Sri. Sadguru Education Trust, Madikeri V. ITO,

ITA 715/BANG/2013

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9467 (ITAT-BANGALORE)
• Duration Of Justice: 6 year(s) 1 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-07-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2005-2006
• Appeal Filed On: 17-05-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR P V PRADEEP KUMAR
• Keywords: Charitable institution; Non-deduction of tax
• Section: 40(a)(ia); 194C; 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N.V VASUDEVAN, VICE PRESIDNET AND SHRI B.R BASKARAN, ACCOUNTANT MEMBER ITA NOS.715 & 716/BANG/2013 ASSESSMENT YEARS : 2005-06 & 2006-07 SRI SADGURU EDUCATION TRUST, SRINIKETAN, NEAR PVT. BUS STAND, MADIKERI-571 201. PAN AAGTS 9754 B. VS. THE INCOME-TAX OFFICER, WARD-1, MADIKERI. APPELLANT RESPONDENT APPELLANT BY : SHRI TATA KRISHNA, ADVOCATE RESPONDENT BY : DR. P.V PRADEEP KUMAR, ADDL. CIT DATE OF HEARING : 27.06.2019 DATE OF PRONOUNCEMENT : 03.07.2019 O R D E R PER B.R BASKARAN, ACCOUNTANT MEMBER BOTH THE APPEALS FILED BY THE ASSESSEE ARE DIRECTE D AGAINST THE ORDERS PASSED BY LD CIT(A), MYSORE AND THEY REL ATE TO THE ASSESSMENT YEARS 2005-06 AND 2006-07. 2. THIS IS IN SECOND ROUND BEFORE THE TRIBUNAL. IN THE FIRST ROUND, THE APPEALS WERE NUMBERED AS ITA NO.550 & 551/BANG/2009 AND CERTAIN MATTERS WERE RESTORED TO THE FILE OF THE AO BY THE TRIBUNAL, VIDE ITS ORDER DATED 30-11-2009 . THE ITA NOS.715 & 716/BANG/2013 PAGE 2 OF 11 ASSESSMENT ORDERS PASSED IN THE SECOND ROUND WERE A LSO CHALLENGED BY THE ASSESSEE BEFORE LD CIT(A) AND THE TRIBUNAL. HOWEVER, BEFORE THE TRIBUNAL, THE ASSESSEE RAISED CERTAIN LEGAL ISS UES AND THE CO- ORDINATE BENCH INITIALLY ALLOWED THE APPEALS, VIDE ITS ORDER DATED 09- 05-2014 ON THE LEGAL ISSUE, WITHOUT ADJUDICATING TH E GROUNDS URGED ON MERITS. HOWEVER, THE ORDERS OF THE TRIBUNAL WER E REVERSED BY HONBLE HIGH COURT OF KARNATAKA AND HENCE THE APPEA LS WERE RESTORED BACK TO THE TRIBUNAL FOR ADJUDICATING THE GROUNDS URGED ON MERITS. CONSEQUENTLY, A COMMON ORDER ON MERITS WAS PASSED BY THE SMC BENCH ON 26-10-2016 FOR BOTH THE YEARS. SI NCE THE SMC BENCH DID NOT ADJUDICATE CERTAIN GROUNDS, THE ASSES SEE MOVED MISCELLANEOUS APPLICATIONS SEEKING RECALL OF ORDERS AND CONSEQUENT THERETO, VIDE ORDER DATED 13-04-2017 PASSED IN M.A. NO.715 & 716/BANG/2017, THE SMC BENCH RECALLED THE COMMON OR DER PASSED FOR BOTH THE YEARS FOR THE LIMITED PURPOSE OF ADJUD ICATING GROUND NOS.3 & 4 RELATING TO CLAIM OF EXEMPTION U/S 10(23C ) AND GROUND NOS. 6 TO 8 RELATING TO DISALLOWANCE MADE U/S 40(A) (IA) FOR NON- DEDUCTION OF TAX AT SOURCE U/S 194C OF THE ACT. ACC ORDINGLY, THESE APPEALS WERE HEARD NOW FOR ADJUDICATING ABOVE SAID ISSUES. 