2004 (7) TMI 48 - HC - Income Tax

Activities of running educational institutions trust - exemption under sections 10(22) and 11 - Concededly the object of the respondent/assessee (trust) is to establish run manage and assist colleges schools and other educational institution solely for educational purpose and in that regard to raise or collect funds donations gifts etc. We are therefore of the considered opinion that the respondent/assessee (trust) is certainly entitled to the benefit of section 10(22). In such event as rightly held by the Tribunal section 11(4A) of the Act is not at all attracted to the instant case. - It would be unreal and hypertechnical to hold that the assessee-society was only a financing body and would not come within the scope of other educational institution as specified in section 10(22)

Summary

Issues:
1. Whether the respondent trust qualifies as an educational institution for exemption under sections 10(22) and 11 of the Income-tax Act.
2. Whether section 11(4A) of the Act is applicable to the case.

Analysis:

Issue 1:
The respondent trust, engaged in running educational institutions, filed a nil return for the assessment year 1992-93, claiming exemption under sections 10(22) and 11 of the Income-tax Act. The Income-tax Officer initially accepted this claim. However, during scrutiny, the Assessment Officer held that the trust was not eligible for exemption under sections 11 and 12 of the Act due to an alleged violation of section 11(4A) of the Act. The Commissioner of Income-tax (Appeals) and the Income-tax Tribunal later ruled in favor of the trust, stating that section 11(4A) was not applicable, and the trust was entitled to the exemption under section 10(22) as an educational institution. The key consideration was whether the trust's activities aligned with the purpose of educational institutions under the relevant sections of the Act.

Issue 2:
The pivotal issue was whether the trust qualified as an educational institution entitled to the benefit of section 10(22) of the Act and if section 11(4A) was applicable. The authorities did not establish that the trust's alleged business activities violated section 11(4A). The trust's objective was to establish and manage educational institutions solely for educational purposes, raising funds for this cause. Citing the case law of Aditanar Educational Institution v. Addl. CIT [1997] 224 ITR 310, the court emphasized that the trust's primary goal was educational, making it eligible for the exemption under section 10(22). The court found the precedent applicable to the present case, concluding that the trust indeed qualified as an educational institution under section 10(22) and that section 11(4A) did not apply. Consequently, the substantial questions of law raised by the Revenue were answered against them, leading to the dismissal of the appeal.

In summary, the judgment upheld the trust's eligibility as an educational institution for exemption under section 10(22) of the Income-tax Act, determining that section 11(4A) was not attracted in this case. The court relied on the trust's core educational objectives to support its decision, aligning with established legal interpretations in similar cases.