TaxTMI 
TaxTMI 
2020 (5) TMI 628
X X X X Extracts X X X X
X X X X Extracts X X X X
.... hearing to the Appellant and thereby violating the principles of natural justice. 1.2 The Appellant prays that the order of the CIT be struck down as bad in law. WITHOUT PREJUDICE TO GROUND NO. I GROUND II: CIT TRAVELLED BEYOND THE SHOW CAUSE NOTICE ISSUED 2.1 On the facts and in the circumstances of the case and in law, the CIT erred in exercising jurisdiction under section 263 on the basis of issues/reasons which were not referred in the show cause notice issued by the CIT to the Appellant and without giving the Appellant the opportunity to controvert the same. 2.2 The Appellant prays the order passed by the CIT u/s. 263 be held as bad in law. WITHOUT PREJUDICE TO GROUND NO. I & II GROUND III: CIT INVOKED PROVISIONS OF SECTION 263 BASED ON ALLEGED FACTS/ALLEGATONS WITHOUT ANY OPPORTUNITY OF REBUTTAL: 3.1 On the facts and circumstances of the case and in law, the CIT erred in invoking provisions of Section 263 of the Act based on alleged facts and allegations without giving any opportunity to rebut the same and thereby, violating the principles of natural justice. 3.2 The Appellant prays the order passed by the CIT ought to be struck down and should be considere....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 4. The assessee was formed with the following objects:- 1. To promote, support and strengthen education, research and training of Information Technology and its application in all fields of activities and to collaborate, co-operate and enter into partnerships with Universities, Colleges and Schools for expanding IT Education and training to play an active role in the human development initiatives of the country by supporting and sponsoring, wherever feasible, the establishment of new Universities, Colleges and Schools for organizing innovative IT Education and training program. 2. To support, sponsor and collaborate with teachers and researchers in Universities and research institutions to develop IT enabled teaching and learning paradigm and new education technologies and to sponsor and support conferences, seminars and workshops of academics and professionals engaged in IT and related fields to share experiences and to strengthen institution industry linkages. 3. To co-operate with and seek cooperation from universities, research institutions and industry in Delhi for strengthening and modernizing the curricula, teaching methods and student assessment procedures in IT Edu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....The assessee has itself stating that it is providing training to youth across India. The A.O. has failed to examine whether the activities carried out by the assessee in the absence of affiliation with any regulatory body and adherence to the criteria for formal education laid down by Hon'ble Supreme Court in Lok Shikshan Sansthan case, by Hon'ble Delhi High Court in Delhi Music Society case etc., still qualify as education. In case if the activities of the assessee do not qualify as education, these will qualify as General Public Utility and the proviso to section 2(15) will be applicable in such case. The assesse has received fees for training student which is in the nature of trade, commerce or business and accordingly the surplus from these activities should be brought to tax. This is further required due to the fact that the receipts from different corporate houses have been subjected to TDS u/s 194(J) and therefore, the nature of these receipts in commercial in nature. 2.1 In case if the activities of the assessee do not qualify as education, these will qualify' as General Public Utility and the proviso to section 2(15) will be applicable in such case. The asses....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and to play and active role in the human development initiatives of the country by supporting and sponsoring, wherever feasible, the establishment of new Universities, Colleges and Schools for organizing innovative IT education and training progammes. It is seen from the records that the assessee has receipt various payments from many corporate entities. On these payments TDS has been deducted at source u/sl94C/194J characterizing the payment as in the nature of contractual/professional services rendered by the assessee. 4.1 The details of payments received from various corporate as per TDS statement during the year are under:- S.No. Name Receipts TDS deducted u/s 194C/J 1. HINDUSTAN COCA COLA BEVERAGES PVT. LTD. 8223755 164474 2. M.P. BUILDING & OTHER CONSTRUCTION WORKER WELFARE BOARD 348170 38686 3. TATA CONSULTANCY SERVICES LIMITED 195003 19500 4. WORLD VISION INDIA 815130 16302 5. ATC TOWER COMPANY OF INDIA PVT. LTD. 1039075 20782 6. APNE AAP WOMEN WORLD WIDE (TRUST) 46765 4677 7. EFICOR 14000 1400 8. HOPE FOUNDATION 96098 1922 9. NUT INITIATIVE FOR LEARNING 10697 1071 10. NIIT YUVAJYOTI LIMITED 594....