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Indian Welding Society Versus Director of Income Tax (Exemptions)

2016 (5) TMI 146 - ITAT DELHI

Registration u/s. 12A denied - whether the activities carried out by the assessee are in nature of business ? - Held that:- The applicant-society’s main activity is to provide education in the field of welding which fully complies to the charitable purposes as per section 2(15) because poor and indigent people are allowed to participate in the course, training programmes free of cost for acquiring the skill and getting the employment indirectly improving their living standard; the school drop ou .....

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ed, shall be applied towards the promotion of the objects subject nevertheless in respect of the expenditures of grants or donations made with any specific conditions as may be imposed from the donors. No portion of the income and property of the society shall be paid or transferred, directly or indirectly, by way of dividends, bonus or otherwise or by way of profits to any persons who at any time are or have been members of the society or to any of them or to any persons claiming through them o .....

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Judicial Member And Shri Prashant Maharishi, Accountant Member For the Petitioner : Sh. Niren Gupta, CA For the Respondent : Sh. D.K. Mishra, CIT(DR) ORDER Per H. S. Sidhu : JM This appeal by the Assessee is directed against the Order dated 30.9.2013 of the Ld. Director of Income Tax (Exemptions), New Delhi. 2. The assessee has filed the revised grounds of Appeal which read as under:- i) That without appreciating the facts and circumstances of the case and in law, the Ld. DIT(E) was not justifi .....

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of the Income Tax Act and holding that the activities carried out by the assessee are in nature of business and denying the registration u/s. 12A of the Act. That the DIT(E) be directed to grant registration u/s. 12A of the Act in the interest of justice. iii) That the appellant craves leave to add, to modify, rescind, supplement or alter any of the grounds stated hereinabove, either before or at the time of hearing of this appeal. 3. The brief facts of the case are that the Assessee Society ha .....

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tivities of the Applicant fall under the category of General Public Utility (GPU) and are in the nature of business. It was further held by the DIT(E) that the receipts of the applicant for the period ending as on 31.3.2013 are ₹ 56,08,255/-, the break-up of which is (i) structured course subscription at ₹ 10,71,085/- (ii) Seminar and delegate/participation course subscription at ₹ 9,07,205/-; (iii) supports / sponsorship ₹ 22,24,300/-; and (iv) share income from collabor .....

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0.9.2013 passed u/s. 12AA(1)(b) r.w.s. 12A of the I.T. Act, 1961. For the sake of clarity, the operative portion of the Ld. DIT(E) s order dated 30.9.2013 vide para no. 3 to 7 at pages 1 to 7 is reproduced hereunder:- 3. The applicant society was created on 4th day March, 2002 various aims and objects. Some of them are given below :- i) To promote the advancement of welding/ cutting & Hard facing and related technologies and allied sciences while the society may decided/ from time to time. i .....

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various levels. iv) To promote professional exchange of information/ experience and advanced training within and among various countries across the globe. v) To enter into arrangements for providing member of the society with advice and assistance on all matters connected with the objects covered by this memorandum. vi) To admit any person to be honorary member of the society on such terms and to confer on them such rights and privileges/ as may seem expedient. 3.1 The applicant has filed note .....

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ng materials, venue rent, honorariums to speakers and trainers, etc. There are programmes, which are conducted free or at concessional amounts also depending on the type of people attending the education programmes. Another head of income is 'through advertisement and sponsorship contributions received from entities who wish to participate. A perusal of the details filed by the applicant revealed that it intends to upgrade the skills of the interested people in trade and students in the fiel .....

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ices rendered, which is as under :- S. No. Nature of income Asstt. Year 2011-12 Asstt. Year 2012-13 Asstt. Year 2013-14 1. Structured Course Subscription - 10,71,086/- 2. Delegation / participation subscription 24,21,279 26,59,880/- 9,07,205/- 3. Support / sponsorship 24,22,692/- 10,50,650/- 22,24,300/- 4. Advertisement 1,62,000/- 4,65,200/- 8,10,000/- 5. Share income from collaboration 3,43,607/- 1,16,748/- 5,95,665/- 5.1 After going through the details filed by the applicant, it was noted that .....

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25.9.2013. 5.3 The applicant has submitted as under :- " the assessee society is directly engaged in imparting education in a specialized field of welding technology through a wide spectrum of means and media. A detained note on the activities, structure, method of education and the achievements are enumerated herein below ;- I. Providing Education on Welding & related subjects. i) Conducting Structural Classroom programmes (full time and part time courses on welding) ii) Conducting dis .....

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national Government / Semi Government agencies and programmes /scheme viii) Publication of Course material and books. ix) Library at Tiruchirappalli x) Encouragement to students and recognition xi) National welders skill competition. II. Activities related to relief to poor. III. Role in medical Relief IV. Role in preservation of environment (Including water sheds/ forests and wild life) and preservation of monuments or place or objects of artistic or historic interest. In the light of above, t .....

