DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTIONS), CHENNAI V. ICT ACADEMY OF TAMIL NADU, CHENNAI

ITA 1535/CHNY/2025

AI Insights

The case revolves around the ICT Academy of Tamil Nadu, which is engaged in skill development and training, and whether its activities qualify as 'charitable' under the Income Tax Act, specifically under the definition of 'education' in section 2(15). The Deputy Commissioner of Income Tax (Exemptions) initially denied the exemption, categorizing the Academy's activities under 'advancement of any other object of general public utility' and applying the proviso to section 2(15), which restricts exemptions if the activities are carried out in a commercial manner. However, the CIT(A) reversed this decision, leading to the Revenue's appeal to the Tribunal. The Tribunal's decision supported the CIT(A)'s findings, emphasizing that the Academy's activities were educational and not commercial in nature.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 846031 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2026
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Chennai
• Assessment Year: 2017-2018
• Appeal Filed On: 28-05-2025
• Other Referred Cases: ACIT (Exemption) v. Ahmedabad Urban Development Authority [2022] 449 ITR 1 (SC)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: G. RAMACHANDRAN
• Assessee Lawyers: C. SIVAKUMAR
• Keywords: Set aside; Revenue expenditure; Depreciation; Charitable institution
• Section: 11; 12A

Judgement Text

" आयकर अपील य अ धकरण, ‘ए’ \u000fयायपीठ, चे\u000fनई IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH, CHENNAI \u0016ी मनु क ुमार ग\u001aर, \u000fया\u001bयक सद य एवं \u0016ी एस. आर. रघुनाथा, लेखा सद य क े सम$ BEFORE SHRI MANU KUMAR GIRI, JUDICIAL MEMBER AND SHRI S. R. RAGHUNATHA, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.: 1535/Chny/2025 \u001bनधा%रण वष% / Assessment Year: 2017-18 DCIT (Exemptions), Chennai. vs. ICT Academy of Tamil Nadu, 2-7 Developed Plots Elcot Complex, Industrial Estate, Perungudi, Chennai – 600 096. (अपीलाथ'/Appellant) [PAN: AAAAI-2467-E] ()*यथ'/Respondent) अपीलाथ' क+ ओर से/Appellant by : Shri. C. Sivakumar, Addl.CIT )*यथ' क+ ओर से/Respondent by : Shri. G. Ramachandran, CA सुनवाई क+ तार ख/Date of Hearing : 08.01.2026 घोषणा क+ तार ख/Date of Pronouncement : 25.03.2026 आदेश /O R D E R PER S. R. RAGHUNATHA, AM : This appeal is filed by the Revenue directed against the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, [herein after “ld.CIT(A)”] dated 11.03.2025 and pertains to assessment year 2017-18 against the order of the Deputy Commissioner of Income Tax Officer, ACIT(Exemptions), Chennai, passed u/s.143(3) of the Income Tax Act, 1961 (in short ‘the Act’) dated 30.12.2019. 2. The issue arising in the appeal is whether the activities carried on by the assessee as educational activity qualify as “charitable purpose” within the meaning of section 2(15) of the Act, thereby entitling it to exemption u/s.11 Printed from counselvise.com :-2-: ITA. No:1535/Chny/2025 and 12 of the Act. The AO has held that the assessee is engaged in activities falling under the limb of “advancement of any other object of general public utility” as specified in section 2(15). Further, according to the AO, since such activities are carried out in the nature of trade, commerce, or business, the proviso to section 2(15) becomes applicable. Consequently, the assessee’s activities were treated as non-charitable, leading to denial of exemption u/s.11 of the Act. The ld. CIT(A), on the other hand disagreeing with the AO and held that the activity carried out by the assessee qualified as “education” in terms of section 2(15) of the Act, and thus entitling the assessee to claim exemption u/s. 11 of the Act. 3. The grievance of the Revenue is that the ld. CIT(A) erred in holding that the activities of the assessee fall within the scope of “education” u/s.2(15) of the Act and in consequently allowing exemption u/s.11 of the Act. It is the contention of the Revenue that the assessee’s activities are in the nature of “advancement of any other object of general public utility” carried out in a commercial manner, and therefore the proviso to section 2(15) of the Act, as rightly invoked by the AO, disentitles the assessee from being treated as engaged in charitable activities and from claiming exemption u/s. 11 of the Act and accordingly, the Revenue is in appeal. 