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THE INSTITUE OF CHARTERED ACCOUNTANTS OF INDIA AND Vs. THE DIRECTOR GENERAL OF INCOME TAX (EXEMPTIONS), D
September, 18th 2013
               THE HIGH COURT OF DELHI AT NEW DELHI
%                                      Judgment delivered on: 04.07.2013

+              W.P.(C) No.3147/2012
THE INSTITUE OF CHARTERED ACCOUNTANTS OF INDIA AND
ANR.                                    .....Petitioners
                         versus

THE DIRECTOR GENERAL OF INCOME TAX (EXEMPTIONS), DELHI
AND ORS.                                .....Respondents
                         AND

+              W.P.(C) No.3148/2012

THE INSTITUE OF CHARTERED ACCOUNTANTS OF INDIA AND
ANR.                                    .....Petitioners
                         versus

THE DIRECTOR GENERAL OF INCOME TAX (EXEMPTIONS), DELHI
AND ORS.                                .....Respondents

                                           AND

+              W.P.(C) No.7181/2012

THE INSTITUE OF CHARTERED ACCOUNTANTS OF INDIA AND
ANR.                                    .....Petitioners
                         versus

THE DIRECTOR GENERAL OF INCOME TAX (EXEMPTIONS), DELHI
AND ORS.                                .....Respondents

Advocates who appeared in this case:
For the Petitioners     : Mr N. K. Poddar, Sr. Advocate with
                          Mr Promad Dayal, Mr Nikunj Dayal,
                          Ms Payal Dayal and Mr Ranjit Kumar Singh
For the Respondents     : Mr Abhishek Maratha, Sr. Standing Counsel
                          with Ms Anshul Sharma for respondents No.1 to 3.
                          Mr Amrit Pal Singh with Ms Sweety
                          Manchanda for respondent No.4.



W.P.(C) Nos.3147/2012, 3148/2012 & 7181/2012                          Page 1 of 48
CORAM:-
HON'BLE MR JUSTICE BADAR DURREZ AHMED, THE ACTING
CHIEF JUSTICE
HON'BLE MR JUSTICE VIBHU BAKHRU

                                      JUDGMENT
VIBHU BAKHRU, J

1.     These writ petitions have been filed by the Institute of Chartered
Accountants of India. The petitioner has challenged the orders passed by the
Director General Income Tax (Exemptions), (hereinafter referred to as
"DGIT(E)"), refusing to grant exemption under Section 10(23C)(iv) of the
Income Tax Act, 1961 (hereinafter referred to as "the Act") to the petitioner.
Whereas writ petition No.3147/2012 impugns the order dated 13.04.2012
declining the exemption with respect to the assessment years 2006-2007, 2007-
2008 and 2008-2009, the writ petition No.3148/2012 has been preferred against
the order dated 13.04.2012 passed by the DGIT(E) refusing to grant the
exemption to the assessee under Section 10(23C)(iv) of the Act for the
assessment years 2009-2010 and 2010-2011. The assessee has preferred the writ
petition No.7181/2012 against the order dated 28.09.12 passed by the DGIT(E)
declining exemption for the assessment year 2011-2012. All the three orders
impugned in the three petitions are similarly worded. As the three petitions raise
common issues the same have been considered together.

2.     The petitioner has been incorporated by virtue of Section 3 of the Institute
of Chartered Accountants Act, 1949 (hereinafter referred to as the "ICAI Act") as
a body corporate which is constituted by all members whose names are entered in
the register of members maintained under the ICAI Act.




W.P.(C) Nos.3147/2012, 3148/2012 & 7181/2012                          Page 2 of 48
3.     The Income Tax Authorities have, since incorporation of the petitioner,
considered the petitioner as having been formed for charitable purposes as
defined under Section 2(15) of the Act. Declarations that the petitioner is entitled
to the exemption under Section 10(23)(iv) of the Act subject to fulfilment of
certain conditions have been notified by the Income Tax Authorities from time to
time until the assessment year 2005-2006. The last notification in this regard was
dated 18.10.2004 and is quoted below:-

                          "GOVERNMENT OF INDIA
                           MINISTRY OF FINANCE
                         DEPARTMENT OF REVENUE
                      CENTRAL BOARD OF DIRECT TAXES
                         NEW DELHI, THE 18.10.2004
                              NOTIFICATION
                              (INCOME TAX)

               S.O. No.      In exercise of the powers conferred by sub
         clause (iv) of clause (23C) of section 10 of the Income Tax Act,
         1961 (43 of 1961), the Central Government hereby notifies "The
         Institute of Chartered Accountants of India, New Delhi for the
         purpose of the said sub clause for the assessment years 2003-
         2004 to 2005-2006 subject to the following conditions, namely:-

         (i) the assessee will apply its income, or accumulate for
         application, wholly and exclusively to the objects for which it is
         established;

         (ii) the assessee will not invest or deposit its funds (other than
         voluntary contributions received and maintained in the form of
         jewellery, furniture etc. for any period during the previous year's
         relevant to the assessment years mentioned above otherwise than
         in any one or more of the forms or modes specified in sub
         section (5) of section 11;

         (iii) this notification will not apply in relation to any income
         being profits and gains of business, unless the business is
         incidental to the attainment of the objectives of the assessee and




W.P.(C) Nos.3147/2012, 3148/2012 & 7181/2012                           Page 3 of 48
         separate books of accounts are maintained in respect of such
         business.

         (iv) the assessee will regularly file its return of income before
         the Income Tax Authority in accordance with the provisions of
         the Income Tax Act, 1961.

         (v) that the event of dissolution, its surplus and the assets will
         be given to a charitable organization with similar objectives.

                                                                       Sd/-
                                                              Deepak Garg
                                 Under Secretary to the Government of India
                                               (F.No.197/115/2004-ITA-I)"





4.     The petitioner applied for the renewal of the exemption under Section
10(23C)(iv) of the Act in the prescribed form (Form No.56 prescribed under rule
2C of the Income Tax Rules, 1962) for the assessment years 2006-2007, 2007-
2008 and 2008-2009. However, the petitioner received no response to the said
application.

5.     The petitioner, filed its return of income for the assessment year 2006-
2007 on 31.10.2006 and the return of income for the assessment year 2007-2008
on 31.10.2007. In both the returns, the assessee showed its taxable income as nil
and claimed exemption as available under Section 11 of the Act.

6.     On 07.05.2008, the petitioner once again made an application in the
prescribed form for renewal of the exemption under Section 10(23C)(iv) of the
Act for the assessment year 2009-2010. No response to this application was also
received by the petitioner at the material time. However, the Assessing Officer
took up the return filed by the petitioner for the assessment year 2006-2007 for
scrutiny and determined the total taxable income of the petitioner at




W.P.(C) Nos.3147/2012, 3148/2012 & 7181/2012                          Page 4 of 48
`33,47,92,000/- and computed the tax payable thereon at `14,96,59,474/- and
raised a demand accordingly.

7.     The petitioner was denied exemption under the Act on the ground that the
petitioner was holding coaching classes for preparing students for the
examinations being conducted by the petitioner and was charging fees for the
same. The Assessing Officer concluded that the activity undertaken by the
petitioner of providing coaching to students amounted to carrying on business
and income from the same was liable to be treated as business income. As the
petitioner was not maintaining separate books of accounts with respect to the
activity of coaching students, the Assessing Officer denied the petitioner's claim
under Section 11 of the Act. The Assessing Officer further held that the petitioner
had violated the provisions of Section 13(1)(d) of the Act as a balance of
`5,65,48,000/- was outstanding against ICAI Accountant Research Foundation in
the books of the petitioner. The Assessing Officer held that this represented an
amount invested or deposited which is not in accordance with the form or modes
specified under Section 11(5) of the Act and thus, the benefit of the exemption
under Section 11 of the Act was not available to the petitioner.

8.     It was contended on behalf of the petitioner before the Assessing Officer
that the petitioner was not carrying on any business and providing coaching to the
students was a part of its function of conducting a course in accountancy which
was not business and thus, would not disqualify the petitioner from the
exemption as available under Section 11 of the Act. The petitioner also
contended that the amount outstanding against the ICAI Accountant Research
Foundation was not an investment but the amount expended by the petitioner in
establishing another institute in furtherance of its object. The petitioner explained
that ICAI Accountant Research Foundation was a company registered under
Section 25 of the Companies Act, 1956 and intended to establish a university in



W.P.(C) Nos.3147/2012, 3148/2012 & 7181/2012                           Page 5 of 48
Rajasthan for education in the field of Accountancy. Research and imparting
education in the field of Accountancy was one of the objects for which the
petitioner had been constituted, accordingly, it was contended that the amount
expended by the petitioner and standing to the debit of ICAI Accountant
Research Foundation amounted to applying funds of the petitioner towards its
object and could not be considered as a deposit or investment made by the
petitioner. Both the contentions raised by the petitioner were rejected by the
Assessing Officer by the order dated 31.12.2008. The assessment order dated
31.12.2008 was carried in appeal by the petitioner before the CIT (Appeals).

9.     With respect to the assessment pertaining to the assessment year 2007-
2008, the Assessing Officer adopted a similar view as was adopted by the
Assessing Officer for the Assessment year 2006-2007 and denied the petitioner
benefit of exemption available under Section 11 of the Act and passed an
assessment order dated 30.12.2009 assessing the petitioner's taxable income at
`35,34,12,000/-. This assessment order was also carried in appeal by the
petitioner before the CIT (Appeals).

10.    In the meantime, the Commissioner of Income Tax passed an order dated
29.03.2010 under Section 263 of the Act holding that the Assessment order dated
21.08.2007 passed by the Assessing Officer with respect to the assessment year
2005-06 was prejudicial to the interest of the revenue and the petitioner could not
be allowed exemption under Section 10(23C)(iv) of the Act as the petitioner was
conducting coaching classes which according to the Commissioner of Income
Tax was not a charitable activity and would disentitle the petitioner from
claiming exemption under Section 11 of the Act.

