Case Law Details
Process-cum-Product Development Centre Vs ACIT (ITAT Delhi)
Conclusion: Where assessee-society engaged only in imparting research based education/allowable skill training to students in manufacturing of sports goods and leisure equipments without any profit motive to enable them to get placement, it would cover within the definition of education u/s 2(15) and hence, entitled for exemption under section 10(23C)(iiiab).
Held: AO denied exemption under section 10(23C)(iiib) to assessee-society on the ground that it was not running an institution to provide systematic education. It was held assessee society, substantially financed by the Government of India, was engaged only in imparting research based education/ skill training to the students in manufacturing of sports goods and leisure equipments without any profit motive, to enable them to get placement fell within the definition of education u/s 2(15), hence entitled for exemption under section 10(23C)(iiiab)
FULL TEXT OF THE ITAT JUDGEMENT
Since common questions of facts and law have been raised in the aforesaid appeals, the same are being disposed off by way of consolidated order to avoid repetition of discussion.
2. The appellant, Process-cum-Product Development Centre (hereinafter referred to as ‘the assessee’) by filing the present appeals, sought to set aside the impugned order all dated 06.03.2017 passed by the ld. CIT (Appeals), Aligarh qua the assessment years 2010-11, 2011-12 & 2013-14 on the identical grounds inter alia that :-
“1. That the Ld. Commissioner of Income- Tax( Appeals) erred in observing that the appellant educational institution is not existing solely for educational purposes and thus, dismissing the claim of exemption U/S 10(23C)(iiiab) of the Income-Tax Act. The observation is unwarranted and against facts of the case.
2. That the appellant institution is solely engaged in imparting education and in the same process train students by sending them to sports industries etc. That the Ld Commissioner of Income-Tax(Appeals) is admitted this facts, that the society is engaged in education/training given to the young in preparation of work in life and its activities were without any profit motive. After that Commissioner of Income- Tax Appeals is not justified to allow the claim of the assessee U/S 10(23C)(iiiab) of the Income-Tax Act, 1961.
3. That the Ld Commissioner of Income- Tax (Appeals) is arbitrary and unjust, for not considering this facts, that the society is substantially financed b the Government and functioning under the administrative control of Micro Small and Medium Enterprises (MSME), Government of India.
4. That the appellant has claimed exemption of its income U/S 1O(23C)(iiiab) irrespective of provisions contained in Section 12AA of the Income-Tax Act, the rejection of the same is bed in law.”
3. Briefly stated the identical facts necessary for adjudication of all the aforesaid three appeals of assessee pertaining to Assessment Years 2010-11, 2011-12 & 2013-14 are : Assessee society is engaged in conducting various short duration training programs of computer training, Doner, CAD/CAM/D.L.G. Tech, DST, Mech. Web Designing, audit CAD, Linus & C++, training in Computer Accounting System (TCAS), Tally 9, Leg guards & Gloves (STST) Hand Gloves Manufacturing, Shuttle Cock Manufacturing, cricket bat manufacturing, carom board manufacturing, Leg guard manufacturing, batting gloves manufacturing, football manufacturing, Cricket ball manufacturing (Jalandhar) and leather workshop, training in R/P workshop, wood work shop etc.. Assessee society claimed exemption under section 10(23C)(iiib) of the Income-tax Act, 1961 (for short ‘the act’). Declining the explanation furnished by the assessee society to prove its eligibility for claiming exemption under section 10(23C)(iiiab), Assessing Officer proceeded to disallow the exemption on the ground that the assessee society is not running an institution to provide systematic education by relying upon the decision rendered by the Hon’ble Supreme Court in the case cited as Solo Trustee Loka Shikshak Trust vs. CIT – 101 ITR 234 and thereby assessed the net taxable income at Rs.56,48,582/-, (-) Rs. 18,23,401/- and (-) Rs.5,48,829/- for AYs 2010-11, 2011-12 and 20 13-14 respectively.
