AI Drafter 
TaxTMI 
TaxTMI 
2020 (5) TMI 628
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...."the Act") without giving a fair and reasonable opportunity 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 nat....
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....0 as per certificate dated 01.12.2004. It is also registered u/s 12A and recognized u/s 80G (5) (vi) of the Act as per order dated 07.03.2008. It filed its return of income on 23.09.2014 declaring Nil income. 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 lin....
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.....11.2016 at NIL Income. While reviewing the assessment the following observations are made with regard to the quality of assessment framed:- 2. As per the income and expenditure account, the assessee has received an amount of Rs. 1,06,66,236/- as tuition fees. 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) a....
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....s Registration Act, 1860 with the main object promote, support and strengthen education, research, and training of Information Technology and its application in all fields of activity and to collaborate, cooperate and enter into partnerships with Universities, Colleges and Schools for expanding IT education and training 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 ....
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....es rendered by the assessee show that the assessee is merely rending services for fee or profit and is not engaged in charitable activity as defined under section 2(15) of the Income Tax Act. Whether assessee is merely a tool for these entities that may or may not be engaged in charitable activities on their own. b. Terms of the contracts with various clients and documents show that that the payment to the assessee are booked in their respective accounts as 'recruitment 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 ....
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....er it is based on commercial arrangements. The payments are received on the basis of invoices raised on deliverables. The donor does not promise to pay the deficit or the assessee has any obligation to pay back the unutilized amounts. The deduction of tax at source on every payments made to the assessee and issue of invoice including service tax show the actual intent of commercial transaction on the side of both the parties. g. There is no element of charity from the side of the assessee, as it is earning surplus from 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 t....
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....re not approved by any government authority. It has also filed screet shots of the website of NSDC in the paperbook filed showing that its centers are approved. A careful perusal of the screen shots filed by the assessee show that it Is blatantly misrepresenting the fact. In all the screen shots, the NSDC partner, who is authorized to run the course is "NIIT YUVA JYOTI LIMITED", Name of the assessee appears at Building Name and Number. NIIT YuvaJyoti Limited Is one of the related parties of the assessee, which is a commercial company. It is thus clear that it is using logistical and infrastructural support 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 cente....
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....son 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 travelling you acquire fresh knowledge. Likewise, if you read newspapers and magazines, see pictures, visit art galleries, museums and zoos, you thereby add to your knowledge. Again, when you grow up and have dealings with other people, some of 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 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 ....
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.... and admission fee from the students. Teachers have been employed and they have been paid salaries. Expenditure is also incurred on the maintenance of musical instruments. All these are reflected In the income and expenditure account for the years ended 31st Match, 2006 to 31st March, 2010. The petitioner has also filed audited account for these years. In annexure P-5 to the writ petition, the petitioner has annexed a write up of its activities. From this, it is seen that there are S49 students enrolled with the petitioner who are taught western instruments according to their choice such as Piano, Guitar, Electronic Key Board, Wind Instruments, Drums and Vocal. The 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 ....
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....nds of education would not fall within the meaning of section 2(15) of the Act, unless the training, instruction, etc. results in grant of a diploma of degree by a university or a governmental agency. 7.2.5 The Patna High Court in the case of Bihar Institute of Mining & Mine Surveying v. CIT [1994] 208 ITR 608/76 Taxman 455 held that mere conducting of classes for open university / distance education can not be construed as charitable activity within the meaning of section 2(15) of the Act. The Patna High Court, after considering the judgment of the Apex Court in CIT v. Andhra Chamber of Commerce [1965] 55 ITR 722 and in the case of CIT v. Sole Trustee, LokaShikshana Trust [1970] 77 ITR 61 (Mys.) has 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 variou....
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....regular and systematic instruction. Where assessee-trust ran an institution conducting classes in event management which were not recognized by governmental bodies and as a consequence it did not result in conferment of any degree or diploma, said activity did not fall within meaning of 'education' and, thus, assessee's claim for registration under section 12AA was to be rejected. 7.2.9 In the case Information Systems Audit & Control Association vs. Deputy Director of Income-tax (Exemptions) -1, Chennai [2016] 46 ITR(T) 665 (Chennai - Trib.) Where assessee-trust conducted courses and seminars to help its members in preparation of a foreign certification course, assessee's activity was not of education but of advancement of any other object of general 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....
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....s of law. It is also required to be examined whether the loss in the earlier year was due to claim of capital expenditure which is allowable to an exempt institution only. 11. In the last point the assessee has argued that the order is not erroneous in as much as prejudicial to the interest of revenue because, the AO had taken one of the possible stands. When two views are possible, and the AO has taken one of the possible views, with which the CIT does not agree, it will not make the order amenable to provisions of section 263 of the Act. A number of case laws have been relied upon by the assessee in this regard. The argument of the assessee no longer holds good in view of amended provisions of law. It is firstly seen that the AO has not taken a considered view of the matter and merely accepted the return of the assessee without 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 sho....
