Case Law Details
Brief of the Case
ITAT Mumbai held In the case of ACIT vs. Institute of Chemical Technology University of Mumbai that the consultancy work done by the assessee – University through its professors, in which part income is held by university and the rest lying with respective professors, is not in any way relatable to the aims and object for which the assessee was established. Therefore the assessee is not entitled for any exemption under the provisions of the Act. Also held that if the Professors of the university are giving consultancy / advice work on regular basis, that it will be presumed that the university is providing these advices itself.
Facts of the Case
The assessee is an Institute of Chemical Technology (ICT) Mumbai, was established as a Department of Chemical Technology on 1st October, 1993 by the University of Mumbai. Subsequently, the assessee was declared as an autonomous Institute and a deemed University by the Central Government in the year 2008. The main aims and object of the Institute are to provide instructions, study, teaching, training and research in various branches of Science and Technology. Though it is the case of the assessee that by virtue of the University Circular bearing No.508 of 1985 dated 7th September, 1985, the revised terms and conditions under which teachers / professors are permitted to undertake the consultation work. The Assessing Officer, after relying upon the provisions of section 2(15) r.w.s. 11(4A), submits that the income accrued to the assessee on account of consultancy work given by the Professors is required to be taxed separately and is not an exempt income within the meaning of law The CIT (A) has exempted the income generated by the assessee for rendering the consultancy services through its professors to various organizations under the provisions of law
Contention of the Assessee
The ld counsel of the assessee submitted that the income of the assessee is an exempt income therefore, is required to be exempt. It was also contended that for providing consultancy services by the Professors is an incidental activity of imparting education, and therefore, in furtherance of advancement of the education. It was also contended that the assessee is not doing anything rather the Professors are independently providing consultancy services to various Government and other organizations and it was only sharing the fees between the assessee and the Professors. It was also contended that two ledger account showing consultancy fees received and paid are the only accounts, which are required to be maintained and are being maintained by the assessee.
The assessee in support of its case, relied upon various judgments, including – (i) Narain Swadeshi Weaving Mills [(1954) 26 ITR 765 (SC)], (ii) Ashish Super Marcato v. DDI (Exemption, Ernakulam), (iii) Sri Pedda Jeeyangar Mutt v. ITO 31 ITD 324, (iv) Tolani Education Society v. DDIT (Exemptions) (2013) 351 ITR 184, (v) M/s.Queen’s Education Society v. CIT 2015 (3) TMI 619, (vi) Indian Chamber of commerce v. ITO 101 ITR 796, (vii) Divya Yog Mandir Trust v. JCIT ITA ITA No.3808/Mum/2015. Institute of Chemical Technology. 12 No.387/Del/2013 and (viii) ADIT (E) v. The Delhi Public School Society ITA No.4344/Del/2011. By relying upon the above said judgments, the assessee sought to justify that providing the consultancy services is an activity incidental to the attainment of the object of the trust, and therefore, exempted from tax.
Contention of the Revenue
The ld counsel of the revenue supported the order of the AO.
Held by CIT (A)
CIT (A) held that there is no dispute regarding the fact that the appellant has been declared as a deemed university by the Government of India as per notification dated 12 September, 2008. So far as the consultancy services are concerned, it is seen that the services are rendered by the professors in their personal capacity and not by the appellant Institute. Apart from receiving the consultancy fee and handing over the share of the professors to them, the appellant has no other role to play in the said activity. No expenditure is incurred by the appellant for earning of such income.
The role of the appellant Institute is restricted to giving permission to its professors to undertake consultancy assignment, from which the appellant is able to mobilize resources for its own objects. This is one of the ways to mobilize resources for the appellant Institute, in view of the expectations of the UGC, which has issued separate “guidelines of incentive for resource mobilization during 11th plan from 2007 to 2012”, which, as one of its objectives has “To encourage university to provide consultancy ON PAYMENT BASIS not only to the industries but to the government, and other bodies and society at large on vital issues of national importance” (a copy of the UGC guidelines in this regard has been submitted). Therefore the activity of mobilization of resources through consultancy services automatically becomes an ancillary / incidental object of any University / Institute. Hence, in my view, the AO was not justified in observing that the provision of consultancy services is not one of the incidental objects of the appellant Institute.
