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Holds continuing education and training programmes of Ahmedabad Management Association entitled to exemption!

Should the term ‘education,’ in the context of the definition of ‘charitable purpose’ under Section 2(15) of the Income-tax Act, be given such a narrow and restricted meaning, so as to include only formal school or college education? Can a public charitable trust pursuing the objects of continuing education, training and research on various facets of management and related areas be denied the benefit of exemption under Section 11 of the Income-tax Act, on the ground that its activities do not fall within the scope of education?

            These two very interesting and important questions recently came up for consideration before the Income-tax Appellate Tribunal (ITAT), Ahmedabad, in the case of Ahmedabad Management Association (AMA). 

           Section 2(15) of the Income-tax Act defines ‘charitable purpose,’ so as to mean relief to the poor, education, medical relief and advancement of any other object of general public utility. With effect from Assessment Year 2009-10, a proviso came to be introduced under this section stating that “the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of 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.”

            Relying on the above proviso, the Assessing Officer, in its income-tax assessment of for AY 2009-10, called upon AMA to show cause as to why it should not be denied the benefit of exemption u/s. 11 of the Income-tax Act. It was submitted by AMA that the proviso to Sec. 2(15) could be attracted only if the Trust was involved with the activities in the nature of trade, commerce or business. AMA was not a trade organization, chamber of commerce or a business association. It was further explained that AMA’s activities are exclusively focused on management education, training and research and that it undertakes multi-faceted activities of education comprising of conducting various continuing education diploma and certificate programmes, management development programmes, public talks, seminars, workshops and conferences. Moreover it also runs the facilities of a library and undertakes the publication of books, journals etc. both, in print and electronic media forms, as an integral part of its educational activities.  

      However, the Assessing Officer held that the activities of AMA did not qualify as being in the nature of education. In support, he relied on the Supreme Court decision in Lok Shikshan Trust’s case 101 ITR 234, wherein it was observed that, “the sense in which the word ‘education’ has been used in section 2(15) is the systematic instruction, schooling or training given to the young is preparation for the work of life. What ‘education’ connotes in that clause is the process of training and developing the knowledge, skill, mind and character of students by normal schooling.” The Commissioner (Appeals) confirmed the assessment and hence AMA moved to the Tribunal in appeal.


           In its elaborate and well reasoned decision, the Tribunal has upheld the plea for exemption sought by AMA, clearly holding that its activities are in the field of education. While doing so, the ITAT has usefully relied on the direct ratio of the Gujarat High Court in the case of Gujarat State Co-operative Union 195 ITR 279 (Guj.), which had occasion to analyze the aforesaid observations of the Supreme Court relied upon by the Assessing Officer. In this case, the High Court had noted that by referring to the systematic instruction, schooling or training given to the young, the Supreme Court has only cited an instance in order to indicate as to what the word ‘education’ appearing in section 2(15) of the Act, which defines ‘charitable purposes’ is intended to mean. We are certain that these observations were not intended to keep out of the meaning of the word ‘education,’ persons other than ‘young.’ The expression ‘schooling’ also means “that schools, instructs or educates.” The Supreme Court has observed that the word ‘education’ also connotes the whole course of scholastic instruction which a person has received. This clearly indicates that the observations of the Supreme Court were not intended to give a narrow or pedantic sense to the word ‘education.’

          In the case of Gujarat State Cooperative Union, the High Court had occasion to hold that conducting employees training and offering special courses were activities for educational purpose. The Court held that it will not be proper to construe the observations of the Supreme Court in a manner that the word ‘education’ is limited to schools, colleges and similar institutions and does not extend to any other media for such acquisition of knowledge. As noticed above, the word ‘schooling’ also means instructing or educating. It, therefore, cannot be said that the word ‘education’ has been given an unduly restricted meaning by the Supreme Court in the said decision.

        The decision of the ITAT, Ahmedabad, in the case of AMA has come at an opportune time and will undoubtedly provide a huge relief to a large number of public charitable trusts across the country, who are devotedly pursuing the cause of education, but who have been trapped in the tricky tax storm raised against them!


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