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St. Joseph's Technical School Premier Automobiles Road Kurla (W), Mumbai 400070 Vs. Asst. DIT (E) - II(1) Piramal Chambers Parel, Mumbai 400012
June, 18th 2015
                 IN THE INCOME TAX APPELLATE TRIBUNAL
                            "J" Bench, Mumbai

                   Before Shri D. Manmohan, Vice President
                  and Shri Sanjay Arora, Accountant Member

                          ITA No. 5973/Mum/2013
                          (Assessment Year: 2009-10)

           St. Joseph's Technical School     Asst. DIT (E) - II(1)
           Premier Automobiles Road      Vs. Piramal Chambers
           Kurla (W), Mumbai 400070          Parel, Mumbai 400012
                               PAN - AACTS0971N
                     Appellant                     Respondent

                     Appellant by:    Shri Anil Thakrar
                     Respondent by:   Shri Akhilendra P. Yadav

                     Date of Hearing:       09.06.2015
                     Date of Pronouncement: 17.06.2015

                                  ORDER

Per D. Manmohan, V.P.

      This appeal by the assessee trust is directed against the order passed
by CIT(A)-1, Mumbai and it pertains to A.Y. 2009-10.

2.     Assessee is a society registered with the Charity Commissioner as well
as under section 12A of the Income Tax Act. The main objects of the society
are promotion of education in India and running educational courses in
Mumbai. For the assessment year under consideration assessee filed its
return on income on 16.09.2009 along with income and expenditure
account, balance sheet and audit report in Form No. 10B declaring `Nil'
income. The income earned by the assessee was claimed as exempt under
section 11 of the Income Tax Act.

3.     The case having been selected for scrutiny, the AO called for the
details with regard to the activities carried on by the assessee and noticed
that the following activities cannot be considered as charitable activities: -

     (a)   Providing technical training to Jet Airways India Ltd. and other
           private companies' employees; assessee received compensation of
                                       2                   ITA No. 5973/Mum/2013
                                                       St. Joseph's Technical School

           `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.

4.     When called upon to explain as to why the above activities should not
be treated as commercial activities, assessee trust, vide its reply dated
19.11.2011, submitted that Don Bosco Institute was running an engineering
college in the campus of the society. Due to insufficiency of funds they
temporarily borrowed funds from St. Joseph's Technical School. Since that
society is also running an educational institution, the amount advanced
cannot be treated as an activity falling outside the ambit of provisions of
section 11/13 of the Act. Similarly, assessee received some amount from
Tata Sky; the trainees from Tata Sky were trained in short term technical
courses, who had to reside in the premises of the society for which stay
charges are reimbursed by Tata Sky. Similar is the situation with the
amount received from Godrej and Ekbote Auto Consultant as well as Jet
Airways. In the case of Jet Airways the management approached the society
to make available vacant classrooms on lease basis for their educational
activities, in the form of training centres, for which the Bombay Salesian
Society, who is the owner of the place, gave them necessary permission.

5.     During the course of hearing assessee trust filed another letter dated
05.12.2011 wherein it was submitted that the assessee has provided funds
to Don Bosco Institute for a short period which was immediately returned in
the next assessment year. Placing reliance upon the decision of the Hon'ble
Delhi High Court in the case of DIT vs. Alarippu 244 ITR 358 it was
submitted that the loan given by the assessee would not constitute either
investment or deposit and hence the assessee could not have charged
interest so as to invoke provisions of section of 13(1)(d) of the Act. Regarding
the facilities given to the trainees of Tata Sky it was submitted that the
                                       3                  ITA No. 5973/Mum/2013
                                                      St. Joseph's Technical School




amount received from them was for providing accommodation to the
students who had come for gaining technical knowledge, which is the main
activity of the assessee trust. He relied upon the decision of the Hon'ble
Calcutta High Court in the case of DIT vs. Sahu Jain Trust (ITA No. 38 of
2001 dated 31st March, 2011) to submit that merely because rental income
was received, exemption should not be denied so long as the object of
leasing out the property was to enable the trust to carry out its object of
education. In other words, it cannot be treated as business income since it
was let out to Tata Sky for the purpose of imparting technical education.

