2025 (5) TMI 1471 - AT - Income Tax

Exemption u/s 11 - training and development receipts etc. - scope of word education - Revenue seeks to contend that training and development fee derived by the Assessee Society are in the nature of business activity in contravention of provisions of sec 2(15) r.w.s 11 12 HELD THAT - The training activities are adjunct to rest of academic activities carried by the Society/Trust/Foundation and such activities cannot be seen in isolation to other academic activities. The trainings are stated to be imparted in a very structured manner with well defined curriculum. The trainings are provided to the candidates for which record of attendances are maintained examinations are conducted and certificates are distributed to successful participants. Noticeably the word education in section 2(15) is not qualified by any restrictions per se. It has been used in its widest amplitude so as to include education of all level to all classes of the society or category. Clearly it is not confined to any section or class of society or any particular type or level of education per se. Meaning thereby any activity which includes or relates to education would ordinarily be for charitable purposes within the meaning of s. 2(15) of the Act. Significantly it is nowhere the case of revenue that the fee collected by way of training and development is not utilised for educational purposes. The training and development carried out by the umbrella entity in the instant case do not merely sub-serve other ongoing academic activities but rather an educational activity in itself. Thus the assessee carries single activity of imparting education. The structured training programme availed year after year by many corporates for developing skills of its employees followed by certifications cannot treated as distinct from other academic activities. It would rather be unrealistic to segregate such activity and treat the same as commercial or business activity. The grounds taken by the revenue that the assessee was carrying on the commercial activity which is not incidental to the objects of the trust and that the assessee has not complied with the provisions of s. 11(4A) by not maintaining separate books of accounts are found to be faulty. A reference has been made to objectives of the AMITY University Uttar Pradesh Act 2005 (the Act of Legislature) whereby the assessee society is required to disseminate advance knowledge by providing such instructions research and extension facilities. The AMITY University Uttar Pradesh Act 2005 also empowers the assessee to grant such certificates and diplomas for providing training to the employees of various corporations based on the method it may deem fit. The assessee grants certificates to the participants of the training programme in sync with it aims and objects of spreading education. The assessee has demonstrated the factual aspects with reference to the AMITY Act. Many companies have availed the training and skill development services offered by the assessee for several years. While conducting such programmes record of attendance are prepared examinations are conducted and certificates are awarded to the participants on successful completion of training programme. Such training programmes thus have all trappings of education . Such trainings are method of continuing education and cannot be considered as business activity. As per the object clauses also providing of training in the normal course is integral part of the main activity of the University/foundation and cannot be viewed separately as business activity of the foundation which can be possibly covered under s. 11(4A) of the Act. As in order to claim exemption under s. 10(23C) it is mandatory that there should be a university or education institution which imparts formal education with certain degree of control over students and should carry standard accountability whereas in order to claim exemption under sec 11 it is sufficient to carry out educational activity without necessarily imparting formal education to the hilt and without necessarily maintaining stricter discipline as expected for educational institutions. The expression education mentioned in sec 2(15) and educational institutions mentioned in sec 10(23C) thus cannot be read in parity. The term education contemplated in sec 2(15) is a broader concept vis-a-vis the educational institution . The assessee is thus eligible for exemption under s. 11(1)(a) of the Act. AO has thus to our mind erroneously applied the purport of the judgments referred by the Hon ble Supreme Court and other Courts. We also observe that mere deduction of TDS by the payer of training fee is not determinative of the character of receipt obtained by the payee. Thus deduction of TDS by the payers ipso facto cannot characterize the receipts as business receipts. CIT(A) in our view has correctly concluded the issue in favour of the assessee.

Summary

The core legal questions considered in the appeals concern the tax treatment of receipts earned by a registered educational society from training and development programmes provided to corporate entities. Specifically, the issues include whether such training fees qualify as income from charitable educational activities exempt under section 11 of the Income Tax Act, 1961 ("the Act"), or whether they constitute taxable business income under section 11(4A) of the Act. Further, the applicability of the principle of consistency in assessment proceedings and the interpretation of the term "education" under section 2(15) of the Act were also examined.

Regarding the nature of the training fees, the relevant legal framework includes sections 2(15), 11, 11(4A), and 12A of the Act. Section 2(15) defines "charitable purpose" to include education, while section 11 provides exemption from tax for income applied for charitable purposes. Section 11(4A) denies exemption for income from business activities unless such activities are incidental to the attainment of the objectives of the trust or institution and separate books of account are maintained. The society was registered under section 12A and notified under section 80G, entitling it to claim exemption under section 11.