11.    The petitioner approached the Income Tax Appellate Tribunal for setting
aside the said order and the Tribunal passed an order dated 18.10.2010 allowing



W.P.(C) Nos.3147/2012, 3148/2012 & 7181/2012                          Page 6 of 48
the appeal of the petitioner. The Tribunal held that the activity of the petitioner
revolved around the education and training for Chartered Accountancy and that
the view that coaching activity was not permissible under the Act was contrary to
the Act. The relevant extract of the decision of the Tribunal is quoted below:-

      "15. The Institute as such merely it is receiving coaching fee from
      students for imparting education, cannot be said to have been
      carrying on business and accordingly it is not required to maintain
      separate books of accounts as alleged by DIT(E). The income of the
      coaching classes earned by the assessee institute is within its objects
      and its Regulations and further these activities are educational
      activity within the definition of section 2(15) of the Income Tax Act,
      1961, and consequently therefore cannot be activity of business for
      which separate books of accounts are required to be maintained. The
      order of the learned DIT(E) is therefore not sustainable as the income
      of the Institute is exempt not only u/s 10(23C)(iv) but also under
      section 11. The institute is an educational institute and hence its
      income will also be exempt under section 11 as education falls
      within the meaning of charitable purpose under section 2(15) of the
      Act."

12.    An appeal was preferred on behalf of the revenue against the order dated
18.10.2010 passed by the Tribunal. This court rejected the appeal vide its
decision dated 19.09.2011 which is reported as Director General of Income Tax
(Exemptions) v. Institute of Chartered Accountants of India: [2012] 347 ITR
86 (Del). We are informed that a special leave petition has been preferred against
the order dated 19.09.2011 which is pending.

13.    The CIT (Appeals) also allowed the appeals preferred by the petitioner
against the assessment orders passed in respect of the assessment years 2006-07
& 2007-08. The revenue filed appeals before the Income Tax Appellate Tribunal
against the orders dated 31.12.2010 and 24.01.2011 passed by CIT (Appeals) in
respect of assessment years 2006-07 & 2007-08. The said appeals were also




W.P.(C) Nos.3147/2012, 3148/2012 & 7181/2012                           Page 7 of 48
dismissed by the Tribunal vide orders dated 09.01.2012 & 16.06.2011
respectively.

14.    The revenue filed an appeal under Section 260A of the Act against the
order dated 16.06.2011 passed by the Tribunal in respect of the assessment year
2007-08. The said appeal was disposed of by this court by an ex-parte order
dated 11.05.2012. This court held that the dominant purpose and objective of the
institute was to regulate the profession of Chartered Accountants in India. The
coaching facilities provided by the petitioner for its members and other students
are with the pre-dominant object of maintaining and upholding standards of the
profession of chartered accountancy and is in furtherance of the object for which
the petitioner has been established. This court further held that there was no
finding by the Assessing Officer that the pre-dominant object of the petitioner in
holding coaching classes was to generate profits. Special leave petitions have
been preferred both by the petitioner as well as by the revenue in the Supreme
Court which, we are informed, are pending.

15.    The DGIT(E) passed an order dated 19.05.2009 rejecting the application
dated 07.05.2008 filed by the petitioner seeking the notification under Section
10(23C)(iv) of the Act. The petitioner preferred the writ petition against the order
dated 19.05.2009 passed by DGIT(E) which was allowed by this court by the
judgment dated 19.09.2011 which is reported as The Institute of Chartered
Accountants of India and Anr v. Director General of Income Tax (Exemptions)
and Ors: [2012] 347 ITR 99 (Del). This court set aside the order dated
19.05.2009 passed by DGIT(E) and remanded the matter for consideration of
certain facts and aspects as well as further developments which had taken place
subsequent to the passing of the order dated 19.05.2009. The DGIT(E) passed a
remand order dated 13.04.2012 once again rejecting the petitioner's application
for exemption under Section 10(23C)(iv) of the Act and the said order is the



W.P.(C) Nos.3147/2012, 3148/2012 & 7181/2012                          Page 8 of 48
subject matter of challenge in Writ Petition No. 3148/2012. In the meantime, the
Assessing Officer has also passed an order dated 26.12.2011 denying the
exemption under Section 11 of the Act to the petitioner. The petitioner has
preferred an appeal against the assessment order dated 26.12.2011 which has
been allowed by CIT (Appeals) vide its order dated 31.01.2013.

16.    In respect to the assessment year 2008-2009, the Assessing Officer passed
an assessment order dated 27.12.2010 under Section 143(3) of the Act and
allowed the petitioner the exemption under Section 11 of the Act. The Assessing
Officer categorically found that the activities of the petitioner fell within the
ambit of Section 2(15) of the Act and further that the petitioner had complied
with the provisions of Section 11 of the Act. The Assessing Officer further held
that no violation of Section 13 of the Act was found. Although the proceedings
under Section 263 of the Act were initiated by the Commissioner of Income Tax
in respect of the assessment order dated 27.12.2010, however, it has been stated
by the learned counsel for the petitioner that the said proceedings have been
dropped and no order under Section 263 of the Act has been passed by the
Commissioner of Income Tax.

17.    In the myriad of all the proceedings as noted above, the central issue
remains the same, which is, whether the petitioner is an institution established for
charitable purposes having regard to the objectives of the institution. Charitable
purpose has been defined under Section 2(15) of the Act and the controversy
revolves around the question whether activities carried out by the petitioner fall
within the ambit of the definition of "charitable purpose". Another issue that also
needs to be considered is whether funds paid by the petitioner to ICAI
Accounting Research Foundation is in violation of Section 13 of the Act which
would disentitle the petitioner from claiming exemption under the Act.




W.P.(C) Nos.3147/2012, 3148/2012 & 7181/2012                          Page 9 of 48
18.     The course of Chartered Accountancy is a distance education programme
where study material is provided by the petitioner institute to all the students
undergoing the pre-qualification course. In order to facilitate further learning, the
petitioner institute also organizes class room instructions by way of
coaching/revisionary classes for students enrolled with it. The coaching and
revisionary classes are with respect to the curriculum approved by the petitioner
institute for various examinations. These coaching classes are with the object to
prepare the students for the examinations being conducted by the petitioner
institute.

19.     The petitioner institute charges fees ranging between ` 1,500/- to ` 2,500/-
for one group and ` 4,000/- to ` 6,000/- for both groups depending on the places
or cities where such classes are held. The Board of studies of the petitioner ­
institute has an expert faculty who conducts oral classes.

20.     The petitioner has contended that the coaching and revisionary classes are
conducted without any commercial motive and are a part of its object of
imparting education to the students registered with it. It is further contended that
students enrolled with the petitioner institute are provided with comprehensive
study material including model test papers and question banks for which no
separate fee is charged. These activities of the petitioner institute are stated to be
undertaken without any profit motive and in discharge of its statutory duties
under the ICAI Act.

21.     The petitioner institute has also asserted that it incurs administrative
expenses which include salaries paid to the staff employed at various branches of
the petitioner institute as well as depreciation on the assets situated at various
branches. The branches of the institute are the main centres for holding coaching
and revisionary classes. It is contended that the common administrative expenses




W.P.(C) Nos.3147/2012, 3148/2012 & 7181/2012                            Page 10 of 48
(including salaries and depreciation) incurred by the petitioner institute exceed
the surplus generated from the coaching facilities provided to the students.

22.    It has been contended on behalf of the petitioner that a large number of
students are enrolled with the petitioner and during the financial year ending
31.03.2012, 10,70,839 students appeared for examination conducted by the
petitioner institute. It has been further contended on behalf of the petitioner that
providing education to the students enrolled with the institute at the pre-
qualification stage as well as to member chartered accountants is the primary and
the main object of the petitioner institute and the activity of controlling and
regulating the conduct of the profession of chartered accountants is wholly
ancillary and incidental to its main object of providing formal education. It is,
thus, contended that the first proviso to Section 2(15) of the Act is wholly
inapplicable to the activity for providing education, thus, the exemption under
Section 10(23C)(iv) of the Act cannot be denied to the petitioner on account of
the petitioner institute holding coaching classes or carrying on certain incidental
activities for a fee.

23.    In the alternative, it is submitted that the objects and activities carried on
by the petitioner fall in two categories specified in the definition of the
expression "charitable purposes". The first category being "education" insofar as
the petitioner institute provides formal education and training to the students
undergoing the chartered accountancy course as well as post-qualification
courses such as corporate management, tax management, information system,
audit etc. The other category being "advancement of any other object of general
public utility" insofar as the petitioner controls and regulates the profession of
chartered accountants. It is contended that the activity of holding coaching
classes is an integral part of providing formal education and, thus, is relatable to




W.P.(C) Nos.3147/2012, 3148/2012 & 7181/2012                           Page 11 of 48
the first object of providing education to which the first proviso to section 2(15)
of the Act is wholly inapplicable.

24.    It is submitted by the petitioner that the amount expended by the petitioner
on account of ICAI Accounting Research Foundation does not violate Section 13
of the Act as ICAI Accounting Research Foundation is itself a charitable
institution as being the company incorporated under Section 25 of the Companies
Act, 1956 which cannot distribute profits to its members. It is further pointed out
that Section 15(2)(k) of the ICAI Act authorises the petitioner for giving financial
assistance to persons other than members of the council for carrying out research
in accountancy. The balance outstanding against ICAI Accounting Research
Foundation, thus, represents application of funds towards the objectives of the
petitioner institute and cannot be stated to be violative of Section 13 of the Act.
The petitioner has further placed reliance on assessment order dated 27.12.2010
wherein the Assessing Officer has accepted that the petitioner has not violated
section 13 of the Act.