4. The Revenue has raised the following grounds of appeal: 1. “The ld.CIT(A) has erred in allowing the appeal of the Assessee, stating that the Assessee is carrying on educational activities and thereby falling under the limb ‘education’ of ‘charitable purpose’, as defined in section 2(15) of the Act, when the Assessee, is not imparting formal scholastic learning and is an institute providing training and issuing certificates, personality development, outsourcing of employees and making graduates employable. 2. The ld.CIT(A) has erred in overruling the decision of the Assessing Officer, that the activities of the assessee fall under the limb’ general public utility of ‘charitable purpose’, as defined in section 2(15) of the Act. 3. The ld.CIT(A) has erred in wrongly interpreting the decision of the Hon’ble Supreme Court in the case of Ahmedabad Urban Development Authority[2022] 449 ITR 1 (SC) while granting relief, even when the markup charged by the assessee on activities other than Government sponsored skill development project is more than 20% which is a threshold limit as envisaged by the Hon’ble Supreme Court in the above case, making it a Printed from counselvise.com :-3-: ITA. No:1535/Chny/2025 commercial activity and such receipts are in the nature of trade commerce and business and the markup need to be determined on year on year basis. 4. The ld.CIT(A) has erred in allowing the claim of exemption u/.11 of the Act, by the Assessee in contrary to the proviso, to Sec 2(15), as the aggregate value of receipts in the nature of trade, commerce or business has exceeded 20% of Gross receipts. 5. The brief facts of the case are that the assessee is a society registered as Public Charitable Trust u/s.12A of the Act. The assessee filed its return of income on 29.10.2017 declaring a total income as Nil. The assessee had gross receipts of Rs.11,99,03,907/-. The case of the assessee was selected for scrutiny through CASS. The assessee was issued various statutory notices. The assessee responded to the notices from time to time submitting details as called for. Subsequently, a show cause notice dated 07.12.2019 was issued which stated as under: 5. “On examination of details furnished by you, it is seen that your activities fall under the last limb of charitable purpose as defined u/s.2(15) viz, ‘General Public Utility’ and the aggregate receipts from such activities exceed stipulated limit of 20% of the gross receipts. Hence, you are required to shoe- cause in writing as to why the provisios to section 2(15) r.w.s. 13(8) should not be invoked in your case on or before 12.12.2019 failing which it would be construed that you do not have any objections to the said disallowance and order u/s.143(3) would be passed without affording further opportunity as the limitation of time for completion of the assessment for AY 2017-18 falls on 31.12.2019” 6. In reply to the show-cause notice, the assessee vide its letter dated 12.12.2019, made its submissions. In concluding the assessment, the AO observed that the activities carried on by the assessee are not covered by the limb ’education’ and applied the provisions of section 2(15) of the Act and brought to tax the excess of income over expenditure amounting to Rs.2,36,62,783/- by holding as under: “6. As it can be seen from the above that the assessee is engaged in the activity of rendering service in relation to commerce or trade. This is seen from the fact that the activity of the assessee involves running an institute providing training and issuing certificates, Personality development, Outsourcing of employees, etc. Thus, the assessee’s case is clearly covered by the last limb of the definition of ‘Charitable Purpose’, contained in section 2(15), viz.,’ advancement of any other object of general public utility’, read with proviso to the said section [2(150}. Of the gross receipts of Rs.14,56,00,220/- only a sum of Printed from counselvise.com :-4-: ITA. No:1535/Chny/2025 Rs.4,46,28,675/- was from Government sponsored skill development projects but the major part of the gross receipt was from activities viz., Certification Examination Fees, membership fee, events / conference / seminars & other income. Therefore, the exception to the proviso, given in Sec 2(15), also does not apply in the assessee’s case, in as much as, the aggregate value of the receipts for the relevant previous year has exceeded 20% of the Gross Receipts. 7.1 Now the taxable income of the assessee is determined in a commercial sense, as envisaged by Board’s Circular No 5P dated 19.06.1968. 8. Accordingly, the excess of income over expenditure (or excess of expenditure over income) is reckoned as the base-point for computation of taxable income. Further, depreciation ahs not been claimed by the assessee in the statement of income. Hence, the same is not discussed. 9. The Gross Income of the assessee as per Income and expenditure account is Rs.14,56,00,220/-. The revenue expenditure before depreciation is Rs.12,19,37,437/-. The excess of income over expenditure over income Rs.2,36,62,783/- is brought to tax” 7. Aggrieved by the order of the AO, the assessee carried the matter in appeal before the ld.CIT(A) who in turn on perusal of the submissions made by the assessee, held that the activities of the assessee qualified as being imparting education and accordingly held that the assessee was entitled to exemption u/s. 11 and 12 of the Act. The ld.CIT(A) observed that the assessee is carrying on activities by providing education to students passing out from institutes and colleges in Tamilnadu to make them ready to be employable in the industry. He further observed that the assessee was basically an institute of skill development to enable to generate more employment in the state. With this finding, he directed the AO to delete the additions made amounting to Rs.2,36,62,783/- in holding as under: - “6.6 In view of above facts, I am of the opinion that appellant is carrying on educational activities which are covered by the provisions section 2(15) of the Income -Tax Act and it is neither business nor profession of the appellant. It definitely constitutes a charitable activity as it does not charge the fees at the level of market rate and even otherwise the surplus generated is also used for charitable activities of education. In view of this, the order passed by the AO is erroneous. The AO is directed to treat that the appellant is carrying on the charitable activities and the same are not for earning any profit. Accordingly, the additions made by the AO of Rs.2,36,62,783/- stands deleted. Ground No 1 to 6 are treated to have been allowed. Printed from counselvise.com :-5-: ITA. No:1535/Chny/2025 7. Ground No 7 is general and hence, not adjudicated. 8. In the result, for statistical purposes the appeal is allowed.” 8. Being aggrieved by the order of the ld. CIT(A), the Revenue has preferred the present appeal before the Tribunal, challenging the finding that the activities of the assessee fall within the scope of “education” u/s. 2(15) of the Act and the consequent grant of exemption u/s.11 of the Act. It is the contention of the Revenue that the assessee’s activities are in the nature of “advancement of any other object of general public utility” carried out in a commercial manner, and therefore the proviso to section 2(15) of the Act, as rightly invoked by the AO, disentitles the assessee from being regarded as engaged in charitable activities and from claiming exemption u/s. 11 of the Act. 9. The ld.DR, in support of the Revenue’s contentions, strongly relied upon the judgment of the Hon’ble Supreme Court in the case of ACIT (Exemption) v. Ahmedabad Urban Development Authority [2022] 449 ITR 1 (SC), with specific reference to para 253 thereof and contended that where activities falling under “general public utility” are carried out in a commercial manner, the proviso to section 2(15) squarely applies, disentitling the assessee from claiming charitable status. It was thus vehemently argued that the ld.CIT(A) had erred in treating the assessee’s activities as “education” and in granting exemption u/s.11 of the Act, and accordingly, it was prayed that the order of the ld.CIT(A) be set aside and that of the AO be restored. 10. On the other hand, the ld. AR submitted that the assessee is a society registered as a Public Charitable Trust u/s.12A of the Act and is engaged in activities closely aligned with the Government of India, Government of Tamil Nadu, and industry stakeholders, particularly in training faculty and students of colleges and universities on industry-relevant curriculum so as to enhance employability. It was submitted that the assessee undertakes various skill Printed from counselvise.com :-6-: ITA. No:1535/Chny/2025 development initiatives under Government programmes such as NCVT schemes, Skill India, Digital India, etc., and also collects membership fees from educational institutions for providing training in IT & ITES and other vocational domains such as banking, insurance, and telecom. On the above basis, the ld. AR contended that the activities of the assessee squarely fall within the ambit of “education” u/s. 2(15) of the Act, and that even if there