Bombay High Court
National Institutes Of Construction ... vs Income-Tax Officer. on 13 June, 1990
Equivalent citations: [1990]34ITD445(MUM)
ORDER
Per Shri U. T. Shah, Vice-President - The main issue involved in this appeal pertains to the assessees claim for exemption under Section 10(22) of the Act.
2. The assessee is assessed in the status of an AOP. The assessment year is 1985-86 and the relevant previous year ended on 31-3-1985.
3. The assessee was incoporated under the societies Registration Act, 1960 vide Certificate date 16-9-1983. As per the memorandum of Association the objects of the assessee are as under :-
"3. Objects The Society shall exist for the service of the construction and allied industries and for increasing its relevance to the national good and international standards. The Society is formed not for purpose of profit. The objects for which the Society is established are :
(a) To enagage in activities for the promotion of education, training, research, professionalism and skill formation at all levels of the construction and other allied industries.
(b) To undertake special projects and activities in various parts of India to promote management and professional training in construction and other allied industries.
(c) To work independently or jointly in collaboration with other Trusts/Societies, Institutions/Associations, Governmental and Non-Governmental organisation, international bodies on projects aimed at attaining the object of NICMAR.
(d) To disseminate, through Seminars, Symposia, Workshops, Conferences, Lectures, Publications and other means, Knowledge concerning all matters relating to construction and other allied industries.
(e) To publish study materials, periodicals, reports and other literature relating to construction and other allied industries.
(f) To undertake research for advancement of technology and management in construction and other industries.
(g) To undertake consultancy, set up consultancy centres of its own and/or in collaboration with other organisation in the areas of construction management and other allied subjects.
(h) To conduct research, training, organise conferences, seminars etc. and to undertake such activities as are necessary for rural development, rural infrastructure public health, human resources development and other allied matters.
(i) To take such actions as are incidental to or conducive to the attainment of all or any of the subjects of the society."
The assessee had also issued a booklet containing information regarding its formation and aims and objects. For our purpose, the general information give at pages 1 and 2 of the said booklet is relevant and reads as under :
"General information Introduction The National Institute of Construction Management and Research (NICMAR) is an independent, autonomous, academic, non-government and non-profit making body. It is incorporated as a "Society" under the Societies Registration Act, 1960, and a "Public Trust" under the Bombay Public Trusts Act, 1950. Donations made to it are exempt from the corporate and personal Income Tax under Section 80G of the Indian Income-tax Act, 1961. The Government of India have designated the Ministry of Commerce as the nodal ministry for the Institute to co-ordinate its work with other government agencies and International bodies.
Objectives NICMAR seeks to promote the managerial capabilities and technical competency of the Indian Construction Industry and the infrastructure development sector. It strives to increase the availability of professionally trained manpower at all levels of construction industry and to up grade the managerial skills of those already employed therein. Through multi-disciplinary education, training, research consultancy and publications, the Institute hopes to lay a sound professional base for construction industry as well as the infrastructure development sector.
NICMAR, is equally interested in the development of rural infrastructure environment, habit, health, safety and such other aspects of national life that help to improve the quality of life of our people.
NICMAR evolved after two years of experimentation and research, as well as, in response to the call given by the government to promote professionalism in construction industry.
In 1981, the Task Force for Project Exports was set up by the Ministry of Commerce, Government of India. The Task Force recommended the setting up of a National Institute of Project management for the construction Industry.
In the Same year, the Builders Association of India and the Overseas Construction Council of India appointed a Steering Committee on Construction Management and Research. This Committee organised a number of training courses for mangers employed in construction industry, government departments and other authorities. It commissioned a research project at the Tata Institute of Social Sciences, Bombay, to identify the training needs of the construction industry. Additionally, it had wide ranging consultations with leading experts and organisations in the construction and related industries.
Encouraged by the response from industry and government agencies, a group of leading construction companies decided to pool resources and establish the Institute in September 1983. Work started in February 1984 and progressed rapidly thereafter.
At present, NICMAR is the only institute of its kind outside North America and the U. K."
The assessee is having a core faculty comprising of eminent person in different disciplines of construction management, people meaning faculty are divided into two categories, viz. Full Time Lectures and Part Time Lectures. The Faculty has also on its panel visiting professors from American and British Universities as well as elsewhere also render services under UNDR technical assistance programme.
At page 13 of the said booklet, it is mentioned the assessee runs various Centres similar to University Department except these center enjoy relatively more operational independence and entrepreneurship in programme development. These Centres are (1) Centre for Contruction Management Studies. (2) Centre for Continuing Education, (3) Centre for Construction Materials & Equipment Management, (4) Centre for Research and Consultancy and (5) Resources Centre (Library, Documentation, Publication) Delhi Regional Centre.