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ucation. In this regard, a reference is made to the decision of Hon ble Supreme Court of India in the case of Sole Trustee Lok Shiksha Trust vs. CIT (1975) 10 ITR 234 (SC) wherein the Apex Court has explained the meaning of the word education as defined in section 2(15) of the Income Tax Act, 1961 by lying down as follows: "The sense in which the word "education has been used in section 2(15) is the systematic instruction, schooling or training given to young in preparation for the wor .....

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within the meaning of education. 6. The activity of the applicant on the contrary falls in the last limb i.e. advancement of any other object of general public utility, In this regard, a reference is made to the definition of 'charitable purpose' as given in section 2(15) of the Income Tax Act, 1961, which reads as under: 2 (15)"Charitable purpose' includes relief of the poor, education, medical relief, [preservation. of environment (including watersheds, forest and wildlife) a .....

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e of the nature of use or application, or retention, of the income from such activity:] [Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is [twenty-five lakh rupees] or less in the previous year;] 6.1 From the details submitted by the assessee, it is clear that applicant is in fact Conducting full time and part time courses on welding, Conducting distance education in welding with affiliated universities / ins .....

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etween two persons, (iii) Element of reciprocity; and (iv) Profit motive. 6.2 Normally, profit motive test must be satisfied, but it is not final. If there is evidence and material to show that the activities were carried out on sound and recognized business principles and pursued with reasonable continuity, it would constitute business, even if there is no profit motive. In the case of P. Krishnamanon (356 ITR 48), the Apex Court has held that it is not motive of the person doing an act, which .....

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e profit nor is it necessary that the people carrying it on should desire or wish to make a profit. In the case of Customs and Excise Commissioner vs. Lord Fissur (1981 STC 238), it was held that lack of pursuit of profit or earning did not prevent an activity from being a business if if in any other respect it plainly was. 6.3 Keeping in view the facts of the case, the activity being carried out by the applicant is held to be in the nature of 'business' as the applicant. 6.4 Thus, it is .....

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9;s case clearly comes under the proviso to se of the Income Tax Act, 1961 and the applicant is not eligible for registration u/s. 12 of the Act. As its gross receipts are more than the income as stipulated in 2nd proviso to section 2(15), the applicant's applicant for registration u/s. 12A liable to be rejected. 7. In view of the above facts, application filed for grant of Registration u/s. 12A of the Income Tax Act, 1961 is hereby rejected as discussed in detail in para 6 above. 4. Against .....

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lding Society and Procedure For Certification of skilled welders before DIT(E); copy of written submission dated 11.7.2013 filed before the DIT(E); copy of the written submission dated 19.7.2013 filed before the DIT(E); Copy of Written Submission dated 25..2013 filed before DIT(E) and the copies of the financial statements for the assessment years 2011-12; 2012-13 and 2013-14. He relied upon the all the written submissions filed before the Ld. DIT(E) and stated that the applicant is a registered .....

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ty. The Society is engaged in academic education & training in welding and provides continuous education and up-gradation of knowledge in the specialized technical field through lectures, class room training, distance learning programmes, discussions, seminars and field trips etc. for all sections of society. It was further submitted by him that Ld DIT(E) while admitting the fact that the society does engage in educational activity has also stated that it is engaged in skill enhancement acti .....

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it is running regular courses, distance learning courses and entered into MOU with various Universities. The Ld DIT(E) has drawn inference from the fact that a certain fee is charged for such activity which is in the nature of business and therefore does not merit status of charitable activity. The conclusion drawn by the Ld DIT(E) is entirely misplaced, incorrect and not based on complete facts of the case and is bad in law. He further stated that the society does not work for any gains or prof .....

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set aside and applicant may be granted registration u/s. 12A of the I.T. Act. 6. Ld. DR relied upon the order of the Ld. DIT(E) and stated that the activities of the Applicant running skilled enhancement course cannot be considered as imparting education, in view of the decision of the Hon ble Supreme Court of India in the case of Sole Trustee, Loka Shishana Trust 101 ITR 234 (SC). He further stated that the Ld. DIT(E) has passed a well reasoned order on the basis of the relevant provisions of l .....

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ed 06.6.2013, 11.7.2013, 19.7.2013 and 25.9.2013 before the Ld. DIT(E), which he relied and reiterated before the Tribunal during the hearing. In our view, there is a need to discuss the Memorandum of Association in which the aims and objects of the society are mentioned. The following are the aims and objects of the society:- i. To promote the advancement of Welding, Cutting, Reclamation, Hard Facing and related technologies and other allied sciences which the Society may decide from time to ti .....

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ment of various levels. iv. To promote professional exchange of information, experience and advanced training within and among various countries across the globe. v. To enter into arrangements for providing members of the Society with advice and assistance on all matters connected with the objects covered by this Memorandum. vi. To admit any person(s) to be Honorary Member(s) of the Society on such terms, and to confer on them such rights and privileges, as may seem expedient. vii. To approach, .....

