TMI Blog2010 (10) TMI 502X X X X Extracts X X X X X X X X Extracts X X X X ..... exemption u/s 10(23C)(iv), where there is no such condition, thus DIT(Exemption) otherwise was also not justified in invoking Section 11(1)(c) of the Act - whether it is exemption u/s 10(23C)(iv) or exemption u/s 11, overseas expenses will not come in the way of allowing exemption - Appeals are allowed - ITA No. 1853/Del/2010 - - - Dated:- 18-10-2010 - A.D. JAIN, JUDICIAL MEMBER AND R.C. SHARMA, ACCOUNTANT MEMBER Ved Jain and Rajesh Jain for the Appellant. Mohanish Verma for the Respondent. ORDER PER R. C. SHARMA, AM: This is an appeal filed by the assessee against the order of CIT passed u/s 263 dated 29.3.2010 for the AY 2005-06. 2. Rival contentions have been heard and record perused. Facts in brief are that assessee, The Institute of Chartered Accountants of India, (in short ICAI) is a statutory body established under the Chartered Accountants Act 1949 for the purpose of regulating profession of Chartered Accountants in India. The main object of the ICAI inter-alia includes enrolling the students who aspire to become Chartered Accountants, to impart education/training and also holding coaching classes before the examination so that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O informing that the order has become erroneous on certain issues, the CIT initiated proceedings u/s 263. In the notice so issued, the CIT raised doubts about five issues dealt with by the AO, but finally agreed with three issues and set aside the order of the AO with regard to two issues namely income shown by the assessee as having been obtained for coaching classes were business income and secondly, the expenditure shown by the assessee on overseas relations which consists of traveling, membership fee of foreign professional bodies etc. were without CBDT permission, therefore not deductible. The CIT observed that assessee was earning income and incurring expenditure on coaching classes, whereas Chartered Accountants Act 1949 nowhere provides for such coaching classes. He further observed that running of coaching classes is a business and not a charitable activity and for this purpose, the assessee ought to have maintained separate books of account in respect of coaching classes. As per CIT, since the assessee has not maintained separate books, the profits and gains of the Institute could not be exempt. He accordingly held that AO has failed to examine whether provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to each issue raised by the DIT. After considering the assessee s reply, the CIT agreed with three objections out of total five objections raised by him. On the issue of coaching fee, it was submitted that it is a part of education being provided by the Institute to the chartered accountancy students and as such cannot be called a business and is the main activity of the institute. The overseas expenses are in respect of the activities being carried on by the institute. As per learned AR, there is no change in the facts and circumstances nor in the activities of the institute as compared to the earlier years and each year, the exemption has been granted, therefore on the principle of consistency, no fault can be found in the order of the AO which has dealt with each issue. He contended that certificate of exemption was renewed by the Government of India after thorough investigation at each time as per the conditions stipulated in the second proviso found below Section 10(23C)(via), where before approval all such documents including audited annual accounts of assessee is called for and verified to satisfy the genuineness of the activities of the institute. 6. Shr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uces a certificate from the head of the coaching organization by whatever name designated, set up under the aegis of the Council, to the effect that he has complied with the requirements of the theoretical education scheme . 51A. Course on General Management and Communication Skills and period thereof An articled clerk who has completed the practical training as provided in these Regulations, before applying for membership of the Institute, shall be required to attend a course on General Management and Communication Skills or any other course as may be specified by the Council from time to time and in the manner so specified 72A. Course on General Management and Communication skills and period thereof. An audit clerk who has completed the practical training as provided in these Regulations, before applying for membership of the Institute, shall be required to attend a course on General Management and Communication Skills or any other course as may be specified by the Council from time to time and in the manner so specified. 130. Duties and functions of regional councils (2) The duties and functions of a Regional Council shall be :- (xi) to arrange, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture should be incurred in India, but on the other hand, the condition for exemption is that for the charitable or religious purpose for which the income is applied should be in India. It was further contended that in this case the public utility purpose that was sought to be achieved by sending a Trade Delegation was for the Indian traders and, therefore, the application of income was for purposes in India. The mere fact that the expenditure has been incurred abroad, according to the learned counsel, does not disqualify the Trust from claiming that the expenditure has been incurred for the purposes in India. Citing an example, the learned counsel pointed out that where a Library functioning in India purchases books for it from abroad and makes the payment for such purchases, the purpose for which the expenditure has been incurred would be in India, though the expenditure has been incurred outside India. Citing another example, the learned counsel pointed out that where a charitable hospital purchases equipment from abroad for the purpose of use in the hospital, it cannot be said that the amount spent for purchase of machinery from abroad would not qualify for exempt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see are charitable. It is also not the case of the Revenue that the expenditure incurred by the assessee in Hanover, Germany has not resulted in the benefit being derived in India. In these circumstances, it cannot be said that the expenditure incurred by the assessee in Hanover, Germany, which resulted in and which was for the purpose of attaining the charitable object in India, is not application of income. This view is also supported by the decision