At page 15 of the said booklet the Programmes and Services are stated as under.
"EDUCATION Diploma Master up Construction Management (MCM)
- A full time program of 18 months duration.
- (Equivalent to M. E. or M. B. A. of Indian Universities).
Post Graduate Diploma in Construction Management (By Correspondence).
- This programme is run on the lines of the Open University system. A student can register for any number of courses at any time and set his own time and pace of studies. The program should be completed within five years from the date of enrolment."
Apart from the above, the assessee is also conducting training for Executive Development programmes, services In-House Company Training Programmes and Consultancy.
At page 17 of the said booklet under the head The Students Body the following achievements are mentioned :
"During the period of 3 years of its existence, the institute granted admission to 566 students for various programmes of Education offered by it. Of these, 161 students completed their studies successfully and were awarded Post Graduate Diploma or Under-Graduate Certificates. A total of 127 students are on the rolls for the academic year 1987-88.
Programmewise enrolment of students for the successive years is shown below :
Sr. No. Programme No. of admissions granted Total Total No. of Diploma, Certificates awarded 1984-85 1985-86 1986-87 1987-88
1.
Diploma Master in Contn. Management Nil Nil Nil 20 20 Nil
2. Post Graduate Diploma in Construction Mgt. (evening).
44 42 39-
125 713. Post Graduate Diploma in Construction Mgt. (By corr-espondence) Nil 132 80 70 282 22
4. Certificate in Building Supervision 42 30 30 37 139 68 Total 86 204 149 127 566 161 The students body was drawn from all over India and overseas."
The assessee has also issued prospectus-Post Graduate Diploma in Construction Management, where in a person having minimum qualification for admission to the Diploma course can apply for the training and Diploma. The minimum requirement for admission mentioned therein reads as under.
B. E. (Civil engineering) or equivalent, or M. B. A., M. M. S., L. L. B., Chartered Accountant, or 3 years diploma in Civil engineering with a minimum of 5 years of work experience at Supervisory/executive level in construction industry.
On the application by the eligible candidate a Selection committee interviews the candidates and select them for admission to the course, The education is imparted in two Semesters.
4. During the relevant previous year the assessee received Rs. 3,20,880 by way of contributions from ordinary Members and Rs. 10,86,000 by way of contributions from Life/Founder Members. On 29-11-1985 the assessee filed a Return showing deficit of Rs. 4,07,200. The Return was accompanied by audited copy do Balance Sheet, Income/Expenditure Account, Form No. 1o-B u/s. 12 A (b), details of Establishment expenses and Notes on accounts. The assessee had claimed exeraption both u/s. 11 and Section 10(22) of the Act. In doing so, he relied on his order for the assessment year 1984-85. The I. T. O. further held that Rs. 3,20,880 and Rs. 10,86,000 were income from business and, were therefore, exigible to tax. He, however, granted exemption u/s. 11 of the Act in respect of the interest income earned by the assessee.
5. In appeal before the Commissioner of Income-tax (Appeals) the assessee once again prayed for exemption both u/s. 11 and Section 10(22) of the Act. In this connection, attention of the CIT (A) was drawn to various materials brought on record since the inception the CIT (A) accepted the assessees claim the income would be exempt u/s. 11 of the Act. However, as regards the donation received from the Life/Founder Members, he held that since they do not form part of the corpus, the same has to be treated as assessees income though exempt u/s. 11 of the Act.
6. As regards the assessees claim for exemption u/s. 10(22) of the Act, the CTT (A) rejected the same in the following manner :-
"9. On perusal of the materials placed before me. I am not satisfied that the appellant has met the requirements of the above section. Section 10(22) postulates, a university or any other education institution, through which education is to be imparted or the education activities are to be carried out. Even assuming for the sake of argument that the appellant carried out educational activities, the same were not carried through the medium of any university or any definite educational institution. The so called Centres mentioned refer to differed Courses run by the Society, they are not educational institutions. The medium through which education is parted is as important as the substance of activity of the society for the purpose of exemption u/s. 10(22). Without prejudice to the appellants perspective plan and future activity, I hold that the claim u/s. 10(22) for the assessment year 1985-86 is premature. In coming to this conclusion I have also taken into consideration the reasons for which ITO rejected appellants claim last year."
