1985 (1) TMI 36 - HC - Income Tax

Summary

Issues Involved:
1. Whether the assessee is an educational institution entitled to exemption u/s 10(22) of the I.T. Act, 1961.
2. Whether the educational institution must be affiliated to a university to qualify for exemption u/s 10(22).
3. Whether the assessee's activities during the relevant previous year qualify it as an educational institution.

Summary:

Issue 1: Educational Institution and Exemption u/s 10(22)
The assessee, a society registered under the West Bengal Societies Registration Act, 1961, claimed exemption u/s 10(22) of the I.T. Act, 1961, as an educational institution. The ITO denied the exemption, citing the assessee's other charitable objects and the benefits already granted u/s 80G and u/s 11. The AAC, upon examining the trust deed, found that the assessee was entitled to the exemption, noting that the society was formed as an educational institution existing solely for educational purposes. The Tribunal upheld the AAC's decision, emphasizing that the objects of the trust were purely educational and that any non-educational activity would be deemed non est.

Issue 2: Affiliation Requirement for Exemption u/s 10(22)
The Revenue argued that the assessee was not a recognized educational institution like a university and thus not entitled to exemption u/s 10(22). The Tribunal, however, found that the educational institution need not be affiliated to any university to qualify for the exemption. The court cited several precedents, including Addl. CIT v. Aditanar Educational Institution and CIT v. Sindhu Vidya Mandal Trust, which established that an educational institution need not be affiliated to a university to be eligible for exemption u/s 10(22).

Issue 3: Activities During the Relevant Previous Year
The Revenue contended that the assessee had not started functioning as an educational institution and was in the preparatory stage, thus not qualifying for the exemption. The court, however, found that the assessee had commenced activities connected with imparting education, such as preparing for regular classes and purchasing books and periodicals. These activities were deemed steps towards running a full-fledged educational institution. The court concluded that the educational institution had been established during the relevant previous year.

Conclusion:
The Tribunal was justified in holding that the assessee was an educational institution entitled to exemption u/s 10(22) of the I.T. Act, 1961. The question was answered in the affirmative, in favor of the assessee and against the Revenue. There was no order as to costs.