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TMI Blog2017 (10) TMI 1307X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the Revenue that profit making is its main objective of the assessee society. The Balance Sheet and Income Expenditure account of the assessee for the year ended on 31.03.2013 show that the during the year the assessee had earned no surplus at all, on the contrary it had excess of expenditure over income of approx. ₹ 1.95 crores and its accumulated losses over the years was ₹ 7.18 crores. The entire funds of the assessee stand invested in fixed assets, fund investments and advances none of which ,except advances to PSIEC, have been found to be not for the purpose of the assessees objects. As advances was for developing the infrastructure of the assessee society for furthering its objectives, which is an application of income in furtherance of its stated objectives and clearly not an investment in violation of the modes of investments prescribed u/s 11(5) of the Act which prescribes the modes in which accumulated money is to be invested or deposited by societies or institutes claiming exemption u/s 11 of the Act. - Decided in favour of assessee - ITA No.270/Chd/2017 - - - Dated:- 30-10-2017 - Shri Sanjay Garg, Judicial Member And Ms. Annapurna Gupta, Accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose of education and not for profit motive since; a) the objects activities of the assessee were not covered under education b) it was earning income from letting out its premises and running coaching classes which activities were beyond its stated objects. 5. The Assessing Officer also noted that the assessee had initially not claimed the said exemption in the return of income filed and further had filed audit report in Form No.10B which was applicable for assessees who claim exemption under section 11. The Assessing Officer also found that the assessee had made advances to Punjab Small Industries Export Corporation Ltd (hereinafter referred as PSIEC), which was in contravention of the prescribed modes of investments as per section 11(5) of the Act. For the above said reasons, the Assessing Officer held that the assessee was not eligible for exemption under section 10(23C)(iiiab) of the Act and, therefore, made addition on account of surplus of ₹ 2,07,99,136/-. 6. Before the Ld. CIT (Appeals), the assessee made detailed submissions to the effect that it had been allowed exemption u/s 10(23C)(iiiab) claimed in earlier years on identical set of fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account of these activities the rent and fees from training and coaching classes have been increasing from year to year and as a result surplus is also generated over the years. The letting out of premises from rent is not an object as per the MOA of the assessee society. Assessing Officer has also mentioned that assessee has not claimed the exemption u/s 10(23C)(iiiab) of the Act in. the return of income and the claim was made during assessment proceeding. It was also noticed that assessee has audited books of accounts as per form 10B which is applicable only for the assessee's who claimed exemption u/s 11 but assessee is not registered u/s 12AA of the Act. For claiming deduction u/s 10(23C)(iiiab) of the Act, assessee was required to file audit report in form 10BB of the Act which was not done. It has also been noted that appellant has given advances to Punjab Small Industries and Export Corporation Ltd. (PSIEC), which are recoverable of ₹ 31.98 crore and the assessee could not file the reason and purpose for such advance before the assessing officer. 6.3.1 The totality of the circumstances narrated above suggest that assessee is indulging into the activities which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised by the assessee are general in nature and, therefore, need no adjudication. 9. Ground Nos.2, 3 7 raised by the assessee are vis- -vis the denial of exemption under section 10(23C)(iiiab) of the Act by holding that the assessee s activities were non-educational and for the purpose of earning profit and the payment made to PSIEC was in violation of section 11(5) of the Act. Since the grounds are interrelated they are being taken up together for adjudication. 10. Before us, the Ld. counsel for the assessee contended that the findings of the Ld.CIT (Appeals) that the assessee was indulging in activities which could not be said to be for the purpose of education, was factually incorrect. The Ld. counsel for the assessee pointed out that the basis for arriving at such findings is that the assessee is collecting revenue from letting out the premises to various organizations and also charging fees from training and coaching classes, both of which allegedly have been held to not come under the purview of education. The Ld. counsel for the assessee pointed out that it was explained to the Ld.CIT (Appeals) that the training and study courses conducted by the assessee society ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he advances given to PSIEC which as per the Ld.CIT (Appeals) having not been explained by the assessee were held to be in contravention of the prescribed modes of investment as per section 11(5) of the Act. The Ld. counsel for the assessee pointed out that it was submitted to the Ld.CIT (Appeals) that the said advance had been given for development of vacant land of the institution for extension of its infrastructure for educational purpose. The Ld. counsel for the assessee drew our attention to para 6.2(iv) of the CIT(A) order wherein the submissions of the assessee making the above averments were reproduced. The Ld. counsel for the assessee further submitted that copy of agreement with PSIEC in this regard had been filed before the Ld.CIT (Appeals). The Ld. counsel for the assessee further stated that it had now been able to procure all the bills and details of the construction were undertaken by PSIEC which has been duly reconciled with the books of account of PSIEC and certified by Chartered Accountants. The Ld. counsel for the assessee stated that it wished to submit these documents as additional evidences and pleaded that the same may be admitted since they went to the root o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted a certificate by the Revenue for non deduction of tax at source on the bank interest which it earned for the reason that its income enjoys exemption from the taxation u/s 10(23C)(iiiab) of the Act. Clearly, the Revenue has consistently been accepting in the past that the assessee is existing for the purpose of education only and not for profit and is thus entitled to claim exemption u/s 10(23C(iiiab) of the Act. In the impugned year no change in the facts of the case have been brought to our notice as compared to the preceding years. For this reason alone we fail to understand how a diametrically opposite view can be taken by the Revenue that the activities of the assessee society are not in the nature of imparting education and not for the purpose of earning profit. 