2015 (12) TMI 694 - AT - Income Tax

Assessee's Driver Training Program Deemed Charitable

Income Tax Officer (E) Trust Ward-II, Delhi Versus Society for Driver Training Institute

The Tribunal upheld the CIT(A)'s decision, determining that the assessee's activities, focused on training drivers and approved by relevant authorities, ... Claim of exemption u/s 11 denied - CIT(A) allowed the claim - Held that:- It is seen that the assessee society was formed by Ashok Leyland Ltd., an Automobile conglomerate, on the request of Govt. Of NCT of Delhi to impart training to drivers of buses & trucks including DTC buses to make Delhi roads safe. The various training courses are designed and prescribed by Government of India, Ministry of Shipping, Road-Transport & Highways. The course content comprises of classroom instruction, training on simulator models, field instructions, practical training and examination. The fee to be recovered for different courses is determined and prescribed by the Transport Department. For each course certificate is awarded to the successful candidates on completion of the course which is signed by the Authorized Signatory of the Transport Department, Govt. Of NCT of Delhi, the Instructor & the Principal of the Driving Institute. The certificate issued is the Statutory basis on which driving license and PSV Badges are issued/renewed by the Transport Authority. A major part of the activity of the society is training of DTC drivers from grants received from Ministry of Shipping, Road Transport & Highways, Govt. of India (MORTH). Indisputably, substantial activity of the assessee revolves around providing training to drivers of buses and trucks. The training programmes are designed/ approved by the Ministry of Shipping, Road Transport and Highways which also gives grants to the assessee society from time to time. As such, the assessee cannot be equated with a private drivers’ training institute. There is no finding by the Department that any benefit of any kind has accrued to any individual member involved in the activities or day to day running of the society. Therefore, in our considered opinion and respectfully following the ratio of the judgments as laid down by the Hon’ble High Court of Gujarat in Gujarat State Co-operative Union vs. CIT (1992 (2) TMI 74 - GUJARAT High Court) and the Hon’ble High Court of Delhi in Institute of Chartered Accountants of India and Another v. DIT (Exemptions) and Others (2013 (7) TMI 205 - DELHI HIGH COURT ) we find no reason to interfere with the impugned order of the Ld. CIT (A). - Decided in favour of assessee. Issues Involved:1. Whether the activities of the assessee are charitable in nature or in the nature of trade, business, or commerce.2. Application of the judgment in the case of Bureau of Indian Standards to the assessee's case.3. Whether the activities of the assessee fall under the category of 'education' as per section 2(15) of the Income Tax Act, 1961.Detailed Analysis:Issue 1: Charitable Nature vs. Trade, Business, or CommerceThe primary issue is whether the activities of the assessee, which involve charging fees for training drivers of buses and trucks, can be considered charitable or fall under trade, business, or commerce. The Assessing Officer (AO) argued that since the assessee charges fees for its services, the activities are commercial in nature and fall under 'advancement of any other object of general public utility' as per the definition of 'charitable purpose' in section 2(15) of the Income Tax Act, 1961. The AO concluded that the assessee is not entitled to exemption under sections 11 and 12 of the Act, and the surplus generated is liable to tax under section 164 at the Minimum Marginal Rate (MMR).Issue 2: Application of Bureau of Indian Standards JudgmentThe Commissioner of Income Tax (Appeals) [CIT(A)] allowed the assessee's appeal by applying the ratio of the judgment in the case of Bureau of Indian Standards vs. DGIT (Exemption), where it was held that charging fees for services like accreditation and inspection does not constitute trade, business, or commerce. The CIT(A) observed that the assessee's activities of training drivers do not involve trade, commerce, or business, and fall under the last limb of section 2(15), i.e., 'advancement of any other object of general public utility.' The CIT(A) also relied on CBDT Circular No. 11/2008 dated 19-11-2008, which states that each case should be decided on its own facts to determine whether the object is charitable.Issue 3: Categorization under 'Education'The assessee argued that its activities fall under the category of 'education' and not 'general public utility.' The CIT(A) supported this view by referring to the judgment of the Hon'ble Gujarat High Court in Gujarat State Co-operative Union vs. CIT, where the Supreme Court's observations in Sole Trustee, Loka Shikshana Trust vs. CIT were cited. The Supreme Court had noted that 'education' connotes systematic instruction and training to increase skill and capability. The CIT(A) concluded that the assessee's activities of training drivers fall under 'education' and allowed the appeal on this ground as well.Department's AppealThe Department challenged the CIT(A)'s findings, emphasizing that the assessee was generating substantial surplus, indicating a profit motive. The Department argued that post-amendment to section 2(15) effective from 01.04.2009, the profit motive is irrelevant, and charitable trusts must eschew activities in the nature of trade, commerce, or business to remain charitable.Tribunal's FindingsThe Tribunal reviewed the rival submissions and relevant judgments. It referred to the Gujarat High Court's decision in Gujarat State Co-operative Union vs. CIT, which held that 'education' includes systematic dissemination of knowledge and training in specialized subjects. The Tribunal also cited the Delhi High Court's ruling in Institute of Chartered Accountants of India and Another v. DIT (Exemptions), which recognized that imparting education and conducting courses are not business activities.The Tribunal noted that the assessee society was formed to impart training to drivers, with courses approved by the Ministry of Shipping, Road Transport, and Highways. The fees were determined by the Transport Department, and the training was not for profit but aimed at public safety. The Tribunal found no evidence of personal benefit to any individual member of the society.ConclusionThe Tribunal upheld the CIT(A)'s order, concluding that the assessee's activities fall under 'education' and do not constitute trade, commerce, or business. The Department's appeal was dismissed.Final Judgment:The appeal of the Department is dismissed, and the order of the CIT(A) is upheld. The activities of the assessee are considered charitable and fall under the category of 'education' as per section 2(15) of the Income Tax Act, 1961.