3. THE FIRST ISSUE RELATES TO THE CLAIM OF EXEM PTION U/S 10(23C) OF THE ACT. THE LD A.R SUBMITTED THAT THE ASSESSEE IS RUNNING EDUCATIONAL INSTITUTION AND IT IS SUBSTANTIALLY FIN ANCED BY THE GOVERNMENT. ACCORDINGLY HE SUBMITTED THAT THE ASSE SSEE IS ELIGIBLE FOR EXEMPTION U/S 10(23C)(IIIAB) OF THE ACT. THE L D A.R, IN THE ALTERNATIVE, SUBMITTED THAT THE ASSESSEE IS ALSO EL IGIBLE FOR EXEMPTION U/S 10(23C)(IIIAD) ALSO, SINCE ITS GROSS RECEIPTS DO NOT EXCEED THE PRESCRIBED LIMITS IN BOTH THE YEARS UNDE R CONSIDERATION. ITA NOS.715 & 716/BANG/2013 PAGE 3 OF 11 4. ON THE CONTRARY, THE LD D.R SUBMITTED THAT TH E ASSESSEE HAD OBTAINED WORKS CONTRACT FROM THE OFFICE OF COMMIS SIONER OF SOCIAL WELFARE, GOVERNMENT OF KARNATAKA TO IMPLEMENT ITS S CHEME OF CONDUCTING VOCATIONAL TRAINING COURSES IN THE FIELD S OF (1) RADIO AND TV REPAIRS FOR 6 MONTHS; (2) TRAINING IN ELECTRICAL WIRING FOR 6 MONTHS; (3) FITTER TRAINING FOR 6 MONTHS AND (4) TR AINING IN VEHICLE REPAIRS FOR 6 MONTHS TO PEOPLE BELONGING TO SCHEDUL ED CASTE IN VARIOUS DISTRICTS OF THE STATE OF KARNATAKA. ACCOR DINGLY, THE ASSESSEE HAS APPOINTED FRANCHISEES TO CONDUCT ABOVE CITED TRAINING PROGRAMMES ON SUB-CONTRACT BASIS. ACCORDINGLY, THE LD D.R SUBMITTED THAT THE ASSESSEE CANNOT BE CONSIDERED TO BE RUNNING AN EDUCATIONAL INSTITUTION. IT IS ONLY A CONTRACTOR APPOINTED BY GOVERNMENT OF KARNATAKA TO IMPLEMENT ITS SCHEME. B Y PLACING HIS RELIANCE ON THE DECISION RENDERED BY HONBLE SUPREM E COURT IN THE CASE OF SOLE TRUSTEE LOK SHIKSANA TRUST VS. CIT (10 1 ITR 234), THE LD D.R SUBMITTED THAT THE WORD EDUCATION USED IN SEC.2(15) WOULD REFER TO THE SYSTEMATIC INSTRUCTION, SCHOOLING OR T RAINING GIVEN TO YOUNG IN PREPARATION FOR THE WORK OF LIFE. IT ALSO CONNOTES THE WHOLE COURSE OF SCHOLASTIC INSTRUCTION WHICH A PERSON HAS RECEIVED. THE LD D.R SUBMITTED THAT THE EDUCATIONAL INSTITUTION REFERRED IN SEC. 10(23C) SHOULD BE ONE IMPARTING EDUCATION AS MENT IONED ABOVE AND IT SHOULD LEAD TO AWARDING OF DEGREE OR DIPLOMA AS HELD IN THE CASE OF SAURASHTRA EDUCATION FOUNDATION VS. CIT (20 05)(273 ITR 139)(GUJ). THE LD D.R SUBMITTED THAT THE ACTIVITIE S OF THE ASSESSEE HEREIN CANNOT BE EQUATED WITH THE ACTIVITIES OF AN EDUCATIONAL INSTITUTION, WHICH WOULD OFFER SYSTEMATIC INSTRUCTI ON OR SCHOOLING OR TRAINING. THE ASSESSEE HAS OBTAINED CONTRACT FOR G IVING SHORT TERM TRAINING IN VOCATIONAL ACTIVITIES AND IT HAS ONLY E XECUTED THE ITA NOS.715 & 716/BANG/2013 PAGE 4 OF 11 CONTRACT BY APPOINT FRANCHISEES ON SUB-CONTRACT BAS IS. HE FURTHER SUBMITTED THAT THE FEE PAID BY THE ASSESSEE TO THE SUB-CONTRACTORS (FRANCHISEES) HAS BEEN HELD TO BE PAYMENT MADE FOR WORK BY THE CO-ORDINATE BENCH IN PARAGRAPH 8 OF ITS ORDER PASSE D IN THE FIRST ROUND IN ITA NOS.550 & 551/BANG./2009. THE ASSESSE E HAS ACCEPTED THE SAID DECISION OF THE TRIBUNAL BY NOT C HALLENGING IT BEFORE THE HONBLE HIGH COURT. ACCORDINGLY, THE LD D.R SUBMITTED THAT THE ASSESSEES CONTENTION CANNOT BE ACCEPTED B Y THE TRIBUNAL, LEST IT SHOULD BE CONTRARY TO THE DECISION ALREADY RENDERED. ACCORDINGLY HE SUBMITTED THAT THE ACTIVITIES OF THE ASSESSEE CANNOT BE CONSIDERED TO BE ACTIVITIES OF AN EDUCATIONAL I NSTITUTION IN TERMS OF SEC.10(23C) OF THE ACT. ACCORDINGLY HE SU BMITTED THAT THE ASSESSEE IS NOT ENTITLED FOR EXEMPTION U/S 10(23C) OF THE ACT. 5. IN THE REJOINDER, THE LD A.R SUBMITTED THAT THE CASE LAWS RELIED UPON BY LD D.R HAS EXPLAINED THE MEANING OF THE WOR D EDUCATION. HOWEVER, SEC.10(23C) USES THE EXPRESSION OTHER EDU CATIONAL INSTITUTION. HENCE THE ASSESSEE SHOULD BE FALLING UNDER THE CATEGORY OF OTHER EDUCATIONAL INSTITUTION. THE LD D.R PLACED HIS RELIANCE ON THE DECISION RENDERED IN THE CASE OF MU DRA FOUNDATION FOR COMMUNICATIONS RESEARCH & EDUCATION VS. CCIT (2 016)(237 TAXMAN 139) BY HONBLE GUJARAT HIGH COURT IN SUPPOR T OF HIS CONTENTIONS. 6. WE HAVE HEARD RIVAL CONTENTIONS ON THIS ISSU E AND PERUSED THE RECORD. WE NOTICE THAT THE PROVISIONS OF SEC. 10(23 C) USES THE EXPRESSION UNIVERSITY OR OTHER EDUCATIONAL INSTITU TION. SINCE A UNIVERSITY SHOULD BE MANAGING THE EDUCATION SYSTEM OF THE ITA NOS.715 & 716/BANG/2013 PAGE 5 OF 11 EDUCATIONAL INSTITUTIONS REGISTERED UNDER IT, IT WA S CATEGORISED AS SEPARATE CATEGORY AND THE EDUCATIONAL INSTITUTIONS HAVE BEEN CATEGORISED AS OTHER EDUCATIONAL INSTITUTION. IF THE CONTENTION OF THE ASSESSEE THAT THE EXPRESSION OTHER EDUCATIONAL INSTITUTION SHOULD BE CONSIDERED AS A THIRD CATEGORY IS ACCEPTE D AS CORRECT FOR A MOMENT, THEN THE FORMAL EDUCATIONAL INSTITUTIONS SH ALL BE OUT OF THE PURVIEW OF PROVISIONS OF SE. 10(23C) OF THE ACT. I N OUR VIEW, THE SUCH KIND OF INTERPRETATION WOULD DEFEAT THE PURPOS E OF SEC.10(23C) OF THE ACT. ACCORDINGLY, WE ARE OF THE VIEW THAT T HE MEANING GIVEN TO THE WORD EDUCATION USED IN SEC. 2(15) OF THE A CT SHOULD BE ADOPTED AS IT IS IN ORDER TO UNDERSTAND THE MEANING OF EDUCATIONAL INSTITUTION. 7. THE MEANING OF EXPRESSION EDUCATION CAME T O BE INTERPRETED BY HONBLE SUPREME COURT IN THE CASE OF SOLE TRUSTE E LOK SHIKSHANA TRUST (SUPRA) AND BY HONBLE GUJARAT HIGH COURT IN THE CASE OF SAURASHTRA EDUCATION FOUNDATION (SUPRA) AND ALSO BY HONBLE PATNA HIGH COURT IN THE CASE OF BIHAR INSTITUTE OF MINING AND MINE SURVEYING V. CIT [1994] 208 ITR. 8. WE NOTICE THAT THE COCHIN BENCH OF TRIBUNAL C ONSIDERED AN ISSUE AS TO WHETHER AN INSTITUTION CONDUCTING COACH ING CLASSES CAN BE CONSIDERED TO BE AN EDUCATIONAL INSTITUTION OFFE RING CHARITABLE ACTIVITY OF EDUCATION WITHIN THE MEANING OF SEC.2(1 