6.      The AO was, however, of the view that the assessee provided technical
services to various companies and fee was received for professional/
technical services. The term "education" means to bring up children by
training them properly whereas, in the instant case, the courses offered by
the assessee are not recognised as such by any competent authority. The
assessee institute has not got any recognition either from the state or
central government. In this regard he relied upon the decision in the case of
Bihar Institute of Mining & Mine Surveying 208 ITR 608 (Patna) wherein it
was held that the institution which was not authorised, cannot be said to
have any element of normal schooling. He thus concluded that the activities
of consultancy and technical & professional services for which the institute
receives payment are not certainly an educational activity but they are the
jobs done for third parties against consideration. The AO distinguished the
decisions of the Apex Court in the case of Sole Trustee, Lok Sikshana Trust
vs. CIT 101 ITR 234 as well as the decision of the Hon'ble Gujarat High
Court in the case of Gujarat State Cooperative Union vs. CIT 195 ITR 279.
On the facts of the aforesaid cases the activities of developing bankers and
finance professionals are different from fees collected by the assessee from
different parties. In his opinion there should be formal education who, in
turn,    should    appear    for   a   particular    examination      such      as
diploma/engineering course. He thus concluded that the income earned by
the assessee-trust cannot be treated as income from educational activity
and hence it has to be treated as business income.
                                         4                    ITA No. 5973/Mum/2013
                                                          St. Joseph's Technical School

7.    With regard to the interest free loan given to Don Bosco Institute of
Technology, the college run by the Bombay Salesian Society, the AO was of
the opinion that the transaction between the two trusts can be hit by the
provisions of section 13(2)(a) of the Act since the assessee has given money
to another trust without adequate interest/security and hence even
provisions of section 11(5) are attracted in which event assessee would lose
the right to exemption in the light of the decision of the Hon'ble Delhi High
Court in the case of Alarippu (supra).

8.    Aggrieved, assessee contended before the CIT(A) that the ADIT erred in
not granting sufficient opportunity while framing the assessment and also
erred in denying the claim of exemption under section 11 of the Act. It was
also contended that he overlooked the contention of the assessee that even
renting of space was extension of the object of education since the premises
was used for the purpose of imparting vocational training. By granting loan
to Don Bosco Institute, assessee has not violated provisions of section
13(2)(a) r.w.s. 11(5) of the Act. Assessee also relied upon several case law in
support its contention that it was an approved professional training institute
affiliated to the National Council for Vocational Training, DGET, Ministry of
Labour & Employment, Government of India. It was also submitted that the
decision of the Hon'ble Delhi High Court in the case of Alarippu (supra) was
wrongly applied by the AO to the facts of the case.

9.    The learned CIT(A) was, however, of the opinion that the assessee
advanced some amount to Don Bosco Institute of Technology which resulted
in parking of amount other than in the manner required under section 11(5)
of the Act. He also observed that any money set apart, invested/deposited in
the forms or modes other than that specified in section 11(5) would be
sufficient to deny the claim of exemption. He also observed that the assessee
earned rental income, which is liable to be taxed as business income.
Though the case of the assessee is that the activity of consultancy, technical
and   professional   services   are   job    done   for   third   parties     against
consideration, the CIT(A) applied the decision of the Hon'ble Patna High
Court in the case of Bihar Institute of Mining & Mine Surveying 208 ITR 608
                                      5                   ITA No. 5973/Mum/2013
                                                      St. Joseph's Technical School

as well as the decision of the Hon'ble Supreme Court in the case of Sole
Trustee, Lok Sikshana Trust vs. CIT 101 ITR 234 to conclude that providing
accommodation and granting computer labs to public in general would
amount to carrying on an adventure in the nature of trade and it cannot be
treated as an activity in the natural course of furtherance of the objects of
the trust. He also relied upon the decision of the Uttarakhand High Court in
the case of CIT vs. National Institute of Aeronautical Engineering and
Educational Society 315 ITR 428 wherein the court observed that mere
imparting of education with the primary purpose of earning profit cannot be
said to be a charitable activity. He thus confirmed the order of the AO.

10.   Further aggrieved, assessee is in appeal before us. The learned
counsel for the assessee placed before us a chart chronologing the reasons
given by the AO as well as the CIT(A) and the remarks against the reasons
given by the tax authorities to submit that the trust had already been
granted registration under section 12A and section 80G of the Income Tax
Act and it has been granted exemption from year to year. Even in the
subsequent year, i.e. A.Y. 2010-11 the learned CIT(A) has allowed the plea of
the assessee that it is eligible for exemption under section 11 of the Act
against which the Revenue has not preferred any appeal. Therefore the
limited issue that needs to be addressed is whether letting out of properties
to enable other parties to impart education, wherein the assessee is also
giving training, the income earned thereon can be considered as furtherance
of the object of education as per the main clause of the trust. It is not in
dispute that assessee's main object is imparting vocational training and it is
a recognised institution. The charges collected by the assessee for imparting
education are much less than what the private/unaided institutions, which
are not recognised, are charging. It is also not in dispute that assessee has
been running certified courses. The net income of the assessee is,
undoubtedly, utilised/applied for the purpose of charity. When additional
space was available it was let out to Tata Sky, Jet Airways, etc. wherefrom
assessee not only received rental income but also received fees for providing
technical training to those trainees and hence it has to be treated as amount
received in the natural course of advancement of its main object, i.e.
                                      6                  ITA No. 5973/Mum/2013
                                                     St. Joseph's Technical School

