The Pune bench of the Income Tax Appellate Tribunal ( ITAT ) has held that failure to satisfy the condition of advancement of any other object of general public utility curbs to avail the benefit of Exemption under section 11 of the Income Tax Act, 1961.
Maharaja Shivchatrapati Pratishthan, the appellant challenged the denial of exemption under section 11 of the Income-tax Act, 1961.
The assessee is a Trust claimed to be engaged in highlighting the life of Chatrapati Shree Shivaji Maharaj. Which was registered under section 12A of the Act on 20-06-1974. A return was filed for the year declaring total income at Nil.
During the course of assessment proceedings, the Assessing Officer (AO) observed that the assessee was mainly engaged in organizing drama `Janta Raja’ on a commercial basis under the head “Historical Education” and received an income of Rs.1,96,70,577/- on this count. Expenditure of Rs.1,16,38,841/was incurred for earning such income. The assessee submitted that the activity of organizing drama Janta Raja was an “educational activity”.
On a perusal of the agreements made by the assessee-trust with different institutes/companies, the AO noted that the drama was organized on a commercial basis by charging a fee/consideration. The AO held that the assessee was not covered within the meaning of `education’ u/s.2(15) of the Act. The AO denied the exemption for the profit element in this transaction. The CIT(A) echoed the assessment order.
The assessee claims itself to be imparting “education” as per section 2(15) and hence eligible for exemption u/s 11 of the Act. The term “education” has not been defined in the Act. It has been interpreted in the context of section 2(15) by the Supreme Court in Sole Trustee Loka Shikshana Trust (supra) that: `The word “education” has not been used in that wide and extended sense, according to which every acquisition of further knowledge constitutes education.
Section 11 of the Act grants exemption in respect of income from property held for charitable or religious purposes. Section 2(15) defines “charitable purpose”.
A Coram comprising of Shri R S Syal, Vice President and Shri S S Viswanethra Ravi, Judicial Member observed that the assessee earned a huge margin on performance of the activity, which is like business, it ceases to fall within the domain of “charitable purpose”, as the business receipts exceed 20% of the total receipts.
The Tribunal held that “the assessee does not satisfy the condition of “advancement of any other object of general public utility” to be covered under section 2(15) and, ex consequent, becoming eligible for the benefit of exemption under section 11 of the Act.”
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