5) OF THE ACT IN THE CASE OF M STAR CHARITABLE SOCIETY VS. CIT (IT A PPEAL NO.7605 (COCH) OF 2011). THE CLAIM OF THE ASSESSEE WAS REJ ECTED BY THE COCHIN BENCH OF TRIBUNAL WITH THE FOLLOWING OBSERVA TIONS BY PLACING RELIANCE ON THE CASE LAWS CITED ABOVE:- ITA NOS.715 & 716/BANG/2013 PAGE 6 OF 11 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. ADMI TTEDLY, THE TAXPAYER IS RUNNING COACHING CLASSES. THE TAXPAYER IS NOT DOING ANY OTHER ACTIVITY. THE QUESTION ARISES FOR CONSIDE RATION IS WHETHER CONDUCTING COACHING CLASSES FOR THE STUDENTS WOULD FALL WITHIN THE MEANING OF EDUCATION AS PROVIDED IN SECTION 2(15) OF THE ACT. THE APEX COURT HAD AN OCCASION TO CONSIDER THE PROVISIO NS OF SECTION 2(15) OF THE ACT IN SOLE TRUSTEE, LOKA SHIKSHANA TRUST V. CIT [1975] 101 ITR 234 (SC). AFTER CONSIDERING THE PROVISIONS OF SECTIONS 2(15) OF THE ACT, THE APEX COURT FOUND THAT ALL KINDS OF ACQUIRING KNOWLEDGE WILL NOT COME WITHIN THE MEANING OF EDUC ATION. WHAT EDUCATION. CONNOTES IN SECTION 2(15) IS THE PROCE SSING OF TRAINING AND DEVELOPING THE KNOWLEDGE, SKILL, MIND AND CHARA CTER OF STUDENTS BY NORMAL SCHOOLING. IN FACT, THE APEX COU RT HAS OBSERVED AS FOLLOWS AT PAGE 241 OF THE ITR: THE SENSE IN WHICH THE WORD EDUCATION HAS BEEN U SED IN SECTION 2(15) IS THE SYSTEMATIC INSTRUCTION, SCHOOL ING OR TRAINING GIVEN TO THE YOUNG IS PREPARATION FOR THE WORK OF LIFE. IT ALSO CONNOTES THE WHOLE COURSE OF SCHOLASTIC INS TRUCTION WHICH A PERSON HAS RECEIVED. THE WORD EDUCATION H AS NOT BEEN USED IN THAT WIDE AND EXTENDED SENSE, ACCORDIN G TO WHICH EVERY ACQUISITION OF FURTHER KNOWLEDGE CONSTI TUTES EDUCATION. ACCORDING TO THIS WIDE AND EXTENDED SENS E, TRAVELING IS EDUCATION, BECAUSE AS A TRAVELING YOU ACQUIRE FRESH KNOWLEDGE. LIKEWISE, IF YOU READ NEWSPAPERS A ND MAGAZINES, SEE PICTURES, VISIT ART GALLERIES, MUSEU MS AND ZOOS, YOU THEREBY ADD TO YOUR KNOWLEDGE. AGAIN, WHE N YOU GROW UP AND HAVE DEALINGS WITH OTHER PEOPLE, SOME O F WHOM ARE NOT STRAIGHT, YOU LEARN BY EXPERIENCE AND THUS ADD TO YOUR KNOWLEDGE OF THE WAYS OF THE WORLD. IF YOU ARE NOT CAREFUL, YOUR WALLET IS LIABLE TO BE STOLEN OR YOU ARE LIABLE TO BE CHEATED BY SOME UNSCRUPULOUS PERSON. THE THIEF W HO REMOVES YOUR WALLET AND THE SWINDLER WHO CHEATS YOU TEACH YOU A LESSON AND IN THE PROCESS MAKE YOU WISER THOU GH POORER. IF YOU VISIT A NIGHT CLUB, YOU GET ACQUAINT ED WITH AND ADD TO YOUR KNOWLEDGE ABOUT SOME OF THE NOT MUCH RE VEALED REALITIES AND MYSTERIES OF LIFE. ALL THIS IN A WAY IS EDUCATION IN THE GREAT SCHOOL OF LIFE. BUT THAT IS NOT THE SE NSE IN WHICH THE WORD EDUCATION IS USED IN CLAUSE (15) OF SECT ION 2. WHAT EDUCATION CONNOTES IN THAT CLAUSE IS THE PROCE SS OF TRAINING AND DEVELOPING THE KNOWLEDGE, SKILL, MIND AND CHARACTER OF STUDENTS BY NORMAL SCHOOLING. 