Education. He also referred to the decision of the learned CIT(A) in
assessee's own case for A.Y. 2010-11 to submit that the assessee has been
conducting examinations for ITI students as per the procedure prescribed by
the NCVT and even on the rented premises certain class timings are
maintained and assessee also has been training students in which event it
would amount to an educational activity falling within the meaning of
section 2(15) of the Act. The order of the learned CIT(A) for A.Y. 2010-11 was
accepted by the Revenue. In fact in the aforesited decision the learned CIT(A)
has also taken into consideration that the amount given as loan to Don
Bosco Institute cannot be treated as deposit or investment within the
meaning of section 13(2) r.w.s. 11(5) of the Act. In this regard the learned
CIT(A) relied upon the decision of Hon'ble Delhi High Court in the case of
ACME Educational Society 326 ITR 146.

11.   The learned counsel for the assessee also placed before us the
decision of the ITAT, Mumbai in the case of Samudra Institute of Maritime
vs. DDIT (ITA No. 5760/Mum/2010 dated 30.11.2011) wherein the Bench
observed that even though the assessee has been conducting two
categories of courses, i.e. one which was approved by the DG Shipping and
another which was not recognised, going by the broader definition of
"Education" and the principle laid down by the Apex Court in the case of
Sole Trustee, Lok Sikshana Trust vs. CIT 101 ITR 234 it is not necessary
that, in order to claim exemption, the institution should be affiliated with a
University or Board. In this regard he referred to the decision of the
Hon'ble Bombay High Court in the case of DIT vs. National Safety Council
305 ITR 257 and contended that merely because some courses are not
recognised by DG Shipping it cannot be a ground for denial of exemption
under section 11 of the Act. The learned counsel also referred to circular
No. 11 of 2008 dated 19th December, 2008 issued by CBDT wherein the
Board observed that having regard to the number of entities engaged in
commercial activities the expression `advancement of any other object of
general public utility' was amended by Finance Act, 2008 but the newly
inserted first proviso to section 2(15) will not apply where the purpose of
the trust or institution is education even if it incidentally involves
                                       7                     ITA No. 5973/Mum/2013
                                                         St. Joseph's Technical School

commercial activity. In other words, the view of the CBDT was that so long
as the case of the assessee falls within the broader spectrum of
advancement of general public utility it may amount to charitable purpose.
In the instant case the assessee was mainly engaged in imparting technical
training which were approved by the NCVT. By letting out the premises, the
space is utilised for training the Jet Airways employees and others to
obtain technical knowledge wherein the assessee was also imparting
training and had the benefit of the lab, etc., provided by them, and thus
the rental income and income received for services rendered cannot be
treated as commercial activity since it is for the advancement of the object
of general public utility. In this regard he relied upon the decision of the
Hon'ble Calcutta High Court in the case of DIT vs. Sahu Jain Trust (ITA
No. 38 of 2001 dated 31st March, 2011) wherein the court observed that if
the rental income was received by way of subletting, to enable the trust to
carry out its charitable object in effective manner, exemption cannot be
denied. He thus strongly submitted that assessee is still engaged in
educational activity and letting out of premises is extension of its activity
since the space is utilised for the same purpose, i.e. vocational training. At
any rate, it falls within the meaning of `education' since it is not denied
that the income is utilised for charitable activities.

12.   On the other hand, the learned D.R. strongly relied upon the orders
passed by the tax authorities. He submitted that in respect of A.Y. 2010-11
provision to section 2(15) was not applicable since the receipts are less than
`10 lakhs whereas in the year under consideration the receipts from Jet
Airways and others exceed `10 lakhs and an automatic presumption arises
that assessee is engaged in commercial activity. However, he has not denied
the fact that the presumption can be rebutted by the assessee by producing
sufficient material to prove that the income earned in the course of the
activity falls outside the ambit of expression `advancement of any other
object of the general public utility' since the purpose of the trust was
providing `education' which constitutes `charitable purpose' even if it
incidentally involves commercial activity.
                                        8                   ITA No. 5973/Mum/2013
                                                        St. Joseph's Technical School




