The ACIT(Exemptions), Circle-1, Ahmedabad V. Gujarat Council of Science City., Ahmedabad

ITA 306/AHD/2019

AI Insights

The case involves the Gujarat Council of Science City, which appealed against the decision of the Assessing Officer (AO) regarding the tax exemption status of its activities under Sections 11 and 12 of the Income Tax Act. The AO had classified the Council's activities as 'general public utility' and commercial in nature, thus denying tax exemptions. However, the Commissioner of Income Tax (Appeals) reversed this decision, classifying the activities as educational and thus exempt. The Revenue challenged this decision, leading to the Tribunal's involvement. The Tribunal considered recent Supreme Court judgments that narrowly defined 'education' and provided guidelines for determining the commercial nature of general public utility activities. The Tribunal did not find the Council's activities to qualify as education under the narrow definition but required further examination to determine if they were commercial in nature.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 133597 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2023
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 21-12-2022
• Assessment Year: 2015-2016
• Appeal Filed On: 27-02-2019
• Other Referred Cases: New Noble Educational Society, CCIT, (2022) 448 ITR 594 (SC), ACIT Vs. Ahmedabad Urban Development Authority, (2022) 449 ITR 1 (SC), Gujarat State Co-op.Union v/s. CIT 195 ITR 279, Sole Trustee Lok Shikshans Trust, T.M.A Pai Foundation v State of Karnataka
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Depreciation; Charitable institution; Rule of consistency; Capital receipt; Set aside
• Section: 10; 11; 143(3); 12AA; 195; 22; 10(23C); 101; 20

Judgement Text

आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठअहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठ ‘C’ अहमदाबाद। अहमदाबाद।अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, AHMEDABAD ] ] BEFORE SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SHRI T.R. SENTHIL KUMAR, JUDICIAL MEMBER ITA No.2405/Ahd/2017 : ITA No.260/Ahd/2018 & ITA No.306/Ahd/2019 (Asstt.Year : 2013-14, 2014-15 and 2015-16) DCIT (Exemption) Cir.1, Ahmedabad. Vs Gujarat Council of Science City, Sola Santej Road Village Hebatpur P.O. New High Court Ahmedabad PAN : AAABG 0071 B (Applicant) (Responent) Assessee by : Shri S.N. Divatia, AR& Shri Samir Vora, AR Revenue by : Shri A.P. Singh, CIT & Shri Rakesh Jha, Sr.DR स ु नवाई क तार ख/D a t e o f H e a r i n g : 2 2 / 1 2 / 2 0 2 2 घोषणा क तार ख /D a t e o f P r o n o u n c e m e n t : 2 0 / 0 3 / 2 0 2 3 आदेश/O R D E R PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER All the above appeals of the Revenue relate to the same assessee and are against order of the ld.Commissioner of Income- Tax-9, Ahmedabad [hereinafter referred to as “ld.CIT(A) dated 2.8.2017, 20.11.2017 and 12.12.2018 passed under section 250(6) of the Income Tax Act, 1961 ("the Act" for short) pertaining to Asst.Years2013-14, 2014-15 and 2015-16 respectively. ITA No.2405/Ahd/2018 and Two Others 2 2. It was common ground that the issue involved in all the appeals was identical, i.e. whether the assessee is carrying out activities qualifying as being “charitable” in terms of section 2(15) of the Act so as to entitle it to claim exemption of its income u/s 11/12 of the Act. The Assessing Officer(AO) holding that the assessee was carrying out activity of “general public utility” as defined under section 2(15) of the Act, and since the activity was carried out in the form of trade, commerce and business, the first proviso to section 2(15) of the Act was attracted, disqualifying it as charitable activity, thus in turn disentitling its claim to exemption of income under section 11 of the Act. The Ld.CIT(A), on the other hand disagreeing with the AO and holding that the activity carried out by the assessee qualified as “education”, in terms of section 2(15) of the Act, and thus entitling the assessee to claim exemption under section 11 of the Act. 3. Common issue being involved in all the appeals,they were all heard together and are being disposed off by a common consolidated order. 4. Our attention was first drawn to thefacts relating to the activities carried out by the assessee as noted in the orders of the authorities below. In this regard the ld.counsel for the assessee first took us to para 5 page no.3 of the assessment order, where brief profile of the assessee was submitted to the AO during assessment proceedings, which reads as under: “Gujarat Council of Science city is registered under the Societies Registration Act for Advancement and promotion of science and Technology and dissemination of information relating to science & Technology by developing science city project. The Govt. of Gujarat, the ITA No.2405/Ahd/2018 and Two Others 3 Central Govt. and other various other Govt. department has provided grant for Capital Expenditure and for various science promotional Activities. The Commissioner of Income Tax, Gandhinagar has granted Registration to the Trust under Section 12AA of the Income Tax Act on 7/02/2000, holding that the Trust exist for Charitable purpose. The Governing body of Gujarat Council of Science city is set up by State Government by G.R. dt.04/09/1999. The Member of Governing Body are (i) Chief Secretary as Chairman and Principal Secretary to Hon. Chief Minister and principal Secretaries to Finance Dept., Education Dept. and Mining Dept. and a Representative from Central Government and National Council of Science & Technology etc.” 5. Referring to the same, he pointed out that the assessee was promoted by the Government of Gujaratfor the purpose of advancement and promotion of science and technology and dissemination of information relating to the science and technology and had been provided grants for its capital expenditure and for various promotional activities. Thereafter our attention was drawn to para-3 page no.2 of the assessment orderwhich noted the purpose for which the assessee society was setup, being advancement and promotion of science and technology and dissemination of information relating to the same ,as under: “3). Gujarat Council of Science City is registered under the society registration Act for advancement and promotion of science and technology and dissemination of information relating to science & technology by developing science city project .As per memorandum of association, the principal objectives of the trust is to promote science & technology and to undertake and encourage research & training in various science activities. The assessee trust has been granted registration U/s. 12A(a) of the I.T.Act vide order No.CIT/GNR/12AA/R- 382/99-2000 dated 07/02/2000.” ITA No.2405/Ahd/2018 and Two Others 4 The aims and objects of the assessee society as outlined in the memorandum of association towards its objectiveswere pointed out from para 4 of the order of the Ld.CIT(A) as under: 1. To promote, co-ordinate and exhibits interaction of science, technology, energy and environment with human life through personal experience-bases presentation. 