OFFICE OF THE DIRECTOR GENERAL OF INCOME TAX (EXEMPTIONS), DELHI. 25th Floor, E-2, Pratyakash Kar Bhawan, Civic Centre, 3. L.Nehru Marg, New Delhi-110002 Name & Address of : The Institute Of Chartered the Applicant Accountants of India ICAI Bhawan, Post Box No. - 7100, Indraprastha Marg, New Delhi- 110002 Period A Y 2012-13 & onwards Date of Order 3 e lq 12013 ORDER U/S 10[23C) [iv) OF THE INCOME TAX ACT, 1961. An application in Form No. 56 seeking exemption u/s 10(23C)(iv) of Income Tax Act, 1961 was filed by the applicant, The Institute Of Chartered Accountants of India in the office of Director of Income Tax (Exemptions), Delhi on 25.9.2012 for the A Y 2012-13. Backqround: 2. The applicant is an autonomous body established under the Act of Parliament "The Chartered Accountant Act, 1949" for the regulation of the profession of the Chartered Accountants so that the country is provided experts in the field of finance, commerce and Accounts. Before proceeding further on the application of the applicant it is pertinent to mention here that an order u/s 10(23C)(iv) of the Income Tax Act,1961 was passed in ide order F No. DGIT(E)/10(23C)(vi)/2009-101137 dated 09 whereby the application of the applicant was rejected for 10 and onwards on several grounds as under:- Page 1 of 6
i) Applicant was holding coaching classes and is not an Educational Institution as per interpretation placed on the word 'education' 'used in Sec. 2(15) of the Income Tax Act,196l(hereinafter1 Act) placing reliance on the decision in the case of Sole Trustee, Loka Shikshana Trust Vs. CIT(1975) 101 ITR 234(SC) and Bihar Institute of Mining and Mine Surveying Vs. CIT(1994) 208 ITR 604 (Patna). ii) The activities of the applicant were covered under the last limb of Sec. 2(15) of the Act, i.e. advancement of any other object of general public utility. The applicant was conducting activity in the nature of business and also charging fees or consideration, earning huge profits in a systematic and organized manner. iii) Applicant had advanced interest free loan to a sister concern, viz, ICAI Accounting Research Foundation amounting to Rs. 565.20 lacs. Accordingly, there was violation of third proviso to Sec. lo(23c) as the accumulated profits were found to be not invested as per forms and modes provided under Sec. ll(5) of the Income Tax Act, 1961. 3. 'Thereafter the applicant filed a writ petition No. 1927/2010 before the Hon'ble High Court of Delhi against this order. The Hon'ble Court vide its order dated 19/09/2011 had set-aside the order passed by this office for the A Y 2009-10 and onwards and had also directed that every endeavor should be made to complete the proceedings within six months w.e.f. 17/10/2011. 4 Thereafter, after considering the submission of the applicant, order u/s 10(23C)(iv) of the I T Act,l961 dated 13-04-2012 was passed rejecting the application of the applicant by holding that:- (i) Conducting of classes for preparing the aspirants for Chartered Accountant examination are purely commercial activities and there is no difference between the activity done by ICAI and such other private organizations/individuals who are also imparting training to such aspirants. HI....a +- (ii) Earning of income from holding campus interviews, by the name and nature explained by the institute clearly established that the ICAI is working as a service provider between its members and the industry. It provides qualified Chartered Accountants to the business houses, etc., according to their need for which fee is charged. It is also providing facilities to its members in finding appropriate career opportunities in the industry. This activity of the institute is similar to the activities undertaken by any placement aaencv that ~rovide man power to the industrv accordina to their need for which fee is charqed. These activities of the assessee clearly Page 2 of 6
indicate that it is involved in the carrying on of activities in the nature of trade, commerce or business and is also involved in the activities of rendering services in relation to trade, commerce and business for a cess or fee and is clearly hit by the proviso to Section 2(15) which disentitles the applicant engaged in the activities mentioned above from enjoying tax exemption. Such private placement agencies have to pay tax as per provisions of Income Tax Act, 1961. PSUs pay taxes when they undertake business or commercial activities. There is no reason or provision to exempt ICAI if activities undertaken by it are business or commercial. Other income on account of Seminars, also come under the business category as conducting teleconferencing programs or holding seminars at Branch level, Regional and Central office level or organizing national or international conferences for duration of half, one, two or maximum three days since these events are held on supportive mode as the income takes care of the related expenditure in this regard just like other business house. 5 The application filed for the claim of exemption u/s 10(23C)(iv)of the Income-tax Act, 1961 in the office of the Director of Income-tax( Exemptions) Delhi on 20.9.2011 for the A.Y.2011-12 and onwards was also rejected in view of the detailed discussion held in the order dated 13.4.2012 in the applicants case for the A.Y.2009-10 & onwards and in view of the facts that the objects of the applicant are advancement of objects of general public utility and the proviso to section 2(15) is clearly applicable to the case of the applicant, vide order No.DGIT(E)/lO(23C)(iv)/522/2012-13 dated 28/9/2012. 6 The Institute of Chartered Accountant of India had filed writ petitions and challenged the orders passed by the Director General of Income-tax(Exemptions) refusing to grant exemption under section 10(23C)(iv) of the Income-tax Act, 1961. Whereas writ petition No.3147/2012 impugns the order dated 13.4.2012 declining the exemption with respect to the assessment years 2006-07,2007-08 and 2008-09, the writ petition No.3148/2012 had been preferred against the order dated 13.4.2012 passed by the DGIT(E) refusing to grant of exemption to the assessee under sectionl0(23c)(iv) of the 1.T.Act for the Assessment years 2009-10 and 2010-11. The assessee had preferred the writ petition No.7181/2012 against the order dated 28.9.2012 passed by the DGIT(E) declining the exemption for the assessment year 2011-12. All the three orders impugned in the three petitions have common issues and the same had been considered together by Hon'ble Delhi High Court. Page 3 of 6
