Appeal Details
Counselvise Citation
[2016] 133 COUNSELVISE.COM (IT) 8035 (ITAT-CHENNAI)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
6 month(s) 19 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
10-02-2016
Appeal Filed By
Assessee
Bench Allotted
A
Next Hearing Date
18-01-2016
Assessment Year
2009-2010
Appeal Filed On
22-07-2015
Judgement Text
, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , ! . ' #$ BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G.PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A.NO.1693 /MDS./2015 ( / ASSESSMENT YEAR :2009-10) M/S.INFORMAION SYSTEMS AUDIT & CONTROL ASSOCIAION, CHENNAI CHAPTER, (FORMERLY KNOWN AS ISACA TRUST) 15, GROUND FLOOR, LUZ GOLDEN ENCLAVE,180/4,LUZ CHURCH ROAD, MYLAPORE, CHENNAI 600 004. VS. DEPUTY DIRECTOR OF INCOME TAX (EXEMPTIONS)-1, CHENNAI. PAN AAATI 2788 R ( %& / APPELLANT ) ( '(%& / RESPONDENT ) / APPELLANT BY : MR.T.BANUSEKAR,C.A / RESPONDENT BY : MR.R.DURAIPANDIAN,JCIT, D.R ! / DATE OF HEARING : 18.01.2016 '# ! /DATE OF PRONOUNCEMENT : 10.02.2016 ) / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL IS FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(A)- 17, CHENNAI DATED 30.03.2015 PERTAINING TO THE ASSESSMENT YEAR 2009-10. ITA NO.1693/MDS/2015 2 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS. 1. FOR THAT THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IS CONTRARY TO LAW, FACTS AND CIRCUMSTANC ES OF THE CASE TO THE EXTENT PREJUDICIAL TO THE INTEREST OF T HE APPELLANT AND AT ANY RATE IS OPPOSED TO THE PRINCIPLES OF EQU ITY, NATURAL JUSTICE AND FAIR PLAY. 2. FOR THAT COMMISSIONER OF INCOME TAX (APPEALS) FA ILED TO APPRECIATE THAT THE ORDER OF ASSESSING OFFICER IS W ITHOUT JURISDICTION. 3. FOR THAT THE COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN HOLDING THAT THE APPELLANT WAS NOT ENTITLED TO C LAIM EXEMPTION ULS.1 1. 4. FOR THAT THE COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN HOLDING THAT THE ACTIVITIES CARRIED ON BY THE AP PELLANT FALL WITHIN THE AMBIT OF THE AMENDED PROVISIONS OF SECTI ON 2(15). 5. FOR THAT THE COMMISSIONER OF INCOME TAX (APPEALS ) FAILED TO APPRECIATE THAT THE ACTIVITIES CARRIED ON BY THE APPELLANT ARE CHARITABLE IN NATURE AND FALL WITHIN THE AMBIT OF CHARITABLE PURPOSE AS PER SECTION 2(15). 6. FOR THAT THE COMMISSIONER OF INCOME TAX (APPEALS ) FAILED TO APPRECIATE THAT THE DEPRECIATION OF RS.1,52,1 73 /- CLAIMED BY THE APPELLANT TRUST WAS AN APPLICATION OF INCOME . ITA NO.1693/MDS/2015 3 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSES SEE TRUST IS REGISTERED U/S.12A(A) OF THE INCOME TAX ACT VIDE PR OCEEDINGS IN C.NO.2/(100)/2000-01 DATED 25.08.2000 AND FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2009-10 ON 29.09.2009 ADMITTING NIL INCOME AFTER CLAIMING EXEMPTION U/S.11 OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE LD. ASSESSING OFFICER F OUND THAT ASSESSEE COLLECTED ` 5,68,050/- FOR APPEARING EXAMINATION FOR THE COURSE OF CERTIFIED INFORMATION SYSTEM AUDITOR AND ALSO COLLECTED ` 7,48,047/- AS SEMINAR FEES FROM THE PARTICIPANTS. THE AO WAS OF THE VIEW THAT THE ABOVE RECEIPTS ARE IN THE NATURE OF TRADE, BUSINESS, AND COMMERCE. THE ASSESSEE WAS ASKED TO SUBSTANTIAT E THE CLAIM OF EXEMPTION U/S.11 OF THE ACT. AFTER EXAMINING THE S UBMISSIONS OF THE ASSESSEE, THE LD. ASSESSING OFFICER WAS OF THE OPIN ION THAT THE OBJECTS OF THE ASSESSEE FALL UNDER THE RESIDUARY CL AUSE, I.E. ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY AND PROVISIONS OF THE SECTION 2(15) ARE CLEARLY ATTRACT ED. FURTHER THE LD. ASSESSING OFFICER OPINED THAT THE PRINCIPLE OF MUT UALITY IS NOT APPLICABLE TO THE ASSESSEES CASE AS THE TRUST DEAL S WITH BOTH MEMBERS AND NON-MEMBERS AND ALSO THE TOTAL RECEIPTS ARE MORE THAN ITA NO.1693/MDS/2015 4 ` 10 LAKHS. THEREFORE, THE LD. ASSESSING OFFICER ARRI VED AT A CONCLUSION THAT THE TRUST IS NOT ENTITLED TO EXEMPTION U/S.11 OF THE ACT AS THE TRUST IS ENGAGED IN COMMERCIAL ACTIVITY BY COLLECTING FEE S TO PROVIDE SERVICE AND BROUGHT TO TAX THE SURPLUS AND DISALLOWED THE D EPRECIATION CLAIMED STATING THAT THE SAME DOES NOT RELATE TO TH IS ASSESSMENT YEAR. ON APPEAL THE LD. CIT(A) CONFIRMED THE ORDER OF THE LD. ASSESSING OFFICER. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 4.1 THE LD.A.R SUBMITTED THAT THE MAIN ACTIVITIES OF THE ASSESSEE TRUST ARE CONDUCTING REVIEW AND COURSES FOR HELPING ASPIRING MEMBERS/MEMBERS IN PREPARING FOR CISA AND CISM CERT IFICATION CONDUCTED BY THE PARENT BODY, ISACA, USA AND ALSO C ONDUCTING MONTHLY PROFESSIONAL EDUCATION MEETINGS WHEREIN PRO FESSIONALS ADDRESS THE PARTICIPANTS FOR SHARING KNOWLEDGE AND EXPERIENCE ON METHODOLOGIES, EMERGING CONCEPTS, SKILLS UPDATION E TC. IN ADDITION TO IT, THE ASSESSEE TRUST IS ORGANIZING SEMINARS AND W ORKSHOPS ON VARIOUS TOPICS IN THE FIELD OF INFORMATION TECHNOLO GY, IN THE AREAS OF SECURITY, CONTROL AND AUDIT, AND CONDUCTING ANNUAL SECURITY DAY CONFERENCE TO COMMEMORATE COMPUTER SECURITY DAY WHE REIN ITA NO.1693/MDS/2015 5 RENOWNED SPEAKERS ARE CALLED UPON TO ADDRESS THE PA RTICIPANTS AND SHARE KNOWLEDGE AND EXPERIENCE ON RELEVANT TOPES IN THE FIELD. FURTHER, THE LD.A.R SUBMITTED THAT IT IS EVIDENT FR OM THE ACTIVITIES AND OBJECTS OF THE TRUST THAT THE TRUST IS ESTABLISHED WHOLLY FOR PROMOTING EDUCATION IN THE AREAS OF SECURITY, CONTROL, AUDIT AND RESEARCH IN THE INFORMATION TECHNOLOGY ENVIRONMENT. HE RELIED ON T HE FOLLOWING DECISIONS. 1.DIT (EXEMPTIONS) V THE CHARTERED ACCOUNTANT STUDY CIRCLE_[2012]_70 DTR 219_(MAD) 2. THE CHARTERED ACCOUNTANT STUDY CIRCLE V ITO IN I TA NO.L97LIMDS/2010 3. THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA AND AND V DGIT (EXEMPTIONS) [2013] 90 DTR 161 (DEL) 4.CIRCULAR NO.11 OF 2008 DATED 19 DECEMBER, 2008 5. INDIA TRADE PROMOTION ORGANIZATION V DOLT (EXEMP TIONS) & OTHERS [2015] 374 ITR 333 (DEL) 6. DIT (EXEMPTION) V SABARMATI ASHRAM GAUSHALA TRUS T [2014] 362 ITR 539 (GUJ) 7. DIT V VISHWA JAGRITI MISSION [2012] 73 DTR (DEL) 195 8. CIT V MARKET COMMITTEE, PIPLI [20111 330 ITR 16 (P&H) 9. CIT V SOCIETY OF SISTERS OF ST.ANNE [19841 146 I TR 28(KAR) 10. CIT V BHORUKA PUBLIC WELFARE TRUST [1999] 240 I TR 513 (CAL) 11. CIT V TINY TOTS EDUCATION SOCIETY [2011] 330 IT R 21 (P&H) 12. CIT V SHETH MANUAL RANCBHODDAS VISHRAM BHAVAN T RUST_[1992]_198_ITR 598_(GUJ) ITA NO.1693/MDS/2015 6 13. CIT V RAIPUR PALLOTTINE SOCIETY [1989] 180 ITR 579 14. CIT V INSTITUTE OF BANKING PERSONNEL SELECTION [2003] 264 ITR_110_(BORN) 15. DIT (E) V FRAMJEE CAWASJEE INSTITUTE [1993] 109 CTR (BORN) 463 16. DDIT V LAKSHMI SARASWATHI EDUCATIONAL TRUST IN ITA NO.452 / MDS / 2014 FOR THE AY 2010-11 CHENNAI ITAT 17. APOLLO HOSPITALS EDUCATIONAL TRUST V DCIT IN IT A NO.2090 / MDS / 2012 FOR THE AY 2008-09 CHENNAI ITAT 18. SERVICES ASSOCIATION OF SEVENTH DAY ADVENTISTS PVT LTD V ITO FOR THE ASSESSMENT YEAR 2006-07 IN ITA NO.1853 / MDS / 2011 CHENNAI ITAT 19. SERVICES ASSOCIATION OF SEVENTH DAY ADVENTISTS PVT LTD V ITO FOR THE ASSESSMENT YEAR 2005-06 IN ITA NO.427 / MDS / 2012 CHENNAI ITAT 20. ACIT V MAMALLAN EDUCATIONAL TRUST