TMI Blog1996 (12) TMI 93X X X X Extracts X X X X X X X X Extracts X X X X ..... through the science of creative intelligence and its practical aspect the transcendental meditation (also abbreviated as TM) and TM-sidhi programme as propounded by his Holiness Maharishi Mahesh Yogi. (ii) To fulfil the goals of the world plan as formulated in 1972 by His Holiness Maharishi Mahesh Yogi : (a) To develop the full potential of the individual. (b) To realise the highest ideal of education. (c) To solve the problems of crime, drug abuse and all behaviour that brings unhappiness to the family of man. (d) To maximise the intelligent use of the environment. (e) To bring fulfilment to the economic and other aspiration of the individual and society. (f) To achieve the spiritual goals of mankind in this generation. (iii) To open training centres throughout India in accordance with the world plan formulated by His Holiness Maharishi Mahesh Yogi. (iv) To get the science of creative intelligence made a subject of teaching and examination in all the different colleges. (v) To take steps for the establishment in each University in India a separate faculty for the teaching of the science of creative intelligence. (vi) To buy build, lease, rent or otherwise a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ections 12 and 13 was not acceptable since the objectives were not existing wholly for charitable purposes. Further there was no registration under section 12A of the Act. 5. Thereafter, the Assessing Officer held that the income was chargeable under section 28 of the Act as income from business/profession. The surplus in the Income and Expenditure Account of Rs. 9,52,237 was taken and after some small adjustments, the total income was computed at Rs. 9,56,260. 6. The assessee filed an appeal before the CIT(A). In the statement of facts, it was mentioned that the assessee-society had established an educational institution Maharishi Vidya Mandir (Public School), Sitapur Road, Lucknow, which had a distinct personality and existence separate from the parent body i.e., the society. Separate accounts for the two entities were wholly justified wherein those for the School would be exclusively with reference of the educational activities entitled for exemption under section 10(22) of the Act, while that of the parent body showing other income, which will have benefit of exemption under sections 11 and 12 of the Act. Reliance was placed on Birla Vidya Vihar Trust v. CIT [1982] 136 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he end, it was claimed that the educational institution existed solely for educational purposes without profit motive during the year under consideration and, therefore, exemption under section 10(22) should be given. 13. The CIT(A) took into consideration the following decisions :--- 1. Birla Vidya Vihar Trust's case. 2. Addl. CIT v. Aditanar Educational Institution's case. 3. Governing Body of Rangaraya Medical College's case. 4. CIT v. Devi Educational Institution [1984] 18 Taxman 221 (Mad.). 14. Thereafter, the CIT(A) came to the conclusion that the assessee-society qualified for exemption under section 10(22) of the Act for the following reasons : (i) Besides other objects, in his an object to undertake and promote the training of various educational programmes and other such kinds. (ii) In the year under consideration it exited solely for educational purposes and not for purposes of profit, and (iii) The surplus generated through its educational activities was not for profit motive as the same was to be used for the expansion of the educational facility. 15. The CIT(A) further held that the funds were not being siphoned out, but merely rent was paid. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en explained. The sense in which the word " education " has been used in section 2(15) is the systematic instruction, schooling or training given to the young in preparation for the work of life. The word " education " had not been used in that wide and extended sense according to which every acquisition of further knowledge constitutes education. It connotes the process of " training and developing the knowledge, skill, mind and character of students by normal schooling ". The CIT(A) noted that the Rajasthan High Court had held in CIT v. Maharaja Sawai Mansinghji Musuem Trust [1988] 169 ITR 379 that the pronouncements were wise enough to cover the case of educational institution for the purpose of section 10(22) of the Act. Following these decisions, the CIT(A) found that none of the objects of the assessee-society fell within the meaning of the term " education ". The school, Maharishi Vidya Mandir was one of its units and the financial affairs were managed by the same set of Managers. 20. The CIT(A) further took a view that to be entitled for, benefit under section 10(22) of the Act, the educational institution must continue to live for all time to come for the sole and exclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se. Reiterating the reasons given by the CIT(A) in assessment year 1993-94, he submitted that exemption under section 10(22) of the Act could not be given in any of the two years. 26. On the other hand, the learned counsel for the assessee relied on the reasoning given by the CIT(A) in assessment year 1991-92. He emphasised that the only activity of the society in these two years, was running of Maharishi Vidya Mandir (Public School) through a separately constituted Managing Committee. The School was affiliated with Central Board of Secondary Education, Delhi and, therefore, there could be no doubt that this purpose was solely for education. 27. It was further stated that in fact, right from inception, the only activity of the assessee was running the above school. Our attention as also invited to a copy of assessment order for assessment year 1983-84 when the claim for exemption was accepted and the income was assessed at nil under section 143(3) of the Act. Similarly, exemption had been allowed in the assessment orders for assessment years 1984-85 and 1985-86. Copies of the assessment orders were available in the Paper Book. 28. The learned counsel for the assessee made a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000 to Laboratory and School Equipment, and Computer Rs. 1 lac. It was stated that all these were for the School. The remaining surplus was lying in the bank. The Balance Sheet showed cash and bank balance of Rs. 13,19,985 as against last year's figure of Rs. 6,00,832. There were no loans and advances to any party. 