13.   We have heard the rival submissions and carefully perused the record.
The main claim of the Revenue is essentially on two counts, i.e. (i) assessee
advanced some amount to Don Bosco Institute out of accumulated income
set apart for application, in terms of section 11(2) of the Act, which is in
violation of the provisions of section 11(5) of the Act, and (ii) assessee let out
its premises partly to Jet Airways and others and the income earned
therefrom is assessable to tax as business income. On the other hand, the
case of the assessee is that the activity of leasing out property was for
advancement of the object of general public utility; assessee was engaged in
imparting vocational training and the institute was recognised by NCVT. The
property was let out for no other purpose than for giving technical training.
Jet Airways and others to whom the premises were let out was also engaged
in imparting technical training and the assessee had also earned income by
participating in the training programmes conducted by them in the form of
offering the services to the lessee. In fact the agreement with Tata Sky
clearly stipulates that the income should be applied solely towards
promotion of the object of the society. Similarly, Jet Airways sought the
expertise for conducting programmes for their employees and staff and
assessee charged for imparting such training. The staff and trainees of Jet
Airways will have access to the play ground and other amenities available to
all students. Leave licence agreement with Ekbote Auto Consultant was to
conduct repairing and servicing of cars as well as providing hands-on
practical training in automobile repairs to the students of the assessee free
of cost. Training timings are to be observed strictly as per normal schooling.
In the case of DIT vs. Sahu Jain Trust 56 DTR 402 (Calcutta) it was
observed that exemption under section 11 cannot be denied on the ground
that the trust had let out property for efficient utilisation of its assets. The
CBDT in its circular dated 19th December, 2008 clarified by mentioning that
the newly inserted proviso to section 2(15) will not apply where the purpose
of a trust or institution is Education, even if it incidentally involves carrying
on of commercial activities. In the case of Samudra Institute of Maritime vs.
DDIT (ITA No. 5760/Mum/2010) ITAT "H" Bench, Mumbai, vide its order
dated 30.11.2011, observed that even if the courses are not approved but if
                                       9                   ITA No. 5973/Mum/2013
                                                       St. Joseph's Technical School

the intention of the assessee was to give technical training, exemption under
section 11 cannot be denied. In other words, as long as the trust is
imparting education as per the object of the trust, income earned by such
trust should be allowed the benefit of exemption under section 11 of the Act.
Having regard to the case law cited before us we are of the view that so long
as the assessee has let out the property for efficient utilisation of its assets
with a larger purpose of imparting technical training in the said campus,
assessee can be said to be carrying on a charitable activity and income
therefrom is exempt from tax.

14.   This leaves us with the issue of the amount given to Don Bosco
Institute without charging any interest for a short period. The case of the
assessee is that the decision of the Hon'ble Delhi High Court in the case of
Alarippu (supra) was wrongly applied by the Tax Authorities since it is in
favour of the assessee and against the Revenue. The case of the AO as well
as the CIT(A) was that the assessee has not complied with the provisions of
section 11(5) of the Act since the money is not invested or deposited in the
forms or modes specified in section 11(5) whereas the case of the assessee is
that no part of the income is applied or invested by way of advances to Don
Bosco Institute and on identical issue the Hon'ble Delhi High Court, in the
case of Acme Educational Society 326 ITR 146, observed 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) r.w.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. The claim of the assessee is not disputed by the learned D.R.
Having regard to the circumstances of the case and in the light of the
decision of the Hon'ble Delhi High Court, we are of the view that the amount
advanced by the assessee to Don Bosco Institute is not covered by section
11(5) of the Act and even on that count the claim of exemption could not
have been denied to the assessee. Under these circumstances we are of the
view that the plea taken before us by the assessee merits acceptance and we
                                        10                   ITA No. 5973/Mum/2013
                                                         St. Joseph's Technical School

direct the AO to grant exemption under section 11 of the Act on the income
earned by the assessee, including lease rent, etc.

15.     In the result, the appeal filed by the assessee is allowed.

Order pronounced in the open court on 17th June, 2015.

                   Sd/-                                     Sd/-
              (Sanjay Arora)                          (D. Manmohan)
           Accountant Member                           Vice President

Mumbai, Dated: 17th June, 2015

Copy to:

   1.   The Appellant
   2.   The Respondent
   3.   The CIT(A) ­ 1, Mumbai
   4.   Director of Income Tax (E), Mumbai
   5.   The DR, "J" Bench, ITAT, Mumbai

                                                        By Order

//True Copy//
                                                  Assistant Registrar
                                          ITAT, Mumbai Benches, Mumbai
n.p.

 
 
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