Income Tax Appellate Tribunal - Mumbai
Gurship Education Trust , Mumbai vs Assessee on 21 September, 2011
IN THE INCOME TAX APPELLATE TRIBUNAL
"G" BENCH: MUMBAI
BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER
AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER
ITA No.4788/Mum/2009
Gurship Education Trust,
2, Prem Sudha, Plot No.136-B,
Sher-E-Punjab Society,
Mahakali Caves Road,
Andheri (E),
Mumbai -400 093 .......... Appellant
Vs
Director of Income-tax (Exemption),
6th Floor, Piramal Chambers,
Parel,
Mumbai -400 012 ........ Respondent
PAN: AABTG 0635 L
Appellant by: Shri Mehul Shah
Respondent by: Shri Pavan Ved
Date of Hearing: 21.09.2011
Date of Pronouncement: .....09.2011
ORDER
PER R.S. PADVEKAR, JM:
In this appeal the assessee has challenged the impugned order of the Ld. Director of Income-tax (Exemption) (In short DI (Exmpt.) Mumbai passed u/s.12AA r.w.s. 12A of the Income-tax Act, 1961 dated 30.06.2009, denying the registration to the assessee as a charitable institution. The assessee has taken the following ground:-
"1. On the facts and in the circumstances of the case, and in law, learned Director of Income-tax (Exemption) erred in 2 ITA 4788 /Mum/2009 Gurship Education Trust refusing registration of the trust under section 12AA contending that activities of education carried out by the Trust are not in nature of Educational activities within the meaning of section 2(15) of the Income-tax Act, 1961 without appreciating the fact that the Appellant was providing training as per directions of Director General of Shipping, Government of India."
2. Briefly stated the facts are as under. The assessee is registered Trust. It is claimed by the assessee that it is imparting training to merchant navy cadets at subsidized rates with an object to make no material surplus (service). It is further claimed by the assessee that the assessee is conducting the activity of imparting training as per the directions of Director General of Shipping, Government of India vide his order dated 11.09.2002. The assessee claims that as the assessee's activities are charitable in nature and hence, it's income is exempt u/s.11 of the I.T. Act. The assessee filed an application for registration as a Charitable Trust/institution on 17.12.2008 u/s.12AA of the I.T. Act, 1961 before the DI (Exmpt.), the assessee stated that it is conducting short-programmes for passenger-ship familiarisation and the assessee also submitted the details of the courses and its company structure which is reproduced in the impugned order by the DI (Exmpt.) the same are as under:-
Course Days Schedule Fees in `
1 P.S.T. (DGS Approved) 3 Days Thu 1500/-
2 PSSR (DGS Approved) 3 Days Mon 1200/-
3 EFA (DGS Approved) 2 & ½ Days Mon 800/-
4 OTFC (DGS Approved) 5 Days Mon-Fri 2500/-
5 Passenger Ship Familiarisation 3 Days Thu 2500/-
(Para1 to 3) (DGS Approved)
3. The assessee stated that the activity of imparting the training to the merchant navy cadets is a charitable activity and hence, the assessee may be recognized as a charitable Trust u/s.11 of the Act.
3 ITA 4788 /Mum/2009 Gurship Education Trust The Ld. DI (Exmpt.) was not impressed with the claim of the assessee. In the opinion of the Ld. DI (Exmpt.) the assessee is merely conducting the coaching classes and there is commerciality in it's activity. The Ld. DI (Exmpt.) referred to the decision of the Hon'ble Supreme Court in the case of Sole Trustee, Loka Shikshana Trust vs. CIT, Mysore 101 ITR 234 and rejected/dismissed the application of the assessee for registration. Now, the assessee is in appeal before us.
4. We have heard rival submissions of the parties and perused the records. The assessee has also filed the paper book which is placed on record. The Ld. Counsel explained the nature of the activity carried out by the assessee. The main plea of the Ld. Counsel for the assessee is that the assessee is a Trust and the training is imparted to the Merchant Navy cadets under the guidance of the DG Shipping, Govt. of India. He referred to the different notifications and guidelines issued by the DG Shipping. He also distinguished the decision of the Hon'ble Supreme Court in the case of Sole Trustee (supra) and submits that the facts in the said case are not applicable to the assessee's case. The Ld. Counsel also tried to impress us by stating that the assessee has no much more surplus from those activity and the assessee hardly gets 10% to 15% surplus after expenditure. He, therefore, pleaded for granting the registration u/s.12AA of the Act. We have also heard the Ld. D.R.
