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Issues: The judgment addresses whether the assessee should be considered an educational institution for the purpose of income exemption under section 10(22) and whether income by way of dividend is exempt as attributable to educational activities.
Issue 1 - Educational Institution Status: The assessee-society was formed to run and maintain a school, receiving shares and funds from a trust. The Income-tax Officer rejected the claim for exemption, but the Tribunal found that the assessee existed solely for running the institution, meeting the criteria of section 10(22) with no other income or activity. The Revenue sought clarification on this matter. Issue 1 Decision: Citing the Supreme Court's decision in Aditanar Educational Institution v. Addl. CIT [1997] 224 ITR 310, the court held that an educational society formed for the purpose of establishing and managing schools qualifies as an educational institution under section 10(22). As the assessee's objective aligns with this definition, the first question was answered in favor of the assessee. Issue 2 - Dividend Income Exemption: The Revenue argued that dividend income is not directly related to educational activities and thus does not qualify for exemption under section 10(22). However, the court noted that the assessee exists solely for educational purposes, running a school without profit motives. Section 10(22) exempts "any income" of such institutions, including dividend income. Issue 2 Decision: Referring to previous court decisions, the court emphasized that the purpose of granting exemption to educational institutions is to support their educational activities, regardless of the source of income. As long as the institution is non-profit and educational in nature, all income, including dividends, is exempt under section 10(22). Therefore, the second question was answered in favor of the assessee.
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