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logy directly or in association with other professional organisations having similar objectives. ix. To amalgamate with, affiliate to, become a member of, to subscribe to, and to communicate and co-operate with any other Scientific Society / company and other concerned bodies and promote measures for the furtherance of mutual objects and to promote any Company or Association or Society or Institution for the purpose of acquiring all or any of the property, rights and liabilities of this Society, .....

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to all States and Union Territories in India; and for the purpose of the above objects: a) Establish, maintain, control and manage chapters/ branches of the society in Indian and elsewhere, and to determine the constitution, rights, privileges, obligations and duties of such chapters / branches and when thought fit to modify or dissolve the same. b) enroll members and collect funds by way of annual / one time subscriptions; donations or otherwise from scientific, industrial and other organizatio .....

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es and in such manner as may from time to time be determined by the Governing Council for the Society and its Chapters/ Branches. e) draw, make, accept, endorse and discount cheques, notes and other negotiable instruments on behalf of and for the purposes of the society. f) acquire by purchase, lease or otherwise land and buildings and any other property real or personal, and dispose off such property or any rights and privileges which the Society for the purposes thereof may from time to time t .....

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uch lawful acts, deeds or things as are incidental or conducive to attainment of the objects. 7.1 We also reproduce the relevant portion of the Rules & Regulations of the Society relating to source of income and utilization of funds. i) The main sources of income of the Society will be membership fee, donations, royalties, government grants, savings from conferences / workshops, seminars, course fees, sale of publication etc. ii) The income and property of the Society, however, derived, shal .....

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them provided that nothing herein contained shall prevent the payment in good faith of remuneration to any members or other persons in return for any services rendered to the Institute, as per the directions given by the General Body of the Society. 7.2 In the background of the aforesaid discussions, we find that the assessee society is engaged in education and training through courses, programmes, seminars symposiums. It has also affiliated with universities and international organizations to .....

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ys an immense role in providing technical education and enrichment of knowledge through its interactive programmes and courses without having any commercial or profit motive. It is managed by very eminent and senior officials and personalities from industry and the government, who work at honorary positions and provide their skills and time to the programmes of the society. 7.3 On going through the Provisional Income Expenditure account for AY 2013-14, it reveals that applicant-society hold stru .....

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d free or at concessional amounts also depending on the type of people attending the education programmes. Another head of income is through advertisement and sponsorship contributions received from entities who wish to participate in the programmes. These entities derive the benefit of showcasing themselves to the trained people that go through the programmes and also providing a window to the people regarding the latest In technology and the linkages in the field of welding between the people, .....

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o be used up for what is recognized as charity. The very concept of charity denotes altruistic though and action. Its object must necessarily be to benefit others rather than one s self. Its essence is selflessness. In a truly charitable activity any possible benefit to the person who does the charitable act is merely incidental or even accidental and immaterial. The action which flows from charitable thinking is not directed towards benefiting one s self, it is always directed at benefiting oth .....

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3 inter-alia stated as under:- To promote the advancement of Welding, Cutting, Reclamation, Hard Facing and related technologies and other allied sciences which the Society may decide from time to time. i. To promote the advancement of Welding, Cutting, Reclamation, Hard Facing and related technologies and other allied sciences which the Society may decide from time to time. ii. To facilitate exchange of ideas, information, development work etc. amongst members; by organising lectures, workshops .....

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ties for the benefit of the public at large, in as much as any person desirous of enhancing his knowledge and training in the field of welding may participate in the programmes, classes, etc. held by the Society. To further classify the activity, it is apparent that the activity of the society is classified as imparting education. The Hon ble Supreme Court has further held in the case of "Sole Trustee LOka Shikshana Trust" 101 ITR 234 as under:- 'The sense in which the word 'ed .....

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and character of students by normal schooling. On going through the aforesaid contents of the judgment, it is crystal clear that the applicant-society is actively engaged in the above activity through its systematic class room / distance learning programmes symposiums, seminars etc. However, it also maintains linkages with universities and other educational institutions to collaborate in imparting education on the specialized subject relate to welding and issue certificates to candidates for co .....

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r profits of its members or any specific class of people. The activities carried for the benefit of the public at large and reaches out to the weakest section of the society in skill and capacity building of the youth in the unorganized sector. 7.6 It is pertinent to mention here that the Ld. DIT(E) in the impugned order has specifically mentioned that the it is clear that applicant is in fact conducting full time and part time courses on welding, conducting distance education in welding with af .....

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digent people are allowed to participate in the course, training programmes free of cost for acquiring the skill and getting the employment indirectly improving their living standard; the school drop outs and youth or rural area below poverty line get free training in welding to bring them in the main stream of their life; special programme for disadvantaged women for their own livelihood for welder training. As per the Rules & Regulations of the society the main source of the Society is mem .....

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