DIRECTOR OF INCOME TAX V. M/S GROUP VOCATIONAL

ITA/199/2015

AI Insights

The case revolves around the appeal by the Director of Income Tax (Exemption) against the ITAT's decision, which granted registration under Section 12AA of the Income Tax Act to the Group Vocational Training Centre Trust. The Trust was established to provide vocational training to unskilled workers, primarily those employed by the settler companies in mining activities. The main legal contention was whether the Trust's activities constituted 'education' and 'advancement of any other object of general public utility' as required for tax exemption under Section 2(15) of the Income Tax Act. The High Court, referencing the Supreme Court's decision in CIT vs Gujarat Maritime Board, affirmed the ITAT's decision, noting that the Trust's activities did benefit the public by providing future employment opportunities, thus meeting the criteria for charitable purposes under the Act.

• Counselvise Citation: [2016] 140 COUNSELVISE.COM (IT) 728629 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 23-02-2016
• Assessment Year: misc
• Other Referred Cases: CIT V Gujarat Maritime Board, Abdul Sathar Haji Moosa Sait Dharmastapanam vs Commissioner of Agricultural Income Tax
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: JINITA CHATTERJEE
• Assessee Lawyers: E I SANMATHI
• Keywords: Charitable purpose; Education; Income Tax; Registration under section 12AA; Advancement of Object of General Public Utility
• Section: 12AA; 13; 2(15); 260-A

