In a significant ruling, the division bench of the Bombay High Court held that Trust imparting ‘Training and Coaching’ services to Students is liable to pay Service Tax irrespective of the fact that it is not profit-oriented.
The division bench comprising of Justice S.C Dharmadhikari and Justice Prakash D Naik said that service tax was rightly imposed on the petitioner Trust under the head ‘commercial training or coaching centre’.
The petitioner, Chanakya Mandal, is a Trust registered under the Bombay Public Trust Act provides necessary training and coaching to IAS aspirants and for those preparing for other civil service exams. The assessee denied their service tax liability on ground that they are not charging fee mandatorily from the students. They claimed that, being an educational Public Trust, they are outside the service tax net. The petitioners further challenged the constitutional validity of the amendment in Finance Act, 2010 inserting an explanation to the definition of the term “taxable service”.
The bench observed that the legislature refers to a commercial training or coaching. It means any training or coaching provided by a commercial training or coaching centre. “The commercial training or coaching centre means any institute or establishment providing commercial training or coaching for imparting skill or knowledge or lessons on any subject or field other than the sports, with or without issuance of a certificate and includes coaching or tutorial classes.”
The bench further observed that as per section 65(105)(zzc) of the Finance Act, taxable service means any service provided or to be provided to any person, by a commercial training or coaching centre in relation to commercial training or coaching.
Interpreting the explanation inserted by Finance Act, 2010, the bench said that “it is hereby declared that the expression “commercial training or coaching centre” occurring in this sub-clause and in clauses (26) and (27) and (90a) shall include any centre or institute, by whatever name called, where training or coaching is imparted for consideration, whether or not such centre or institute is registered as a Trust or a society or similar other organisation under any law for the time being in force and carrying on its activity with or without profit motive and the expression “commercial training or coaching” shall be construed accordingly. Therefore, the explanation removes any doubts with regard to the nature of the activity and its character.”
Dismissing the petition, the bench concluded that “A educational coaching is covered by the expression “coaching centre” as defined in section 65(26) and (27). That it is not on commercial basis or predominantly for profit is the only argument canvassed throughout. On some occasions in the past, it was accepted but after the insertion of the explanation even that is unavailable. Now, irrespective of profit motive and so long as such service is rendered for consideration, it falls within the purview of the tax.”
Read the full text of the Judgment below.
