By TIOL News Service

NEW DELHI, NOV 23, 2017: THE ISSUE BEFORE THE TRIBUNAL IS - Whether society engaged in imparting education to downtrodden women, can be denied exemption u/s 11, merely because the vocational courses taught by society were not recognized by any University/Board of education. NO is the answer.

Facts of the case:

The Assessee, registered under Societies Registration Act, is rooted in the Christian faith and endeavour to promote full development of women/girls irrespective of race, culture and creed. During the subject year, the Assessee society declared nil income in its return, which was accompanied by audit report in form no.10B for exercising option u/s 11(2). The case was selected for scrutiny, wherein it was noticed by AO that Assessee had not included income of women training institute, and therefore, applying the proviso to section 2(15), the AO finalized the assessment by disallowing exemption to Assessee society. On appeal, the CIT(A) directed the AO to allow exemption on the earning from unrecognized courses as well, as being included in the definition of 'education'.

Tribunal held that,

++ there is no dispute to the fact that identically for AY 2009-10, in the case of assessee itself, the Tribunal had held that the unrecognized courses also comes within the meaning of education or in other words, it can be said that the charitable purposes includes relief to the poor, education (yoga), medical relief, preservation of environment and preservation of monuments or placed or objects of artistic or historic interest and the advancement of any other objection of general public utility. Admittedly, substitution was made by the Finance Act, 2015 w.e.f. 01/04/2016 as per which the advancement of any other object of general public utility shall not be concealed as charitable, if it involves the, carrying on 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. It is observed here that no differentiation has been made with respect to education whether the courses are recognized or unrecognized. Unless and until specific language is used in the section differentiating the courses, the plain language used in the section has to be considered;

++ the AO, while making the addition taxed the income on the ground that the receipts are from non recognized courses, therefore, it is for non-charitable purposes. The claim of assessee is that the deposits made by it are wholly used for charitable purposes and neither the principal nor the trustees are in a position to utilize the deposits for any other purposes except charitable purposes. It is also noted that even in the assessment order, the AO nowhere pointed out that the receipts earned by assessee were utilized for non charitable purposes. Under the provisions of Explanation-2 of Section-11(1), accumulation of the amount of income, derived from property held under the trust, are permitted to be accumulated u/s 11(2) and under the provision of section 11(1) of the Act, the earning of the assessee from property held for charitable purposes is permitted to be accumulated up to the specified limit of its gross receipts. The assessee society is imparting education to the poor woman for providing vocational and non-vocational education, which has been considered by the Tribunal in its own case for AY 2009-10. The proviso to section-2(15) is applicable only in a situation, when the activities of the assessee are found against the purposes/act and the primary objective even if it is unrecognized by the university/board, it cannot be said that the education is not being imparted. Thus, we don't find any infirmity in the conclusion of the CIT(A).

(See 2017-TIOL-1627-ITAT-DEL)