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....lopment centers run by assessee. He submitted that assessee is primarily operating various educational and development centers in rural areas and slums for all economically backward pockets of semi urban and urban areas across India so as to impart education to the students belonging to the under privileged, economically backward strata of the society with an object to develop their skill so that their employability can increase. He further submitted that assessee has conducted various educational courses in the field of information technology and other communication and vocational courses such as information technology, English, soft skills, business process outsourcing, banking sector, accounting skills, personality development etc. duly developed or approved by the government authorities and/or globally recognized institutions for the poor and 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 ....
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....ily subsidized rates at its centers, the amount of tuition fees received is not adequate to fund the aforesaid charitable activity of the assessee and therefore part of the expenses are funded by donations received from various persons. He further referred that several corporate shave also sponsored various centers operated by the assessee and these corporate sponsors reimburse the cost incurred by the assessee for operating these centers on actual basis. He also referred the details of such contribution and corporate sponsor during the relevant previous year. Therefore, he submitted that as the courses conducted by the assessee are affiliated with the competent authorities and accordingly activities of the assessee would classify as an educational activities. 12. He further submitted that the learned CIT has treated the activity carried out by 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,....
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.... submitted the details of the reconciliation of receipt as per form number 26AS and income and expenditure account along with the income tax return. He also submitted the submission dated 6 June 2016 where the copy of the memorandum of Association of the society containing its objects and note on the history of the activities conducted by the assessee were also explained to the assessing officer. He therefore submitted that the learned assessing officer during the course of assessment proceedings had made specific enquiries about the nature of services and activities conducted by the assessee and assessee has furnished complete details of the activities along with the relevant supporting documents. He submitted that after satisfaction with respect to the nature of activities of the assessee, the income stream of donation and fees, the learned assessing 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 t....
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....tures and they are not at all related as defined under section 13 (1) (C) of the act. He further referred to the various agreements entered into by the assessee titled as Memorandum of Understanding. The first referred such agreement placed at page number 677 of his paper book being memorandum of understanding entered into between the assessee and Tata consultancy services Ltd. He submitted that the Tata consultancy services in order to alleviate the condition of meritorious students hailing from economically backward areas particularly from the Chindwara district of M P. TCS offered scholarship for NIIT foundation students in that region. For that purpose, the memorandum of understanding was entered into. He further referred to clause 2 of that agreement which has scholarship objective and stated that ı 20,000 per annum per student was provided 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 prov....
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.... Certificates, which are for examination conducted by the National Institute of Open Schooling under the scheme of National Digital Literacy Mission of Department of Electronic And Information Technology Under The Ministry Of Communication And Information Technology, Government of India. He therefore submitted that the assessee is engaged in the educational activities in the manner in which it should have been conducted. Thus assessee is eligible for exemption which has been rightly granted by the learned assessing officer under section 11 and 12 of The Income Tax Act holding it to be an society engaged in the Educational Activities falling within the meaning of section 2 (15) of The Income Tax Act. 15. He further submitted a detailed paper book containing 39 judicial precedents supporting his arguments with respect to his various contentions. With respect 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 t....
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....es the learned assessing officer has failed to make. He submitted that merely enquiry, which the CIT exemption thought fit, but which are not warranted in the case of the assessee, or has already been examined by the assessing officer, cannot be a basis on which revision under section 263 can be made. He further submitted that if two views are possible and AO has accepted one of the plausible views, than section 263 cannot be invoked. He referred to the celebrated decision of the honourable Supreme Court in case of Malabar industrial Co Ltd versus CIT [243 ITR 83] to support his contention. On the issue of the assessment order being cryptic, small, not discussing the issues in details, he submitted that the decision of the assessing officer could not be prejudicial or erroneous for the only reason that assessing officer has not made any elaborate discussion in 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....
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....ragraphs, wherein the first paragraph the learned assessing officer has mentioned about the status of the assessee and the objects for which it has been framed. Thereafter the learned assessing officer has computed the income of the assessee granting the assessee exemption under section 2 (15) and 11/12 of the income tax act on holding that activities of the assessee are charitable in nature and within the meaning of section 2 (15) of The Income Tax Act 1961. He further referred to para number 2.1 of the show cause notice issued by the learned CIT Exemption which state that in case of the activities of the assessee do not qualify as education and there would be qualifying as general public utility and the proviso to section 2 (15) will be applicable in such cases. The reasons for the same is that assessee 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 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 r....
