thereof, which necessarily means that the Commissioner shall satisfy himself about the fact that the activities are genuine and in consonance with the objects of the trust or the institution. In other words, if establishing and running a school is the object of the Society, as given in its bye-laws, it has to be satisfied that the Society has established the school, where education is being imparted as per rules and the factum of establishment and running school is a genuine activity. The enquiry regarding genuineness of the activities cannot be stretched beyond this." 12. In the impugned order the ld CIT has relied on the judgment in the case of CIT vs. National Institute of Aeronautical Engineering 314 ITR 428 to hold that mere imparting education for primary purpose of earning profit cannot said to be a charitable activity. The said judgement has no application to the facts of the appellant trust. There is no evidence to show that this trust has been set up with the primary purpose earning profit and in any case, as held above under the amended provisions, "trade" or "commerce" cannot be a consideration to hold that "education activities ..... X X X X Extracts X X X X X X X X Extracts X X X X
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