[DIT (Exemption) v. ICAI, (2011) 14 Taxman.com 5 (Del.)]
The assessee-institute, Institute of Chartered Accountants of India (ICAI), is a statutory body established under the Chartered Accountants Act, 1949 (‘the 1949 Act’) for regulating the profession of Chartered Accountants in India. The CBDT, had approved the ICAI for exemption u/s.10(23C)(iv) of the Income-tax Act, 1961 since A.Y. 1996-97. For the A.Y. 2005-06, the Assessing Officer completed the assessment u/s.143(3) of the Act, granted exemption u/s.10(23C) (iv) of the Act and computed the total income at Rs.Nil. Subsequently, the DIT (Exemption) passed an order u/s.263 on two grounds, namely, coaching activity was undertaken by the institute and the said activity was ‘business’ and not a charitable activity. In those circumstances, the institute was required to maintain separate books of account and, thus, there was violation of section 11(4A). Secondly, it was held that the institute had incurred expenses on overseas activities including travelling, membership of foreign professional bodies, etc., without permission from the CBDT as required u/s.11(1)(c) and, thus, income of the institute was not entitled to exemption as a charitable institution. On appeal, the Tribunal held that the power u/s.263 was wrongly exercised and the DIT was not justified in giving the directions on the two grounds relied upon by him.
On appeal, the Revenue questioned the findings of the Tribunal on the first ground, i.e., in respect of coaching classes, whether the same amounted to business and whether separate books of account were required to be maintained by the institute.
The Delhi High Court upheld the decision of the Tribunal and held as under:
“(i) The Tribunal examined the provisions of the 1949 Act and the role assigned to and undertaken by the institute. It was held that the institute has been created to regulate the profession of chartered accountancy and for this purpose the institute can and is required to provide education, training and monitor professional skills of the members. It is also required to provide education and training to students/articled clerks who are appearing in the examinations and aspire to be enrolled as member of the institute.
(ii) The aforesaid findings as to the object, purpose and role of the institute cannot be disputed. The DIT has taken a very narrow and myopic view and has not examined the question of object and role of the institute in proper and correct perspective. The order passed by him is devoid of reasoning. This has resulted in the error made by the DIT, which has been corrected by the Tribunal.
(iii) The second question which arises for consideration is whether activities of the institute mentioned above including those of holding classes for students/articled clerks/ members and charging fee for classes and for providing literature/material can be regarded as a business activity. Again, the order passed by the DIT is devoid of any reasons and relevant consideration on the aspects like of what is meant and understood by the term ‘business’. He proceeded on an erroneous basis that mere holding of classes amounts to business and the same was outside the scope, ambit and object of the institute. The last aspect is not correct. The order passed by the DIT is bereft of reasons and does not meet the requirement of section 263.
(iv) In these circumstances, the order passed by the DIT u/s.263 cannot be sustained and was, therefore, rightly upset and set aside by the Tribunal.”
