TaxTMI 
TaxTMI 
2023 (3) TMI 920
X X X X Extracts X X X X
X X X X Extracts X X X X
....12 of the Act. The Assessing Officer(AO) holding that the assessee was carrying out activity of "general public utility" as defined under section 2(15) of the Act, and since the activity was carried out in the form of trade, commerce and business, the first proviso to section 2(15) of the Act was attracted, disqualifying it as charitable activity, thus in turn disentitling its claim to exemption of income under section 11 of the Act. The Ld.CIT(A), on the other hand disagreeing with the AO and holding that the activity carried out by the assessee qualified as "education", in terms of section 2(15) of the Act, and thus entitling the assessee to claim exemption under section 11 of the Act. 3. Common issue being involved in all the appeals, they were all heard together and are being disposed off by a common consolidated order. 4. Our attention was first drawn to the facts relating to the activities carried out by the assessee as noted in the orders of the authorities below. In this regard the ld. counsel for the assessee first took us to para 5 page no.3 of the assessment order, where brief profile of the assessee was submitted to the AO during assessment proceedings, which reads as....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ate and exhibits interaction of science, technology, energy and environment with human life through personal experience-bases presentation. 2. To design, develop or undertake Exhibitions and demonstration or Equipments and educational technology on the frontier area of science and technology irrespective of race, cast, religion, community or social status. 3. To organize or to assist in organizing training course, workshops, seminars, conferences, discussions, dissertation, consultancy services and exhibitions, independently or in association with other agencies for the benefit and development of science & technology irrespective or their race, caste, religion, community or social status. 4. To undertake and encourage research and training for (i) Ecologically sustainable development (ii) Conservation, evaluation and utilization of the nation's Biological wealth. (iii) Development and harnessing alternate sources of energy; (v) Technology development, information dissemination and science communication. 6. The ld. counsel for the assessee thereafter contented that the assessee had claimed is activities to be in the nature of imparting education as defined under s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to be treated as capital receipts; that these grants included in its income & expenditure had to be excluded from the same, as also expenditure incurred by the assessee from the said grants, for the purpose of arriving at the surplus earned by the assessee from its charitable activities, and its eligibility to grant of exemption in terms section 11 of the Act. With this finding, he directed the AO to verify the facts and recompute income of the assessee. The relevant finding of the ld.CIT(A) in para 4.4 and 4.5 of the order are as under: "4.4 During the appellate proceedings appellant has submitted details of activities carried out by it over the years. Appellant was also informed that in IMAX Theater only scientific education films are shown, it has developed Hall! Of Science which is a big open laboratory, where visitors are involved in in hand on experience of various Science Exhibits and discovery process. There are experience of various Science Exhibits and discovery process. There a-e exhibits on science of light, vision, mirrors, cinematic, mathematics, sound, fluidic energy etc. Energy Park, LED display screen, Earth Station, Planet Earth, Amphitheatre and all other activ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eds to look at the computation of come submitted by the appellant. It is seen from the submission of the appellant that appellant is receiving project specific grants from Government of Gujarat as well as Central Government^ These projects Specific grants cannot be part of income and expenditure account but will have to be considered as capital receipts because funds have been given by the donor with a specific direction with regard to its utilization. Thus, project specified grants cannot be part of revenue receipt and will have to be considered as capital receipt. These types of grants would be eligible for deduction u/s.11(1)(d) of the Act. Appellant is also not eligible to claim any expenditure out of these grants incurred for the purpose of creation of fixed assets as application of income. It would also not be eligible to claim depreciation on these assets as application of income. During the appellate proceedings appellant has accepted these principles for computation of income of exempt person and it had filed revised return of income. In the revised computation of income the quantum of accumulation u/s.11(1)(a) has gone down. This is mainly for the reason that in the earli....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cent judgment in the case of New Noble Educational Society, CCIT, (2022) 448 ITR 594 (SC) and in ACIT Vs. Ahmedabad Urban Development Authority, (2022) 449 ITR 1 (SC), giving a narrow meaning to the term education as imparting formal scholastic learning and giving guidelines for determining the commercial nature of General Public Utility activities respectively, both the parties, more particularly, the Ld. Counsel for the assessee was directed to demonstrate before us as to how the findings of the ld.CIT(A) were in consonance with the law as laid down by the Hon'ble Apex Court in this regard in the two cases, as noted above by us. Accordingly, the ld. counsel for the assessee proceeded to make his arguments before us. The ld. counsel for the assessee began by stating that first limb of his argument was that the decision of Hon'ble Apex Court in the case of New Noble Educational Society (supra), defining the term "education" as including only imparting formal scholastic learning i.e. in the narrower meaning of the term, as opposed to wider interpretation given by the ld.CIT(A), was rendered in the context of section 10(23C)(vi) of the Act where the term "education" was interpreted ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ataka where it was held that 'education' under the Constitution meant and included education at all levels, from primary school up to postgraduation, and also included professional education. The expression 'educational institution' meant institutions which imparted education as understood in the formal sense of schooling. It was further elaborated that having regard to the demographics and the geographical spread of the nation, as well as the challenges faced by the country, it was beyond the economic capacity of the State to provide free or subsidised