TMI Blog2022 (11) TMI 194X X X X Extracts X X X X X X X X Extracts X X X X ..... to the main activities. Rather the aforesaid terms of MOU make it appear that the assessee s main activity was to give training of Managerial Nature to the two hotels and they were far beyond the objects relied by the assessee s AR to impress that ultimately the beneficiary were the workers. The object heavily relied by the of assessee to cover the activity is (vii) In general to open, establish, finance, assist and contribute institutions, commercial, technical education pertaining to fine arts or industries such as workshops, factories and other institutions for imparting education in workmanship and for providing employment and means of earning adequate wages for the unemployed and needy. However, same no where seems to be fulfilled by the terms and conditions of aforesaid referred MOU. The intention of these objects seems to be to give some sort of technical training of workmanship to those who are seeking employment and cannot be extended to give on the job training to those persons who have been recruited by some organization. Assessee was merely responsible for organizing qualified trainers for conducting the above mentioned training program and all the remaining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning Institute namely Institute for International Management and Technology ( IIMT ) at Gurgaon. The assessee is a trust. As per the statement of facts the main objects of the trust, inter alia, are: i. To establish, maintain, support or subsite, schools, collage, Pathshalas and other institutions for general educational of boys and girls. ii. To give stipend, scholarship and monetary aids to students and schools. iii. To grant aids to promote, establish support and maintain institutions for the growth, advancement and diffusion of knowledge. 3. Return of Income for A Y. 2014-15 was filed on 30.09.2014 declaring total Income Rs. NIL/- after claiming application of income as per provisions of Section 11 12 of the Income Tax Act. 1961. Subsequently, the case was selected for scrutiny assessment under Computer Assisted Scrutiny Selection (CASS). Notice u/s 143(2) of the Income Tax Act, 1961 was issued on 28.08.2015 and duly served. Notice u/s 142(1) of the Income Tax Act, 1961 along with questionnaire was issued on 06.06.2016. 4. Ld. AO observed that as per Schedule 12 to the Income Expenditure account, an amount of Rs 2,25,00,000 has been received by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use keeping staff, front office staff and other supervisory personnel. Assessee has charged a training fees of Rs 1 crore plus service tax for the whole year to Bhadohi Hotels Ltd on which TDS of Rs 11,23,600 was deducted by Bhadohi Hotels Ltd. Assessee has charged training fees of Rs 1,25.00,000 plus service tax for the whole year to A B Hotels Ltd on which TDS of Rs 14,04,500 was deducted by A B Hotels Ltd. As per the information available in Form 26AS (copy provided to the assessee), TDS has been deducted u/s 194 J by A B Hotels Ltd and Bhadohi Hotels Ltd. TDS u/s 194J is deducted on the professional services rendered by the service provider. Further as per the submission of the assessee, service tax has also been paid on these receipts. Please explain in view of all these facts as to how these receipts will qualify for being exempt u/s 11/12 and why these receipts shall not be subjected to tax being commercial in nature. As per the service tax return, service tax has been paid on the gross value of services amounting to Rs 6,07,50,971. Please submit a copy of the service tax return and explain when service tax is being paid on the entire receipts then why these r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or business. It is seen from tire material gathered by the Assessing Officer that providing training to employees of corporate hotels is not as per objects of the trust for which the Assessing Officer has relied upon the trust deed and listed the objects of the trust in para 5.5.12 of the assessment order. It has also been noted that no formal exams were conducted and only a certificate as regards completion of the training was given. It has also been noted that as per the Memorandum of Understanding entered into with the two hotels, it was the responsibility of the two hotels to ensure that all required employees were available at the time of the training of their respective batches and no attendance record was maintained. It has also been brought on record that the training programmes/courses were not in the purview of any government authority including AICTE since the said courses were not degree or diploma courses. It is the contention of the appellant that the training given helps the trainers and the trainees to enhance their skills with on-the-job and off the job training sessions and it also helps in developing connections with the companies to find internship and placemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts brought on record by the Assessing Officer, I find no infirmity in the finding of the Assessing Officer that the corporate training given was a commercial activity. 