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TMI Blog2007 (12) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... clause 26 of Section 65 of the Act. The diploma/degree issued by GLIM is not recognized by law. All India Council of Technical Education (AICTE) has not recognized the institute. It was observed that during the year 2004-05 GLIM had earned excess income over expenditure of Rs. 84,41,777/- and had transferred Rs. 80 lakhs to its infrastructure project fund. After due process of law, the Commissioner (Service Tax) vide his order in original No. 14/07 dated 30.04.07, concluded that GLIM imparted commercial training or coaching as defined in Section 65(26) of the Act. He found that the institute being a licensee under Section 25 of the Companies Act, 1956 and being granted the status of a public charitable trust under the Income Tax Act, 1961 did not alter the character and classification of service provided by the institute. The institute was a 'not for profit' organization under the Income Tax Act. But that fact was not relevant for the Finance Act '94. He also rejected the plea of the institute that it was 'a vocational training institute' as the institute did not impart training which equipped the students with any particular skill to take up a vocation like typing or tailorin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Board's Circular dated 01/11/06 to the effect that the totality of the activity and object of the existence of the institution determined whether it was a commercial institute or not. The Circular was issued to clarify that IITs IIMs existed to impart education and the fact that they charged fees for assisting recruitment of personnel by companies did not make them commercial concerns and therefore 'manpower recruitment agencies'. Commissioner wrongly held that only public educational institutes which conferred recognized degrees (not profit generating educational institutes) are not to be taxed in terms of the Board's Circular. GLIM imparted similar education as IIMs which are not taxed. An alternate plea is that the institute provided vocational training which is exempted from service tax in terms of Notification No. 9/03-ST. There was no deliberate attempt to evade service tax and demand should not have been raised invoking larger period. Penalty imposed is not justified. They failed to follow the formalities under bonefide belief that their activities did not constitute taxable service. They deserve the benefit of Section 80 of the Finance Act, 94 and penalty shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a consideration given by a client to the man power recruitment agency. A commercial concern meant a concern engaged in any activity with profit motive. Revenue's understanding that profit motive was not necessary for a commercial concern was not at all correct. vii). M/s. ICFAI, Hyd. Vs. CCE, Hyd. 2007-TIOL-811-CESTAT-BANG The Tribunal granted waiver of demands, in one case around Rs. 19 crores and in another case above Rs. 9.43 crores, among others. The Tribunal took into account the argument that the amount collected as fee by the assessee was funded back for the purpose of education and therefore, there was no commercial coaching service involved. viii). M/s. Administrative State College in India Vs. CCE 2007-TIOL-613-CESTAT-BANG. The Tribunal granted full waiver in this case since the Government of India has recognized the appellant's activity as non commercial one. The appellants are rendering training to the candidates selected by the Central Government and State Government. Stay granted as the organization is not a profit generating organization. 4. The Ld. SDR submits that the institute collects ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons, grants etc. and investing such funds in shares, securities or other form of movable or immovable properties. As per the MOA no portion of the income or property shall be paid or transferred by way of dividend, bonus or otherwise to members of the company or anybody else through such members. If at all any remuneration or other benefit in money is paid to any member/members, the same will be with the prior approval of the Central Government. Such approval shall be required also for appointment of any member to any office under the company. On dissolution of the company any property available after settling the dues owed by the company shall be transferred to such other institution or institutions having objects similar to the company. If the surplus cannot be donated in the above fashion, the same would be spent towards some charitable objects or in default, by order of the jurisdictional High Court. 5.2. On 7/01/2005, GLIM has been issued licence under Section 25 of the Companies Act, 1956, on the condition that it shall act as per the provisions of the MOA and that its income would be spent solely to promote the objects set forth in the MOA. This allows the compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the appellants, no individual gains any profit by its operations. The MOA clearly spells out that no income earned by the company shall be paid by way of dividend, bonus or otherwise by way of profit to any member of the company or to anybody else through the members. If any surplus remains when the company is wound up, it shall be transferred to another institution run for the same object as the company or for some charitable object. These facts indicate that GLIM is not a commercial concern and therefore, training or coaching rendered by it is not liable to service tax as 'commercial training or coaching'. 5.4. 'Commercial concern' is not defined in the Act. Now we will examine the case law submitted by the counsel for the appellants to see if they throw any light on the scope of this crucial expression. In Board of Control for Cricket in India (supra), the Tribunal went by the judgement of the apex Court in the case of Secretary, Ministry of I B Vs. Cricket Association of Bengal, reported in [1995 (2) SCC 161] which had held that BCCI was not a commercial organization. In Institute of Banking and Personnel Selection (supra), the Tribunal held that the institute setup w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to so carry on the activity that the expenditure balances the income and there is no resulting profit. That would not only be difficult of practical realization but would also reflect unsound principle of management. We, therefore, with Beg J. when he said in Sole Trustee Loka Shikshana Trusts case (1975)101 ITR 234, 256(SC) that: ".. if the profits must feed a charitable purpose under the terms of the trust, the mere fact that the activities of the trust yield profit cannot alter the charitable character of the trust. This test now is, more clearly than in the past, the genuineness of the purpose tested by the obligation created to spend the money exclusively or essentially on charity. 5.5 We find the ensuing observations of the Tribunal in the above order squarely apply to the subject case. As per CBEC Circular F.No. 137/71/2006-CX dated 1.11.06, a commercial concern is an institution or establishment that is primarily engaged in commercial activities. The Board clarified that the principal activity of institutes like IITs or IIMs is to impart education without the objective of making profit and, therefore, such institutes cannot be called commercial concerns, even if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity education which has received well deserved recognition. 6.1 Healthcare and education are social services essential to provide minimum quality of life to the people of a country. As the demand for these services cannot be met by the Public Sector alone, private sector fills the gap. For most of them in the private sector, health education are lucrative business. However, we find that education in the instant case is not a business. The primary object of GLIM is to impart education. Profit making is not its main motive. The refrain of the several judicial authorities cited is that profit motive characterizes a commercial concern as against general public utility in the case of a charitable organization. Therefore GLIM is not a commercial concern and the training or coaching provided by GLIM is not a commercial activity. In the view we have taken of the issue on merits we do not consider it necessary to examine the question if the demand is time barred. In the circumstances, we set aside the impugned order and allow the appeal filed by M/s. Great Lakes Institute of Management. (Order pronounced in the open court on) (P.KARTHIKEYAN) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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