Case Law Details
ITAT CHENNAI BENCH ‘A’
Institute of Chartered Shipbrokers
versus
Director of Income-tax (Exemptions), Chennai
IT Appeal No. 348 (Mds.) of 2012
July 30, 2012
ORDER
Dr. O.K. Narayanan, Vice-President
This appeal is filed by the assessee. The appellant is registered as a public charitable trust under section 12AA of the Income-tax Act, 1961. Registration under section 12AA was granted to the assessee in terms of section 2(15) of the Income-tax Act, 1961, holding that the assessee is carrying on the activities of education in a charitable manner. The assessee, The Institute of Chartered Shipbrokers (ICS) having its headquarters at London, regulates and supports the profession of shipbroking throughout the world. The Institute is established in London on the strength of a Royal Charter issued by the Queen of Great Briton. ICS, London has permitted establishment of Institutes in various parts of the world to work for the objects of the Institute. The assessee is such an Institute established in India by way of getting registered as per the Municipal Laws. ICS is by and large taking care of the professional education of shipbroking. Students aspiring of becoming the members of the Institute have to pass a number of examinations. Once they qualify in the examinations and undergo the necessary training, they will be enrolled as the members of the Institute, which enables them to apply for different positions in the shipping industry. The society in Madras was established in 1995. At that time the Chennai Institute had 18 members. At present it has 164 members. The Institute in Madras is registering students to write the examinations conducted by the ICS, London. It collects registration fees from the students and provides necessary academic support so that the students can qualify in the examinations. The assessee institute is maintaining a faculty to provide educational support and counseling to the registered students. It is maintaining a library for the benefit of the students. It subscribes to various international magazines and in a way it is the only academic centre where registered students can prepare for the examination conducted by ICS, London.
2. It is in the above background that the assessee was given registration under section 12AA of the Act.
3. The matter was resting so, the Director of Income-tax(Exemptions) at Chennai passed an order through his proceedings dated 15-12-2011 under section 12AA(3) of the Income-tax Act, 1961, cancelling the registration granted to the assessee under section 12AA of the Act. The reason for cancellation, as recorded by the Director of Income-tax(Exemptions) in his order is that the assessee’s activities, as per Memorandum of Association, have not been found to be genuine. It is the finding of the Director of Income-tax(Exemptions) that the institute is only an agent of ICS, London, working on commercial terms. According to him, the Indian institute is a tutor running a coaching centre on commercial terms. Accordingly, he held that the activities of the institute cannot be called as educational. On the basis of the above observation, he cancelled the registration with effect from 1-4-2009, relevant to the assessment year 2009-10 onwards. It is against the above order that the assessee has come in appeal before us.
4. We heard both sides in detail. Shri S. Sathiyanarayanan, the learned counsel appearing for the assessee, explained the legal status and functions of the Institute in detail. He explained that the Indian Institute is affiliated to the ICS, London only for academic purposes and international accredition and there is no commercial functions shared between ICS, London and the Indian Institute. He has relied on a number of decisions in support of his arguments to hold that the assessee is a charitable institution engaged in educational activities, e.g.:
1. CIT v. Red Rose School [2007] 163 Taxman 19 (All.).
2. Gujarat State Co-operative Union v. CIT [1992] 195 ITR 279 (Guj.)
The learned counsel has also placed heavy reliance on the judgment of the Hon’ble Madras High Court rendered in the case of DIT (Exemptions) v. Chartered Accountants Study Circle Prince Arcade [judgment dated 13-2-2012 in Tax Case(Appeal) No.593 of 2011]. He explained that the activities of the assessee institute are exactly the same as the activities of the Chartered Accountants Study Circle and, therefore, the judgment of the jurisdictional High Court squarely applies to the assessee’s case. Therefore, the order of the Director of Income-tax(Exemptions) cancelling the registration, passed under section 12AA(3) needs to be quashed.
5. Shri Shji P Jacob, the learned commissioner of Income-tax appearing for the Revenue, on the other hand, contended that the assessee is rendering professional and other commercial services and is engaged only in coaching the students preparing for ICS examination and it is not carrying on any charitable activities in the nature of educational activities. The learned Commissioner of Income-tax argued that the assessee Institute is sharing the fees collected from the students with its mother Institute in London and at every stage the income received by the assessee Institute needs to be shared with its counterpart in London. Referring to the Memorandum of association of the assessee trust, the learned Commissioner of Income-tax contended that in the event of dissolution of the assessee institution, all the assets will bestow upon the London Institute and therefore it is necessary to see that the assessee is basically an agent of a foreign institute and therefore cannot be construed as carrying on charitable activities in India. The learned Commissioner of Income-tax contended that the registration under section 12AA is granted only for institutions carrying on charitable activities within the territories of India.
