DAMODARAM SANJIVAYYA

NATIONAL LAW UNIVERSITY

SABBAVARAM, VISAKHAPATNAM, A.P., INDIA

PROJECT TITLE
Isha foundation In re - Case study

SUBJECT

Tax law - II

NAME OF THE FACULTY

Prof . VISHNU KUMAR SIR

Name of the Candidate: Zakkula Deeven Kumar

Roll No.: 20LLB131

Semester: 7th

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ACKNOWLEDGEMENT:

I have made my PROJECT titled “ISHA FOUNDATION IN RE- CASE STUDY”. I

express my sincere gratitude towards my TAX LAW-II teacher, PROF. VISHNU
KUAMR SIR for supervising me and for giving guidance when I needed. I have done
this project by collecting information and deducing facts to the best of my knowledge.
It is deeply regretted for any kind of errors that may have been noticed in it. If further
comments and suggestions regarding improvising the provisions are made, I will be
grateful.

- Z. DEEVEN KUMAR.

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 SYNOPSIS
ABSTRACT:
Applicant is desirous to run a gurukul style of residential school - Applicant will teach
subjects like Sanskrit and English language, Indian classical music (Carnatic and
Hindustani, Indian classical dance (Bharatanatyam and other forms),
Kalaripayattu,Yoga and intellectual development - HELD: Applicant is just teaching
said subjects as any other normal residential schools but with a difference that
subjects taught here are not same - As per deed provided by applicant there is no
mention of any words like advancement of religion or spirituality or yoga - Applicant
is registered under section 12AB of Income-tax Act but services provided by assessee
through said school does not qualify to be 'charitable activities' as defined in
Notification No. 9/2017- Integrated Tax (Rate), dated 28-6-2017 and Sl. No. 69 of
Notification No. 9/2017-Integrated Tax (Rate) as defined in said notification and
therefore is not eligible to claim exemption as per Sl. no. 1 of said Notification
[Section 11 of Central Goods and Services Tax Act, 2017/Karnataka Goods and
Services Tax Act, 2017] [Paras 13 and 13.2] [In favour of revenue].

Applicant will teach subjects like sanskrit and english language, Indian classical
music (Carnatic and Hindustani, Indian classical dance (Bharatanatyam and other
forms), Kalaripayattu, Yoga and intellectual development - HELD: Since, assessee is
neither providing pre-school education nor education up to higher secondary school
and they are following their own curriculum, applicant is not covered under definition
of "educational institution" as per notification No. 9/2017 - Integrated Tax (Rate) -
Therefore, assessee cannot claim exemption as per Sl. No. 69 of said notification.

LITREATURE REVIEW:
The major primary source used in this project include case law analysing the concept.
Major

secondary sources include web articles and research papers.

RESEARCH QUESTION:
i. Whether the Education being provided by the applicant is exempt
under Entry No. 57 of Notification No. 9/2017-Integrated Tax (Rate)
dated 28th June, 2017?

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 ii. If no for point (a), whether such service is exempt under any other
notification?

RESEARCH METHODOLGY:

 SCOPE OF THE RESEARCH: The study is limited to critically analyse

the Isha foundation In re judgement completely and to understand the
reasoning behind the judgement and to analyze the impact of the decision
taken by Bombay high court.

OUTCOME OF THE RESSEARCH;

This project helps the reader to understand the concept of efficacy and evergreening
by complete

analysis of the judgement. It also helps the reader to understand the Arbitration and
Conciliation Act 1996 and section 11 of the act would amount to embargo.

OBJECTIVE OF THE STUDY:

o To analysis the facts, issues and judgement of the case.

o To understand the rationale behind the judgement.

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 TABLE OF CONTENTS
1) FACTS OF THE CASE
2) ISSUE
3) ARGUMENTS
4) LEGAL REASONING
5) DECISION
6) CONCLUSION
7) STUDENT ANALYSIS

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 A) FACTS OF THE CASE:
The applicant, Isha Foundation, is a public charitable trust registered under the
Central Goods and Services Tax Act, 2017, and the Karnataka Goods and Services
Tax Act, 2017. They are involved in promoting education, yoga, meditation, and other
charitable objectives.

The applicant intends to establish a gurukul-style residential school known as Isha

Samskriti. The school's objective is to provide education to children between the ages
of 7 and 18 in Chikkaballapur, Karnataka.The primary subjects taught at Isha
Samskriti include Sanskrit and English language, Indian classical music (Carnatic and
Hindustani), Indian classical dance (Bharatanatyam and other forms), Kalaripayattu,
Yoga, and basic arithmetic. Additionally, extracurricular activities such as football,
volleyball, and treks are offered.