is incidental generation of income, the same would not vitiate its charitable character. It was further submitted that the proviso to section 2(15) applies only to cases falling under “advancement of any other object of general public utility” and is attracted only where the dominant objective is profit-making through activities in the nature of trade, commerce, or business. Emphasizing that the assessee’s primary objective is not profit but skill development and public welfare, the ld. AR argued that the proviso has no application in the present case. The ld. AR also placed reliance on judicial principles to submit that where the dominant purpose is charitable, incidental commercial receipts would not disentitle exemption. 11. The ld. AR further filed a paper book comprising 198 pages containing, inter alia, audited financial statements along with computation of income, copies of Income Tax returns filed in ITR-7, a copy of the judgment of the Hon’ble Supreme Court in ACIT (Exemption) v. Ahmedabad Urban Development Authority [2022] 449 ITR 1 (SC), and the assessment order for AY 2022 - 23. Placing specific reliance on Para 172 of the said judgment and the material placed in the paper book, the ld. AR supported the order of the ld. CIT(A) and the written submissions, and prayed that the appeal of the Revenue be dismissed. 12. We have heard the rival submissions, perused the orders of the lower authorities and the material placed on record, including the paper book filed by the assessee. The short issue that arises for our consideration is whether the activities carried on by the assessee fall within the ambit of “education” as defined u/s.2(15) of the Act, thereby entitling it to exemption u/s.11 and 12 Printed from counselvise.com :-7-: ITA. No:1535/Chny/2025 of the Act, or whether the same fall under the residuary limb of “advancement of any other object of general public utility” and are hit by the proviso to section 2(15) of the Act. 13. It is an admitted fact that the assessee is a society registered under section 12A of the Act and is engaged in activities relating to skill development, training, certification, and employability enhancement of students and faculty in coordination with Government bodies and educational institutions. The nature of activities, as borne out from the record, indicates that the assessee conducts structured training programmes, faculty development initiatives and vocational courses aligned with national skill development policies. 14. The AO has treated the said activities as falling under the limb of “general public utility” and invoked the proviso to section 2(15) on the ground that the assessee is generating receipts from certification fees, membership fees, and other related activities, which according to the AO are in the nature of trade, commerce or business. The ld.CIT(A), however, has held that the activities of the assessee constitute “education” and accordingly allowed exemption u/s.11 of the Act. 15. In order to adjudicate the issue, it is necessary to consider the ratio laid down by the Hon’ble Supreme Court in the case of Assistant Commissioner of Income Tax (Exemptions) vs. Ahmedabad Urban Development Authority (2022) 449 ITR 1 (SC). The Hon’ble Apex Court has comprehensively interpreted the scope of section 2(15) and the applicability of its proviso. It has been held that the proviso to section 2(15) is attracted primarily in cases falling under the residuary limb of “general public utility” where the activities are carried out in the nature of trade, commerce or business. At the same time, the Hon’ble Court has clarified that the determination is fact-specific and has to be undertaken on a year-to-year basis, having regard to the nature of Printed from counselvise.com :-8-: ITA. No:1535/Chny/2025 receipts and whether the charges are on cost basis or involve significant mark-up . 16. The Hon’ble Supreme Court has further emphasized that where the receipts are merely incidental and aimed at cost recovery or are intrinsically linked to the main charitable object, the same would not ipso facto render the activity as commercial. It is only where the activities are undertaken with a profit motive and involve substantial mark-up that the proviso would be attracted. Applying the aforesaid principles to the facts of the present case, we find that the dominant object of the assessee is to impart skill-based education and training with the objective of enhancing employability. Such activities, in the present socio-economic context, form an integral part of the educational framework. The programmes conducted by the assessee are structured, curriculum-based and aimed at systematic development of skills and knowledge. Therefore, the same cannot be equated with mere commercial or business activities. 