7. Being aggrieved by the order of the CIT (A), the assessee has come up in appeal before the Tribunal. At the time of hearing the learned Counsel for the assessee stated that the assessees main grievance against the action of the CIT (A) is that the CIT (A) ought not to have rejected the assessees clam for exemption u/s. 10(22) of the Act in the manner he did. In this connection, he took us through his paper book containing the material already brought on record (partly reproduced above) and strongly urged that since the assessee was in face existed society for educational purposes and not for the purpose of profit, it should have been granted exemption u/s. 10(22) of the Act. In this connection, he relied on the decision of the Honble Orissa High Court in the case of Secondary Board of Education v. ITO [1972] 86 ITR 408. Wherein the Honble High Court had an occasion to consider the provisions of Section 10(22) of the Act. According to the learned Counsel for the assessee, the assessees Case is stronger than the one considered by the Honble High Court, inasmuch as, in the case before the Honble High Court the Board itself was not imparting education but compiling, publishing, printing and selling text books. However, in the instant case there is sufficient material on record to show that the assessee is conducting educational courses of very advance stage in Construction Management. He also relied on the order of the Tribunal in the case of Trustees of the Tagore Educational Society v. Seventy ITO [1984] 10 ITD 279 (Bom). Here he pointed out that even though the Society had not set up schools and colleges during the relevant previous year but had granted freeship and scholarship, the Tribunal was pleased to hold that the said Society had not set up schools and college during the relevant precious year but had granted freeship and scholarship, the Tribunal was pleased to hold that the said Society was an educational institutional institution within the meaning of Section 10(22) of the Act. According to the learned Counsel for the assessee, the assessees case is stronger, inasmuch as, it had conducted courses, imparted education, held examination and granted Diploma in Construction Management. Finally, he also relied on the decision of the Honble Karnataka High Court in the case of Ecumenical Christian Center v. CIT [1983] 139 ITR 226, where in the High Court had an occasion to consider the meaning of educational institution vis-a-vis Section 2 (15) and Section 8Go of the Act.
As regards the Membership/Donation of the Life/Founder Members, the learned Counsel for the assessee submitted that the CIT (A) was not justified in treating the same as income in view of the direct decision of the Honble Bombay High Court in the case of CIT v. Film Federation of India [1988] 41 Taxman 239 [1989] 178 ITR 425.
He, therefore, urged that the ITO should be directed to accept assessees claim for exemption u/s. 10(22) of the Act and modify the assessment accordingly.
8. The learned representative for the department, on the other hand, strongly supported the order of the CIT (A). Railing on the decision of the Honble Supreme Court in the case of Sole Trustee. Loka Shikshana Trust v. CIT [1975] 101 ITR 234, he submitted that the expression "education" connotes the process of training and developing the knowledge, sill, mind and character of students by normal schooling. However, since in the instant case there is no systematic instruction, schooling or training give, the assessee would not be entitled to exemption u/s. 10(22) of the Act.
9. We have considered the rival submissions of the parties and we are constrained to observe that this litigation would not have be taken place it the Income-tax authorities had properly comprehended the facts and circumstances obtaining in the instant case. We make this observation as we find from the material already brought on record that the assessee cannot be created anything else than an educational institution contemplated u/s. 10(22) of the Act. In fact we fail to appreciate how the aforesaid decision of the Honble Supreme Court referred to and relifed upon on behalf of the department would be of any help to the Revenue. It appears to us, reliance was placed on that decision by the Revenue, as, according to it, there is no "normal schooling" involved in the present case. In coming to this conclusion the Revenue has totally failed to appreciate that the education given by the assessee was of post-Graduate level and, therefore, there cannot be "normal schooling" as understood in the ordinary parlance. The Post-Graduate Diploma course in Construction Management is a Full-Time course of 18 months duration and is equivalent to M. E. or M. B. A. of Indian Universities. Not only that the assessee is running a Core Faculty by engage Full-Time and Part-Time experts. Further, under the United National Development Programme, visiting professors of universities in U. S. A. and U. K. come to India and impart knowledge on Construction Management. All these clearly show that the assessee is an educational institution within the meaning of section 10(22) of the Act, The reported decisions relied on behalf on the assessee clearly support its stand for the exemption u/s. 10(22) of the Act. In fact, the aforesaid decision of the Honble Supreme Court also supports the assessees stand that it is nothing but an educational institution within the meaning of section 10(22) of the Act and we would, therefore direct the ITO to accept the assessees claim in this regard and modify the assessment accordingly.
10. In view of our aforesaid decision, we do not deem it fit to discuss at length the treatment to be accorded to the donations received from Life/Founder Members. Suffice it to say that here also the assessees stand is unassailable, in view of the aforesaid decision of the Honble Bombay High Court in the case of Film Federation of India (supra).
11. In the result, the appeal is allowed.