Maharaja Shivchatrapati Pratishthan, Pune V. Income-tax Officer, (Exemption) Ward - 2, Pune

ITA 2640/PUN/2017

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 3113 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 14-11-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Charitable institution
• Section: 11; 143(3); 12A; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUNE BEFORE SHRI S.S. GODARA, JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER ITA No. 2640/PUN/2017 (Assessment Year: 2013-14) Maharaja Shivchatrapati Pratishthan Vishrambaug Wada Kumthekar Road Sadashiv Peth, Pune 411030 Vs. ITO (Exemptions), Ward -2 PMT Building, Swargate Pune 411037 PAN – AAATM5937E Appellant Respondent Appellant by: None Respondent by: Shri S.P. Walimbe Date of Hearing: 25.04.2022 Date of Pronouncement: 04.05.2022 O R D E R Per S.S. Godara, JM This assessee’s appeal for AY 2013-14 is against the CIT(A) 10, Pune’S order dated 11.09.2017 passed in case No. PN/CIT (A)-10/ITO(E)/Wd- 2/164/15-16, involving proceedings under Section 143(3) of the Income Tax Act, 1961 in short the Act. Case called twice. None appears at assessee’s behest. Nor has anybody filed vakalath on behalf of the assessee till date. It is accordingly proceeded as ex- parte. 2. Coming to the assessee’s sole substantive grievance that the learned lower authorities have erred in law and on facts in treating it as not eligible for Section 11 r.w.s. 2(15) exemption, we find that the CIT(A)’s detailed discussion has taken into consideration all of its activities to have been run on commercial lines as follows: - “Ground No.1, 3 and 4 (i) These grounds relate to challenging the findings of A.O., wherein, the A.O. has not treated the activity of the appellant as ITA No. 2640/Pun/2017 Maharaja Shivchatrapati Pratishthan 2 Education within the main limb of charitable purpose as defined u/s 2 (15) of I.T. Act, but has carried over it under the fourth limb of general public utility. While challenging the findings of A.O., the A.R. of the appellant explained the issue as under: "The Trust has written a script of the drama Janata Raja [means an intelligent King who understood the feelings of his public] and is performing its shows all over India. The said drama is not an entertainment activity simpliciter. The script of the drama is written in such a way that good governance qualities of Maharaja Shivaji are being highlighted by appropriate historical incidents which have a deep impact on persons witnessing the drama. The aforesaid principles of good governance need to be practiced by all of us in present modern world. The political wisdom and acumen ship practiced by the Maharaja has been in an appropriate and apt manner unveiled, which is relevant even today. In order to appreciate and understand the said drama in its proper perspective, the appellant has given you the video and audio CDS, both in Marathi and Hindi language. For your ready reference, the short script of said drama in Hindi language is enclosed wherein some of the important issues have been highlighted. The appellant submits that the way in which the said drama is exhibited, it ceases to be an amusement simpliciter and enters in to the modem technique of social education in the field of good moral human character and patriotic qualities. The appellant submits that due to modernization the methods and techniques of education at every level are witnessing unprecedented changes. The effect of audio/ visual impact on the student is effective and is appreciated and accepted all over the world. Even in India, the education department is making a fast swift from taxing the students by voluminous books and is adopting internet and video techniques for education right from the class of junior KG. In Maharashtra the Computer are provided by the State in all schools even in rural areas. It is respectfully submitted that the activities for which the appellant trust is formed are squarely covered by the word education as used in Section 2f15} of the 1.T. Act 1961. However the learned Assessing Officer by mistakenly placing reliance on the decision of Hon. Supreme Court in the case of Sole Trustee, Lok Shikshan Trust v/s C.I.T. reported in 101 I.T.R. Page 234 has held that the objects of the appellant Trust do not fall within the definition of education as mentioned in the aforesaid section but are covered under any other object of general public utility. During the assessment proceedings the appellant trust vide its submissions dt.21/ 12/2015 [reproduced by the learned Assessing Officer in the impugned assessment order) objected to the aforesaid contention but the same have been rejected without properly appreciating the objections of the appellant. The appellant submits that the submissions dt.21/ 12/2015 referred above may also be treated as submissions made during the present appellate proceedings. The appellant most respectfully submits that the learned Assessing Officer has lost sight of the decision of the Hon. Supreme Court in the ITA No. 2640/Pun/2017 Maharaja Shivchatrapati Pratishthan 3 case of C.I.T. v/s Potdar Cement Pvt Ltd reported in 226 I.T.R. Page 625 wherein the Hon. Supreme Court has held as under: At this juncture, we can also refer to the judgment cited by Mr. Syali regarding updating construction of the words used in the statute. In State (Through CBI/New