2. To design, develop or undertake Exhibitions and demonstration or Equipments and educational technology on the frontier area of science and technology irrespective of race, cast, religion, community or social status. 3. To organize or to assist in organizing training course, workshops, seminars, conferences, discussions, dissertation, consultancy services and exhibitions, independently or in association with other agencies for the benefit and development of science & technology irrespective or their race, caste, religion, community or social status. 4. To undertake and encourage research and training for (i) Ecologically sustainable development (ii) Conservation, evaluation and utilization of the nation's Biological wealth. (iii) Development and harnessing alternate sources of energy; (v) Technology development, information dissemination and science communication. 6. The ld.counsel for the assessee thereafter contented that the assessee had claimed is activities to be in the nature of imparting education as defined under section 2(15) of the Act, which defines charitablepurpose to be including the activity of education. But the AO rejected claim of the assessee holding that word “education” used in clause to sub-section (15) of section 2 includes only systematic method of training through well defined pedagogical method and the advancement&promotion of science and technology per se, therefore, cannot be treated as “education”. The AO thereafter went on to hold that the nature of the activities carried out by the assessee clearly fell in the last limb of the definition to ‘charitable activity’ as provided in law,being of the nature of general public utility activities and since it was charging fees for various services rendered by it, as enumerated at para 6.1 of the order as under: ITA No.2405/Ahd/2018 and Two Others 5 “6.1 From the perusal of details, it is found that GCSC has earned income of Rs.3,64,61,445/- from sale of tickets and the details of the same is as under: . Entry tickets - Rs. 49,78,222/- • IMAX Theater - Rs.2,28,76,036/- • Simulator - Rs.33,27,402/- • Parking - Rs.7,61,738/- • Space ride -Rs.31,32,682/- • Inflatable Planetarium -Rs.19,145/- • Musical Fountains - Rs. 13,66,220/- Hence it is a fact that the assessee trust is charging fee for various services rendered by them.” the AO held that it was clearly covered by the first and second proviso to section 2(15) which provided that “advancement of any other objects of general public utility” would not qualify as charitable purpose if it involved carrying on of any activity in the nature of trade, commerce and business. Accordingly, he held that the assessee was therefore not entitled to exemption otherwise allowable under sections 11 and 12 of the Act, thus, assessing its income for various years involved as under: Astt.Year 2013-14 : Rs.1,43,55,410/- Asst.Year 2014-15 : Rs.5,32,11,730/- Asst.Year 2015-16 : Rs.9,70,52,360/- 7. Thereafter the matter was carried in appeal before the ld.CIT(A) who in turn held that the activities of the assesseequalified as being in thenature of imparting education in the field of science and technology, and accordingly held that the assesseewasentitled to exemption under section 11 and 12 of the Act. He further held that the grants received by the assessee from the Government which were project specific should not be treated ITA No.2405/Ahd/2018 and Two Others 6 as part of the income & expenditure account, but were to be treatedas capital receipts; that these grants included in its income & expenditure had to be excluded from the same, as also expenditure incurred by the assessee from the said grants, for the purpose of arriving at the surplus earned by the assessee from its charitable activities, and its eligibility to grant of exemption in terms section 11 of the Act. With this finding, he directed the AO to verify the facts and recompute income of the assessee. The relevant finding of the ld.CIT(A) in para 4.4 and 4.5 of the order are as under: “4.4 During the appellate proceedings appellant has submitted details of activities carried out by it over the years. Appellant was also informed that in IMAX Theater only scientific education films are shown, it has developed Hall! OfScience which is a big open laboratory, where visitors are involved in in hand on experience of various Science Exhibits and discovery process. There are experience of various Science Exhibits and discovery process. There a-e exhibits on science of light, vision, mirrors, cinematic, mathematics, sound, fluidic energy etc. Energy Park, LED display screen, Earth Station, Planet Earth, Amphitheatre and all other activities are relating to Science & Technology. The expenditure incurred is for the maintenance of these exhibits as well as the Hall of Science. The expenditure includes security charges, electricity, Municipal charges and repair and maintenance and for this purpose, certain fees are charged from the visitors of Science City. According to appellant it is imparting education in the field of Science & Technology. Appellant has relied upon the judgment of Hon'ble Gujarat High Court in the case of Gujarat State Co-op.Union v/s. CIT 195 ITR 279 which has referred and explained the judgment of Hon'ble Supreme Court in the case of Sole Trustee Lok Shikshans Trust. Hon'ble Gujarat High Court according to appellant have distinguished that the normal meaning of the word 'Education' has to be applied only when the provision of section 10(22) has to be applied i.e. Regular schooling and wider meaning of the word "Education" has to be applied for the word 'Education' when it refers to section 2(15) of the Act. On going through the objects of the Trust and the activities it has undertaken, it is seen that appellant is in receipt of project specified grants from State Government & Central Government from which it developed projects of Science City. The activities that are undertaken in the Science City are definitely not in the nature of trade, commerce or business. These are purely science based activities such as spreading knowledge relating to space, under the sea, experience of walking on the Moon etc. Visitors do not visit Science City for the purpose ITA No.2405/Ahd/2018 and Two Others 7 of entertainment but for the purpose of learning. Therefore, I am of the considered opinion that appellant is involved in the process of imparting education and its activities do not fall under the last limb i.e. advancement of general public utility. Considering the activities undertaken by the appellant, I am of the opinion that A.O. was not justified in applying provisions of proviso to section 2(15) r.w. 13(8) of the Act and thereby denying benefit of section 11 & 12 of the Act. Therefore, I hold that appellant is covered by the definition of education u/s.2(15) of the Act. Accordingly, appellant would be eligible for the benefit of section 11 & 12 of the Act. Therefore, ground of appeal Nos.(i) tc (vi) are hereby allowed. 