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt or training expenses' (with TCS), for installation and supply of computer equipment ( with Chemical Terminal Trombay limited), for managing, operating and upgrading recruitment centers ( with JSL Limited), to act as a technical consultant for course run by Aga Khan Foundation, etc. The fact that essentially comes out from the said agreement is that the assessee is providing supplies and services to its clients who are actually undertaking serme activities in the field of training etc. All the Clients of the assessee have invariably deducted TDS and termed the services received from the assessee as either professional or contractual receipts. The assessee has also raised invoices terming the same as consultancy or professional services and service tax was raised in the invoices The A.O. has failed to appreciate the actual nature of activities undertaken by it. c. It has also came to notice that in all the development centers, the name of the client and the name of NIIT is incorporated prominently in the naming of the centers. The certificates also show the names of the client and NIIT. Thus not only the activities result in advertisement of client but also in creation of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....m providing training, by not only charging the training but also getting its cost and profit recouped, who make payments either out of business considerations or out of CSR obligations. The assessee is acting only under a commercial contract as a consultant/contractor. The activity of the assessee cannot be categorised as an activity within the meaning of 'education as defined in section 2(15) of the income tax act'. Even if the activity of the assessee is considered as charitable under the limb of General Public Utility, it is hit by proviso to section 2(15) of the act. 6. Now the arguments submitted by the assessee during the course of present proceedings, it is seen that the assessee has filed a very detailed reply, which can be summarized in following points.- Summary of reply:- a. Its courses are affiliated with competent authorities and accordingly its activity would classify as education. It has stated that its courses are mainly approved by NSDC (a government body) and it is incorrect to state that the course are not approved by regulatory authorities. b. it further states that even otherwise three is no requirement that the courses conducted by the assess....
X X X X Extracts X X X X
X X X X Extracts X X X X
....upport of the assessee for running NSDC courses. The assessee is merely hired for providing some support and services. The approval for running the courses are with NIIT YuvaJyoti Limited and not with the assessee. Apart from the assessee, the said company would have employed other professional commercial agencies also. Whether all such agencies can be said to be running an authorsied course by NDMC. The reply is clearly in negative, As such, at the outset itself, it is seen that the assessee has misrepresented the fact that it is running approved course from its centers, it is also seen from the details of payments received by the assessee that NIIT YuvaJyoti Limited has made payment of Rs. 5947278/- on which TDS of Rs. 190360 has been made by it.Thus it is clear that the payment is made for the use of infrastructure and support services rendered by the assessee. The assessee cannot claim that it is authorized agency for running of NSDC course and thus the argument that its courses are approved by government authorities are factually incorrect. 7.2 The assessee has alternatively claimed that for undertaking charitable activities in the field of 'education' it is not re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....stolen or you are liable to be cheated by some unscrupulous person. The thief who removes your wallet and the swindler who cheats you teach you a lesson and in the process make you wiser though poorer. If you visit a night club, you get acquainted with and add to your knowledge about some of the not much revealed realities and mysteries of life. 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 normal schooling." 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 Training classes may provide some kind of knowledge to the students. But that kind of acquisition of knowledge through coaching classes cannot fall within the meaning of "education" as provided in section 2(15) of the Act. As the Apex Court observed, one may acquire knowledge in the course of travelling; during the course of reading newspaper; etc. But that kind of knowled....
