Expenditure on educational seminars by 'Charitable Institutions' related to the main object cannot be disallowed

'Chintan Shivirs' for the exchange of knowledge is not new, and, without going too much into the political landscape, it is especially not new to the current government in India. Organizing such seminars, conferences, and lectures provides a platform and environment for the exchange of knowledge and experience, upgrades the knowledge about the latest development in the area of teachings, and equips both teachers and students with skills and practical knowledge.

It also facilitates the development of understanding between the participants, like teachers and students, for the free flow of knowledge and ideas. Hence, where the main object of the assessment is that of imparting/improving education, such expenditure cannot be considered as not related to the object.

The same was held in the case of SARSWATI VIDHYA PRATISHTHAN M.P. vs. DCIT (E) BHOPAL [2023-VIL-1262-ITAT-IND]. Similarly, it can be a case of an assessee with a main object u/s 11 of ITA’61 [Sec 332-355 of ITA'25] as that of promotion of scientific development (engineering institutes), promotion of protection of trade & commerce (chambers of commerce), promotion of real estate (institutions like CREDAI), promotion of management studies (management institutes), etc.

However, what these organizations have to look into are the observations of the Hon’ble Apex Court declaring that specific incomes themselves may or may not be exempt in the case of trusts; in the back-to-back judgements in the 2nd half of 2022, in the case of Ahmedabad Urban Development Authority and New Noble Education Society. In simple words, the entities claiming exemption u/s 11 of the Income Tax Act have to prove the following:

A. That there is no standalone activity in the nature of trade, commerce, or business. If that be so, then separate books of accounts should be maintained and the profits should be offered for tax.

B. In the course of advancing the object of GPU, the entity can carry on ‘connected’ activities in the nature of trade, commerce, or business. But the receipts from these activities should not be more than 20% of the total receipts. The consideration for such connected activities should also be on a cost basis or nominally above cost.

How much above cost is not mentioned. But it is a fact that 15% accumulation is officially allowed by the Income Tax Act, and possibly that could be a benchmark.