4.1.6 The other issue is whether this activity which has been held to be in the nature of trade, commerce or business is incidental to the activities of the trust. For this, the Assessing Officer has relied upon the decision of tire Hon'ble Delhi High Court in the case of Mehta Charitable Prajnalaya Trust (supra) wherein tire Hon'ble Court have held that the mere fact that proceeds of a business activity have been utilised for charitable purpose do not make the business activity incidental. The Assessing Officer has also examined whether this activity is incidental to the activity of the trust and for this the Memorandum of Association of the assessee was examined and it was found that none of the objectives of the assessee related to providing corporate training. 4.1.7 The expression 'incidental to the attainment of the objectives' is significant in deciding the operation of section 11(4A). The word 'incidental' is not defined in the Income Tax Act, 1961. In common parlance, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning fees as income from business and profession by invoking provision of section 11(4A) of the Act. 10. Heard and perused the record. 11. It was submitted on behalf of the assessee by the ld AR that the Ld.AO and ld CIT(A) have fallen an error in not taking into consideration the primary objects of the trust which permitted the assessee trust to give training in skill development to the said hotels. She specifically refered to following two objects of the trust:- The objects of the trust as per the trust deed are defined as under: (iii) To assist or make donations or to maintain schools, colleges or boarding houses or any other educational institution for imparting technical, industrial or commercial knowledge or training or having objects similar to those of this trust. (vii) In general to open, establish, finance, assist and contribute institutions, commercial, technical education pertaining to fine arts or industries such as workshops, factories and other institutions for imparting education in workmanship and for providing employment and means of earning adequate wages for the unemployed and needy. 12. It was submitted that the ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Management Association 74 TTJ 177 (Mum) St. Joseph Technical School v. Asstt. DIT 154 ITD 10 (Del) Praxis Institute of Participatory Practices v. DIT 70 SOT 443 (Hyd) Water and Land Management Training and Research 25 Institute v. DIT Gujarat State Co-operative Union v. CIT reported in 195 ITR 279 15. On the other hand the ld DR submitted that the ld Tax Authorities below have thoroughly examined the activities of the assessee in context to the objects and there is no error in concluding that the assessee had received the amounts on account of certain services extended which were not in the nature of any education or training 16. Appreciating the matter on record it can be observed from the assessment order that the memorandum of understanding ( hereinafter referred as MOU) entered by the assessee with Bhadohi Hotels Ltd. and A B Hotels Ltd. were examined by Ld. AO and the relevant terms of same are reproduced here: The relevant portion of MOU between the assessee trust and Bhadohi Hotels Ltd . is as under . 1. Term 1.1 The term of this MOU shall commence from 01st April, 2013 ( Commencement Date ) and remain in full force ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.2 Umak will be responsible for organising qualified trainers for conducting the above mentioned training programme. 2.3 Umak will award certificates to candidates successfully completing the training. 3 Roles and responsibilities of ABH 3.1 ABH will be responsible for facilitating the conduct of Training programmes by providing adequate space and IT infrastructure. 3.2 It is ABH s prerogative to identify and enable employees required to attend/ participates in the specific training activities being conducted by Umak. 3.3 ABH will communicate the names and department of the employees who will attend the training at least 10 days before the training Programme is scheduled to start. 3.4 It will be the responsibility of ABH to ensure that all the required employees are available at the time of training of their respective batches. No training session will be repeated or rescheduled for any reason. 17. The aforesaid clauses establish that the assessee was conducting training program for the newly recruited employees which were of managerial level and were not nature enhancing workmanship. As the object of trust relied by the assessee are consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not using its own infrastructure to give any sort of training of workmanship at its premises and resources. Merely because at the end of training of the recruit they were to be given a certificate by the assessee does not change the nature of its activity from commercial to charitable. 20. Next, it can be observed from the assessment order that the Ld. AO had primarily started the enquiry from the fact that TDS on professional services were deducted by the commercial hotels and the service tax was charged by the assessee. On behalf of the appellant at the time of assessment or before Ld. CIT(A) or here before the Tribunal, no explanation has been given as to under what circumstances the assessee allowed to deduct the TDS by the two hotels assuming that it was paying for professional services rendered by the assessee. At the same time, there is no explanation why the assessee has made a service tax charged on the receipts. If it was merely providing training of the nature educative in accordance with its object. 21. The bench is of considered opinion that the judgment which Ld. AR has relied are all distinguishable on facts narrated above with special regard to the term ..... X X X X Extracts X X X X X X X X Extracts X X X X
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