of a Co-ordinate Bench of this Tribunal in the case of Gem and Jewellery Export Promotion Council (supra), wherein, it has been held as follows:- "A bare reading of the sub-s. 11(1)(a) does not leave us in doubt that the requirement under s. 11 is for application of income for purposes in India and it does not restrict the application of income within the territory of India. The charitable purpose for which the income should be applied for claiming exemption under s. 11(1)(a) should be in India. In this case, it is not disputed that the trade delegation had been sent abroad for the benefit of the entire trade in India. The exports are made from India and the purpose for sending the delegation was to increase the possibilities of e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. On these reasonings, in the absence of any material change justifying the Revenue to take a different view of the matter and, if there was no change, it was in support of the assessee-we do not think the question should have been reopened and contrary to what had been decided by the Commissioner of Income-tax in the earlier proceedings, a different and contradictory stand should have been taken. We are, therefore, of the view that these appeals should be allowed and the question should be answered in the affirmative, namely, that the Tribunal was justified in holding that the income derived by the Radhasoami Satsang was entitled to exemption under sections 11 and 12 of the Income-tax Act of 1961. 12. In view of the above arguments duly supported by the documents on record, learned AR contended that there was no mistake in the order of the AO and DIT(Exemption) was not justified in setting aside the issue back to the file of the AO for deciding afresh, in terms of discussion made in the impugned order. 13. On the other hand, it was contended by learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the same was taken under scrutiny. During the course of scrutiny assessment, the AO issued detailed questionnaire dated 12.7.2007 which was placed by the assessee in the paper book at page 114, wherein the AO has asked the assessee with regard to instrument by which institute was created, government notification with regard to institution, balance sheet, income and expenditure account of last two years. The AO has also asked the details of activities of the institution and copies of various resolutions passed during the year. Details of all expenditure exceeding Rs. 10,000/- under each head was also asked by the AO. Whether any activity/intended business carried by the assessee and details with regard to various books of account maintained by the assessee was also enquired by the AO. We have gone through the detailed reply filed by the assessee as placed at page 117 giving all the information and explanations sought by AO. The AO has examined all the details and explanations and completed the assessment as on 31.8.2007. The CIT has treated this order as erroneous and prejudicial to the interest of revenue by exercising his powers u/s 263 against which assessee i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such task is entrusted to the revenue. If due to an erroneous order of the Assessing Officer the revenue is losing tax payable by a person, it will certainly be prejudicial to the interest of the revenue. It was observed that the phrase prejudicial to the interest of revenue has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interest of revenue. Further clarifying, it was observed that when an ITO adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views were possible and the Assessing Officer has taken one view with which Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interest of revenue unless the view taken by the Assessing Officer is unsustainable to law. With respect to the reliance placed by ld. CIT DR on the proposition of Delhi High Court in the case of Gee Vee Enterprises (supras) wherein non making of inquiry by the AO was stated to justify the action of CIT u/s 263, it is very pertinent to mention the late ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e gone through the various regulations of ICAI which provide for coaching etc. to the students of chartered accountancy course. These regulations inter-alia provide that no candidate shall be admitted to the professional examination unless he produces a certificate from the head of the coaching organization to the effect that he is registered with coaching organization and has complied with the requirements of the theoretical education scheme. The candidate is also required to pay such fees as may be fixed by the council for such professional education. Before a student is eligible for appearing in the examination, he has to produce a certificate from the head of the coaching organization to the effect that he has complied with the requirements of postal tuition scheme. An articled clerk who has completed the practical training as provided in these regulations, before complying for membership of the institute, shall be required to attend a course on general management and communication skills. Similarly, an audit clerk who has completed the practical training is also required to attend the course on general management and communication skill or any other course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gards the illustration of the Institute of Chartered Accountants of India, although the institute was earlier not running formal classes and there was no geographical proximity when instructions were being imparted through postal tuitions, the Institute of Chartered Accountants of India has always been an institution set up, inter alia for imparting formal education in accountancy and connected subjects in an organized and systematic manner. The institute is accountable as per the provisions of the Act establishing it and the institute also has disciplinary control over the students who are required to be registered with its in the first place and who appear at the exams being held by the institute 15. The Institute as such merely it is receiving coaching fee from students for imparting education, cannot be said to have been carrying on business and accordingly it is not required to maintain separate books of accounts as alleged by DIT(E). The income of the coaching classes earned by the assessee institute is within its objects and its Regulations and further these activities are educational activity within the definition of section 2(15) of the Income Tax Act, 1961 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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