TaxTMI 
TaxTMI 
2010 (10) TMI 502
X X X X Extracts X X X X
X X X X Extracts X X X X
....se of the powers conferred by sub-clause (iv) of clause (23C) of Section 10 of IT Act since the AY 1996-97, exempting the income of ICAI u/s 10(23C)(iv) for the AY 1996-97 till the assessment year under consideration. The notification dated 18.10.2004, relevant for the year under appeal reads as under:- "TO BE PUBLISHED IN PART-II, SECTION 3, SUB-SECTION (II) OF THE GAZETTE OF INDIA Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes New Delhi, the 18th October, 2004 S.O. "In exercise of powers conferred by the sub-clause (iv) of clause (23C) of section 10 of the Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby approves "The Institute of Chartered Accountants of India, New Delhi" for the purpose of the said sub- clause for the AY 2003-04 to 2005-06 subject to the following conditions, namely: (i) the assessee will apply its income, or accumulate for application, wholly and exclusively to the objects for which it is established; (ii) the assessee will not invest or deposit its fund (other than voluntary contributions r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ovisions of coaching classes is an activity approved by the Chartered Accountant Act 1949. 4. With regard to expenditure incurred on overseas relations, the CIT observed that assessee has not obtained permission from CBDT, therefore income of the institution cannot be allowed to be exempt u/s 10(23C). As per CIT, Section 10(23C) provides that application of income for charitable purposes has to be in India only, in view of the expenditure incurred by the assessee on overseas relations, the AO ought to have examined whether assessee is carrying on any charitable activity outside India. Accordingly, grant of exemption u/s 10(23C) was held to be wrongly allowed. Finally on these points, the DIT(Exemption) set aside the order of the AO by holding the same as erroneous insofar as prejudicial to the interest of the Revenue and AO was directed to re-assess the income of the assessee in terms of discussion made in the impugned order. Aggrieved by the above order, the assessee is in appeal before us. 5. Shri Ved Jain, Chartered Accountant appeared on behalf of the as....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ond proviso found below Section 10(23C)(via), where before approval all such documents including audited annual accounts of assessee is called for and verified to satisfy the genuineness of the activities of the institute. 6. Shri Jain also drawn our attention to Regulation 21(b) of the Institute of Chartered Accountants which provides for condition to become members and give council the power to specify syllabus etc. As per the regulation, a student has to undertake practical training before passing the examination as per the syllabus and required to attend the course as provided in these regulations. Our further attention was drawn to the following regulations:- "21. Conditions to become a member except as otherwise provided in the Act or these Regulations, a person in order to qualify himself for membership of the Institute should have- (b) completed the practical training, passed the Final examinations as per the syllabus as may be specified by the Council and attended the course as provided in these Regulations". The various Regulation giving wide power to the institute to provide for coaching, etc t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sp; these Regulations, before applying for membership of the Institute, shall be required to attend a course on General Management and Communication Skills or any other course as may be specified by the Council from time to time and in the manner so specified." 130. Duties and functions of regional councils (2) The duties and functions of a Regional Council shall be :- (xi) to arrange, if found practicable, for coaching candidates for the aforesaid examinations at convenient centres in its region". 7. Our attention was also drawn to the facts and figures with regard to provisions and regulations under which education and training to more than 8 lakh students was given out of which more than 1,75,000 have qualified to become Chartered Accountants and rest of the students were aspiring to become Chartered Accountants. As per learned AR, the major activity of the institute revolves around chartered accountancy education and training and as such, the observation of the DIT(Exemption) that coaching activity is not allowed, is contrary to the facts on record. With regard to overseas expenses, learned AR s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....xample, the learned counsel pointed out that where a Library functioning in India purchases books for it from abroad and makes the payment for such purchases, the purpose for which the expenditure has been incurred would be in India, though the expenditure has been incurred outside India. Citing another example, the learned counsel pointed out that where a charitable hospital purchases equipment from abroad for the purpose of use in the hospital, it cannot be said that the amount spent for purchase of machinery from abroad would not qualify for exemption under section 11(1)(a). According to the learned counsel, the expenditure incurred by the assessee is for purposes in India and, therefore, the revenue was not justified in denying the benefit under section 11(1)(a) of the said expenditure. In our considered view, the assessee deserves to succeed. It may be useful to reproduce section 11(1)(a). "11(1)(a) Income derived from property held under Trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India; and, where any such income is accumulate....
