TMI Blog1992 (8) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... , the institute was running under the name and style of " Surat Parsi Technical and Industrial Institute, Surat ". On October 8, 1943 Shirinbai and Dhabbhai Sorabji Paruok, two sisters donated a sum of Rs. 4 lakhs to this institute under certain terms and conditions, one of them being to name the institute as " Sorabji Naseerwanji Paruck Parsi Polytechnic Institute " in order to perpetuate the memory of the parents of the donor-sisters, In course of time, due to paucity of funds, the trustees of the institute found it impossible to carry on the, institution. An attempt was, therefore, made to enter into an agreement with the then Bombay Government to take over the institute. However, before the agreement could be entered into, one R. K. Kanga of Bombay moved the Surat Court with a plea that, instead of handing over the institute to the Government, it would be beneficial to the interest of the boys of the Parsi community to see that the institute is shifted to Bombay. While the proceedings were pending before the court, the trustees of Sheth Manekji Cooper Trust, Bombay, moved the court with a request to permit them to run the institute at Bombay, under their control. The request wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es clear that the Income-tax Officer has noted that since January, 1956, onwards, the institution has not continued to be an educational institution inasmuch as it stopped carrying on educational activities, and started merely granting scholarships to Parsi students. He was, therefore, of the opinion that the institution could not be termed as an educational institution within the meaning of section 10(22) of the Act. He also found that the institution was established for " charitable purposes " within the meaning of section 2(15) of the Act, and hence, the income was exempted under section 11(1) of the Act to the extent of its application on the objects. He, accordingly, disallowed the claim of the assessee to exempt it fully under section 10(22) of the Act, and held that its income is exempt under section I l(1) of the Act to the extent of its application on the objects. (iv) Being aggrieved by the order of the Income-tax Officer, the assessee preferred an appeal to the Appellate Assistant Commissioner who allowed the appeal holding that the assessee was an institution for the propagation and advancement of secular education, and that it was on that basis that the assessee cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing education as stated above is started, the interest on the entire amount be utilised towards its expenses. (iii) I have delivered this amount to you with the aim of giving benefit of the new institution to Zoroastrian day-scholars of any outside place over and above the inmates of the orphanage because you may collect the share of expenditure from the funds of the orphanage as per its trust deed for the inmates of the said orphanage who may get benefit of this institution, however, it is absolutely at your discretion whether to collect such a share and if to collect at what rate and for what reason, taking into consideration the condition from time to time of this fund. You are given full power to act in this direction at your entire discretion. (iv) If the Zoroastrian boys of Surat or of any place other than Surat desire to take advantage of the proposed new institution it may be given to them. If it is found essential to make boarding and lodging arrangements for such boys who may be from outside Surat, such arrangements be made by you and, if you do so, you are at liberty to make use of the interest of any amount towards the expenses of the same." From the aforesaid obj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctivity for profit " at the end of the definition in section 2(15) of the Act even if the purpose of the trust is " advancement of any other object of general public utility ", it would not be considered to be " charitable purpose " unless it is shown that the above purpose does not involve the carrying on of any activity for profit. The result, thus, of the change in the definition is that in order to bring a case within the fourth category of charitable purpose, it would be necessary to show that : (i) the purpose of the trust is advancement of any other object of general public utility, and (ii) the above purpose does not involve the carrying on of any activity for profit. Both the above conditions must be satisfied before the purpose of the trust can be held to be charitable purpose. In the above context, it shall have to be seen as to what meaning should be given to the word " education " which occurs in section 2(15) of the Act. In the case of Sole Trustee, Loka Shikshana Trust v. CIT [1975] 101 ITR 234 (SC) in the context of institution carrying on activities to educate the people of India in general, and of Karnataka in particular, the Supreme Court had an occasion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " It becomes clear from the aforesaid provision that in order to be eligible to gain total exemption under section 10(22) of the Act, it is necessary that there must exist an educational institution. Secondly, such institution must solely exist for educational purposes, and thirdly, the institution should not exist for the purpose of profit. It is not disputed before us that the assessee is an institution which was existing at the relevant time. It is not necessary therefore for us to undertake the exercise of ascertaining the meaning of the word "institution" and to find out as to whether the assessee is an