4.5 However, while giving effect to the appellate order, the A.O. needs to look at the computation of come submitted by the appellant. It is seen from the submission of the appellant that appellant is receiving project specific grants from Government of Gujarat as well as Central Government^ These projects Specific grants cannot be part of income and expenditure account but will have to be considered as capital receipts because funds have been given by the donor with a specific direction with regard to its utilization. Thus, project specified grants cannot be part of revenue receipt and will have to be considered as capital receipt. These types of grants would be eligible for deduction u/s.11(1)(d) of the Act. Appellant is also not eligible to claim any expenditure out of these grants incurred for the purpose of creation of fixed assets as application of income. It would also not be eligible to claim depreciation on these assets as application of income. During the appellate proceedings appellant has accepted these principles for computation of income of exempt person and it had filed revised return of income. In the revised computation of income the quantum of accumulation u/s.11(1)(a) has gone down. This is mainly for the reason that in the earlier computation filed with return of income it has claimed even specific grants as part of income to calculate accumulation u/s.11(1)(a) @ 15%. Nonetheless A.O. is directed to re-verify the computation of income on the above referred lines.” 8. Aggrieved by order of the ld.CIT(A), the Revenue has come in appeal challenging order of the ld.CIT(A) holding that the assessee’s activities qualified as education, and also in allowing accumulation of 15% of its income as per the provision of section 11 of the Act. 9. Common grounds raised by the Revenue in all the appeals, and for the sake of convenience, we reproduce the grounds raised ITA No.2405/Ahd/2018 and Two Others 8 by the assessee in ITA No.2405/Ahd/2017 pertaining to the Asst.Year 2013-14. “1. The Ld. CITCA) has erred in the law and on facts in holding that the activities of the assessee do not fall in the last limb i.e. advancement of general public utility but they are in the nature of imparting of education.. 2. The Ld CIT(A) erred in the law and on facts in allowing the accumulation @15% of Rs.1,95,08,855/- u/s11(l)(a) of the Act without appreciating the fact that once the proviso to section 2(15) is applicable, the benefit of section 11 and 12 cannot be allowed further. 3. On the facts and circumstances of the case, the Ld. Commissioner of Income-Tax (Appeals) ought to have upheld the order of the Assessing Officer. 4. It is, therefore, prayed that the order of the Ld. Commissioner of Income-tax (Appeals) may be set aside and that of the Assessing Officer be restored. 5. The revenue craves to add, alter, amend, modify, substitute, delete and/or rescind all or any Grounds of appeal on or before the final hearing, in necessity so arises.” 10. At this juncture, noting the fact that there were primarily two issues involved in all these appeals; (i) whether the activities carried out by the assessee qualified as “education” as defined in terms of section 2(15) of the Act as held by the Ld.CIT(A), and (ii) in the alternate, if it did not qualify as “education” but as “general public utility” as contended by the Revenue, whether first/second proviso to section 2(15) which provide for general public utility activities carried out by way of business or commerce to notqualify as charitable, was invoked in the present case, and taking note of the fact that Hon’ble Apex Court has dealt with specifically these two issues in a very recent judgment in the case of ITA No.2405/Ahd/2018 and Two Others 9 New Noble Educational Society, CCIT, (2022) 448 ITR 594 (SC) and in ACIT Vs. Ahmedabad Urban Development Authority, (2022) 449 ITR 1 (SC), giving a narrow meaning to the term education as imparting formal scholastic learning and giving guidelines for determining the commercial nature of General Public Utility activities respectively, both the parties, more particularly, the Ld.Counsel for the assessee was directed to demonstrate before us as to how the findings of the ld.CIT(A) were in consonance with the law as laid down by the Hon’ble Apex Court in this regard in the two cases, as noted above by us. Accordingly, the ld.counsel for the assessee proceeded to make his arguments before us. The ld.counsel for the assessee began by stating that first limb of his argument was that the decisionof Hon’ble Apex Court in the case of New Noble Educational Society (supra), defining the term “education” as including only imparting formal scholastic learning i.e. in the narrower meaning of the term, as opposed to wider interpretation given by the ld.CIT(A), was rendered in the context of section 10(23C)(vi) of the Act where the term “education” was interpreted along with term “solely” and therefore the narrower interpretation. 11. In this regard, he took us through the judgment in the case New Noble Educational Society (supra) copy of which was placed before us also, and first took us to page no.603 of ITR 448 i.e. beginning of the order, wherein subject matter of the appeals before the Hon’ble Apex Court was outlined on para-2 as under: ITA No.2405/Ahd/2018 and Two Others 10 “2. The subject matter of these appeals3 is the rejection of the appellants’ claim for registration as a fund or trust or institution or any university or other educational institution (hereinafter collectively referred to as “institution / trust”) set up for the charitable purpose of education, under the Income Tax Act, 1961 (hereinafter, “IT Act”). The Andhra Pradesh High Court, by its detailed impugned judgment4, held that the appellant trusts which claimed benefit of exemption under Section 10 (23C) of the IT Act were not created ‘solely’ for the purpose of education, and that to determine that issue, the court had to consider the memorandum of association or the rules or the constitution of the concerned trust. Additionally, the appellants were denied registration on the ground that they were not registered under the Andhra Pradesh Charitable and Hindu Religious Institutions and Endowments Act, 1987 (hereinafter, “A.P. Charities Act”) as condition precedent for grant of approval.” 12. From the above, the ld.counsel for the assessee pointed out that as noted by the Hon’ble Apex Court, the issue before it was rejection of the assessee’s claim for registration as fund or trust or institution or any university or other educational institution set up for charitable purpose of education in terms of section 10(23C) of the Act, which denial was upheld by the Hon’ble Andhra Pradesh High Court holding that since the assessee was not created solely for the purpose of “education” it was rightly denied the registration. 