Investors Financial Education Academy, CHENNAI V. ITO (Exemption), CHENNAI

ITA 2565/CHNY/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5182 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 26-10-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VIJAY KUMAR PUNNA J
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Search and seizure; Charitable institution; Non compliance
• Section: 12AA

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI . . . , ! . '#'$ , % !& ' [BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ] ./I.T.A. NO.2565/CHNY/2017 / ASSESSMENT YEAR : --- M/S. INVESTORS FINANCIAL EDUCATION ACADEMY, 5A, 5 TH FLOOR, KENCES TOWER, NO.1, RAMAKRISHNA STREET, T.NAGAR, CHENNAI 600 017. VS. THE INCOME TAX OFFICER, (EXEMPTION) WARD 4, CHENNAI 600 034. [PAN AACCI 5911R] ( () / APPELLANT) ( *+() /RESPONDENT) / APPELLANT BY : SHRI. R. VIJAYARAGHAVAN, ADV /RESPONDENT BY : SHRI. VIJAY KUMAR PUNNA, J. STANDING COUNSEL. /DATE OF HEARING : 07-06-2018 ! /DATE OF PRONOUNCEMENT : 11-06-2018 / O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER IN THIS APPEAL FILED BY THE ASSESSEE, IT ASSAILS AN ORDER DATED 29.09.2017 OF LD. COMMISSIONER OF INCOME TAX (EXEMP TIONS), CHENNAI, DENYING IT THE REGISTRATION SOUGHT U/S.12AA OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). ITA NO.2565/2017. :- 2 -: 2. GROUNDS TAKEN BY THE ASSESSEE ARE REPRODUCED HEREUN DER:- 1.THE ORDER OF THE COMMISSIONER OF INCOME TAX (EXEMPTION) IS CONTRARY TO LAW, FACTS AND IN THE CIRCUMSTANCES OF THE CASE. 2.THE COMMISSIONER OF INCOME TAX (EXEMPTION) ERRED IN REJECTING THE APPLICATION FILED IN FORM NO .10A FOR GRANT OF REGISTRATION U/S.12AA OF THE ACT 3.THE COMMISSIONER OF INCOME TAX (EXEMPTION) ERRED IN HOLDING THAT THE APPELLANT IS NOT ENTITLED TO REGISTRATION U/ S. 12AA. 4.THE COMMISSIONER OF INCOME TAX (EXEMPTION) OUGHT TO HAVE APPRECIATED THAT THE MAIN OBJECTS OF THE APPELLANT IS EDUCATING AND DISSEMINATION OF KNOWLEDGE. 5.THE COMMISSIONER OF INCOME TAX (EXEMPTION) OUGHT TO HAVE APPRECIATED THAT WHEN THE OBJECT OF TRUST IS FOR EDUCATIONAL PURPOSES THE REGISTRATION CANNOT REJECTED ON THE BASIS OF FIRST PROVISO TO SECTION 2(15). 6.WITHOUT PREJUDICE, ASSUMING BUT NOT CONCEDING THA T PROVISO TO SECTION 2(15) IS APPLICABLE THE SAME WOU LD HAVE TO CONSIDERED IN THE LIGHT OF SECTION 13(8) IN THE COURSE OF ASSESSMENT OF THE TRUST AND NOT FOR DETERMINING THE CHARITABLE NATURE OF THE TRUST. 7.THE COMMISSIONER OF INCOME TAX OUGHT TO HAVE APPRECIATED THAT FOR GRANTING REGISTRATION UNDER SECTION 12AA ONLY THE CHARITABLE NATURE OF THE TRUS T AND GENUINENESS OF THE ACTIVITIES, HAVE TO BE EXAMINED. 8.THE APPELLANT CRAVES LEAVE TO ADDUCE ADDITIONAL GROUNDS AT THE TIME OF HEARING. 3. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT MAIN O BJECT OF THE ASSESSEE WAS TO IMPART FINANCIAL EDUCATION AND AWARENESS AMONGST THE INVESTOR COMMUNITY. AS PER THE LD. AUT HORISED ITA NO.2565/2017. :- 3 -: REPRESENTATIVE, LD. CIT ERRONEOUSLY CONCLUDED THAT ASSESSEES ACTIVITY WOULD FALL ONLY UNDER EDUCATION. FURTHER, AS PER THE LD. AUTHORISED REPRESENTATIVE, THOUGH THE LD. CIT EXAMINED VARIOU S LIMBS OF U/S.2(15) OF THE ACT, HE DID NOT ACCEPT THE CONTENT ION OF THE ASSESSEE THAT IT WAS AN ORGANIZATION PURSUING ACTIVITIES W HICH ADVANCED OBJECTS OF GENERAL PUBLIC UTILITY. SUBMISSION OF T HE LD. AUTHORISED REPRESENTATIVE, WAS THAT LD. CIT CAME TO A WRONG CO NCLUSION ON THE NATURE OF ASSESSEES ACTIVITIES. ACCORDING TO HIM, LD. COMMISSIONER OF INCOME TAX ERRONEOUSLY TOOK A VIEW THAT ASSESSEE WAS IMPARTING FINANCIAL EDUCATION/AWARENESS FOR A PRICE, WHEN I N REALITY IT WAS NOT COLLECTING ANY FEES FROM ANY OF THE PARTICIPANTS OF VARIOUS PROGRAMMES CONDUCTED BY IT. AS PER THE LD. AUTHORISED REPRESE NTATIVE, ASSESSEE WAS CONDUCTING INVESTOR MEETS ACROSS TIER II CITIE S IN INDIA AND WAS IMPARTING EDUCATION FOR DEVELOPING FUNDAMENTAL SKI LLS IN INVESTING. FURTHER, AS PER THE LD. AUTHORISED REPRESENTATIVE, ASSESSEE HAD CONDUCTED 25 TO 30 INVESTOR AWARENESS PROGRAMMES I N ASSOCIATION WITH M/S. NANAYAM VIKATAN, A LEADING FINANCIAL MAGA ZINE OF SOUTH. 