TMI Blog1983 (11) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... carrying on any activity for profit. The ITO rejected the assessee's claim on the ground that in view of s. 13(3) read with s. 13(2)(a) of the Act, the assessee cannot claim the benefit of exemption under s. 11. In the further appeal filed by the assessee to the AAC, an alternative claim was also put forward by the assessee. The contention of the assessee was that even if it was not entitled to the benefit of exemption under s. 11, it could clearly claim relief on the basis of s. 10(22) and s. 10(22A) of the Act as an educational institution existing solely for educational purposes and not for purposes of earning profit. The AAC, after referring to the claim of the assessee both under s. 1 as well as under ss. 10(22) and 10(22A), held that the assessee was not entitled to the benefit of exemption under s. 11 of the Act. However, lie did not give his view on the question as to whether the assessee was entitled to the benefit of ss. 10(22) and 10(22A) of the Act. Thereafter, the assessee went before the Tribunal. Though the memorandum of appeal filed did not contain any ground based on the applicability of s. 10(22) or s. 10(22A) of the Act, the Tribunal considered that question, hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would not be available to the assessee ? (5) Whether the income of the trustee is not exempt from taxation ? Aggrieved by the decision of the Tribunal holding that the assessee is entitled to the benefit of exemption under s. 10(22) and s. 10(22A) of the Act, the Revenue has sought for and obtained a reference to this court in T.C Nos. 595 and 596 of 1978 on the following common question-. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the assessee is an institution falling under s. 10(22) of the Income-tax Act, 1961, and, therefore, its in come is totally exempt from tax ? " If the assessee is held to be entitled to the benefit of exemption under s. 10(22) or s. 10(22A) of the Act, it will be unnecessary to go into the question as to whether the assessee will be entitled to exemption under s. 11 or not, as the exemption under s. 10(22) is of much wider scope than the one under s. 11 of the Act. Therefore, the main question that has to be gone into now is whether the assessee could claim exemption under s. 10(22), as has been held by the Tribunal. The Tribunal has set out the objects for which the assessee-so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erson, any income falling within any of the following clauses shall not be included... (22) any income of a University or other educational institution, existing solely for educational purposes and not for purposes of profit ; " Having regard to the above provision, any University or other educational institution existing solely for educational purposes and not for purposes of profit is entitled to claim exemption in respect of its income. The Tribunal has held that having regard to the objects for which the assessee-society was established, the assessee should be taken to come within the expression " other educational institution " which exists solely for educational purposes. Before the Tribunal, a contention was urged by the Revenue that one of the objects of the assessee-society being to run other allied or auxiliary institutions including any agency such as auto mobile workshop, driving school, printing press, etc., it will take the assessee-society outside the purview of s. 10(22) of the Act, for the object of establishing commercial institutions such as automobile workshop, driving school and printing press will show that the assessee-society does not exist solely for e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ake the assessee society out of the purview of s. 10(22) of the Act. The entire argument of the learned counsel for the Revenue proceeds on the basis that clause (d) enables the assessee to carry on a commercial activity for profit and that, therefore, the assessee should be taken to exist not only for educational purposes but also for purposes of carrying on the various commercial activities referred to in that clause. However, we are not inclined to agree with the learned counsel for the Revenue that clause (d) contains an object for carrying on an activity for purposes of earning profit. According to the learned counsel for the Revenue, clause (d) should be construed as an independent clause and if it is so construed without reference to the other objects set out in the memorandum of association, it will indicate that the assessee-society was established not only to carry out the other objects, but also the objects referred to in clause (d) which are for purposes of earning profit by carrying on a commercial activity. But we are not in a position to construe clause (d) as an independent clause. A mere reading of clause (d) itself will indicate that it cannot be read independentl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in question and that, therefore, the mere existence of clause (d) in the memorandum of association cannot be taken to deprive the assessee from getting the benefit of s. 10(22) of the Act. In support of the said submission, the learned counsel for the assessee relied on a decision of the Supreme Court in Dharmaposhanam Co. v. CIT [1978] 114 ITR 463. In that case, the Supreme Court referred to Rex v. Special Commissioners of Income-tax [1922] 8 TC 286 (CA), wherein it was pointed out that where the settlor reserved to himself the power of appointment under which he might appoint to non-charitable purpose, the trust cannot claim exemption under S.11 even though the power of appointment is in fact exercised in favour of a charitable object, that it would be a different case where one or more of the objects mentioned in the memorandum of association, although included therein, were never intended to be under taken and that if there was evidence pointing to that conclusion, clearly the court would ignore the object and proceed to consider the case as if it did not exist in the memorandum. However, there is no material before us to indicate that the assessee never intended to undertake ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and so long as it was found that the institution existed for educational purposes in the relevant year and so long as its profit was incidental to the purpose of education, its income would be exempt. However, it is unnecessary for us to express any opinion on that question, for the question referred to us relates only to two assessment years and we are called upon to answer the question whether the assessee is entitled to claim exemption under s. 10(22) of the Act only in relation to those two years. If and when exemption is claimed in the subsequent years, it is open to the Revenue to contend that there is no general exemption for all years to come and the question of exemption has to be examined with reference to the facts of each year. We, therefore, answer the question referred to us in T.Cs. Nos. 595 and 596 of 1978 in the affirmative and against the Revenue. In view of the said answer, the questions referred to us in T.Cs. Nos. 593 and 594 of 1978 become unnecessary and are, therefore, returned unanswered. Coming to T.Cs. Nos. 405 to 407 of 1978, the assessee in those cases are institutions which made donations to Sri Paramakalyani Education Society, which is the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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