The curriculum at Isha Samskriti emphasizes holistic development, including

physical, mental, emotional, and spiritual aspects of a child's growth.

The applicant's trust deed mentions its primary objective as promoting education,
yoga, meditation, and other charitable objectives.

B) Issues:
Whether the education provided by the applicant qualifies for exemption under Entry
No. 57 or Entry No. 69 of Notification No. 9/2017-Integrated Tax (Rate) dated 28th
June 2017.

C) Arguments:
Applicant's Arguments:

The applicant argues that their primary and predominant activity is the advancement
of spirituality and yoga. They contend that their services should be exempt under
Entry No. 1 of the mentioned notification, which exempts services by an entity

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registered under section 12AA or 12AB of the Income-tax Act, 1961, by way of
charitable activities. They assert that their curriculum and objectives are aligned with
promoting spirituality and yoga.

The applicant asserts that their foundation’s primary objective is the advancement of
spirituality and yoga. They contend that their curriculum, focusing on traditional arts,
languages, martial arts, and yogic practices, aligns with this spiritual goal. The
foundation, therefore, sought tax exemption under Entry No. 1 of the notification,
which grants exemptions for charitable activities relating to the advancement of
religion, spirituality, or yoga.

Furthermore, the applicant sought exemption under Entry No. 69 of the notification,
which pertains to educational institutions. They argued that while their curriculum
differs from mainstream education, Isha Samskriti is an educational institution
following the gurukul tradition, imparting knowledge beyond conventional
academics.

The applicant believes that their education at Isha Samskriti is covered under Entry
No. 69 of the mentioned notification, which exempts services provided by an
educational institution to its students, faculty, and staff.

Revenue's Arguments: The revenue argues that the applicant does not meet the
criteria for tax exemption under either Entry No. 1 or Entry No. 69 of the notification.

The revenue department, however, contested the applicant’s claims. They pointed out
that the foundation’s trust deed did not explicitly mention the advancement of religion
or spirituality, which is a prerequisite for qualifying as charitable activities under the
notification. Additionally, the revenue contended that Isha Samskriti did not align
with the definition of an educational institution as specified in the notification.

D) Legal Reasoning:
The first issue revolves around the definition of "charitable activities" as per the
notification. The notification defines charitable activities as including the
advancement of religion, spirituality, or yoga. The applicant's primary objective is to
promote education, yoga, meditation, and other charitable objectives, but the revenue
argues that there is no mention of advancement of religion or spirituality in the trust
deed.

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In the second issue, the court examines whether the applicant qualifies as an
educational institution under Entry No. 69 of the notification. The notification defines
an educational institution as one that provides pre-school education and education up
to higher secondary school or equivalent. Since the applicant follows its curriculum,
does not offer pre-school or higher secondary education, and is not recognized by any
law for qualification, they do not meet the definition of an educational institution
under the notification.

He court meticulously analyzed the provisions of the notification, especially the

definitions of charitable activities and educational institutions. They scrutinized the
applicant’s trust deed and the nature of the education provided at Isha Samskriti. The
absence of explicit references to the advancement of religion or spirituality in the trust
deed played a pivotal role in the court's decision. Without such references, the court
found that the foundation's activities did not meet the criteria for charitable activities
under the notification.

Regarding the claim under Entry No. 69, the court carefully examined the definition
of an educational institution. They observed that Isha Samskriti did not provide
education up to higher secondary school or equivalent, nor did it offer education
recognized by any law. Since the school followed its curriculum, diverging from
mainstream education, it did not fulfill the criteria of an educational institution as
defined in the notification.

E) Decision:
The court rules in favor of the revenue, concluding that the services provided by the
applicant through Isha Samskriti do not qualify as "charitable activities" as defined in
the notification, and therefore, they are not eligible for tax exemption under Entry No.
1 of the notification.

Additionally, the court determines that the applicant does not meet the definition of an
educational institution under the notification, as they do not provide pre-school or
higher secondary education, and they follow their own curriculum. Thus, they cannot
claim exemption under Entry No. 69 of the notification.

In summary, the court found that the Isha Foundation's activities at Isha Samskriti did
not meet the criteria for tax exemption based on the definitions and conditions
outlined in the relevant notification. As a result, the applicant was not eligible for the
claimed tax exemptions, and the revenue's position was upheld.

In light of the legal analysis, the court ruled in favor of the revenue department. They
concluded that the services provided by Isha Samskriti did not qualify as charitable
activities under the notification, and the foundation did not meet the definition of an

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educational institution. Consequently, the applicant was not eligible for the claimed
tax exemptions under either Entry No. 1 or Entry No. 69 of Notification No. 9/2017-
Integrated Tax (Rate) dated 28th June 2017.

