Reason for not granting Exemption under Section 10(23C)(vi): Education is not the exclusive reason
Fact and issue of the case
The present batch of 4 appeals has been filed by the assessee challenging the separate impugned orders passed by the learned Commissioner of Income Tax (Exemptions), Mumbai, [“learned CIT(E)”], rejecting the applications filed by the assessee seeking exemption under section 10(23C)(vi) of the Income Tax Act, 1961 (“the Act”), for the assessment year 2016-17, 2017–18, 2018-19 and 2019-20. 2. Since in these appeals, the common grievance of the assessee is against denial of exemption under section 10(23C)(vi) of the Act, therefore, as a matter of convenience, these appeals were heard together and are being disposed off by way of this consolidated order. With the consent of the parties, the assessee”s appeal for the assessment year 2017-18 is taken up as a lead case and the decision rendered therein shall apply mutatis mutandis to other appeals.
The brief facts of the case as emanating from the record are: The assessee is an Indian company incorporated under section 26 of the Indian Companies Act, 1913 on 30/04/1928. Initially, the company was an association called the Indian Institute of Bankers and subsequently, the assessee’ s name was changed to the Indian Institute of Banking and Finance from 28/08/2003. The assessee claiming itself to be an educational institution existing solely for educational purposes and not for the purpose of profit filed an application dated 24/10/2017 seeking exemption under section 10(23C)(vi) of the Act for the assessment year 2017-18. Upon perusal of the aforesaid application and the details filed by the assessee, it was observed that the object of the assessee prima facie shows that the entire work of the institution is related to developing professionally qualified and competent bankers and financial professionals, to encourage innovation and creativity among finance professionals. Thus, no general public is being served with the services of the institution and the assessee is not imparting any formal education or normal schooling which shows that it does not exist solely for education. It was also observed that every year there is a huge surplus which indicates that the activities are conducted with the motive of profit. Accordingly, vide show cause notice the learned CIT(E) asked the assessee to show cause as to how the assessee is eligible for registration under section 10(23C)(vi) of the Act. In response thereto, the assessee filed its detailed submissions. However, the learned CIT(E) vide impugned order did not agree with the submissions of the assessee and rejected the application filed by the assessee seeking exemption under section 10(23C)(vi) of the Act. The learned CIT(E) held that since the assessee is conducting very substantial non-educational activities such as collecting fees for examination, earning Royalty from publications, providing services to members, and earning hefty fees for membership, it certainly cannot be said to be existing solely for education. The learned CIT(E) further held that the assessee is carrying out the activities with a clear objective of earning profit year after year and generating surplus and by its activities, it certainly cannot be said that it solely exists for education and not for profit, which is the spirit of section 10(23C)(vi) of the Act. Being aggrieved, the assessee is in appeal before us.
Observation of the court
From the perusal of the above objectives of the assessee, it is evident that some of the objectives pertain to the study of theory and practice of banking and finance; developing the professional qualified and competent bankers and finance professionals through a process of education, training, examination; testing and certifying attainment of competence in the profession of banking and finance; lectures, discussions to promote information on banking and finance. While other deals with the collection, analysis, and provision of information needed by professionals in banking and finance; encouraging innovation and creativity among finance professionals so that they could face competition and succeed. Thus, the first leg of assessee’ s objectives may seem to be for the purpose of education, while the other objectives appear to be to promote professional development, sharing information with such professionals, and sharing statistics relating to the business of banking and finance. In the list of activities of the assessee, on page 3 of the paper book, it is mentioned that the assessee provides a daily e‑ newsletter, publishes monthly newsletter and quarterly journal on banking, finance, and allied subjects, to its over 3 lakh members free of cost every month. It is also mentioned that these publications are also available on the portal free of cost. The fact that the assessee charges lifetime membership fees of Rs.1500 from its members cannot thus be said to be only to entitle the members to certain courses for which non-members are not eligible to be enrolled and the same is also for sharing the other information periodically by the assessee. The fact that these publications are also available on the portal free of cost raises a question about sharing the same information specifically with its members on a daily/monthly/quarterly basis. Even by following the accounting treatment of initially taking the membership fees to the balance sheet and then annually proportionately crediting to the income and expenditure account over a period of 35 years, the assessee in the year ending 31/03/2017 has still declared lifetime membership fees of Rs.4,85,04,165 in its profit and loss account as compared to Rs.2,92,53,302 in the preceding year. Further, it is undisputed that the membership is available only to employees of the bank and financial institutions. Therefore, from the above, we are of the considered opinion that all the objects of the assessee are not for the purpose of education but the same also include the dissemination of information helpful to professionals in the banking and finance industry for their professional development. Thus, from the above, it is evident that all the objects are not aimed at or related to imparting education or in relation to educational activities. In this regard, the observation of the Hon’ ble Supreme Court in Sole Trustee Lok Shikshana Trust (supra) becomes relevant wherein it was held that the word “education” has not been used in that wide and extended sense, according to which every acquisition of further knowledge constitutes education.
Since the assessee has been found to be not „existing’ solely for the purposes of education on the basis of the above findings, therefore, the other aspects raised in the impugned order become academic. Accordingly, the denial of exemption under section 10(23C)(vi) of the Act is upheld. As a result, the appeal filed by the assessee for the assessment year 2017-18 on the impugned issue is dismissed.
As the facts for other assessment years are agreed by the parties to be similar to the assessment year 2017-18, therefore, our aforesaid findings/conclusion shall apply mutatis mutandis to other appeals of the assessee before us. Accordingly, the other appeals filed by the assessee on the impugned issue are also dismissed.
In the result, all the appeals by the assessee are dismissed.
Order pronounced in the open Court on 17/05/2023
In the result, appeal of the assessee is allowed and ruled in favour of the assessee