25.    We have heard the counsel for the parties.

26.    Section 2(15) and Section 10(23C)(iv) of the Act are relevant and are
extracted hereunder:-

       "2. - Definitions.-In this Act, unless the context otherwise requires,--

       xxxx            xxxx            xxxx         xxxx           xxxx

       (15) `charitable purpose' includes relief of the poor, education,
       medical relief, preservation of environment (including watersheds,
       forests and wildlife) and preservation of monuments or places or
       objects of artistic or historic interest, and the advancement of any
       other object of general public utility:

       Provided that the advancement of any other object of general
       public utility shall not be a charitable purpose, if it involves the



W.P.(C) Nos.3147/2012, 3148/2012 & 7181/2012                              Page 12 of 48
       carrying on of any activity in the nature of trade, commerce or
       business, or any activity of rendering any service in relation to any
       trade, commerce or business, for a cess or fee or any other
       consideration, irrespective of the nature of use or application, or
       retention, of the income from such activity:

       Provided further that the first proviso shall not apply if the
       aggregate value of the receipts from the activities referred to therein
       is ten lakh rupees or less in the previous year."

       xxxx            xxxx            xxxx       xxxx          xxxx

       "10. Incomes not included in total income.-In computing the total
       income of a previous year of any person, any income falling within
       any of the following clauses shall not be included-

       xxxx            xxxx            xxxx       xxxx          xxxx

       (23C) any income received by any person on behalf of ­

       xxxx            xxxx            xxxx       xxxx          xxxx

       (iv) any other fund or institution established for charitable purposes
       which may be notified by the Central Government in the Official
       Gazette, having regard to the objects of the fund or institution and
       its importance throughout India or throughout any State of States".

27.    A plain reading of Section 2(15) of the Act indicates that expression
"charitable purpose" has been divided into six categories, namely, (i) relief to
poor, (ii) education, (iii) medical relief, (iv) preservation of environment
including water sheds (forest and wildlife), (v) preservation of monuments and
places or objects of artistic or historical importance, and (vi) advancement of any
other object of general public utility.

28.    Section 2(15) was substituted w.e.f. 01.04.2009. Prior to its substitution by
the Finance Act, 2008, section 2(15) as amended by the Finance Act, 1983 read
as under:-



W.P.(C) Nos.3147/2012, 3148/2012 & 7181/2012                           Page 13 of 48
       "15:- `Charitable purpose' includes relief to the poor, education,
       medical relief and the advancement of any other object of general
       public utility."

29.    Section 2(15) was substituted by the Finance Act, 2008 by introducing the
proviso, the effect of which was to exclude from the ambit of the expression
"charitable purpose" any activity which is in the nature of a trade, commerce or
business or any activity of rendering service in relation to any trade, commerce or
business for a fee or any other consideration.

30.    The issue whether the income of the petitioner is exempt under Section
10(23C)(iv) of the Act has to be considered by examining the provisions of the
ICAI Act, the functions performed and the activities carried on by the petitioner
and determining whether the same fall within the definition of the expression
`charitable purpose'.

31.    The petitioner - Institute of Chartered Accountant of India is a statutory
body established by the ICAI Act. Prior to enactment of the ICAI Act, in 1932
the Government of India had framed the Auditors Certificates Rules in 1932 in
exercise of the powers conferred by section 144 of the Indian Companies Act,
1913 and the profession of accountancy in India was regulated by those rules.
The Indian Accountancy Board used to advise Government in all matters relating
to the profession and assisted the Government in maintaining the standards of the
professional qualifications and the conduct required of the members of the
profession. The ICAI Act was enacted to constitute an autonomous association of
accountants to maintain standards of professional competence and regulate the
profession of chartered accountants. The Statement of objects and reasons for
enactment of the ICAI Act clearly indicates the object and purpose for which the
Petitioner Institute has been established and is quoted hereunder:




W.P.(C) Nos.3147/2012, 3148/2012 & 7181/2012                          Page 14 of 48
       "STATEMENT OF OBJECTS AND REASONS

               The accountancy profession in India is at present regulated by
       the Auditors Certificates Rules framed in 1932 in exercise of the
       powers conferred on the Government of India by section 144 of the
       Indian Companies Act, 1913, and the Indian Accountancy Board
       advises Government in all matters relating to the profession and
       assists it in maintaining the standards of the professional
       qualifications and conduct required of the members of the
       profession. The majority of the Board's members are elected by
       Registered Accountants members of the profession from all parts of
       India. These arrangements have, however, all long been intended to
       be only transitional, to lead up to a system in which such accountants
       will, in autonomous association of themselves, largely assume the
       responsibilities involved in the discharge of their public duties by
       securing maintenance of the requisite standard of professional
       qualifications, discipline and conduct, the control of the Central
       Government being confined to a very few specified matters.

              The Bill seeks to authorize the incorporation by statute of
       such an autonomous professional body and embodies a scheme
       which is largely the result of a detailed examination of the whole
       position by an ad hoc expert body constituted for the purpose, after
       taking into account the views expressed by the various Provincial
       Governments and public bodies concerned."

32.    The preamble of the ICAI Act also indicates that the purpose of the ICAI
Act was to make provision for the regulation of the profession of Chartered
Accountants. The relevant extract from the preamble of the ICAI Act is as
under:-
       "WHEREAS it is expedient to make provision for the regulation of
       the profession of chartered accountants and for that purpose to
       establish an Institute of Chartered Accountants;"

33.    The petitioner has been incorporated by virtue of Section 3 of the ICAI
Act as a body corporate constituted by all members whose names are entered in



W.P.(C) Nos.3147/2012, 3148/2012 & 7181/2012                         Page 15 of 48
the `register'. The register is defined under Section 2(i)(g) of the ICAI Act to
mean `register of members' maintained under the Act. Section 19 of the ICAI Act
provides for maintaining of register of members of the institute wherein, the
particulars of the members of the petitioner as specified are to be included.
Section 20 of the ICAI Act provides for power to remove the names of the
members from the register. By virtue of Section 7 of the ICAI Act, the
constituent members of the petitioner who are in practice are required to use the
designation of `Chartered Accountant' and no member of the petitioner is entitled
to practice the profession of Accountancy unless he has obtained a certificate for
practice from the petitioner.

34.    The petitioner institute functions through a Council constituted in terms of
Section 9 of the ICAI Act. The Council includes elected members of the
petitioner and also persons who are nominated by the Central Government. The
petitioner functions under the overall control, guidance and supervision of the
Council which is vested with the obligation to carry out the provisions of the
ICAI Act including the functions as specified under section 15(2) of the ICAI
Act. Section 15 of the ICAI Act is quoted below:-

       "15.- Functions of Council. - (1) The Institute shall function under
       the overall control, guidance and supervision of the Council and the
       duty of carrying out the provisions of this Act shall be vested in the
       Council.

       (2) In particular, and without prejudice to the generality of the
       foregoing powers, the duties of the Council shall include:

       (a) to approve academic courses and their contents ;

       (b) the examination of candidates for enrolment and the prescribing
           of fees therefor.

       (c) the regulation of the engagement and training of the articled and
           audit assistants;



W.P.(C) Nos.3147/2012, 3148/2012 & 7181/2012                          Page 16 of 48
       (d) the prescribing of qualifications for entry in the Register;

       (e) the recognition of foreign qualifications and training for the
           purposes of enrolment ;

       (f) the granting or refusal of certificates of practice under this Act.

       (g) the maintenance and publication of a Register of persons
           qualified to practice as chartered accountant ;

       (h) the levy and collection of fees from members, examinees and
           other persons ;

       (i) subject to the orders of the appropriate authorities under the Act,
           the removal of names from the Register and the restoration to
           the Register of names which have been removed;

       (j) the regulation and maintenance of the status and standard of
           professional qualifications of members of the Institute ;

       (k) the carrying out by granting financial assistance to persons other
           than members of the Council or in any other manner, of research
           in accountancy;

       (l) the maintenance of a library and publication of books and
           periodicals relating to accountancy ;

       (m) to enable functioning of the Director (Discipline), the Board of
           Discipline, the Disciplinary Committee and the Appellate
           Authority constituted under the provisions of this Act;

       (n) to enable functioning of the Quality Review Board;

       (o) consideration of the recommendations of the Quality Review
           Board made under Clause (a) of Section 28B and the details of
           action taken thereon in its annual report ;and

       (p) to ensure the functioning of the Institute in accordance with the
           provisions of this Act and in performance of other statutory
           duties as may be entrusted to the Institute from time to time."


35.    The petitioner conducts academic courses which leads successful students
completing the courses to be eligible for being inducted as members of the



W.P.(C) Nos.3147/2012, 3148/2012 & 7181/2012                              Page 17 of 48
petitioner. The petitioner has specified the code of conduct and ethics which are
required to be followed by its members in practice of the profession of
accountancy. In addition, the petitioner as an expert body also prescribes the
accounting principles, practices and standards which are required to be followed
by various entities in reporting their affairs.

36.    The functions of the Council as are listed in Section 15(2) of the ICAI Act
are not exhaustive as indicated by the opening words of Section 15(2) of the ICAI
Act and the Council, thus, has the power to take all necessary actions and conduct
all activities that are necessary for developing and regulating the profession of
public accountants in India.

