TMI Blog1982 (10) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... er school or schools that may be started by the Managing Body ; (b) to organise and develop the St. Joseph's Upper Primary School and other school or schools on approved lines. The managing body consists of 7 persons. Though the name of the society is Upper Primary School, it is ordinarily meant to cover classes upto VII ; there had been an expansion in 1967 and there are X classes run in English medium. The school is located in two buildings. One belongs to Smt. S.C. Rojamma who is the headmistress and who is also incidentally the daughter-in-law of the Founder-Secretary, Sri Swamykannu Pillai. The other building is owned by the society. It was the assessee's case that its surplus income was exempt from tax under section 10(22) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elonged to her. He assumed that the property in the name of Smt. Rojamma was purchased and improved entirely out of the funds of the society. Since the school building did not belong to the society and that it would revert to Smt. Rojamma in the event of dissolution, he concluded that it was an educational institution for profit. He, therefore, did not agree that the assessee was eligible for exemption either under section 10(22) or even under section 11. 3. The learned counsel for the assessee claimed that there had been number of mistakes made by the authorities below on facts. The school is run in two buildings. One of them undoubtedly belongs to the society. The other belongs to Smt. Rojamma. It was purchased by her and the ground flo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. He also claimed that the fact there was a surplus show that the institution exists for making profit. He also relied upon the other argument that a society running an institution is not the same as the institution itself. Only the latter will be eligible for exemption. He also relied on the other arguments found in the orders of the authorities below. 4. We have carefully considered the records as well as the arguments. The objects of the society are reproduced in para 2. Both the objects are merely to run the institution already running in the name of St. Joseph's Upper Primary School or any other school that may be started by the managing body. In other words, the society has educational purpose as its sole object. As for the first ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal institution within the meaning of section 10(22). The High Court referred to an English decision in Ereaut v. Girls Public Day School Trust Ltd. [1930] 15 TC 529 (HL), where it was held that a limited company running a public school could be treated as a 'public school' itself within the meaning of the UK Income-tax Act. The Calcutta High Court in Birla Vidhya Vihar Trust v. CIT [1982] 136 ITR 445, held that even a trust running educational institutions, etc., for the benefit of the public would be eligible for exemption under section 10(22) and the surplus of income over expenditure will not be liable for tax. While all these different High Courts have taken the same view that a society with educational purpose alone could be treated a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cretary of the society and is also the Headmistress in her own right. The authorities are wrong in presuming that the entire purchase consideration was met by the society. The plot and the ground floor was constructed by her out of her own resources. The first and second floors were, however, constructed by borrowing from the society. But the society had the benefit of housing its school in the premises without paying rent. It was for this reason that no interest was charged. No doubt, both interest and rent were mutually charged from 1-4-1977. The learned departmental representative tried to make out a point out of the fact that the interest charged was less than the rent of Rs. 1,500 per month fixed for the building. It is only because pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l owner in the event of dissolution, it does not mean the assets of the society are being distributed to the founder or his relatives. Under the Societies Registration Act, the funds have to be utilised for a similar purpose for running some other educational institution and hence this is a case where assets or the surplus cannot be diverted for any purpose other than the objects of the society. Stress was also laid by the learned departmental representative on the point that the assessee had made a profit and that section 10(22) confines the benefit only to institutions which are not run for profit. Here again, we are not in a position to say that the institution is run for purposes of earning profit. There had been loss in one year and su ..... X X X X Extracts X X X X X X X X Extracts X X X X
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