13. He alsotook us to page no.615 of the said ITR where the argument of the Additional Solicitor General was reproduced at para 22 as under: “22. The Additional Solicitor General urged that the expression ‘education’ found place in several provisions of the Constitution. As to what was the precise scope of the expression was examined by this court on several occasions. The ASG relied on the decision of the eleven- judge bench in T.M.A Pai Foundation v State of Karnataka where it was held that ‘education’ under the Constitution meant and included education at all levels, from primary school up to postgraduation, and also included professional education. The expression ‘educational institution’ meant institutions which imparted education as understood in the formal sense of schooling. It was further elaborated that having ITA No.2405/Ahd/2018 and Two Others 11 regard to the demographics and the geographical spread of the nation, as well as the challenges faced by the country, it was beyond the economic capacity of the State to provide free or subsidised universal education at all levels. Therefore, per force private educational institutions had to function to fill the needs of students. Within that framework, the role of charitable institutions in imparting education was vital and prominent. Imparting education had always been regarded as head of charity. Tracing the history of the law relating to charities, the learned ASG submitted that even in England, charitable objects included imparting education.10 It was submitted that various articles in the Constitution, namely Article 21-A, Articles 28 to 30, Article 41, Articles 45- 46 and Article 51 (k) as well as several entries in the Seventh Schedule made it apparent that education meant mainstream curriculum-based education and not education as was broadly or commonly understood. He emphasised the importance of this aspect because while deciding whether tax exemption under the IT Act could be granted for educational institutions, the term ‘education’ as a charitable purpose could not be comprehended as the enlarged meaning. It was in the constitutional sense, and under the IT Act, of curriculum-based schooling, that education had to be understood under Section 2 (15) of the IT Act as a head of charitable purpose.” 14. Referring to the same, he pointed out that ASG had urged a narrower definition or interpretation of the term “education” used in section 2(15) relying upon the decision of Eleven-Judges Bench of the Hon’ble Apex Court in the case of T.M.A Pai Foundation Vs. State of Karnataka (supra) wherein term was interpreted in the sense in which it was referred to, in the Constitution of India. He then took us to page no.619 wherein section 10(23C)(vi) was reproduced as under: “10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included— (23C) any income received by any person on behalf of— ..... (iiiab) any university or other educational institution existing solely for educational purposes and not for purposes of profit, and which is wholly or substantially financed by the Government; or ...... Explanation.—For the purposes of sub-clauses (iiiab) and (iiiac), any university or other educational institution, hospital or other institution referred therein, shall be considered as being substantially ITA No.2405/Ahd/2018 and Two Others 12 financed by the Government for any previous year, if the Government grant to such university or other educational institution, hospital or other institution exceeds such percentage of the total receipts including any voluntary contributions, as may be prescribed, of such university or other educational institution, hospital or other institution, as the case may be, during the relevant previous year; or (iiiad) any university or other educational institution existing solely for educational purposes and not for purposes of profit if the aggregate annual receipts of such university or educational institution do not exceed the amount of annual receipt as may be prescribed or (iv) any other fund or institution established for charitable purposes which may be approved by the prescribed authority, having regard to the objects of the fund or institution and its importance throughout India or throughout any State or States; or (v) any trust (including any other legal obligation) or institution wholly for public religious purposes or wholly for public religious and charitable purposes, which may be approved by the prescribed authority, having regard to the manner in which the affairs of the trust or institution are administered and supervised for ensuring that the income accruing thereto is properly applied for the objects thereof; (vi) any university or other educational institution existing solely for educational purposes and not for purposes of profit, other than those mentioned in sub-clause (iiiab) or sub-clause (iiiad) and which may be approved by the prescribed authority; or...” 15. Referring to the same, he pointed out that the said section related to educational institution existing solely for the education purpose. 16. Thereafter our attention was drawn to the analysis and conclusion by the Hon’ble Apex Court at page no.623 of the said ITR para 32 onwards, pointing out to the conclusion of the Hon’ble Apex Court with regard to the interpretation of the term of “education” used in section 10(23C) as relating to imparting formal scholastic learning at para 32 and 33 of the order as under: “32. Education ennobles the mind and refines the sensibilities of every human being. It aims to train individuals to make the right choices. Its ITA No.2405/Ahd/2018 and Two Others 13 primary purpose is to liberate human beings from the thrall of habits and preconceived attitudes14. It should be used to promote humanity and universal brotherhood. By removing the darkness of ignorance, education helps us discern between right and wrong. There is scarcely any generation that has not extolled the virtues of education, and sought to increase knowledge. 33. The subject of education is vast, even sublime. Yet, it is not the broad meaning of the expression which is involved in this case. As was held in T.M.A Pai Foundation (supra), education in the narrower meaning of the term as scholastic structured learning is what is meant in Article 21-A, Articles 29-30 and Articles 45- 46 of the Constitution. As to what is ‘education’ in the context of the IT Act, was explained in LokaShikshana Trust v. Commissioner of Income Tax15 in the following terms: "5. The sense in which the word "education" has been used in section 2(15) is the instruction, 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. The word "education" has not been used in that wide and extended sense, according to which every acquisition of further knowledge constitutes education. According to this wide and extended sense, travelling is education, because as a result of 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....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 section 2. What education connotes in that clause is the process of training and developing the knowledge, skill, mind and character of students by formal schooling." Thus, education i.e., imparting formal scholastic learning, is what the IT Act provides for under the head of “charitable” purposes, under Section 2 (15). 