Precedents heavily relied upon include the Supreme Court decision in Sole Trustee, Loka Shikshana Trust v. CIT, which clarified that the term "education" in section 2(15) connotes systematic instruction or schooling aimed at developing knowledge, skill, mind, and character by normal schooling, and does not extend to every acquisition of knowledge. The Delhi High Court's judgment in Delhi Music Society v. DGIT was also considered, which dealt with exemption under section 10(23)(c)(vi) and emphasized formal schooling characteristics such as maintenance of discipline and conducting examinations. Other cited cases include Mehta Charitable Prajnalay Trust and Gujarat State Cooperative Union v. CIT, which interpreted the scope of education and charitable purposes.

The Court's interpretation focused on the facts of the instant case, distinguishing it from the cited precedents. The society operates multiple educational institutions, including a university established under a State Legislature Act, which authorizes it to conduct training, grant certificates, and diplomas. The training programmes provided to corporate employees were structured with defined curricula, attendance records, examinations, and certification. The Court noted that these features align with the concept of "normal schooling" and systematic dissemination of knowledge, thus falling within the ambit of "education" under section 2(15).

Key evidence included the society's memorandum of association outlining objects related to education, training, seminars, and research; registration under section 12A and notification under section 80G; the university's legislative backing under the Amity University Uttar Pradesh Act, 2005; and operational details of the training programmes such as attendance and certification. The society's claim that the training activities are integral to its educational objectives and not separate commercial ventures was supported by these facts.

The Court applied the law to the facts by observing that the training fees are derived from activities incidental and integral to the society's educational purpose. The training is not a separate business activity but part of the overall educational mission. The Court rejected the Revenue's contention that the deduction of tax at source (TDS) by corporate payers on such fees indicates a commercial nature, holding that TDS deduction is not determinative of the character of receipts. The Court further held that section 11(4A) applies only to business activities not covered by the objects of the trust and requires separate books of account, which was not the case here.

On the principle of consistency, the Court noted that in earlier assessment years, the same training activities were accepted as educational and exempt. The Revenue's attempt to take a contrary view in the years under appeal was found to violate the principle of consistency, which, while not strictly res judicata in tax matters, requires that fundamental facts remaining the same should not lead to contradictory assessments. The Court emphasized the need for certainty and predictability in tax administration.

The Court addressed competing arguments by distinguishing the facts of the present case from those in Loka Shikshana Trust, where the activity was newspaper publishing and the educational effect indirect and incidental. The Court highlighted that the society here is a registered university with statutory authority to conduct training and grant certificates, making the training activities directly educational. The Court also pointed out that the Revenue's reliance on the absence of separate books of account and the commercial spirit attributed to the training activities was misplaced given the integrated nature of the society's operations.

In conclusion, the Court held that the training and development fees received by the society are income from educational activities exempt under section 11 of the Act and not taxable business income under section 11(4A). The principle of consistency was upheld, and the Revenue's appeals were dismissed for both assessment years.

Significant holdings include the following verbatim excerpt from the appellate order: "The training provided was properly structured as per the requirement of the organisations, attendance was ensured... By no stretch of imagination, I can presume that the training provided by IIM Bangalore was not education and the receipt from the same was taxable... If the training is provided by a recognised university or college or institute, and that the training was properly structure and attendance was ensured then the same should fall in the category of education."

The Court also articulated the core principle that "the word 'education' in section 2(15) is not qualified by any restrictions per se... any activity which includes or relates to education would ordinarily be for charitable purposes within the meaning of section 2(15) of the Act."

Final determinations on each issue are:

1. The training and development fees earned by the society from corporate entities constitute income from educational activities and are exempt under section 11 of the Act.

2. The activities are integral to the society's objects and not separate business activities; thus, section 11(4A) is not applicable.

3. The principle of consistency applies, and the Revenue cannot adopt a contradictory stance in successive assessment years without new material.

4. Deduction of TDS by payers on such fees does not alter the nature of the receipts as educational income.

5. The society's registration under section 12A and notification under section 80G support the claim of exemption, subject to the activities being in line with its objects, which is satisfied here.