TMI Blog1989 (10) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... being expenditure incurred towards charitable purposes, viz., towards schools and hostels, and found a sum of Rs. 4,355 as excess of income over expenditure. Therefore, he held a sum of Rs. 4,360 as taxable income and levied tax of Rs. 350 on the same. The assessee appealed to the Appellate Assistant Commissioner contending that the entire income of the trust is exempt from tax under section 10(22) of the Act. The Appellate Assistant Commissioner held that the trust has been in existence for more than half a century, that the object of the trust is running of educational institutions, that he is satisfied that the trust satisfies the requirements of section 10(22) of the Act and that once section 10(22) of the Act is applicable, there is no question of consideration of the income under sections 11 to 13 of the Act. In view of the applicability of section 10(22) of the Act, the entire income is exempt from tax and, consequently, he allowed the appeal. The Revenue appealed to the Income-tax Appellate Tribunal against the order of the Appellate Assistant Commissioner and contended that even if the assessee is a charitable trust, it does not automatically qualify to be treated as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... more or less the same sources. Contribution to the Higher Elementary Schools amounted to Rs. 10,094. The surplus was Rs. 27,023. This would clearly show that the trust which is a public charitable trust was carrying on business under lease of shandies and cinema theatre and from out of that income was maintaining two schools. The income of the trust cannot be said to be the income of the educational institutions which alone is exempt under section 10(22). Secondly, the educational institution for qualifying for exemption under section 10(22) should exist solely for educational purposes. It is true that the schools exist only for educational purposes, but the income is the income of the trust which does not exist solely for educational purposes. From what we have stated above, it would also appear that only a small portion of the income has been applied to the educational institution and in the circumstances section 10(22) does not apply in the assessee's case." The Tribunal has also distinguished the case cited by the assessee and consequently held that the case of the assessee does not fall under section 10(22) of the Act and reversed the order of the Appellate Assistant Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose of the educational institution. He, therefore, prayed for reversing the order of the Tribunal and restoring the order of the Appellate Assistant Commissioner. In support of his contentions, learned counsel for the assessee referred to a number of decisions. On the other hand, learned counsel for the Revenue submitted that the income should be derived from the educational institution itself to attract the benefits of section 10(22) of the Act. He further submitted that having regard to the income and expenditure of the trust, as stated in the order of the Tribunal, the income cannot be exempted from tax under section 10(22) of the Act since it is only a case of a trust and, therefore, it has to be considered whether the income is exempt from tax under sections I 1 to 13 of the Act, and if so, to what extent. The Tribunal has rightly referred the matter to the Appellate Assistant Commissioner for considering that question and, therefore, it does not call for any interference by this court. In the decision reported in Secondary Board of Education v. ITO [1972] 86 ITR 408 (Orissa), which was also referred to and dealt with by the Tribunal, the assessee was the Board ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Aditanar Educational Institution [1979] 118 ITR 235 (Mad), the assessee is a society registered under the Societies Registration Act, 1960. It had as its objects to establish, and run, manage, or assist colleges and other educational organisations existing solely for educational purposes. The assessee received donations from a trust, viz., "Thanthi Trust". During the previous year relevant to the assessment year 1965-66, it received as donation a sum of Rs. 15,71,370, another sum of Rs. 5,62,432.25 during the previous year relevant to the assessment year 1966-67 and yet another sum of Rs. 4,78,899.67 during the previous year relevant to the assessment year 1967-68. The assessee filed returns for all these three assessment years stating that "its taxable income was nil as it was an educational institution existing solely for educational purposes". The Income-tax Officer closed the assessments stating that since there was no taxable income, the question of granting the exemption under section 10(22) of the Act did not arise. The Commissioner of Income-tax revised the order under section 263 of the Act holding that the principle of ejusdem generis would apply in the construction of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ." From the aforesaid two decisions, it is clear that, to claim exemption under section 10(22) of the Act, it is not necessary that the assessee itself should be an educational institution and so long as the profits of an institution or society, which exists for educational purposes, is incidental to the purpose of education, the income of such institution or society is exempt from tax under section 10(22) of the Act. In the decision reported in CIT v. Bimetal Bearings Ltd. [1985] 152 ITR 85, the Madras High Court has considered the claim of an educational society for exemption with reference to the objects as found in its memorandum. The society was formed to provide high quality education and to promote the formation of, and continue the management of, Sri Parama Kalyani High School, Alwarkurichi, Thirunelveli District. The object also provided for collecting funds by way of subscriptions, donations or other means for the purpose of running the school. One of the clauses in the memorandum is to manage any other allied or auxiliary institution including automobile workshop, driving school, printing press, etc., and to run them if need be on a commercial basis in order to make ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever, on the facts, as extracted in the order of the Tribunal, we agree with the Tribunal that, in the instant case, the object of the trust is to provide not only for running educational institutions but also for spending some money for religious purposes regarding two temples. The Tribunal has also extracted in its order paragraphs 15 and 16 of the judgment of this court in C. S. No. 29 of 1956, which run as follows: "15. The income from the properties of the trust shall be realised and after contributing the prescribed sums for the conduct of Sri Ramaswami Temple at Rajapalayam and for the 5th day festival in Panguni Agnikuli festival in Droupathi Amman Temple, all or any expenditure requisite and necessary or incidental to the administration and carrying on of the educational institutions and the maintenance of the properties of the trust shall be met. 16. A sum up to Rs. 150 is authorised to be spent by the trustees for the Sri Ramanavami and Krishna Jayanthi festivals in Sri Ramaswami Temple at Rajapalayam and a sum up to Rs. 200 per annum is authorised to be spent by the trustees for the 5th day festival in the Panguni Agnikuli festival in Droupathi Amman Temple. The con ..... X X X X Extracts X X X X X X X X Extracts X X X X
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