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TMI Blog2022 (4) TMI 964X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of section 2(15) of the Act. The ld. CIT(E) further held that the assessee is rendering service for price with a view to generate profit and the same is not a charitable purpose and accordingly the application of the assessee was rejected. On appeal before the ITAT, vide its order in I.T.A. No. 2565/Chny/2017 dated 11.06.2018, the Tribunal upheld the rejection order passed by the ld. CIT(E). 3. Subsequently, the assessee made a fresh application in Form No. 10A for registration under section 12AA of the Act on 15.03.2018 on the ground that it made amendment in the MOA and therefore, it is entitled for registration under section 12AA of the Act. After considering the application as well as by following the decision of the Tribunal, the ld. CIT(E) rejected the application dated 15.03.2018 in Form No. 10A for grant of registration under section 12AA of the Act. 4. On being aggrieved, the assessee is in appeal against the order of the ld. CIT(E). The ld. Counsel for the assessee has submitted that against the order of the ITAT in I.T.A. No. 2565/Chny/2017 dated 11.06.2018 upholding the rejection of original application in Form 10A filed by the assessee on 02.03.2017 towards g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivity of imparting 'financial education/awareness' is a service for price, to the investor in the field of investments; the assessee's activity is designed in such a way that what it receives in the form of fee from the client for imparting financial education/ awareness is always higher than what is spent for imparting such education/ awareness to the said clients. It was further stated that the entire structure is designed to generate surplus/profit and there is no element of charity in the process, rather it is purely on commercial basis amounting to a commercial activity. 5. It was further stated that the activity of the assessee in the nature of rendering services to the investor community amounts to rendering services to a particular trade/commerce/business. Further, there is a clear price/fee/ consideration fixed for the said services and the quantum of consideration is always on commercial basis. Therefore, the CIT held that the activity of the assessee amounts to an activity of rendering services in relation to trade/commerce/business, for fee/consideration and such activity is specifically excluded from the definition of 'Charitable Purpose' as provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... servation, as a general proposition, may be right, yet the Income Tax Department has been consistently granting registration under Section 12AA of the Act to several companies registered under Section 25 of the Companies Act, which have the main objects more or less as that of the assessee company. Before us, the details pertaining to six such companies have been given, viz., (i) Tejas International Education Institutions; (ii) Invest Karnataka Forum; (iii) MCCIA Electronic Cluster Foundation; (iv) Jain International Trade Organisation; (v) Arya Bhatta Welfare Organisation; and (vi) Financial Literacy Advisory Board of India. Among the six companies, the Financial Literacy and Advisory Board of India does the activities akin to that of the assessee company. We say so upon comparison of the main objects of the said company with that of the main objects of the assessee company. In this regard, it would be relevant to refer to the decision of the High Court of Delhi in ICAI Accounting Research Foundation vs. DGIT (Exemptions) [(2009) 183 Taxman 462 (Delhi)]. In the said decision, the Court examined the case of a company registered under Section 25 of the Companies Act and pointed out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re benefited by the decision of the High Court of Gujarat in the case of DIT (Exemption) vs. Ahmedabad Management Association [(2014) 47 taxmann.com 162 (Guj.)]. The Court considered the decision in Loka Shikshana Trust (supra), as it was argued by the Revenue as is done before us that the activity is not education as explained in Loka Shikshana Trust (supra) and it was held as follows:- 5.4.Now while considering whether the activities of the assessee can be said to be educational activities or not the decision of this Court as well as Honble the Supreme Court is required to be referred to and considered. In the case of Gujarat State Cooperative Union (Supra) it is held by the Division Bench of this Court that mere existence of profit will not disqualify institution for exemption under Section 10(22) of the Act, if sole purpose of its existence is not profit making but is educational activities. In the said decision the Division Bench also considered the decision of Honble the Supreme Court in the case of Lok Shikshana Trust (Supra), which has been relied upon by the Assessing Officer as well as the learned Counsel appearing on behalf of the revenue. In the said decision the Divi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... life, the Supreme Court has indicated that the word education is not used in a loose sense so as to include acquisition of even such knowledge. The observations of the Supreme Court only indicate the proper confines of the word education in the context of the provisions of Section 2(15) of the Act. It will not be proper to construe these observations in a manner in which they are construed by the tribunal when it infers from these observations, in paragraph 17 of its judgment, that the word education is limited to schools, colleges and similar institutions and does not extend to any other media for such acquisition of knowledge. The observations of the Supreme Court do not confine the word education only to scholastic instructions but other forms of education also are included in the word education. As noticed above, the word schooling also means instructing or educating. It, therefore, cannot be said that the word education has been given an unduly restricted meaning by the Supreme Court in the said decision. Though, in the context of the provision of Section 10(22), the concept of education need not be given any wide or extended meaning, it surely would encompass