Skill development training qualifies as 'education' under S.2(15); proviso inapplicable absent profit motive or substantial markup.

आदेश /ORDER

PER S. R. RAGHUNATHA, AM :

This appeal is filed by the Revenue directed against the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, [herein after “ld.CIT(A)”] dated 11.03.2025 and pertains to assessment year 2017-18 against the order of the Deputy Commissioner of Income Tax Officer, ACIT(Exemptions), Chennai, passed u/s.143(3) of the Income Tax Act, 1961 (in short ‘the Act’) dated 30.12.2019.

2. The issue arising in the appeal is whether the activities carried on by the assessee as educational activity qualify as “charitable purpose” within the meaning of section 2(15) of the Act, thereby entitling it to exemption u/s.11 and 12 of the Act. The AO has held that the assessee is engaged in activities falling under the limb of “advancement of any other object of general public utility” as specified in section 2(15). Further, according to the AO, since such activities are carried out in the nature of trade, commerce, or business, the proviso to section 2(15) becomes applicable. Consequently, the assessee’s activities were treated as non-charitable, leading to denial of exemption u/s.11 of the Act. The ld. CIT(A), on the other hand disagreeing with the AO and held that the activity carried out by the assessee qualified as “education” in terms of section 2(15) of the Act, and thus entitling the assessee to claim exemption u/s. 11 of the Act.

3. The grievance of the Revenue is that the ld. CIT(A) erred in holding that the activities of the assessee fall within the scope of “education” u/s.2(15) of the Act and in consequently allowing exemption u/s.11 of the Act. It is the contention of the Revenue that the assessee’s activities are in the nature of “advancement of any other object of general public utility” carried out in a commercial manner, and therefore the proviso to section 2(15) of the Act, as rightly invoked by the AO, disentitles the assessee from being treated as engaged in charitable activities and from claiming exemption u/s. 11 of the Act and accordingly, the Revenue is in appeal.

4. The Revenue has raised the following grounds of appeal:

1. “The ld.CIT(A) has erred in allowing the appeal of the Assessee, stating that the Assessee is carrying on educational activities and thereby falling under the limb ‘education’ of ‘charitable purpose’, as defined in section 2(15) of the Act, when the Assessee, is not imparting formal scholastic learning and is an institute providing training and issuing certificates, personality development, outsourcing of employees and making graduates employable.

2. The ld.CIT(A) has erred in overruling the decision of the Assessing Officer, that the activities of the assessee fall under the limb’ general public utility of ‘charitable purpose’, as defined in section 2(15) of the Act.

3. The ld.CIT(A) has erred in wrongly interpreting the decision of the Hon’ble Supreme Court in the case of Ahmedabad Urban Development Authority[2022] 449 ITR 1 (SC) while granting relief, even when the markup charged by the assessee on activities other than Government sponsored skill development project is more than 20% which is a threshold limit as envisaged by the Hon’ble Supreme Court in the above case, making it a commercial activity and such receipts are in the nature of trade commerce and business and the markup need to be determined on year on year basis.

4. The ld.CIT(A) has erred in allowing the claim of exemption u/.11 of the Act, by