X X X X Extracts X X X X
X X X X Extracts X X X X
....school faculty comprises of 30 teachers with 25 of them being Grade 8 and above in western music. There is reference to scholarshipsthat are open to the students including waiver of fees from 25% to 90%.It has been stated that several students of the school have gone on for higher musical studies to places like Moscow, London, New York, Prague and Rome. The schedule of fees effective from April, 2011 is also made part of the annexure. There are rules and regulations governing the running of the school which are also made part of the annexure. The main rules and regulations are that the school works for all seven days a week and remains closed only on national and public holidays; that the school year is divided into four terms of three months each; that students who are attending instrumental music classes would be taught individually by the teachers; that dance students would be taught in groups; that there would be workshops/lecture demonstrations arranged for the benefit of the students from time to time and that attendance in such workshops would be compulsory; that students who report late by more than 20 minutes may be marked absent and so on. There is also a rule that th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as observed as follows at page 615 of the ITR; " It is true that by reason of the Finance Act, 1983, the question as to whether any charitable institution is being run with a profit motive or not has lost its relevant. However, the word "charitable" prefixing the word "institution" has to be given its full effect. It appears that one of the principal projects of the petitioner's institution has the object of coaching and preparing the students for appearing in various examinations conducted by the Board of Mining Examination and / or Ml(l) section 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." The above ruling is a landmark ruling wherein the Hon'ble Bihar High Court further ruled that an incidental educational activity or a training program can be considered as education only if such activities are conducted by a recognized educational institution. But if such training program are conducted stand alone by an institu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ral public utility and involved trade, commerce or business, hence, not entitled for exemption under section 11 8. The purpose of citing the above decisions is merely to show that the activities undertaken by the assessee cannot be categorized as 'education' per se, even if the same were being conducted on its own accounts as the element of formal schooling as envisaged therein is competly missing.. The above decisions emphasize the fact that the definition of 'education' in section 2(15) of the Act is much narrow and every kind of training cannot be considered for exemption from taxation by the legislature. The courses run on behalf of its clients spanning for a duration .of 20 hours to 200 hours without any fixed curriculum, criteria, disciple and other essential ingredients of formal education, but merely to teach how to operate a smart phone, or use e-mail, and speak English cannot be considered education Thus from the facts of the case and nature of courses run by it, it is very clear that the assessee cannot place reliance on the decisions referred by it because:- a. It is rendering the services only as a contractor/service provider. b. The content and n....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t making the necessary enquiries. The law as its stands today contains a deeming provision when the order of the assessing officer can be deemed to be 'erroneous and prejudicial' to the interest of revenue. Explanation 2 of section 263 of the Act clearly states that where the order is passed without making inquiries or verification which should have been made or the order is passed allowing any relief without inquiring into the claim then such order shall be deemed to be erroneous in so far as prejudicial to the interest of revenue. The case laws relied upon by the assessee is therefore not discussed as it no longer holds good in view of the extant provisions of law relating to revision of assessment." 8. Thereafter, the learned CIT - exemption held that the assessment order passed by the learned assessing officer accepting the contention of the assessee and allowing exemption under section 11 and 12 ignoring the clear provisions of section 2 (15) of the act and also its first proviso. Thus, the order passed by the learned assessing officer is clearly erroneous within the meanings of provisions of section 263 of the act and prejudicial to the interest of the revenue. He fu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d physically and mentally challenged students at either free of cost or at heavily subsidized rates. Assessee also assists its student in getting job placement after completing certified educational courses offered by assessee. He further referred to Para number 1.9 of his submission to say that the assessee operates centers, which are duly approved by National Skill Development Corporation to conduct various educational courses. He submitted that assessee has around 24 centers located across India and presently they have almost 133 centers across India. He also referred to the various locations of the centers. He submitted that from those centers assessee has educated and trained almost 4.25 lakhs students till date and other completing certified educational courses, which has made those students to get better employment opportunity. Therefore, he submitted that the basic activity of the assessee is helping to the poor, economically backward strata of the society to get them employment by imparting them knowledge/training in centers approved by national skill development Corporation. He further stated that National Skill Development Corporation was founded in 2009 by the Ministry ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the assessee as business since the persons who have contributed have deducted tax at source on the payments made to the assessee and assessee has charged service tax on the fees collected from the students and on those sums. In response to this he submitted the nature of the activities carried on by the assessee are educational in nature, merely for these reasons and cannot be regarded as a business of the assessee. He referred to the decision of the honourable Delhi High Court in India Trade Promotion Organization Versus Director of Income Tax (Exemption) 371 ITR 333. He submitted that as the inherent nature of the activity itself is not the business of the assessee but the 'educational activities' for charitable purposes, merely because service tax has been charged by the assessee or tax has been deducted at source by the payer in compliance with some specific law, the nature of the receipt in the hands of the assessee trust would not become business receipts. He further submitted that these factors are not relevant at all in determining the nature of receipt of the assessee. For this proposition, he relied upon the decision of the coordinate bench in case of a CIT versus Kalyan....