systematic disse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the observation made by the Hon'ble Supreme Court in Loka Shikshana Trust (supra). Considering the correctness of the order of the Tribunal, it was held as follows:- 5. From the nature of the activities of the assessee, it is abundantly clear to us that the assessee is existing solely for educational purposes. It was sought to be contended by learned counsel for the Revenue that having regard to the objects enumerated in clauses (iii), (iv), (vi) and (viii) of bye-law 2 of the bye-laws of the assessee, it cannot be said that the assessee was existing solely for educational purposes. In clause (iii) of bye-law 2, the object enumerated is that the assessee will function as a focusing centre on non-official opinion on various subjects affecting the movement and for representing it in proper quarters. Under clause (iv), its object is to further the spread of the co-operative movement. Clause (vi) refers to the objects of opening circulating libraries, publishing periodicals, books, pamphlets, and literature in general on co-operation, rural development and allied subjects, while clause (viii) refers to running of a printing press. It is difficult to accept the contention of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rative Union is given financial assistance by the Government. The resolutions of the Government dated February 15, 1968, and December 10, 1982 (mentioned in para 8 of the order of the Commissioner of Income-tax (Appeals)) clearly indicate that the grants sanctioned by the Government are for educational purposes. The Government had sanctioned Rs. 15 lakhs for the year 1982-83 which appears to have been raised to Rs. 20 lakhs from the year 1988-89. We are fully satisfied from the nature of the activities of the assessee-Co-operative Union and its objects that the assessee is existing exclusively for educational purposes and not for the purposes of profit. The assessee was publishing two journals : (1) "Sahakar", a weekly journal having a circulation of 6,700 copies, and (2) "Gram Swaraj", a monthly magazine having a circulation of 7,150 copies. Both these journals were published in connection with the activities of the assessee and on the subject of co-operative movement. The assessee was also having an audio-visual unit for exhibiting films on the co-operative movement to educate the masses. It also appears that the assessee maintained a rich library on the subject of co-operation. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o give a narrow or pedantic sense to the word "education". By giving further illustrations of a traveller gaining knowledge, victims of swindlers and thieves becoming wiser, the visitors to night clubs adding to their knowledge the hidden mysteries of life, the supreme Court has indicated that the word "education" is not used in a loose sense so as to include acquisition of even such knowledge. The observations of the Supreme Court only indicate the proper confines of the word "education" in the context of the provisions of section 2(15) of the Act. It will not be proper to construe these observations in a manner in which they are construed by the Tribunal when it infers from these observations, in para 17 of its judgment, that the word "education" is limited to schools, colleges and similar institutions and does not extend to any other media for such acquisition of knowledge. The observations of the Supreme Court do not confine the word "education" only to scholastic instructions but other forms of education also are included in the word "education". As noticed above, the word "schooling" also means instructing or educating. It, therefore, cannot be said that the word "education ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C) (iiiad) and (vi) may be summed up as follows: Where an educational institution carries on the activity of education primarily for educating persons, the fact that it makes a surplus does not lead to the conclusion that it ceases to exist solely for educational purposes and becomes an institution for the purpose of making profit. The predominant object test must be applied - the purpose of education should not be submerged by a profit making motive. A distinction must be drawn between the making of a surplus and an institution being carried on "for profit". No inference arises that merely because imparting education results in making a profit, it becomes an activity for profit. If after meeting expenditure, a surplus arises incidentally from the activity carried on by the educational institution, it will not be cease to be one existing solely for educational purposes. The ultimate test is whether on an overall view of the matter in the concerned assessment year the object is to make profit as opposed to educating persons. 19. It is clear, therefore, that the Uttarakhand High Court has erred by quoting a non existent passage from an applicable judgment, namely, Aditana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en followed by the Hon'ble Supreme Court in Chief Commissioner of Income Tax vs. St. Peter's Educational Society [(2016) 14 SCC 306]. In the case of P.A.Inamdar & Ors. vs. State of Maharashtra & Ors. [AIR 2005 SC 3226], the Constitution Bench while considering various issues pertaining to educational institution, which included issue of fee structure, reservation, admission policies, etc., followed the decision in the case of T.M.A. Pai Foundation vs. State of Karnataka [(2002) 8 SCC 481] and held that every institution is free to advice its own fee structure subject to the limitation that there should be no profiteering and no capitation fee charged, directly or indirectly, or in any form. The Court further held that no profiteering does not imply that the institution cannot have reasonable surplus for future sustenance and expansion of the institute and it was held that up to 15% of profit could be considered and reasonable and legitimate for any charitable organisation. Though the aforementioned decision arose out of a matter concerning educational institutions, it was examining the cases of institutions, which were registered as charitable trust and a profit rate of 15% ..... 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