5. We find that the assessee is conducting coaching-type classes to the cadets joining Merchant Navy. Those classes are for the duration of the 2½ days, 3 days and 5 days. So far as guidelines issued by DG of Shipping, Govt. of India, these guidelines are given for framing out the course and which is required for cadets joining Merchant Navy. It appears that the said course or coaching is compulsory for the cadets for joining the ship. On the perusal of the Balance-sheet of the assessee for the financial year 2007-08, page no.25 of P/B, we find that there is no infrastructure or any asset and only advances of cash 4 ITA 4788 /Mum/2009 Gurship Education Trust and bank balances are shown. Though it is argued that the charitable activities are carried out by the Trust and Trust is created as per requirement of the Ministry of Shipping, Govt. of India. But, in our opinion, mere entity as a Trust is not eligible to claim the exemption of sec. 11. Relevant part of Sec. 11 reads as under:-
"(1) Subject to the provisions of sections 60 to 63, the following income shall not be included in the total income of the previous year of the person in receipt of the income--
[(a) income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India; and, where any such income is accumulated or set apart for application to such purposes in India, to the extent to which the income so accumulated or set apart is not in excess of [fifteen] per cent of the income from such property;
(b) income derived from property held under trust in part only for such purposes, the trust having been created before the commencement of this Act, to the extent to which such income is applied to such purposes in India; and, where any such income is finally set apart for application to such purposes in India, to the extent to which the income so set apart is not in excess of [fifteen] per cent of the income from such property;
(c) income [derived] from property held under trust--
(i) created on or after the 1st day of April, 1952, for a charitable purpose which tends to promote international welfare in which India is interested, to the extent to which such income is applied to such purposes outside India, and
(ii) for charitable or religious purposes, created before the 1st day of April, 1952, to the extent to which such income is applied to such purposes outside India:
Provided that the Board, by general or special order, has directed in either case that it shall not be included in the total income of the person in receipt of such income; [(d) income in the form of voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or institution.] [Explanation.--For the purposes of clauses (a) and (b),--
(1) in computing the [fifteen] per cent of the income which may be accumulated or set apart, any such voluntary contributions as are referred to in section 12 shall be deemed to be part of the income;
5 ITA 4788 /Mum/2009 Gurship Education Trust (2) if, in the previous year, the income applied to charitable or religious purposes in India falls short of eighty-five per cent of the income derived during that year from property held under trust, or, as the case may be, held under trust in part, by any amount--
(i) for the reason that the whole or any part of the income has not been received during that year, or
(ii) for any other reason, then--
(a) in the case referred to in sub-clause (i), so much of the income applied to such purposes in India during the previous year in which the income is received or during the previous year immediately following as does not exceed the said amount, and
(b) in the case referred to in sub-clause (ii), so much of the income applied to such purposes in India during the previous year immediately following the previous year in which the income was derived as does not exceed the said amount, may, at the option of the person in receipt of the income (such option to be exercised in writing before the expiry of the time allowed under sub-section (1) of section 139 [* * *] for furnishing the return of income) be deemed to be income applied to such purposes during the previous year in which the income was derived; and the income so deemed to have been applied shall not be taken into account in calculating the amount of income applied to such purposes, in the case referred to in sub-clause
(i), during the previous year in which the income is received or during the previous year immediately following, as the case may be, and, in the case referred to in sub-clause (ii), during the previous year immediately following the previous year in which the income was derived.
(1A) For the purposes of sub-section (1),--
(a) where a capital asset, being property held under trust wholly for charitable or religious purposes, is transferred and the whole or any part of the net consideration is utilised for acquiring another capital asset to be so held, then, the capital gain arising from the transfer shall be deemed to have been applied to charitable or religious purposes to the extent specified hereunder, namely:--
(i) where the whole of the net consideration is utilised in acquiring the new capital asset, the whole of such capital gain ;
(ii) where only a part of the net consideration is utilised for acquiring the new capital asset, so much of such capital
6 ITA 4788 /Mum/2009 Gurship Education Trust gain as is equal to the amount, if any, by which the amount so utilised exceeds the cost of the transferred asset;
(b) where a capital asset, being property held under trust in part only for such purposes, is transferred and the whole or any part of the net consideration is utilised for acquiring another capital asset to be so held, then, the appropriate fraction of the capital gain arising from the transfer shall be deemed to have been applied to charitable or religious purposes to the extent specified hereunder, namely:--
(i) where the whole of the net consideration is utilised in acquiring the new capital asset, the whole of the appropriate fraction of such capital gain;
(ii) in any other case, so much of the appropriate fraction of the capital gain as is equal to the amount, if any, by which the appropriate fraction of the amount utilised for acquiring the new asset exceeds the appropriate fraction of the cost of the transferred asset.