Delhi) v. S.J. Choudhary, AIR 1996 SC 1491, 1494; [1996J 2 SCC 428, this court has quoted the following passage with approval in support of updating construction (page 433 of [1996] 2 SCC): "Statutory Interpretation by Francis Bennion, 2nd edn. section 288 with the heading 'Presumption that updating construction to be given' states one of the rules thus (page 617) (2) It is presumed that Parliament intends the court to apply to an ongoing Act a construction that continuously updates its wording to allow for changes since the Act was initially framed (an updating construction). While it remains law, it is to be treated as always speaking. This means that in its application on any date, the language of the Act, though necessarily in its own time, is nevertheless to be construed in accordance with the need to treat it as current law. In the comments that follow it is pointed out that an ongoing Act is taken to be always speaking. It is a lso, further, stated thus (pp. 618-19): 'In construing an ongoing Act, the interpreter is to presume that Parliament intended the Act to be applied at any future time in such a way as to give effect to the true original intention. Accordingly the interpreter is to make allowances for any relevant changes that have occurred, since the Act's passing, in law, social conditions, technology, the meaning of words, and other matters. Just as the US Constitution is regarded as "a living Constitution", so an ongoing British Act is regarded as "a living Act". That today's construction involves the supposition that Parliament was catering long ago for a state of affairs that did not then exist is no argument against that construction. Parliament, in the wording of an enactment, is expected to anticipate temporal developments. The drafter will try to foresee the future, and allow for it in the wording. An enactment of former days is thus to be read- today, in the light of dynamic processing received over the years, with such modification of the current meaning of its language as will now give effect to the original legislative intention. The reality and effect of dynamic processing provides the gradual adjustment. It is constituted by judicial interpretation, year in and year out. It also comprises processing by executive officials'." The appellant therefore submits that imparting education by means of video and audio methods is a recognized method of education and hence it may please be held that performing the drama Janata Raja by the appellant Trust amounts to education within the meaning and provisions of Section 2[15] of the 1.T. Act 1961." (ii) I have considered the submission of the appellant carefully and gone through the reasoning's enumerated by A.O Section 2(15) of I.T. Act defines charitable purpose to include the following ITA No. 2640/Pun/2017 Maharaja Shivchatrapati Pratishthan 4 (i) Relief of the poor (ii) Education (iii) Medical relief (iv) and advancement of any other object of general public utility An entity with a charitable object of the above nature is eligible for exemption from tax under section 11 of I.T. Act. However, it was seen that a number of entities who were engaged in commercial activities were also claiming exemption on the ground that such activities were for the advancement of objects of general public utility in terms of the fourth limb of the definition of charitable purpose. Therefore, section 2(15) was amended vide finance Act 2008 by adding a proviso which states that the advancement of any other object of general public utility shall not be charitable purpose, if it involves the carrying of any activity In the nature of trade, commerce, or business or any activity of rendering any serV1ce In relation to any trade, commerce or business for a cess or fee or any other consideration irrespective of the nature of use or application or retention of the income from such activity. Several implications have arose from this amendment. The newly inserted proviso will not apply in respect of the first three limbs of section 2(15) i.e. relief of poor, education or medical relief. Consequently, where the purpose of a trust or institution is relief of the poor, education or medical relief, it will constitute charitable purpose, even if, it incidentally involves the carrying of commercial activities. The newly inserted proviso to section 2(15) will apply only to entities whose purpose is advancement of any other object of general public utility i.e the fourth limb of the definition of charitable purpose contained in section 2(15). Hence, such entities will not be eligible for exemption u/s 11 of I.T. Act, if they carryon commercial activities. Whether, such an entity is carring on an activity in the nature of trade, commerce, or business is a question of fact, which will be decided based on the nature, scope, extent and frequency of the activity. (iii) Now coming to the definition of main limb of education, there is a saying that it is very noble to feed a hungry person, however, imparting knowledge is even better. Feeding a person is momentary support, imparting knowledge is permanent. The term education has not been defined in the I.T. Act. In common parlance, the expression education refers to the process of imbibing knowledge. This process takes the form from Gurukul to formal schooling. Time and again, the form of education has undergone