4. CONTINUING HIS SUBMISSIONS, LD. AUTHORISED REPRESE NTATIVE, POINTED OUT THAT MANY MUTUAL FUNDS AND LIFE INSURAN CE COMPANIES LIKE GOLDMAN SACHS, TATA LIFE INSURANCE, RELIANCE LIFE INSURANCE, BHARTI AXA LIFE INSURANCE, ETC. WERE SPONSORING PROGRAMM ES, WHICH ITA NO.2565/2017. :- 4 -: ASSESSEE WAS CONDUCTING FOR THE BENEFIT OF PUBLIC. LD. AUTHORISED REPRESENTATIVE SOUGHT TO BRING TO OUR ATTENTION THE INVESTOR EDUCATION MATERIAL PUBLISHED ON A PERIODIC BASIS, AND SIMIL AR ARTICLES PUBLISHED IN A FORTNIGHTLY MAGAZINE. ACCORDING TO THE LD AUT HORISED REPRESENTATIVE, ASSESSEE WAS CONDUCTING E-COURSES F OR IMPARTING BASIC SKILLS FOR MAKING INVESTMENT, TO COMMON PEOPLE AND HAD ALSO DEVELOPED A MOBILE APP FOR THIS PURPOSE. AS PER THE LD. AUTHORISED REPRESENTATIVE, ASSESSEE WAS ACCREDITED BY NATIONAL INSTITUTE OF SECURITIES MARKET (NISM) AS A PROVIDER OF CONTINUIN G PROFESSIONAL EDUCATION. FURTHER, AS PER THE LD. AUTHORISED REPRE SENTATIVE, ASSESSEE HAD FUTURE PLANS TO PURSUE EDUCATIONAL COURSES TO SCHOOL CHILDREN AND COLLEGE STUDENTS AND TRAINING OF SCHOOL TEACHERS FOR THIS PURPOSE. 5. ADVERTING TO THE DEFINITION OF CHARITABLE PURPOS E GIVEN IN SECTION 2(15) OF THE ACT, LD. AUTHORISED REPRESENTA TIVE SUBMITTED THAT ASSESSEE WAS ELIGIBLE FOR REGISTRATION U/S.12AA OF THE ACT. ACCORDING TO HIM ASSESSEE WAS RECOGNIZED AS A CHARITABLE ASSOCIA TION BY MINISTRY OF COMPANY AFFAIRS, SINCE IT WAS REGISTERED U/S.25 OF THE COMPANIES ACT, 1956. AS PER THE LD. AUTHORISED REPRESENTATIVE, TH ERE WAS A CLAUSE IN ITS MEMORANDUM OF ASSOCIATION, WHICH MANDATED UTILI ZATION OF ITS INCOME AND PROPERTY SOLELY FOR THE PROMOTION OF ITS OBJECTS. LD. AUTHORISED REPRESENTATIVE ALSO POINTED OUT THAT SIM ILAR INSTITUTIONS ITA NO.2565/2017. :- 5 -: WHICH WERE IMPARTING FINANCIAL EDUCATION TO GENERA L PUBLIC LIKE VIJAYA FINANCIAL LITERACY TRUST, JNANA JYOTHI FINANCIAL L ITERACY AND CREDIT COUNSELING TRUST, INDIAN INSTITUTE OF FINANCIAL SE RVICES, INSURANCE RESEARCH AND EDUCATION FOUNDATION, NATIONAL INSURA NCE ACADEMY, AND ITM UNIVERSITY WERE GIVEN REGISTRATION U/S.12A OF THE ACT AND ASSESSEE COULD NOT BE SINGLED OUT FOR A DIFFERENT T REATMENT. RELIANCE WAS PLACED ON GOVERNMENTS POLICY, STRATEGY AND RO AD MAP FOR FINANCIAL LITERACY. SUBMISSION OF THE LD. AUTHORIS ED REPRESENTATIVE WAS THAT ASSESSEE WAS PURSUING OBJECTS OF GENERAL PUBLI C UTILITY, AND WAS ELIGIBLE FOR REGISTRATION U/S.12AA OF THE ACT. ACC ORDING TO THE LD. AUTHORISED REPRESENTATIVE, QUESTION OF APPLYING PRO VISO TO SECTION 2(15) OF THE ACT WAS SOMETHING WHICH WAS TO BE CONS IDERED BY THE LD. ASSESSING OFFICER AT THE TIME OF ASSESSMENT AND NOT RELEVANT WHILE CONSIDERING AN APPLICATION FOR REGISTRATION U/S.12A A OF THE ACT. AS PER THE LD. AUTHORISED REPRESENTATIVE, ASSESSEE DID NOT PROMOTE ANY FINANCIAL PRODUCT OR ANY SPECIFIC INSTITUTION THROU GH ITS ACTIVITIES. THUS, AS PER THE LD. AUTHORISED REPRESENTATIVE, ASSESSEE WAS UNJUSTLY DENIED REGISTRATION SOUGHT U/S.12AA OF THE ACT. 6. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE STRONGL Y SUPPORTING THE ORDER OF THE LD. CIT SUBMITTED THAT OBJECTS OF THE ASSESSEE DID NOT FALL WITHIN THE CATEGORY OF GENERA L PUBLIC UTILITY. AS ITA NO.2565/2017. :- 6 -: PER THE LD. DEPARTMENTAL REPRESENTATIVE, ASSESSEE C OULD NOT BE GRANTED REGISTRATION SOUGHT BY IT U/S.12AA OF THE A CT. RELIANCE WAS PLACED ON THE JUDGMENT OF HONBLE UTTARAKHAND HIGH COURT IN THE CASE OF CIT VS. NATIONAL INSTITUTE OF AERONAUTICAL ENGINEER ING EDUCATIONAL SOCIETY, 315 ITR 428 AND THAT OF HONBLE APEX COURT IN THE CASE OF SOLE TRUSTEE, LOKA SHIKSHANA TRUST VS. CIT, 101 ITR 234 . 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. BEFORE ADVERTING TO THE FACTS, IT WILL BE APPOSITE TO EXTRACT SECTION 2(15) OF THE ACT WHI CH DEFINED CHARITABLE PURPOSE. CHARITABLE PURPOSE INCLUDES RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF, PRESERVATION OF ENVIRONM ENT (INCLUDING WATERSHEDS, FORESTS AND WILDLIFE) AND PRESERVATION OF MONUMENTS OR PLACES OR OBJECTS OF ARTISTIC OR HISTORIC INTEREST, AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY : PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT O F 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 RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COM MERCE OR BUSINESS, FOR A CESS OR FEE OR ANY OTHER CONSIDE RATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, O R RETENTION, OF THE INCOME FROM SUCH ACTIVITY, UNLESS :- ITA NO.2565/2017. :- 7 -: (I) SUCH ACTIVITY IS UNDERTAKEN IN THE COURSE OF ACTUAL CARRYING OUT OF SUCH ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY AND (II) THE AGGREGATE RECEIPTS FROM SUCH ACTIVITY OR ACTIVITIES DURING THE PREVIOUS YEAR, DO NOT EXCEED TWENTY PER CENT OF THE TOTAL RECEIPTS OF THE TRUST OR INSTITUTION UNDERTAKING SUCH ACTIVITY OR ACTIVITIES OF THAT PREVIOUS YEAR. CLAIM OF THE ASSESSEE IS THAT IT WOULD FALL UNDER T HE LIMB EDUCATION AND ALTERNATIVELY, IF THIS IS NEGATIVED IT WOULD F ALL WITHIN THE LAST LIMB WHICH IS ADVANCEMENT OF ANY OTHER OBJECT OF GENE RAL PUBLIC UTILITY. MAIN OBJECTS OF THE ASSESSEE AS IT APPEAR IN ITS M OA IS REPRODUCED HEREUNDER;- 1.TO INTEGRATE FINANCIAL LEARNING, EDUCATION & PROTECTION AND PROPAGATE THE NEED FOR FINANCIAL PLANNING, INVE STMENT PRODUCTS AND SERVICES, THE POLICIES AND PROCEDURES, ITS STRENGTH AND PITFALLS IN INDIA OR ABROAD EITHER ON ITS OWN OR IN ALLIANCE WITH ANY OTHER PERSON/ BODY IN INDIA OR AB ROAD UNDER ANY ARRANGEMENT 2. TO COLLECT, RESEARCH, PROCESS, DISSEMINATE, DIST RIBUTE SUPPLY, FURNISH, GIVE, SEND, PART WITH, DISPOSE OF, PUBLISH, PROMULGATE, PROCLAIM, DECLARE AND DO ALL SUCH ACTS AND DEEDS TO MAKE PUBLIC ANY KIND OF TECHNICAL, INDUSTR IAL, FINANCIAL, ECONOMIC OR COMMERCIAL INFORMATION DATA, KNOWLEDGE, DETAILS AND THE LIKE OF OR RELATING TO M ATTERS OF INTEREST TO INVESTORS, ORGANIZATIONS, ASSOCIATIONS, CHAMBERS, COMPANIES, BANKS OR OTHER ENTITIES INCLUDING INFORM ATION ABOUT PERSONS AND ENTITIES WHO HAVE BEEN DECLARED DEFAULTERS BY ANY GOVERNMENT, REGULATORY OR ANY OTH ER BODY, OR WHO ARE NON COMPLIANT WITH ANY LAWS/ POLICIES/ G UIDELINES OF THE GOVERNMENT, REGULATORY OR ANY OTHER BODY, OR ABOUT BUSINESS/COM PANIES IN DISTRESS AND ALLIED MATTERS, WHETHER FOR CONSIDERAT ION OR OTHERWISE, AND BY WAY OF PRINTING AND PUBLISHING OR THROUGH WEBSITE, NEWSPAPER, MAGAZINE, BROCHURE, RADIO BROAD CAST, CD ROMS, FLOPPIES, DIRECTORIES, CHARTS, MOVIES, AUD IO-VISUAL, ITA NO.2565/2017. :- 8 -: PAMPHLET OR OTHER WORKS AND TO CREATE, MAINTAIN AND MANAGE FUND/S FOR THE ABOVE. 