34. The issues which require resolution in these cases are firstly, the correct meaning of the term ‘solely’ in Section 10 (23C) (vi) which exempts income of “university or other educational institution existing solely for educational purposes and not for purposes of profit”. Secondly, the proper manner in considering any gains, surpluses or profits, when such receipts accrue to an educational institution, i.e., their treatment for the purposes of assessment, and thirdly, in addition to the claim of a given institution to exemption on the ground that it actually exists to impart education, in law, whether the concerned tax authorities require satisfaction of any other conditions, such as registration of charitable institutions, under local or state laws. ITA No.2405/Ahd/2018 and Two Others 14 17. The ld.counsel for the assessee then took us at page no.647 of the ITR, para 76 which contained conclusion of the Court in the order, more particularly pointing out to (a) and (b) of the conclusion as under: a. It is held that the requirement of the charitable institution, society or trust etc., to ‘solely’ engage itself in education or educational activities, and not engage in any activity of profit, means that such institutions cannot have objects which are unrelated to education. In other words, all objects of the society, trust etc., must relate to imparting education or be in relation to educational activities. b. Where the objective of the institution appears to be profit-oriented, such institutions would not be entitled to approval under Section 10(23C) of the IT Act. At the same time, where surplus accrues in a given year or set of years per se, it is not a bar, provided such surplus is generated in the course of providing education or educational activities. 18. Referring to the above; right from the issue before the Hon’ble Apex Court, the arguments made before it ,to the conclusion of the Hon’ble Apex Court pointed out above, the ld.counsel for the assessee contended that the matter for interpretation was inrespect of section 10(23C)(vi) of the Act which qualifies educational institutions existing “solely for education” for the purpose of being registered under the said section for exemption from their income and the judgment of the Hon’ble Apex Court was therefore to be interpreted in the context of the said section where the term “education”has been interpreted by reading it along with term “solely” for the purpose .of education; that for the said reason alone the judgment gave a narrow meaning to the term education to mean in a systematic manner by way of schooling and not by any other method. He therefore stated that the interpretation of Hon’ble Apex Court of the term ITA No.2405/Ahd/2018 and Two Others 15 “education” as used in section 2(15) of the Act could not be applied in the facts of the present case. 19. The next contention of the ld.counsel for the assessee was that Hon’ble Apex Court while concluding had held that law declared in the present judgment was operative prospectively. He drew our attention to para-78 of the order in this regard. He accordingly pleaded that in any case, the Hon’ble Apex Court judgment was not applicable to the present case. The para-78 reads as under: “78. In the light of the foregoing discussion, the assessees’ appeals fail. It is however clarified that their claim for approval or registration would have to be considered in the light of subsequent events, if any, disclosed in fresh applications made in that regard. This court is further of the opinion that since the present judgment has departed from the previous rulings regarding the meaning of the term ‘solely’, in order to avoid disruption, and to give time to institutions likely to be affected to make appropriate changes and adjustments, it would be in the larger interests of society that the present judgment operates hereafter. As a result, it is hereby directed that the law declared in the present judgment shall operate prospectively. The appeals are hereby dismissed, without order on costs.” 20. The ld.counsel for the assessee alternately contended that even if activities of the assessee qualified as general public utility activities as contended by the Revenue, first proviso to section 2(15) holding general public utility carried in a commercial manner as not qualifying as charitable activities, was not attracted in the present case. In this regard, he drew our attention to the decisionof the Hon’ble Apex court in the case of Ahmedabad Urban Development Authority (supra) wherein he contended that Hon’ble Apex Court laid down guidelines for determining whether activities carried out were commercial in nature or not. The ld.counsel for the assessee in this regard first ITA No.2405/Ahd/2018 and Two Others 16 drew our attention to para-4of the order wherein primary question before the Hon’ble Court,as being the correct interpretation of the provision of section 2(15) of the Act was pointed out. He thereafter drew our attention to para-253 particularly clause ‘A’ and ‘E’ of the order which contained summation of conclusion in this regard as under: A. General test under section 2(15) A.1 It is clarified that an assessee advancing general public utility cannot engage itself in any trade, commerce or business, or provide service in relation thereto for any consideration ("cess, or fee, or any other consideration"); A.2 However, in the course of achieving the object of general public utility, the concerned trust, society, or other such organization, can carry on trade, commerce or business or provide services in relation thereto for consideration, provided that (i) the activities of trade, commerce or business are connected ("actual carrying out..." inserted with effect from 1-4-2016) to the achievement of its objects of GPU; and (ii) the receipt from such business or commercial activity or service in relation thereto, does not exceed the quantified limit, of 20 per cent of total receipts of the precious year; A.3 Generally, the charging of any amount towards consideration for such an activity (advancing general public utility), which is on cost-basis or nominally above cost, cannot be considered to be "trade, commerce, or business" or any services in relation thereto. It is only when the charges are markedly or significantly above the cost incurred by the assessee in question, that they would fall within the mischief of "cess, or fee, or any other consideration" towards "trade, commerce or business". In this regard, the Court has clarified through illustrations what kind of services or goods provided on cost or nominal basis would normally be excluded from the mischief of trade, commerce, or business, in the body of the judgment. A.4 Section 11(4A) must be interpreted harmoniously with section 2(15), with which there is no conflict. Carrying out activity in the nature of trade, commerce or business, or service in relation to such activities, should be conducted in the course of achieving the GPU object, and the income, profit or surplus or gains must, therefore, be incidental. The requirement in section 11(4A) of maintaining separate books of account is also in line with the necessity of demonstrating that the quantitative limit prescribed in the proviso to section 2(15), has not been breached. Similarly, the insertion of section 13(8), seventeenth proviso to section ITA No.2405/Ahd/2018 and Two Others 17 10(23C) and third proviso to section 143(3) (all with retrospective effect from 1-4-2009), reaffirm this interpretation and bring uniformity across the statutory provisions. E.I. In