IN ITA NO.180 8 / MDS / 2012 FOR THE AY 2008-09 CHENNAI ITAT 21. DCIT V MAMALLAN EDUCATIONAL TRUST IN ITA NO.91 / MDS / 2013 FOR THE AY 2009-10 CHENNAI ITAT 22. ITO V SRI RANGANATHAR TRUST IN ITA NO.1954 / MD S / 2012 FOR THE AY 2009-10 CHENNAI ITAT 23. ITO V KGISL TRUST IN ITA NO.1813 / MDS / 2012 F OR THE AY 2009-10 CHENNAI ITAT 24. CIT V RAO BAHADUR CALAVALA CUNNAN CHETTY CHARIT IES_[19821_135_ITR 485_(MAD) 25. DEVI KARUMARIAMMAN EDUCATIONAL TRUST V DCIT (EX EMPTIONS) [2015] 60 TAXMANN.COM 439 (MADRAS) 26. ITO V THE GRD TRUST IN ITA NO.2537 / MDS / 2014 FOR THE_AY 2010-11_ CHENNAI_ITAT 4.2 THE DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF CIT. ITA NO.1693/MDS/2015 7 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. SEC. 11 OF THE ACT STIPULATES THAT THE INCOME FROM PROPERTY HELD FOR CHARITABLE OR RELIGIOUS PURP OSE SHALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE PREVIOUS YEAR O F THE PERSON IN RECEIPT OF THE INCOME TO BE GIVEN EFFECT IN THE MAN NER AS SPECIFIED THEREIN. THE TERM 'CHARITABLE PURPOSE' HAS NOT BEEN DEFINED UNDER THE STATUTE; BUT FOR THE INCLUSIVE NATURE OF THE TERM A S SPECIFIED UNDER S. 2(15) OF THE ACT, WHICH AS EXISTED BEFORE THE AMEND MENT IS AS FOLLOWS: 'SEC. 2(15) : 'CHARITABLE PURPOSE' INCLUDES RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY.' AS PER FINANCE ACT, 2008, THE SAID PROVISION WAS AM ENDED ADDING A 'PROVISO' W.E.F. 1ST APRIL, 2009 AS FOLLOW S : 'PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PU RPOSE, IF IT INVOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR ANY ACTIVITY OF REND ERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS FOR A CESS OR FEE OR ANY OTHER CONSIDERATI ON ITA NO.1693/MDS/2015 8 IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION OR RETENTION OF THE INCOME FROM SUCH ACTIVITY.' THE AO HAS TAKEN A STAND THAT BY VIRTUE OF THE AMEN DMENT AS ABOVE, THE ASSESSEE IS NOT ENTITLED TO EXEMPTION U/S.11 OF THE ACT. 5.1. THE LD. AR SUBMITTED THAT, THE IDEA AND UNDERS TANDING OF THE AO WITH REGARD TO THE SCOPE OF AMENDMENT TO SEC.2(1 5) IS THOROUGHLY WRONG AND MISCONCEIVED. THERE IS NO TRADE OR BUSIN ESS IN THE ACTIVITIES PURSUED BY THE ASSESSEE AND WILL NOT TAK E IT OUTSIDE THE PURVIEW OF CHARITY AND HENCE, THAT THE PROVISO AD DED TO SEC.2(15) OF THE ACT, IS NOT AT ATTRACTED TO THE CASE IN HAND. HE ALSO SUBMITTED THAT THE STATUTE, AS IT STOOD EARLIER, HAD CLARIFIED THE CHARITABLE PURPOSE MENTIONED IN SEC.2(15) OF THE ACT, BY THE WORDS 'NO T INVOLVING THE CARRYING ON OF ANY ACTIVITY FOR PROFIT'. BY VIRTUE OF THE EXISTENCE OF THESE CLARIFYING WORDS, IF THERE WAS ANY ELEMENT OF PROFIT IT WAS ENOUGH LIABLE TO BE RECKONED AS CHARITABLE PURPOSE RIGHT FROM THE INCEPTION OF THE ACT IN 1961 TILL 1 ST APRIL, 1984, WHEN THE WORDS 'NOT INVOLVING THE CARRYING ON OF ANY ACTIVITY FOR PROFI T' WERE DELETED. THUS THE CONTENTION IS THAT AFTER 1 ST APRIL, 1984, THERE IS NO ALLERGY TO PROFIT ITA NO.1693/MDS/2015 9 AND IF THE PROFIT FEEDS CHARITY, IT STANDS CLEARED FOR EXEMPTION UNDER S. 11 OF THE ACT. 5.2. TO ANALYSE THE SCOPE AND OBJECT OF THE AMENDM ENT, WE HAVE GONE THROUGH THE 'BUDGET SPEECH' OF THE MINIST ER FOR FINANCE IN THE FINANCE BILL 2008, REPORTED IN (298 ITR (ST.) 3 3 AT PAGE 65 : '180. CHARITABLE PURPOSE INCLUDES RELIEF OF THE P OOR, EDUCATION, MEDICAL RELIEF AND ANY OTHER OBJECT OF G ENERAL PUBLIC UTILITY. THESE ACTIVITIES ARE TAX EXEMPT, AS THEY SHOULD BE. HOWEVER, SOME ENTITIES CARRYING ON REGUL AR TRADE, COMMERCE OR BUSINESS OR PROVIDING SERVICES I N RELATION TO ANY TRADE, COMMERCE OR BUSINESS AND EAR NING INCOMES HAVE SOUGHT TO CLAIM THAT THEIR PURPOSES WO ULD ALSO FALL UNDER 'CHARITABLE PURPOSE'. OBVIOUSLY, TH IS WAS NOT THE INTENTION OF PARLIAMENT AND HENCE I PROPOSE TO AMEND THE LAW TO EXCLUDE THE AFORESAID CASES. GENUI NE CHARITABLE ORGANIZATIONS WILL NOT IN ANY WAY BE AFF ECTED ' (EMPHASIS SUPPLIED). 