TaxTMI 
TaxTMI 
2014 (8) TMI 638
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....oposed following substantial question of law : "Whether the Appellate Tribunal has substantially erred in holding that the activities of the assessee are in the field of education and that the assessee was eligible for exemption under section 11(1) of the Act ?" The assessee-Ahmedabad Management Association-is a public charitable trust, which is dedicated to pursue the objects of continuing education, training and research on various facets of management and related areas for the past 50 years. Various activities of the assessee and its revenues are highlighted by the Assessing Officer in paragraph 5 of the Assessment Order : "The summarized position of the income and expenditure of various of the assessee, as submitted by the assessee is as under : Nature of educational programme Income (Rs.) Expenditure (Rs.) Continuing Education Diploma & Certificate Programs 3,32,51,021 1,73,50,202 Management development programs 65,73,962 55,18,482 Public talks and seminars 0 11,59,959 Works....
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....mpletely free of charge for the benefit of the public at large and, hence, in respect of the same, there is only expense and no income. The Assessing Officer summarized the position and bifurcated the same in four categories, (i) continuing education diploma and certificate programs, (ii) management development programs, (iii) public talks and seminars, and (iv) workshops and conferences. The Assessing Officer observed that considering the nature of courses, its durations and the resultant surplus from each activity, the activity of the assessee is not considered educational, as defined by the hon'ble the Supreme Court in the case of Sole Trustee, Loka Shikshana Trust v. CIT reported in [1975] 101 ITR 234 (SC). The Assessing Officer also held that the activities of the assessee falls within the scope of the amendment of "advancement of any other object of general public utility and any other activity" of section 2(15) of the Act and, therefore, the activities of the assessee were not educational since the aggregate value of receipts were more than Rs. 10 lakhs and, therefore, the proviso to section 2(15) of the Act were applicable and the assessee was not entitled for exemption....
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.... profit making and, therefore, it cannot be said to be educational activity for charitable purpose, as defined under section 2(15) of the Act and, therefore, the assessee is not eligible for exemption under section 11 of the Act. 3.1. Shri Bhatt, learned counsel appearing on behalf of the appellant, has heavily relied upon the decision of the Division Bench of this court in the case of Saurashtra Education Foundation v. CIT reported in [2005] 273 ITR 139 (Guj) (paragraphs 40 and 41). It is submitted by Shri Bhatt, learned counsel appearing on behalf of the appellant-Revenue, that in the said decision it is observed and held that while a trust is holding the property for charitable purpose of education as defined by section 2(15) of the Act may also be an educational institution existing solely for the purpose of education, the two institutions cannot be treated as belonging to the same class. It is further held that an institution may be imparting educational activities without imparting formal education and without being affiliated to or accountable to any authority, such a trust can certainly be considered as qualifying for exemption under section 11(1)(a) read with section 2(....
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....ppellant-Revenue, that in the present case as such Circular No. 11 of 2008, dated December 19, 2008 (see [2009] 308 ITR (St.) 5), would be applicable. It is submitted that in paragraph 3 of the aforesaid Circular, it is clarified that the newly inserted proviso to section 2(15) will apply only to entities whose purpose is "advancement of any other object for general public utility", i.e., the forth limb of the definition of "charitable purpose" contained in section 2(15) of the Act and, hence, such entities will not be eligible for exemption under section 11 or under section 10(23C) of the Act if they carry on commercial activities. It is further submitted that in the aforesaid Circular it is clarified that whether such an entity is carrying on an activity in the nature of trade, commerce or business is a question of fact which will be decided based on the nature, scope, extent and frequency of the activity. 3.6. It is further submitted by Shri Bhatt, learned counsel appearing on behalf of the appellant-Revenue, that, as contended before this court by the respondent, it was not the case of the assessee before the Assessing Officer or before the Commissioner of Income-tax (Appeal....
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.... is submitted that as such for the assessment years 1995-96 to 2008-09, the Department has consistently held that the objects and activities of the assessee are related to "education". It is submitted that accordingly the income of the assessee has always been treated as entitled to exemption under section 11 of the Act, which is applicable to the trust whose activities are for any charitable purpose within the meaning of section 2(15) of the Act. It is submitted that only in the assessment year 2009-10 the Assessing Officer has held that the activities of the assessee cannot be considered as educational and the same will fall within the scope of "any other object of general public utility rendering service to any other trade, commerce or industry" as per the amended definition of section 2(15) of the Act. It is further submitted that the finding recorded by the Assessing Officer that the activities of the assessee cannot be held as educational as defined by the hon'ble Supreme Court in the case of Sole Trustee, Loka Shikshana Trust v. CIT reported in [1975] 101 ITR 234 (SC) and the assessee is not entitled to claim the benefit of exemption under section 10(23C)(iiad) of the Ac....
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....ose is "advancement of any other object of general public utility", i.e., the fourth limb of the definition of "charitable purpose" contained in section 2(15) of the Act. Hence, such entities will not be eligible for exemption under section 11 or under section 10(23C) of the Act if they carry on commercial activities. It is submitted that there are industry and trade associations who claim the exemption from tax under section 11 of the Act on the ground that their objects are for "charitable purpose" as these are covered under "any other object of general public utility". It is submitted that under the principle of mutuality, if trading takes place between persons who are associated together and contribute to a common fund for the financing of some venture or object and in this respect have no dealings or relations with any outside body, then any surplus returned to the persons forming such association is not chargeable to tax. It is submitted that in such cases, there must be complete identity between the contributors and the participants. It is further submitted that, therefore, where industry or trade associations claim both to be charitable institutions as well as mutual organi....