radical changes. Then, the system of formal schooling came into existence. Education plays a cardinal role In transforming a society into a civilized nation. It accelerates the progress of the country in every sphere of national activity. In recent times, due to advancement of technology, the scope, method and type of education have undergone substantial changes. (iv) The fundamental meaning of education conveys that it is the process of imbibing knowledge, which involves teachers on one side and students on the other. By technique and process, the teacher teaches students who imbibe knowledge. In this era this process is getting advanced and future will have a different form of education altogether For the purpose of terming education, the fundamental ITA No. 2640/Pun/2017 Maharaja Shivchatrapati Pratishthan 5 aspect of imbibing knowledge through the process of education has to be considered. The term education occurring in section 2(15) has been used in the wider sense and in it's widest amplitude. In the case of house of lords in IRC vs Mcmullen 54 TC 413 (HL) it was held that it cannot be whittled down by narrow sense. This is for the simple reason that the education takes verity of form and it can not be restricted to a particular form and manner. This expression is not amenable to any fixed or rigid formulae. In the case of D.V. Arur vs CIT 13 ITR 465 H'ble Bombay High Court held it, In my opinion, looking at the definition in the various acts, a charitable purpose which is not of a religious character must contain the element of benefiting the public, so that a trust, the object and scope of which is limited to the education of the members of the family would not come within the definition of a charitable purpose contained in I.T. Act. H'ble Supreme Court in the case of MCD vs Children Book trust 63 taxman 385 (1992), while considering section 115(4) of the Delhi Municipal Corporation Act 1957 held that the imparting of education must involve public benefit so as to fall within the meaning of charitable object. As per explanation to section 115(4) (a) of the Delhi Municipal Corporation Act. 1957, charitable purpose includes relief of the poor, education and medical relief but does not include a purpose that relates exclusively to religious teaching. It more or less conforms to the definition of charitable purposes as defined u/s 2(15) of I.T. Act. Apart from the above, there are plethora of case laws, wherein, education has been held as charitable activity and further included in the main limb. For this purpose, reliance is placed on the decision of H'ble Supreme Court in the case of Sole trustee lok Shikshan Trust 101 ITR 234 wherein H'ble Supreme Court observed that the sense in which the word education has been used in section 2(15) is the systematic Institution, schooling or training given to the young in preparation for the work of life. It also connotes the whole course of scholastic instruction which a person has received ... what education connotes in that clause in the process of training and developing the knowledge, skill, mind and character of students by normal schooling. Similarly m the case of Saurashtra Education Foundation 273 ITR 139, H'ble Gujrat High Court viewed that in order to fall within the meaning of education u/s 2(15), an 'educational institution should be recognized by a Competent Authority and should be imparted through normal schooling. (v) For the purpose of examining the issue further, whether predominant activity-has been education or not, it is relevant to have a look at the objects of the trust incorporated in the memorandum which are as under: “ The objectives for utilization of the income and principal amounts of the trust arc as follows: - i) Research on the life of Shri Shiv Chatrapati, colleciinq and publishing historical information with old documents, propagate and give financial awards for scientific work done in relation to Shiv Charitra. ITA No. 2640/Pun/2017 Maharaja Shivchatrapati Pratishthan 6 ii) Granting scholarships to students conducting research on history of Shivaji Maharaj. iii) Making museums of historical things like weapons, coins etc. or literary compositions. iv) Making & maintaining of historical constructions at various places. v) Maintenance of Gods and Godess of Shiv Chatrapati. vi) Spreading of Shiv Charitra through lectures, writings and competitions etc. vii) Collect & spend necessary funds as required for work of Shiv Chatrapati viii] Make memorials to illustrate Shri Shakkarte Shiv Chatrapati's life sketch and maintain the same ix) Amount is to be spent as approved by the trustees in the meeting keeping in view the aforesaid major objective. (vi) In fact, while denying the benefit of section 11 of IT. Act, the A.O also emphasized on the fact that the predominant activity of the appellant is General public utility and not the education and accordingly, applied the proviso to section 2(15) of IT. Act considering the charging of fee as commercial activity with profit motive. As can be seen from the above and rightly pointed out by A.O. also, the predominant object of the trust is not education and it does not deserve to be included in the main limb of education within the meaning of section 2(15) of IT. Act. The impugned activity has also not found a place in the object of the trust as enumerated above on the basis