5. FROM THE ABOVE JUDGMENT OF THE APEX COURT IT WOULD BE ABUNDANTLY CLEAR THAT THERE SHOULD BE A SYSTEMATIC INSTRUCTION TO THE STUDENTS BY WAY OF NORMAL SCHOOLING. MERE COACH ING CLASSES ITA NOS.715 & 716/BANG/2013 PAGE 7 OF 11 MAY PROVIDE SOME KIND OF KNOWLEDGE TO THE STUDENTS. BUT THAT KIND OF ACQUISITION OF KNOWLEDGE THROUGH COACHING CLASSE S CANNOT FALL WITHIN THE MEANING OF EDUCATION AS PROVIDED IN SE CTION 2(15) OF THE ACT. AS THE APEX COURT OBSERVED, ONE MAY ACQUIR E KNOWLEDGE IN THE COURSE OF TRAVELING; DURING THE COURSE OF READI NG NEWSPAPER; ETC. BUT THAT KIND OF KNOWLEDGE CANNOT FALL WITHIN THE TERM EDUCATION AS PROVIDED IN SECTION 2(15) OF THE ACT . THERE SHOULD BE A NORMAL SCHOOLING BY WAY OF REGULAR AND SYSTEMATIC INSTRUCTION. 6. THE PATNA HIGH COURT IN THE CASE OF BIHAR INSTITUTE OF MINING AND MINE SURVEYING V. CIT [1994] 208 ITR HELD THAT MERE CONDUCTING OF CLASSES FOR OPEN UNIVERSITY/DISTANCE EDUCATION CANN OT BE CONSTRUED AS CHARITABLE ACTIVITY WITHIN THE MEANING OF SECTIO N 2(15) OF THE ACT. THE PATNA HIGH COURT, AFTER CONSIDERING THE JUDGMEN T OF THE APEX COURT IN CIT V. ANDHRA CHAMBER OF COMMERCE [1965] 55 ITR 722 (SC) AND IN THE CASE OF CIT V. SOLE TRUSTEE, LOKA SHIKSHANA TRUST [1970] 77 ITR 61 (MYS) HAS OBSERVED AS FOLLOWS AT P AGE 615 OF THE ITR: IT IS TRUE THAT BY REASON OF THE FINANCE ACT, 1983 , THE QUESTION AS TO WHETHER ANY CHARITABLE INSTITUTION I S BEING RUN WITH A PROFIT MOTIVE OR NOT HAS LOST ITS RELEVA NT. HOWEVER, THE WORD CHARITABLE PREFIXING THE WORD INSTITUTI ON HAS TO BE GIVEN ITS FULL EFFECT. IT APPEARS THAT ONE OF TH E PRINCIPAL PROJECTS OF THE PETITIONERS INSTITUTION HAS THE OB JECT OF COACHING AND PREPARING THE STUDENTS FOR APPEARING I N VARIOUS EXAMINATIONS CONDUCTED BY THE BOARD OF MINI NG EXAMINATION AND/OR MI(1) SECTION (A)(B) AND THE SAI D COACHING OF STUDENTS IN AN INSTITUTE IS NOT, IN OUR OPINION, AN IMPARTING OF EDUCATION WHICH CAN BE SAID TO BE A PROCESS OF TRAINING AND DEVELOPING KNOWLEDGE AND CHARACTER OF STUDENTS BY NORMAL SCHOOLING. A COACHING INSTITUTE CANNOT BE SAID TO BE AN INSTITUTION WHERE NORMAL SCHOOLING IS DONE. THE DEFINITION OF CHARITABLE PURPOSE IS INCLUSIVE AND NOT EXHAUSTIVE. 7. IT IS FURTHER SEEN THAT THE GUJARAT HIGH COURT ALS O HAD AN OCCASION TO CONSIDER IDENTICAL ISSUE IN THE CASE OF SAURASHTRA EDUCATION FOUNDATION V. CIT [2005] 273 ITR 139 (GUJ). THE GUJARAT HIGH COURT FOUND THAT ALL KINDS OF EDUCATION WOULD NOT FALL WITHIN THE MEANING OF SECTION 2(15) OF THE ACT. THE TRAINI NG, INSTRUCTION, ETC. WOULD RESULT IN GRANT OF A DIPLOMA OR DEGREE B Y A UNIVERSITY OR A GOVERNMENTAL AGENCY. IN THE CASE BEFORE US, ADMIT TEDLY, THE TAXPAYER IS CONDUCTING COACHING CLASSES. THEREFORE, IT CANNOT BE TREATED AS A CHARITABLE INSTITUTION AS PROVIDED IN SECTION 2(15) OF ITA NOS.715 & 716/BANG/2013 PAGE 8 OF 11 THE ACT. THIS TRIBUNAL IS OF THE OPINION THAT THE T AXPAYER IS NOT ELIGIBLE FOR REGISTRATION U/S 12AA OF THE ACT. ACCO RDINGLY, THE ORDER OF THE LOWER AUTHORITY IS CONFIRMED. 