2017 (1) TMI 1512 - AT - Income Tax

Eligibility for exemption u/s 11 - whether trust cannot be construed as engaged in educational activity? - Held that - Education as provided under Section 2(15) of the Act cannot be construed acquisition of knowledge by anyone. An individual may acquire knowledge every day and every minute in participating in some programme or activity that cannot be construed as education at all. Education is a formal schooling which results in confirmation of a degree or diploma by a Government or a Government agency or a University established under law. Acquisition of all kind of knowledge cannot be construed as an education at all. Therefore preaching of ideology by the trust cannot be construed as engaged in educational activity. The assessee s trust cannot be construed to be an educational trust. The main object of the trust is to provide guest houses for those who visit Pondicherry and also preach the ideology of Shri Aurobindo and the Mother. Therefore this Tribunal is of the considered opinion the activity of the assessee is nothing but general public utility. It is not in dispute that if the assessee s object is general public utility proviso to Section 2(15) of the Act would come into operation. It is also not in dispute that the annual receipt exceeded the limit prescribed in proviso to Section 2(15) of the Act. Therefore the assessee is not eligible for exemption under Section 11 of the Act. Hence this Tribunal do not find any reason to interfere with the orders of the lower authorities. Accordingly the same is confirmed. - Decided against assessee.

Summary

Issues:
Interpretation of the object of the trust under Section 2(15) of the Income Tax Act, 1961 for exemption under Section 11.

Analysis:
The appeal involved a dispute regarding the classification of the trust as an educational trust or a general public utility trust under Section 2(15) of the Income Tax Act, 1961. The assessee argued that the trust's objective of promoting the teachings of Shri Aurobindo and the Mother should be considered educational, thus exempt from the proviso to Section 2(15). The Assessing Officer, however, deemed the trust as a general public utility due to its guest house operations. The Tribunal analyzed the definitions of education and public utility under the Act. It concluded that the trust's activities did not align with the formal schooling definition of education, leading to the classification as a general public utility trust.

The representatives presented contrasting arguments, with the assessee claiming educational trust status based on promoting teachings and the Departmental Representative asserting general public utility due to guest house operations. The Tribunal acknowledged the trust's guest houses in Pondicherry but emphasized that the preaching of ideology did not meet the Act's education criteria. It highlighted that education involves formal schooling leading to degrees or diplomas, not mere acquisition of knowledge. Consequently, the trust's activities were deemed general public utility, triggering the proviso to Section 2(15) due to exceeding prescribed limits.

The Tribunal's decision upheld the lower authorities' rulings, denying the assessee's exemption under Section 11 of the Act. It emphasized that the trust's primary purpose was providing guest houses and promoting ideology, falling under general public utility rather than educational activities. As the trust's annual receipts surpassed the proviso limit, it was deemed ineligible for the exemption. The Tribunal's confirmation of the lower authorities' orders led to the dismissal of the assessee's appeal, with the judgment pronounced on January 31, 2017, in Chennai.