(E), New Delhi V. The Institute of Chartered Accountant of India, New Delhi

ITA 2088/DEL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77612 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-04-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 12-02-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 10-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R S MEENA
• Keywords: Charitable institution
• Section: 11

Judgement Text

ITA NO. 2088/DEL/2013 ASSTT.YEAR: 2009-10 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `H NEW DELHI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER I.T.A.NO.2088/DEL/2013 ASSESSMENT YEAR : 2009-10 DY.DIRECTOR OF INCOME TAX(E), VS THE INSTITUTE OF CHARTERED ACCOUNTANTS TRUST CIRCLE-IV, NEW DELHI. OF INDIA, PB-7100, ICAI BHAWAN, I.P. MARG, NEW DELHI-110002 (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI RAJESH JAIN RESPONDENT BY : SHRI R.S. MEENA, C.I.T. DR O R D E R PER CHANDRA MOHAN GARG, JUDICIAL MEMBER THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAI NST THE ORDER OF THE COMMISSIONER OF INCOME TAX(A)-XXI, NEW DELHI DATED 31.01.2013 IN APPEAL NO.310/11-12/934 FOR AY 2009-10. 2. GROUND NO.3 OF THE REVENUE IS GENERAL IN NATURE WHICH NEEDS NO ADJUDICATION. REMAINING GROUNDS OF THE REVENUE REA DS AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) HAS ERRED IN IGNORING THAT THE ASSESSEE S PREDOMINANT OBJECTIVES ARE TO CONDUCT EXAMINATIONS FOR THE CANDIDATES FOR THE CHARTERED ACCOUNTANTS AND TO REGULATE IT MEMBERS AND IT DOES NOT PROVIDE ANY SCH OLASTIC EDUCATION, THEREFORE, ITS ACTIVITIES DO NOT FALL WI THIN THE CATEGORY OF EDUCATION COVERED BY THE DEFINITION OF THE EXPRESSION CHARITABLE PURPOSE WHICH IS SECOND LIM B OF THE SECTION 2(15) OF THE I.T.ACT, 1961. ITA NO. 2088/DEL/2013 ASSTT.YEAR: 2009-10 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS ERRED IN IGNORING THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF SOLE TRUSTY, L OK SHIKSHANA TRUST VS. COMMISSIONER OF INCOME TAX (197 5) 10 ITR 234(C) WHEREIN THE HONBLE APEX COURT HAS DEFINED THE WORD EDUCATION AND OBSERVED THAT THE SENSE IN WHICH THE WORD EDUCATION HAS BEEN SUED IN SECT ION 2(15), IS THE SYSTEMATIC INSTRUCTION, SCHOOLING OR TRAINING GIVEN TO YOUNG IN PREPARATION FOR THE WORK OF LIFE. THE WORD EDUCATION HAS NOT BEEN USED IN SECTION 2(15) , IS THE SYSTEMATIC INSTRUCTION, SCHOOLING OR TRAINING GIVEN TO YOUNG IN PREPARATION FOR THE WORK OF LIFE. THE WOR D EDUCATION HAS NOT BEEN USED IN THAT WIDE AND EXTE NDED SENSE ACCORDING TO WHICH EVERY ACQUISITION OF FURTH ER KNOWLEDGE CONSTITUTES EDUCATION. 