TaxTMI 
TaxTMI 
2026 (1) TMI 954
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....ntellectual development of its community members, develop Rajputana culture of bravery, devotion to nation and also to provide financial support to intelligent students from poor families and helpless or widow ladies. The appellant society runs educational classes on a two-tier system wherein poor and meritorious students from the community are exempted from payment of fees while other students pay moderate charges to meet institutional expenses and charitable purposes undertaken by the Society. 2. The appellants were issued two show cause notices dated 16.01.2017 and 10.04.2017 for the period April 2011 to March 2015 and April 2015 to September 2016 respectively, alleging nonpayment of service tax under the categories of commercial training or coaching services, renting of immovable property services and short time accommodation services demanding a total Service Tax amount of Rs.3,23,41,057/-. Extended period of limitation in terms of Section 73(1) of the Finance Act, 1994 has also been invoked in the matter. 3. It is the contention of the appellant that they were under the bonafide belief, based on advice of statutory auditors that being a charitable institution and regist....
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....he aspect of demand of service tax along with interest and invocation of penalty on them would not arise. 7. Learned Authorized Representative for the department submits that the aforestated two show cause notices adjudicated vide common order collectively for service tax demand of Rs.3,23,41,057/- were confirmed by the authorities below as the appellant rendered commercial training or coaching services [Section 65(105)(zzc)], renting of immovable services [Section 65(105)(zzzz)], accommodation/short term accommodation services [Section 65(105)(zzzzw)] and miscellaneous income/other taxable services covered under the definition of service under Section 65B(44) of the Finance Act, 1994 with effect from 01.07.2012. He reiterates the findings of the lower authority. 8. The ground for consideration that would thus arise is (a) whether the appellant has rendered service delivery of the aforestated services, and (b) and whether the said services so provided would be non-taxable/exempted as claimed by the appellant in terms of Notification No. 25/2012-ST dated 20.06.2012. 9. We have heard both the sides at length and perused the case records. 10. We note that though the appell....
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....ng of coaching and or training to the community members, preparing them for various competitive examinations like RAS/IAS to be covered in terms of clause (k) (iii) of para 2 (Definitions) of Notification No. 25/2012-ST which deals with education as relating to advancement of educational programs or a skill development relating to abandoned or orphaned or homeless children or physically or mentally abused or traumatized persons or persons over the age of 65 yeas of age, residing in rural areas. As the noticee has not conducted any such educational program or skill development of the type described above any consideration charged/received by the appellant against educational programs would not, according to the authorities, remain outside the scope of taxability for purpose of levy of service tax. They thus concluded that educational activities undertaken by the appellant were outside the scope of charitable functions and the scope of the notification. Learned appellate authority as well as adjudicating authority have dismissed, outright the appellants contentions and have held that the coaching provided by the noticee is a pure act of providing commercial coaching open to everyone ....
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....as also dismissed the argument that the appellant is not charging anything against providing such service and receiving rent as per discretion/desire of the service recipients, who avail of the said facilty. The discretionary nature of payment as also recorded by the authorities is a complete give away as to the true colour and texture of the transaction and certainly goes in to support the argument of charity as canvassed by the appellant. The fact that there is no fixed and organized tariff structure laid out for the purpose, certainly goes in to support the appellant's contentions. Mere showing of such income under 'advance rent received/rent receivable' as recorded in the appellant's financial statements, cannot make their earnings questionable, in the maze of plethora of factual evidence furnished. The authorities hold that such entries corroborated the department's version of rendering of the said services, as stated. We note that this is a very narrow understanding and interpretation of the subject matter, and cannot be maintained. 14. As for the miscellaneous/other taxable income, the adjudicating authority has pointed out that the appellants themselves have not question....
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.... of the revenue, merely because certain fee is charged or amount realized by the appellant as stated in foregoing paras. If no fee is charged or no amounts recovered as reported by way of advance rent etc., how can the various charitable acts be executed. Such amounts realized feed charity. Unless some other considerations are shown to be received towards profiteering or personal gains of the trustees or its members, the charitable cover cannot be blown off. 18. The aspect of charitable activities, which is not in dispute, thus cannot be lost sight of while interpreting the provisions and scope of the definition of services as rendered by the appellant in the aforesaid matter. We have gone through the bye-laws of the society that clearly establishes that all activities undertaken by the trust/the appellant herein are aimed at religious, spiritual and educational upliftment of the Rajput Samaj and the public members. The transactions of the society with its members can at best, under the circumstance, be treated as those indeed rendered between a service provider and a service recipient in the ordinary course but however exempted from payment of tax. That being the case service t....
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....applied is to ascertain the main or primary object of the trust whether is charitable or not. Moreover even under the Income Tax Act, educational activity has been otherwise also treated as for a charitable purpose in certain given circumstances. As long as the test of dominant or main purpose of the primary objective is satisfied, any act of profit would need to be intertwined or wrapped up with or implied in the purpose of the institution or the trust. Another object which in itself may not be charitable but which is merely ancillary or incidental to the primary or dominant purpose would not prevent the institution from being a valid charity, to which effect was also held by the apex court. 21. To disentitle the appellant of any benefit of exemption, as admissible to charitable institutions it is required to be demonstrated that the activity undertaken is propelled by dominant profit motive and is far removed from undertaking charitable work. Thus even if some receipt of income is generated by virtue of any act that is charitable and such income generated is wholly applied for carrying out charitable work it cannot then be reckoned to be of a non-charitable objective. 22. A....
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....itable organization in the exemption notification No.25/2012-ST dated 20.06.2012, the Revenue has lost even the fig leaf of argument of suppression as made out in the matter. 24. We note that the fact of the appellant, being registered as a charitable institution under the Co-operative Registration Act as well as the Income Tax Act, has great force with regard to taxability. The Tribunal's decision in the case of Great Lakes Institute of Management Ltd. v. Commr. of S.T., Chennai [2008 (10) S.T.R. 202 (Tri.-Chennai)] indeed comes to their aid rather quite strongly wherein it was expressly pointed out that as no individual stood to gain from profits of the establishment which were ploughed back for charitable purposes and hence the same was not held to be a commercial enterprise. Facts in the present matter are quite akin. It may also be mentioned in passing, that it is settled law that any delay in furnishing of information sought for by the Revenue from the appellant cannot be a reasonable ground for invocation of extended period. 25. Were the appellant unlikely to succeed on merits of the matter, the fact of harboring of a bonafide belief in the given circumstances certainl....