5.3 THE LEARNED COUNSEL POINTS OUT THAT, THE AMENDM ENT WAS BROUGHT ABOUT AS A MEASURE OF RATIONALIZATION AND S IMPLIFICATION, ITA NO.1693/MDS/2015 10 STREAMLINING THE DEFINITION OF CHARITABLE PURPOSE A ND NOT AS A MEASURE OF TAXATION. IT IS ALSO STATED THAT THE CON CEPT OF CHARITY IN INDIA IS WIDER, SIMULTANEOUSLY ADDING THAT, BY VIRT UE OF THE AMENDMENT, THE POSITION THAT EXISTED PRIOR TO 1ST F EB., 1984 HAS BEEN BROUGHT BACK AND THAT IS ALL. THIS HOWEVER WILL NO T TILT THE BALANCE IN ANY MANNER IN THE CASE OF THE ASSESSEE SO AS TO TAK E THE ACTIVITIES OUTSIDE THE CHARITABLE PURPOSE, PARTICULARLY IN VIE W OF THE FACT THAT ACTIVITIES OF ASSESSEE TRUST WILL NOT CONSTITUTE ANY TRADE OR BUSINESS. ACCORDING TO THE LD. AR, TO PERFORM CHARITY, INCOME IS INEVITABLE AND CONTENDED THAT THE ACTIVITIES BEING PURSUED BY THE ASSESSEE MAY CONSTITUTE A TRADE OR BUSINESS, IF IT IS NOT APPLIE D FOR THE PURPOSES OF CHARITY. CONTRARY TO THIS, THE LD. DR SUBMITTED TH AT THOUGH THE OBJECT OF THE ASSESSEE IS TO CARRY ON CHARITABLE ACTIVITIE S, BUT IT DOES NOT CARRY THOSE CHARITABLE ACTIVITIES, AND IT WAS ONLY CONDUCTING COURSES FOR HELPING PERSONS IN PREPARING FOR CISA AND CISM CERTIFICATION CONDUCING BY PARENT BODY IN A COMMERCIAL MANNER, WH ICH CANNOT BE CONSTRUED AS CHARITABLE ACTIVITY. IN OTHER WORDS, IT WAS CONTENDED BY THE LD. DR THAT THE ASSESSEE CARRIED ON ACTIVITIES IN A BUSINESS ORIENTED MANNER, IT WILL DEFINITELY COME WITHIN THE FOURTH LIMB OF THE ITA NO.1693/MDS/2015 11 AMENDED SEC.2(15) OF THE ACT, WHERE THE PROHIBITION OF ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS FOR ANY ACTIV ITY OF RENDERING SERVICE OR ANY OTHER CONSIDERATION, IRRESPECTIVE OF THE NATURE OF THE USE OR APPLICATION OR RETENTION OF THE INCOME OF SU CH ACTIVITY IS SPECIFIED AND HENCE, NOT ENTITLED TO ANY EXEMPTION. 5.4. TO ANALYSE THE ACTIVITIES CARRIED ON BY THE AS SESSEE, WE HAVE TO GO THROUGH THE NATURE OF ACTIVITIES PURSUED BY T HE ASSESSEE AND PERUSAL OF THAT ACTIVITIES CARRIED ON BY THE ASSESS EE, CANNOT BE OUST THE INVOLVEMENT OF TRADE, COMMERCE OR BUSINESS OR ANY SERVICE IN CONNECTION WITH TRADE, COMMERCE OR BUSINESS AS CONTEMPLATED UNDER THE STATUTE. FURTHER, WE NOTE THAT THERE I S SUBSTANTIAL VARIATION IN THE STATUTORY POSITION AS IT EXISTED EARLIER TO 1 ST APRIL, 2009, WHERE THE ASSESSEE HAS BEEN GIVEN EXEMPTION UNDER SECTION 11 OF THE ACT AND THE POSITION AVAILABLE AFTER AMENDMENT TO SECTION 2(15) OF THE ACT, BROUGHT INTO EFFECT FROM 1 ST APRIL, 2009. YET ANOTHER IMPORTANT ASPECT TO BE NOTED IN THIS CONTEXT IS THA T, AFTER THE AMENDMENT BY INCORPORATING PROVISO TO SECTIO N 2(15), THE 4TH LIMB AS TO THE ADVANCEMENT OF 'ANY OTHER OBJECT OF GENERAL PUBLIC ITA NO.1693/MDS/2015 12 UTILITY' WILL NO LONGER REMAIN AS CHARITABLE PURPOS E, IF IT INVOLVES CARRYING ON OF : (A) ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE O R BUSINESS, (B) ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATI ON TO ANY TRADE, COMMERCE OR BUSINESS FOR A CESS OR A FEE OR ANY OTH ER CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION OR RETENTION OF THE INCOME FROM SUCH ACTIVITY. 