3. WE HAVE HEARD RIVAL ARGUMENTS OF BOTH THE PARTIE S AND CAREFULLY PERUSED THE RECORD PLACED BEFORE US. DURING THE AR GUMENTS, ASSESSEES REPRESENTATIVE SUBMITTED COPIES OF THE DECISIONS OF ITAT DELHI H BENCH IN ASSESSEES OWN CASE I.E. ITA NO. 1930/D/2011 DATED 16.6.2011 FOR AY 2007-08, COPY OF THE JUDGMENT OF HONBLE HIGH COURT OF DELHI DATED 04.07.2013 IN ASSESSEES OWN CASE BY WHICH WRIT PET ITIONS OF THE ASSESSEE FOR AY FROM 2006-07 TO 2011-12 HAVE BEEN ALLOWED BY SET TING ASIDE IMPUGNED ORDERS OF DIRECTOR GENERAL INCOME TAX (EXEMPTION) D ATED 13.04.2012 AND 28.9.2012 WITH A DIRECTION TO DGIT(E) TO RECOGNIZE THE PETITIONER/ASSESSEE AS ELIGIBLE U/S 10(23)(C)(IV) OF THE INCOME TAX ACT , 1961(FOR SHORT THE ACT) FOR CHARITABLE PURPOSES, HAVING REGARD TO ITS OBJE CT AND IMPORTANCE, SUBJECT TO THE PETITIONER/ASSESSEE COMPLYING WITH THE OTHER PROVISIONS OF THE ACT. ITA NO. 2088/DEL/2013 ASSTT.YEAR: 2009-10 3 THE AR ALSO SUBMITTED A COPY OF THE ORDERS OF HONB LE SUPREME COURT OF INDIA IN SPECIAL LEAVE TO APPEAL (CIVIL) NO. CC792/ 2014 DATED 27.01.2014 BY WHICH SPECIAL LEAVE PETITION OF THE DEPARTMENT A GAINST THE ORDER OF THE JUDGMENT OF HONBLE HIGH COURT OF DELHI DATED 04.07 .2013 (SUPRA) HAVE BEEN DISMISSED. LD. DR SUBMITTED THAT THE COMMISSI ONER OF INCOME TAX(A) HAS ERRED IN IGNORING THAT THE ASSESSEES PREDOMINA NT OBJECTIVES ARE TO CONDUCT EXAMINATION FOR THE CAS AND TO REGULATE ITS MEMBERS AND IT DOES NOT PROVIDE ANY SCHOLASTIC EDUCATION, THUS, ITS ACTIVIT IES DO NOT FALL WITHIN THE CATEGORY OF EDUCATION COVERED BY THE DEFINITION OF THE EXPRESSION CHARITABLE PURPOSES WHICH IS THE SECOND LIMB OF SECTION 2(15) OF THE ACT. 4. THE DR FURTHER POINTED OUT THAT THE COMMISSIONER OF INCOME TAX(A) HAS ERRED IN NOT TAKING COGNIZANCE OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF SOLE TRUSTEE, LOKA SHIKSHANA TRUST VS COMMISSIONER OF INCOME TAX (1975) 101 ITR 234 (SC) WHEREIN THE HONBLE APEX COURT HAS DEFINED THE WORD EDUCATION AND OBSERVED THAT THE MEANING OF THE WORD EDUCATION HAS BEEN DEFINED AND USED IN SECTION 2( 15) OF THE ACT AND AS PER THIS PROVISION, THE SYSTEMATIC INSTRUCTION, SCHOOLI NG OR TRAINING GIVEN TO THE YOUNG IS PREPARATION FOR THE WORK OF LIFE IS EDUCAT ION. THE DR FURTHER POINTED OUT THAT THE WORD EDUCATION HAS NOT BEEN USED IN THAT WIDE AND ITA NO. 2088/DEL/2013 ASSTT.YEAR: 2009-10 4 EXTENDED SENSE AND, ACCORDINGLY, ANY OTHER ACQUISIT ION OF FURTHER KNOWLEDGE CONSTITUTES EDUCATION. 5. REPLYING TO THE ABOVE, THE AR POINTED OUT PARA 4 TO 8 OF THE ORDER OF ITAT H BENCH IN ITA NO. 1930/D/2011 (SUPRA) WHERE IN DISMISSING THE APPEAL OF THE REVENUE, IT HAS BEEN HELD THAT THE AS SESSEE INSTITUTE IS AN EDUCATIONAL INSTITUTE, HENCE ITS INCOME WILL BE EXE MPT U/S 11 AS EDUCATION FALLS WITHIN THE MEANING OF CHARITABLE PURPOSES U/S 2(15) OF THE ACT. THE RELEVANT OPERATIVE OBSERVATIONS AND FINDINGS PART O F THIS ORDER READ AS UNDER:- 4. