Director of Income Tax (Exemption) Vs Samudra Institute of Maritime Studies Trust (Bombay High Court)
Summary: Bombay High Court dismissed the Revenue’s appeal against the order granting Section 11 exemption to Samudra Institute of Maritime Studies Trust. The Revenue contended that the assessee’s pre-sea and post-sea maritime training did not constitute charitable education under Section 2(15), particularly because certain courses were not approved by the Director General of Shipping. It relied upon the Supreme Court ruling in Sole Trustee, Loka Shikshana Trust Vs Commissioner of Income Tax, Mysore and argued that the expenditure on such training could not qualify for exemption under Section 11.
The assessee contended that the Tribunal had correctly appreciated the nature of its activities and that its maritime training could not be equated with running a coaching class. It was imparting training in several areas to seamen to prepare them for the challenges and duties aboard ships. According to the assessee, neither the absence of Director General of Shipping approval for some courses nor the existence of a substantial surplus from non-approved courses justified denial of Section 11 exemption.
The High Court examined the assessee’s objects and found that the Trust had been established to set up, administer and maintain technical training institutions at various places in India for pre-sea and post-sea training for ships and the maritime industry as a public charitable institution for education. Its activities included on-board and offshore training and continuing technical education for officers on both the deck and engine sides. One of its objects was also to register with the Director General of Shipping and obtain necessary approvals at the State and Central levels.
The Court specifically held that merely because all courses were not approved by the Director General of Shipping, it could not be concluded that the purpose of the Trust was not charitable. Considering the Trust’s objects and actual activities, the Court agreed with the Tribunal and CIT(A) that the assessee was entitled to exemption under Section 11. It emphasised that this was not an institution running a coaching class or centre; rather, it imparted education through pre-sea and post-sea training to seamen so as to prepare them for their duties.
Finding no error of law or perversity in the concurrent factual findings of the lower authorities, the Bombay High Court held that no substantial question of law arose. Accordingly, the Revenue’s appeal was dismissed with no order as to costs.
Cases Discussed
- Sole Trustee, Loka Shikshana Trust Vs Commissioner of Income Tax, Mysore — 101 ITR 234 (Supreme Court) — Relied upon by Revenue and considered. Revenue invoked the decision to contend that the assessee’s maritime-training activities did not constitute education for charitable purposes. The High Court found no basis for interfering with the Tribunal’s conclusion granting Section 11 exemption.
- Director of Income Tax (Exemptions) Vs National Safety Council — (2008) 305 ITR 257 (Bombay High Court) — Considered. The Division Bench expressly considered this decision along with the Supreme Court authority while examining the meaning of education and the assessee’s entitlement to exemption.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
1. The Appellant challenges the order passed by the ITAT, Mumbai in ITA No.5760/Mum/2010 on 30th November 2011. The Assessment Year is 2007-08. Mr Malhotra, learned counsel appearing for the Revenue submits that the sole question and which is substantial question of law is that the Tribunal in the facts and circumstances so also in law was in complete error in confirming the order of the CIT (Appeals) in allowing exemption under section 11 of the Income Tax Act 1961 by ignoring the ratio of the judgment of the Hon’ble Supreme court in the case of Sole Trustee, Loka Shikshana Trust v/s Commissioner of Income Tax, Mysore, reported in 101 ITR 234.
2. Mr Malhotra has taken us through the finding rendered by the Tribunal and the Commissioner of Income Tax (Appeals). Mr Malhotra submits that Chapter III in which section 10 falls and of which clause 23(c) is a part deals with incomes which are not included in total income. In the present case, that clause cannot be invoked nor the section. In the present case, section 2(15) of the Income Tax Act 1961 and defining charitable purpose would be relevant. In the present case, the purpose cannot be said to be charitable firstly because the Assessee has submitted a chart before the Assessing Officer which would denote that the training courses are not approved by the Director General of Shipping. Secondly, that is not educational activity inasmuch the same is not for coaching and training to those who wish to take the job of seamen and make that as their career. In such circumstances, the pre-sea and post-sea training expenses, which is the main object of the Assessee, will not be an expenditure which would qualify for exemption under section 11 of the Income Tax Act.
3. On the other hand, Mr Murlidhar, learned counsel appearing on behalf of the Respondent submits that there are concurrent findings of fact and which indicate that the Tribunal was fully aware of the judgment of the Hon’ble Supreme Court in the case of Sole Trustee, Lok Shikshan Trust v/s CIT, Mysore, reported in Vol.101 ITR page 234. The Tribunal held that the activities cannot be equated with a coaching class. This is not a case where the Assessee is giving training to seamen not with an intention to prepare them to face the challenges on board a ship. In fact, the Assessee is giving training in several areas to seamen. The courses may not be approved by the Director General of Shipping or because there is huge surplus in the non-working courses than the approved work courses but the same cannot be the basis for denial of exemption under section 11 of the Act. He submits that the Assessee is imparting education and that is how it qualifies for exemption. In such circumstances, the Appeal does not raise any substantial question of law and should be dismissed.
4. We have perused the orders passed by the authorities including the Tribunal. We have also perused the two decisions, one of the Hon’ble Supreme Court and relied upon by both the counsel and equally a short judgment of the Division Bench of this Court in the case of Director of Income Tax (Exemptions) v/s National Safety Council, reported in (2008) 305 ITR 257(Bom).
5. We are of the opinion that the Tribunal has applied the correct test in concluding that the exemption under section 11 of the Act can be availed of by the Respondent – Assessee. In doing so, the Tribunal referred to the objects as set out in the Trust Deed of the Respondent – Assessee. They are to set up, administer and maintain technical training institution at various places in India for pre-sea and post-sea training for the ships and maritime industry as a Public Charitable Institute for education. That is to provide on-board and offshore training and continuing technical education for Officers, both on the deck and engine side. One of the object was to register with the Director General of Shipping and obtain other necessary approvals at the State and Central levels. We do not find that the ratio of the judgment of the Hon’ble Supreme Court or of this Court, which may be dealing with section 10(22), has been applied to such an extent as complained by Mr Malhotra. In the present case, the Tribunal in paragraph 9.6 of the impugned order concludes that the Assessee is giving training in the above area to seamen. All the courses may not be approved by the Director General of Shipping but that by itself is no ground to hold that the purpose is not charitable. The exemption under section 11 can be claimed and bearing in mind the object of the Trust. We are of the opinion that the Tribunal and the CIT (Appeals) have approached the issue correctly and in the light of the definition so also the tests laid down came to a factual conclusion that the Respondent is entitled to exemption under section 11 of the Act. This is not a case where the purpose can be said to run a coaching class or a centre. This is an institution which imparts education in the area of pre-sea and post-sea training to seamen so as to prepare them for all duties. In such circumstances, we do not find that the concurrent findings of fact are vitiated by error of law apparent on the face of the record or perversity enabling us to entertain this Appeal. There is no substantial question of law. The Appeal is therefore dismissed with no order as to costs.