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing officer accepted the activities of the assessee as charitable and education in nature. He therefore submitted that the order passed by the learned assessing officer couldn't be considered as erroneous and prejudicial to the interest of revenue as the learned assessing officer has made all the due enquiries which he should have made to grant exemption to the assessee under section 11, 12 and 13 of the income tax act holding that assessee is engaged in educational activities. He therefore submitted that the due enquiries have been made, the learned CIT exemption has not held that what kind of enquiries further the assessee officer should have made in that particular case. He thereafter relied upon the plethora of judicial precedent to submit that where the learned assessing officer based on income tax return of the assessee has made the detailed enquiries, the order passed by him cannot be said to be erroneous and prejudicial to the interest of revenue. He further referred to specifically the decision of the coordinate bench in case of Narayan Tatu Rane versus Income Tax Officer (70 taxman.com 227) with respect to the explanation - 2 inserted in the section 263 of the act. He fur....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... by that Institute in 12 equal monthly installments to assessee foundation for the scholarship. He further referred to clause 5, which deals with the scholarship eligibility of the students. In view of this, he submitted that the above agreement is purely for imparting education to the meritorious students and the TCS has merely provided a grant/donation/ scholarship to the students who are participating in the courses conducted by the assessee. He further referred to page number 82 of the paper book which consist of memorandum of understanding in the month of June 2014 between NIIT foundation, appellant, as well as, CTTL a Tata group company. He submitted that when the memorandum of understanding has been entered in the month of June 2014 could not be part of the record. Even otherwise, he submitted that Tata Company wanted to engage the assessee for setting up and maintaining "Hole- in -the- wall" learning stations for schoolchildren. He further submitted that the total project cost of that educational activity was Rs. 1011608/- which was to be paid by that company to the assessee for conducting these activities. Similarly, he referred to agreement with the Aga Khan foundation d....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to the fact that the assessee should have been put to the notice before any issue in order under section 263 of the income tax act has been passed by the learned CIT - E, he relied on the decision of the honourable Supreme Court of India in C IT Versus Amitabh Bachchan [384 ITR 200] wherein it has been specifically held that though there can be no dispute that while CIT is free to exercise his jurisdiction in consideration of all relevant facts, a full opportunity to contribute the same and to explain the circumstances surrounding such facts, as may be considered relevant by the assessee, must be afforded to assessee by the CIT prior to the finalization of the decision. He submitted that the various contracts/memorandum of understanding as well as the provisions of section 13 (1) (c) of the act were not at all confronted to the assessee either in the original show cause notice or during the course of revision proceedings. On the issue of the want of natural justice, he submitted that the law always provides assessing officer as well as the assessee to respond to the assessing officer in the process ensuring that both the parties have many opportunities of being heard and there is ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... his order. He submitted that such discussion can only be made, or generally are made by the learned assessing officer, when the assessee is denied certain benefits or they are not satisfied with the explanation given by the assessee. When the learned assessing officer is satisfied with the detailed explanation given by the assessee, there is no need of mentioning the same in elaborate manner in the assessment order itself. Even otherwise, that does not make the order passed by the learned assessing officer erroneous. 16. He also submitted that the order is not at all prejudicial to the interest of revenue. He submitted that even if the activity of the assessee is regarded as business activity, then the losses incurred by the assessee in earlier years would be eligible for set off against that income and that may be determined for the current year and accordingly there would not be any loss of revenue in the current year. He submitted that appellant has been incurring losses from the activities to last year aggregating to ı 3.6 crores which is never been claimed by the assessee. He referred to page number 622 of the paper book volume 2. He therefore submitted that if in this ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f, trade, commerce or business and accordingly the surplus from these activities should be brought to tax. This is further because of the reason that the receipt from different corporate houses have been subjected to tax deduction at source under section 194J of The Income Tax Act and therefore the nature of these receipts are in commercial in nature. He further referred to the order of the learned CIT Exemption wherein the reliance was placed on the decision of the Honourable Supreme Court in sole trustee Lok Shiskhsan sansthan Trust wherein it has been held that there should be a process of training and developing the knowledge, skill, mind and character of the student by normal schooling. He submitted that assessee is not conducting educational activities as it should have been and in conformity with the decision of the honourable Supreme Court. Therefore, on this ground no fault can be found with the order of the learned CIT Exemption. He further referred to the argument of the learned authorised representative and submitted that on the two views possible concept the learned CIT Exemption has given detailed answer in para number 11 of the order. He submitted that the assessing ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... per month. Each employed student contributed to increase family income making the family more sustainable. It was further stated that various digital literacy initiatives were also started during the period. Assessee is holding Hole in The wall learning stations were also set up across Telangana, Sikkim, West Bengal, and Bihar to provide free access to technology to children in the age group of 6 - 12 years. The children learned to use this learning stations to improve their understanding of science, IT, English, GK and mathematics apart from this Digital Literacy Program was also launched at several locations to provide teacher training and free basic information technology