Case Law Details

Case Name : Green Acres Educational Trust Vs. DCIT (ITAT Mumbai)
Appeal Number : I.T.A. No. 412/Mum/2013
Date of Judgement/Order : 24.06.2016
Related Assessment Year : 2013-14

Whether Pre-School would fall in the term ‘education’ as  envisaged u/s 2(15):

We have gone through the reasoning given by the Ld. DIT and we find that the view adopted by him is not only contrary to law and facts, but we also find it to be highly myopic and regressive. In today’s world the ‘education’ has attained its unprecedented dimensions. With the advancement of technologies and evolution of multi cultural socities, the complexities in business and real life situations have grown many folds. Under such circumstances, need for appropriate education for each and every person right from its childhood can never be over emphasized. The education has got different meaning, purpose or object for each person depending upon its position and background. We have education of various types e.g. Pre-schooling, schooling, higher education, professional education, vocational training, professions training etc etc.

After completing the school education, students go for higher education which may be obtained through college, university or they may choose to go for a professional course even after completing the professional qualification. There are many post qualification courses. That is to convey that ‘education’ may begin at any stage and it may go on throughout the life of a person. Under these circumstances, one cannot isolate ‘education’ given at one of the stages to say that it should not be treated as part of ‘education’. The pre-schooling has become today a mandatory prelude to school education. It is like step number one in the ladder. If step number one is taken properly, then other higher steps would be achievable more efficiently and effectively. That is the purpose as has been understood by the parents who send their kids to pre­schools and it has become a mandatory requirement today for all the schools imparting quality educations. It is because sending a child to pre-school is like preparing a sapling of the tree to be planted in the fields. Recently, Mumbai Bench of the Tribunal in the case of ADIT (Exemption) vs Jeevan Vidya Mission (ITA Nn 770/M/2014 Dt 30-09-2015 analysed scope of the term ‘Education’ as envisaged by the legislature while mentioning it u/s 2(15). Observation given in the order may be useful here and therefore reproduced hereunder:

“8.1 In our considered opinion, based upon analysis of the facts of this case, the assessee trust is engaged in the field of ‘education7~ In our considered view, based upon our understanding of law, there is no merit in the order of Assessing Officer to give a restricted meaning to the scope of meaning of term educational activities. It is not necessary that there should be holding of regular classes or wholesome educational activities to be only eligible to be called educational activities eligible for benefits under section 11 and 12. As per our understanding, the term “education” is of wide scope and amplitude, especially in the context of section 2(15). In this fast evolving society, the term ‘education’ has assumed greater role and significance, then ever. Education has got pivotal role in evolution of a society. Therefore, keeping this crucial aspect in mind, the legislature in its wisdom had decided to place this activity within the definition clause of the term “charitable purpose”, as per section 2(15) of the Income-tax Act, wherein it has been specifically mentioned that the term ‘charitable purpose’ includes … “education” … Thus, the very activity of education itself has been included within the meaning of the term ‘charitable purpose’. It may further be seen that activity of imparting “education” has been specifically included in the definition, thus showing that the intention of the legislature, very clearly, is to promote education, which is further fortified by the fact that when the first proviso was inserted to section 2(15), the activity of ‘education’ was not covered therein and only other object of general public utility alone was covered therein. The first proviso was brought in to curtail the scope of ‘charitable purpose’ with respect to the activities of general public utility, by excluding the same from this definition, if it involved carrying on of any activity in the nature of trade, commerce or business. Further, even after huge litigation with respect to blanket exemption to educational institutions, when the amendment was made by the Finance Act, 2009, the activity of the education was kept outside the purview of newly inserted proviso. Thus, impliedly, it can be said that, it is clear that the legislature has given great significance to the utility of ‘education’ in our country.”

Further, it is noted in the case of Life Shines Educational & Charitable Trust (supra) Chennai Bench of the Tribunal held that “pre-schooling’ shall fall within meaning and scope of the ‘education’ as used u/s 2(15). Thus, in view of the aforesaid discussion and facts of this case, we do not find any justification in the view adopted by the Ld. DIT that pre-schooling is not part of education activity. In our considered view pre-schooling is very much integral part of the term ‘education’ as has been envisaged u/s 2(15) of the Act and we hold so.

Whether charging of fee and retaining surplus amounts to commercial activity, disentitling an assessee from the benefit of exemption u/s 11 and 12:

It has been mentioned by the Ld. DIT that since the school is charging fee for issue of prospectus, school uniforms, kits and admission fees etc., and thus, the pre-school is being run like a commercial activity and therefore, the assessee should be refused the benefit of registration. We find that here also, Ld. DIT has gone wrong on law as well as on facts. It has not been stipulated under the statute that for the purpose of getting the benefit of exemption u/s 11 and 12 by the educational institutions, the assessee must carry out all its activities free of cost i.e. without charging anything from anyone. Rather as per section 2(15), the term ‘charitable purpose’ includes inter­alia ‘education’. Thus the intention of the legislature is unambiguously clear that carrying out the activity of ‘education’ itself is charitable. Thus, when the carrying out of the activity of ‘education’ itself is a charitable purpose, then at the stage of granting registration u/s 12A, Ld. DIT is required to examine only the genuineness of the activities of the trust. Thus, the DIT may examine at this stage that activities of the trust are as per the objects contained in the trust deed or its memorandum. He is neither permitted nor obliged under the law, to go beyond that at the stage of registration.

The second aspect to be examined is whether the amount received or income earned by the assessee from carrying out of the education activities are applied solely for the purpose of education or not. But, since the registration is granted at the very inception of an institution, therefore the law has not put this duty upon the shoulders of the Ld. CIT/DIT. This obligation has been put by the legislature upon the shoulders of the AO who shall examine these facts at the stage of assessment of the trust and in case he is not satisfied with this aspect and find that the income of the trust has been applied for activities which are not permitted under the law, and the same has not been applied for the activities for which registration has been granted, then the benefit of exemption can be denied by the AO in accordance with law. It is further noted by us that this controversy had been arising earlier because of the judgment of Hon’ble Uttarakhand High Court in the case of Queen’s Educational Society of India wherein it was held by the Hon’ble High Court that if an ‘educational institute earns any surplus i.e. if receipts of the institute are more than it expenditure then the institute shall loose the benefit of exemption under the income tax Act. Various High Courts had taken a contrary view. Finally this controversy has been put to rest by Hon’ble Supreme Court in the case of Queen’s Educational Society of India v. CIT 372 ITR 699(SC) wherein Hon’ble Apex Court has not agreed with the judgment of Hon’ble Uttarakhand High Courts and agreed with the judgments of other High Court and held that merely because an Educational institute happens to earn surplus then by that facts itself it would not be held that educational institute is not charitable and will not loose the benefit of exemption under the law by that fact alone.

Thus, keeping in view totality of the facts and circumstances, we find that Ld. DIT had gone wrong on law as well as facts, on both of the above aspects. In our view, the assessee trust is carrying out the activity of education and is therefore entitled for benefit of registration u/s 12A and we direct the DIT to grant the benefit of registration u/s 12A.

Accordingly, the assessee is hereby granted the benefit of u/s 12A with effect from the date when the application was filed by the assessee. The AO is at liberty under the law to examine the aspect of application of income solely for the purpose of education and also to examine that the assessee is carrying out the activity of education only and AO is also permitted to examine compliance of other provisions of the law in this regard and accordingly he may decide about the granting of benefit of exemption at the time of assessment in different years. In view of the same, appeal of the assessee is allowed.

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