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TMI Blog2019 (6) TMI 1448X X X X Extracts X X X X X X X X Extracts X X X X ..... ment year 2011-12, on the following grounds: "I. Whether on the facts and in the circumstances of the case the is Ld. CIT(A) justified in giving the benefit of Section 11 of the Act by deleting the addition of Rs. 1,85,46,802/- which the disallowed by invoking the provision of section 2(15) ofthe Act. II. Whether on the facts and the circumstances of the case is the Ld. CIT(A) justified in treating the expenses like Assistance to Voluntary Agencies, Management Assistance & Training, Public Education Programme, Research & Publications and Expenses for community service as application of income. III. On the facts and circumstances of the case, the Ld. Commissioner of Income-Tax (Appeals) ought to have upheld the order of the Assessing Officer. IV. It is, therefore, prayed that the order of the Ld. Commissioner of Income-tax (Appeals) may be set aside and that of the Assessing Officer be restored." 4. There are thus two issues requiring our adjudication in this appeal- first, whether or not the CIT(A) was justified in holding that proviso to Section 2(15) will not have any application on the facts of this case and thus benefit of Section 11 cannot be declined to the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngthening the services in education, health and human care and other social sectors existing in Baroda and State of Gujarat" and "assessing on a continuing basis the need for human service programs, to seek solution to human problems, to assist in the development of new or the expansion or modification of existing human services programs, and to foster cooperation among local, state and national agencies for providing service to the community". It was also pointed out that the assessee contributes by strengthening the services in education, by providing vocational training to the disabled, helping orphans, empowering women through various programs and providing mid meal to poor students. The details of the eye camp and thalassemia screening and detection camp conducted by the assessee were also furnished. The assessee also gave details of how the monies are spent to these ends. As regards the application of proviso to Section 2(15), it was pointed out that only when the institutions are carrying out activities on commercial lines with profit motive, this provision comes into play. It was pointed out that surplus funds are purely incidental and the institution is not run on the comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t can at best be an object of general public utility. It was then noted that the application of earnings from this activity will not end the nature of prime activity. He then referred to the provisions of Section 13(8) and observed that the benefits of section 11 and 12 will not be applicable even in a case of registered charitable institution in a situation in which the provisions of Section 2(15) come into play as in this case. The Assessing Officer reiterated that sale of entry tickets and hiring out of stalls is clearly a commercial activity. The Assessing Officer thus rejected the claim of exemption under section 11. While he allowed deduction, in computation of income, of such expenses as were incidental to earning of the income, the Assessing Officer disallowed the following expenses : Sr. No. Particulars Amount (Rs.) 1 FSF Doubtful Loan Provided 2205000 2 Assistance to Voluntary Agencies 10822700 3 Management Assistance & Training 120317 4 Public Education Programme 468116 5 Research & Publications 37179 6 Expenses for Community Service 898840 8. The Assessing Officer thus computed taxable profits at Rs. 1,85,46,802. Aggrieved, assessee ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in organising annual Garba events in Baroda, which provide a large part of its financial requirements for its activities. It is seen from the material available on record that the assessee's activities include providing Ayurvedic medicines at nominal charges to beneficiaries and on further discount of 15% to senior citizens, provided trained medical personnel to KGP Children Hospital for screening out school children for ophthalmic problems, provided funds for education, recreation, prevocational training for mentally challenged children, has provided study loans to academically bright students of financial weaker sections, has provided funds for providing midday meals to school children for their better health and nutrition etc. It is therefore, seen that the activities of the assessee are in the nature of education and medical relief, which are in consonance with its stated objectives. It is seen that the assessee organizes its annual Garba event as a part of its fund raising activity and the funds raised by such event are used for assessee's objects. It is true that not all the activities of the assessee relate to either education or medical relief, but the fact lemons th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ushala Trust [2014] 44 taxmann.com 141 (Guj), Hon'ble ITAT, Delhi has, in the case of DDIT (E) vs Institute of Chartered Accountants of India [2016] 70 taxmann.com 54 (Delhi-Trib.), held that ICAI was an educational institute and its coaching activities, which generated surplus, fell within meaning of charitable purpose under section 2(15), hence it would be entitled to exemption under section 11. Therefore, simply because an activity has generated surplus, it cannot be said that the same constitutes trade, commerce or business. 5.7 Hon'ble ITAT, Delhi has, in the case of DDIT (E) vs All India Football Federation [2015] 62 taxmann.com 362 (Delhi - Trib.), has held that the assessee viz. All India Football Federation was constituted with an objective of promoting sports of football. Apart from Government and FIFA grant, assessee earned income from allocating sponsorship rights and telecasting rights of matches and this fund was required for advancement of main objectives of sports promotion activity as grants were very insufficient, Hon'ble ITAT held that the mere fact that assessee had generated sponsorship funds during course of carrying on ancillary objects, would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m property held under trust wholly for charitable or religious purposes to the extent to which such income is applied to such purposes in India, and, where any such income is accumulated or set apart for application to such purposes in India shall not be included in the total income of the previous year of the person in receipt of the said income. '"Charitable purpose" is defined under Section 2(15) of the Act, which reads as under; "Charitable purpose" includes relief of the poor, education, medical relief [preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest] and the advancement of any other object of general public utility.' However, subsequently and with effect from Assessment Year 2008-09 proviso to Section 2(15) of the Act has been added and Section 2(15) has been amended by the Finance Act, 2008 by adding the proviso which states that the 'advancement of any other object of general public utility' shall not be a charitable purpose if it involves the carrying on of-(a) any activity in the nature of trade, commerce or business; or (b) any activity of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sense in which the word 'education' has been used in Section 2(15) of the Act in the systematic instruction, schooling or training given to the young is 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 and extended sense, according to which every acquisition of further knowledge constitutes education. According to this wide and extended sense, travelling is education, because as a result of travelling you acquire fresh knowledge....but this not the sense in which the word 'education' is used in Clause (15) of Section 2. What 'education' connotes in that Clause is the process of training and developing the knowledge, skill, mind and character of students by normal schooling? The Supreme Court, in the above observations by referring to the systematic instruction, schooling or training given to 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t outlook for further education, ft 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 the acceptance of new ideas and development of appropriate means to reach them to recipients.' 5.5 Now so far as reliance placed upon the decision of the Division Bench of this Court in the case of Saurashtra Education Foundation (Supra) by the learned advocate appearing on behalf of the revenue is concerned, it is required to be noted that as such the tribunal has considered the same in detail and has rightly held and observed that as such the said decision would assist the assessee rather than the revenue. It is also required to be noted that as such in the said decision the Division Bench has not taken any contrary decision that of the decision of Gujarat State Co-operative Union (Supra). It is to be noted that, on facts, it was held that the assessee cannot be said to be an educational institution and, therefore, the assessee would not be entitled to exemption as contemplated under Section 10(22) of the Act 5.6 Now applying the ratio of the decision of the Division Bench of this Court in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith Circular No.11/2008 dated 19/12/2008 it appears that if the case of the assessee does not fall within the first three limbs of Section 2(15) of the Act i.e. relief to the poor; education or medical relief and if it falls in the fourth limb i.e. advancement of any other object of general public utility and it is found that such activity of advancement of any other object of general public utility involves carrying on of (a) any activity in the nature of trade, commerce or business; or (b) any activity of rendering any service in relation to any trade, commerce or business; for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention of the income from such activity, the same shall not be considered for "charitable purpose" and shall not be entitled to exemption under Section 11 of the Act. 5.8 In the present case, as observed hereinabove and rightly held by the tribunal, the activities of the assessee would fall within the definition of "charitable purpose" as per Section 2(15) of the Act and, therefore, would be entitled to exemption under Section 11 of the Act. 6. In view of the above, we are in complete agreement with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble purpose' u/s 2(15), viz. relief to poor, education and medical relief and a large part of its activities also relate to fulfilling these objectives and are not hit by the first proviso to section 2(15) of the Act. Keeping in view decisions of Hon'ble jurisdictional High Court in Ahmedabad Management Association (supra) and Sabarmati Ashram Gaushala Trust (supra), it Is held that the assessee cannot be denied exemption u/s 11 of the Act on the ground that it is engaged in any other object of general public utility and that it is hit by first proviso to section 2(15) of the Act. The Assessing Officer is directed to allow the claimed exemption u/s 11 to the assessee. The assessee succeeds on these grounds of appeal." 9. Aggrieved by the relief so granted by the CIT(A), the Assessing Officer is in appeal before us. 10. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 11. Let us begin by taking a look at the provisions of Section 2(15) as it stood at the relevant point of time, which, for ready reference, is reproduced below: Section 2(15) "charitable purpose" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... human service needs of the community and to reduce the duplication of efforts to the extent feasible and practical for resource mobilization - To deploy United Way financial and management support so as to maximize the resources available to agencies for services aimed at the most urgent current needs of the community - To facilitate starting of United Way Organizations in various cities, towns and villages in India with local support and with the objective of promoting, strengthening and coordinating the voluntary efforts of citizens by providing assistance to them." 13. In pursuance of these objects, even if the assessee performs some activities, which can be alleged to be on commercial lines, are performed, the charitable nature of the objects will not be vitiated as proviso to Section 2(15) comes into play only in respect of "any other object of general public utility" and is not covered by the specific objects pointed out earlier- including relief to poor, education and medical relief. Nothing, therefore, really turns on the garba event being organized on the basis of, what can be termed as, commercial principles. That aspect of the matter is not relevant in the presen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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