37.    The petitioner is the only body that can confer the qualification of a
Chartered Accountant to any person successfully undergoing courses which are
designed and conducted by the institute. No other person is entitled to confer any
degree, diploma or bestow any designation which would indicate attainment of
any qualification or competence as similar to that of a member of the petitioner.
Section 24A(1)(ii) of the ICAI Act is relevant and is quoted below:-

       "24A. Penalty for using name of the Council, awarding degrees
       of chartered accountancy, etc.- (1) Save as otherwise provided in
       this Act, no person shall-
       (i)     xxxxx           xxxxx           xxxxx   xxxxx
       (ii)    award any degree, diploma or certificate or bestow any
               designation which indicates or purports to indicate the
               position or attainment of any qualification or competence
               similar to that of a member of the Institute: or
       (iii)   xxxxx           xxxxx           xxxxx   xxxxx"




W.P.(C) Nos.3147/2012, 3148/2012 & 7181/2012                           Page 18 of 48
38.    Section 30 of the ICAI Act empowers the council to make regulations for
carrying out the objects of the ICAI Act, inter alia with respect to the matters as
specified in Section 30(2). Section 30 of the Act is relevant and is quoted below:

       "30. - Power to make regulations. ­ (1) The Council may, by
       notification in the "Gazette of India", make regulations for the
       purpose of carrying out the objects of this Act.
       (2) In particular, and without prejudice to the generality of the
       foregoing power, such regulations may provide for all or any of the
       following matters :-
         (a) the standard and conduct of examinations under this Act;

         (b) the qualifications for the entry of the name of any person in
             the Register as a member of the Institute;

         (c) the conditions under which any examination or training may
             be treated as equivalent to the examination and training
             prescribed for members of the Institute;

         (d) the conditions under which any foreign qualification may be
             recognised;

         (e) the manner in which and the conditions subject to which
             applications for entry in the Register may be made;

         (f)   the fees payable for membership of the Institute and the
               annual fees payable by associates and fellows of the Institute
               in respect of their certificates;

         (g) the manner in which elections to the Regional Councils may
             be held;

         (h) the particulars to be entered in the Register;

         (i)   the functions of Regional Councils;

         (j)   the training of articled and audit assistants, the fixation of limits
               within which premia may be charged from articled assistants




W.P.(C) Nos.3147/2012, 3148/2012 & 7181/2012                                Page 19 of 48
               and the cancellation of articles and termination of audit
               service for misconduct or for any other sufficient cause;

         (k) the regulation and maintenance of the status and standard of
             professional qualifications of members of the Institute;

         (l)   the carrying out of research in accountancy;

         (m) the maintenance of a library and publication of books and
             periodicals on accountancy;

         (n) the management of the property of the Council and the
             maintenance and audit of its accounts;

         (o) the summoning and holding of meetings of the Council, the
             times and places of such meetings, the conduct of business
             there at and the number of members necessary to form a
             quorum;

         (p) the powers, duties and functions of the President and the
             Vice-President of the Council;

         (q) the functions of the Standing and other Committees and the
             conditions subject to which such functions shall be
             discharged;

         (r)   the terms of office, and the powers,duties and functions of the
               Secretary and other officers and servants of the Council; and

         (s)   xxxx            xxxx            xxxx     xxxx           xxxx

         (t)   any other matter which is required to be or may be prescribed
               under this Act.

39.    All regulations made by the council under the ICAI Act require
publication and prior approval of the Central Government. In exercise of the
powers, the council has published the Chartered Accountants Regulations, 1988
which provide for regulations for training of the students, their examination,
award of the certificates, and enrolment of the members of the petitioner institute.



W.P.(C) Nos.3147/2012, 3148/2012 & 7181/2012                           Page 20 of 48
40.    The present scheme for a student to be enrolled as a chartered accountant
is as under:-

       (i)      A student has to enroll with the institute for Common
       Proficiency Test (CPT) after passing class 10th examination
       conducted by an examining body constituted by law in India or an
       examination recognised by the Central Government as equivalent
       thereto.

       (ii)     On enrolment a student is provided with the study material
       for the Common Proficiency Test.

       (iii)    A student may take the CPT Examination after he has
       appeared in Sr. Secondary Examination (10+2) Examination and
       after completing the period of 60 days from the date of registration
       for CPT with the board of studies.

       (iv)     After clearing the CPT, a student joins the Integrated
       Proficiency Competence Court (IPCC) /Accounting Technician
       Court (ETC) and registers for 100 hours of Information Technology
       Training (ITT).

       (v)      A student has to undergo 100 hours of ITT and appear in
       IPCC examination which is divided into two groups. The student can
       appear for IPCC after completion of a specified period of study
       course. After clearing group I of IPCC a student is eligible to enroll
       as an article clerk for practical training, the duration of which is
       three years.




W.P.(C) Nos.3147/2012, 3148/2012 & 7181/2012                          Page 21 of 48
       (vi)    After the student has cleared both the groups of IPCC, he has
       to enroll for the final course with the board of studies and he is
       provided study material for the final examination. Student also has to
       undergo the course of General Management Skills while studying for
       his final course and can appear for the final examination which
       serving the last six months of his article training or thereafter.

       (vii)   On passing the final examination and completing the article
       training or thereafter, a student is eligible to be enrolled as a member
       of the petitioner institute.

41.    The petitioner institute has not only approved and designed the course and
the training required to a student to obtain the proficiency in accountancy but also
imparts education in the subjects comprising the curriculum for the examinations
conducted by the petitioner institute. In addition, the petitioner institute also
conducts post qualification courses in Corporate Management, Tax Management
and Information System Audit and awards certificates/degrees to the students on
successfully completing the said courses. There are several other workshops and
post qualification courses that are conducted by the petitioner institute for the
benefit of its members for maintaining and improving the professional standards
of chartered accountants.

42.    Indisputably, substantial activity of the petitioner institute revolves around
providing education to students for the purposes of feeding the profession of
Chartered Accountancy in India. It is only those students who successfully
undergo the courses conducted by the petitioner who are eligible to practice the
profession of a Chartered Accountant in India. The special programmes also
include providing coaching classes to students to enable them to attain the
requisite level of proficiency in various subjects forming the course as approved




W.P.(C) Nos.3147/2012, 3148/2012 & 7181/2012                                Page 22 of 48
by the petitioner. This Court in the case of Institute of Chartered Accountants of
India v. Director General of Income Tax (Exemptions) (supra) while disposing
of writ petition no. 1927/2010 and remanding the matter to the respondent
DGIT(E) also held that the petitioner was providing education and the conduct of
the courses by the petitioner could not be equated or categorized as coaching
classes conducted by private institutions for students to appear in entrance
examination or for pre-admission in examinations being conducted by
universities and other Institutions. This Court further held that a private coaching
institute does not have any statutory or regulatory duty to perform and in this
aspect, the case of the petitioner was different and the activities undertaken by the
petitioner satisfied the term `education'. The relevant extract of the said judgment
is as under:-

        "36. It may be noted that the petitioner-Institute provides
        education and training in their post-qualification courses,
        corporate management, tax management and information system
        audit. It awards certificates to members of the Institute who
        successfully complete the said courses. Post-qualification diploma
        courses are also conducted in several fields. The examination
        conducted by the petitioner institute consists of Common
        Proficiency Test, Professional Education Examination,
        Professional Competence Examination, Accounting Technician
        Course, Integrated Professional Competence Course, final and
        post-qualification courses. The conduct of these courses cannot be
        equated and categorized as mere coaching classes which are
        conducted by private institutes to prepare students to appear for
        entrance examination or for pre-admission or examinations being
        conducted by the universities, school-boards or other professional
        examinations. The courses of the institute, per se, it does appears
        cannot be equated to a private coaching institute. There is a clear
        distinction between coaching classes conducted by private
        coaching institutions and the courses and examinations which are
        held by the petitioner-Institute. The decision, in the case of Bihar
        Institute of Mining and Mine Surveying [1994] 208 ITR 608
        (Patna) is not applicable. A private coaching institute has no
        statutory or regulatory duty to perform. It cannot award degrees or



W.P.(C) Nos.3147/2012, 3148/2012 & 7181/2012                           Page 23 of 48
        enroll members as Chartered Accountants. These activities
        undertaken by the petitioner-institute satisfies the requirement of
        the term "education" as defined by the Supreme Court in Sole
        Trustee, Loka Shikshana Trust [1975] 101 ITR 234 (SC)."

43.    Although, this Court has held that the activities of the petitioner fell within
the term "education", it was nonetheless held that the petitioner institute fell
under the category of "advancement of any object of general public utility" as the
petitioner is a statutory body constituted under the ICAI Act and its fundamental
or dominant object was to exercise control and regulate the activities of Chartered
Accountants in India. The relevant finding of this court is as under:

       "6. The petitioner-institute will fall under the sixth category, i.e.,
       advancement of any other object of general public utility. The
       petitioner-institute cannot be regarded as an educational institute as
       the petitioner's main or predominant objective is to regulate the
       profession of, and the conduct of, Chartered Accountants enrolled
       with them. The petitioner is a statutory authority under the
       Chartered Accountants Act, 1949 ("the CA Act") and its
       fundamental or dominant function is to exercise overall control and
       regulate the activities of the members/enrolled chartered
       accountants. This is apparent from the CA Act and the regulations
       framed under the said Act."

44.    This Court while dismissing the appeal (ITA no. 274/2012) preferred by
the revenue under section 260A of the Act against the order dated 16.06.2011
passed by the Tribunal in relation to the Assessment year 2007-08 by its
judgment dated 11.5.2012 held as under:

       "As held by this Court in its decision dated 19.9.2011 in Writ
       Petition No.1927/2010 entitled as Institute of Chartered Accountants
       of India v. DIT, Delhi and Others, the dominant purpose and
       objective of the Institute is to regulate the profession of chartered
       accountants in India and for this purpose it holds entrance
       examination, regulates the conduct of the members and prescribes
       and fixes the accountancy standards etc. No doubt, the assessee



W.P.(C) Nos.3147/2012, 3148/2012 & 7181/2012                            Page 24 of 48
       holds classes and provides coaching facilities for the members and
       articled clerks etc. who want to appear in the examination conducted
       by the Institute of Chartered Accountants, but these classes are not
       held for coaching or for appearance in an examination conducted by
       some other entity / body. Conducting of coaching classes is with the
       predominant object of maintaining and upholding the standards of
       the accountancy profession and in furtherance of the object and
       purpose for which the institute is established, i.e., professional
       excellence and promotion of accountancy as a preferred profession.
       Members of petitioner Institute attend courses/lectures etc. to
       sharpen their skill and knowledge. These are ancillary activities to
       the main activity performed and the object for which the institute
       has been established."

