COMMERCIAL COACHING & TRAINING PROVIDING BY REGISTERED SOCIETY

[Dr. Sanjiv Agarwal]

If an institution is a registered society providing education in various fields say, economics, finance, management etc, would it be covered under the definition of commercial coaching or training center or not has been a matter of litigation and there are various rulings on the same. For taxability, we also need to differentiate between coaching and education.

It may be noted that service tax is levied on service of commercial training or coaching and not on a center as such. Also, there are certain exclusions and exemptions in relation to levy of service tax on commercial training or coaching services.

As per Section 65(26), commercial training or coaching means any training or coaching provided by a commercial training or coaching centre.

Two conditions must be satisfied to come within the ambit of this definition, one the institution should be a commercial concern coaching center and two, it should impart any training or coaching. This may relate to imparting certain skills or knowledge or lessons on any vocation or subject. Such centres should provide coaching or training and not running of certain degree or diploma courses. Coaching includes private tuitions, specialised training or teaching or instruction training i.e. the action of teaching a person a particular skill or type of behaviour.

As per Section 65(27), commercial training or coaching centre is a place where training or coaching is provided to trainees. Such a centre should operate on a commercial basis. It would include commercial vocational institutes, coaching centres and private tutorials. Such centres should provide commercial training or coaching for imparting skills or knowledge or lessons on any subject or field with or without issuance of certificate. It also includes coaching or tutorial classes.

Thus, following basic tests must be qualified to be called a commercial training or coaching centre —

(i) it should be an institute or establishment or centre.

(ii) it should provide commercial training or coaching or classes.

(iii) it should relate to imparting some skills or knowledge or lessons.

(iv) service may relate to any field or subject including postal coaching.

(v) it may or may not result in issuance of any certificate.

(vi) it includes coaching and tutorials including postal coaching.

However, the following are specifically excluded -

(i) any centre providing coaching or training in sports

(ii) pre-school coaching or training centres

(iii) any institute or establishment which issues any certificate/diploma/degree or other educational qualification recognised by law.

Taxable service, as per section 65(105) (zzc), means any service provided or to be provided to any person, by a commercial training or coaching center in relation to commercial training and coaching.

For a service provider, it is essential that it should be a commercial training or coaching center which could be either an institute or a   establishment. The words- 'commercial' prefixed in the definition would indicate that such establishment or institute must be commercial in nature, i.e,. with the objective of earning profits by rendering the service of coaching or training, as the case may be.

In Institute of Chartered Financial Analysts of India (ICFAI) v. Commissioner of Customs & Central Excise, Hyderabad-II [2009 -TMI - 32004 - CESTAT, BANGALORE], where ICFAI was registered under Societies Registration Act and were awarding degrees/ diplomas in management, financial analysis and financial management, it has been held that so long as institutions are established and registered under Societies Registration Act for educational purposes, they can not be brought under the scope of commercial training or coaching center .

It is very clear that 'commercial training or coaching' is any training or coaching provided by a commercial training or coaching center . Therefore, what is important is the center which provides training of coaching should be a commercial center. Therefore, the word commercial is very important. It can not be said that the word commercial has no significations. The coaching center or training center should be a commercial one. It was also held that the fact that the institution had got income tax exemption was very relevant and is could not be said that these facts were irrelevant because the income tax is for different purpose. The term commercial has got great significance in interpreting the provisions of law. So long as the institution are registered under the Societies Registration Act for education purposes, they can not be brought within the ambit of commercial training or coaching center. Even the Board's Circular Notification No 59 dated 20.6.2003 Clarifies the point very well.

A similar view was taken by Tribunal in Administrative Staff College Of India (ASCI) v. Commissioner of Customs & Central Excise, Hyderabed - 2009 -TMI - 32750 - CESTAT, BANGALORE. It was held that where an assessee registered as society conducted various programmes for people who were already in service, in a professional manner, in all fields of administration and management, service tax was not leviable  on such services under commercial coaching or training.

