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TMI Blog2023 (3) TMI 920X X X X Extracts X X X X X X X X Extracts X X X X ..... re set aside. We hold that the assessee is not engaged in the charitable activity of imparting education as defined under Section 2(15) of the Act and the order of the learned CIT(A) holding so is, therefore, set aside. Alternate contention of the assessee that its activities, if not in the nature of imparting education, they qualify as general public utility activity as held by the Assessing Officer also; but to exclude it from the definition of charitable purpose as defined under Section 2(15) - The activities carried out by the assessee are not in the nature of imparting education, but are in the nature of general public utility activities in terms of Section 2(15) of the Act; and for the purpose of determining whether they are commercial in nature so as to disqualify them from being charitable activities in terms of first and second proviso to Section 2(15) of the Act, the matter needs reconsideration by the Assessing Officer in terms of the guidelines laid down by the Hon ble Apex Court in the case of AUDA ( 2022 (10) TMI 948 - SUPREME COURT] ) for determining the commercial nature of such activities. For the said purpose all the appeals are restored back to the AO. The AO is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ogy and dissemination of information relating to science Technology by developing science city project. The Govt. of Gujarat, the Central Govt. and other various other Govt. department has provided grant for Capital Expenditure and for various science promotional Activities. The Commissioner of Income Tax, Gandhinagar has granted Registration to the Trust under Section 12AA of the Income Tax Act on 7/02/2000, holding that the Trust exist for Charitable purpose. The Governing body of Gujarat Council of Science city is set up by State Government by G.R. dt.04/09/1999. The Member of Governing Body are (i) Chief Secretary as Chairman and Principal Secretary to Hon. Chief Minister and principal Secretaries to Finance Dept., Education Dept. and Mining Dept. and a Representative from Central Government and National Council of Science Technology etc. 5. Referring to the same, he pointed out that the assessee was promoted by the Government of Gujarat for the purpose of advancement and promotion of science and technology and dissemination of information relating to the science and technology and had been provided grants for its capital expenditure and for various promotional activities. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o sub-section (15) of section 2 includes only systematic method of training through well defined pedagogical method and the advancement promotion of science and technology per se, therefore, cannot be treated as education . The AO thereafter went on to hold that the nature of the activities carried out by the assessee clearly fell in the last limb of the definition to charitable activity as provided in law,being of the nature of general public utility activities and since it was charging fees for various services rendered by it, as enumerated at para 6.1 of the order as under: 6.1 From the perusal of details, it is found that GCSC has earned income of Rs.3,64,61,445/- from sale of tickets and the details of the same is as under: . Entry tickets - Rs. 49,78,222/- IMAX Theater - Rs.2,28,76,036/- Simulator - Rs.33,27,402/- Parking - Rs.7,61,738/- Space ride -Rs.31,32,682/- Inflatable Planetarium -Rs.19,145/- Musical Fountains - Rs. 13,66,220/- Hence it is a fact that the assessee trust is charging fee for various services rendered by them. the AO held that it was clearly covered by the first and second proviso to section 2(15) which provided that advancement of any other objects of ge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or this purpose, certain fees are charged from the visitors of Science City. According to appellant it is imparting education in the field of Science Technology. Appellant has relied upon the judgment of Hon'ble Gujarat High Court in the case of Gujarat State Co-op.Union v/s. CIT 195 ITR 279 which has referred and explained the judgment of Hon'ble Supreme Court in the case of Sole Trustee Lok Shikshans Trust. Hon'ble Gujarat High Court according to appellant have distinguished that the normal meaning of the word 'Education' has to be applied only when the provision of section 10(22) has to be applied i.e. Regular schooling and wider meaning of the word Education has to be applied for the word 'Education' when it refers to section 2(15) of the Act. On going through the objects of the Trust and the activities it has undertaken, it is seen that appellant is in receipt of project specified grants from State Government Central Government from which it developed projects of Science City. The activities that are undertaken in the Science City are definitely not in the nature of trade, commerce or business. These are purely science based activities such as sprea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the ld.CIT(A), the Revenue has come in appeal challenging order of the ld.CIT(A) holding that the assessee s activities qualified as education, and also in allowing accumulation of 15% of its income as per the provision of section 11 of the Act. 9. Common grounds raised by the Revenue in all the appeals, and for the sake of convenience, we reproduce the grounds raised by the assessee in ITA No.2405/Ahd/2017 pertaining to the Asst.Year 2013-14. 1. The Ld. CITCA) has erred in the law and on facts in holding that the activities of the assessee do not fall in the last limb i.e. advancement of general public utility but they are in the nature of imparting of education.. 2. The Ld CIT(A) erred in the law and on facts in allowing the accumulation @15% of Rs.1,95,08,855/- u/s11(l)(a) of the Act without appreciating the fact that once the proviso to section 2(15) is applicable, the benefit of section 11 and 12 cannot be allowed further. 3. 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. 