45.    Given the aforesaid findings, the issue whether the petitioner was entitled
to exemption under section 10(23C)(iv) of the Act prior to 01.04.2009 is no
longer res integra and the said issue stands concluded in favour of the petitioner
as its activities fell within the definition of `charitable purpose' as it existed prior
to 01.04.2009. The only question that remains to be considered is whether the
activities of the petitioner fall in the proviso to Section 2(15) as introduced w.e.f.
01.04.2009.

46.    The first proviso to Section 2(15) of the Act carves out an exception which
excludes advancement of any other object or general public utility from the scope
of charitable purpose to the extent that it involves carrying on any activity in the
nature of trade, commerce or business or any activity of rendering certain
services in relation to any trade, commerce or business, for a cess or fee or any
other consideration is irrespective of the nature of the use or obligation, or
retention of the income from such activity.

47.    This court on the earlier occasion had considered the entire controversy
and after elucidating the legal principles had remanded the matter to the
respondent for a limited purpose for considering and examining the submissions



W.P.(C) Nos.3147/2012, 3148/2012 & 7181/2012                              Page 25 of 48
made by the petitioner with regard to the expenses incurred by the petitioner and
for answering the question whether the petitioner was carrying on any business,
trade or commerce in the light of the observations and finding made by this court
in its judgment The Institute of Chartered Accountant of India v. Director
General of Income-tax (Exemption) (supra). This court had remanded the
matter, inter alia, on the grounds that the figures with respect to the fee charged,
expenditure and profits had been disputed by the petitioner institute. We find
from the impugned order that DGIT(E) has failed to follow the legal principles
and the observations made by this court while remanding the matter. The
DGIT(E) was required to consider the submissions made by the petitioner which
had been quoted by this court while remanding the matter and are quoted
hereunder for convenience:-

       "31. The assessee-Institute does not get any grant from any source
       and the only source of its income is fees received from its members
       and students. For providing quality education to its students, the
       assessee-Institute charges very nominal fees from its students and in
       turn provides them with the study material, course modules,
       infrastructural facilities, library services, books/reading material,
       web based teaching e-learning, facility of interaction with faculty,
       etc. This is done purely on a charitable basis, without any profit
       motive, and in terms of its statutory duties and obligations under the
       Chartered Accountants Act, 1949, and the Regulations made there
       under.
       32. The receipts from holding such coaching/revisionary classes are
       also accompanied with various expenses, which are shown as
       coaching/revisionary expenses in the financial statements. These
       expenses are in the nature of rental of premises, payment of
       faculties, hiring charges of projectors, etc., printing and stationery,
       cost of study material, entertainment expenses, etc. Further, the
       amount of expenditure incurred for these classes are not inclusive of
       other common expenditure, which includes the cost of free study
       material issued to the students for the purpose of
       coaching/revisionary classes.




W.P.(C) Nos.3147/2012, 3148/2012 & 7181/2012                          Page 26 of 48
       33. Such common administrative expenses also include, inter alia,
       depreciation on assets installed and salaries paid to the staff
       employed by the branches of the Institute, which are the main
       centres for holding coaching and revisionary classes for the students
       enrolled for the chartered accountancy course throughout the
       country, as per details given in paragraph 4 of the supplementary
       affidavit sworn on behalf of the Institute on March 17, 2010, and
       already filed in this Hon'ble court earlier, which details are again set
       out hereunder for ready reference:


          Financial years    Salaries          (Rs. in lakhs)     Total
                                               Depreciation
          2003-04            55.27              51.64             106.91
          2004-05            66.38              54.32             120.70
          2005-06            85.96              73.04             159.00
          2006-07            81.51              118.77            200.28
          2007-08            98.40              226.54            324.94
          2008-09            136.94             467.48            604.42


       34. The common administrative expenses referred to hereinabove
       are far more than the so called surplus directly arising in providing
       the coaching facilities to the students, as set out in the table
       appearing under paragraph 5 of the impugned order dated May 19,
       2009, passed by respondent No. 1 herein under section 10(23C)(iv)
       of the Income-tax Act, 1961 (kindly see pages 76-83 of the instant
       WP, and in particular at page 80 thereof. The said table is also
       setout hereunder for ready reference:


            Assessment       Fees charged           Direct        Direct surplus
               year          for providing        expenditure       arising in
                            coaching (Rs. in      incurred in       providing
                                 lakhs)          coaching (Rs.    coaching*(Rs.
                                                   in lakhs)         in lakhs)
            2002-03         115.36              68.03            47.33
            2003-04         178.51              96.63            81.88
            2004-05         192.08              110.46           81.62
            2005-06         237.11              133.14           103.97
            2006-07         228.40              139.95           88.45
            2007-08         301.90              164.75           137.15
            2008-09         385.99              172.18           213.81



W.P.(C) Nos.3147/2012, 3148/2012 & 7181/2012                                Page 27 of 48
       35. The surplus generated out of the activities of the institute is
       utilized towards the infrastructure development and other
       students/members related activities. It is not a commercial or
       business income and no part of the surplus is being utilized for the
       purposes other than the purposes specified in the Chartered
       Accountants Act. The whole of the income is utilized directly or
       indirectly for the development and benefits of the persons pursuing
       and who have already pursued the chartered accountancy course.

       36. No amount of the surplus, in any manner, can be distributed or
       utilized for any activity other than the activities specified within the
       charter of the assessee-Institute.
       37. In the facts and circumstances stated hereinabove, holding of
       these coaching and revisional classes is not a business or commercial
       activity; it is wholly incidental and ancillary to the objects of the
       assessee-Institute for providing education and conducting
       examinations of the candidates enrolled for chartered accountancy
       course, so as to bring out the true professionals, as part of its main
       objectives."

48.    In addition, the DGIT(E) was also required to examine the facts relating to
the funds paid by the petitioner institute to Jaipur Development Authority and the
Government of Rajasthan which had been reflected as debit balance against ICAI
Accounting Research Foundation. ICAI Accounting Research Foundation had
been incorporated by the petitioner institute with the object to impart training,
promote knowledge, learning and education in various fields relating to
accountancy and the funds paid by the petitioner were for the purposes of
establishing a university in Rajasthan. In the impugned order, the DGIT(E) has
not given any finding that the funds paid by the petitioner institute violate Section
13 of the Act.

49.    On remand, the DGIT(E) has passed the impugned order dated
13.04.2012, holding that the petitioner's activity of conducting classes is purely a
commercial activity. The DGIT(E) has proceeded on the basis that the functions




W.P.(C) Nos.3147/2012, 3148/2012 & 7181/2012                           Page 28 of 48
of ICAI are similar to the functions performed by UPSC and held that the
position of ICAI, in providing coaching classes to its students was similar to the
position of private organisations imparting similar training to the aspirants. The
relevant extract from the impugned order is as under:-


        "8. The function of ICAI may be considered similar to functions in
        the administrative governance which are performed by UPSC. At
        state level the State Public Service Commissions are rendering such
        services. This examination conducted by UPSC is the backbone of
        civic governance. The functions of ICAI are in the field of financial
        governance of the country and economy. Now just imagine a
        situation wherein UPSC also starts coaching for the aspirants of
        civil services with the arguments that this is being done in order to
        improve the quality of the administrators or civil servants. It is well
        known fact that many of such institutes in the private capacity are
        working in this field. Coaching by UPSC itself to the aspirants of
        civil services can be a very reprehensive act and will not be
        acceptable to the society or the government. This may also
        undermine the dignity of the UPSC and also affect the quality
        adversely. Since those aspirants who get training in the branches of
        training centers managed by UPSC will have special advantages in
        much respect like probable questions, change of trend & so on.
        These candidates will have access to the inner policies and
        perspectives of the UPSC and will be in special advantageous
        position vis-à-vis the other candidates who are not availing such
        grooming/training or are being trained by other private
        organization/institutes. The importance of the work can be judged
        from the fact that a special place has been assigned to the UPSC in
        constitution. This is also the case with ICAI which has been created
        by the Act of Parliament. When ICAI is also conducting classes by
        recruiting/engaging the teachers locally and charging fees for the
        services which is also being done by other private
        persons/organizations for a fee or profit motives, then there is no
        difference between this activity of ICAI and the private business
        organizations. This is not the case that ICAI is upgrading the skill



W.P.(C) Nos.3147/2012, 3148/2012 & 7181/2012                           Page 29 of 48
        of the Chartered Accountants who have already qualified the
        examination and are regular chartered accountant, by seminars and
        such training which upgrades their skill and so there is spread of
        higher level of learning or training. In fact, once the examinations
        are conducted the examination body should not have any
        connection with such type of training to avoid the kind of bias
        which may creep in unknowingly for training and improvement of
        the skills may be necessary as in the case of civil servants which
        should affect the examination part. So, the above comparison
        clearly indicates that the sort of action/conducting of classes for
        preparing the aspirants for chartered accountant examination are
        purely commercial activities and there is no difference between the
        activity    done     by    ICAI     and      such    other   private
        organization/individuals who are also imparting training to such
        aspirants."

50.    The DGIT(E) held that the petitioner institute had received fees for
holding interviews with respect to campus placement program and this also
amounted to the petitioner working as a service provider between the members
and the industry and were similar to the activities undertaken by any placement
agency providing manpower to the industry.

