TMI Blog1979 (2) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment 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 actual figure shown was " loss " for all the three years. The ITO closed the assessments stating that since there was no taxable income, the question of granting the exemption under s. 10(22) did not arise. The CIT took proceedings under s. 263 of the Act as, in his view, the assessment made by the ITO was erroneous and prejudicial to the revenue. According to him, the ITO had not considered the question whether the assessee was entitled to exemption in respect of the receipts of voluntary contributions. In his view, the assessee was not entitled to any exemption in view of the provisions of ss. 11 and 12(2) of the Act. After giving the necessary notice to show cause why the assessments for these years should not be cancelled, the Commissioner passed an order on 30th March, 1972, cancelling the assessments for these three years and directing the ITO to make fresh assessments taking into consideration the voluntary contributions received from " Thanthi Trust ". It may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8th February, 1965, approved the opening of a college at Tiruchendur, under the management of the assessee subject to certain conditions. On 31st May, 1965, the assessee applied to the Registrar of the Madras University for affiliation for the P.U.C. course and also for opening of the college at Tiruchendur. In the application sent to the University, the assessee stated that the entire fund of more than Rs. 22,00,000 standing in its name was earmarked for the college and that the amount would not be diverted to any other purpose without obtaining the prior sanction of the University. The Syndicate considered the application and after obtaining a report of inspection requested the assessee to comply with certain conditions before affiliation was granted. As the assessee complied with those conditions the college was granted affiliation. After the Madurai University was established, the college was affiliated to that University. Section 10(22), to the extent relevant, runs as follows : " In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included--...... (22) any income of a University or other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was, therefore, open to a private individual or body to establish a University. There is a good deal in common between educational institutions which are not universities and those which are universities. Both teach students and both have teachers for the purpose. But what distinguishes a University from any other educational institution is that a University grants degrees of its own while other educational institutions cannot. It is this granting of degrees by a University which distinguishes it from the ordinary run of educational institutions. Thus, in law, in India there was no prohibition against establishment of Universities by private individuals or bodies and in fact the famous Viswabharathi University was started by Rabindranath Tagore as a private individual. It was only in 1956 by sub-s. (1) of s. 22 of the University Grants Commission Act (III of 1956) it was laid down that the right of conferring or granting degrees should be exercised only by a University established or incorporated by or under a Central Act or a State legislature. The other " educational institution " cannot come within the category " University ". The term " University " stands for a higher degree o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e could effectuate its objects is the college and by employing this medium, the assessee imparts education. It is not possible to accept the contention that the assessee is only a financing body and does not on the facts come within the scope of " other educational institution " occurring in s. 10(22). The provision requires that the institution should exist solely for educational purposes and not for purposes of profit. We have already reproduced the clauses in the memorandum describing the objects of the society. In effect, there are only two clauses, viz., cls. (a) and (b), which are material for this purpose. Clause (a) provided for establishment, running or management of colleges or assistance to colleges. Clause (b) contemplates the same being done for schools and other educational organisations. Thus, the sole purpose for which the assessee has come into existence is education at the levels of college and school. This point as to whether a society could by running an institution claim exemption under s. 10(22) has been considered by the Allahabad High Court in Katra Education Society v. ITO [1978] 111 ITR 420. It has been held therein that an educational society could b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such deposits are to be invested in Government securities or trustee securities which yield income. Though such income would otherwise be taxable, still in view of the fact that it has a direct relation to the running of the institution which imparts education, the exemption would have to be granted. It would not be possible or proper to lay down in any precise terms as to what would be the income of the educational institution which would qualify for exemption under s. 10(22) and what would be outside the exemption. The answer would depend upon the facts in each case. What can possibly be stated is that any income, which has a direct relation or is incidental to the running of the institution, as such, would qualify for exemption. Before parting with the case, we may point out that a paper book was filed on behalf of the assessee and it was stated by Mr. Jayaraman, the standing counsel for the Commissioner, that the said book contains certain other materials, which have not been made annexures to the statement of the case. We did not look into those materials. The question is accordingly answered in the affirmative and in favour of the assessee. The assessee will be entitle ..... X X X X Extracts X X X X X X X X Extracts X X X X
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