4. It is, therefore, prayed that the order of the Ld. Commissioner of Income-tax (Appeals) may be set as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubject matter of the appeals before the Hon ble Apex Court was outlined on para-2 as under: 2. The subject matter of these appeals3 is the rejection of the appellants claim for registration as a fund or trust or institution or any university or other educational institution (hereinafter collectively referred to as institution / trust ) set up for the charitable purpose of education, under the Income Tax Act, 1961 (hereinafter, IT Act ). The Andhra Pradesh High Court, by its detailed impugned judgment4, held that the appellant trusts which claimed benefit of exemption under Section 10 (23C) of the IT Act were not created solely for the purpose of education, and that to determine that issue, the court had to consider the memorandum of association or the rules or the constitution of the concerned trust. Additionally, the appellants were denied registration on the ground that they were not registered under the Andhra Pradesh Charitable and Hindu Religious Institutions and Endowments Act, 1987 (hereinafter, A.P. Charities Act ) as condition precedent for grant of approval. 12. From the above, the ld. counsel for the assessee pointed out that as noted by the Hon ble Apex Court, the issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation as a charitable purpose could not be comprehended as the enlarged meaning. It was in the constitutional sense, and under the IT Act, of curriculum-based schooling, that education had to be understood under Section 2 (15) of the IT Act as a head of charitable purpose. 14. Referring to the same, he pointed out that ASG had urged a narrower definition or interpretation of the term education used in section 2(15) relying upon the decision of Eleven-Judges Bench of the Hon ble Apex Court in the case of T.M.A Pai Foundation Vs. State of Karnataka (supra) wherein term was interpreted in the sense in which it was referred to, in the Constitution of India. He then took us to page no.619 wherein section 10(23C)(vi) was reproduced as under: 10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included (23C) any income received by any person on behalf of .. (iiiab) any university or other educational institution existing solely for educational purposes and not for purposes of profit, and which is wholly or substantially financed by the Government; or Explanation. For the purposes of sub-clauses (iiiab) an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... choices. Its primary purpose is to liberate human beings from the thrall of habits and preconceived attitudes14. It should be used to promote humanity and universal brotherhood. By removing the darkness of ignorance, education helps us discern between right and wrong. There is scarcely any generation that has not extolled the virtues of education, and sought to increase knowledge. 33. The subject of education is vast, even sublime. Yet, it is not the broad meaning of the expression which is involved in this case. As was held in T.M.A Pai Foundation (supra), education in the narrower meaning of the term as scholastic structured learning is what is meant in Article 21-A, Articles 29-30 and Articles 45- 46 of the Constitution. As to what is education in the context of the IT Act, was explained in LokaShikshana Trust v. Commissioner of Income Tax15 in the following terms: 5. The sense in which the word education has been used in section 2(15) is the 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 and extend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accrues in a given year or set of years per se, it is not a bar, provided such surplus is generated in the course of providing education or educational activities. 18. Referring to the above; right from the issue before the Hon ble Apex Court, the arguments made before it ,to the conclusion of the Hon ble Apex Court pointed out above, the ld. counsel for the assessee contended that the matter for interpretation was inrespect of section 10(23C)(vi) of the Act which qualifies educational institutions existing solely for education for the purpose of being registered under the said section for exemption from their income and the judgment of the Hon ble Apex Court was therefore to be interpreted in the context of the said section where the term education has been interpreted by reading it along with term solely for the purpose .of education; that for the said reason alone the judgment gave a narrow meaning to the term education to mean in a systematic manner by way of schooling and not by any other method. He therefore stated that the interpretation of Hon ble Apex Court of the term education as used in section 2(15) of the Act could not be applied in the facts of the present case. 19. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e service in relation thereto for any consideration ( cess, or fee, or any other consideration ); A.2 However, in the course of achieving the object of general public utility, the concerned trust, society, or other such organization, can carry on trade, commerce or business or provide services in relation thereto for consideration, provided that (i) the activities of trade, commerce or business are connected ( actual carrying out inserted with effect from 1-4-2016) to the achievement of its objects of GPU; and (ii) the receipt from such business or commercial activity or service in relation thereto, does not exceed the quantified limit, of 20 per cent of total receipts of the precious year; A.3 Generally, the charging of any amount towards consideration for such an activity (advancing general public utility), which is on cost-basis or nominally above cost, cannot be considered to be trade, commerce, or business or any services in relation thereto. It is only when the charges are markedly or significantly above the cost incurred by the assessee in question, that they would fall within the mischief of cess, or fee, or any other consideration towards trade, commerce or business . In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is and nominally above cost cannot be treated as trade, commerce and business, and only when the charges markedly and significantly above cost, that they would fall within the mischief of cess, fee or any other consideration towards trade, commerce or business. 