7. Hon'ble Delhi High Co~~rt vide its order dated 4.7.2013, as per para-80 of the order, allowed petitions and set-aside the two impugned order dated 13.4.2012 and 28.9.2012 passed by the respondent DGIT(E). Present ~roceedinas: r 8. During the course of proceedings for the application filed for the A.Y.2012-13 onwards, a notice dated 11.9.2013 issued to the assessee and the case was fixed for hearing on 16.09.2013 and 18.9.2013. After considering the application filed on 25.09.2012 and having regard to High Court's order dated 4.7.2013, the following order is passed. 9. In exercise of the powers conferred by the Sub-clause(iv)of Clause (23C) of Section 10 of the Income-tax Act, 1961, The Institute of Chartered Accountants of India,ICAI Bhawan, Post Box IVo.7100, Indraprastha Marg, New Delhi-110002, is hereby approved for the purpose of the said sub- clause subject to the following conditions only:- (a) The applicant shall conform to and comply with the provisions of sub-clause (vi) of clause (23C) of section 10 of the Income Tax Act, 1961 read with rule 2CA of the Income Tax Rules, 1962. (b) The applicant will apply its income, or accumulate for application, wholly and exclusively to 'the objects for which it is established and in a case where more than fifteen per cent of its income is accumulated on or after 1st day of April, 2002, the period of the accum~~lation of the amount exceeding fifteen per cent of its income shall in no case exceed five years, as required in clause (a) of the third proviso to section lo(23c) of the Income Tax Act, 1961. The applicant will not invest or deposit its funds (other than oluntary 'contributions received and maintained in the form f jewellery, furniture etc.) for any period during the previous ears relevant to the assessment years mentioned above therwise than in any one or more of the forms or modes specified in sub-section (5) of Section 11 of the Income Tax Act, 1961, as required in clause (b) of the third proviso to section lo(23c) of the Income Tax Act, 1961. (d) Application of income outside India will be allowed if it is for a charitable purpose which tends to promote international Page 4 of 6
welfare in which India is interested and will be allowed to the extent to which prior approval has been taken from the CBDT as per the provisions of the sec. ll(l)(c) of the Income Tax Act, 1961. (e) This approval shall not apply in relation to any income from any activity in the nature of trade, commerce or business or rendering of any service in relation to trade, corrlmerce or business irrespective of the nature of use or application or retention of income from such activity. (f) The applicant will get its accounts audited by an accountant as defined in explanation below sub section (2) of section 288 and furnish along with the return of income, the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed. (g) The applicant will reg~~larly file its return of income along-with audit report before the Income-tax authority in accordance with section 139(4C)of the Income-tax Act, 1961. (17) That in the event of dissolution, its surplus and the assets will be given to a charitable organization with similar objectives and no part of the same will go to any of the trustees/beneficiaries of the society or any person(s) specified in section 13(3) of the Income Tax Act, 1961. (i) The approval shall not apply in relation to anonymous donations in terms of the fifteenth proviso to section lo(23c) read with section 115 BBC of the Income Tax Act, 1961. (j) That the surplus funds, if any shall be utilized only for educational purposes and will not be diverted to other non educational objectives. That if any amount is paid by way of salary, allowance or otherwise to any person referred to in sub-section (3) of section 13 of the I T Act.1961 out of the resources of the society, the same shall not be in excess of what may be reasonably paid for such services. w (I) That the applicant will give free admissions to students of EWS category as per the state Education Policy Page 5 of 6
10. Taxability or, otherwise of the income of the Institution would be separately considered as per the provisions of the Income-tax Act, 1961. 11 This order is applicable for Asstt. Year 2012-13 and onwards. 12. The above order is liable to be withdrawn by the prescribed authority, if it is subsequently found that the activities of the applicant are not genuine or if they are not carried out in accordance with all or any of the conditions subject to which it was approved. The above order is subject to the final decision of the Supreme Court. Sd- (RAJENDRA KUMAR) Director General of Income-tax (Exemptions), New Delhi. F.No. DGIT(E)/10(23C)(i~)/522/2012-13//2 84 Date: 36-9 -20/3 Copy to :- l.director, ITA-I, Central Board of Direct Taxes, New Delhi. 2.The Director of Income-tax (Exemptions), New Delhi.,$.The Principal Officer, The Institute of Chartered Accountants of India ICAI Bhawan, Post Box No. - 7100, Indraprastha Marg, New Delhi- 110002. 4.The Asstt Director of Income Tax, Trust Circle IV, New Delhi. 5.Master File ( R.S.NEGI ) Joint Director of Income tax Hqrs.(Exernption), New Del hi. Page 6 of 6