The Madras High Court held that the assessee, investor Financial Education Academy is entitled to exemption for conducting activities for charitable purpose.
The assessee, M/s.Investor Financial Education Academy filed an application, before the Director of Income Tax (Exemptions) for grant of registration under Section 12AA of the Act.
The assessee represented that they are a Company incorporated under Section 25 of the Companies Act, 1956 and that they are applying for obtaining registration under Section 12AA of the Act.
The Commissioner of Income Tax (Exemptions) issued notice to the assessee calling for certain clarifications, which were furnished by the assessee. The CIT by order rejected the application on the ground that the assessee’s activity of imparting ‘financial education/awareness’ is a service for price, to the investor in the field of investments.
The assessee’s activity is designed in such a way that what it receives in the form of fee from the client for imparting financial education/awareness is always higher than what is spent for imparting such education/awareness to the said clients.
It was further stated that the entire structure is designed to generate surplus/profit and there is no element of charity in the process, rather it is purely on commercial basis amounting to a commercial activity.
The activity of the assessee in the nature of rendering services to the investor community amounts to rendering services to a particular trade/commerce/business.
Further, there is a clear price/fee/consideration fixed for the said services and the quantum of consideration is always on a commercial basis.
The CIT held that the activity of the assessee amounts to an activity of rendering services in relation to trade/commerce/business, for fee/consideration and such activity is specifically excluded from the definition of ‘Charitable Purpose’ as provided in Proviso to Section 2(15) of the Act.
The assessee preferred appeal to the Tribunal, which dismissed the appeal by the impugned order and held that the object of the assessee, which admittedly is imparting financial education to the general public through programmes sponsored by various companies, will clearly show that pursuing subject object would not come within the meaning of “education”. It further observed that none of the objects as contained in the main object clauses of the MOA, will fall within the meaning of “education”.
The issue raised in this case was whether the Tribunal was justified in holding that the appellant is not entitled for registration under Section 12AA of the Income Tax Act, 1961 and whether the Tribunal was justified in holding that the appellant is not entitled to exemption under section 2(15) of the Act, holding that the activities carried on by it are not charitable in nature.
The division judge bench of Justice T.S. Sivanganam and Justice V. Bhawani Subba held that the rejection of the application filed by the assessee for registration under Section 12AA is erroneous and said that appellant is entitled to exemption under s 2(15) of the Act, holding that the activities carried on by it are charitable in nature.
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