institution or not. The Revenue has, however, seriously urged before us that the assessee was not an educational institution and was therefore not entitled to the total exemption under section 10(22) of the Act. At this stage, we may also refer to section 11(1)(a) of the Act, which grants exemption to income from property held for charitable or religious purposes. It may be noted that it is not at all disputed before us by the Revenue that to the extent the assessee-trust has applied for exemption of its income for the purposes of educational activities of the said institu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sweep of " educational activities ". The aforesaid rival contentions of the parties shall have now to be examined in the light of the statutory provisions set out hereinabove, and the judicial pronouncements on the subject. In the case of Addl. CIT v. Victoria Technical Institute [1979] 120 ITR 358, the Division Bench of the Madras High Court was called upon to decide the question in a partially similar situation. Before the Madras High Court, the assessee-institute was a society registered under the Societies Registration Act, and was established to impart or to assist in imparting instruction to persons of either sex in scientific or artistic principles which underlie the commercial and industrial occupations of the people as well as instruction in the manual and other practice involved in the application of such principles and to assist persons of either sex who are engaged in artistic, industrial or commercial occupations. The claim of the assessee before the court was that the objects of the institute fall within the concept of " education " on the ground that the primary object of the assessee was to impart instruction in handicrafts and the institute was a charitable tru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... students. It must be very close to normal schooling. Therefore, when the activity of the institution is that of only giving scholarships to a class of beneficiaries for the purpose of enabling them to pursue their educational activity elsewhere, the institute cannot he said to be carrying on educational activity for educational purposes as stipulated by section 10(22) of the said Act. Mr. B. J. Shelat, learned counsel for the Revenue, has invited our attention to the decision of the Division Bench of the Karnataka High Court in the case of CIT v. Saraswath Poor Students Fund [1984] 150 ITR 142. The assessee before the Karnataka High Court was a society registered under the Societies Registration Act with the main object to extend financial assistance to poor and deserving students belonging to the Saraswath Community by way of loans scholarships and assistance for purchase of books and other educational requisites. Unlike the case before us, even the objects of the trust before the Karnataka High Court did not stipulate establishment of an educational institution to impart education to the students. The primary object of the assessee was to extend financial help to the students. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 10(22) if the assessee is an educational institution or an establishment which primarily engages itself in educational activities. The institution, however, may incidentally take other activities for the benefit of the students or in furtherance of their education. It may invest its funds in any manner, but the income generated therefrom must be utilised exclusively for educational activities. If these requirements are complied with, the assessee's income shall be exempt under section 10(22) of the Act. " From the aforesaid observations, it becomes clear that, in order to earn total exemption under section 10(22) of the Act, an assessee should be an educational institution or an establishment which primarily engages itself in educational activities. Though the words " educational activities " are words of very wide amplitude, we would like to add that the element of imparting education to students or the element of normal schooling where there are teachers and taught must be present so as to fall within the sweep of section 10(22) of the Act. We would, at the same time, like to add that such an institution may, incidentally, take other activities for the benefit of stude ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... araswath Poor Students Fund [1984] 150 ITR 142 (Kar). It may be noted that in the case of Academy of General Education [1984] 150 ITR 135 (Kar) the assessee was a society with the object to make available technical and commercial education in as many as 47 subjects with a number of other ancillary objectives. The academy was, in fact, running nine educational institutions and also supervised 22 aided educational institutions. Prior to the assessment year 1970-71, the income of the assessee was treated as exempted under section 10(22) of the Act. However, for the relevant assessment year, the claim of the assessee under section 10(22) was disallowed which ultimately resulted in reference of a question of law to the High Court and the High Court found that the primary object of the institute was to establish, support, manage or conduct schools, colleges and such other educational institutions. The society has income of its own. The society, out of its income, has given outright grants to some schools. It has not spent its income for any purpose unconnected with education. It was, therefore, an educational institution existing purely for educational purposes and not for profit. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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