51.    The DGIT(E) further held that the petitioner's contention that it was
charging very nominal fee could not be considered as a charitable purpose as
there was no specific arrangement for poor or needy candidates to get coaching
from the institute without payment of fees. The DGIT(E) held that in order to fall
within the definition of charitable purpose under the Act, it was necessary that the
welfare and interest of public and specially poor section of the public be taken
care of and since the fees structure of the petitioner institute remained the same
for all categories of students and no arrangement was made by the petitioner
institute for providing free coaching or coaching at concessional rate to poor




W.P.(C) Nos.3147/2012, 3148/2012 & 7181/2012                          Page 30 of 48
section of the society, the petitioner could not be stated to be involved in charity.
In this regard the relevant extract from the impugned order is quoted below:-

        "The applicant's contention that it provides coaching at a very
        nominal fee cannot be ground for regarding it as a Charitable
        Institution. Section 2(15) defines "charitable purpose" for availing
        the benefits of section 11 & 12 of the I.T. Act, 1961 that an
        assessee must be carrying on charitable activities. The inclusive
        definition of charitable purpose states among other things, relief
        of the poor, education, and medical relief etc. are in the nature of
        charitable purpose. The concept of charitable purpose may be
        manifested in different forms like relief of the poor; education,
        medical relief etc. but a charitable purpose should always take
        care of the welfare and interest of the public and especially the
        poor section of the public. The fee structure for coaching as
        explained by the institute is for all categories of
        students/candidates enrolled with the institution. In other words,
        there is no arrangement made by the institute to provide free
        coaching or coaching at concessional rates to the poor section of
        the society. If fee is similar to all the candidates, then how it can
        be said that the institute is doing charity in the field of education
        by taking care of the welfare and interest of the students enrolled
        from poor section of the society. It cannot be ruled out that many
        candidates/students enrolled with the institution must have come
        from remote areas and do not have enough money to compete
        with the candidates coming from urban areas and having strong
        financial backgrounds. The institute has no specific arrangement
        for these candidates to get coaching from the institute without
        paying any fees or fees at concessional rates. Therefore, it cannot
        be said that the institute is doing any charity in the field of
        education. As explained above, it is only working like a private
        organization / institute providing coaching to its students /
        candidates for preparing for CA examination for which fee is
        charged. The coaching is being provided against fee and is




W.P.(C) Nos.3147/2012, 3148/2012 & 7181/2012                           Page 31 of 48
        therefore squarely covered by the proviso to section 2(15) of the
        Act."


52.    The DGIT(E) vide impugned order held that the ratio of the decision of the
Patna High Court in the case of Bihar Institute of Mining and Mine Surveying
v. CIT: (1994) 208 ITR 604 (Patna) squarely covered the facts of the petitioner
institute and therefore, the petitioner was liable to be taxed as a commercial
establishment. The relevant finding of the DGIT(E) is as under:-

       "As it is on the same line as any other coaching institute, the case of
       Bihar Institute of Mining and Mine Surveying v. CIT (1994) 2008
       ITR 604 (Patna) squarely covers of the fact of the applicant and
       therefore to be taxed as commercial establishment."


53.    We find that the entire approach of the DGIT(E) in passing the impugned
order is erroneous and runs contrary to the findings and observations of this court
while remanding the matter to DGIT(E). This court held that the petitioner
institute fell within the category of "advancement of any object of general public
utility". As such the petitioner would be an institution established for charitable
purposes unless it is excluded by the application of the first proviso to Section
2(15) of the Act. The first proviso carves out an exception and excludes
"advancement of any object of general public utility" from the ambit of charge to
the extent any activity is carried on in the nature of trade, commerce or business,
or any activity of rendering any service in relation to any trade, commerce or
business for a cess or a fee or any other consideration. This court had while
remanding the matter examined in detail the meaning of the terms "trade",
"commerce" and "business" and directed the DGIT(E) to apply the said
principles. This court has expressly held that the decision in the case of Bihar
Institute of Mining and Mine Surveying (supra) was not applicable. The private




W.P.(C) Nos.3147/2012, 3148/2012 & 7181/2012                           Page 32 of 48
coaching concerns did not have a statutory or regulatory duty to perform and
thus, coaching classes being provided by the petitioner could not be categorised
as mere coaching classes conducted by a private institute. This court had set aside
the order dated 19.05.2009 passed by DGIT(E) wherein reliance had been placed
on the decision of Patna High Court in the case of Bihar Institute of Mining and
Mine Surveying (supra). However, we find that despite an express finding of this
court that the said decision was not applicable to the facts of the present case, The
DGIT(E) has proceeded to hold to the contrary. It is, thus, apparent that DGIT(E)
has failed to comprehend the decision or the directions of this court while
remanding the matter.

54.    The expression "trade" was discussed by the Supreme Court in its decision
in the case of Khoday Distilleries Ltd. v. State of Karnataka: (1995) 1 SCC 574.
In the said case, Supreme Court held as under:-

       "68. There is no doubt that the word "business" is more
       comprehensive than the word "trade" since it will include
       manufacture which the word "trade" may not ordinarily include. The
       primary meaning of the word "trade" is the exchange of goods for
       goods or goods for money."


55.    The Supreme Court has further considered the expression "business" in
the case of State of Andhra Pradesh v. H. Abdul Bakhi and Bros.: (1964) 15
STC 644 (SC), wherein it was held that the expression business was of indefinite
import and in the taxing statute it is used for the sense of occupation and
profession which occupies time, attention or labour of a person and is clearly
associated with the object of making profit.


56.    In the case of Institute of Chartered Accountants in England & Wales v.
Customs and Excise Commissioners :(1999) 1 W.L.R. 701, the House of Lords




W.P.(C) Nos.3147/2012, 3148/2012 & 7181/2012                           Page 33 of 48
also examined the expression `business' with reference to the question whether
the Institute of Chartered Accountants in England & Wales was carrying on
"economic activity" for the purpose of the Value Added Tax, 1994 and held as
under:-

          "Although differences between them may arise, it seems to me that
          the Appellants were right in their case to accept that "The
          expression business, it is accepted, represents economic activity".
          It is not necessarily sufficient (though it may often be sufficient in
          different contexts) that money is paid and a benefit obtained,
          performing on behalf of the state this licensing function is not the
          carrying on of a business.
          In relation to the Directive, the tribunal said: "Any regulatory
          activity carried out under a statutory power for the purpose of
          protecting the public by supervising and maintaining the standard of
          practitioners in, for example, the Financial Services field fall on the
          other side of the line from economic activities.
          In the present case, I agree that that is entirely right and the same
          goes for "business" in the context of these three Statutes."


57.    After discussing various decisions with regard to the scope of the words
trade, commerce & business, this court in The Institute of Chartered Accountant
of India v. Director General of Income-tax (Exemption) (supra) held that while
construing the term business for the purpose of Section 2(15) of the Act the
object and purpose of the Section must be kept in mind and a broad and extended
definition of business would not be applicable for the purpose of interpreting and
applying the first proviso to Section 2(15) of the Act. The relevant extract of the
said judgment is as under:-

        "Section 2(15) defines the term "charitable purpose". Therefore,
       while construing the term "business" for the said section, the object
       and purpose of the section has to be kept in mind. We do not think
       that a very broad and extended definition of the term "business" is
       intended for the purpose of interpreting and applying the first



W.P.(C) Nos.3147/2012, 3148/2012 & 7181/2012                             Page 34 of 48
       proviso to section 2(15) of the Act to include any transaction for a
       fee or money. An activity would be considered "business" if it is
       undertaken with a profit motive, but in some cases this may not be
       determinative. Normally, the profit motive test should be satisfied
       but in a given case activity may be regarded as business even when
       profit motive cannot be established/proved. In such cases, there
       should be evidence and material to show that the activity has
       continued on sound and recognized business principles, and pursued
       with reasonable continuity. There should be facts and other
       circumstances which justify and show that the activity undertaken is
       infact in the nature of business. The test as prescribed in Raipur
       Manufacturing Company [1967] 19 STC 1 (SC) and Sai Publication
       Fund [2002] 258 ITR 70 (SC) ; [2002] 126 STC 288 (SC) can be
       applied. The six indicia stipulated in Lord Fisher [1981] STC 238
       are also relevant. Each case, therefore, has to be examined on its
       own facts."

58.    In the case of Commissioner of Sales Tax v. Sai Publication Fund:[2002]
258 ITR 70 (SC), the Supreme Court while interpreting the word "business" in
the context of Section 2(5A) of the Bombay Sales Tax Act, 1959 held that the
inclusion of incidental or ancillary activity in the definition of business pre-
supposes the existence of trade, commerce and business. Thus, if the dominant
activity of the assessee was not business then any incidental or ancillary activity
would also not fall within the definition of business. In that case, the Supreme
Court was examining the issue whether the activity of the trust in bringing out
and selling a publication to spread the message of Sai Baba would make the
assessee trust a dealer. The Supreme Court also referred to various other
decisions wherein it was held that if the principal object or purpose of an assessee
was not business then an incidental activity would also not be exigible to sales
tax and constitute the assessee as a dealer. In the case of State of Gujarat v.
Raipur Manufacturing Co. Ltd.: (1967) 19 STC 1 (SC), the Supreme Court held
that in order for any activity to be considered as business, there must be a course




W.P.(C) Nos.3147/2012, 3148/2012 & 7181/2012                          Page 35 of 48
of dealings either actually continued or contemplated to be continued with the
motive to earn profit and not for sport or pleasure.

59.    This court while remanding the matter quoted the relevant passages from
the decisions of the Supreme Court in the case of Raipur Manufacturing Co.
(supra) and Sai Publication Fund (supra) and held that the test as prescribed in
the said decisions can be applied to determine whether the petitioner institute was
carrying on any business, trade or commerce. The DGIT(E) has completely
ignored the said observations of this court and has proceeded to mechanically
hold that the activities of the petitioner institute amounted to carrying on
business. This, in our view, is completely erroneous.

60.    The petitioner institute has been constituted under the ICAI Act with the
object to regulate the profession of Chartered Accountants in India and to ensure
that the standards of professional knowledge and skill are met and maintained.
The activities being undertaken by the petitioner substantially involve imparting
education in the field of accountancy in order to ensure that the standards or
profession of accountancy are maintained. The petitioner institute is the sole body
empowered to conduct or approve a course in the field of accountancy. No other
person can conduct any course or award any degree or certificate which indicates
a level of proficiency or competence in the field of accountancy similar to that as
of a chartered accountant. The activity of petitioner in conducting coaching
classes is integral to the activity of the petitioner institute in conducting the
courses in accountancy.