the present batch of cases, non-statutory bodies performing public functions, such as ERNET and NIXI are engaged in important public purposes. The materials on record show that fees or consideration charged by them for the purposes provided are nominal. In the circumstances, it is held that the said two assessees are driven by charitable purposes. However, the claims of such non-statutory organisations performing public functions, will have to be ascertained on a yearly basis, and the tax authorities must discern from the records, whether the fees charged are nominally above the cost, or have been increased to much higher levels E.2. It is held that though GSI India is in fact, involved in advancement of general public utility, its services are for the benefit of trade and business, from which they receive significantly high receipts. In the cir- cumstances, its claim for exemption cannot succeed having regard to amended section 2(15). However, the court does not rule out any future claim made and being independently assessed, if GSI is able to satisfy that what it provides to its customers is charged on cost-basis with at the most, a nominal mark-up. 21. Referring to the same, he pointed out that Hon’ble Apex Court in the said case had held that charging of any amount towards consideration which is on cost to cost basis and nominally above cost cannot be treated as trade, commerce and business, and only when the charges markedly and significantly above cost, that they would fall within the mischief of cess, fee or any other consideration towards trade, commerce or business. 22. The ld.counsel for the assessee contended that in the present case no such exercise was carried out by the Revenuebefore holding that the assessee was engaged in some business, trade or commerce. He further drew our attention to the financials statement of the assessee placed at page no.12 and pointed from the income & expenditure account reproduced therein that out of total surplus generated of Rs.1.43 crores for ITA No.2405/Ahd/2018 and Two Others 18 the financial year ending on 31.3.2013, the special purpose grant received by the assessee amounted to Rs.1.45 crores, which means that entire surplus was on account of special purpose grants and these special purpose grant could not be treated as part of the income of the assessee, and excluding the same, therefore, there was no surplus generated by the assessee at all showing that it was operating even less than the cost basis, and as per the decision of the Hon’ble Apex Court also, it could not be held that it was indulging in any trade, commerce or business. 23. The last contention raised by the ld.counsel for the assessee was that it had continuously been granted exemption in the past years, and following the rule of consistency, therefore, it was to be allowed exemption. In support, he also relied on the following decisions: i) Radhasaomi Satsang Saomi Bagh Vs. CIT, 193 ITR 321 (SC); ii) CIT Vs. Excel Industries, 262 CTR 261 (SC). 24. The ld.DR on the other hand stated that the ld.counsel for the assessee has misinterpreted/misread the judgment of Hon’ble Apex Court. He contended that the Hon’ble Apex Court had interpreted the term “education” in terms of section 2(15) only as relating to that of imparting in systematic manner by way of schooling etc. The narrower interpretation of term “education” was given by the Hon’ble Apex Court in terms of its definition as charitable purpose in section 2(15) of the Act, which is clearly evident from the order of the Hon’ble Apex Court. Therefore, the contention of the ld.counsel for the assessee that interpretation of the term “education” by the Hon’ble Apex court in the decision of ITA No.2405/Ahd/2018 and Two Others 19 New Noble Educational Society (supra) was rendered in the context of use of term “education” along with “solely” in terms of section 10(23C)(vi) of the Act was not correct. 25. As for the issue, reference by the ld.counsel of the assessee on the guidelines laid down by the Hon’ble Apex Court for determining whether an activity qualifies as commercial activity being general public utility in terms of first proviso to section 2(15), he fairly conceded that Revenue authorities in the present case had not evaluated the issue in terms of the said guidelines. He contended that the contentions of the ld.counsel for the assessee that specific purpose grants beexcluded for the purpose of determining surplus generated bythe assessee during the year, was not correct.Thatitwas only capital grants which were required to be excluded and not the specific purpose grant. He therefore contended that for the limited purpose for determining whether general public utility activities carried out by the assessee qualified as commercial or not in terms of first proviso to section 2(15) of the Act, the issue be restored back to the AO to be decided in terms of guidelines issued by the Hon’ble Apex court in this regard. 26. The ld.counsel for the assessee countered by saying that in various judicial decisions including that of the jurisdictional High Court had laid down that specific purpose grants were not be included in the income of the assessee for the purpose of computing the income qualifying for exemption under section 11 of the Act. He therefore contended that there was no merit in the arguments of the ld. DR that specific purpose grant be included in ITA No.2405/Ahd/2018 and Two Others 20 the income for determining whether the activities carried out by the assessee qualified as commercial or not. 27. We have heard both the parties at length and have also gone through the judgements of the Hon’ble Apex Court in the cases of New Noble Educational Society(supra) and Ahmedabad Urban Development Authority (supra), as also various case-laws referred to before us. 28. The issue to be adjudicated and determined in the present case is the nature of charitable activity carried out by the assessee in terms of its definition provided in Section 2(15) of the Act for the purposes of enabling the assessee to claim its income as exempt in terms of Section 11/12 of the Act. The Revenue contending that it qualifies as general public utility and being carried out in a commercial manner does not, therefore, qualify as a charitable activity in terms of Section 2(15) of the Act. The learned CIT(A), on the other hand, holding that the activities qualify as imparting education and thus entitling the assessee to claim its income as exempt under Section 11/12 of the Act. 29. In view of the recent decision of the Hon’ble Apex Court in the case of New Noble Educational Society (supra) wherein the interpretation of the term “education” was dealt with at length by the Hon’ble Apex Court, arguments were heard by both the parties. Admittedly, the Hon’ble Apex Court in the said decision has interpreted the term ‘education’ in a narrower sense as imparting formal scholastic learning by way of systematic instruction, schooling or training given to the young. The arguments of the learned Counsel for the assessee before us is that this narrow interpretation was given only in the context of interpreting it for the purposes of Section 