3. TO ESTABLISH STATE-OF-THE-ART FACILITIES FOR EDU CATION, SOFTWARE DEVELOPMENT AND TRAINING AND TO CARRY OUT TEACHING AND RESEARCH AND TO OFFER CONTINUING EDUCATION PROG RAMS, VOCATIONAL SKILLS TRAINING IN VARIOUS FIELDS THROUG H ANY MEDIUM INCLUDING REPORTS, TELEVISION, INTERNET, NEWSPAPERS , SEMINARS, CAREER GUIDANCE FESTIVALS AND OTHER FORMS OF MEDIA AND COMMUNICATION AND TO CONFER DEGREES, DIPLOMAS, CERTIFICATES AND OTHER ACADEMIC DISTINCTIONS ON THE BASIS OF EXAMINATION, OR ANY OTHER METHOD OF EVALUATION SUBJ ECT TO APPROVAL FROM THE APPROPRIATE AUTHORITIES IN THE FI ELD OF INVESTMENTS AND TO CONDUCT MARKET SURVEYS, INVESTOR SURVEYS, OPINION POLLS AND OTHER STUDIES RELATING T O INVESTMENTS AND FINANCIAL MARKETS FOR THE BENEFIT O F ALL IRRESPECTIVE OF CASTE, CREED AND RELIGION. 4. TO CREATE HIGHER LEVELS OF INTELLECTUAL ABILITIES AND STANDARDS IN THE FIELD OF INVESTMENTS AND FINANCIAL MARKETS AND TO PROMOTE AND INCULCATE HONORABLE BUSINESS PRACTICES. 8. FIRST TAKING UP THE QUESTION WHETHER ASSESSEE CAN B E CONSIDERED AS ENGAGED IN EDUCATION, WHAT WAS HE LD BY THE HONBLE APEX COURT IN THE CASE OF SOLE TRUSTEE, LOKA SHIKSHANA TRUST AT PARA 41 OF ITS JUDGMENT IS REPRODUCED HEREUNDER:- 41. THE SENSE IN WHICH THE WORD 'EDUCATION' HAS BEEN USED IN S. 2(15) IS THE SYSTEMATIC INSTRUCTION, SCH OOLING OR TRAINING GIVEN TO THE YOUNG IN PREPARATION FOR T HE 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 EXTENDED SENSE, ACCORDING TO WHICH EVERY ACQUISITIO N OF FURTHER KNOWLEDGE CONSTITUTES EDUCATION. ACCORDING TO THIS WIDE AND EXTENDED SENSE, TRAVELLING IS EDUCATI ON, BECAUSE AS A RESULT OF TRAVELLING YOU ACQUIRE FRESH KNOWLEDGE. LIKEWISE, IF YOU READ NEWSPAPERS AND MAGAZINES, SEE PICTURES, VISIT ART GALLERIES, MUSEU MS AND ZOOS, YOU THEREBY ADD TO YOUR KNOWLEDGE. AGAIN, ITA NO.2565/2017. :- 9 -: WHEN YOU GROW UP AND HAVE DEALINGS WITH OTHER PEOPL E, SOME OF WHOM ARE NOT STRAIGHT, YOU LEARN BY EXPERIE NCE AND THUS ADD TO YOUR KNOWLEDGE OF THE WAYS OF THE WORLD. IF YOU ARE NOT CAREFUL, YOUR WALLET IS LIABL E TO BE STOLEN OR YOU ARE LIABLE TO BE CHEATED BY SOME UNSCRUPULOUS PERSON. THE THIEF WHO REMOVES YOUR WAL LET 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 SOME 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 CL. (15) OF S. 2. WHAT EDUCATION CONNOTES IN THAT CLAUSE IS THE PROCESS OF TRAINING AND DEVELOPING THE KNOWLEDGE, S KILL, MIND AND CHARACTER OF STUDENTS BY NORMAL SCHOOLING . IN RELATION TO THE MAIN OBJECT OF LOKA SHIKSHANA TRUST , WHAT WAS HELD BY THEIR LORDSHIPS AT PAGE 39 OF THE JUDGMENT IS RE PRODUCED HEREUNDER:- 39. THE ITO SENT A COMMUNICATION TO THE TRUST ON 27TH APRIL, 1963, TO THE EFFECT THAT SINCE THE ONLY ACTIVITY OF THE TRUST WAS PRINTING, PUBLICATION AND SALE OF NEWSPAPER, WEEKLY AND MONTHLY JOURNAL, THE TRUST CARRIED ON AN ACTIVITY FOR PROFIT AND WAS NOT ENTIT LED TO EXEMPTION. IN REPLY TO THAT NOTICE THE SOLE TRUSTEE STATED THAT THE ABOVE-MENTIONED ACTIVITIES OF THE T RUST WERE COVERED BY CL. (C) OF THE OBJECTS CLAUSE OF TH E TRUST DEED. IT WAS ADDED THAT THE ABOVE OBJECT DID NOT INVOLVE THE CARRYING ON OF ANY ACTIVITY FOR PROFIT. IN A FURTHER COMMUNICATION DT. 26TH JUNE, 1964, THE SOLE TRUSTEE WROTE : 'THE TRUST HAS FOUR OBJECTS IN ITS OBJECTS CLAUSE ONE OF WHICH IS TO SUPPLY THE KANNADA SPEAKING PEOPLE WITH AN ORGAN OR ORGANS OF EDUCATED PUBLIC OPINION, ETC. [CL. 2(C) OF TRUST DEED]. UNDER THIS CLAUSE WE CONDUCT THE PUBLICATION OF NEWSPAPERS. THIS HAS NOT BEEN AGREED UPON BY YOUR HONOUR AS ITA NO.2565/2017. :- 10 -: A CHARITABLE PURPOSE AND WE HAVE ACCORDINGLY PREFERRED APPEALS FOR RELIEF. THE MAIN OBJECT OF THE TRUST IS EDUCATION AND THIS MAY BE ACHIEVED BY CONDUCTING AND HELPING EDUCATIONAL INSTITUTIONS AND BY RUNNING READING ROOMS AND LIBRA RIES AND HELPING THE INSTITUTIONS HAVING SIMILAR OBJECTS AS OF OUR