contained. Further, Delhi, Haryana, Rajasthan, Maharashtra, MP, Tamil Nadu, Telengana, Sikkim, West Bengal, and Bihar were the main geographies where the impact was created during this financial year. The assessee further submitted the details of its activity by letter dated 7 November 2016 where the assessee explained its revenue from tuition fees and educational services. The assessee submitted that in respect of fees charged, the assessee is imparting educational services to the economically weaker section ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ring inclusive development in India. It was further explained that assessee has begun a number of programs that will positively influence the underserved society of the country through various educational interventions. It was stated that intent of the assessee is to better understand the education and employability issues at the grassroots level and build sustainable training intervention models of the assessee, explored the back to training in information technology and IT enabled areas for various not-for-profit organizations across the country. It has many prototypes with the intent to build scalable and sustainable models. At the same time assessee is also continuing to expand the areas of impact as they collaborate with the corporate social responsibility in the corporate sector, NGOs and funding organizations. The main objects of the assessee were also explained by submitting the copy of the memorandum of Association and a subsequent amendment. Assessee also supported its activity narrated by the assessee by producing before him the various bank accounts as well as the details of donation. After examination of all these information, learned assessing officer passed an order ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....15) of the act. Thereafter considering the reply filed by the assessee the learned CIT Exemption set aside the order passed by the learned assessing officer holding that assessee is only rendering services as a contractor, service provider, the content and nature of the services cannot be characterized as education in any manner whatsoever, and the nature, duration and the quality of courses run by the assessee are not comparable to the activities of the assessee in any manner. It was further held that the courses run on behalf of its clients for a duration of 20 hours to 200 hours without any fixed curriculum, criteria, discipline and other essential ingredients of formal education, but merely to teach how cooperate a Smartphone or use an email, and speak English cannot be considered as an education thus it was held that the order passed by the learned assessing officer is erroneous as he has not made any such enquiries. 22. The details of the activities conducted by the assessee have been explained above at various places therefore to avoid repetition, they are not reiterated. The assessee has categorically stated that it is primarily operating various education and development ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tions, it does not make the income so received by the assessee as business income, Naturally, the character of outflow from the payer cannot always used in characterizing the inflow of the recipient. The obligation of the assessee of complying with the service tax law also does not make assessee an Institute, which is carrying on business. More so, the opinion of the assessing officer for this year that assessee is carrying on an educational activity is also supported by the assessment history of the assessee where in earlier year also on identical facts and circumstances, the assessee was held to be carrying on educational activities, entitled to deduction/exemption under section 11 and 12 of The Income Tax Act, 1961. Honourable Supreme Court 23. Further , the decision of the honourable Supreme Court in case of The Sole Trustee, Lok Shikshana Trust vs. The Commissioner of Income Tax, Mysore (28.08.1975 - SC) : MANU/SC/0273/1975 It is held that "5. The sense in which the word "education" has been used in Section 2(15) is the systematic instruction, schooling or training given to the young in preparation for the work of life. It also connotes the whole course of scholastic instruc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t, while dealing with the provisions of section 11 read with section 2(15) of the Act which defines "charitable purpose" observed as under (at page 241) : "The sense in which the word 'education' has been used in section 2(15) 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 extended sense, travelling is education, because as a result of travelling you acquire fresh knowledge.......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 normal schooling." The Supreme Court, in the above observations, by referring to the systematic instruction, schooling or training given to the young has only cited an instance in order to indicate as to what the word ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion 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 the recipients. Even if it were to be held that the observations of the Supreme Court would apply only to the schools, colleges and similar institutions as held by the Tribunal, we are satisfied from the nature of the activities of the assessee-Co-operative Union of running colleges and training centres for various courses for the purposes of imparting training and/or awarding diplomas and certificates, that the assessee is an educational institution existing solely for educational purposes and not for the purposes of profit. The question before the Supreme Court, in the above case was as to whether exemption under section 11 read with section 2(15) of the Act could be given to a trust which was at the relevant time publishing newspapers and journals. Section 11(a) ap....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rsons who are fulfilling the criteria of section 13 (3) of the act. Thus, the order of the learned CIT exemptions so far as this issue is involved is not supported by any evidence. 29. Further, it is apparent from the assessment order and the communication made by the assessee during the course of assessment proceedings before the assessing officer it is apparent that all and every aspect of the assessment of the income of the assessee have been examined by him. The learned assessing officer has in detailed look into the activities, object, the functions, nature of receipts, nature of expenditure, applicability of service tax, applicability of tax deduction at source credit and above all the applicability of the provisions of section 2 (15) of the act. Thereafter, the learned assessing officer has granted assessee the benefit of being an educational Institute. It is not required for the assessing officer to examine how the payer of an income has dealt with receipt of an income in the hands of the assessee. This cannot be a general law but in the specific facts of the case where the payment made by the parties are subjected to tax deduction at source under section 194J of the incom....