61.    The coaching classes being conducted by the petitioner cannot be equated
with private coaching classes being conducted by organisations on commercial
basis for preparing students to undertake entrance or other examinations in
various professional courses. The coaching carried on by private organisations



W.P.(C) Nos.3147/2012, 3148/2012 & 7181/2012                          Page 36 of 48
are not integral to the courses being conducted by them but for preparing students
for examinations being conducted by other institutes and universities. In the case
of the petitioner institute, the coaching classes are integral to the curriculum of
the programme being conducted by the petitioner institute.




62.    The comparison of the petitioner institute with UPSC (Union Public
Service Commission) is also, in our view, not apposite. Whereas UPSC conducts
an examination for the purpose of selection of candidates for employment into
service and is required to be consulted by the Governments with regard to various
matters as specified in Article 310 of the Constitution of India, the petitioner
institute conducts an education programme and provides not only theoretical
knowledge but also practical knowledge. The object of the study programme or
post-qualification courses being conducted by the petitioner institute is to impart
knowledge and skill in the field of accountancy and related subjects to students
and the same is not similar to the function as performed by UPSC. In our opinion,
the DGIT(E) erred in proceeding on the basis that the object of the petitioner was
limited to conducting examinations for a selection process enabling the
successful candidates to be selected as chartered accountants. The impugned
order completely ignores the nature of the educational programme being
conducted by the petitioner which includes not only designing of the course,
imparting of training, providing study material but also instructions by an expert
faculty.

63.    We are also unable to agree with the reasoning of the DGIT(E) that
holding interviews for a fee for the purposes of campus placement of its students
amounts to carrying on a business. Campus placement is only a small incidental
activity carried on by the petitioner institute like several other universities for
placement of their students in gainful employment. This too is an activity
ancillary to the educational programme being conducted by the petitioner



W.P.(C) Nos.3147/2012, 3148/2012 & 7181/2012                          Page 37 of 48
institute and cannot be considered as a business being carried on by a placement
agency. The object of the petitioner institute is not to carry on such business but
to assist its students in securing employment. In this case, the object with which
the activity of campus placement is carried on would determine its nature and the
same is our view is not business, trade or commerce.

64.    The reasoning of the DGIT(E) that since the petitioner institute charges a
uniform fee from all students for providing coaching classes, thus, it cannot be
said to be carrying on a charitable activity is also erroneous. It is now well settled
that an eleemosynary is not an essential element of charitable purpose as defined
under the Act. It is not necessary that a person should give something for free or
at a concessional rate to qualify as being established for a charitable purpose. If
the object or purpose of an institution is charitable, the fact that the institution
collects certain charges does not alter the character of the institution. In the case
of King v. Commissioners for Special Purposes of Income-tax: 5 TC 408, the
Court of Appeal held that the purpose of advancement of education does not
cease to be charitable merely because education is not confined to the poor and it
extends to professional or commercial education as well as to higher education.
Similar view has been expressed by the privy council in Re:Trustees of Tribune:
(1939) 7 ITR 415 (PC) wherein the court opined as under:-

       "In the High Court stress was laid by the learned Chief Justice and
       by Addison, J., on the fact that the Tribune newspaper charges its
       readers and advertisers at ordinary commercial rates for the
       advantages which it affords. As against this the evidence or findings
       do not disclose that any profit was made by the newspaper or press
       before 1918 and it is at least certain that neither was founded for
       private profit whether to the testator or any other person. By the
       terms of the trust it is not to be carried on for profit to any
       individual. It cannot in their Lordships' opinion be regarded as an
       element necessarily present in any purpose of general public utility,



W.P.(C) Nos.3147/2012, 3148/2012 & 7181/2012                            Page 38 of 48
       that it should provide something for nothing or for less than it costs
       or for less than the ordinary price. An elemosynary element is not
       essential even in the strict English view of charitable uses
       [Commissioners v. University College of North Wales (i)]. There
       seems to be no solid distinction to be taken under the phrase
       "general public utility" between a school founded by a testator but
       charging fees to its pupils and a paper founded by a testator and sold
       to its readers. The purpose of providing the poor or the community
       in general with some useful thing without price or at a low price may
       doubtless be in itself a purpose of general public utility. But if
       another object be independently in itself of general public utility the
       circumstances that the testator's (sic) bounty was only in respect of
       the initial capital assets, or had only to meet a working loss
       temporarily and not permanently will not, necessarily at least, alter
       the character of the object."

65.    The fact that the petitioner institute charges a uniform fee from all students
for coaching would not exclude the petitioner from the ambit of Section 2(15) of
the Act unless it is found that the petitioner falls within the scope of the first
proviso to Section 2(15) of the Act i.e. the petitioner carries on any trade,
business or commerce or any activity of rendering any service in relation to any
trade, commerce or business, for a cess or a fee.

66.    As stated earlier the matter was remanded to DGIT(E) to consider the
submissions of the petitioner that it had been incurring administrative expenses
which were much greater than the surplus and that had resulted due to the
coaching provided to the students. Having erroneously come to the conclusion
that the petitioner was carrying on business, the DGIT(E) has rejected the
submission of the petitioner that its common administrative expenditure exceeded
the surplus generated from coaching, as being not relevant. The DGIT(E) has also
failed to consider that the activities being pursued by the petitioner are not with
the object of earning profit but with the object of imparting knowledge and skill



W.P.(C) Nos.3147/2012, 3148/2012 & 7181/2012                           Page 39 of 48
to ensure that Chartered Accountants in India have the requisite skill and
professional competence and comprehend the code of ethics to be followed by
them.

67.     The expressions "trade", "commerce" and "business" as occurring in the
first proviso to section 2(15) of the Act must be read in the context of the intent
and purport of section 2(15) of the Act and cannot be interpreted to mean any
activity which is carried on in an organised manner. The purpose and the
dominant object for which an institution carries on its activities is material to
determine whether the same is business or not. The purport of the first proviso to
section 2(15) of the Act is not to exclude entities which are essentially for
charitable purpose but are conducting some activities for a consideration or a fee.
The object of introducing the first proviso is to exclude organizations which are
carrying on regular business from the scope of "charitable purpose". The purpose
of introducing the proviso to Section 2(15) of the Act can be understood from the
Budget Speech of the Finance Minister while introducing the Finance Bill 2008.
The relevant extract to the Speech is as under:-

                 "......."Charitable purpose" includes relief of the poor,
         education, medical relief and any other object of general public
         utility. These activities are tax exempt, as they should be.
         However, some entities carrying on regular trade, commerce or
         business or providing services in relation to any trade, commerce
         or business and earning incomes have sought to claim that their
         purposes would also fall under "charitable purpose". Obviously,
         this was not the intention of Parliament and, hence, I propose to
         amend the law to exclude the aforesaid cases. Genuine charitable
         organizations will not in any way be affected."

The expressions "business", "trade" or "commerce" as used in the first proviso
must, thus, be interpreted restrictively and where the dominant object of an
organisation is charitable any incidental activity for furtherance of the object
would not fall within the expressions " business", "trade" or "commerce".



W.P.(C) Nos.3147/2012, 3148/2012 & 7181/2012                          Page 40 of 48
68.      In the case of Sai Publication Fund (supra) the activity of publishing and
selling publication was not held to be business by the Supreme Court since the
dominant object of the activity was not to carry on business but to spread the
message of Sai Baba for the welfare of the public at large. In the present case,
there can be little doubt that the dominant object of the petitioner institute is to
regulate the profession of Chartered Accountants in India and for that purpose,
the petitioner institute conducts an extensive educational program to ensure that
the profession is fed by Chartered Accountants having high standards of
knowledge, skill and professional competence. Coaching classes conducted by
the petitioner are also in aid of its objects.

69.      In the case of Addl. Commissioner of Income Tax v. Surat Art Silk Cloth
Manufacturers Association: [1980] 121 ITR 1 (SC), the Supreme Court held as
under:
         "The test which has, therefore, now to be applied is whether the
         predominant object of the activity involved in carrying out the object
         of general public utility is to subserve the charitable purpose or to
         earn profit. Where profit-making is the predominant object of the
         activity, the purpose, though an object of general public utility would
         cease to be a charitable purpose. But where the predominant object
         of the activity is to any out the charitable purpose and not to earn
         profit, it would not lose its character of a charitable purpose merely
         be cause some profit arises from the activity."

70.      Although in that case the statutory provisions being considered by the
Supreme Court were different and the utilisation of income earned is, now, not a
relevant consideration in view of the express words of the first proviso to section
2(15) of the Act, nonetheless the test of dominant object of an entity would be
relevant to determine whether the entity is carrying on business or not. In the




W.P.(C) Nos.3147/2012, 3148/2012 & 7181/2012                            Page 41 of 48
present case, there is little doubt that the objects of the activities of the petitioner
are entirely for charitable purposes.

71.    Although, it is not essential that an activity be carried on for profit motive
in order to be considered as business, but existence of profit motive would be a
vital indicator in determining whether an organisation is carrying on business or
not. In the present case, the petitioner has submitted figures to indicate that
expenditure on salaries and depreciation exceeds the surplus as generated from
holding coaching classes. In addition, the petitioner institute provides study
material and other academic support such as facilities of a library without any
material additional costs. The Supreme Court in the case of State of Andhra
Pradesh v. H. Abdul Bakhi and Bros. (supra) held as under:

        "The expression "business" though extensively used a word of
        indefinite import, in taxing statutes it is used in the sense of an
        occupation, or profession which occupies the time, attention and
        labour of a person, normally with the object of making profit. To
        regard an activity as business there must be a course of dealings,
        either actually continued or contemplated to be continued with a
        profit motive, and not for sport or pleasure."
                                                         (Underlining added)

72.    There is nothing on record to indicate the assertion of the petitioner that its
activities are not fuelled by profit motive is incorrect. Absence of profit motive,
though not conclusive, does indicate that the petitioner is not carrying on any
business.