TRUST. THESE ARE ALL CHARITABLE OBJECTS. IN CAS E THE TRUST HAS A SURPLUS INCOME IT CANNOT BE SPENT ON AN Y OBJECT OTHER THAN THE OBJECTS OF THE TRUST. FOR THE PRESENT WE HAVE BEEN EDUCATING THE KANNADA SPEAKING PEOPLE THROUGH NEWSPAPERS AND JOURNALS AND WE SHALL BE TAKING UP THE OTHER WAYS AND MEANS OF EDUCATION AS NOTED IN OUR TRUST DEED AS AND WHEN IT IS POSSIBLE FOR THE TRUST. WE HAVE NO OPTION AT ALL EXCEPT TO SPEND OUR INCOME ON THE OBJECTS OF OUR TRUST WHICH ARE ALL CHARITABLE WITHOUT ANY DOUBT OR AMBIGUITY.' ANALYSIS OF THE OBJECT CLAUSE OF THE M/S. LOKA SHIKSHANA TRUST, MADE BY THE APEX COURT, APPEAR AT PARA 38 OF THE JUDGMEN T AND THIS IS REPRODUCED HEREUNDER:- 38. IN ORDER TO SEE AS TO WHETHER THE APPELLANT-TRUST IS FOR A CHARITABLE PURPOSE, WE MAY FIRST GO INTO THE QUESTION AS TO WHAT IS THE OBJECT OF THE APPELLANT-TRUST. AC CORDING TO MR. PALKHIVALA, LEARNED COUNSEL FOR THE APPELLAN T, THE OBJECT OF THE APPELLANT-TRUST IS EDUCATION, WHILE T HE STAND OF MR. SHARMA ON BEHALF OF THE REVENUE IS THAT NOT EDUCATION, BUT THE LAST MENTIONED CATEGORY IN S. 2( 15), VIZ., THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERA L PUBLIC UTILITY, IS THE OBJECT OF THE APPELLANT-TRUS T. THE REASON FOR THE ABOVE DIVERGENCE IN THE STANDS OF MR . PALKHIVALA AND MR. SHARMA IS THAT, ACCORDING TO MR. PALKHIVALA, THE CONCLUDING WORDS OF THE DEFINITION IN S. 2(15) OF THE ACT 'NOT INVOLVING THE CARRYING ON OF ANY ACTIVITY FOR PROFIT' DO NOT QUALIFY THE FIRST THREE CATEGORIES OF RELIEF OF THE POOR, EDUCATION, OR MEDICAL RELIEF BUT QUALIFY ONLY THE FOURTH CATEGORY OF 'ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY'. ONCE THE O BJECT OF THE APPELLANT- TRUST IS HELD TO BE EDUCATION, THE T RUST ITA NO.2565/2017. :- 11 -: WOULD, ACCORDING TO MR. PALKHIVALA, BE HELD TO BE F OR A PUBLIC PURPOSE AS DEFINED IN S. 2(15) OF THE ACT. I N SUCH AN EVENT, IT WOULD BE IMMATERIAL WHETHER THE OBJECT OF THE TRUST INVOLVES OR DOES NOT INVOLVE THE CARRYING ON OF ANY ACTIVITY FOR PROFIT. AS AGAINST THAT, MR. SHARM A HAS CONTROVERTED THE SUBMISSION THAT THE CONCLUDING WOR DS OF THE DEFINITION, VIZ., 'NOT INVOLVING THE CARRYING O N OF ANY ACTIVITY FOR PROFIT' QUALIFY ONLY THE FORTH CATEGOR Y OF 'ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY'. ACCORDING TO MR. SHARMA, THE CONCLUDING W ORDS QUALIFY THE FIRST THREE CATEGORIES OF RELIEF OF THE POOR, EDUCATION AND MEDICAL RELIEF ALSO. IN ANY CASE, SUB MITS MR. SHARMA, THE OBJECT OF THE APPELLANT-TRUST FALLS IN THE FOURTH CATEGORY OF THE DEFINATION, NAMELY, 'ANY OTH ER OBJECT OF GENERAL PUBLIC UTILITY'. IT IS, IN OUR OP INION, NOT NECESSARY TO EXPRESS AN OPINION IN THIS CASE ON THE QUESTION AS TO WHETHER THE WORDS 'NOT INVOLVING THE CARRYING ON OF ANY ACTIVITY FOR PROFIT' QUALIFY THE FOURTH OBJECT, VIZ., THE ADVANCEMENT OF ANY OTHER OBJECT O F GENERAL PUBLIC UTILITY, OR WHETHER THEY ALSO QUALIF Y THE OTHER THREE OBJECTS OF RELIEF OF THE POOR, EDUCATIO N, AND MEDICAL RELIEF, BECAUSE WE ARE OF THE VIEW THAT THE OBJECT OF THE APPELLANT-TRUST WAS NOT EDUCATION BUT ANY OT HER OBJECT OF GENERAL PUBLIC UTILITY. CLAUSES 2, 6, 10, 14, 16 AND 18 OF THE TRUST DEED OF THE APPELLANT READ AS U NDER : '2. THE OBJECT OF THE TRUST SHALL BE TO EDUCATE THE PEOPLE OF INDIA IN GENERAL AND OF KARNATAKA IN PARTICULAR BY (A) ESTABLISHING, CONDUCTING AND HELPING DIRECTLY O R INDIRECTLY INSTITUTIONS CALCULATED TO EDUCATE THE P EOPLE BY SPREAD OF KNOWLEDGE ON ALL MATTERS OF GENERAL INTEREST AND WELFARE: (B) FOUNDING AND RUNNING READING ROOMS AND LIBRARIE S AND KEEPING AND CONDUCTING PRINTING HOUSES AND PUBLISHING OR AIDING THE