HELD The petitioner institute has been constituted under the ICAI Act with the object to regulate the profession of Chartered Accountant...
- The petitioner institute has been constituted under the ICAI Act with the object to regulate the profession of Chartered Accountants in India and to ensure that the standards of professional knowledge and skill are met and maintained.
- The activities being undertaken by the petitioner substantially involve imparting education in the field of accountancy in order to ensure that the standards or profession of accountancy are maintained.
- The petitioner institute is the sole body empowered to conduct or approve a course in the field of accountancy. No other person can conduct any course or award any degree or certificate which indicates a level of proficiency or competence in the field of accountancy similar to that as of a chartered accountant.
Interpretation of the 1st proviso to section 2(15)
- The expressions "trade", "commerce" and "business" as occurring in the first proviso to section 2(15) of the Act must be read in the context of the intent and purport of section 2(15) of the Act and cannot be interpreted to mean any activity which is carried on in an organised manner.
- The purpose and the dominant object for which an institution carries on its activities is material to determine whether the same is business or not.
- The purport of the first proviso to section 2(15) of the Act is not to exclude entities which are essentially for charitable purpose but are conducting some activities for a consideration or a fee.
- The object of introducing the first proviso is to exclude organizations which are carrying on regular business from the scope of "charitable purpose".
- The purpose of introducing the proviso to Section 2(15) of the Act can be understood from the Budget Speech of the Finance Minister while introducing the Finance Bill 2008 wherein it was clarified that "However, some entities carrying on regular trade, commerce or business or providing services in relation to any trade, commerce or business and earning incomes have sought to claim that their purposes would also fall under "charitable purpose". Obviously, this was not the intention of Parliament and, hence, I propose to amend the law to exclude the aforesaid cases. Genuine charitable organizations will not in any way be affected."
- The expressions "business", "trade" or "commerce" as used in the first proviso must, thus, be interpreted restrictively and where the dominant object of an organisation is charitable any incidental activity for furtherance of the object would not fall within the expressions " business", "trade" or "commerce".
- The activity of petitioner in conducting coaching classes is integral to the activity of the petitioner institute in conducting the courses in accountancy.
- The coaching classes being conducted by the petitioner cannot be equated with private coaching classes being conducted by organisations on commercial basis for preparing students to undertake entrance or other examinations in various professional courses.
- The coaching carried on by private organizations are not integral to the courses being conducted by them but for preparing students for examinations being conducted by other institutes and universities.
- In the case of the petitioner institute, the coaching classes are integral to the curriculum of the programme being conducted by the petitioner institute.The comparison of the petitioner institute with UPSC (Union Public Service Commission) is also, not apposite.
- Whereas UPSC conducts an examination for the purpose of selection of candidates for employment into service and is required to be consulted by the Governments with regard to various matters as specified in Article 310 of the Constitution of India, the petitioner institute conducts an education programme and provides not only theoretical knowledge but also practical knowledge.
- The object of the study programme or post-qualification courses being conducted by the petitioner institute is to impart knowledge and skill in the field of accountancy and related subjects to students and the same is not similar to the function as performed by UPSC.
- The DGIT(E) erred in proceeding on the basis that the object of the petitioner was limited to conducting examinations for a selection process enabling the successful candidates to be selected as chartered accountants. The impugned order completely ignores the nature of the educational programme being conducted by the petitioner which includes not only designing of the course, imparting of training, providing study material but also instructions by an expert faculty.
- The reasoning of the DGIT(E) that since the petitioner institute charges a uniform fee from all students for providing coaching classes, thus, it cannot be said to be carrying on a charitable activity is also erroneous.
- It is now well settled that an eleemosynary is not an essential element of charitable purpose as defined under the Act.
- It is not necessary that a person should give something for free or at a concessional rate to qualify as being established for a charitable purpose.
- If the object or purpose of an institution is charitable, the fact that the institution collects certain charges does not alter the character of the institution.
- The fact that the petitioner institute charges a uniform fee from all students for coaching would not exclude the petitioner from the ambit of Section 2(15) of the Act unless it is found that the petitioner falls within the scope of the first proviso to Section 2(15) of the Act i.e. the petitioner carries on any trade, business or commerce or any activity of rendering any service in relation to any trade, commerce or business, for a cess or a fee.
- Although, it is not essential that an activity be carried on for profit motive in order to be considered as business, but existence of profit motive would be a vital indicator in determining whether an organisation is carrying on business or not. In the present case, the petitioner has submitted figures to indicate that expenditure on salaries and depreciation exceeds the surplus as generated from holding coaching classes. In addition, the petitioner institute provides study material and other academic support such as facilities of a library without any additional costs.
- There is nothing on record to indicate the assertion of the petitioner that its activities are not fuelled by profit motive is incorrect. Absence of profit motive, though not conclusive, does indicate that the petitioner is not carrying on any business.
- The petitioner institute has been established to perform a function of regulating the profession of Chartered Accountants. The functions performed by the petitioner institute are in the genre of public welfare and not for any private gain or profit and in this view, it cannot be said that the petitioner is involved in carrying on any business, trade or commerce.
- After going through the provisions of the ICAI Act and the Regulations framed therein as well as various activities carried on by the petitioner, we are of the view that the petitioner institute does not carry on any business, trade or commerce.
- The activity of imparting education in the field of accountancy and conducting courses both at pre-qualification as well as post-qualification level are activities in furtherance of the objects for which the petitioner has been constituted.
- Activities of providing coaching classes or undertaking campus placement interviews for a fee are in relation to the main object of the petitioner which as stated earlier cannot be held to be trade, business or commerce.
- Accordingly, even though fees are charged by the petitioner institute for providing coaching classes and for holding interviews with respect to campus placement, the said activities cannot be stated to be rendering service in relation to any trade, commerce or business as such activities are undertaken by the petitioner institute in furtherance of its main object which as held earlier are not trade, commerce or business.
- Assessee(ICAI)'s writ petition allowed and Department directed to allow exemption under section 10(23C)(iv).