5.5. THE FIRST LIMB OF EXCLUSION FROM CHARITABLE P URPOSE UNDER CL. (A) WILL BE ATTRACTED, IF THE ACTIVITY PURSUED BY THE INSTITUTION INVOLVES ANY TRADE, COMMERCE OR BUSINESS. BUT THE S ITUATION CONTEMPLATED UNDER THE SECOND LIMB [CL. (B)] STANDS ENTIRELY ON A DIFFERENT PEDESTAL, WITH REGARD TO THE SERVICE IN R ELATION TO THE TRADE, COMMERCE OR BUSINESS MENTIONED THEREIN. TO PUT IT M ORE CLEAR, WHEN THE MATTER COMES TO THE SERVICE IN RELATION TO THE TRADE, COMMERCE OR BUSINESS, IT HAS TO BE EXAMINED WHETHER THE WORDS ' ANY TRADE, COMMERCE OR BUSINESS' AS THEY APPEAR IN THE SECOND LIMB OF CL. (B) ARE IN CONNECTION WITH THE SERVICE REFERRED TO THE TRADE, COMMERCE OR BUSINESS PURSUED BY THE INSTITUTIONS TO WHICH THE S ERVICE IS GIVEN BY ITA NO.1693/MDS/2015 13 THE ASSESSEE. IF THE SAID WORDS ARE ACTUALLY IN RES PECT OF THE TRADE, COMMERCE OR BUSINESS OF THE ASSESSEE ITSELF, THE SA ID CLAUSE [SECOND LIMB OF THE STIPULATION UNDER CL. (B)] IS RATHER OT IOSE. SINCE THE ACTIVITY OF THE ASSESSEE INVOLVING ANY TRADE, COMMERCE OR BU SINESS, IS ALREADY EXCLUDED FROM THE CHARITABLE PURPOSE BY VIR TUE OF THE FIRST LIMB [CL. (A)] ITSELF, THERE IS NO NECESSITY TO STIPULAT E FURTHER, BY WAY OF CL. (B), ADDING THE WORDS 'OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS ....... ...........'. AS IT STANDS SO, GIVING A PURPOSIVE INTERPRETATION TO THE STATUT E, IT MAY HAVE TO BE READ AND UNDERSTOOD THAT THE SECOND LIMB OF EXCLUSI ON UNDER CL. (B) IN RELATION TO THE SERVICE RENDERED BY THE ASSESSEE, T HE TERMS 'ANY TRADE, COMMERCE OR BUSINESS' REFERS TO THE TRADE, C OMMERCE OR BUSINESS PURSUED BY THE RECIPIENT TO WHOM THE SERVI CE IS RENDERED AND IN SUCH CIRCUMSTANCES, THE ACTIVITIES CARRIED O N BY THE ASSESSEE CANNOT BE CONSIDERED AS CHARITABLE ACTIVITIES. 5.6. THE ACTIVITIES CARRIED ON BY THE ASSESSEE CAN NOT BE CONSIDERED AS ACTIVITIES OF MEDICAL RELIEF OR EDUCA TION OR RELIEF OF THE POOR. IT IS NOT TRUE THAT THE ACTIVITIES CARRIED O N BY THE ASSESSEE TAKE ITA NO.1693/MDS/2015 14 CARE OF THE POOR PEOPLE ALSO AND THOSE ACTIVITIES C ANNOT BE CLASSIFIED UNDER ANY OF THE SPECIFIC ACTIVITIES OF RELIEF OF T HE POOR; EDUCATION OR MEDICAL RELIEF. THE CORRECT WAY TO EXPRESS THE NATU RE OF THE ACTIVITIES CARRIED ON BY THE ASSESSEE IS TO SAY THAT THE ASSES SEE IS CARRYING ON 'ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY'. WHEN THAT IS THE CASE, THE ASSESSEE IS HIT BY THE PROVISO GIV EN UNDER SECTION 2(15). THE PROVISO READS THAT 'ADVANCEMENT OF ANY O THER OBJECT OF GENERAL PUBLIC UTILITY' SHALL NOT BE A CHARITABLE P URPOSE, IF IT INVOLVES CARRYING ON ANY ACTIVITY IN THE NATURE OF TRADE, CO MMERCE OR BUSINESS, OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATIO N TO ANY TRADE, COMMERCE OR BUSINESS FOR CONSIDERATION, IRRESPECTIV E OF THE APPLICATION OF THE MONEY. THEREFORE, THE CASE OF T HE ASSESSEE IS HIT BY PROVISO TO SECTION 2(15) AND THE ASSESSEE IS NOT ENTITLED FOR THE BENEFIT OF SECTION 11 FOR THAT PART OF INCOME GENER ATED IN THE HANDS OF THE ASSESSEE FROM RUNNING ITS ACTIVITIES OF TRUST. ALTERNATIVELY, ONE HAS TO LOOK INTO SECTION 11(4A). SUB-SECTION (4A) P ROVIDES THAT EXEMPTION SHALL NOT APPLY IN RELATION TO ANY INCOME OF A TRUST OR AN INSTITUTION, BEING PROFITS AND GAINS OF BUSINESS, U NLESS THE BUSINESS IS INCIDENTAL TO THE ATTAINMENT OF THE OBJECTIVES OF T HE ASSESSEE AND ITA NO.1693/MDS/2015 15 SEPARATE BOOKS OF ACCOUNT ARE MAINTAINED BY SUCH TR UST OR INSTITUTION IN RESPECT OF SUCH BUSINESS. IN THE PRESENT CASE, T HERE IS NO DISPUTE ON THE FACT THAT THE ASSESSEE IS CARRYING ON THE AC TIVITIES IN COMMERCIAL MANNER. BUT, THE CRUCIAL QUESTION IS WH ETHER RUNNING OF THE ACTIVITIES IS A BUSINESS INCIDENTAL TO THE ATTA INMENT OF THE OBJECTIVES OF THE TRUST OR NOT. BY ANY STRETCH OF I MAGINATION, IT IS NOT POSSIBLE TO HOLD THAT THE ACTIVITY IS INCIDENTAL TO THE STATED OBJECTIVES OF THE ASSESSEE-TRUST. 