The document discusses the taxability of professional development programs conducted by institutes like ICAI and ICSI for their members. It analyzes whether such programs constitute a taxable service. It concludes that (1) professional development programs provided for consideration likely satisfy the definition of taxable service, (2) the principle of mutuality does not apply since the institutes and members have separate legal identities, and (3) delegate fees charged to members and non-members for such programs may be subject to service tax.

1. Volume IX Part 6 December 25, 2014 18 Business Advisor
Taxability of professional development
programmes
Dr Sanjiv Agarwal
Backdrop
We are all aware that various professional institutes
such as the ICAI, and the ICSI, provide the services of
professional development and skill up-gradation of
their members through various training programmes
in the form of conferences, seminars, workshops, and
meetings, generally on self-financing or subsidised
cost basis. These institutes charge delegate or
participation fee from members and even arrange for
hotel accommodation on payment basis. These institutes have made
participation of members in such programmes mandatory for which they
have to earn programme credit hours as prescribed.
While such programmes are neither a part of formal education nor a
commercial or vocational coaching, there may be a doubt as to whether
such services are exigible to service tax or not.
Professional development programmes
Professional development and continuing education of the members of the
institutes is one of the important functions of the institutes.
These institutes, their regional offices and branches/ chapters organise the
following types of programmes:
(a) National and international conferences/ convention;
(b) Conference of the practising members;
(c) Seminars on the important subjects pertaining to the profession;
(d) Workshops/ training programmes on the relevant topics/ subjects.
Such programmes enable the members to constantly upgrade their
professional competence and skills, improve their level of confidence to meet
ever-changing demands on the profession and to assure users of
professional services that they possess adequate skills commensurate with
their professional responsibilities.

2. Volume IX Part 6 December 25, 2014 19 Business Advisor
What is service?
The term „service‟ has been defined in clause (44) of the new section 65B
inserted by the Finance Act, 2012, as applicable w.e.f. 1.7.2012 and means:
 any activity
 for consideration
 carried out by a person for another
 and includes a declared service.
The said definition further provides that „service‟ does not include –
 any activity that constitutes only a transfer in title of goods or immovable
property by way of sale, gift or in any other manner;
 a transfer, delivery or supply of goods which is deemed to be a sale of
goods within the meaning of clause (29A) of article 366 of the
Constitution;
 a transaction only in money or actionable claim;
 a service provided by an employee to an employer in the course of the
employment;
 fees payable to a court or a tribunal set up under a law for the time being
in force.
Further, Explanation 2(a) to the definition of service in section 65B (44)
clarifies that an unincorporated association or a body of persons (ICAI /
ICSI / ICWAI in this case) and a member thereof (participants who are
members of ICAI / ICSI / ICWAI) shall be treated as distinct persons. This
implies that concept of „mutuality‟ may not apply.
The ICAI / ICSI / ICWAI satisfies the scope of „service‟ as defined in Section
65B(44), as the professional development programmes involving training or
knowledge enhancement activities, i.e., seminars/ conferences/ talks/
lectures/ meetings etc., are provided to the members of the ICAI / ICSI /
ICWAI, non-members, corporate bodies, spouses, sponsored participants
etc., by meeting the following conditions:
a) Activity is involved (imparting training or academic advancement);
b) Consideration is involved (participation fee / delegate fee);
c) Such activity is for a consideration;

3. Volume IX Part 6 December 25, 2014 20 Business Advisor
d) Two persons are involved - ICAI / ICSI / ICWAI and members/ non-
members/ corporate sponsored persons.
In such cases, service provider and service receiver are two different
persons, i.e., ICAI / ICSI / ICWAI which is a body established under law,
and participants are members/ non-members/ corporate participants.
Both fall under the scope of “person” as defined in section 65B (37) of the
Finance Act, 1994.
Negative list
The following services relating to education are specified in the negative list
under clause (l):
 pre-school education and education up to higher secondary school or
any education equivalent thereto;
 education as a part of a prescribed curriculum for obtaining a
qualification (degree/ diploma/ certificate) recognised by law for the time
being in force; and
 education as a part of any approved vocational education course.
The activities of organising professional development programmes such as
conventions/ seminars/ conferences / workshops / meetings etc., by ICAI /
ICSI / ICWAI are for enhancement of education and training for updation
and upgradation of academic and professional skills/ knowledge of its
members. Such meetings/ seminars etc., conducted by ICAI / ICSI / ICWAI
cannot be said to be providing any education as a part of a prescribed
curriculum for obtaining a qualification recognised by law for the time being
in force. These only facilitate skill enhancement after formal education is
complete. Also, professional development programmes/ seminars/
conferences do not fall under the criteria of school or pre-school education
or for providing vocational education services.
Neither is it a course affiliated to the National Council for Vocational
Training or State Council for Vocational Training offering courses in
designated trades as notified under the Apprentices Act, 1961, nor is it run
by a person registered with the Directorate General of Employment and
Training, Ministry of Labour and Employment, Government of India.
Exemptions
W.e.f 11.07.2014, the scheme of exemption in relation to education has
been modified. The exemption is available on the following services:

4. Volume IX Part 6 December 25, 2014 21 Business Advisor
a) All services provided by an educational institution to its student, staff
and faculty would be exempt.
b) Services provided “ to” an educational institution by way of:
i) transportation of students, faculty and staff;
ii) catering, including any mid-day meals scheme sponsored by
government;
iii) security or cleaning or house-keeping services performed in such
educational institution;
iv) services relating to admission to, or conduct of examination by such
institution.
The activity of organising professional programmes/ conferences/ seminars
by ICAI/ ICSI/ ICWAI shall not be covered under facilities provided to the
members, since it does not get covered under services provided to students,
faculty and staff as explained above.
Members and non-members are neither student nor faculty nor staff.
Moreover, these are not in relation to “education” per se. Thus, the activities
may not be covered under this entry and shall be liable to tax under the
service tax provisions as these are not directly or indirectly in respect of the
CA/ CS/ CWA courses but only a voluntary activity to enhance and update
the knowledge of members etc.
These institutes (ICAI / ICSI / ICWAI) also arrange for hotel accommodation
for delegates/ participants on their request, wherever applicable, and take
reimbursement from the members/ non-members for onward remittance to
such hotels.
In such cases, hotels are not paid directly by participants but they pay to
the institutes in their individual capacity and the institutes make payment
to the hotels. Going by the valuation rules and practices, the following
situations may arise:
a) Members/ delegates paying directly to hotels on bookings made by the
institutes – No service tax involved on the part of the institutes.
b) Members/ delegates paying to ICAI/ ICSI/ ICWAI and the ICAI/ ICSI/
ICWAI paying to hotel - If on actuals, no service tax may be attracted,
provided all other conditions are fulfilled.
c) Members/ delegates paying to ICAI/ ICSI/ ICWAI and the ICAI/ ICSI/
ICWAI paying to hotel but some margin/ profit element is retained by
ICAI/ ICSI/ ICWAI - Service tax may be attracted.

5. Volume IX Part 6 December 25, 2014 22 Business Advisor
Principle of mutuality
“No man can trade with himself, he cannot make income by dealing with
himself.”
The “principle of mutuality” which has its genesis from the above statement,
is beneficially utilised by mutual concerns like members‟ clubs, co-operative
societies, mutual benefit funds or chit funds, trade associations etc., where
the persons form the concern or the association for the benefit or
advancement of certain mutual activities. Such organisations where the
benefits are available to only a „class of public‟ instead of „general public‟ can
take the shelter of ‟principle of mutuality‟.
It is evident that ICAI/ ICSI/ ICWAI are separate legal entities and are
distinct from the members. For the sake of argument, if it is assumed that
the ICAI/ ICSI/ ICWAI gets dissolved, in such a case, its members cannot
claim right on the assets and liabilities of the institute as the ICAI/ ICSI/
ICWAI is not established/ formed by the members but is a body corporate set
up under an Act of Parliament with certain objectives. The ICAI/ ICSI/ ICWAI
has a perpetual succession, i.e. it shall continue forever irrespective of the
continuity of its members except in case of winding up or liquidation of the
institute as per law. The “principle of mutuality” may not apply in case of
facilities/ services provided by ICAI / ICSI / ICWAI to its members as both
have separate legal existence. Not only this, ICAI / ICSI / ICWAI cannot also
declare dividend to its members.
The “principle of mutuality” may not apply on the services/ facilities
provided by these institutes to their members and may be taxable subject to
the fulfilment of other conditions of taxability. The concept of mutually does
not apply to non-members.
Taxability to service tax
The professional development programmes such as seminars/ meetings/
conferences etc., organised by ICAI / ICSI / ICWAI are for knowledge
The “principle of mutuality” may not apply on the services/
facilities provided by these institutes to their members and
may be taxable subject to the fulfilment of other conditions of
taxability.

6. Volume IX Part 6 December 25, 2014 23 Business Advisor
enhancement/ skill development of the members of ICAI / ICSI / ICWAI.
These are provided for a consideration (charge/ fee collected from members).
The activities clearly fall within the purview of a service. Moreover, the same
are neither covered under Entry No. (l) of the Negative List nor are they
provided by an educational institution to students, faculty and staff so as to
be covered under Entry No. 9 of Mega Exemption Notification No. 25/2012-
ST(as amended).
Further, the “principle of mutuality” may not apply when services are
provided by ICAI/ ICSI/ ICWAI to its members, as ICAI/ ICSI/ ICWAI is a
separate legal entity distinct from the members. Also, Explanation 2 to the
definition of “service” under Section 645B(44) creates a deeming fiction by
considering unincorporated association or body of persons and its members
as distinct persons for the purpose of service tax.
Thus, the delegate fees collected from the members for participating in
professional programmes such as seminars/ meetings / conferences etc.,
may be liable to levy of service tax. The delegate fee collected from non-
members/ corporate participants (non-members)/ spouse of member
participants by way of participation in seminars/ conferences/ meetings
shall also be liable to service tax.
If the institutes are paying hotel accommodation charges on behalf of the
participants and are receiving/ collecting only the actual amount incurred
for procuring the accommodation facility from the participants, in such
case, the same shall get covered under scope of pure agent and the
institutes may not be liable to pay service tax on such accommodation
charges received from the participants (members, non-members, corporate
participants) as reimbursement. However, if actual amount is not collected
by the institutes for providing hotel accommodation facility and some profit
element is also included, in such a case, whole of the amount shall be
leviable to service tax. This would apply to reimbursements for members as
well as non-members.
(Dr Sanjiv Agarwal is Partner, Agarwal Sanjiv & Company, Jaipur)
Delegate fees collected from the members for participating in
professional programmes such as seminars/ meetings /
conferences etc., may be liable to levy of service tax.