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (APPEALS), REFERRED TO HIS OWN APPELLATE ORDER FOR A.Y. 2006-07 AS UNDER:- I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE LD. AUTHORISED REPRESENTATIVE OF THE APPELLANT INSTITUT ION VIS- A-VIS FINDING OF THE ASSESSING OFFICER MADE OUT IN THE ASSESSMENT ORDER IN RESPECT OF HOLDING THE INCOME O F COACHING CLASSES AS AN ACTIVITY OF BUSINESS. THE MA IN EMPHASIS OF THE ASSESSING OFFICER IN ARRIVING TO CONCLUSION THAT INCOME OF THE APPELLANT INSTITUTE F ROM COACHING CLASSES IS AN ACTIVITY OF BUSINESS, IS THE FIGURE OF EARNING FROM COACHING CLASSES AS REFLECTED BY HIM I N THE TABLE PREPARED IN THE ASSESSMENT ORDER GIVING DETAI LED OF GROSS INCOME OF COACHING, EXPENDITURE INCURRED IN COACHING AND NET EARNING FROM COACHING CLASSES FROM ASSESSMENT YEAR 2002-03 TO ASSESSMENT YEAR 2008-09 AND HIS REMARK THAT THE APPELLANT INSTITUTE IS EARN ING HUGE INCOME OVER THE YEARS LIKE ANY BUSINESSMAN EAR N FROM THE ACTIVITIES OF BUSINESS. HOWEVER, ON THE OT HER SIDE THE LD. AUTHORISED REPRESENTATIVE OF THE APPEL LANT EMPHASIZED THAT THE CONDUCTING OF COACHING CLASSES THROUGH REGIONAL COUNCILS, THE APPELLANT INSTITUTE, FOLLOWING ITS MAIN PURPOSE AND OBJECTIVE OF GIVING ITA NO. 2088/DEL/2013 ASSTT.YEAR: 2009-10 5 TRAINING TO THE FUTURE CHARTERED ACCOUNTANTS, FOR W HICH IT HAS BEEN ENACTED BY THE PARLIAMENT AND FURTHER EMPHASIZING THAT CBDT WHILE GRANTING NOTIFICATION U /S 10(23C)(IV) OF THE ACT TO THE APPELLANT INSTITUTE W AS WELL AWARE ABOUT THE COMPONENT OF ITS INCOME REFLECTED I N ANNUAL ACCOUNTS FILED WITH THE APPLICATION FOR APPL YING FOR EXEMPTION OF INCOME U/S. 10(23C)(IV) OF THE ACT CONSISTENTLY TO THE ASSESSMENT YEAR 2005-06, AND THEREFORE THE OBJECTION OF THE ASSESSING OFFICER IN THIS RESPECT IS MISCONCEIVED, EVEN ON THE PRINCIPLE OF DOCTRINE OF CONSISTENCY ENUNCIATED BY HONBLE SUPRE ME COURT IN THE CASE OF RADHASWAMY SATSANG (CITED SUPR A). PURSING THE CHARTERED ACCOUNTANTS REGULATIONS, ANNU AL ACCOUNTS OF THE APPELLANT INSTITUTE AND WRITTEN ARG UMENTS OF THE LD. AUTHORISED REPRESENTATIVE AND JUDICIAL PRECEDENTS BROUGHT TO MY NOTICE ON THE ISSUE INVOLV ED, I AM INCLINED TO ACCEPT THE ARGUMENT OF THE LD. COUNS EL THAT INCOME OF COACHING CLASSES OF THE APPELLANT INSTITU TE IS NOT AN ACTIVITY OF BUSINESS AS ALLEGED BY THE ASSES SING OFFICER IN THE ASSESSMENT ORDER, BUT THE SAID INCOM E HAS ARISEN FROM THE ANCILLARY ACTIVITY ARISEN FROM THE MAIN OBJECTS FOR WHICH IT HAS BEEN ENACTED BY THE PARLIA