TMI Blog2008 (1) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... ation into the activities of GLIM, the department came to a tentative conclusion that GLIM is a 'commercial training or coaching centre' for the purpose of Finance Act, 1994 (the Act), It appeared to be an establishment providing commercial training or coaching for imparting knowledge or lessons on any subject or field other than sports as defined in clause 26 of Section 65 of the Act. The diploma/degree issued by GLIM is not recognized by law. All India Council of Technical Education (AICTE) has not recognized the institute. It was observed that during the year 2004-05 GLIM had earned excess income over expenditure of Rs.84,41,777/- and had transferred Rs.80 lakhs to its infrastructure project fund. After due process of law, the Commissioner (Service Tax) vide his order in original No. 14/07 dated 30.04.07, concluded that GLIM imparted commercial training or coaching as defined in Section 65(26) of the Act. He found that the institute being a licensee under Section 25 of the Companies Act, 1956 and being granted the status of a public charitable trust under the Income Tax Act, 1961 did not alter the character and classification of service provided by the institute. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holders as dividend or as profit. Therefore, the findings that the institute is engaged in commercial activity is incorrect. The service is intended to tax such institutions which prepared students for Board examinations and competitive examinations such as IIT, civil service examination etc, for whom education is a business. The Commissioner overlooked the instructions in the Board's Circular dated 01/11/06 to the effect that the totality of the activity and object of the existence of the institution determined whether it was a commercial institute or not. The Circular was issued to clarify that IITs IIMs existed to impart education and the fact that they charged fees for assisting recruitment of personnel by companies did not make them commercial concerns and therefore 'manpower recruitment agencies'. Commissioner wrongly held that only public educational institutes which conferred recognized degrees (not profit generating educational institutes) are not to be taxed in terms of the Board's Circular. GLIM imparted similar education as IIMs which are not taxed. An alternate plea is that the institute provided vocational training which is exempted from service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (v) CC, Madras V. Murugapa Chettiar Research Centre -1998 (100) ELT 439 (Tri.) Held. Merely because some fees is charged for the service rendered would not make an institution a commercial institution. (vi) CCE, Mangalore V. Employ Me- 2006 (4) STR 303 (Tri.-Bang.) It was held that though the youth paid some fees to respondents for training that could not be treated as consideration given by a client. This fee was definitely not a consideration given by a client to the man power recruitment agency. A commercial concern meant a concern engaged in any activity with profit motive.Revenue's understanding that profit motive was not necessary for a commercial concern was not at all correct (vii) M/s. ICFAI, Hyd. V. CCE, Hyd. -2007(8) S.T.R. 41(Tri) = 2007-TIOL-811-CESTAT-BANG The Tribunal granted waiver of demands, in one case around Rs.19 crores and in another case above Rs.9.43 crores, among others. The Tribunal took into account the argument that the amount collected as fee by the assessee was funded back for the purpose of education and therefore, there was no commercial coaching service involved. (viii). M/s. Administrative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... OA) of GLIM, the main objects of the company are to establish and run educational institutions, coaching students for various post graduate, graduate, under graduate courses and to promote related research and disseminate knowledge through publications, workshops etc. The MOA also sets out incidental or ancillary objects to the attainment of the aforesaid main objects. These include entering into collaboration with domestic and foreign institutions for facilitating imparting of education, to raise funds by way of subscription from members, donations, grants etc. and investing such funds in shares, securities or other form of movable or immovable properties. As per the MOA no portion of the income or property shall be paid or transferred by way of dividend, bonus or otherwise to members of the company or anybody else through such members. If at all any remuneration or other benefit in money is paid to any member/members, the same will be with the prior approval of the Central Government. Such approval shall be required also for appointment of any member to any office under the company. On dissolution of the company any property available after settling the dues owed by the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng from Rs.9.3 lakhs per annum to Rs.17 lakhs per annum in the last year. The appellants have been closely associated with top management of leading companies in various sectors of industry such as Infosys , Tata Sons Pepsi who interacted with their students, GLIM aims to mould itself into a center of excellence in consonance with its avowed objective. The provision of education by an institution will attract service tax only if the institution is a commercial concern. A commercial concern is run with the sole object of making profit. In the case of the appellants, no individual gains any profit by its operations. The MOA clearly spells out that no income earned by the company shall be paid by way of dividend, bonus or otherwise by way of profit to any member of the company or to anybody else through the members. If any surplus remains when the company is wound up, it shall be transferred to another institution run for the same object as the company or for some charitable object. These facts indicate that GLIM is not a commercial concern and therefore, training or coaching rendered by it is not liable to service tax as 'commercial training or coaching' 5.4. Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... table purpose or to earn profit. Whether profit making is predominant object of the activity, the purpose, though an object of general public utility would cease to be a charitable purpose. But where the predominant object of the activity is to carry out charitable purpose and not to earn profit, it would not lose its character of a charitable purpose merely because some profit arises from the activity. The exclusionary clause does not require that the activity must be carried on in such a manner that it does not result in any profit. It would indeed be difficult for person in charge of the trust or institution to so carry on the activity that the expenditure balances the income and there is no resulting profit. That would not only be difficult of practical realization but would also reflect unsound principle of management. We, therefore, with Beg J. when he said in Sole Trustee Loka Shikshana Trusts case (1975)101 ITR 234, 256(SC) that: (S.C.). if the profits must feed a charitable purpose under the terms of the trust, the mere fact that the activities of the trust yield profit cannot alter the charitable character of the trust. This test now is, more clearly than in the past, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he activity of imparting education, we hold that activity they are engaged in is predominantly one of public utility benefiting eligible youth thereby sub-serving a much larger interest of providing useful talents to the industry and ultimately the economy of the country. No individual is gaining any monetary benefit out of the activity of GLIM. The appellants are housed in a small facility in Saidapet and propose to re-locate to spacious premises and own building to be constructed. They have already allocated most of the savings to achieve this objective. We find that the appellants are acting strictly in accordance with the MOA, imparting quality education which has received well deserved recognition. 6.1 Healthcare and education are social services essential to provide minimum quality of life to the people of a country. As the demand for these services cannot be met by the Public Sector alone, private sector fills the gap. For most of them in the private sector, health education are lucrative business. However, we find that education in the instant case is not a business. The primary object of GLIM is to impart education. Profit making is not its main motive. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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