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TMI Blog2019 (9) TMI 141X X X X Extracts X X X X X X X X Extracts X X X X ..... the no takeover of any land (immovable property), put pays all doubts with regard to the acquisition of a running school or, rather, adoption of a running school. Prima facie , the affiliation to a recognized university, which is not in doubt, should allay any doubt in the matter. In fact, quality is an aspect which, though integral to education, as it indeed is to any other human endeavor, is something the assessment of which is outside the scope of the instant proceedings. Then, it would raise a question as to whether any education can be regarded as not so on account of poor quality, besides the issue of its definition, i.e., as to what constitutes quality education . - Without doubt, the cost of education, as of any other service, can not be properly compared without taking into account its quality; rather, the quality of both the input resources as well as the output. If the educational activity carried out in pursuance of its objects by the assessee-society, could be, on account of its pricing, discounted, i.e., not regarded as education , given its definition u/s. 2(15)? - Held that:- Education, as defined u/s. 2(15), makes the same an irrelevant consideration. One could ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /colleges and institutions in the backward areas of the state so as to serve the children/youth of the area, enabling them to seek productive employment in life and, thus, integrate in the nation building process. It, besides running an engineering college by the name 'Guru Ram Dass Institute of Engineering and Technology', affiliated to the Punjab Technical University, Jalandhar, was found to have adopted a school by the name 'Harbhajan International School' (at Lehra Bega), being a run by Dasmesh Educational and Welfare Society (DEWS), during, as it appears, financial year (fy) 2011-12. The assessee was, accordingly, in examination of its' application u/s. 12AA, enquired of the legal steps adopted for the purpose, i.e., in the take-over of the said school. The assessee, which had been till then claiming exemption u/s. 10(23C), had reported losses at ₹ 55.90 lacs and ₹ 26.72 lacs for the previous years relevant to assessment years (AYs.) 2015-16 and 2014-15 respectively, filing its' returns under ITR-5, i.e., as applicable to a business enterprise, claiming business losses per the same, also furnishing an audit report in the requisite form along with. This was clearly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s is if educational activity could be regarded as 'charitable purpose' (as defined u/s. 2(15)), where undertaken in a manner that results in profit, i.e., an excess of income over expenditure. That is, the education is so priced that it not only covers all costs, but also yields adequate operating surplus, sufficient to meet the financing cost as well as finance expansion (growth), which we observe to be the case, and which the ld. CIT(E) refers to as 'profiteering'. It would be relevant to present the working results for the only year (fy 2014-15) for which data is on record (PB pgs. 16-30): (Amt. in Rs. lacs) Particulars/ College Schools Misc. Total (%) Receipts 540.83 18.23 - 559.06 (100.00) Operating cost (288.21) (30.30) - (318.51) (56.97) Operating surplus 252.62 (12.07) - 240.55 (43.03) % (46.71) (66.21) Interest (110.65) (110.65) (19.79) Other adjustments 1.54 1.54 (0.28) Cash surplus (131.44) (23.51) Other Depreciation (64.15) (0.16) - (64.31) (11.50) Net surplus 188.47 (12.23) (109.11) (67.13) (12.01) (figures in brackets represent negative figures & % age) The operating parameters, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut pays all doubts with regard to the acquisition of a running school or, rather, adoption of a running school. 4.3 The engineering college, qua which no adverse comments have been made, is located, as it appears, in Bathinda, which is not stated to be a backward area. The college, charging for transportation, has vehicles (at ₹ 91.03 lacs) and, besides, offers hostel facility. It is thus clear that it serves students of the surrounding areas, providing accredited educational courses. Whether the same is of an acceptable and standard quality, as Sh. Vineet Krishan would emphasize, seeking to justify the cost charged to the students on that basis, is difficult to say. Prima facie, the affiliation to a recognized university, which is not in doubt, should allay any doubt in the matter. In fact, 'quality' is an aspect which, though integral to education, as it indeed is to any other human endeavor, is something the assessment of which is outside the scope of the instant proceedings. Then, it would raise a question as to whether any 'education' can be regarded as not so on account of poor quality, besides the issue of its' definition, i.e., as to what constitutes 'quality educati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pted/recognized business management practices and principles, on commercial or market driven basis, could be said to exclude an activity geared to achieve an object otherwise constituting a charitable purpose. The Hon'ble Apex Court has, per a series of decisions, as in Sole Trustee, Loka Shikshana Trust v. CIT [1975] 101 ITR 234 (SC); Indian Chamber of Commerce v. CIT [1975] 101 ITR 796 (SC); Dharmadeepti v. CIT [1978] 114 ITR 454 (SC); CIT v. Surat Art Silk Cloth Manufacturers' Association [1980] 121 ITR 1 (SC); Aditanar Educational Institution v. CIT (Addl.) [1997] 224 ITR 310 (SC); American Hotel & Lodging Assn. Educational Institute v. CBDT [2008] 301 ITR 86 (SC); and Queens' Educational Society v. CIT [2015] 372 ITR 699 (SC), the last also approving the decision by the Hon'ble jurisdictional High Court in Pine Grove International Charitable Trust vs. Union of India [2010] 327 ITR 273 (P&H), settled the law, explaining that on an overall view of the matter the object should not be to make profit, i.e., 'profit-making' should not be the predominant object, as where the charitable purpose gets submerged by the profit motive, the latter masquerading under the guise of the former. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turns on the assessee stating before us of its' expenditure exceeding income; the expenditure including a handsome component of depreciation (₹ 37 lacs for AY 2015-16), so that there is substantial cash profit and, two, the depreciation stands provided on an accelerated (WDV) basis at the rates prescribed under the Act for determining business income, which inflates the charge for the initial years, as against being applied uniformly over the life of the asset. Before us, the ld. counsel sought to justify the fees which, on an annual basis, ranges from ₹ 40,000/- to ₹ 50,000/-, with reference to the quality of the education; the school also providing training in Robotics, a new discipline. Without doubt, the cost of education, as of any other service, can not be properly compared without taking into account its' quality; rather, the quality of both the input resources as well as the output. We have, however, already clarified that no quantitative tests (viz. the rate of profit; the rate of return on investment, etc.) in this regard have been laid down, which the Hon'ble Courts have eschewed for perhaps precisely this reason, i.e., as a number of variables impinge ..... X X X X Extracts X X X X X X X X Extracts X X X X
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