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Issues Involved:
1. Entitlement to exemption under section 10(22) of the Income-tax Act, 1961. 2. Entitlement to exemption under section 11 of the Act. 3. Justification of additions made by the Assessing Officer. Detailed Analysis: 1. Entitlement to Exemption under Section 10(22): The primary issue was whether the assessee, an educational institution running a school, was entitled to exemption under section 10(22) of the Income-tax Act, 1961. The assessee claimed exemption on the grounds of being an educational institution existing solely for educational purposes and not for profit. The Tribunal considered the judgment of the Supreme Court in Aditanar Educational Institution, which held that if a trust is running an educational institution, it should be deemed an educational institution. The Tribunal noted that the assessee was only engaged in running a school and followed the Supreme Court's ratio to conclude that the assessee-trust existed for educational purposes. The Tribunal also addressed the question of whether the trust existed for profit by analyzing the financial figures and payments made to other educational institutions, concluding that there was no surplus and the trust did not exist for profit. Therefore, the Tribunal held that the assessee was entitled to exemption under section 10(22). 2. Entitlement to Exemption under Section 11: Alternatively, the Tribunal considered whether the assessee was entitled to exemption under section 11 of the Act. The exemption under section 11 was initially denied by the Assessing Officer due to alleged violations of section 11(5) involving advances made to other trusts. The Tribunal, however, noted that payments to other educational institutions should be considered as expenditure incurred for educational purposes, referencing the Bombay High Court's decision in Trustees of The Jadi Trust and the Supreme Court's decision in S.RM.M.CT.M. Tiruppani Trust. Since the payments were for educational purposes and the addition on account of unaccounted donations was deleted, the Tribunal concluded that there was no contravention of section 11(5)/13, making the assessee eligible for exemption under section 11. 3. Justification of Additions Made by the Assessing Officer: The Tribunal first addressed the various additions made by the Assessing Officer, which had an impact on the main issue of exemption. For assessment year 1989-90, the Assessing Officer made an ad hoc addition of Rs. 8,000 based on materials found during a search at the residence of Mr. A.F. Pinto, a trustee of a different trust. The Tribunal found that the statement of Mr. Abraham Chacko, on which the addition was based, was irrelevant as he was not connected with the assessee-trust. The Tribunal also noted that no search was conducted at the assessee's premises and no incriminating material was found. Consequently, the Tribunal deleted the addition of Rs. 8,000. For assessment year 1990-91, the Assessing Officer made an addition of Rs. 2,60,000 on account of income from undisclosed sources, which was deleted by the CIT(A) and accepted by the revenue, leading the Tribunal to draw no adverse inference against the assessee. Conclusion: The Tribunal upheld the CIT(A)'s orders for assessment years 1990-91 and 1992-93, confirming the assessee's entitlement to exemption under section 10(22). For assessment year 1989-90, the Tribunal set aside the CIT(A)'s order and directed the Assessing Officer to allow exemption under section 10(22). The Tribunal also confirmed that the assessee was entitled to exemption under section 11, given there was no contravention of section 11(5)/13. The Tribunal distinguished the present case from the case of St. Xavier Educational Trust, noting the absence of evidence for unaccounted donations or personal gain by the trustees in the present case. Thus, the revenue's appeals were dismissed, and the assessee's appeal was allowed.
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