30. Similarly, the surplus for assessment year 1993-94 was Rs. 16,94,895 and additions to Fixed Assets during the year were Rs. 10,48,238. These consisted mainly of Furniture and Fixtures Rs. 2,24,032, Computer Rs. 2,47,250, Building under construction Rs. 3,47,395. All the additions to Fixed Assets were for the school. Construction had been started for the School's own building in this year which would enable the assessee to have its own premises and save the lease rent being paid for hired premises. It was further submitted that the remaining surplus had gone to the bank, the balance this year being Rs. 26,15,570 as against Rs. 20,99,830 last year. Here again, the Balance Sheet did not show any loans and advances to any party. 31. On the basis of the above, the learned counsel for the assessee reiterated that there was no profit motive of the school and the surplu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal on this alternative submission or the matter should be restored to the file of the CIT(A) for a decision. 37. In reply, the learned Departmental Representative stated that even after the Amendment to the Memorandum of Association on 24-9-1996, object No. 05 included T.M., which was not education according to the ratio of the decision of the Supreme Court in the case of Sole Trustee Loka Shikshana Trust's case. 38. The learned Counsel for the assessee, however, invited our attention to the decision of the A-Bench of the income-tax Appellate Tribunal, Delhi in the case of S.R.M Foundation of India. The Tribunal had taken into account, the decision of the Supreme Court in the case of Sole Trustee Loka Shikshana Trust and following the ratio came to the conclusion that Transcendental Meditation (T.M.) and Science of Creative Intelligence (S.C.I.) amounted to medical education. In coming to this conclusion, a detailed analysis of the procedure, method and effects of the above had been taken into consideration as expressed by the Supreme Court in Hira Lal v. State of Bihar AIR 1977 SC 2236 at 2243. It was described as a science having a therapeutic effect on the human body and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipts Rs. 8,12,155.10 By Interest earned Rs. 1,66,317.00 ------------------------------------ Rs. 68,98,829.10 ------------------------------------ 41. The expenses include lease rent of hired premises of the school of Rs. 3 lacs per year to Maharishi Institute of Creative Intelligence, Delhi, which is a separate society. The surplus was Rs. 9,52,237 for assessment year 1991-92 and Rs. 16,94,895 for assessment year 1993-94. Almost the entire surplus has gone to increase in Fixed Assets for the School and increase in bank balances. There are no loans and advances in the Balance Sheet. Building construction of the school commenenced in assessment year 1993-94 and Rs. 3,47,395 was spent on the same during that year. 42. It will also be useful at this stage to note the provisions of section 10(22) of the Act :--- " Section 10 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 educational institution, existing solely for educational purposes and not for purposes of profit." 43. It is necessary to keep in mind the distinction between the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t's case. In that case, the assessee was a public charitable trust and was receiving income from running theatre, leasing etc. Only a small portion of the income was spent for educational purposes and part of the income was spent on religious purposes. On the facts of the case, it was noticed that factually only a very small amount had been spent for educational purposes leaving a huge surplus for other charitable purposes. It was held that it could not be said that the institution was solely for educational purposes and, thus, entitled to exemption under section 10(22) of the Act. However, the facts in the present case are distinguishable. The assessee-society did not carry out any of the non-educational purposes. The only activity was solely for educational purposes. No amount was spent for religious or non-educational purpose. The surplus has been shown to have been utilised for expansion of school activity. We have noticed that the surplus went towards procurement of Fixed Assets for the school and building construction was also started. The remaining surplus was kept available in bank and not diverted as loans and advances. The ratio of the case relied upon cannot be applied t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e society are not educational and, therefore, it does not exist solely for educational purposes. It is an admitted fact that some of the objects of the society were not for educational purposes. We have already noted this. However, the activity of running Maharishi Vidya Mandir (Public School) under a separate Managing Committee, authorised, inter alia by clause (vii) of the objects, was undoubtedly solely for educational purposes. We have drawn out this distinction earlier also. This distinction was not kept in view by the CIT(A) either. The decision of the Supreme Court relied upon by him, along with the decision of the Rajasthan High Court in Maharaja Sawai Mansinghji Museum Trust's case does not, therefore, help us in coming to a proper conclusion, the facts of the case being materially different. 49. We have also to examine the allegation of the Assessing Officer in assessment year 1991-92 that the assessee was siphoning out its funds to its parent society by paying huge lease rent. We do not find merit in this allegation, and it has been rightly rejected by the CIT(A) in that year. The assessee was paying lease rent of Rs. 3 lacs annually to a separate society, not its par ..... X X X X Extracts X X X X X X X X Extracts X X X X
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