22. The ld. counsel for the assessee contended that in the present case no such exercise was carried out by the Revenue before holding that the assessee was engaged in some business, trade or commerce. He further drew our attention to the financials statement of the assessee placed at page no.12 and pointed from the income expenditure account reproduced therein that out of total surplus generated of Rs.1.43 crores for the financial year ending on 31.3.2013, the special purpose grant received by the assessee amounted to Rs.1.45 crores, which means that entire surplus was on account of special purpose grants and these special purpose grant could not be treated as part of the income of the assessee, and excluding the same, therefore, there was no surplus generated by the assessee at all showing that it was operating even less than the cost basis, and as per the decision of the Hon ble Apex Court also, it could not be held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... saying that in various judicial decisions including that of the jurisdictional High Court had laid down that specific purpose grants were not be included in the income of the assessee for the purpose of computing the income qualifying for exemption under section 11 of the Act. He therefore contended that there was no merit in the arguments of the ld. DR that specific purpose grant be included in the income for determining whether the activities carried out by the assessee qualified as commercial or not. 27. We have heard both the parties at length and have also gone through the judgements of the Hon ble Apex Court in the cases of New Noble Educational Society(supra) and Ahmedabad Urban Development Authority (supra), as also various case-laws referred to before us. 28. The issue to be adjudicated and determined in the present case is the nature of charitable activity carried out by the assessee in terms of its definition provided in Section 2(15) of the Act for the purposes of enabling the assessee to claim its income as exempt in terms of Section 11/12 of the Act. The Revenue contending that it qualifies as general public utility and being carried out in a commercial manner does no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riving from its above two decisions, the Hon ble Apex Court categorically held that, in terms of Section 2(15) of the Act, education means only imparting formal scholastic learning. We are reproducing the findings of the Hon ble Apex Court in this regard as again hereunder:- 32. Education ennobles the mind and refines the sensibilities of every human being. It aims to train individuals to make the right choices. Its primary purpose is to liberate human beings from the thrall of habits and preconceived attitudes14. It should be used to promote humanity and universal brotherhood. By removing the darkness of ignorance, education helps us discern between right and wrong. There is scarcely any generation that has not extolled the virtues of education, and sought to increase knowledge. 33. The subject of education is vast, even sublime. Yet, it is not the broad meaning of the expression which is involved in this case. As was held in T.M.A Pai Foundation (supra), education in the narrower meaning of the term as scholastic structured learning is what is meant in Article 21-A, Articles 29-30 and Articles 45- 46 of the Constitution. As to what is education in the context of the IT Act, was e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interpretation/meaning given to the term solely used in Section 10(23C)(vi) of the Act along with the word education where the exemption was allowed to institution existing solely for education . The Hon ble Apex Court at paragraph No. 78 of the order has noted in a very clear terms that since in the present judgment it has departed from the previous rulings regarding the meaning of the term 'solely', therefore, in order to avoid disruption, and to give time to institutions likely to be affected to make appropriate changes and adjustments, it would be in the larger interests of society that the present judgment operates hereafter. As a result, it is directed that the law declared in the present judgment shall operate prospectively . Therefore, it is very clear that the prospective operation of the judgment is only in the cases involving the interpretation of the term solely for the purpose of claiming exemption under Section 10(23C)(vi) of the Act. The prospective operation clearly is not for the meaning/definition/scope of the term education as used in Section 2(15) of the Act defining charitable purpose. As noted above, while giving a narrow interpretation to the term edu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or provide service in relation thereto for any consideration ( cess, or fee, or any other consideration ); A.2 However, in the course of achieving the object of general public utility, the concerned trust, society, or other such organization, can carry on trade, commerce or business or provide services in relation thereto for consideration, provided that (i) the activities of trade, commerce or business are connected ( actual carrying out inserted with effect from 1-4-2016) to the achievement of its objects of GPU; and (ii) the receipt from such business or commercial activity or service in relation thereto, does not exceed the quantified limit, of 20 per cent of total receipts of the precious year; A.3 Generally, the charging of any amount towards consideration for such an activity (advancing general public utility), which is on cost-basis or nominally above cost, cannot be considered to be trade, commerce, or business or any services in relation thereto. It is only when the charges are markedly or significantly above the cost incurred by the assessee in question, that they would fall within the mischief of cess, or fee, or any other consideration towards trade, commerce or busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing the guidelines laid down by the Hon ble Apex Court in the case of AUDA (supra) for the said purpose. 37. Having said so, we have noted that both the parties are in dispute regarding the manner of treatment of specific purpose funds received by the assessee from the Government whether to be treated as capital receipts as claimed by the assessee or to be treated as revenue receipts as claimed by the Department. 38. We have gone through the order of the learned CIT(A) and we have noted that he has given specific finding that the project specific grants will have to be considered as capital receipts at paragraph No. 4.5 of his order and he has directed the Assessing Officer to verify the nature of the grants received by the assessee and thereafter treated as capital or revenue in accordance with his order that the projects specific grants are to be treated as capital receipts. This finding of the learned CIT(A) has not been challenged by the Revenue before us. Therefore, for all purposes, this issue stands settled as held by the learned CIT(A). 39. In view of the above, therefore, we hold that the activities carried out by the assessee are not in the nature of imparting educatio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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