PUBLICATION OF BOOKS, BOOK LETS, LEAFLETS, PAMPHLETS, MAGAZINES, ETC., IN KANNADA AN D OTHER LANGUAGES, ALL THESE ACTIVITIES BEING STARTED , CONDUCTED AND CARRIED ON WITH THE OBJECT OF EDUCATI NG THE PEOPLE; (C) SUPPLYING THE KANNADA SPEAKING PEOPLE WITH AN ORGAN OR ORGANS OF EDUCATED PUBLIC OPINION AND CONDUCTING JOURNALS IN KANNADA AND OTHER LANGUAGE FOR THE DISSEMINATION OF USEFUL NEWS AND INFORMATIO N ITA NO.2565/2017. :- 12 -: AND FOR THE VENTILATION OF PUBLIC OPINION ON MATTER S OF GENERAL PUBLIC UTILITY; AND (D) THE ORIGINAL TRUSTEE SHALL HAVE POWER AND AUTHORITY TO SPEND AND UTILISE THE MONEY AND THE PROPERTY OF THE TRUST FOR ANY OF THE PURPOSES OF TH IS TRUST IN SUCH MANNER, AS TO HIM MAY APPEAR PROPER. THE ORIGINAL TRUSTEE SHALL BE ENTITLED TO OPERATE A LL THE BANKING ACCOUNTS OF THE TRUST. 10. THE ORIGINAL TRUSTEE SHALL HAVE FULL POWER TO T AKE OVER ON SUCH TERMS AS HE MAY DEEM FIT SUCH CONCERN OR CONCERNS, OR UNDERTAKINGS AS, IN HIS OPINION, AR E CONGENIAL OR CONDUCIVE TO ANY OF THE PURPOSES OF TH E TRUST. 14. THE ORIGINAL TRUSTEE SHALL BE ENTITLED TO APPOI NT A MANAGER OR MANAGERS OF INSTITUTIONS OF THE TRUST, EDITOR OR EDITORS AND OTHER SUBORDINATES FOR THE PURPOSES OF CARRYING OUT THE PRINTING AND PUBLICATI ON OF ANY NEWSPAPER OR NEWSPAPERS, WEEKLIES, MONTHLIES , MAGAZINES, BOOKS OR OTHER PUBLICATIONS, AND SHALL HAVE POWER FROM TIME TO TIME TO DELEGATE TO ANY ONE OR MORE PERSONS BY POWER OF ATTORNEY OR OTHERWISE ANY ONE OR MORE OF THE FOLLOWING POWERS : (A) TO OPEN ONE OR MORE BANKING ACCOUNTS, TO OPERAT E THE SAME AND TO DEPOSIT AND WITHDRAW MONEYS FROM THE SAME; (B) TO GIVE RECEIPTS OR DISCHARGES FOR MONEY OR PROPERTY RECEIVED BY THEM OR ANY ONE OF THEM IN THE COURSE OF BUSINESS CARRIED ON BY THE TRUST; (C) TO BUY OR SELL PAPER, INK, MACHINES, BOOKS AND MATERIALS REQUIRED FOR THE PURPOSES OF THE BUSINESS OF THE TRUST; (D) TO ENTER INTO CONTRACTS WITH AGENTS, DEALERS AN D OTHERS IN THE COURSE OF THE BUSINESS OF THE TRUST; (E) TO EMPLOY OR REMOVE SUBORDINATES AND WORKERS NECESSARY FOR THE WORK; (F) AND GENERALLY TO DO ALL THINGS NECESSARY AND EXPEDIENT IN CARRYING OUT THE BUSINESS ENTRUSTED TO HIM OR THEM. 16. THE ORIGINAL TRUSTEE OR TRUSTEES SHALL NOT TAKE ANY REMUNERATION FOR DISCHARGING HIS OR THEIR DUTIES AS A ITA NO.2565/2017. :- 13 -: TRUSTEE OR TRUSTEES PROVIDED THAT THIS PROVISION SH ALL NOT PRECLUDE A TRUSTEE OR TRUSTEES FROM BEING PAID OUT OF THE TRUST FUND, SUCH REMUNERATION AS MAY BE DEEMED PROPER FOR CARRYING OUT ANY WORK AND DUTY IN CONNECTION WITH THE CONDUCT OR MANAGEMENT OF INSTITUTIONS OF THE TRUST, OR WITH THE BUSINESS OF PRINTING, PUBLISHING OR OTHER ACTIVITIES CARRIED ON BY THE TRUST. A TRUSTEE SHALL BE ENTITLED TO BE PAID A LL EXPENSES THAT MAY BE INCURRED BY HIM IN CONNECTION WITH HIS DUTIES AS A TRUSTEE INCLUDING TRAVELLING A ND OTHER EXPENSES. 18. THE ORIGINAL TRUSTEE OR OTHER TRUSTEES SHALL NO T BE RESPONSIBLE FOR ANY LOSS OCCASIONED TO THE TRUST IN RESPECT OF ANY BUSINESS OR DEALINGS CARRIED ON BEHA LF OF THE TRUST UNLESS THE SAME IS DUE TO HIS OWN FRAU D OR MISAPPROPRIATION OR BREACH OF TRUST AND EVERY TR UST SHALL BE INDEMNIFIED BY AND OUT OF THE FUNDS AND MONEYS OF THE TRUST AGAINST ANY LOSS OR DAMAGE WHIC H THE TRUSTEE MIGHT SUFFER IN REGARD TO ANY ACT, DEED , OR ANY FINES OR PENALTIES IMPOSED UNDER THE FACTORIES ACT OR ANY LABOUR LEGISLATION OR PRESS ACT OR ANY OTHER SIMILAR ENACTMENT IN THE VERY SAME JUDGMENT THEIR LORDSHIPS ALSO ELUC IDATED THE AMBIT OF THE TERM OBJECT OF PUBLIC GENERAL UTILITY A T PARAS 27 AND 28, WHICH ARE REPRODUCED HEREUNDER:- 27. THE DIFFICULT QUESTION, HOWEVER, STILL