'INCIDENTAL' MEANS OFFSHOOT OF THE MAIN ACTIVITIES; INHERENT BY-PRODUCT OF PRINCIPAL ACTIVI TIES. ACTIVITIES TO COMPLIMENT AND SUPPORT THE MAIN OBJECTIVES ARE NOT IN THE NATURE OF INCIDENTAL TO THE BUSINESS. THEY ARE SUPPORTING ACT IVITIES, AT THE MAXIMUM. THE GENESIS OF INCIDENTAL ACTIVITIES MUST BE FROM THE PRINCIPAL ACTIVITIES THEMSELVES. THERE CANNOT BE ON E SOURCE FOR THE PRINCIPAL ACTIVITIES AND ANOTHER SOURCE FOR INCIDEN TAL ACTIVITIES. IN THE PRESENT CASE, IT WAS NOT POSSIBLE TO CONCLUDE THAT RUNNING OF BUSINESS IN THE FORM OF ACTIVITY IS INCIDENTAL TO CARRYING O N OF MAIN OBJECTIVE OF THE ASSESSEE-TRUST AND IT IS THE MAIN BUSINESS OF T HE ASSESSEE. THEREFORE, THE ASSESSEE IS NOT PROTECTED BY THE PRO VISION STATED IN SECTION 11 (4A), EITHER. ITA NO.1693/MDS/2015 16 6. THEREFORE, LOOKING AT THE ACTIVITIES CARRIED ON BY THE ASSESSEE, WE FULLY AGREE WITH THE FINDINGS OF THE AO. IN THE PRESENT CASE, IT IS AN ADMITTED FACT THAT THE ASSESSEE HAS COLLECTED A SUM OF ` 5,68,050/- FROM MEMBERS TO APPEAR FOR THE EXAMINATION IN THE COURSE OF CERTIFIED INFORMATION SYSTEM AUDITOR. THE TRUST HAS ALSO COLLECTED A SUM OF ` 7,48,047/- AS SEMINAR FEES FROM THE PARTICIPANTS. THE ACTIVITIES OF THE ASSESSEE TRUST WAS IN NATURE OF T RADE, BUSINESS, COMMERCE OR PROVIDING SERVICES IN RELATION TO ANY TRADE, BUSINESS, COMMERCE AND IT CANNOT BE SAID THAT IT FALLS UNDER THE PURVIEW OF SEC.1(15) OF THE ACT SO AS TO SAY ASSESSEE IS CARRY ING ON THE CHARITABLE ACTIVITIES. 7. FURTHER, THE APEX COURT IN THE CASE OF SOLE TRU STEE, LOKA SHIKSHANA TRUST VS COMMISSIONER OF INCOME-TAX (1975 ) 101 ITR 234 (SC) HAD AN OCCASION TO CONSIDER THIS ISSUE AND THE APEX COURT FOUND THAT ALL KINDS OF ACQUIRING KNOWLEDGE MAY NOT COME WITHIN THE TERM EDUCATION. THE APEX COURT, IN FACT, HAS OBSE RVED AS FOLLOWS: THE SENSE IN WHICH THE WORD EDUCATION HAS BEEN USED IN SECTION 2(15) IS THE SYSTEMATIC INSTRUCTION, SCHOOLING OR T RAINING GIVEN TO THE YOUNG IS PREPARATION FOR THE WORK OF LIFE. IT ALSO CONNOTES THE WHOLE ITA NO.1693/MDS/2015 17 COURSE OF SCHOLASTIC INSTRUCTION WHICH A PERSON HAS RECEIVED. THE WORD EDUCATION HAS NOT BEEN USED IN THAT WIDE AND EXTE NDED SENSE, ACCORDING TO WHICH EVERY ACQUISITION OF FURTHER KNO WLEDGE CONSTITUTES EDUCATION. ACCORDING TO THIS WIDE AND EXTENDED SENS E, TRAVELLING IS EDUCATION, BECAUSE AS A TRAVELLING YOU ACQUIRE FRES H KNOWLEDGE. LIKEWISE, IF YOU READ NEWSPAPERS AND MAGAZINES, SEE PICTURES, VISIT ART GALLERIES, MUSEUMS AND ZOOS, YOU THEREBY 6 ITA NO.4 86/COCH/2013 ADD TO YOUR KNOWLEDGE. AGAIN, WHEN YOU GROW UP AND HAVE DEALINGS WITH OTHER PEOPLE, SOME OF WHOM ARE NOT STRAIGHT, Y OU LEARN BY EXPERIENCE AND THUS ADD TO YOUR KNOWLEDGE OF THE WA YS OF THE WORLD. IF YOU ARE NOT CAREFUL, YOUR WALLET IS LIABLE TO BE ST OLEN OR YOU ARE LIABLE TO BE CHEATED BY SOME UNSCRUPULOUS PERSON. THE THIEF W HO REMOVES YOUR WALLET AND THE SWINDLER WHO CHEATS YOU TEACH YOU A LESSON AND IN THE PROCESS MAKE YOU WISER THOUGH POORER. IF YOU VISIT A NIGHT CLUB, YOU GET ACQUAINTED WITH AND ADD TO YOUR KNOWLEDGE ABOUT SOM E OF THE NOT MUCH REVEALED REALITIES AND MYSTERIES OF LIFE. ALL THIS IN A WAY IS EDUCATION IN THE GREAT SCHOOL OF LIFE. BUT THAT IS NOT THE SENSE IN