6. In support of his arguments the learned Commissioner of Income-tax has relied on the following decisions:-
1. Sole Trustee, Loka Shikshana Trust v CIT [1975] 101 ITR 234 (SC)
2. Indian Chamber of Commerce v. CIT [1975] 101 ITR 796 (SC)
3. Rajah Sir Annamalai Chettiar Foundation v. DIT [2011] 10 ITR (Trib) 424/48 SOT 502
4. Bihar Institute of Mining and Mine Surveying v. CIT [1994] 208 ITR 608
5. CIT v. National Institute of aeronautical Engineering Educational Society [2009] 315 ITR 428
6. DIT v. Maruti Center for Excellence [2012] 208 Taxman 236
7. Gurship Education Trust v. DIT (Exemption) [IT Appeal No. 4788 (Mum.) of 2009, dated 28-9-2011]
7. We heard both sides in detail and considered the arguments carefully. On going through the Memorandum of Association and other Bye-laws and particulars of the assessee Institute, we find that it is an institution registered in India for all purposes of law. It cannot be construed as an agent of a foreign institution. The foreign institution, ICS of London, is a world professional body controlling the profession of shipbrokers around the world and granting professional affiliations. The co-operation between ICS, London and the assessee Institute in India is that of educational affiliation. The relationship is not that of commercial or business or trade related. It is something like a collaboration of Oxford University with one of the Indian Universities. In the modern world, educational and professional field cannot remain isolated geographically. International affiliation and international recognition are necessary. Therefore, almost all the modern professions in the world are having similar arrangements of affiliation and recognition. On the ground of affiliation there is no reason to hold that the assessee is an agent or branch of a foreign Institute.
8. The programme of professional education imparted by the assessee Institute in India is not in the nature of coaching or tuition. The Institute at London is an Institute established by a Royal Charter and recognized world-wide as the nodal agency of design, improving and controlling the profession of ship-broking. Ship-broking is recognised world over as the only profession engaged in dealing with all aspects of shipping industry. The examinations conducted by the Institute to enable the registered students to enroll as members of the Institute require continuous study for a period of three to four years. What is imparted by the assessee Institute in India is professional education like chartered accountancy, law, architecture, etc. The syllabus prescribed for the examination covers almost all areas of shipping industry including maritime laws. It includes management of logistics of shipping industry. It is not that the members who qualify the examination are just acting as brokers for good/ships. The members who qualify the examinations are working in different fields of shipping industry including port-trust. Therefore, it is not possible to hold a view that the assessee is running a coaching centre for a particular examination. On the other hand, the assessee is an Institute imparting professional education in the field of shipping industry.
9. There is nothing on record to show that the assessee is engaged in any commercial or professional activities in India by way of consultancy or professional advices and they are not earning any income by way of carrying on any trade or commerce. The income of the assessee is the fees collected from the students and the expenses are incurred for running the Institute for imparting professional education to its registered students. The income of the assessee Institute is not utilized for any private initiation or for the benefit of any interested person. The expenditure is incurred only for the purpose for which the Institute is established.
9.1 In the facts and circumstances of the case we find that the decision of the Hon’ble Madras High Court rendered in the case of the Chartered Accountants Study Circle Prince Areade (supra) is applicable to the present case. In the above judgment, their Lordships have held in paragraphs 8 and 9 as follows:-
“8. The objects of the assessee-trust, as referred to above, are among other things to conduct periodical meetings on professional subjects and to achieve the said objects, the assessee is publishing books, booklets, etc. on professional subjects, and selling the same only on the subjects related to audit and not on any other subject. Consequently, those books are primarily sold only to the members of the society. Of course, the books are also made available for sale to the general public aiming to help the society to get better, well-equipped and skilled set of Chartered Accountants for maintaining audit quality.
9. In our opinion, such activities of the assessee-trust cannot be construed to be one of trade or commerce or business and it would only be a charitable in nature. Therefore, it cannot be held that the activities of the assessee-trust in publishing and selling books of professional interest, which are meant to be used as a reference material even by the general public as well as the professionals in respect of Bank Audit, Tax Audit, etc., cannot be construed to be one of commerce in nature. The finding of the Tribunal in this regard requires no interference.”
10. We hold that the above observations of the Hon’ble jurisdictional High Court equally apply to the present case as well.
11. In the facts and circumstances of the case, we find that the order passed by the Director of Income-tax(Exemptions) at Chennai under section 12AA(3) of the Income-tax Act, 1961 is not sustainable in law. Accordingly, the said order is set aside. The assessee continues to enjoy the registration under section 12AA, as if there was no interruption.
12. In result, this appeal filed by the assessee is allowed.