REMAINS : W HAT IS THE MEANING OF 'CHARITABLE PURPOSE' WHICH IS ONL Y INDICATED BUT NOT DEFINED BY S. 2(15) OF THE ACT ? IT SEEMS TO ME THAT A COMMON CONCEPT OR ELEMENT OF 'CHARITY' IS SHARED BY EACH OF THE FOUR DIFFERENT CATEGORIES OF CHARITY. IT IS TRUE THAT CHARITY DOES NOT NECESSARILY EXCLUDE CARRYING ON AN ACTIVITY WHICH Y IELDS PROFIT, PROVIDED THAT PROFIT HAS TO BE USED UP FOR WHAT IS RECOGNISED AS CHARITY. THE VERY CONCEPT OF CHARITY DENOTES ALTRUISTIC THOUGHT AND ACTION. ITS OBJECT M UST NECESSARILY BE TO BENEFIT OTHERS RATHER THAN ONE'S SELF. ITS ESSENCE IS SELFLESSNESS. IN A TRULY CHARITABLE ACTIVITY ANY POSSIBLE BENEFIT TO THE PERSON WHO DOES CHARITA BLE ACT IS MERELY INCIDENTAL OR EVEN ACCIDENTAL AND ITA NO.2565/2017. :- 14 -: IMMATERIAL. THE ACTION WHICH FLOWS FROM CHARITABLE THINKING IS NOT DIRECTED TOWARDS BENEFITING ONE'S S ELF. IT IS ALWAYS DIRECTED AT BENEFITING OTHERS. IT IS THIS DIRECTION OF THOUGHT AND EFFORT AND NOT THE RESULT OF WHAT IS DONE, IN TERMS OF FINANCIALLY MEASURABLE GA IN, WHICH DETERMINES THAT IT IS CHARITABLE. THIS DIRECT ION MUST BE EVIDENT AND OBLIGATORY UPON THE TRUSTEE FRO M THE TERMS OF A DEED OF TRUST BEFORE IT CAN BE HELD TO BE REALLY CHARITABLE. 28. WE THINK THAT THIS GOVERNING IDEA OF CHARITY MUST QUALIFY PURPOSE OF EVERY CATEGORY ENUMERATED IN S. 2(15) OF THE ACT OF 1961. WE THINK THAT THE WORDS INTRODUCED BY THE ACT OF 1961 TO QUALIFY THE LAST A ND WIDEST CATEGORY OF OBJECTS OF PUBLIC UTILITY WERE R EALLY INTENDED TO BRING OUT WHAT HAS TO BE THE DOMINANT CHARACTERISTIC OF EACH AND EVERY CATEGORY OF CHARIT Y. THEY WERE INTENDED TO BRING THE LAST AND MOST GENER AL CATEGORY IN LINE WITH THE NATURE OF ACTIVITIES TRUL Y CHARITABLE AND MENTIONED IN THE EARLIER CATEGORIES. THE RATIO- DECIDENDI OF THE ABOVE JUDGMENT WHEN AP PLIED TO THE OBJECT OF THE ASSESSEE BEFORE US WHICH ADMITTEDLY I S IMPARTING FINANCIAL EDUCATION TO THE GENERAL PUBLIC THROUGH PROGRAMMES SPONSORED BY GOLDMAN SACHS, ICICI, TATA, RELIANCE LIFE ETC, WILL CLEARLY SHOW THAT PURSUING SUCH OBJECT WOULD NOT COME WITHIN THE MEAN ING OF EDUCATION. IN FACT NONE OF THE OBJECTS AS CONT AINED IN THE MAIN OBJECT CLAUSES OF THE MOA, WILL FALL WITHIN THE MEA NING OF EDUCATION. 9. THIS BRINGS US TO THE QUESTION WHETHER ASSESSEES A CTIVITY WILL FALL WITHIN THE LAST LIMB OF CHARITABLE PURPOSE WHICH IS ADVANCEMENT OF GENERAL PUBLIC UTILITY. THE TYPE OF PROGRAMMES CONDUCTED BY THE ITA NO.2565/2017. :- 15 -: ASSESSEE AS IT APPEAR IN THE DOCUMENTS FILED BEFORE THE DIRECTOR OF INCOME TAX (EXEMPTIONS) TO GIVE A BIRDS EYE VIEW O F THE NATURE OF ITS ACTIVITIES. THIS IS REPRODUCED HEREUNDER:- IFEA HAS BEEN CONDUCTING INVESTOR AWARENESS PROGRAM S ACROSS CITIES FOR TARGETED AUDIENCE WITH THE SUPPOR T OF VARIOUS MARKET PLAYERS. IFEA HAS CONDUCTED PROGRAMS IN ASSO CIATION WITH GOLDMAN SACHS ASSET MANAGEMENT COMPANY, RELIAN CE MUTUAL FUND, ICLCI MUTUAL FUND, RELIANCE LIFE INSUR ANCE, BHARTI AXA LIFE INSURANCE, TATA LIFE INSURANCE. ALSO, IFEA HAS PARTNERED WITH NSE, NSDL , CUB AND NANAYAM VIKATAN TO CONDUCT A SERIES OF AWARENE SS PROGRAMS LIST OF PROGRAMS CONDUCTED BY IFEA:- YEAR NAME OF THE SPONSOR NO OF PROGRAMS 2014 GOLDMAN SACHS 9 2015 NANAYAM VIKATAN, NSE, NSDC 7 2015 RELIANCE LIFE INSURANCE 254 2016 NANAYAM VIKATAN, NSE, NSDL 8 2016 RELIANCE LIFE INSURANCE 60 2016 BHARTI AXA LIFE INSURANCE 131 2016 TATA LIFE INSURANCE 160 2017 NANAYAM VIKATAN, NSE, NSDL, CUB 6 2017 TATA LIFE INSURANCE 160 CLAIM OF THE ASSESSEE IS THAT THROUGH THE ABOVE AWA RENESS PROGRAMMES, IT WAS DOING AN ACTIVITY OF GENERAL PUB LIC UTILITY. IT MAY BE TRUE THAT ASSESSEE