18. Even otherwise, we find that the activity of training and conducting study courses, conferences, seminars and lectures to Public service administrative officers in the field of public administration tantamounts to nothing else but imparting education. All the stated objects of the assessee society are aimed at diffusing certain branch of knowledge i.e. Public administration by conducting training programmes, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as also the activities actually carried on by it will throw considerable light on the question whether the assessee-Co-operative Union is existing solely for educational purposes or not. Bye-Laws 2 of the assesseeCo-operative Union, a copy of which is placed on record by the consent of both the learned counsel for our consideration, enumerates therein eight objects of the assessee- Co-operative Union and they read as under: (i) to impart education to members of co-operative societies and to workers in the Co-operative Movement; (ii) to act as a co-ordinating agency on all matters pertaining to Cooperative education and function as a body of experts in matters relating to education; (iii) to function as a focusing centre on non-official opinion on various subjects affecting the movement and for representing it in proper quarters; (iv) to further the spread of the Co-operative Movement; (v) to promote the study of problems connected with Co-operation and carry on research in the same; (vi) to open circulating libraries, to publish periodicals, books, pamphlets, and literature in general on co-operation; rural development and allied subjects; (vii) to conduct tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Clause (vi) refers to objects of opening circulating libraries, publishing periodicals, books, pamphlets, and literature in general on co- operation, rural development and allied subjects, while cl. (viii) refers to running of a printing press. It is difficult to accept the contention of the Revenue that these clauses indicate any object other than educational for which the assessee seems to have been established. On totality of the objects enumerated in Bye-law 2, it is clear to us that the assessee-Co-operative Union is existing solely for educational purposes and even the objects which are enumerated in cls. (iii), (iv), (vi) and (viii) are referable to such purposes. It will not be open to read any of these clauses in isolation torn of its context for the purposes of urging that the assessee is not existing solely for educational purposes as envisaged under s. 10(22) of the Act. It is obvious that the objects of functioning as a focusing centre on non-official opinion on various subjects affecting the movement and for representing it in proper quarters, promoting the study of problems connected with cooperation and carrying on research in the same and of opening circulating lib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g an audio-visual unit for exhibiting films on co-operative movement to educate the masses. It also appears that the assessee maintained a rich library on the subject of co-operation. As noticed above, from the objects of the assessee, it is conducting training centres and colleges for various courses having bearing on the field of co-operative movement. It appears to us that the decision of the Tribunal which seeks to rest it on the observations made by the Supreme Court in lok shikashana trust's case (supra), for holding that the assessee is not entitled to exemption under s. 10(22) of the Act is based on a complete misreading of the observations of the Supreme Court. In Lok Shikashana Trust's case (supra) the Supreme Court while dealing with the provisions of s. 11 r/w s. 2(15) of the Act which defines charitable purposes' observed as under : The sense in which the word education' has been used in s. 2(15) in the systematic instruction, schooling or training given to the young in preparation for the work of life. It also connotes the whole course of scholastic instruction which a person has received. The word education' has not been used in that wide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the word schooling' also means instructing or educating. It, therefore, cannot be said that the word education' has been given an unduly restricted meaning by the Supreme Court in the said decision. Though in the context of the provisions of s. 10(22) the concept of education need not be given any wide or extended meaning, it surely would encompass systematic dissemination of knowledge and training in specialised subjects as is done by the assessee. The changing time and the ever widening horizons of knowledge may bring in changes in the methodology of teaching and a shift for the better in the institutional setup. Advancement of knowledge bring within its fold suitable methods of its dissemination and though the primary method of sitting in a class-room may remain ideal for most of the initial education, it may become necessary to have a different outlook for further education. It is not necessary to nail down the concept of education to a particular formula or to flow it only through a defined channel. Its progress lies in acceptance of new ideas and development of appropriate means to reach them to the recipients. 19. In view of the above we hold that the activitie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpose of the assessees objects. . 23. As for the argument of the Ld. DR that the advances made to Punjab Small Industries Export Corporation Ltd. not being in accordance with that prescribed u/s 11(5) of the Act, we find no merit in this contention of the Revenue also. The assessee has all along claimed before the lower authorities that the purpose of making such advances was for development of vacant land of the institute for expansion of its infrastructure. Copy of the agreement entered into with PSIEC was also filed before the lower authorities. In view of the same, the purpose of making aforesaid advances was for developing the infrastructure of the assessee society for furthering its objectives, which is an application of income in furtherance of its stated objectives and clearly not an investment in violation of the modes of investments prescribed u/s 11(5) of the Act which prescribes the modes in which accumulated money is to be invested or deposited by societies or institutes claiming exemption u/s 11 of the Act. 24. Therefore, we hold that the activities of the assessee society are educational and not for the purpose of making profit and thus assessee society fu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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