Vocational training constitutes 'education' under Section 2(15) of Income Tax Act; profit generation does not negate exemption if income is utilized for educational purposes.

JUDGMENT :

S.G. PANDIT, J.

1. The assessee-M/s Deshpande Education Trust [Hereinafter referred to as ‘Appellant’] is in appeal under Section 260A of the Income Tax Act, 1961 [Hereinafter referred to as ‘The Act’]aggrieved by the Order of the Income Tax Appellate Tribunal ‘A’ Bench, Bengaluru [Hereinafter referred to as ‘Tribunal’] dated 13.10.2016 in ITA Nos. 1422 and 1423 (Bang) 2016 for the assessment years [Hereinafter referred to as ‘AY’ 2011-12] and 2012-13, wherein, the appeals filed by the appellant challenging the orders of the learned Commissioner of Income Tax (Appeals), Hubli [Hereinafter referred to as ‘CIT(A)’] were dismissed.

2. The appeal was admitted on 20.11.2017 to examine the following substantial questions of law:

i. Whether, in the facts and in the circumstances of the case, the Tribunal was right in law in holding that the activity of the appellant is not education but 'advancement of any other object of general public utility'?

ii. Without prejudice to the above, whether in the facts and in the circumstances of the case, the Tribunal is right in holding that activity of the appellant is in the nature of trade, commerce or business and hit by the first proviso to section 2(15)?

iii. Whether, the finding of the Tribunal that the appellant is collecting hefty fee, making huge profits and carrying business is perverse?

BRIEF FACTS:

3. The appellant is a registered trust under Section 12AA of the Act engaged in the activity of running coaching classes and training programmes for skill development and vocational training to students by charging fees. The appellant filed the return of income for AYs 2011-12 and 2012-13 declaring nil income on 26.07.2011 and 26.09.2012, respectively. The case of the appellant for AY 2011-12 was selected for scrutiny and notices under Section 143 (2) and Section 142 (1) were issued to the appellant on 20.09.2012. Subsequently, the case of the appellant for AY 2012-13 was selected for scrutiny and notice under (2) and notice under (1) were issued to the appellant on18.09.2013 and 15.10.2014, respectively.

4. The Respondent No.2-Assessing Officer, Hereinafter referred to as ‘AO’ passed the assessment Order for AY 2011-12 under Section 143 (3) of the Act on 29.11.2013 denying the exemption claimed by the appellant under Section 11 of the Act and assessing the total income of the appellant at Rs. 6,19,527/-. Further, Respondent No.3-AO passed the assessment Order for AY 2012-13 under (3) of the Act on 14.11.2014 denying the exemption claimed by the appellant under of the Act and assessing the total income of the appellant at Rs.3,41,730/-.

5. Aggrieved by the orders of the AO, the appellant filed appeals before the Learned CIT(A) for both the AYs 2011- 12 and 2012-13 which came to be dismissed on 08.02.2016 and 31.03.2016, respectively. Challenging the Orders of the Learned CIT(A), the appellant filed appeals before the Tribunal. The Tribunal vide common impugned Order dated 13.10.2016 has dismissed the appeals filed by the Appellant and has held that activity of the appellant is in the nature of ‘advancement of any other object of general public utility’ and the proviso to Section 2 (15) of the Act gets attracted and hence, the appellant shall not be entitled to exemption under Section 11 of the Act. Hence, the present appeal.

6. Heard learned senior counsel Sri. Chythanya K.K. for learned counsels Sri. S Sharath and Sri. Shashank Hegde for the appellant and learned counsel Sri. Thirumalesh for Respondents-Revenue Author