WAS NOT COLLECTING ANY FEES FROM ANY OF THE PARTICIPANTS BUT ADMITTEDLY, IT WAS COLLECTING SUBS TANTIAL AMOUNT AS SPONSORSHIP FEES FROM VARIOUS SPONSORS. FURTHER, AL MOST ALL OF THESE SPONSORS WERE FROM PRIVATE SECTOR AND NOT FROM ANY DEPARTMENT OF GOVERNMENT. A LOOK AT THE PROFIT AND LOSS ACCOUNT O F THE ASSESSEE FOR ITA NO.2565/2017. :- 16 -: YEARS ENDING 31.03.2015 AND 31.03.2016 GIVE THE NAT URE OF THE REVENUE EARNED BY IT. PERTINENT PART IS REPRODUCED HEREUNDER:- 31.03.2016 I IN 000 31.03.2017 I IN 000 11. REVENUE FROM OPERATIONS INVESTORS EDUCATION ON FINANCIAL AND INSURANCE PRODUCTS 9,62,65 2,03,35 ADVERTISEMENT INCOME 7,00 33,50 INTEREST INCOME 6,93 --- TOTAL 9,76.58 2,36,85 IT HAD PROFIT BEFORE TAX OF I27,49,000/- FOR YEAR E NDED 31.03.2014, I22,09,000 FOR YEAR ENDED 31.03.2015, AND I93,38,00 0/- FOR YEAR ENDING 31.03.2016. THE NATURE OF RECEIPTS AS WELL A S THE SURPLUS GENERATED, IN OUR OPINION, GO CONTRARY TO ASSESSEE S CLAIM THAT IT WAS PURSUING ANY CHARITABLE ACTIVITY. 10. ONE OF THE ARGUMENTS TAKEN BY THE LD. AUTHORISED REPRESENTATIVE BEFORE US IS THAT APPLICABILITY OF F IRST PROVISO TO SECTION 2(15) OF THE ACT, WAS SOMETHING WHICH WAS TO BE LOO KED INTO BY THE LD. ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT AND NOT AN ISSUE WHICH WAS TO BE CONSIDERED WHILE ADJUDICATING AN AP PLICATION FOR REGISTRATION U/S.12AA OF THE ACT. WE ARE AFRAID, W E CANNOT ACCEPT THIS LINE OF ARGUMENT. FIRST PROVISO IS CLEAR IN THAT A DVANCEMENT OF ANY ITA NO.2565/2017. :- 17 -: OTHER OBJECT OF GENERAL PUBLIC UTILITY WILL NOT BE A CHARITABLE PURPOSE, IF IT INVOLVED CARRYING ON ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TO TRADE, COMMERCE OR BUSINESS, FOR A CESS OR FEE. A SSESSEES ACTIVITY WAS IMPARTING FINANCIAL SKILLS, THROUGH PROGRAMME SPONSORED BY VARIOUS COMPANIES AND THIS IN OUR OPINION WAS NOTH ING BUT RENDERING SERVICES IN RELATION TO TRADE, COMMERCE OR BUSINESS CARRIED ON BY SUCH COMPANIES. ASSESSEE WAS IN RECEIPT OF HUGE SPONSO RSHIP FEES FROM THEM. JUST BECAUSE ASSESSEE WAS REGISTERED U/S.25 OF THE COMPANIES ACT, 1956 WOULD NOT IPSO FACTO MAKE IT ELIGIBLE FOR REGISTRATION U/S.12AA OF THE ACT. PREDOMINANT ACTIVITY OF THE A SSESSEE WAS TO CONDUCT PROGRAMMES WHICH WERE SPONSORED BY OTHER C OMPANIES AND FOR WHICH SUBSTANTIAL FEES WERE PAID BY THE SPONSOR S. IN OUR OPINION, WHETHER OR NOT ASSESSEE COLLECTED FEES FROM PARTICI PANTS WAS IMMATERIAL SINCE IT WAS COLLECTING SPONSORSHIP FEE S FROM SUCH COMPANIES. IF THE INTERPRETATION SOUGHT BY LD. AUT HORISED REPRESENTATIVE IS ACCEPTED THEN EVERY COMPANY OR CO NCERN ENGAGED IN AN ACTIVITY OF INFRASTRUCTURE DEVELOPMENT WILL BE COME ELIGIBLE FOR EXEMPTION U/S.11 AND 12 OF THE ACT FOR THE SOLE RE ASON THAT DEVELOPMENT OF INFRASTRUCTURE IS AN ACTIVITY WHICH IS OF GREAT GENERAL PUBLIC UTILITY. UNLESS THE DOMINANT ACTIVITY SHOW A LTRUISTIC THOUGHT AND ACTION WHICH REFLECTS SELFLESSNESS, WE CANNOT SAY I T INVOLVES ANY ITA NO.2565/2017. :- 18 -: CHARITY. IN THE CIRCUMSTANCES, WE ARE NOT INCLIN ED TO ACCEPT THE ARGUMENT OF THE ASSESSEE THAT IT WAS CARRYING ON ANY CHARITABLE ACTIVITY WITHIN THE MEANING OF SECTION 2(15) OF THE ACT. WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. C IT. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMI SSED. ORDER PRONOUNCED ON MONDAY, THE 11TH DAY OF JUNE, 2018, AT CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) / JUDICIAL MEMBER ( ! . '#'$ ) (ABRAHAM P. GEORGE) % / ACCOUNTANT MEMBER '# / CHENNAI $% / DATED:11TH JUNE, 2018. KV %& '()( / COPY TO: 1 . / APPELLANT 3. *+, / CIT(A) 5. (-. / / DR 2. / RESPONDENT 4. * / CIT 6. .01 / GF