73.    The petitioner institute has been established to perform a function of
regulating the profession of Chartered Accountants. The functions performed by
the petitioner institute are in the genre of public welfare and not for any private
gain or profit and in this view, it cannot be said that the petitioner is involved in
carrying on any business, trade or commerce. This court in the case of Bureau of



W.P.(C) Nos.3147/2012, 3148/2012 & 7181/2012                              Page 42 of 48
Indian Standards v. Director General of Income Tax (Exemptions) : W.P. (C)
1755 of 2012 decided on 27.09.2012 while considering whether the activities of
the Bureau of Indian standards in awarding licences and granting certification for
fees amounted to carrying on business, trade or commerce held as under:

               "In these circumstances, "rendering any service in relation
         to trade, commerce or business" cannot, in the opinion of the
         Court, receive such a wide construction as to enfold regulatory
         and sovereign authorities, set up under statutory enactments, and
         tasked to act as agencies of the State in public duties which cannot
         be discharged by private bodies. Often, apart from the controlling
         or parent statutes, like the BIS Act, these statutory bodies
         (including BIS) are empowered to frame rules or regulations,
         exercise co-ercive powers, including inspection, raids; they
         possess search and seizure powers and are invariably subjected to
         Parliamentary or legislative oversight. The primary object for
         setting up such regulatory bodies would be to ensure general
         public utility. The prescribing of standards, and enforcing those
         standards, through accreditation and continuing supervision
         through inspection etc., cannot be considered as trade, business or
         commercial activity, merely because the testing procedures, or
         accreditation involves charging of such fees. It cannot be said that
         the public utility activity of evolving, prescribing and enforcing
         standards, "involves" the carrying on of trade or commercial
         activity."

74.    Following the decision of this court in the case of Bureau of Indian
Standards (supra), it cannot be said that the petitioner is carrying on any
business, trade or commerce.

75.    The question whether the petitioner carries on business has also been
examined by the Tribunal in its order dated 18.10.2010 and the Tribunal has after
examining the activities of the petitioner come to the conclusion that the major
activity of the petitioner revolves around accountancy education and training and
the petitioner cannot be stated to be carrying on any business.




W.P.(C) Nos.3147/2012, 3148/2012 & 7181/2012                           Page 43 of 48
76.     An appeal was preferred on behalf of the revenue against the order of the
Tribunal dated 18.10.2010 which has been rejected by this court vide its decision
dated 19.09.2011 in the case of Director General of Exemption v. Institute of
Chartered Accountants of India (supra), wherein this court affirmed the finding
of the Tribunal and has held as under :-
        "14. What is noticeable and clear from the order dated March 29,
       2010, of the appellant is lack of discussion, and examination of the
       concept/term "business", the object and role assigned to and
       performed by the Institute. On the other hand, the Income-tax
       Appellate Tribunal examined the provisions of the 1949 Act and
       the role assigned to and undertaken by the Institute. It was held
       that the Institute has been created to regulate the profession of
       chartered accountancy and for this purpose the Institute can and is
       required to provide education, training and monitor professional
       skills of the members. It is also required to provide education and
       training to students/articles clerks who are appearing in the
       examinations and aspire to be enrolled as members of the Institute.
       In the impugned order, it has been elucidated by the Tribunal as
       under :
            "We have gone through the various regulations of the ICAI
            which provide for coaching, etc., to the students of
            chartered accountancy course. These regulations, inter alia,
            provide that no candidate shall be admitted to the
            professional examination unless he produces a certificate
            from the head of the coaching organization to the effect that
            he is registered with coaching organization and has
            complied with the requirements of the theoretical education
            scheme. The candidate is also required to pay such fee as
            may be fixed by the Council for such professional
            education. Before a student is eligible for appearing in the
            examination, he has to produce a certificate from the head
            of the coaching organization to the effect that he has
            complied with the requirements of postal tuition scheme.
            An articled clerk who has completed the practical training
            as provided in these regulations, before applying for
            membership of the Institute, shall be required to attend a
            course on general management and communication skill or
            any other course as may be specified in the Council from



W.P.(C) Nos.3147/2012, 3148/2012 & 7181/2012                          Page 44 of 48
            time to time. For this purpose, the Council is to arrange
            funds for this purpose, the Institute is also conducting
            classes for chartered accountancy students registered with it.
            We found that these classes for chartered accountancy
            students registered with it. We found that these classes are
            conducted for which classes are provided to the students
            registered with the Institute to train and is discharging its
            statutory function as required by Parliament, which does not
            amount to any commercial activity. From the detailed
            brochure, we also found that the Institute provides a
            comprehensive study package including large question bank
            for which no separate cost is charged from the students.
            The board of studies also provides a CD for self-assessment
            and model test papers. Expenditure is being incurred for
            preparation of the study package, CD, etc., salary of the
            faculty and other professionals, printing and stationery,
            research and development, etc. The students registered for
            chartered accountancy are also provided on-line guidance
            through the Institute's own website. At a very nominal cost,
            these services are provided to the students. The Institute
            also provides computer training to the students registered
            with it, at a very low fee."

       15. Thereafter, the Tribunal has quoted a judgment of the Gujarat
       High Court in Saurashtra Education Foundation v. CIT [2005] 273
       ITR 139 (Guj) at page 146, in which it has been observed as under:
            "As regards the illustration of the Institute of Chartered
            Accountants of India, although the Institute was earlier not
            running formal classes and there was no geographical
            proximity when instructions were being imparted through
            postal tuitions, the Institute of Chartered Accountants of
            India has always been an institution set up, inter alia, for
            imparting formal education and for testing proficiency for
            entry to the profession of chartered accountants. The
            Institute imparts formal education in accountancy and
            connected subjects in an organized and systematic manner.
            The institute is accountable as per the provisions of the Act
            establishing it and the Institute also has disciplinary control
            over the students who are required to be registered with its
            in the first place and who appear at the exams being held by
            the I nstitute."



W.P.(C) Nos.3147/2012, 3148/2012 & 7181/2012                            Page 45 of 48
       16. The aforesaid findings as to the object, purpose and role of
       the Institute cannot be disputed. The appellant has taken a very
       narrow and myopic view and has not examined the question of
       object and role of the Institute in proper and correct perspective.
       As noticed above, the order passed by the appellant is devoid of
       reasoning. This has resulted in the error made by the appellant,
       which has been corrected by the Tribunal."

77.     After going through the provisions of the ICAI Act and the Regulations
framed therein as well as various activities carried on by the petitioner, we are of
the view that the petitioner institute does not carry on any business, trade or
commerce. The activity of imparting education in the field of accountancy and
conducting courses both at pre-qualification as well as post-qualification level are
activities in furtherance of the objects for which the petitioner has been
constituted. Activities of providing coaching classes or undertaking campus
placement interviews for a fee are in relation to the main object of the petitioner
which as stated earlier cannot be held to be trade, business or commerce.
Accordingly, even though fees are charged by the petitioner institute for
providing coaching classes and for holding interviews with respect to campus
placement, the said activities cannot be stated to be rendering service in relation
to any trade, commerce or business as such activities are undertaken by the
petitioner institute in furtherance of its main object which as held earlier are not
trade, commerce or business.

78.    The second aspect for which the matter was remanded to DGIT(E) was to
consider the issue whether the funds provided by the petitioner institute to ICAI
Accounting Research Foundation would violate Section 13 of the Act. In this
regard, the petitioner had submitted that it had not granted any loan or advance to
ICAI Accounting Research Foundation and in any event the funds paid to the
Jaipur Development Authority and Government of Rajasthan for establishing an



W.P.(C) Nos.3147/2012, 3148/2012 & 7181/2012                          Page 46 of 48
institution by ICAI Accounting Research Foundation must be considered as
application of funds towards the object of the petitioner institute since ICAI
Accounting Research Foundation has been incorporated under Section 25 of the
Companies Act,1956 as a company not for profit and for the purposes of carrying
on research in the field of accountancy. The ICAI Accountancy Research
Foundation is also entitled to exemption under Section 10 (23C)(iv) of the Act
read with Section 11 of the Act. The petitioner has also placed reliance on the
fact that the CIT (Appeals) in its order dated 31.12.2010 relevant to the
assessment year 2006-07 has accepted this contention of the petitioner and the
same has been affirmed by the Tribunal by its order dated 09.01.2010. The
petitioner has further placed reliance on the assessment order dated 27.12.2010
relevant to the assessment year 2008-09 wherein the Assessing Officer has held
as under:

         "On verification, it is found out that its activities fall within the
         ambit of section 2(15) of the Act, i.e. "charitable purpose" and it
         has complied with the provision of section 11/12 of the Act.
         Violation of section 13 of the Act was not found."

79.     We note from the above that revenue has not found any violation of
Section 13 of the Act. We also notice that DGIT(E) has not found any violation
of Section 13 of the Act in the impugned orders. Further, it has also not been
contended before us that the petitioner has violated section 13 of the Act. Thus,
this dispute also stands concluded in favour of the petitioner.

80.    In view of the above, we allow these writ petitions and set aside the two
impugned orders dated 13.04.2012 and 28.09.12 passed by the respondent
DGIT(E) and further direct DGIT(E) respondent to recognise the petitioner as
eligible under Section 10(23C)(iv) of the Act as an institution established for
charitable purposes having regard to its object and importance for the assessment



W.P.(C) Nos.3147/2012, 3148/2012 & 7181/2012                          Page 47 of 48
years 2006-2007, 2007-2008, 2008-2009, 2009-2010, 2010-2011 and 2011-2012,
subject to the petitioner complying with the other provisions of the Act.

81.    The parties are left to bear their own costs.




                                       VIBHU BAKHRU, J




                                       BADAR DURREZ AHMED, ACJ

JULY 04, 2013
MK/rk




W.P.(C) Nos.3147/2012, 3148/2012 & 7181/2012                          Page 48 of 48

 
 
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