MENT AND FURTHER ACCEPTED AS SUCH BY CENTRAL BOARD OF DI RECT TAXES YEAR TO YEAR, WHILE NOTIFYING IT FOR THE PURP OSE OF SECTION 10(23C)(IV) OF THE ACT. THE OBSERVATION OF THE ASSESSING OFFICER THAT THE APPELLANT INSTITUTE IS E ARNING HUGE INCOME OVER THE YEARS AND THIS SURPLUS INCOME IS EARNED IN A SYSTEMATIC AND ORGANIZED WAY, THE WAY I N WHICH BUSINESS ACTIVITIES ARE CARRIED OUT IS ALSO MISCONCEIVED AS MERELY BECAUSE PROFIT HAS RESULTED FROM THE ACTIVITY OF IMPARTING EDUCATION WOULD NOT CHANG E THE CHARACTER OF THE INSTITUTION. THE HONBLE SUPREME C OURT IN THE CASE OF SURAT ART SILK CLOTH MANUFACTURES ASSOCIATION AND HONBLE DELHI HIGH COURT IN THE VER Y RECENT JUDGEMENT IN THE CASE OF SISTER CONCERN OF T HE APPELLANT INSTITUTE ICAI ACCOUNTING RESEARCH FOUNDATION REPORTED AT 321 ITR 73 HELD THAT THE MER E FACT OF GENERATING INCOME, WHILE CARRYING OUT THE ANCILLARY OBJECTS FOR ACHIEVING THE MAIN OBJECTS, W OULD NOT PER SE CHANGE THE CHARACTER OF THE ASSESSEE TIL L THE ITA NO. 2088/DEL/2013 ASSTT.YEAR: 2009-10 6 SURPLUS RECEIVED QUA THESE ACTIVITIES ARE UTILIZED FOR ADVANCEMENT OF THE OBJECTIVES FOR WHICH THE ASSESSE E HAS BEEN ESTABLISHED. HENCE, GROUND NO. 6 ISALLOWED IN FAVOUR OF THE APPELLANT. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) FURTHER TOOK NOTE THAT HONBLE ITAT, DELHI BENCH IN ITA NO. 1853/DEL/2010 ALSO HELD THAT: THE INSTITUTE AS SUCH MERELY IT IS RECEIVING COACH ING FEE FROM STUDENTS FOR IMPARTING EDUCATION, CANNOT BE SA ID TO HAVE BEEN CARRYING ON THE BUSINESS AND ACCORDINGLY IT IS NOT REQUIRED TO MAINTAIN SEPARATE BOOKS OF ACCOUNTS AS ALLEGED BY DIT(E). THE INCOME OF THE COACHING CLASS ES EARNED BY THE ASSESSEE INSTITUTE IS WITHIN ITS OBJE CTS AND ITS REGULATIONS AND FURTHER THESE ACTIVITIES ARE EDUCATIONAL ACTIVITY WITHIN THE DEFINITION OF SECTI ON 2(15) OF THE INCOME TAX ACT, 1961, AND CONSEQUENTLY THERE FORE CANNOT BE ACTIVITY OF BUSINESS FOR WHICH SEPARATE B OOKS OF ACCOUNTS ARE REQUIRED TO BE MAINTAINED. THE ORDER O F THE DIT(E) IS THEREFORE NOT SUSTAINABLE AS THE INCOME O F THE INSTITUTE IS EXEMPT NOT ONLY U/S 10(23C)(IV) BUT AL SO UNDER SECTION 11. THE INSTITUTE IS AN EDUCATIONAL INSTITU TE AND HENCE ITS INCOME WILL ALSO BE EXEMPT U/S. 11 AS EDU CATION FALLS WITHIN THE MEANING OF CHARITABLE PURPOSE UNDE R SECTION 2(15) OF THE ACT. 5. AGAINST THE ABOVE ORDER, THE REVENUE IS IN APPEA L BEFORE US. 6. LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE I SSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F THIS TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 1853/DEL/2010 FOR A.Y. 2005-06. IN THIS REGARD, LD. COUNSEL OF THE ASSESSEE REFERRED PARA 15 OF THE ABO