WHICH THE WORD EDUCATION IS USED IN CLAUSE (15) OF SECT ION 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. ITA NO.1693/MDS/2015 18 8. THE COURSE CONDUCTED BY THE ASSESSEE MAY BE A SO URCE OF ACQUISITION OF SOME KNOWLEDGE BY THE RESPECTIVE STU DENTS/PERSONS. BUT SUCH A COURSE OR ACQUISITION OF KNOWLEDGE BY TH E STUDENTS AT THE CLASS CONDUCTED BY THE ASSESSEE FOR CONDUCTING REVI EW AND COURSES FOR HELPING ASPIRING MEMBERS/MEMBERS IN PREPARING F OR CISA AND CISM CERTIFICATION CONDUCTED BY THE PARENT BODY, IS ACA, USA AND ALSO CONDUCTING MONTHLY PROFESSIONAL EDUCATION MEET INGS WHEREIN PROFESSIONALS ADDRESS THE PARTICIPANTS FOR SHARING KNOWLEDGE AND EXPERIENCE ON METHODOLOGIES, EMERGING CONCEPTS, SKI LLS UPDATION ETC., CANNOT BE CONSIDERED TO BE EDUCATION WITHIN THE MEANING OF SECTION 2(15) OF THE ACT. 9. IN OUR OPINION, EDUCATION CONNOTES IN SECTION 2(15) IS THE PROCESSING OF TRAINING AND DEVELOPING THE KNOWLEDGE , SKILL, MIND AND CHARACTER OF STUDENTS BY NORMAL SCHOOLING. IN FACT, THE APEX COURT HAS OBSERVED AS FOLLOWS AT PAGE 241 OF THE ITR: T HE SENSE IN WHICH THE WORD EDUCATION HAS BEEN USED IN SECTION 2(15) IS THE SYSTEMATIC INSTRUCTION, SCHOOLING OR TRAINING GIVEN TO THE YOU NG IS PREPARATION FOR THE WORK OF LIFE. IT ALSO CONNOTES THE WHOLE COURSE OF SCHOLASTIC ITA NO.1693/MDS/2015 19 INSTRUCTION WHICH A PERSON HAS RECEIVED. THE WORD EDUCATION HAS NOT BEEN USED IN THAT WIDE AND EXTENDED SENSE, ACCO RDING TO WHICH EVERY ACQUISITION OF FURTHER KNOWLEDGE CONSTITUTES EDUCATION. ACCORDING TO THIS WIDE AND EXTENDED SENSE, TRAVELLI NG IS EDUCATION, BECAUSE AS A TRAVELLING YOU ACQUIRE FRESH KNOWLEDGE . LIKEWISE, IF YOU READ NEWSPAPERS AND MAGAZINES, SEE PICTURES, VISIT ART GALLERIES, MUSEUMS AND ZOOS, YOU THEREBY ADD TO YOUR KNOWLEDGE . AGAIN, WHEN YOU GROW UP AND HAVE DEALINGS WITH OTHER PEOPLE, SO ME OF WHOM ARE NOT STRAIGHT, YOU LEARN BY EXPERIENCE AND THUS ADD TO YOUR KNOWLEDGE OF THE WAYS OF THE WORLD. IF YOU ARE NOT CAREFUL, Y OUR WALLET IS LIABLE TO BE STOLEN OR YOU ARE LIABLE TO BE CHEATED BY SOME U NSCRUPULOUS PERSON. THE THIEF WHO REMOVES YOUR WALLET AND THE S WINDLER WHO CHEATS YOU TEACH YOU A LESSON AND IN THE PROCESS MA KE YOU WISER THOUGH POORER. IF YOU VISIT A NIGHT CLUB, YOU GET A CQUAINTED WITH AND ADD TO YOUR KNOWLEDGE ABOUT SOME OF THE NOT MUCH RE VEALED REALITIES AND MYSTERIES OF LIFE. ALL THIS IN A WAY IS EDUCATI ON IN THE GREAT SCHOOL OF LIFE. BUT THAT IS NOT THE SENSE IN WHICH THE WOR D EDUCATION IS USED IN CLAUSE (15) OF SECTION 2. WHAT EDUCATION CONNOTE S IN THAT CLAUSE IS THE PROCESS OF TRAINING AND DEVELOPING THE KNOWLEDG E, SKILL, MIND AND ITA NO.1693/MDS/2015 20 CHARACTER OF STUDENTS BY NORMAL SCHOOLING. FROM T HE ABOVE JUDGMENT OF THE APEX COURT IT WOULD BE ABUNDANTLY C LEAR THAT THERE SHOULD BE A SYSTEMATIC INSTRUCTION TO THE STUDENTS BY WAY OF NORMAL SCHOOLING. MERE COACHING CLASSES MAY PROVIDE SOME K IND OF KNOWLEDGE TO THE STUDENTS. BUT THAT KIND OF ACQUISI TION OF KNOWLEDGE THROUGH COACHING CLASSES CANNOT FALL WITHIN THE MEA NING OF EDUCATION AS PROVIDED IN SECTION 2(15) OF THE ACT . AS THE APEX COURT OBSERVED, ONE MAY ACQUIRE KNOWLEDGE IN THE COURSE O F TRAVELLING; DURING THE COURSE OF READING NEWSPAPER; ETC. BUT TH AT KIND OF KNOWLEDGE CANNOT FALL WITHIN THE TERM EDUCATION A S PROVIDED IN SECTION 2(15) OF THE ACT. THERE SHOULD BE A NORMAL SCHOOLING BY WAY OF REGULAR AND SYSTEMATIC INSTRUCTION. 