February 2020

Proviso to section 2(15) r/w/s 11 and 12 – As part of running an educational institution and imparting training to the students, the assessee had undertaken research projects for the industry and earned consultancy fees from them – Since the dominant object was to impart education, the proviso to section 2(15) does not apply

Jagdish D. Shah | Jagdish T. Punjabi
Chartered Accountants

10. Institute of Chemical Technology vs. ITO (Mum.) Members: Saktijit Dey (J.M.) and Rifaur Rahman (A.M.) I.T.A. Nos. 6111 and 6922/Mum/2016 A.Ys: 2011-12 and 2012-13 Date of order: 15th January, 2020 Counsel for Revenue / Assessee: Nishant Thakkar and Jasmine Amalsadwala / Kumar Padmapani Bora

 

Proviso to section 2(15) r/w/s 11 and 12 – As part of running an educational institution and imparting training to the students, the assessee had undertaken research projects for the industry and earned consultancy fees from them – Since the dominant object was to impart education, the proviso to section 2(15) does not apply

 

FACTS

The assessee was established as the Department of Chemical Technology by the University of Bombay on 1st October, 1933. With the passage of time, the assessee was granted autonomy and subsequently got converted into an independent institution in January, 2002. In September, 2008 the assessee was granted deemed university status. When the assessee was a part of Mumbai (earlier Bombay) University, the income earned by it formed part of the income of Mumbai University and was exempt u/s 10(23C). For the impugned assessment years, the assessee in its return of income declared nil income after claiming exemption u/s 11.

 

During the year under consideration the assessee had received consultancy fees. Applying the provisions of section 2(15) read with  sections 11 and 12, the AO disallowed its claim of exemption with regard to the consultancy fee received. The assessee’s claim of exemption u/s 11 in respect of other income was allowed by the AO.

 

The assessee explained that as a part of the curriculum and with a view that the students / fellows of the Institution gain actual working experience, the assessee had undertaken research projects for the industry and earned consultancy fees from the industry clients. Out of the fees received, only 1/3rd amount was retained by the assessee and the balance amount was paid to the fa

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