of which it was granted registration u/s 12A of IT. Act. It does not satisfy the condition as laid down by H'ble Supreme Court in the case of Sole Trustee Cited (Supra). Regarding, appellant's contention that due to modernization, the methods and technique of education at every level are witnessing unprecedented changes. The effect of audio / visual impact on the student is effective and is appreciated and accepted all over the world. No doubt, with change of times and the even widening horizons of knowledge may bring in changes in the methodology of teaching or shift for the better in the institutional set up. Advancement of knowledge brings within it's fold suitable methods of it's dissemination and though the primary methods of sitting in classroom may remain ideal for most of the initial education, it may become necessary to have a different outlook for further education, however, considering the intent of the existing Law, the point to be emphasized here is, the purpose for which the institution is set up and the form of education that is provided. If the claim of the appellant is accepted, then, there is no need for fourth limb of the definition of charitable purpose and that is general public utility because overall charity activities are being carried out either in the field of education, medical help or relief of the poor. Therefore, unless a restrictive and specific meaning is not given to the main limb of charitable purpose viz education, medical and relief of the poor, all activities involving general public utility will get associated with the main limb because once these are allowed to be associated with the main limb, the motive and actual ITA No. 2640/Pun/2017 Maharaja Shivchatrapati Pratishthan 7 execution of the activities being commercial in nature would have no meaning, as the newly inserted proviso to Section 2(15) of I.T. Act does not apply to the main limb and it's operation is confined to the fourth limb only and that is advancement of any other general public utility. In included in main limb of education or advancement of any other general public utility. Hon'ble Allahabad High Court in the case of Ganga Prasad Verma Memorial Society 134 ITR 421 held that maintenance of Libraries and reading rooms where news papers and periodicals are provided and printing and purchase of books with an object of advancement of the general condition of the people so as to make them better citizen morally, intellectually, politically and socially fall within the meaning of advancement of any other public utility. Similarly, in appellant's case also, the purpose of the drama is to bring to the notice of the public is regarding work done by Chatrapati Shivaji Maharaj, which may prepare them better citizen morally or socially and a responsible citizen of the country. By doing this activity, it is not preparing the people so as to help them in getting jobs or earning income etc. There are plethora of case laws, wherein, similar kind of activities have been treated as in the nature of general public utility only and no benefit of main limb of either education or medical relief has been given. These are as under: (a) To promote commerce, art and science held charitable program under the fourth limb South Indian photography and allied trades association 166 ITR 166 (Mad) 1987. (b) Promotion of social, education, and industry held as charitable purpose falling under advancement of general public utility Dharmaposhanam Company 114 ITR 463 (S.C.)1978. (c) Conducting music programme as per the traditional mUSIC of Tamilnadu falls under advancement of general utili ty in the case of Hammsadhawani Vs DIT (Exempt) 50 SOT 89, Chennai ITAT-20 12. (vii) Therefore, considering the above facts and legal position on this issue, I am inclined to upheld the view of A.O., wherein, the activity of the appellant has not been treated as education under the main limb as defined in Section 2 (15) of 1.T. Act. I agree with the view of A.O. that the impugned activity squarely falls under the category of advancement of any other general public utility. As a result, grounds of appeal No.1, 3 and 4 are dismissed.” 3. We note with able assistance coming from the Revenue side that the assessee pleading even no way aver that its drama shows are being run on commercial lines. 4. Mr. Walimbe invited our attention to the assessment findings in para 7 onwards and more particularly in penultimate page of the assessment order dated 28.12.2015 that the assessee had outsourced its so called shows for huge consideration. We thus see no reason to interfere with both the learned ITA No. 2640/Pun/2017 Maharaja Shivchatrapati Pratishthan 8 lower authorities’ findings treating the assessee as not eligible for the impugned exemption. The CIT(A)’s above extracted discussion has also cited a catena of case law (supra) that the assessee’s activities do not fall under “education” lines under Section 2(15) of the Act. The same stands upheld. 5. This assessee’s appeal is dismissed. Order pronounced in the open court on 4 th May, 2022. Sd/- Sd/- (Dipak P. Ripote) (S.S. Godara) Accountant Member Judicial Member Pune, Dated: 4 th May, 2022 Copy to: 1. The Appellant 2. The Respondent 3. The CIT(A) -10, Pune 4. The CIT - (Exemptions), Pune 5. The DR, “A” Bench, ITAT, Pune By Order //True Copy// Assistant Registrar ITAT, Pune Benches, Pune n.p.