1983 (10) TMI 12 - HC - Income Tax

Summary

Issues Involved:
1. Whether the assessee is an educational institution entitled to exemption u/s 10(22) of the Income-tax Act, 1961.
2. Whether donations made to the assessee qualify for exemption from the total income of the donors.

Summary:

Issue 1: Exemption u/s 10(22) for Educational Institution
The primary issue was whether the assessee, Devi Educational Institution, qualifies as an educational institution under s. 10(22) of the Income-tax Act, 1961, and thus, is entitled to income tax exemption. The Income Tax Officer (ITO) denied the exemption, stating that the assessee was an educational trust and not an educational institution, as no educational institution had yet come into existence. The Appellate Assistant Commissioner (AAC) reversed this decision, noting that the assessee had taken substantial steps towards establishing an educational institution, such as applying for college affiliation, petitioning for land allotment, and starting various educational activities. The Tribunal upheld the AAC's decision, asserting that the steps taken by the trust qualified it for exemption under s. 10(22). However, the High Court disagreed, emphasizing that the actual existence of an educational institution is a precondition for exemption under s. 10(22). The court directed the Tribunal to reassess whether the activities conducted by the assessee constituted an educational institution.

Issue 2: Exemption for Donations
The second issue concerned whether donations made to the assessee qualify for exemption from the total income of the donors. The AAC granted exemption, which the Tribunal upheld, based on the premise that the assessee was an educational institution. Given the High Court's directive for the Tribunal to reassess the status of the assessee as an educational institution, the question of exemption for donations also required reconsideration. The High Court noted that if the assessee did not qualify under s. 10(22), the donors might still claim exemption under s. 11, provided the donations were made to a charitable institution. The Tribunal was instructed to consider this aspect afresh.

Conclusion:
The High Court returned the references unanswered and directed the Tribunal to rehear the appeals, considering the observations made in the judgment and the precedent set in Aditanar Educational Institution's case [1979] 118 ITR 235. The Tribunal was tasked with determining whether the assessee's activities qualified it as an educational institution and whether the donations made to it were eligible for exemption.