VE SAID ORDER WHICH READS AS UNDER:- 15. THE INSTITUTE AS SUCH MERELY IT IS RECEIVING C OACHING FEE FROM STUDENTS FOR IMPARTING EDUCATION, CANNOT B E SAID TO HAVE BEEN CARRYING ON BUSINESS AND ACCORDINGLY I T IS ITA NO. 2088/DEL/2013 ASSTT.YEAR: 2009-10 7 NOT REQUIRED TO MAINTAIN SEPARATE BOOKS OF ACCOUNTS AS ALLEGED BY DIT(E). THE INCOME OF THE COACHING CLASS ES EARNED BY THE ASSESSEE INSTITUTE IS WITHIN ITS OBJE CTS AND ITS REGULATIONS AND FURTHER THESE ACTIVITIES ARE EDUCATIONAL ACTIVITY WITHIN THE DEFINITION OF SECTI ON 2(15) OF THE INCOME TAX ACT, 1961, AND CONSEQUENTLY THERE FORE CANNOT BE ACTIVITY OF BUSINESS FOR WHICH SEPARATE B OOKS OF ACCOUNTS ARE REQUIRED TO BE MAINTAINED. THE ORDER O F THE LD.DIT(E) IS THEREFORE, NOT SUSTAINABLE AS THE INCO ME OF THE INSTITUTE IS EXEMPT NOT ONLY U/S 10(23C)(IV) BU T ALSO UNDER SECTION 11. THE INSTITUTE IS AN EDUCATIONAL I NSTITUTE AND HENCE ITS INCOME WILL ALSO BE EXEMPT UNDER SECT ION 11 AS EDUCATION FALLS WITHIN THE MEANING OF CHARITA BLE PURPOSE UNDER SECTION 2(15) OF THE ACT. 7. IN LIGHT OF THE ABOVE, LD. COUNSEL OF THE ASSESS EE CONTENDED THAT THIS ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THIS TRIBUNAL AS ABOVE . 7.1 LD. DEPARTMENTAL REPRESENTATIVE COULD NOT CONTROVERT THIS PROPOSITION. HE FAIRLY AGREED THAT THIS ISSUE STANDS COVERED BY THE SAID TRIBUNAL ORDER. 8. ACCORDINGLY, IN THE BACKGROUND OF THE AFORESAID DISCUSSION AND PRECEDENT, WE DO NOT FIND ANY INFIRM ITY OR ILLEGALITY IN THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS), HENCE, WE UPHOLD THE SAME. 6. IN THE LIGHT OF ABOVE, LD. AR SUBMITTED THAT THE SOLE ISSUE AGITATED BY THE REVENUE IN THIS APPEAL STANDS COVERED IN FAVOUR OF THE ASSESSEE BY ABOVE DECISION OF THIS TRIBUNAL. LD. DR COULD NOT SUBSTA NTIALLY CONTROVERT THIS PROPOSITION AND HAS FAIRLY AGREED THAT THIS ISSUE S TANDS COVERED BY THE SAID TRIBUNAL ORDER IN FAVOUR OF THE ASSESSEE AND AGAINS T THE REVENUE. ACCORDINGLY, ON THE BASIS OF DISCUSSION AND EARLIER ORDER OF THIS TRIBUNAL AS ITA NO. 2088/DEL/2013 ASSTT.YEAR: 2009-10 8 REPRODUCED HEREINABOVE AND RESPECTFULLY FOLLOWING T HE SAME AS AN ORDER OF COORDINATE BENCH OF THIS TRIBUNAL AS A PRECEDENT, W E DO NOT FIND ANY INFIRMITY, ILLEGALITY OR ANY OTHER VALID REASON TO INTERFERE WITH THE IMPUGNED ORDER OF THE COMMISSIONER OF INCOME TAX(A). HENCE, WE UPHOLD THE SAME. ACCORDINGLY, BOTH THE GROUNDS OF THE REVENUE BEING DEVOID OF MERITS ARE DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 17.4.2014. SD/- SD/- (S.V. MEHROTRA) (CHANDRA MOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 17 TH APRIL 2014 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSTT. REGISTRAR