INCOME TAX ACT, 1961

Section 263

Revision under section 263 - Erroneous and prejudicial order - CIT(E) held assessee's activities as non-educational in nature and also hit by proviso to section 2(15) -

Assessee was a society registered under under section 12A. CIT(E) held that allowance of exemption under section 11 was erroneous and prejudicial to the interest of revenue on the ground that income and expenditure account of assessee showed that assessee had received tuition fee income of Rs. 1 crore and AO failed to examine whether activities carried out by assessee in the absence of affiliation with any regulatory body and adherence to criteria for formal education did not qualify as education. As per CIT(E) assessee's activities amounted to advancement of any other object of general public utility receipt of fees for training students, in the nature of trade, commerce or business hit by proviso to section 2(15), especially when deficit in certain projects was reimbursed by several corporate entities and assessee was under obligation to comply with service tax law. Held: Courses conducted by assessee were in the same manner as that of any course or classes conducted by other educational Institute in a schooling format. Assessee had also developed the fixed curriculum, which was duly recognized by government authorities or might be recognized by other globally recognized institutions. The complete session plan for every course was covered. Therefore, it was in a planned manner. Attendance of students was also compulsory to allow them to take further examination. The necessary certificates to successful candidates were also issued. Accordingly, assessee was carrying on educational activity and merely because deficit was reimbursed by several corporate entities by spending out of their corporate social responsibility funding to assessee, did not make assessee an non-educational institute. If, for any reasons, those entities have deducted tax at source due to their own tax obligations, it does not make income so received by assessee as business income, Naturally, character of outflow from the payer could always used in characterizing the inflow of the recipient. The obligation of the assessee of complying with the service tax law also did not make assessee an institute, which is carrying on business. Further, assessee did not charge fees at the level of market rate and even otherwise surplus generated was also used for charitable activities of education. Accordingly, assessee carrying on educational activities and was entitled to deduction/exemption under sections 11 and 12 and, therefore, assessment order could not be treated as erroneous and prejudicial.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2014-15

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