9. IN THE INSTANT CASE, WE HAVE NOTICED THAT THE ASSESSEE HAS BEEN AWARDED A CONTRACT TO CONDUCT SHORT TERM VOCATIONAL TRAINING COURSES IN VARIOUS DISTRICTS OF STATE OF KARNATAKA. THE ASSESSEE HAS UNDERTAKEN THE CONTRACT AND HAS APPOINTED FRANC HISEES ON SUB-CONTRACT BASIS. THOUGH IT IS NOT CLEAR AS TO W HETHER THE ASSESSEE ITSELF HAS CONDUCTED TRAINING OR NOT, YET THE VOCATIONAL TRAINING GIVEN BY THE ASSESSEE, IF ANY, AND THE FRA NCHISEES CAN, IN OUR VIEW, FALL UNDER THE CATEGORY OF COACHING INST ITUTES ONLY, SINCE THE SAME WOULD NOT FALL UNDER THE CATEGORY OF NORMA L SCHOOLING AND SYSTEMATIC INSTRUCTION AND EDUCATION EXPLAINED BY H ONBLE SUPREME COURT AND OTHER HIGH COURTS. IN ANY CASE, WE HAVE NOTICED THAT THE ASSESSEE IS ONLY EXECUTING THE WOR KS CONTRACT GIVEN BY GOVERNMENT OF KARNATAKA. IN OUR VIEW, THE RELIA NCE PLACED BY THE ASSESSEE IN THE CASE OF MUDRA FOUNDATION FOR CO MMUNICATION RESEARCH & EDUCATION IS NOT APPROPRIATE, SINCE PARA GRAPH 16 OF THE ORDER OF HIGH COURT WOULD MAKE IT CLEAR THAT THE AS SESSEE THEREIN WAS AWARDING DIPLOMAS, CERTIFICATES ETC AFTER PROVI DING TRAINING IN COMMUNICATION, ADVERTISING AND RELATED SUBJECTS TO EQUIP THEM THOROUGHLY TO PRACTICE THE ART AND PROFESSION OF CO MMUNICATION IN WHICH THEY HAVE BEEN TRAINED. THE FACTS OF THE PRE SENT CASE IS QUITE DIFFERENT. HENCE THE CLAIM OF THE ASSESSEE THAT IT IS RUNNING AN EDUCATIONAL INSTITUTION WITHIN THE MEANING OF SEC .10(23C) OF THE ACT IS LIABLE TO BE REJECTED. ACCORDINGLY WE ARE O F THE VIEW THAT THE TAX AUTHORITIES ARE JUSTIFIED IN REJECTING THE CLAI M OF EXEMPTION U/S 10(23C)(IIIAB) AND (IIIAD) OF THE ACT. ITA NOS.715 & 716/BANG/2013 PAGE 9 OF 11 10. THE NEXT ISSUE RELATES TO THE DISALLOWANCE MAD E U/S 40(A)(IA) OF THE ACT FOR NON-DEDUCTION OF TAX AT SOURCE U/S 194C OF THE ACT ON THE PAYMENTS MADE TO FRANCHISEES. WE HAVE EARLIER NOTICED THAT THE CO-ORDINATE BENCH HAS ALREADY HELD IN THE FIRST ROU ND THAT THE SUB- CONTRACT GIVEN TO THE FRANCHISEES WOULD FALL UNDER THE CATEGORY OF WORK DEFINED IN SEC.194C OF THE ACT. CONSEQUENTL Y, THE ASSESSEE SHALL BE LIABLE TO DEDUCT TAX AT SOURCE FROM THE PA YMENTS SO MADE. 11. BEFORE US, THE LD A.R TOOK AN ALTERNATIVE CON TENTION THAT THE SCOPE OF PROVISIONS OF SEC.194C HAS BEEN EXTENDED T O INCLUDE ASSOCIATION OF PERSONS ONLY FROM 1 ST JUNE, 2008. HE SUBMITTED THAT THE ASSESSEE HAS BEEN ASSESSED AS ASSOCIATION OF PERSONS BY THE AO AND HENCE THE PROVISIONS OF SEC.194C SHOULD NOT BE MADE APPLICABLE TO THE YEARS UNDER CONSIDERATION. 