4. Assessee carried the matter by way of an appeal before the CIT (Appeals) who has dismissed the appeals. Feeling aggrieved, the assessee has come up in appeals before the Tribunal.
5. We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.
6. Short question to be decided in all the aforesaid appeals is as to whether assessee society is eligible for claiming exemption under section 10(23C)(iiib). AO as well as ld. CIT (A) have declined the exemption to the assessee society on the ground that the assessee society does not exist solely for educational purposes.
7. Undisputedly, the affairs of the assessee society are managed, administered, directed and controlled by the Governing Council on orders / directives received from Government of India through Government Council. It is also not in dispute that the accounts of the assessee society are audited by Comptroller and Auditor General of India (CAG). It is also not in dispute that assessee society gets raw material from industries and after manufacturing the goods through its trainee returns the finished goods after receiving its job charges. It is also not in dispute that as per Memorandum of Association, assessee society is managed/run by Ministry of Small Scale Industries, Ministry of Industry, Department of Industrial Development through its Governing Council and the element of profit making is not there.
8. Before proceeding further, it is imperative to examine the aims and objects of the assessee society which are extracted for ready perusal as under :-
“III. The main objectives for which the Society is established are:
1. To develop new technologies and upgrade the existing level of technology of sports goods and leisure time equipment.
2. To develop new products/design of sports goods and leisure time equipments
3. To identify export-worthy sports goods product and leisure time equipments, develop and establish technologies for their manufacture.
4. To improve the quality of these products through quality control and standardization to meet national and international standards and also make this industry competitive.
5. To impart training to craftsmen and supervisors from the industry in the field of manufacture and development of sports goods.
6. To collect, collate and disseminate technical information and know-how to the user industry by providing documentation services and coordinate with research and development institutions.
7. To render technical support services through the Centre’s common facility work-shop/laboratories in the above areas.
8. To conduct market research and identify products for domestic and export markets.”
9. The conjoint reading of the main objects of the assessee society goes to prove that it is engaged in multifarious activities related to education and training for production of sports goods and leisure time equipments.
10. Perusal of the audited income and expenditure account for the year ending 31.03.2018 available at page 4 of the paper book, for the year ending 31.03.2009 available at page 20 of the paper book, for the year ending 3 1.03.2010 available at page 39 of the paper book, for the year ending 31.03.2011 available at page 56 of the paper book, for the year ending 3103.2012 available at page 73 of the paper book and for the year ending 31.03.2013 available at page 92 of the paper book, go to prove that the substantive income / receipt of the assessee society is from training courses being imparted to the students.
11. CIT(A) proceeded to decline the exemption under section 10(23C)(iiiab) to the assessee on the sole ground that assessee society is running process-cum-product development centre and involved in multifarious activities and all the activities cannot be considered to be educational in nature.
12. Under section 10(23C)(iiiab), any income received by a person on behalf of any university or any educational institution existing solely for educational purposes and not for purposes of profit and which is wholly or substantially financed by the Government, is entitled for exemption.
13. AO relied upon the decision rendered by Hon’ble Supreme Court in the case of Solo Trustee Loka Shikshak Trust (supra) wherein the word ‘education’ as referred in section 2(15) of the Act is explained as under :-
“The word “education” in section 2(15) of the Income-tax Act, 1961, connotes the process of training and developing the knowledge, skill, mind and character of students by normal schooling, and has not been used in the wide and extensive sense according to which every acquisition of further knowledge constitutes education.”
14. Now, we are to examine main objects of the assessee society whether imparting training by it, falls within the definition of Hon’ble Supreme Court in the case of Solo Trustee Loka Shikshak Trust (supra) has categorically held that ‘education’ connotes process of training and developing the knowledge, skill, mind and character of students by normal schooling.