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....objects of the society and thereafter held that income of the assessee society is a charitable in nature within the meaning of section 2 (15) of The Income Tax Act, 1961. Thereafter he computed the income of the assessee and assessed at Rupees Nil. During the course of assessment proceedings, assessee submitted a letter dated 24 November 2016 wherein the assessee explained its charitable activities conducted during the financial year. Assessee submitted that during the financial year 2013 - 14, 15656 underprivileged youths were trained by in NIIT foundation across various streams such as information technology, English, soft skills, BPO, retail sector banking sector and service sectors. The training was conducted at NIIT foundation run centers and NGO partner centers. Out of the youths that were eligible for job, 2903 students were placed with an average income of ı 6800 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, We....
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....rent, repairs and maintenance activities as well as administrative expenses. On 3 September 2016, assessee also explained before the assessing officer the reconciliation of revenue as per the service tax returns filed by the assessee and the revenue disclosed in the income tax returns. Further, the reconciliation of receipts as perform number 26AS and receipts shown in the income tax return are also reconciled with the tax deduction at source made by the corporate. As per page number 283, which is part of the submission made by the assessee before the assessing officer, as per communication dated 6 June 2016, assessee submitted brief note indicating the history of the appellant. Assessee explained that assessee is 'not for profit education society' set up by the promoters of NIIT in 2004 in the name of NIIT education society to reach the unreached, uncaring and unattended for ensuring 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 emp....
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.... education laid down by the honourable Supreme Court in case of Sole Trustee, Lok shiskhasn Sansthan case does not qualify as education. It was further alleged that the assessee has received fees for training students, which is in the nature of trade, commerce or business, and accordingly the surplus from these activities should be brought to tax. The learned CIT exemption was also guided by the fact that the receipt from different corporate houses has been subjected to tax deduction at source under section 194J and therefore the nature of these receipts are commercial in nature. Further it was also point of concern for CIT exemption that the turnover from services reported to the service tax authorities amounted to ı 38665028 and assessee has also paid service tax on the fees etc received from the students making it a further strong case for invoking the proviso to section 2 (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 a....
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....s are compared to the market rate are very low, the deserving student are granted concession or subsidy. The assessee has also conducted various approved educational and vocational courses in government schools, community schools and centers operated by other NGOs. The digital literacy Mission trainings are also provided to the children. The work of the assessee has been accredited by various organizations by awarding recognition and awards. Assessee has also shown various newspaper reports, which clearly shows that assessee, is providing education. Merely because of in certain projects there is a deficit, which deficit is reimbursed by the several corporate entities by spending out of their corporate social responsibility funding to the assessee does not make assessee an non-educational Institute. If, for any reasons, those entities have deducted tax at source due to their own tax obligations, 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....
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.... the income-tax officer shows that the trust at present is carrying out only the last mentioned object of the trust, namely, supplying the Kannada speaking people with an organ or organs of educated public opinion." 25. In fact the activities carried on by the assessee squarely fits into the above criteria. 26. Further honourable Gujarat High court in 195 ITR 279 has analyzed and interpreted the decision of the Honourable supreme court of Sole Trustee Lok shiskshan sansthan ( Supra) as under :- "It appears to us that the decision of the Tribunal which seeks to rest it on the observations made by the Supreme Court in LokaShikshana Trust's case [1975] 101 ITR 234, 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 LokaShikshana Trust's case [1975] 101 ITR 234, 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 (at page 241) : "The sense in which the word 'education' has been used in section 2(15) in the systematic instructio....
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.... such acquisition of knowledge. The observations of the Supreme Court do not confine the word "education" only to scholastic instructions but other forms of education also are included in the word "education". As noticed above, the word "schooling" also means instructing 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 provision of section 10(22), the concept of education need not be given any wide or extended meaning, it surely would encompass systematic dissemination of knowledge and training in specialised 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 for 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 particul....
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....contention canvassed on behalf of the Revenue by the learned advocate, Mr. Shelat, that because the assessee was having income from its properties, it was not qualified to get exemption under section 10(22) of the Act." [Underline supplied by us] 27. If the activities carried out by the assessee are visualized in the context of judicial precedent as relied upon above, it is apparent that assessee is not engaged in any other activity other than education. Therefore, for this reason, we are of the view and hold so that the learned CIT - E is not correct in holding that assessee is not engaged in educational activities covered under section 2 (15) of the Act. 28. No evidences have been put forth by the revenue except merely an allegation of violation of the provisions of section 13 (1) (C) of the act. It has not been shown that how the assessee has conferred any benefit directly or indirectly on any person. It is also not shown that who are those persons 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....