The fact that the Income tax Department had given them exemption was very relevant. It could not be agreed with the department that said point was not at all relevant. In that case the legislature could have taxed all training and coaching. They need not have used the word ' commercial' The very fact the word commercial has been used indicates that the word 'commercial' qualifies the commercial coaching or training centre It does not qualify coaching or training. It qualifies the center. As long as the institution is registered under the Societies Registration Act and also exempted from income tax, it cannot be considered as commercial center. Therefore, no service tax was leviable on the assessee under the category of commercial coaching or training.

Similarly, in Magnus Society v. CC & CE [2009 -TMI - 32212 - CESTAT BANGLORE] it was held that so long as the institutions impart education without any profit motive, the same can not be considered as commercial training and coaching. Education may include coaching or training but not vice versa.

 So far as difference between education and coaching or training is concerned, former is of macro and wider horizon where as later has a narrow and limited purpose. The term 'education' has not been defined in either income tax or excise or service tax provisions. Of course, courts have tried to interpret it in few cases. Supreme court in Sole Trustee, Loka Shikshana Trust v. CIT [2008 -TMI - 6453 - SUPREME Court] observed that education connotes the process of training and developing knowledge, skill and character of students by normal schooling. The word 'education' is derived from the latin word 'educa' which means bringing out a latent faculties. 'Education' means the act or process of imparting or acquiring general knowledge, developing the powers of reasoning and judgment, and generally of preparing oneself or others intellectually or mature life; the act or process of imparting or acquiring particular knowledge or skills. It is the result produced by instruction, training or study. Thus, the word has very wide import. [Padmanav Dhury v. State of Orissa, AIR 1999 Ori 97, 99]. The expression 'education' occurring in various articles of the Constitution of India means and includes education at all levels, from the primary school level up to the postgraduate level and professional education. [TMA Pai Foundation v. State of Karnataka (2002) 8 SCC 481, para 450].

According to Aiyar's Advanced Law Lexicon, education means the bringing up, the process of developing and training the powers and capabilities of human beings. It is an act of providing with knowledge.

Coaching or training is a very narrow activity imparting skill in a particular discipline but education is a broader term which is a process of development of personality of body, mind and intellect. The scope of education is broad but training or coaching is in a particular field. In ICAFI case [2009 -TMI - 32004 - CESTAT, BANGALORE], tribunal observed that coaching normally refers to a special teaching or a personalized teaching in certain subjects. Training is generally used to refer to practical instruction or learning proce4ss. Education is the process of overall development of a person. It included moral, intellectual and physical development of a child or a person. It is not restricted to a particular subject and it covers various subjects and arrears. Moreover, as distinguished from coaching, education is not meant for succeeding in an examination or test but for overall development of the student. Education is a term of wide import and encompasses within its ambit the specialized function of training and coaching but this does not make all the three terms synonymous in nature.

According to Circular No 107/ 01/ 2009 dated 28.1.2009, CBEC has clarified that the word "Commercial" used in the phrase is with reference to the activity of training or coaching and not to the nature or activity of the institute providing the training or coaching. Thus, services provided by all institutes or establishments, which fulfills the requirements of definition, are leviable to service tax.

Since the concept of recognition of an educational qualification in India has been dynamic in nature (i.e. the degree/diploma/ certificate an institute or establishment may be recognized by the law at one time and not recognized at other, due to change in legal provisions) the taxability of the courses conducted would depend on the legal status of such institute or establishment at the point of time when such service is provided (i.e. course is conducted). CBEC has clarified that it cannot be said that once recognized an institute or establishment would remain so even in future or was so in the past. 

Many a time private institutes conduct courses and issue diplomas or certificates in collaboration with certain foreign institutes universities. In many cases private enterprises conduct campus interviews of the students of such institutes and offer them jobs. Such certificates/diplomas may be accepted for higher education abroad. However, such a certificate/diploma cannot be called as the one 'recognized by the law for the time being in force' unless such a diploma/ certificate has been specifically recognized by the statutory authorities such as UGC, AICTE. Consequently, such institutes would not fall under the exempted category and would be subjected to tax, as clarified by CBEC.

In view of the above, it can be clearly said that while education is not a subject mater of service tax, if coaching and training is provided by a commercial training or coaching center, service tax will be attracted.