TaxTMI 
TaxTMI 
2023 (3) TMI 920
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....e it to claim exemption of its income u/s 11/12 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....
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....d out from para 4 of the order of the Ld.CIT(A) as under: 1. To promote, co-ordinate 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 fo....
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....xemption under section 11 and 12 of the Act. He further held that the grants received by the assessee from the Government which were project specific should not be treated as part of the income & expenditure account, but were 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 E....
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....f the Act. Accordingly, appellant would be eligible for the benefit of section 11 & 12 of the Act. Therefore, ground of appeal Nos.(i) tc (vi) are hereby allowed. 4.5 However, while giving effect to the appellate order, the A.O. needs 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 the....
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....nd proviso to section 2(15) which provide for general public utility activities carried out by way of business or commerce to not qualify as charitable, was invoked in the present case, and taking note of the fact that Hon'ble Apex Court has dealt with specifically these two issues in a very recent 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 (su....
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....dditional Solicitor General urged that the expression 'education' found place in several provisions of the Constitution. As to what was the precise scope of the expression was examined by this court on several occasions. The ASG relied on the decision of the eleven-judge bench in T.M.A Pai Foundation v State of Karnataka 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 his....
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....e may be, during the relevant previous year; or (iiiad) any university or other educational institution existing solely for educational purposes and not for purposes of profit if the aggregate annual receipts of such university or educational institution do not exceed the amount of annual receipt as may be prescribed or (iv) any other fund or 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 ....
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....at 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). 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. coun....
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....ra-78 reads as under: "78. In the light of the foregoing discussion, the assessees' appeals fail. It is however clarified that their claim for approval or registration would have to be considered in the light of subsequent events, if any, disclosed in fresh applications made in that regard. This court is further of the opinion that since the present judgment has departed from the previous rulings regarding the meaning of the term '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. I....
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....ection 2(15), with which there is no conflict. Carrying out activity in the nature of trade, commerce or business, or service in relation to such activities, should be conducted in the course of achieving the GPU object, and the income, profit or surplus or gains must, therefore, be incidental. The requirement in section 11(4A) of maintaining separate books 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. 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 ....
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....ed exemption. In support, he also relied on the following decisions: i) Radhasaomi Satsang Saomi Bagh Vs. CIT, 193 ITR 321 (SC); ii) CIT Vs. Excel Industries, 262 CTR 261 (SC). 24. The ld.DR on the other hand stated that the ld. counsel for the assessee has misinterpreted/misread the judgment of Hon'ble Apex Court. He contended that the Hon'ble Apex Court had interpreted the term "education" in terms of section 2(15) only as relating to that of imparting in systematic manner by way of schooling 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 Cou....
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....o claim its income as exempt under Section 11/12 of the Act. 29. In view of the recent decision of the Hon'ble Apex Court in the case of New Noble Educational Society (supra) wherein the interpretation of the term "education" was dealt with at length by the Hon'ble Apex Court, arguments were heard by both the parties. Admittedly, the Hon'ble Apex Court in the said decision has interpreted the term 'education' in a narrower sense as imparting formal scholastic learning by way of systematic instruction, schooling or training 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 asses....
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....s the instruction, schooling or training given to the young in 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. Likewise, if you read newspapers and magazines, see pictures, visit art galleries, 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 Co....
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....n the case of LokaShikshana Trust (supra) consistently holding that education is to be given a narrow meaning as imparting scholastic learning in a systematic manner. The Hon'ble Apex Court has not noted any inconsistency in this interpretation of the term "education" by it. Therefore also there arises no question as per the decision of the Hon'ble Apex Court in the case of New Noble Educational Society (supra) for giving it a prospective operation. This contention of the learned Counsel for the assessee is, therefore, also rejected. As for the contention 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. 3....
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....what kind of services or goods provided on cost or nominal basis would normally be excluded from the mischief of trade, commerce, or business, in the body of the judgment. A.4 Section 11(4A) must be interpreted harmoniously with section 2(15), with which there is no conflict. Carrying out activity in the nature of trade, commerce or business, or service in relation to such activities, should be conducted in the course of achieving the GPU object, and the income, profit or surplus or gains must, therefore, be incidental. The requirement in section 11(4A) of maintaining separate books 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 ....