Since, provision of consultancy services is not included in the terms of employment of the employee professors of the appellant Institute, therefore, as a compensation for the breach of contract of the terms of employment, the appellant charges a part of the consultancy fees from its employee professors. Such consultancy fee received by the appellant is in the nature of passive income, as the appellant itself is not involved in providing consultancy. Hence, being ancillary / incidental object of the appellant Institute, the consultancy fees earned by the appellant cannot be denied exemption under section 11
Held by ITAT
From the conjoint reading of section 2(15) and 11(4A), it is clear that any activity in the nature of trade, commerce or business, or any activity of rendering any services in relation to any trade, commerce or business, for a cess or fees or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity, shall not be for the purposes of charitable unless such activities is incidental to the attainment of the object of the trust and separate books of account are maintained by such trust qua profit and gains.
The main aims and object of the Institute are to provide instructions, study, teaching, training and research in various branches of Science and Technology. Though it is the case of the assessee that by virtue of the University Circular bearing No.508 of 1985 dated 7th September, 1985, the revised terms and conditions under which teachers / professors are permitted to undertake the consultation work.
We find that invariably, the consultancy services provided for the specific project or a specific purpose which has direct co-relation with the education imparted by the assessee-University should come within the realm of services imparted for the attainment of the object of the trust. But in the present case, a sample letter from Bharat Petroleum Corporation Ltd. placed on record clearly shows that the expert advice services were sought from Dr. V.V.Mahajani for the corporate R & D Centre, Greater Noida. The letter dated 29th October, 2010 has been reproduced hereinabove was addressed to the Director, Institute of Chemical Technology (the assessee). Therefore, it is not right on the part of the assessee to allege that it is not rendering any services rather; its Professors are rendering the services. The juristic person like the assessee can only execute its work either through its trustees or employees.
Since the employees of the assessee trust (juristic person) are rendering consultancy / advice services for a fee and the part of the fee is also coming to the chest of the assessee, therefore, in our opinion, the activity of the assessee is not covered by the provisions of section 2(15) of the Act and the assessee is not entitled to any exemption for the consultancy fees. The reliance on the definition of the business is of no help to the assessee. The judgment of Narain Swadeshi Weaving Mills (1954) 26 ITR 765 (SC), clearly provides that “no general principle could be laid down which would applicable to all cases and that each case must be decided on its own circumstances according to ordinary common sense principles.
As a matter of fact, huge amount has been earned by the Professors through this consultancy work, though the same is separately taxed but on account of the work done by the Professors of the University, the University being the employer had also earned. In view of the above, the consultancy work done by the assessee-University (through the modus of sharing of revenue with its Professors) is not in any way relatable to the aims and object for which the assessee was established, therefore, we hold that the assessee is not entitled for any exemption under the provisions of the Act. This Tribunal is not oblivious to the fact that if the Professors of the assessee / gives consultancy / advice work on regular basis, that will have the colour of the advice given by the assessee. Further the said consultancy work will also impair the regular studies of the students. The assessee will fall under proviso to section 11(4A) and since there is no co-relation between the activity of consultancy with the aims and objects of the trust, therefore, the income in the hands of the assessee as its shares of consultancy work rendered by the Professors, is required to be excluded from exemption.
The Hon’ble High Court of Punjab & Haryana in the case of Regional Computer Centre Vs.: Commissioner of Income Tax [2009] 311 ITR 182 (P&H) in the identical facts and circumstances had held that the assessee is not entitled for exemption under the Act
Accordingly appeal of the revenue allowed.