F) CONCLUSION:
The case of Isha Foundation highlights the complexity of tax exemptions in the
context of charitable and educational activities. The court’s decision, rooted in a
meticulous analysis of legal provisions and the foundation’s activities, underscores
the importance of explicit alignment with the criteria outlined in relevant
notifications. For entities seeking tax exemptions, precise documentation and
adherence to statutory requirements are crucial to navigate the intricate legal
landscape of charitable and educational services under the tax laws.

STUDENT ANALYSIS:
As a law student delving into the intricacies of the Isha Foundation case, it is
crucial to comprehend the multifaceted legal framework underpinning charitable
and educational tax exemptions in India. The case sheds light on the nuanced
interpretations of relevant statutes and notifications, offering profound insights into
the complexities faced by entities seeking tax benefits for their philanthropic and
educational initiatives.

Background and Legal Context:

The Isha Foundation, a registered charitable trust, found itself entangled in a legal
dispute concerning the applicability of tax exemptions under the Central Goods and
Services Tax Act, 2017 (CGST Act) and the Karnataka Goods and Services Tax
Act, 2017 (KGST Act). The crux of the matter lies in the foundation's intent to
establish Isha Samskriti, a gurukul-style residential school. The foundation claimed
tax exemptions under two specific entries of Notification No. 9/2017-Integrated Tax
(Rate) dated 28th June 2017: Entry No. 1, pertaining to charitable activities related

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to the advancement of religion, spirituality, or yoga, and Entry No. 69, regarding
educational institutions.

Analysis of Relevant Provisions: To embark on a comprehensive analysis, it is

imperative to deconstruct the pertinent legal provisions.

1. Entry No. 1: Charitable Activities and Advancement of Religion, Spirituality, or

Yoga: The foundation's primary contention rested on the interpretation of the term
"charitable activities." Notification No. 9/2017-Integrated Tax (Rate) defines
charitable activities as those related to the advancement of religion, spirituality, or
yoga. This provision necessitates a careful examination of the trust deed and the
actual activities conducted by the foundation. The absence of explicit references to
religious or spiritual advancement in the trust deed becomes pivotal. As a law
student, one must recognize the importance of precise drafting in charitable
organizations' foundational documents to align with tax exemptions.

2. Entry No. 69: Definition of Educational Institutions: Another crucial aspect

revolves around whether Isha Samskriti qualifies as an educational institution. The
notification defines an educational institution as an entity providing services related
to pre-school education, education up to higher secondary school, education
forming part of a recognized curriculum, or approved vocational education courses.
Here, the divergence from conventional educational frameworks and the
foundation's independent curriculum become central points of contention.

Trust Deed and Intentions of the Foundation:

As a law student, dissecting the trust deed is essential. The court examined the trust
deed meticulously, focusing on the foundation's stated objectives. The absence of
explicit references to religious or spiritual advancement within the trust deed posed
a significant challenge for the foundation’s claim. Legal documents, especially
foundational ones, serve as the bedrock of legal interpretations. The court's scrutiny
underscores the importance of explicit drafting to align organizational objectives
with statutory requirements for tax exemptions.

Educational Institution Status and Unique Curriculum: Understanding the

nuances of educational institutions is pivotal. The court delved into whether Isha
Samskriti adhered to the definition of an educational institution. The institution’s

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distinctive curriculum, which diverged from mainstream educational models, raised
pertinent questions. The absence of education up to higher secondary levels and
adherence to an unconventional syllabus posed challenges to the foundation's claim.
For a law student, this highlights the necessity of conforming to prescribed
educational norms to qualify for exemptions.

Implications for Charitable and Educational Entities: For charitable and

educational organizations, the Isha Foundation case serves as a cautionary tale. As
legal entities, meticulous adherence to statutory requirements is paramount.
Explicitly outlining religious, spiritual, or educational objectives within
foundational documents can substantially impact tax benefits. Additionally,
aligning educational initiatives with recognized curricula becomes essential for
institutions seeking exemptions.

Conclusion and Legal Insights: In conclusion, the Isha Foundation case

illuminates the intricacies of charitable and educational tax exemptions. For law
students, this case underscores the significance of robust legal documentation,
precise statutory adherence, and aligning organizational objectives with statutory
criteria. Legal interpretations, as exemplified in this case, can profoundly influence
the operational landscape of charitable and educational entities. As future legal
practitioners, understanding such complexities and learning from real-world cases
are invaluable in navigating the nuanced arena of tax laws governing philanthropic
and educational pursuits.

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