universal education at all levels. Therefore, per force private educational institutions had to function to fill the needs of students. Within that framework, the role of charitable institutions in imparting education was vital and prominent. Imparting education had always been regarded as head of charity. Tracing the history of the law relating to charities, the learned ASG submitted that even in England, charitable objects included imparting education.10 It was submitted that various articles in the Constitution, namely Article 21-A, Articles 28 to 30, Article 41, Articles 45- 46 and Article 51 (k) as well as several entries in th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r institution established for charitable purposes which may be approved by the prescribed authority, having regard to the objects of the fund or institution and its importance throughout India or throughout any State or States; or (v) any trust (including any other legal obligation) or institution wholly for public religious purposes or wholly for public religious and charitable purposes, which may be approved by the prescribed authority, having regard to the manner in which the affairs of the trust or institution are administered and supervised for ensuring that the income accruing thereto is properly applied for the objects thereof; (vi) any university or other educational institution existing solely for educational purposes and not for purposes of profit, other than those mentioned in sub-clause (iiiab) or sub-clause (iiiad) and which may be approved by the prescribed authority; or..." 15. Referring to the same, he pointed out that the said section related to educational institution existing solely for the education purpose. 16. Thereafter our attention was drawn to the analysis and conclusion by the Hon'ble Apex Court at page no.623 of the said ITR para 32 onwards, pointi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 34. The issues which require resolution in these cases are firstly, the correct meaning of the term 'solely' in Section 10 (23C) (vi) which exempts income of "university or other educational institution existing solely for educational purposes and not for purposes of profit". Secondly, the proper manner in considering any gains, surpluses or profits, when such receipts accrue to an educational institution, i.e., their treatment for the purposes of assessment, and thirdly, in addition to the claim of a given institution to exemption on the ground that it actually exists to impart education, in law, whether the concerned tax authorities require satisfaction of any other conditions, such as registration of charitable institutions, under local or state laws. 17. The ld. counsel for the assessee then took us at page no.647 of the ITR, para 76 which contained conclusion of the Court in the order, more particularly pointing out to (a) and (b) of the conclusion as under: a. It is held that the requirement of the charitable institution, society or trust etc., to 'solely' engage itself in education or educational activities, and not engage in any activity of profit, means that such inst....
X X X X Extracts X X X X
X X X X Extracts X X X X
....m 'solely', in order to avoid disruption, and to give time to institutions likely to be affected to make appropriate changes and adjustments, it would be in the larger interests of society that the present judgment operates hereafter. As a result, it is hereby directed that the law declared in the present judgment shall operate prospectively. The appeals are hereby dismissed, without order on costs." 20. The ld. counsel for the assessee alternately contended that even if activities of the assessee qualified as general public utility activities as contended by the Revenue, first proviso to section 2(15) holding general public utility carried in a commercial manner as not qualifying as charitable activities, was not attracted in the present case. In this regard, he drew our attention to the decision of the Hon'ble Apex court in the case of Ahmedabad Urban Development Authority (supra) wherein he contended that Hon'ble Apex Court laid down guidelines for determining whether activities carried out were commercial in nature or not. The ld. counsel for the assessee in this regard first drew our attention to para-4of the order wherein primary question before the Hon'ble Court, as being t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o section 2(15), has not been breached. Similarly, the insertion of section 13(8), seventeenth proviso to section 10(23C) and third proviso to section 143(3) (all with retrospective effect from 1-4-2009), reaffirm this interpretation and bring uniformity across the statutory provisions. E.I. In the present batch of cases, non-statutory bodies performing public functions, such as ERNET and NIXI are engaged in important public purposes. The materials on record show that fees or consideration charged by them for the purposes provided are nominal. In the circumstances, it is held that the said two assessees are driven by charitable purposes. However, the claims of such non-statutory organisations performing public functions, will have to be ascertained on a yearly basis, and the tax authorities must discern from the records, whether the fees charged are nominally above the cost, or have been increased to much higher levels E.2. It is held that though GSI India is in fact, involved in advancement of general public utility, its services are for the benefit of trade and business, from which they receive significantly high receipts. In the circumstances, its claim for exemption cannot ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ooling etc. The narrower interpretation of term "education" was given by the Hon'ble Apex Court in terms of its definition as charitable purpose in section 2(15) of the Act, which is clearly evident from the order of the Hon'ble Apex Court. Therefore, the contention of the ld. counsel for the assessee that interpretation of the term "education" by the Hon'ble Apex court in the decision of New Noble Educational Society (supra) was rendered in the context of use of term "education" along with "solely" in terms of section 10(23C)(vi) of the Act was not correct. 25. As for the issue, reference by the ld. counsel of the assessee on the guidelines laid down by the Hon'ble Apex Court for determining whether an activity qualifies as commercial activity being general public utility in terms of first proviso to section 2(15), he fairly conceded that Revenue authorities in the present case had not evaluated the issue in terms of the said guidelines. He contended that the contentions of the ld. counsel for the assessee that specific purpose grants beexcluded for the purpose of determining surplus generated bythe assessee during the year, was not correct.Thatitwas only capital grants which wer....
X X X X Extracts X X X X
X X X X Extracts X X X X
....raining given to the young. The arguments of the learned Counsel for the assessee before us is that this narrow interpretation was given only in the context of interpreting it for the purposes of Section 10(23C)(vi) of the Act which exempts income of Institutions existing "solely for the purpose of education", which was the issue before the Hon'ble Apex Court. The learned Counsel for the assessee has argued that the term "education" has not been interpreted by the Hon'ble Apex Court for the purposes of Section 2(15) of the Act defining charitable purpose to include education also. 30. We are not in agreement with this contention of the learned Counsel for the assessee. The Hon'ble Apex Court in fact has, in a very clear terms, given narrow meaning to the term 'education' for the purposes of Section 2(15) of the Act only. In its findings, as reproduced above, the Hon'ble Apex Court has categorically held that education means imparting formal scholastic learning for the purposes of qualifying as charitable purposes under Section 2(15) of the Act. The Hon'ble Apex Court has referred to its decision in the case of T.M.A Pai Foundation, wherein the meaning of the word "education" as sc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ries, museums and zoos, you thereby add to your knowledge....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 formal schooling." Thus, education i.e., imparting formal scholastic learning, is what the IT Act provides for under the head of "charitable" purposes, under Section 2 (15)." 31. We have also noted from the above, that in the case of LokaShikshana Trust (supra) on which the Hon'ble Apex Court has relied, museums were said to be imparting education in a wider sense and not in the narrower sense of systematic schooling or imparting instruction. Therefore, we reject the contentions of the learned Counsel for the assessee that the decision of the Hon'ble Apex Court in the case of New Noble Educational Society (supra) did not apply to the facts of the present case; and accordingly we hold that in view of the narrow and restricted meaning given to the term "education" as used in Section 2(15) of the Act, the activities carried out by the as....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion of the Ld. Counsel that its activities has consistently been held to be in the nature of imparting education in the past which position cannot now be disturbed, the same also merits no consideration since the nature of the activity being carried out has been determined in accordance with the interpretation by the Hon'ble apex court whose interpretation of law is to read as the law always was. 33. In view of the above, we hold that the assessee is not engaged in the charitable activity of imparting education as defined under Section 2(15) of the Act and the order of the learned CIT(A) holding so is, therefore, set aside. 34. Taking up the alternate contention of the assessee that its activities, if not in the nature of imparting education, they qualify as general public utility activity as held by the Assessing Officer also; but to exclude it from the definition of charitable purpose as defined under Section 2(15) of the Act invoking first and second proviso to the said section stating that all general public utility activities carried out in a commercial manner are not to be treated as charitable activities, the learned Counsel for the assessee has contended that the Hon'ble....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of account is also in line with the necessity of demonstrating that the quantitative limit prescribed in the proviso to section 2(15), has not been breached. Similarly, the insertion of section 13(8), seventeenth proviso to section 10(23C) and third proviso to section 143(3) (all with retrospective effect from 1-4-2009), reaffirm this interpretation and bring uniformity across the statutory provisions. 35. His contention in this regard is that the Assessing Officer has not treated the activities carried out by the assessee as commercial in the light of these guidelines, but merely by noting that the assessee was collecting fees for various activities carried out by it and was generating surplus, he held that the activities of the assessee qualified as being commercial in nature. His request before us, therefore, was that the matter may be restored back to the Assessing Officer to determine its character as commercial or not in the light of the guidelines laid down by the Hon'ble Apex Court in the case of AUDA (supra). The learned DR has fairly admitted before us to the fact that the Assessing Officer has not arrived at his finding of the assessee's activities being commercial in n....