10(23C)(vi) of the Act which exempts income of Institutions existing “solely ITA No.2405/Ahd/2018 and Two Others 21 for the purpose of education”, which was the issue before the Hon’ble Apex Court. The learned Counsel for the assessee has argued that the term “education” has not been interpreted by the Hon’ble Apex Court for the purposes of Section 2(15) of the Act defining charitable purpose to include education also. 30. We are not in agreement with this contention of the learned Counsel for the assessee. The Hon’ble Apex Court in fact has, in a very clear terms, given narrow meaning to the term ‘education’ for the purposes of Section 2(15) of the Act only. In its findings, as reproduced above, the Hon’ble Apex Court has categorically held that education means imparting formal scholastic learning for the purposes of qualifying as charitable purposes under Section 2(15) of the Act. The Hon’ble Apex Court has referred to its decision in the case of T.M.A Pai Foundation, wherein the meaning of the word “education” as scholastic structured learning was derived from the Article 21-A, Articles 29&30 and Articles 45 & 46 of the Constitution. It also referred to its decision in the case of Sole Trustee, LokaShikshana Trust Vs. CIT [1975] 101 ITR 234 (SC) (supra), pointing out that in the said decision, “education”, in the context of the Income-tax Act, was defined as the systematic instruction, schooling or training given to the young; that it has not been used in a wide and extended sense. Deriving from its above two decisions, the Hon’ble Apex Court categorically held that, in terms of Section 2(15) of the Act, “education” means only imparting formal scholastic learning. We are reproducing the findings of the Hon’ble Apex Court in this regard as again hereunder:- “32. Education ennobles the mind and refines the sensibilities of every human being. It aims to train individuals to make the right choices. Its primary purpose is to liberate human beings from the thrall of habits and preconceived attitudes14. It should be used to promote humanity and ITA No.2405/Ahd/2018 and Two Others 22 universal brotherhood. By removing the darkness of ignorance, education helps us discern between right and wrong. There is scarcely any generation that has not extolled the virtues of education, and sought to increase knowledge. 33. The subject of education is vast, even sublime. Yet, it is not the broad meaning of the expression which is involved in this case. As was held in T.M.A Pai Foundation (supra), education in the narrower meaning of the term as scholastic structured learning is what is meant in Article 21-A, Articles 29-30 and Articles 45- 46 of the Constitution. As to what is ‘education’ in the context of the IT Act, was explained in LokaShikshana Trust v. Commissioner of Income Tax15 in the following terms: "5. The sense in which the word "education" has been used in section 2(15) is the instruction, 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. The word "education" has not been used in that wide and extended sense, according to which every acquisition of further knowledge constitutes education. According to this wide and extended sense, travelling is education, because as a result of 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....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 section 2. What education connotes in that clause is the process of training and developing the knowledge, skill, mind and character of students by formal schooling." Thus, education i.e., imparting formal scholastic learning, is what the IT Act provides for under the head of “charitable” purposes, under Section 2 (15).” 31. We have also noted from the above, that in the case of LokaShikshana Trust (supra) on which the Hon’ble Apex Court has relied, museums were said to be imparting education in a wider sense and not in the narrower sense of systematic schooling or imparting instruction. Therefore, we reject the contentions of the learned Counsel for the assessee that the decision of the Hon’ble Apex Court in the case of New Noble Educational Society (supra) did not apply to the facts of the present case; and accordingly we hold that in view of the narrow and restricted meaning given to the term “education” as used in Section 2(15) of the Act, the activities carried out by ITA No.2405/Ahd/2018 and Two Others 23 the assessee being primarily run as a science museum does not qualify as education. The findings of the learned CIT(A), therefore, holding so are set aside. 32. As for the contention of the learned Counsel for the assessee that the law declared by the Hon’ble Apex Court in the case of New Noble Educational Society (supra) was operative prospectively, we do not find any merit in the same. As a perusal of paragraph No. 78 of the order of the Hon’ble Apex Court reveals that the prospective operation was to the interpretation/meaning given to the term “solely” used in Section 10(23C)(vi) of the Act along with the word “education” where the exemption was allowed to institution existing “solely for education”. The Hon’ble Apex Court at paragraph No. 78 of the order has noted in a very clear terms that “since in the present judgment it has departed from the previous rulings regarding the meaning of the term 'solely', therefore, in order to avoid disruption, and to give time to institutions likely to be affected to make appropriate changes and adjustments, it would be in the larger interests of society that the present judgment operates hereafter. As a result, it is directed that the law declared in the present judgment shall operate prospectively”. Therefore, it is very clear that the prospective operation of the judgment is only in the cases involving the interpretation of the term “solely” for the purpose of claiming exemption under Section 10(23C)(vi) of the Act. The prospective operation clearly is not for the meaning/definition/scope of the term “education” as used in Section 2(15) of the Act defining charitable purpose. As noted above, while giving a narrow interpretation to the term “education”, the Hon’ble Apex Court has referred to the decision in the case of T.M.A Pai Foundation (supra) and its decision in the case of LokaShikshana Trust (supra) consistently holding that education is to be given a narrow ITA No.2405/Ahd/2018 and Two Others 24 meaning as imparting scholastic learning in a systematic manner. The Hon’ble Apex Court has not noted any inconsistency in this interpretation of the term “education” by it. Therefore also there arises no question as per the decision of the Hon’ble Apex Court in the case of New Noble Educational Society (supra) for giving it a prospective operation. This contention of the learned Counsel for the assessee is, therefore, also rejected. As for the contention of the Ld.Counsel that its activities has consistently been held to be in the nature of imparting education in the past which position cannot now be disturbed, the same also merits no consideration since the nature of the activity being carried out has been determined in accordance with the interpretation by the Hon’ble apex court whose interpretation of law is to read as the law always was. 33. In view of the above, we hold that the assessee is not engaged in the charitable activity of imparting education as defined under Section 2(15) of the Act and the order of the learned CIT(A) holding so is, therefore, set aside. 