10 ITA NO.48 6/COCH/2013 10. THE PATNA HIGH COURT IN THE CASE OF BIHAR INS TITUTE OF MINING AND MINE SURVEYING VS C.I.T. (1994) 208 ITR 608 (PA T) HELD THAT MERE CONDUCTING OF CLASSES FOR OPEN UNIVERSITY / DI STANCE EDUCATION CANNOT BE CONSTRUED AS CHARITABLE ACTIVITY WITHIN T HE MEANING OF SECTION 2(15) OF THE ACT. THE PATNA HIGH COURT, AFT ER CONSIDERING THE JUDGMENT OF THE APEX COURT IN COMMISSIONER OF INCOM E-TAX VS ITA NO.1693/MDS/2015 21 ANDHRA CHAMBER OF COMMERCE (1965) 55 ITR 722 (SC) A ND IN THE CASE OF COMMISSIONER OF INCOME-TAX VS SOLE TRUSTEE, LOKA SHIKSHANA TRUST (1970) 77 ITR 61 (MYS) HAS OBSERVED AS FOLLOWS AT PAGE 615 OF THE ITR: IT IS TRUE THAT BY REASON OF THE FINANCE ACT, 1983, THE QUESTION AS TO WHETHER ANY CHARITABLE INS TITUTION IS BEING RUN WITH A PROFIT MOTIVE OR NOT HAS LOST ITS RELEVA NT. HOWEVER, THE WORD CHARITABLE PREFIXING THE WORD INSTITUTION HAS T O BE GIVEN ITS FULL EFFECT. IT APPEARS THAT ONE OF THE PRINCIPAL PROJEC TS OF THE PETITIONERS INSTITUTION HAS THE OBJECT OF COACHING AND PREPARIN G THE STUDENTS FOR APPEARING IN VARIOUS EXAMINATIONS CONDUCTED BY THE BOARD OF MINING EXAMINATION AND / OR MI(1) SECTION (A)(B) AND THE S AID COACHING OF STUDENTS IN AN INSTITUTE IS NOT, IN OUR OPINION, AN IMPARTING OF EDUCATION WHICH CAN BE SAID TO BE A PROCESS OF TRAI NING AND DEVELOPING KNOWLEDGE AND CHARACTER OF STUDENTS BY N ORMAL SCHOOLING. A COACHING INSTITUTE CANNOT BE SAID TO B E AN INSTITUTION WHERE NORMAL SCHOOLING IS DONE. THE DEFINITION OF CHARITABLE PURPOSE IS INCLUSIVE AND NOT EXHAUSTIVE. IT IS FU RTHER SEEN THAT THE GUJARAT HIGH COURT ALSO HAD AN OCCASION TO CONSIDER IDENTICAL ISSUE IN THE CASE OF SAURASHTRA EDUCATION FOUNDATION VS C.I. T. (2005) 273 ITA NO.1693/MDS/2015 22 ITR 139 (GUJ). THE GUJARAT HIGH COURT FOUND THAT AL L KINDS OF EDUCATION WOULD NOT FALL WITHIN THE MEANING OF SECT ION 2(15) OF THE ACT. THE TRAINING, INSTRUCTION, ETC. WOULD RESULT I N GRANT OF A DIPLOMA OR DEGREE BY A UNIVERSITY OR A GOVERNMENTAL AGENCY. IN THE CASE BEFORE US, ADMITTEDLY, THE TAXPAYER IS CONDUCTING COACHING CLASSES. THEREFORE, IT CANNOT BE TREATED AS A CHARITABLE INS TITUTION AS PROVIDED IN SECTION 2(15) OF THE ACT. 11. IN VIEW OF THE ABOVE, WE ARE OF THE OPINION TH AT THE ASSESSEE CANNOT BE CONSIDERED TO BE AN EDUCATIONAL TRUST W ITHIN THE MEANING OF SECTION 2(15) OF THE ACT. THEREFORE, IT IS NOT E NTITLED FOR EXEMPTION U/S.11 OF THE ACT AND THIS INCOME OF THE ASSESSEE I S TO BE ASSESSED AS BUSINESS INCOME UNDER THE HEAD AOP AND IT IS T O BE ASSESSED AFTER GIVING ALL DEDUCTION AVAILABLE O THE ASSESSEE UNDER THE HEAD BUSINESS INCOME. HOWEVER, WE MAKE IT CLEAR THAT IF THE COST OF FIXED ASSETS HAS BEEN CLAIMED AS APPLICATION OF INCOME WH ILE CLAIMING EXEMPTION U/S.11 OF THE ACT UNDER CHAPTER-III OF TH E ACT IN EARLIER ASSESSMENT YEARS, THE ASSESSEE CANNOT CLAIM DEPRECI ATION ON THE SAME ASSET U/S.32 OF THE ACT AS THE COST OF FIXED A SSET WAS ALREADY ITA NO.1693/MDS/2015 23 ALLOWED AS APPLICATION OF INCOME AND ITS COST HAS A LREADY BECOME NIL. ACCORDINGLY, THE ORDER OF THE COMMISSIONER IS CONFIRMED ON THE REASONS GIVEN BY THIS TRIBUNAL ABOVE. ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS DISMISSED. 12. IN THE RESULT, THE APPEAL OF ASSESSEE IS DISMIS SED. ORDER PRONOUNCED ON WEDNESDAY, THE 10 TH OF FEBRUARY,2016 AT CHENNAI. SD/- SD/- ( . ) (G.PAVAN KUMAR) ( ( $% & ) ) ' CHANDRA POOJARI () JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 10 TH FEBRUARY,2016 . K S SUNDARAM. *+)),-).- /COPY TO: ) 1. /APPELLANT 2. /RESPONDENT 3. ) /)'( /CIT(A) 4. ) / /CIT 5. -01 )2 /DR 6. 13)4 /GF
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