1996 (6) TMI 32 - HC - Income Tax

Summary

Issues involved:
The denial of exemption under section 80G of the Income-tax Act to a Brahmin Educational Society due to income derived from running chits, the contention regarding the purpose of income utilization for educational activities, and the interpretation of relevant sections 10(22) and 11(4A) of the Income-tax Act.

Exemption under section 80G:
The petitioner, a registered society solely for educational purposes, sought exemption under section 80G for donations received, which was granted for previous assessment years. The Commissioner denied exemption for subsequent years citing income from chits, despite the income being utilized for educational purposes. The petitioner argued that income used for education should not be included and that the denial was unjustified.

Interpretation of section 10(22):
The court considered section 10(22) which exempts income of educational institutions existing solely for educational purposes. It was established that if a society primarily runs educational institutions and uses income for education, it qualifies for exemption under section 10(22), regardless of other objects. Precedents emphasized the purpose of the institution and the utilization of income for education, supporting the petitioner's claim.

Relevance of section 11(4A):
The Revenue contended that the petitioner, originally claiming exemption under sections 11 and 12, was not entitled to exemption for business income. However, the court clarified that section 11(4A) was not applicable to income from educational activities under section 10(22), and the denial based on this provision was erroneous. The court quashed the orders denying exemption and directed the authorities to grant certificates under section 80G for the required assessment years, allowing the original petition.