Vildirect: IncomeTax-caselaws-2013-VIL-984-ITAT-CHN

2013-VIL-984-ITAT-CHN

Income Tax Appellate Tribunal COCHIN

I.T.A No. 455/Coch/2013

Date: 25.10.2013

NEW ELIM CHARITABLE & EDUCATIONAL TRUST

COMMISSIONER OF INCOME-TAX

For the Appellant : Sukumar Nainan Oommen
For the Respondent : Smt. Latha V. Kumar

BENCH

N.R.S. Ganesan And B.R. Baskaran, JJ.

JUDGMENT

PER : N.R.S. Ganesan

This appeal of the assessee is directed against the order of the Administrative Commissioner dated 26-04-2013 rejecting the application of the assessee for registration u/s 12AA of the Act.

2. Shri Sukumar Nainan Oommen, the ld. counsel for the assessee submitted that the assessee trust was established by a registered deed of trust executed on 02-07-2008 to establish educational institution. In furtherance of the object of the trust, the assessee has established an institution to provide study centre of Karnataka Open University. According to the ld. representative, the assessee was an authorized centre of Karnataka Open University to admit students and provide education as per the curriculum of Karnataka Open University. According to the ld.representative, the Commissioner of Income-tax misunderstanding the fact simply says that the assessee was distributing study material and provides local examination centre facility for the examination conducted by Karnataka Open University. According to the ld. representative, 70% of the fee charged by the assessee trust goes to the assessee. The fees prescribed for admission of the student is paid by demand draft in favour of the trust. Therefore, according to the ld. representative, the Commissioner of Income-tax is not correct in rejecting the application of the assessee. The ld. representative placed his reliance on various judgments of the High Courts in support of his contention.

3. On the contrary, Smt. Latha V Kumar, the ld. DR submitted that the assessee is acting as agent / study centre for Karnataka Open University. Therefore, it cannot be considered to be an educational institution. An organization merely providing facilities for open university studies cannot be considered to be a regular school / college. Therefore, the Commissioner of Income-tax has rightly rejected the claim of the assessee.

4. We have considered the rival submissions on either side and also perused the material available on record. All modes of acquiring knowledge cannot be considered to be an educational activity. The Supreme Court in the case of Sole Trustee, Loka Shikshana Trust v. CIT [1975] 101 ITR 234 had an occasion to consider this issue. The Apex Court found that all kinds of acquisition of knowledge cannot be considered to be "education". Only "education" acquired in the course of normal schooling has to be considered as "education" within the meaning of section 2(15) of the Act. This Tribunal had an occasion to examine an identical issue in the case of M Star Charitable Society in ITA No.605/Coch/2011 in order dated 14/12/2012. In fact, this Tribunal, after considering the judgment of the Apex Court in the case of Sole Trustee, Loka Shikshana Trust (supra) has observed as follows:

4. We have considered the rival submissions on either side and also perused the material available on record. Admittedly, the taxpayer is running coaching classes. The taxpayer is not doing any other activity. The question arises for consideration is whether conducting coaching classes for the students would fall within the meaning of "education" as provided in section 2(15) of the Act. The Apex Court had an occasion to consider the provisions of section 2(15) of the Act in Sole Trustee, Loka Shikshana Trust v. CIT [1975] 101 ITR 234 (SC). After considering the provisions of sections 2(15) of the Act, the Apex Court found that all kinds of acquiring knowledge will not come within the meaning of "education". What "education". connotes in section 2(15) is the processing of training and developing the knowledge, skill, mind and character of students by normal schooling. In fact, the Apex Court has observed as follows at page 241 of the ITR:

"The sense in which the word "education" has been used in section 2(15) is 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 and magazines, see pictures, visit art galleries, museums and zoos, you thereby 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 a lesson and in the process 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."

5. From the above judgment of the Apex Court it would be abundantly clear that there should be a systematic instruction to the students by way of normal schooling. Mere coaching classes may provide some kind of knowledge to the students. But that kind of acquisition of knowledge through coaching classes cannot fall within the meaning of "education" as provided in section 2(15) of the Act. As the Apex Court observed, one may acquire knowledge in the course of travelling; during the course of reading newspaper; etc. But 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.

7. 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 Patna High Court, after considering the judgment of the Apex Court in CIT v. Andhra Chamber of Commerce [1965] 55 ITR 722 and in the case of CIT v. Sole Trustee, Loka Shikshana Trust [1970] 77 ITR 61 (Mys.) has observed as follows at page 615 of the ITR:

" It is true that by reason of the Finance Act, 1983, the question as to whether any charitable institution is being run with a profit motive or not has lost its relevant. However, the word "charitable" 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 of students by normal schooling. A coaching institute cannot be said to be an institution where normal schooling is done. The definition of "charitable purpose" is inclusive and not exhaustive."

8. It is further seen that the Gujarat High Court also had an occasion to consider identical issue in the case of Saurashtra Education Foundation vs C.I.T. (2005) 273 ITR 139 (Guj). The Gujarat High Court found that all kinds of education would not fall within the meaning of section 2(15) of the Act. The training, instruction, etc. would result in grant of a diploma or degree by a university or a governmental agency. In the case before us, admittedly, the taxpayer is conducting coaching classes. Therefore, it cannot be treated as a charitable institution as provided in section 2(15) of the Act. This Tribunal is of the opinion that the taxpayer is not eligible for registration u/s 12AA of the Act. Accordingly, the order of the lower authority is confirmed.'

5. In view of the above, this Tribunal is of the considered opinion that conducting a study centre for Karnataka Open University cannot be considered to be an educational institution within the meaning of section 2(15) of the Income-tax Act. Therefore, the assessee is not entitled for registration. In view of the judgment of the Apex Court in the case of Sole Trustee, Loka Shikshana Trust (supra), the judgments of the various High Courts relied upon by the ld. representative for the assessee are not applicable to the facts of the case. Accordingly, the order of the Administrative Commissioner is confirmed and the appeal of the assessee stands dismissed.

Order pronounced in the open court on this 25^th October, 2013.

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