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....nder section 10(23C) of the Act. It needs to be appreciated that the activities of AMA as seen hereinbefore do not involve in any manner the carrying on of any activity in the nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business. (iii) The Circular also indicates that industry and trade associations, engaged in any activity in the nature of trade, commerce or business or rendering any service in relation to trade, commerce or business, who claim exemption from tax under section 11 of the Act on the ground that their objects are for charitable purpose, would fall under the proviso to section 2(15) of the Act as these are covered under "any other object of general public utility". Understanding the spirit of the Circular, it is quite clear that the legislative intention of the amendment is to cover within its scope industry and trade associations. 4.4. It is further submitted by Shri Patel, learned advocate appearing on behalf of the assessee, that the Tribunal has rightly relied upon the ratio of the decision of this court in the case of Gujarat State Co-operative Union v. CIT reported in [1992] 195 ITR 2....
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.... court in the case of CIT v. Sorabji Nusserwanji Parekh reported in [1993] 201 ITR 939 (Guj) as well as in the case of Saurashtra Education Foundation v. CIT reported in [2005] 273 ITR 139 (Guj) and has rightly observed that as such the aforesaid decisions would assist the assessee rather than the Revenue. 4.7. Making the above submissions and relying upon the above decisions, it is requested to dismiss the present tax appeal and answer the question in favour of the assessee and against the Revenue. Heard the learned advocates appearing on behalf of the respective parties at length. The question, which is posed for consideration of this court is, whether the Tribunal has committed any error in holding that the activities of the assessee are in the field of education and that the assessee was eligible for exemption under section 11(1) of the Act ? 5.1. At the outset, it is required to be noted that the dispute is for the assessment year 2009-10. The assessee declared the total income of Rs. 62,523 and claimed exemption under section 11 of the Act on the ground that the activities of the assessee are educational activities and, therefore, they are entitled to exemption under....
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....ative Union v. CIT (supra) that the activities of the assessee can be said to be an educational activity and, therefore, is entitled to exemption under section 11 of the Act as claimed. At this stage, it is required to be noted that all throughout for the previous years, right from the assessment year 1995-96 till 2008-09 the Revenue has considered the activities of the assessee as educational activity and has granted the benefit under section 11 of the Act. 5.3. Section 11 of the Act provides that subject to the provisions of section 60 to section 63 the 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 accumulated or set apart for application to such purposes in India shall not be included in the total income of the previous year of the person in receipt of the said income. "Charitable purpose" is defined under section 2(15) of the Act, which reads as under : "Charitable purpose' includes relief of the poor, education, medical relief preservat....
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....counsel appearing on behalf of the Revenue. In the said decision, the Division Bench of this court has observed as under (page 286 of 195 ITR) : "It appears to us that the decision of the Tribunal which seeks to rest it on the observations made by the Supreme Court in Loka Shikshana Trust's (supra) for holding that, the assessee is not entitled to exemption under section 10(22) of the Act is based on a complete misreading of the observations of the Supreme Court. In Loka Shikshana Trust's case [1975] 101 ITR 234 (SC) the Supreme Court, while dealing with the provisions of section 11 read with section 2(15) of the Act, which defines 'charitable purpose' observed as under (page 241 of 101 ITR) : 'The sense in which the word 'education' has been used in section 2(15) of the Act in the systematic instruction, schooling or training given to the young is 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 e....
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.... or educating. It, therefore, cannot be said that the word 'education' has been given an unduly restricted meaning by the Supreme Court in the said decision. Though, in the context of the provisions of section 10(22), the concept of education need not be given any wide or the extended meaning, it surely would encompass systematic dissemination of knowledge and training in specialized subjects as is done by the assessee. The changing times and the ever widening horizons of knowledge may bring in changes in the methodology of teaching and a shift of the better in the institutional setup. Advancement of knowledge brings within its fold suitable methods of its dissemination and though the primary method of sitting in a classroom may remain ideal for most of the initial education, it may become necessary to have a different outlook for further education. It is not necessary to nail down the concept of education to a particular formula or to flow it only through a defined channel. Its progress lies in the acceptance of new ideas and development of appropriate means to reach them to recipients." 5.5. Now, so far as reliance placed upon the decision of the Division Bench of this co....
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....ct will apply to entities whose purpose is advancement of any other object of general public utility, i.e., the fourth limb of the definition of "charitable purpose" contained in section 2(15) of the Act and, hence, such entities will not be eligible for exemption under section 11 or under section 10(23C) of the Act if they carry on commercial activities. Thus, on a fair reading of section 2(15) of the Act the newly inserted provisio to section 2(15) of the Act will not apply in respect of the first three limbs of section 2(15) of the Act, i.e., relief to the poor ; education or medical relief. Thus, where the purpose of a trust or institution is relief of the poor ; education or medical relief, it will constitute "charitable purpose" even if it incidentally involves the carrying on of the commercial activities. Thus, on a fair reading of section 2(15) of the Act read with Circular No. 11 of 2008, dated December 19, 2008, it appears that if the case of the assessee does not fall within the first three limbs of section 2(15) of the Act, i.e., relief to the poor ; education or medical relief and if it falls in the fourth limb, i.e., advancement of any other object of general public u....