2003 (2) TMI 18 - HC - Income Tax

Exemption under section 10(22) of the Income-tax Act, 1961 - The Vidya Vikas Vihar, Nagpur, is a registered society registered under the Maharashtra Co-operative Societies Act and it is engaged in imparting technical education to the students - assessee-institution solely existed for educational purposes - incidental object of constructing houses for weaker sections was never implemented or acted upon by the assessee in the relevant assessment year - Tribunal was justified in holding that income of the assessee is exempt under section 10(22) for the relevant years involved in the appeals

Summary

Issues:
Interpretation of section 10(22) of the Income-tax Act, 1961 for exemption of income of an educational institution.

Analysis:
The judgment of the High Court of BOMBAY dealt with the interpretation of section 10(22) of the Income-tax Act, 1961 regarding the exemption of income of an educational institution. The case involved a registered society engaged in imparting technical education to students, with additional objectives related to providing housing for weaker sections of society. The primary issue was whether the income of the institution was exempt under section 10(22) of the Act. The Tribunal had held that the institution was solely for educational purposes and not for profit, thus qualifying for exemption. The High Court examined the statutory provision and previous judicial decisions to determine the eligibility for exemption under section 10(22).

The court emphasized the importance of the institution existing solely for educational purposes and not for profit to qualify for exemption under section 10(22). Referring to previous cases, the court highlighted that the character of the assessee, whether a university or any person engaged in business, is not material for exemption eligibility. The court also discussed the distinction between the corpus, objects, and powers of the entity in determining exemption under section 10(22). It reiterated that the crucial test is whether the primary object is to make a profit. The court cited the case law of Oxford University Press and Aditanar Educational Institution to support its interpretation of the statutory provision.

In the present case, the High Court upheld the Tribunal's decision, stating that the institution solely existed for educational purposes, and the secondary objective of constructing houses for weaker sections was not implemented. Therefore, the court found no fault with the Tribunal's findings, as they were in line with legal principles established by previous judicial decisions. The court concluded that the institution must demonstrate its existence solely for educational purposes each year to claim exemption under section 10(22). Consequently, the appeals were dismissed, and no costs were awarded.

In conclusion, the High Court's judgment clarified the criteria for exemption of income under section 10(22) of the Income-tax Act, emphasizing the necessity for educational institutions to exist solely for educational purposes and not for profit to qualify for exemption. The court's decision was based on a thorough analysis of the statutory provision and relevant case law, affirming the importance of annual evaluation of the institution's objectives to maintain exemption eligibility.