X X X X Extracts X X X X
X X X X Extracts X X X X
....herein, it has been held as follows:- "A bare reading of the sub-s. 11(1)(a) does not leave us in doubt that the requirement under s. 11 is for application of income for purposes in India and it does not restrict the application of income within the territory of India. The charitable purpose for which the income should be applied for claiming exemption under s. 11(1)(a) should be in India. In this case, it is not disputed that the trade delegation had been sent abroad for the benefit of the entire trade in India. The exports are made from India and the purpose for sending the delegation was to increase the possibilities of exports out of India. We accordingly hold that since the assessee has applied the income for charitable purposes in India, the mere fact that the expenditure has been incurred out of India, does not disqualify the expenditure from exemption under s. 11(1)(a)." 9. It was further contended that the institute has obligation under section 15(2)(j) of the Chartered Accountants Act, 1949 to maintain status and standard of professional qualification of chartered accountancy and for that purpose it is important to obs....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the Commissioner of Income-tax in the earlier proceedings, a different and contradictory stand should have been taken. We are, therefore, of the view that these appeals should be allowed and the question should be answered in the affirmative, namely, that the Tribunal was justified in holding that the income derived by the Radhasoami Satsang was entitled to exemption under sections 11 and 12 of the Income-tax Act of 1961. 12. In view of the above arguments duly supported by the documents on record, learned AR contended that there was no mistake in the order of the AO and DIT(Exemption) was not justified in setting aside the issue back to the file of the AO for deciding afresh, in terms of discussion made in the impugned order. 13. On the other hand, it was contended by learned CIT-DR Shri Mohanish Verma that no specific query relating to coaching classes and expenditure on overseas relations were raised by the AO during the course of assessment proceedings. As per learned DR, the AO has failed to examine the application of income outside India and also coaching classes being run in India generating income and incurring expenditure. He further submitted that assessee did....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hich institute was created, government notification with regard to institution, balance sheet, income and expenditure account of last two years. The AO has also asked the details of activities of the institution and copies of various resolutions passed during the year. Details of all expenditure exceeding Rs. 10,000/- under each head was also asked by the AO. Whether any activity/intended business carried by the assessee and details with regard to various books of account maintained by the assessee was also enquired by the AO. We have gone through the detailed reply filed by the assessee as placed at page 117 giving all the information and explanations sought by AO. The AO has examined all the details and explanations and completed the assessment as on 31.8.2007. The CIT has treated this order as erroneous and prejudicial to the interest of revenue by exercising his powers u/s 263 against which assessee is in further appeal before us. Section 263 empowers the CIT for revision of the orders in a case where after calling for and examining the record of any proceedings under the Act, he considers that any order passed therein by the Assessing Office....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rson, it will certainly be prejudicial to the interest of the revenue. It was observed that the phrase 'prejudicial to the interest of revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interest of revenue. Further clarifying, it was observed that when an ITO adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views were possible and the Assessing Officer has taken one view with which Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interest of revenue unless the view taken by the Assessing Officer is unsustainable to law. With respect to the reliance placed by ld. CIT DR on the proposition of Delhi High Court in the case of Gee Vee Enterprises (supras) wherein non making of inquiry by the AO was stated to justify the action of CIT u/s 263, it is very pertinent to mention the latest decision of Hon'bl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....titute and income derived therefrom. We have gone through the various regulations of ICAI which provide for coaching etc. to the students of chartered accountancy course. These regulations inter-alia provide that no candidate shall be admitted to the professional examination unless he produces a certificate from the head of the coaching organization to the effect that he is registered with coaching organization and has complied with the requirements of the theoretical education scheme. The candidate is also required to pay such fees as may be fixed by the council for such professional education. Before a student is eligible for appearing in the examination, he has to produce a certificate from the head of the coaching organization to the effect that he has complied with the requirements of postal tuition scheme. An articled clerk who has completed the practical training as provided in these regulations, before complying for membership of the institute, shall be required to attend a course on general management and communication skills. Similarly, an audit clerk wh....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng income cannot be held to be a different activity as held by Gujarat High Court in the case of Saurashtra Education Foundation vs CIT 273 ITR 139 at page 146 has observed as under : "As regards the illustration of the Institute of Chartered Accountants of India, although the institute was earlier not running formal classes and there was no geographical proximity when instructions were being imparted through postal tuitions, the Institute of Chartered Accountants of India has always been an institution set up, inter alia for imparting formal education in accountancy and connected subjects in an organized and systematic manner. The institute is accountable as per the provisions of the Act establishing it and the institute also has disciplinary control over the students who are required to be registered with its in the first place and who appear at the exams being held by the institute..." 15. The Institute as such merely it is receiving coaching fee from students for imparting education, cannot be said to have been carrying on busines....