15. Though the main objects of the assessee society are divided into 8 objects but all are interconnected with each other so as to impart the best available trainings to the students to develop new products / business of sport goods and leisure time equipments. We are of the considered view that when the training imparted to the students is not to produce goods of world standard by making necessary marketing research and by identifying products for domestic and export market, such training would be of no use and the students who have been given training would not be in a position to get placement in the sport goods and leisure time equipments industry. Moreover the entire emphasis is laid by our Government on “skill development” by departing from age old system of imparting academic education and training not as per requirement of the industry.
16. Furthermore, when we examine the audited income and expenditure account of the assessee society it shows that substantial income is from training courses and there is a miniscule income from job receipts. When the assessee society is admittedly getting raw material from the various industries to produce the sport goods for them and the job charges paid by them are again used for running the training institute it can not be said by any stretch of imagination that assessee society is not being run for education / training purpose. Particularly, there is no case of the Revenue that the main objects of the assessee society is profit making rather declining the exemption on the sole ground that the assessee institution is not existing solely for educational purposes. So, we are constrained to record that the word ‘education’ is to be given wide interpretation which includes training and developing the knowledge, skill, mind and character of the students by normal schooling.
17. So, we are of the considered view that assessee society is engaged in imparting training to the students in manufacturing the sport goods and leisure equipments without any profit motive.
18. CIT(A) proceeded to record in the impugned order that the issue of charitable activities of the assessee society being of charitable nature is not relevant in this case as assessee society is yet to be registered under section 12AA of the Act. However, in the face of the admitted fact that the coordinate Bench of the Tribunal in assessee’s own case vide order dated 13.02.2017 and 13.04.2018 vide ITA No.410/Del/2012 and 3837/Del/2013 respectfully remanded the case back to CIT (A) to reconsider the ground of registration under section 12AA by relying upon the decision rendered by the Hon’ble Orissa High Court in case of Orissa Trust of Technical Education and Training vs. CIT – 24 taxmann.com 202 (2012) (Orissa), wherein the trust engaged in the identical activities has been granted registration under section 12AA of the Act. Coordinate Bench of the Tribunal in case cited as Central Institute of Tool Design vs. DIT (E) in ITA No.1563/Hyd/2014 vide order dated 08.07.2015 also directed the DIT (E) to reconsider the ground of registration under section 12AA of the Act to Central institute of Delhi Design engaged in imparting training facilities to technical personnel in designing and in making tools, dies and moulds, which activities are identical to the assessee society. So when the co-ordinate bench of the Tribunal had already directed the CIT (E) to reconsider the grant of registration under section 12AA of the Act in the light of the numerous decisions referred at page 6 of the order passed in ITA No.410/Del/2012, the claim of the assessee for exemption u/s 10(23C)(iiiab) cannot be rejected. Moreso exemption sought for by assessee society u/s 10(23C) (iiiab) is independent of exemption being sought for by the assessee u/s 12AA of the Act. So exemption u/s 10(23C) (iiiab) can not be declined on the ground that registration u/s 12A has been rejected.
19. Hon’ble High Court of Allahabad in case of City Montessori School vs. UOI – (2009) 315 ITR 48 (All.) decided the identical issue defining the word systematic research based “education and training” as under :-
“The assessee was not only providing traditional education, but was also preparing students by providing guidelines to get admissions in the professional institutions to pursue their higher studies. 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 in preparation for the work of life. Similarly, extending financial assistance/scholarship, etc., to the students for their educational purpose would squarely fall within the connotation of ‘education I as per the ratio laid down in the case of CIT v. Saraswath Poor Students Fund [1984] 150 ITR 142, 147 / [1985] 20 taxman 211 (Kar.). Thus, the assessee was engaged in ‘educational activities’ which fell under charitable purpose.”
20. In view of what has been discussed above, we are of the considered view that the assessee society, substantially financed by the Government of India, is engaged only in imparting research based education/ skill training to the students in manufacturing of sports goods and leisure equipments without any profit motive, to enable them to get placement falls within the definition of education u/s 2(15) of the Act, hence entitled for exemption under section 10(23C)(iiiab) of the Act. Consequently, all the three appeals filed by the assessee are allowed.