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 23RD DAY OF FEBRUARY 2016 PRESENT THE HON’BLE MR.JUSTICE JAYANT PATEL AND THE HON’BLE MRS.JUSTICE S. SUJATHA ITA No.199/2015 BETWEEN: DIRECTOR OF INCOME TAX (EXEMPTION), C R BUILDINGS QUEENS ROAD, BANGALORE. ….APPELLANT (BY SRI:E I SANMATHI, ADV) AND: M/S. GROUP VOCATIONAL TRAINING CENTRE TRUST B H ROAD, OPP:BESCOM LTD., CHIKKANAYAKANAHALLI TUKMKUR-572214. …RESPONDENT (BY SMT:JINITA CHATTERJEE, ADV FOR MR.PARTHASARATHI, ADV) THIS APPEAL IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, TO SET ASIDE THE ORDER DATED 19.09.2014 PASSED BY THE ITAT, ‘B’ BENCH BANGALORE, AS SOUGHT FOR IN THE RESPONDENT-ASSESSEE’S CASE, IN APPEAL PROCEEDINGS NO.ITA NO.848/BANG/2012. 2 THIS APPEAL COMING ON FOR ADMISSION THIS DAY, JAYANT PATEL J., DELIVERED THE FOLLOWING: JUDGMENT The present appeal has been preferred by the appellant- revenue by raising the following substantial question of law: “1. Whether on the facts and in circumstances of the case, the Tribunal is right in law in holding that the assessee is imparting education within the meaning of Section 2(15) of the IT Act, when the trust is formed to train the unskilled employees and workers of the settler companies and the benefit of such training is directly going to the settler companies which is in contravention of provisions of Section 13 of the Income Tax Act, 1961? 2. Whether the Tribunal was correct in holding that the trust is entitled for registration under Section 12AA and the activities of the trust would fall within the ambit of ‘education and ‘advancement of any other object of general public utility’ though the objects and the activities of the trust are towards a group of person/employees engaged by the settlers and not for the purpose of general public at large?” 2. We have heard Mr.E I Sanmathi, learned Counsel appearing for the appellant-revenue and Miss.Jinita Chatterjee 3 for Mr.S Parthasarathi, learned Counsel appearing for the respondent-assessee. 3. We may record that the Tribunal in the impugned order while considering the contention raised by both the sides at para 4.2.1. to 4.2.5., has observed thus: “4.2.1. We have heard both parties and perused and considered the material on record including the judicial decisions relied on. The facts on record are that the assessee trust was formed on 20.01.2010 by registered trust deed and as per its main objects, as listed out at para 2.1 of the order, and its preamble, the primary purpose for its creation was training of those persons, skilled and unskilled, who are employed or to be employed in mining activities in and around Zone III Karnataka and in respect of all safety measures in a professional manner. It is in respect of these objects and activities that the assessee trust filed its application for registration under section 12AA of the Act. 4.2.2 For the purpose of registration under section 12aa of the Act, the scope of enquiry of the learned DIT, as laid by the Hon’ble Karnataka High Court in the case of Sanjeevamma Hanumanthe Gowda Charitable trust (Supra) is limited to calling for such documents or 4 information from the assessee to satisfy himself about the genuineness of the objects of the trust and that its activities have been conducted in accordance with the objects thereof. Sufficient safeguard is provided in the Act for cancellation of registration of a trust under section 12AA(3) of the Act in the event it is later on found out and the learned DIT is satisfied that the activities of the trust are not genuine or are not being conducted in accordance with its stated objects. In the case on hand, we find that the learned DIT in the impugned order has not rendered any adverse finding with regard to either the objects of the trust being not genuine or that its activities were not in accordance with its objects but has proceeded further to disallow the assessee’s Registration under section 12AA of the Act. 4.2.3 The learned DIT was of the view that the assessee trust is not for charitable purpose as per section 2(15) of the Act but formed only to cater to the needs of the settlers of the trust, as the benefit of the vocational training was only to their employees and not for the public at large and being restricted to only a section of the people, would not be covered by ‘advancement of any other object of general public utility. The learned DIT was also of the view that the activities of the trust would not be covered by 5 “education” as laid down in section 2(15) of the Act at best it can be classified as training or coaching of unskilled workers. It was in view of the above reasons that the learned DIT rejected the assessee registration under section 12AA of the Act. 4.2.4 As discussed in the pre-paras 4.2.1 to 4.2.3 (supra), we find that the learned DIT is of the view that the assessee’s activities would not fall under education or advancement of any other object of public activity’ as per the provisions of section 2(15) of the Act. However, at para 3.5 of his order, he contends himself: “… I am of the considered view that there is no normal schooling in the applicant’s case and its activities or training of unskilled workers…” On the one hand, the learned DIT holds that no education is involved, but on the other hand he acknowledges that training is involved; which in our view would obviously educate both skilled and unskilled workers in the mining activities in a systematic manner. Further, the learned DIT in his order held that the assessee trust was set up to impart training only to workers of the settlers of the trust and therefore it was restricted to a section of society and not for ‘advancement of object of 6 general public utility.’ On the other hand, he concludes that the training is imparted to unskilled workers(supra). This reference, obviously is not to the training of permanent workers in the mining activities; who are also to be trained by the assessee trust, but to the unskilled and unemployed others who are to benefit by future employment, from such training rendered to them. In coming to this view, we draw support from the decision of the Hon’ble Apex Court in the case of CIT V Gujarat Maritime Board (2007) 295 ITR 561 (SC) wherein at para 10 &11, it held as under:- “10. We have perused number of decisions of this Court which have interpreted the words, in section 2(15), namely, ‘any other object of generally public utility’. From the said decisions it emerges that the said expression is of the widest connotation. The word ‘general’ in the said expression means pertaining to a whole class. Therefore, advancement of any object of benefit to the public or a section of the public as distinguished from benefit to an individual or a group of individuals would be a charitable purpose CIT vs. Ahmedabad Rana Caste Association [1983] 140 ITR 1 (SC). The said expression would prima facie include all objects which promote the welfare of the general public. It 7 cannot be said that a purpose would cease to be charitable even if public welfare is intended to be served. If the primary purpose and the predominant object are to promote the welfare of the general public, the purpose would be charitable purpose. When an object is to promote or protect the interest of a particular trade or industry that object becomes an object of public utility, but not so, if it seeks to promote the interest of those who conduct the said trade or industry CIT vs. Andhra Chamber of Commerce [1965] 55 ITR 722 (SC). If the primary or predominant object of an institution is charitable, any other object which might not be charitable but which is ancillary or incidental to the dominant purpose, would not prevent the institution from being a valid charity-Addl. CIT vs Surat Art Silk Cloth Mfrs. Association [1980] 121 ITR 1 (SC). 11. The present case in our view is squarely covered by the judgment of this Court in the case of CIT vs. Andhra Pradesh State Road Transport Corpn. [1986] 159 ITR 1 in which it has been held that since the Corporation was established for the purpose of providing efficient transport system, having no profit motive, though it earns income in the process, it is not liable to income-tax”. 8 4.2.5. In our considered opinion, the factual matrix of the case on hand clearly evidences that the assessee imparts ‘education’ to both employed and to be employed skilled and unskilled workers of both the settlers and others and its objects also further ‘any other object of public utility’ as it would benefit the public in terms of future employment and would fulfill the requirement of charitable purposes as laid out under section 2(15) of the Act as there is no profit motive involved. In our view, the learned DIT has not followed or applied his mind to the scope of enquiry to be made when considering the assessee’s application for registration under section 12AA of the Act as laid down by the Hon’ble Karnataka High Court in the case of Sanjeevamma Hanumanthe Gowda(supra). Further, we are of the view that, in the factual matrix of the case, the finding of the learned DIT that the assessee’s objects and activities would not fall within the ambit of ‘education’ and ‘advancement of any other object of general public utility’ to be factually unsustainable, and we therefore direct the learned DIT to grant the assessee registration under section 12AA of the Act.” 4. The aforesaid shows that the Tribunal has relied upon the decision of Apex Court in the case of Commissioner 9 of Income Tax vs Gujarat Martitme Board [(2007) 295 ITR 0561 (SC)] and has held that the assessee imparts education to both employed or to be employed, skilled and unskilled workers and the Tribunal further observed that there are other objects which can be said that ‘any other object of the public utility’. 5. When the Tribunal has followed the decision of Apex Court, we do not find that any substantial question of law would arise for consideration as sought to be canvassed. 6. Mr.E I Sanmathi, learned Counsel appearing for the appellant did rely upon the decision of Apex Court in the case of Abdul Sathar Haji Moosa Sait Dharmastapanam vs Commissioner of Agricultural Income Tax [(1973) 91 ITR 5] and contended that in the said case, the Apex Court had found that the activity of the Trust could not be said to be charitable and consequently, not entitled to be registered. 7. Perusal of the aforesaid decision of Apex Court shows that at paragraph 4, it was observed by the Apex Court, inter alia as under: “From the above provisions, it is clear that the 3/4th of the income of the B schedule 10 properties was primarily earmarked for the benefit of near relations of the testator. Hence, we are in agreement with the High Court that this part of the bequest cannot be considered as a public charitable trust.” 8. Such are not the facts situation since the income is not to be shared by any person who may be the relative of the settler of the trust, and hence, decision is of no help to the learned Counsel for the appellant. 9. In view of the above, we find that as no substantial question of law arises for consideration in the present appeal, the appeal deserves to be dismissed. Hence, the appeal is dismissed. Sd/- JUDGE Sd/- JUDGE *bgn/- "