Explanation.--In this sub-section,--
(i) "appropriate fraction" means the fraction which represents the extent to which the income derived from the capital asset transferred was immediately before such transfer applicable to charitable or religious purposes;
(ii) "cost of the transferred asset" means the aggregate of the cost of acquisition (as ascertained for the purposes of sections 48 and 49) of the capital asset which is the subject of the transfer and the cost of any improvement thereto within the meaning assigned to that expression in sub-clause (b) of clause (1) of section 55;
(iii) "net consideration" means the full value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer.] (1B) ..........
(2).............
(3).............
6. Before claiming a exemption u/s.11, some conditions must be fulfilled and following two conditions go to the roots of the entire matter:-
(i) the income should be earned from the property which is held wholly for charitable or religious purposes and income is also to be applied for the religious or charitable
7 ITA 4788 /Mum/2009 Gurship Education Trust purpose in India and if the income is accumulated the same is permissible to the extent of the 15%; and
(ii) there should not be any commerciality in the object of the Trust.
7. We find that the trustees are taking remuneration from the assessee-trust,( page no.26 of the paper-book) and which is reflected in the Income and Expenditure A/C. for the financial year 2007-08. In the case of Sole Trustee, Loka Shikshana Trust vs. CIT, Mysore 101 ITR 234, while interpreting the word "education" appearing in sub- section (15) of sec.2 of the Act the Hon'ble Supreme Court held as under:-
"The sense in which the word "education" has been used in section 2(15) in the systematic instruction, schooling or training given to the young is preparation for the work of life. It also connotes the whole course of scholastic instruction which a person has received. The word "education" has not been used in that wide and extended sense, according to which every acquisition of further knowledge constitutes education. According to this wide and extended sense, traveling is education, because as a result of traveling you acquire fresh knowledge. Likewise, if you read newspapers and magazines, see pictures, visit art galleries, museums and zoos, you thereby add to your knowledge. Again, when you grow up and have dealings with other people, some of whom are not straight, you learn by experience and thus add to your knowledge of the ways of the world. If you are not careful, your wallet is liable to be stolen or you are liable to be cheated by some unscrupulous person. The thief who removes your wallet and the swindler who cheats you teach you a lesson and in the process make you wiser though poorer. If you visit a night club, you get acquainted with
8 ITA 4788 /Mum/2009 Gurship Education Trust and add to your knowledge about some of the not much revealed realities and mysteries of life. All this in a way is education in the great school of life. But that is not the sense in which the word "education" is used in clause (15) of section 2. What education connotes in that clause is the process of training and developing the knowledge, skill, mind and character of students by normal schooling."
8. So far the present assessee is concerned, though it is claimed that education is imparted but, in our opinion, as per material on record, it is just a coaching class and cannot be equated with the word "education" as contemplated in sec. 2(15) of the Act, thereby, it can be said that the assessee's activity is covered into the charitable purpose. Moreover, though it is argued that there is no commerciality but, we find that the entire coaching to the cadets is imparted only on the commercial basis. How much surplus is with the assessee-trust is not the decisive but the entire foundation of the exemption is based on objects and activities of the Trust / Institution. It is true that, in the Trust-Deed the assessee has shown charitable object in very colourful manner but as per the evidence on record the said objects are only on the paper.
9. After giving our anxious consideration to all the facts and evidence on record, in our opinion, the assessee is conducting the coaching classes of the short duration of the 2 and 3 days to the cadets desiring to joint Merchant Navy and the said coaching classes cannot be treated as charitable one. Moreover, the assessee's activity is commercially tainted and nothing is placed before us to show that at what concessional rates the courses are being conducted. In our opinion, the Ld. DI (Exempt) has rightly rejected the application of the assessee. We find no merits in the appeal filed by the assessee.
10. In the result, assessee's appeal is dismissed.
9 ITA 4788 /Mum/2009 Gurship Education Trust Order pronounced in the open court on this day of ...... September 2011.
(P.M. JAGTAP) (R.S. PADVEKAR)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Dated: ........... September 2011 Copy to:-
1) The Appellant.
2) The Respondent.
3) The DIT (Exempt) -concerned..., Mumbai.
4) The DIT/ CIT- concerned..., Mumbai.
5) The D.R. "G" Bench, Mumbai.
By Order
Asstt. Registrar
I.T.A.T., Mumbai
*Chavan
Sr.N. Concerned
Episode of an order Date Initials
1 Draft dictated on 15.09.2011 Sr.PS
2 Draft placed before author 19.09.2011 Sr.PS
3 Draft proposed & placed before the second Member JM/AM
4 Draft discussed/approved by Second Member JM/AM
5 Approved Draft comes to the Sr.PS/PS Sr.PS/PS
6 Kept for pronouncement on Sr.PS/PS
7 File sent to the Bench Clerk Sr.PS/PS
8 Date on which file goes to the Head Clerk
9 Date of dispatch of Order