Skill Development Qualifies as "Education" Under Section 2(15) – ITAT Bangalore Upholds Exemption for Charitable Trust

Background and Overview

The Income Tax Appellate Tribunal (ITAT), Bangalore, in the matter of Deshpande Educational Trust Vs DCIT (Exemptions), has delivered a significant ruling affirming that skill development and vocational training activities conducted by a charitable trust fall squarely within the meaning of "education" as defined under Section 2(15) of the Income Tax Act, 1961. Consequently, the Tribunal directed that exemption under Section 11 and Section 12 of the Act be granted to the assessee-trust for Assessment Years 2015-16, 2016-17, and 2017-18.

This ruling carries considerable weight for charitable trusts engaged in non-conventional educational activities, particularly those operating in rural empowerment, vocational training, and skill-based learning spaces, where tax authorities have frequently attempted to deny exemptions by classifying such activities as commercial in nature.

Background of the Assessee

The assessee, Deshpande Educational Trust, is a public charitable trust registered under Section 12AA of the Income Tax Act, 1961, having been established in the year 2010. The primary object of the trust is to promote and encourage education in rural and semi-urban regions of India. Toward this end, the trust has been operating structured training and skill development programs specifically designed to make rural and semi-urban youth employable and self-reliant.

The trust's activities are wide-ranging and include:

  • Offering degree-linked programs in affiliation with Karnataka University, including a Master of Social Entrepreneurship (MSE) course
  • Conducting vocational training and skill development programs pursuant to a Memorandum of Agreement with the National Skill Development Corporation dated 07.09.2015
  • Running residential programmes for vocational learning
  • Empowering underprivileged women through structured skill-based education
  • Conducting youth development and entrepreneurship initiatives in rural communities

The assessee had filed its return of income for Assessment Year 2015-16 on 28.10.2017, declaring total income of Rs. Nil, having claimed exemption under Section 11 of the Act amounting to Rs. 1,53,20,787/-. The total receipts of the trust were placed at Rs. 1,64,36,313/-, comprising fee income of Rs. 1,14,89,020/- and voluntary contributions of Rs. 37,08,000/-.

Proceedings Before the Assessing Officer

The case was not originally selected for scrutiny. However, a notice under Section 148 of the Act was issued on 31.03.2021, reopening the assessment on the ground that the trust's activities constituted advancement of any other object of general public utility, and since the receipts from such activities exceeded the threshold prescribed under Section 2(15), the trust was not entitled to the benefit of Section 11 and Section 12.

Key Findings and Objections of the Assessing Officer

The Assessing Officer (AO) rejected the assessee's claim for exemption on the following basis: