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2016 (3) TMI 545 - ITAT CHENNAI

2016 (3) TMI 545 - ITAT CHENNAI - [2016] 46 ITR (Trib) 665 - Entitlement to claim exemption u/s. 11 - examination for the course of certified information system auditor and also collected as seminar fees from the participants - Held that:- The course conducted by the assessee may be a source of acquisition of some knowledge by the respective students/persons. But such a course or acquisition of knowledge by the students at the class conducted by the assessee for conducting review and courses for .....

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nal trust” within the meaning of section 2(15) of the Act. Therefore, it is not entitled for exemption u/s.11 of the Act and this income of the assessee is to be assessed as business income under the head ‘AOP’ and it is to be assessed after giving all deduction available o the assessee under the head ‘'Business income”. However, we make it clear that if the cost of fixed assets has been claimed as application of income while claiming exemption u/s.11 of the Act under Chapter-III of the Act in e .....

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BER: This appeal is filed by the Assessee is directed against the order of the Learned Commissioner of Income Tax(A)-17, Chennai dated 30.03.2015 pertaining to the assessment year 2009-10. 2. The assessee has raised the following grounds. 1. For that the order of the Commissioner of Income Tax (Appeals) is contrary to law, facts and circumstances of the case to the extent prejudicial to the interest of the appellant and at any rate is opposed to the principles of equity, natural justice and fair .....

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Appeals) failed to appreciate that the activities carried on by the appellant are charitable in nature and fall within the ambit of charitable purpose as per section 2(15). 6. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the depreciation of ₹ 1,52,1 73/- claimed by the appellant trust was an application of income. 3. The brief facts of the case are that the assessee trust is registered u/s.12A(a) of the Income Tax Act vide proceedings in C.No.2/(100)/2000-01 .....

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trade, business, and commerce. The assessee was asked to substantiate the claim of exemption u/s.11 of the Act. After examining the submissions of the assessee, the ld. Assessing Officer was of the opinion that the objects of the assessee fall under the residuary clause, i.e. advancement of any other object of general public utility and provisions of the section 2(15) are clearly attracted. Further the ld. Assessing Officer opined that the principle of mutuality is not applicable to the assesse .....

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he order of the ld. Assessing Officer. Against this, the assessee is in appeal before us. 4.1 The ld.A.R submitted that the main activities of the assessee trust are conducting review and courses for helping aspiring members/members in preparing for CISA and CISM certification conducted by the parent body, ISACA, USA and also conducting monthly professional education meetings wherein professionals address the participants for sharing knowledge and experience on methodologies, emerging concepts, .....

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of the trust that the trust is established wholly for promoting education in the areas of security, control, audit and research in the Information Technology Environment. He relied on the following decisions. 1.DIT (Exemptions) v The Chartered Accountant Study Circle_[2012]_70 DTR 219_(Mad) 2. The Chartered Accountant Study Circle v ITO in ITA No.l97lIMds/2010 3. The Institute of Chartered Accountants of India and And v DGIT (Exemptions) [2013] 90 DTR 161 (Del) 4.Circular No.11 of 2008 dated 19 .....

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. CIT v Sheth Manual Rancbhoddas Vishram Bhavan Trust_[1992]_198_ITR 598_(Guj) 13. CIT v Raipur Pallottine Society [1989] 180 ITR 579 14. CIT v Institute of Banking Personnel Selection [2003] 264 ITR_110_(Born) 15. DIT (E) v Framjee Cawasjee Institute [1993] 109 CTR (Born) 463 16. DDIT v Lakshmi Saraswathi Educational Trust in ITA No.452 / Mds / 2014 for the AY 2010-11 - Chennai ITAT 17. Apollo Hospitals Educational Trust v DCIT in ITA No.2090 / Mds / 2012 for the AY 2008-09 - Chennai ITAT 18. S .....

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ust in ITA No.1954 / Mds / 2012 for the AY 2009-10 - Chennai ITAT 23. ITO v KGISL Trust in ITA No.1813 / Mds / 2012 for the AY 2009-10 - Chennai ITAT 24. CIT v Rao Bahadur Calavala Cunnan Chetty Charities_[19821_135_ITR 485_(Mad) 25. Devi Karumariamman Educational Trust v DCIT (Exemptions) [2015] 60 taxmann.com 439 (Madras) 26. ITO v The GRD Trust in ITA No.2537 / Mds / 2014 for the_AY 2010-11_- Chennai_ITAT 4.2 The Departmental Representative relied on the order of CIT. 5. We have heard both th .....

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is as follows: "Sec. 2(15) : "Charitable purpose" includes relief of the poor, education, medical relief and the advancement of any other object of general public utility." As per Finance Act, 2008, the said provision was amended adding a 'proviso' w.e.f. 1st April, 2009 as follows : "Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade .....

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2(15) is thoroughly wrong and misconceived. There is no trade or business in the activities pursued by the assessee and will not take it outside the purview of charity and hence, that the proviso added to sec.2(15) of the Act, is not at attracted to the case in hand. He also submitted that the statute, as it stood earlier, had clarified the charitable purpose mentioned in sec.2(15) of the Act, by the words "not involving the carrying on of any activity for profit". By virtue of the exi .....

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the amendment, we have gone through the "Budget Speech" of the Minister for Finance in the Finance Bill 2008, reported in (298 ITR (St.) 33 at page 65 : "180. Charitable purpose includes relief of the poor, education, medical relief and any other object of general public utility. These activities are tax exempt, as they should be. However, some entities carrying on regular trade, commerce or business or providing services in relation to any trade, commerce or business and earning .....