17. We further find that the receipts earned by the assessee from certification fees, membership fees and training programmes are incidental to its main object of imparting education and skill development. There is nothing on record to indicate that the assessee is engaged in profit maximization or that the fees charged are disproportionately high so as to characterize the activities as trade, commerce or business. The finding of the ld. CIT(A) that the assessee does not charge fees at market-driven commercial rates and that the surplus, if any, is ploughed back into its charitable activities, remains uncontroverted by the Revenue. 18. The reliance placed by the ld. DR on the judgment of the Hon’ble Supreme Court in Ahmedabad Urban Development Authority (supra) is, in our view, misplaced. The said decision does not lay down an absolute proposition that any receipt exceeding a particular threshold would automatically disentitle an assessee from exemption. On the contrary, the Printed from counselvise.com :-9-: ITA. No:1535/Chny/2025 Hon’ble Supreme Court has clearly held that the true test is the nature, object and manner of carrying out the activity, and whether the receipts are incidental or indicative of a profit-oriented commercial activity. 19. In the present case, the Revenue has failed to demonstrate, on the basis of cogent material, that the assessee’s activities are driven by a profit motive or that they constitute business activities in substance. The mere presence of receipts from training or certification programmes cannot, in isolation, lead to the conclusion that the proviso to section 2(15) is attracted. Further, we find merit in the submissions of the ld.AR with regard to the applicability of the judgment of the Hon’ble Supreme Court in the case of ACIT (Exemption) v. Ahmedabad Urban Development Authority [2022] 449 ITR 1 (SC). In this regard, para 172 of the said judgment states as under: “172. Yet another manner of looking at the definition together with sections 10(23) and 11 is that for achieving a general public utility object, if the charity involves itself in activities, that entail charging amounts only at cost or marginal mark up over cost, and also derive some profits, the prohibition against carrying on business or service related to business is not attracted - if quantum of such profits do not exceed 20% of its overall receipts.” 20. Applying the above ratio to the facts of the present case, we note from the material placed on record, including the financial statements for the impugned year that the assessee had incurred deficits in several years. This clearly indicates that the activities were not driven by a profit motive. 21. We also find that the ld. CIT(A), after appreciating the nature of activities and the material on record, has rightly concluded that the assessee is engaged in educational activities and is therefore entitled to exemption under section 11. The findings of the ld. CIT(A) are based on proper appreciation of facts and do not call for any interference. In view of the foregoing discussion, and respectfully following the ratio laid down by the Hon’ble Supreme Court in Ahmedabad Urban Development Authority (supra), we hold that the activities of the assessee fall within the ambit of Printed from counselvise.com :-10-: ITA. No:1535/Chny/2025 “education” u/s.2(15) of the Act and are not hit by the proviso thereto. Consequently, the assessee is entitled to exemption u/s.11 and 12 of the Act. Accordingly, we find no merit in the grounds raised by the Revenue. The order of the ld. CIT(A) is upheld and the appeal filed by the Revenue is dismissed. 22. In the result the appeal of the revenue is dismissed. Order pronounced in the open court on 25th March, 2026 at Chennai. Sd/- (मनु क ुमार ग\u001aर) (MANU KUMAR GIRI) \u000fया\u001bयक सद य/Judicial Member Sd/- (एस. आर. रघुनाथा) (S. R. RAGHUNATHA) लेखा सद य/Accountant Member चे\u000fनई/Chennai, /दनांक/Dated, the 25th March, 2026 JPV आदेश क+ )\u001bत1ल2प अ3े2षत/Copy to: 1. अपीलाथ'/Appellant 2. )*यथ'/Respondent 3.आयकर आयु4त/CIT– Chennai/Coimbatore/Madurai/Salem 4. 2वभागीय )\u001bत\u001bन ध/DR 5. गाड% फाईल/GF Printed from counselvise.com PRASANNA VANI JETTY Digitally signed by PRASANNA VANI JETTY Date: 2026.03.27 12:37:12 +05'30' "