12. THE LD D.R, ON THE CONTRARY, SUBMITTED THAT T HE ASSESSEE IS A TRUST AND THE TRUSTS HAVE BEEN INCLUDED LONG BACK IN SEC.194C OF THE ACT. HE SUBMITTED THAT THE AMENDMENT INSERTED WITH EFFECT FROM 1 ST JUNE, 2008 WAS INTENDED TO COVER SPECIAL PURPOSE V EHICLES FORMED AS ASSOCIATION OF PERSONS. 13 WE HEARD THE PARTIES ON THIS ISSUE. THE EXP LANATORY MEMORANDUM MAKES IT CLEAR THAT THE SCOPE OF SEC.194 C WAS EXTENDED TO COVER ASSOCIATION OF PERSONS FROM 1 ST JUNE 2008, SINCE A LARGE NUMBER OF WORKS CONTRACTS ARE EXECUTED BY A NUMBER OF SPECIAL PURPOSE VEHICLES (SPVS) STRUCTURED AS JOINT VENTURES/CONSORTIUMS IN THE NATURE OF ASSOCIATION O F PERSONS. HOWEVER, THE PROVISIONS OF SEC.194C IS CLEAR THAT T HE TRUSTS ARE ITA NOS.715 & 716/BANG/2013 PAGE 10 OF 11 LIABLE TO DEDUCT TAX AT SOURCE. THERE IS NO DISPUT E THAT THE ASSESSEE IS A TRUST AND HENCE, IN VIEW OF SPECIFIC PROVISION S OF SEC.194C, IT SHALL BE LIABLE TO DEDUCT TAX AT SOURCE. IT MAY BE PERTINENT TO NOTE THAT THE TRUSTS FILE THEIR RETURN OF INCOME UNDER T HE CATEGORY OF ASSOCIATION OF PERSONS ONLY, MEANING THEREBY, THE CATEGORY ASSOCIATION OF PERSONS WOULD ENCOMPASS DIFFERENT FORMS OF ASSOCIATION, OF WHICH SPVS AND TRUSTS ARE ONE OF TH E FORMS OF ASSOCIATION. SINCE THE PROVISIONS OF SEC.194C SPEC IFICALLY INCLUDE TRUSTS IN THE LIST OF ASSESSEES LIABLE TO DEDUCT TAX AT SOURCE, IN OUR VIEW, THE ASSESSEES CLAIM TO CONSIDER IT UNDER THE CATEGORY OF SPVS IS LIABLE TO BE REJECTED. ACCORDINGLY WE DO NOT FI ND ANY MERIT IN THIS CONTENTION OF THE ASSESSEE. 14. IN THE RESULT, ALL THE GROUNDS RELATING TO B OTH THE APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD JULY, 2019. SD/ - (N.V VASUDEVAN) VICE PRESIDENT SD/ - (B.R BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED, 3 RD JULY, 2019. /VMS / COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3 . THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER A SST. REGISTRAR, ITAT, BANGALORE. ITA NOS.715 & 716/BANG/2013 PAGE 11 OF 11 1. DATE OF DICTATION 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO SR.P.S .. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER .. 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S. .. 6. DATE OF UPLOADING THE ORDER ON WEBSITE.. 7. IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO .. 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. DATE ON WHICH ORDER GOES FOR XEROX & ENDORSEMENT 10. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 11. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER . 12. THE DATE ON WHICH THE FILE GOES TO DISPATCH SEC TION FOR DISPATCH OF THE TRIBUNAL ORDER . 13. DATE OF DESPATCH OF ORDER. ..