TaxTMI 
TaxTMI 
1997 (12) TMI 669
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....essment year 1994-95 the assessee has also claimed exemption of its income under the provisions of section 10(22) of the Income-tax Act. This ground is not taken for the assessment years 1991-92 and 1993-94. Before considering the stand taken by the Revenue authorities it will be useful to consider the objects of the appellant institute. 3. The appellant is a Society registered under the Societies Registration Act, 1860 and it was registered on 1st March, 1984. Clauses I to III of the Memorandum gives the objects of the Society and these clauses read as follows : I. The name of the Society shall be 'Institute of Banking Personnel Selection (IBPS)'. II. The Registered Office of the Society shall be situated in the State of Maharashtra at present at Paper Box Estate, Mahakali Caves Road, Andheri (East), Bombay-400 093. III. The objects for which the Society is established are : (1) to establish and to carry on the administration and management of the Institute of Banking Personnel Selection. (2) to plan, promote and produce for competent, well-qualified and efficient cadres of personnel at various levels to the banks and financi....
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....ments/agencies like Banking Service Recruitment Boards in regard to designing, developing and printing of tests/tools, assessment of answer papers and processing results of examinations for recruitment or promotion at various levels. (4) Undertake to conduct on behalf of banks or financial institutions or other organisations a total partial selection project for recruitment or promotion involving all stages like designing and release of advertisement, receipt and screening of applications, conduct of examination, processing of results, etc. (5) Train persons for (i) developing suitable selection tests/tools through workshops, seminars, etc., and (ii) for conducting examinations comprising objective tests or simulation exercises. (6) Provide consultancy services under its auspices or through its faculty to banks and financial institutions as well as other organisations on matters having a bearing on selection, placement, performance appraisal, promotion, motivation, etc., in order to improve productivity of the services rendered by the banks and financial institutions. (7) Maintain liaison with banking and financial directly or through the personn....
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.... The assessee filed its return along with its audited accounts and the income and expenditure accounts for the respective years showed that the main receipts were : (i) Material fees, (ii) testing fees, (iii) fees from consultancy projects. Substantial expenditure was incurred both on establishment of the assessee society and also in carrying out the objects of the Institute. The following results are culled out from the income and expenditure accounts of the assessee for the respective years : - YEAR ENDED 31-3-1990 31-3-1991 31-3-1992 31-3-1993 31-3-1994 (1)Material fees 1,85,83,480 2,15,85,479 2,10,27,0002, 2,40,04,219 3,21,67,715 (2)Testing fees 81,62,098 75,08,213 73,20,655 75,22,496 88,58,384 YEAR ENDED 31-3-1990 31-3-1991 31-3-1992 31-3-1993 31-3-1994 (3)Fees from consultancy project 9,46,721 2,74,805 8,30,162 15,86,314 20,03,580 (4)Surplus (+) (+)33,81,128 (+)16,32,021 (+) 76,86,111 Deficit (-) -15,13,3....
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....oka Shikshana Trust v. CIT (1975) 101 ITR 234 in which the Apex Court observed as under : "Education connotes the process of training & developing the knowledge, skill, mind and character of student by normal schooling and use of the said word in section 2(15) is not in wide and extensive sense to consider every acquisition of further knowledge as Education." He observed that the assessee persued profit making activities and so it cannot be held as a charitable organisation. In this context he relied upon the decision of the Apex Court in the case of Dharmaposhanam Co. v. CIT (1978) 114 ITR 463 /1 Taxman 61 and also the decision in Yogiraj Charity Trust v. CIT (1976) 103 ITR 777. He also observed that under the provisions of section 28(iii) of the Income-tax Act income derived from rendering specific services to members has to be construed as income and as the fees received by the appellant institute are substantially from rendering services to its own members which are public sector banks, he held that the income of the appellant is assessable under the head "Business". Accordingly he gave deduction only for expenses incurred on establishment and ignored the expe....
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....y vide Notification dated 29-7-1994 for the period 1-4-1992 to 31-3-1995. He has invited our attention to the objects of the assessee and contended firstly that the Institute is entitled for exemption under section 10(22) as it is an educational institution. In this context the assessee invited our attention to a letter dated 13th November, 1996 of Bombay University which may be seen at page 43 of the appellant's paper book and vide this letter the said University has continued the recognisation enjoyed by the appellant institute for guiding students for the Ph.D. (Arts Degree) in the subjects of Psychology & Education. In support of the proposition that the assessee is an educational institute within the meaning of section 10(22), the assessee has relied upon the decision of the Hon'ble Gujarat High Court in the case of Gujarat State Co-operative Union v. CIT (1992) 195 ITR 279. He has also pleaded that the appellant society conducted tests for candidates whose number runs into lakhs and so the surplus derived in any particular year does not prove that the assessee had indulged in profit making activities. He has explained that the assessee charges fees at pre-determined r....
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.... of the trust. The test now is, more clearly that in the past, the genuineness of the purpose tested by the obligation created to spend the money exclusively or essentially on charity'." He has also mentioned that the above observations have been reiterated by the Apex Court and approved in the case of Thiagarajar Charities v. Addl. CIT (1997) 225 ITR 1010/ 92 Taxman 152. In support of his contention that the objects of the appellant society are charitable inasmuch as they involved the advancement of an object of general public utility within the meaning of section 2(15) of the Income-tax Act, the assessee relied upon a number of decisions amongst which the following may be mentioned : Surat Art Silk Cloth Mfrs. Association's case (supra) Incorporated Council of Law Reporting v. Attorney General 47 TC 321 (CA) Hyderabad Stock Exchange Ltd. v. CIT (1967) 66 ITR 195 (AP) Addl. CIT v. Automobile Association of Southern India (1981) 127 ITR 730/ 5 Taxman 77 (Mad.) Addl. CIT v. Delhi Brick Kiln Owners Association (1981) 130 ITR 55/(1980) 4 Taxman 420 (Delhi) Girijan Co-operative Corpn. Ltd. v. CIT (1989) 178 ITR 359/ 44 Ta....
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....ance and efficiency of not only the banking sector but even other public sector undertakings. The main objects are only four as can be seen from clause III of the memorandum reproduced hereinabove. There are ancillary functions which are undertaken to carry out the main four objects. The appellant has charged fees at pre-determined rates and when the number of candidates involved are in the region of 20 to 30 lakhs as explained by the learned counsel for the assessee, there is bound to be surplus or deficit and the existence of a surplus in a few years does not prove that the objects of the society do not advance a general public utility or that the organisation is necessarily a profit seeking commercial organisation. It is true that there is no specific provision in the memorandum prohibiting the appellant society to distribute profits but the dissolution has to be done in accordance with sections 13 and 14 of the Societies Registration Act and under these sections on the dissolution of the society, any surplus remaining shall be given to some other society and no member is to receive profit on dissolution. Further so far the appellant society has not distributed any profits in it....
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....ominant object. In view of the above we have to hold that the assessee is not entitled for exemption of its income under section 10(22) of the Act but is entitled to exemption under section 11 of the I.T. Act as an organisation whose objects advance objects of general public utility within the meaning of section 2(15). We may also mention that the expression "not involving the carrying on of any activity for profit" has been omitted from section 2(15) by the Finance Act, 1983 with effect from 1-4-1983 and the decisions on which the Revenue authorities have relied were interpreting the scope of this expression. As this expression has been deleted from section 2(15) what is to be seen is only whether the objects of the appellant advanced a general public utility or not. As already mentioned, we are of the view that the objects and also the constitution of the society go to indicate that they advance an object of general public utility being the promotion of efficiency in the financial sector of the country. The provisions of section 11(4A) have also been substituted by the Finance (No. 2) Act, 1991 with effect from 1-4-1992 and it is only the substituted provision which are relevant ....