By TIOL News Service

MUMBAI, JULY 26, 2016: THE issue is - Whether pre-schooling is an integral part of the term 'education' as envisaged u/s 2(15) of the Act. YES is the answer.

Facts of the case

The assessee is a trust, which has been constituted by the trust deed with the objects of imparting high quality education to students of all castes, creeds and communities by way of setting-up schools (including pre-primary schools), colleges, and educational and vocational training institutes in India. The assessee filed an application u/s 12A with the DIT (Exemption) for the purpose of seeking registration u/s 12A. The DIT rejected the application for grant of registration on following two reasons(i) The assessee is running the pre-school which is stage prior to normal schooling, and therefore, its activities cannot be treated as falling within the gamut of 'Education' as per section 2(15). The justification was that pre-schooling is a kind of informal education, (ii). The assessee is charging fees for issue of prospects, additional fees on account of supply of School Kit, admissions fees etc. hence the assessee trust was engaged in the business of commercial activity while running the pre-school.

On Appeal before the Tribunal the AR submitted that the DIT has ignored the object mentioned in the trust deed wherein it is specifically provided that the trust has been constituted for the purpose of imparting high quality education to all types of students from any background by way of setting up schools, colleges and vocational training institutes in India. The preschool is just one of the activities; it was further submitted on 'without prejudice' basis that in any case pre-schooling was also integral part of 'education' and cannot be and could not be seen in isolation from it. It was also submitted that the assessee is required to maintain appropriate infrastructure & establishment as well as arrangement of competent faculties so as to provide good quality of education for the students. It was lastly submitted by him that in any case it was beyond the jurisdiction of DIT to examine these facts at this stage. It would be domain of the AO to examine whether the receipts from education activity have been applied solely in the activity of education or not.

Having heard the parties, the Tribunal held that,

++ the pre-schooling has become today a mandatory prelude to school education. It is like step number one in the ladder. If step number one is taken properly, then other higher steps would be achievable more efficiently and effectively. That is the purpose as has been understood by the parents who send their kids to preschools and it has become a mandatory requirement today for all the schools imparting quality educations. It is because sending a child to pre-school is like preparing a sapling of the tree to be planted in the fields. In our considered view pre-schooling is very much integral part of the term 'education' as has been envisaged u/s 2(15) of the Act;

++ when the carrying out of the activity of 'education' itself is a charitable purpose, then at the stage of granting registration u/s 12A, the DIT is required to examine only the genuineness of the activities of the trust. He is neither permitted nor obliged under the law, to go beyond that at the stage of registration. Since the registration is granted at the very inception of an institution, therefore the law has not put this duty upon the shoulders of the CIT/DIT. This obligation has been put by the legislature upon the shoulders of the AO who shall examine these facts at the stage of assessment and in case he is not satisfied with this aspect and find that the income of the trust has been applied for activities which are not permitted under the law, and the same has not been applied for the activities for which registration has been granted, then the benefit of exemption can be denied by the AO in accordance with law. The assessee trust is carrying out the activity of education and is therefore entitled for benefit of registration u/s 12A and we direct the DIT to grant the benefit of registration u/s 12A.

(See 2016-TIOL-1312-ITAT-MUM)