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a measure of taxation. It is also stated that the concept of charity in India is wider, simultaneously adding that, by virtue of the amendment, the position that existed prior to 1st Feb., 1984 has been brought back and that is all. This however will not tilt the balance in any manner in the case of the assessee so as to take the activities outside the charitable purpose, particularly in view of the fact that activities of assessee trust will not constitute any trade or business. According to t .....

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ommercial manner, which cannot be construed as charitable activity. In other words, it was contended by the ld. DR that the assessee carried on activities in a business oriented manner, it will definitely come within the fourth limb of the amended sec.2(15) of the Act, where the prohibition of activity in the nature of trade, commerce or business for any activity of rendering service or any other consideration, irrespective of the nature of the use or application or retention of the income of su .....

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existed earlier to 1st April, 2009, where the assessee has been given exemption under section 11 of the Act and the position available after amendment to section 2(15) of the Act, brought into effect from 1st April, 2009. Yet another important aspect to be noted in this context is that, after the amendment by incorporating proviso to section 2(15), the 4th limb as to the advancement of "any other object of general public utility" will no longer remain as charitable purpose, if it invol .....

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situation contemplated under the second limb [cl. (b)] stands entirely on a different pedestal, with regard to the service in relation to the trade, commerce or business mentioned therein. To put it more clear, when the matter comes to the service in relation to the trade, commerce or business, it has to be examined whether the words "any trade, commerce or business" as they appear in the second limb of cl. (b) are in connection with the service referred to the trade, commerce or busin .....

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ng the words "or any activity of rendering any service in relation to any trade, commerce or business ..................". As it stands so, giving a purposive interpretation to the statute, it may have to be read and understood that the second limb of exclusion under cl. (b) in relation to the service rendered by the assessee, the terms "any trade, commerce or business" refers to the trade, commerce or business pursued by the recipient to whom the service is rendered and in s .....

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e nature of the activities carried on by the assessee is to say that the assessee is carrying on 'advancement of any other object of general public utility'. When that is the case, the assessee is hit by the proviso given under section 2(15). The proviso reads that 'advancement of any other object of general public utility' shall not be a charitable purpose, if it involves carrying on any activity in the nature of trade, commerce or business, or any activity of rendering any serv .....

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an institution, being profits and gains of business, unless the business is incidental to the attainment of the objectives of the assessee and separate books of account are maintained by such trust or institution in respect of such business. In the present case, there is no dispute on the fact that the assessee is carrying on the activities in commercial manner. But, the crucial question is whether running of the activities is a business incidental to the attainment of the objectives of the trus .....

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There cannot be one source for the principal activities and another source for incidental activities. In the present case, it was not possible to conclude that running of business in the form of activity is incidental to carrying on of main objective of the assessee-trust and it is the main business of the assessee. Therefore, the assessee is not protected by the provision stated in section 11 (4A), either. 6. Therefore, looking at the activities carried on by the assessee, we fully agree with t .....

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lls under the purview of Sec.1(15) of the Act so as to say assessee is carrying on the charitable activities. 7. Further, the Apex Court in the case of Sole Trustee, Loka Shikshana Trust vs Commissioner of Income-tax (1975) 101 ITR 234 (SC) had an occasion to consider this issue and the Apex Court found that all kinds of acquiring knowledge may not come within the term education . The Apex Court, in fact, has observed as follows: The sense in which the word education has been used in section 2(1 .....

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apers and magazines, see pictures, visit art galleries, museums and zoos, you thereby 6 ITA No.486/Coch/2013 add to your knowledge. Again, when you grow up and have dealings with other people, some of whom are not straight, you learn by experience and thus add to your knowledge of the ways of the world. If you are not careful, your wallet is liable to be stolen or you are liable to be cheated by some unscrupulous person. The thief who removes your wallet and the swindler who cheats you teach you .....

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schooling. 8. The course conducted by the assessee may be a source of acquisition of some knowledge by the respective students/persons. But such a course or acquisition of knowledge by the students at the class conducted by the assessee for conducting review and courses for helping aspiring members/members in preparing for CISA and CISM certification conducted by the parent body, ISACA, USA and also conducting monthly professional education meetings wherein professionals address the participants .....

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the systematic instruction, schooling or training given to the young is preparation for the work of life. It also connotes the whole course of scholastic instruction which a person has received. The word education has not been used in that wide and extended sense, according to which every acquisition of further knowledge constitutes education. According to this wide and extended sense, travelling is education, because as a travelling you acquire fresh knowledge. Likewise, if you read newspapers .....

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make you wiser though poorer. If you visit a night club, you get acquainted with and add to your knowledge about some of the not much revealed realities and mysteries of life. All this in a way is education in the great school of life. But that is not the sense in which the word education is used in clause (15) of section 2. What education connotes in that clause is the process of training and developing the knowledge, skill, mind and character of students by normal schooling. From the above jud .....

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that kind of knowledge cannot fall within the term education as provided in section 2(15) of the Act. There should be a normal schooling by way of regular and systematic instruction. 10 ITA No.486/Coch/2013 10. The Patna High Court in the case of Bihar Institute of Mining And Mine Surveying vs C.I.T. (1994) 208 ITR 608 (Pat) held that mere conducting of classes for open university / distance education cannot be construed as charitable activity within the meaning of section 2(15) of the Act. The .....

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able prefixing the word institution has to be given its full effect. It appears that one of the principal projects of the petitioner s institution has the object of coaching and preparing the students for appearing in various examinations conducted by the Board of Mining Examination and / or MI(1) section (a)(b) and the said coaching of students in an institute is not, in our opinion, an imparting of education which can be said to be a process of training and developing knowledge and character o .....

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