1987 (8) TMI 80 - HC - Income Tax

Summary

Issues Involved:
The judgment addresses the following issues:
1. Whether Agarwal Shiksha Samiti Trust is a separate assessable entity under the income-tax law or a part of Agarwal Shiksha Samiti.
2. Whether the Tribunal was correct in ruling that the assessee-trust was not an educational institution eligible for exemption under section 10(22) of the Income-tax Act.

Issue 1 - Agarwal Shiksha Samiti Trust as a Separate Entity:
The reference pertains to Agarwal Shiksha Samiti Trust's claim for exemption under section 10(22) of the Act. The Income-tax Officer found that the trust, formed by a registered deed, was giving donations to Agarwal Shiksha Samiti, which operated educational institutions. The Appellate Assistant Commissioner and the Tribunal concluded that the trust did not run educational institutions like universities or colleges, as it only received and disbursed donations. The trust's counsel argued that it was a separate legal entity created to support the educational objectives of Agarwal Shiksha Samiti, maintaining separate accounts for donations. Citing legal precedents, the counsel contended that the trust's purpose aligned with educational promotion, meeting the criteria for exemption under section 10(22) of the Act.

Issue 2 - Eligibility as an Educational Institution:
The Revenue argued that since Agarwal Shiksha Samiti Trust did not directly operate schools or colleges and maintained separate accounts, it did not qualify for exemption under section 10(22) of the Act. Referring to a Supreme Court case involving a trust for general public utility, the Revenue contended that the trust's activities did not align with the definition of "education" under the Act. However, the court noted that the trust collected donations solely for educational purposes, without profit motives, meeting the requirements of section 10(22). Consequently, the court ruled in favor of the assessee, holding that the trust fulfilled the conditions stipulated in section 10(22) and was eligible for exemption as an educational institution.

Conclusion:
The court answered the reference questions as follows:
1. Agarwal Shiksha Samiti Trust is a separate legal entity for assessment under income-tax law, not part of Agarwal Shiksha Samiti.
2. The Tribunal erred in ruling that the assessee-trust was not an educational institution as per section 10(22) of the Act. No costs were awarded in the matter.