34. Taking up the alternate contention of the assessee that its activities, if not in the nature of imparting education, they qualify as general public utility activity as held by the Assessing Officer also; but to exclude it from the definition of charitable purpose as defined under Section 2(15) of the Act invoking first and second proviso to the said section stating that all general public utility activities carried out in a commercial manner are not to be treated as charitable activities, the learned Counsel for the assessee has contended that the Hon’ble Apex Court in the case of AUDA (supra) has laid down certain guidelines for determining whether the general public ITA No.2405/Ahd/2018 and Two Others 25 utility activities qualify as commercial activities. He has drawn our attention to paragraph No. 253(A) of the order which is reproduced above containing the said guidelines. For the sake of convenience, the same is reproduced again hereunder:- A. General test under section 2(15) A.1 It is clarified that an assessee advancing general public utility cannot engage itself in any trade, commerce or business, or provide service in relation thereto for any consideration ("cess, or fee, or any other consideration"); A.2 However, in the course of achieving the object of general public utility, the concerned trust, society, or other such organization, can carry on trade, commerce or business or provide services in relation thereto for consideration, provided that (i) the activities of trade, commerce or business are connected ("actual carrying out..." inserted with effect from 1-4-2016) to the achievement of its objects of GPU; and (ii) the receipt from such business or commercial activity or service in relation thereto, does not exceed the quantified limit, of 20 per cent of total receipts of the precious year; A.3 Generally, the charging of any amount towards consideration for such an activity (advancing general public utility), which is on cost-basis or nominally above cost, cannot be considered to be "trade, commerce, or business" or any services in relation thereto. It is only when the charges are markedly or significantly above the cost incurred by the assessee in question, that they would fall within the mischief of "cess, or fee, or any other consideration" towards "trade, commerce or business". In this regard, the Court has clarified through illustrations what kind of services or goods provided on cost or nominal basis would normally be excluded from the mischief of trade, commerce, or business, in the body of the judgment. A.4 Section 11(4A) must be interpreted harmoniously with section 2(15), with which there is no conflict. Carrying out activity in the nature of trade, commerce or business, or service in relation to such activities, should be conducted in the course of achieving the GPU object, and the income, profit or surplus or gains must, therefore, be incidental. The requirement in section 11(4A) of maintaining separate books of account is also in line with the necessity of demonstrating that the quantitative limit prescribed in the proviso to section 2(15), has not been breached. Similarly, the insertion of section 13(8), seventeenth proviso to section 10(23C) and third proviso to section 143(3) (all with retrospective effect from 1-4-2009), reaffirm this interpretation and bring uniformity across the statutory provisions. ITA No.2405/Ahd/2018 and Two Others 26 35. His contention in this regard is that the Assessing Officer has not treated the activities carried out by the assessee as commercial in the light of these guidelines, but merely by noting that the assessee was collecting fees for various activities carried out by it and was generating surplus, he held that the activities of the assessee qualified as being commercial in nature. His request before us, therefore, was that the matter may be restored back to the Assessing Officer to determine its character as commercial or not in the light of the guidelines laid down by the Hon’ble Apex Court in the case of AUDA (supra). The learned DR has fairly admitted before us to the fact that the Assessing Officer has not arrived at his finding of the assessee’s activities being commercial in nature in the light of the guidelines as laid down by the Hon’ble Apex Court and has agreed to the matter being restored back to the Assessing Officer for the said purpose. 36. In vie w of the same, we restore the issue back to the Assessing Officer to determine whether the activities carried out by the assessee being in the nature of general public utility can be said to be commercial in nature so as to disqualify it from being categorised as charitable activities in terms of the first and second proviso to Section 2(15) of the Act by following the guidelines laid down by the Hon’ble Apex Court in the case of AUDA (supra) for the said purpose. 37. Having said so, we have noted that both the parties are in dispute regarding the manner of treatment of specific purpose funds received by the assessee from the Government – whether to be treated as capital receipts as claimed by the assessee or to be treated as revenue receipts as claimed by the Department. ITA No.2405/Ahd/2018 and Two Others 27 38. We have gone through the order of the learned CIT(A) and we have noted that he has given specific finding that the project specific grants will have to be considered as capital receipts at paragraph No. 4.5 of his order and he has directed the Assessing Officer to verify the nature of the grants received by the assessee and thereafter treated as capital or revenue in accordance with his order that the projects specific grants are to be treated as capital receipts. This finding of the learned CIT(A) has not been challenged by the Revenue before us. Therefore, for all purposes, this issue stands settled as held by the learned CIT(A). 39. In view of the above, therefore, we hold that the activities carried out by the assessee are not in the nature of imparting education, but are in the nature of general public utility activities in terms of Section 2(15) of the Act; and for the purpose of determining whether they are commercial in nature so as to disqualify them from being charitable activities in terms of first and second proviso to Section 2(15) of the Act, the matter needs reconsideration by the Assessing Officer in terms of the guidelines laid down by the Hon’ble Apex Court in the case of AUDA (supra) for determining the commercial nature of such activities. For the said purpose all the appeals are restored back to the AO. The AO is directed to determine the same and thereafter determine the income liable to tax in accordance with law. 40. In view of the above, all the three appeals filed by the Revenue are allowed for statistical purposes. Order pronounced in the Court on 20 th March, 2023 at Ahmedabad. Sd/- Sd/ (T.R. SENTHIL KUMAR) JUDICIAL MEMBER (ANNAPURNA GUPTA) ACCOUNTANT MEMBER Ahmedabad, dated 20/03/2023