Case Law Details
Brief Facts of the case: Assessee has filed its return of income along with Balance sheet ,Income expenditure A/c and audit report in form 10B declaring NIL Income. This case has been selected for the scrutiny and AO was of the opinion that the following activities which the assessee has entered into, does not fall under charitable activities :
a) Providing technical training to Jet Airways India Ltd. and other private companies’ employees; assessee received compensation of Rs. 87,84,000/- for training and also for providing space on rental basis.
(b) Assessee trust gave advance of `97,60,000/- to various firms; for example amount was advanced to Don Bosco institute, which is run by the Bombay Salesian Society and is running an engineering college in the same campus of St. Josephs’s Technical School, Kurla.
With regard to the above assessee explained that there was temporary deficiency of funds with Don Bosco Institute, because of which assessee has advanced interest free loan to it and renting of space was also for providing vocational training ,so the above both activities contribute to the charitable activities.
Ao passed an order disallowing the above activities which assessee considers for allocation of funds .
Assessee filed an appeal with CIT(A) who also passed an order against assessee.
Contention of assessee/Appellant: Assessee was of the view that Don Bosco institute whose primary objective was also to provide education was running temporary shortage of funds and moreover it was in the same society in which the assessee’s college was there. So the assessee had advanced interest free loan to Don Bosco Institute. So advancing of interest free loan cannot be treated as business activity but the same falls under the ambit of provisions of section 11/13 of the act .
Moreover as far as renting of space is concerned ,assessee provides training to the students of Tata Sky ,jet airways who also used to reside in the premises of the society for which the charges are reimbursed are Tata sky,jet airways as the case maybe.
Assessee also mentioned that the CBDT issued a circular no 11 of 2008 Dt 19-12-2008 ,in which it was cleared that it the society enters into any activity that is for the advancement of the object of the general public utility that will been treated as the charitable activity.
So in the above case also space was rented to the students of Tata Sky and jet airways for providing them education and training which was for the advancement of the object of the general public utility .Assessee also gave the reference of the case law DIT vs Sahu Jain Trust(ITA No 38 of 2001 dt 31-03-2011). Moreover the lending of interest free loan to other educational institute whose primary purpose was to impart education and training was also for the benefit of the general public so the same should be treated as charitable activity and the exemption u/s 11 should not be disallowed.
Contention of the revenue/Respondent: The ld CIT(A) was of the opinion that the assessee advanced some amount to the Don Bosco Institute of technology which resulted in the parking of amount other than in the manner mentioned under sec 11(5) of the act. He was also of the view that any investment made apart from mentioned under sec 11(5) would be sufficient to deny the claim of exemption .
He was also of the view that the rental income earned by the assessee is a business income and the courses offered by the assessee was also not recognized by any university ,state,central govt. so the above activity is not a charitable activity on which exemption should be denied .
So he confirmed the order of the AO .
Held by the respective court: CBDT has also clearified that any activity which is carried on commercial basis will not be a business activity if the purpose of the trust/society is to impart education, training. As far as the question of renting of space is concerned ,the space has been rented to the students of Tata Sky and Jet airways for imparting technical training which is for the benefit of the society .Moreover agreement with the Tata Sky and Jet airways revealed that any income earned form the renting of the space will be applied for the promotion of the object of the society. So considering the above renting of space will be a charitable activity and exemption u/s 11 cannot be denied.
Respective court followed the decision given in Humble Delhi High Court, in case of Acme Educational Society 326 ITR 146 ,in which it was decided that that interest free loan given by the assessee society to another society with identical object cannot be treated as “investment” or “deposit” in which event there is no violation of section 13(1)(d) row’s. 11(5) of the Act. The case of the assessee herein is that both the assessees have similar objects and were registered under section 12A of the Act and interest free loan was returned subsequently.So exemption u/s 11 cannot be denied .
So appeal filed by the assessee is allowed.
