1983 (11) TMI 32 - HC - Income Tax

Summary

Issues Involved:
1. Applicability of Section 13 of the Income-tax Act, 1961.
2. Adequacy of security offered for the advance.
3. Applicability of Section 13(1)(c)(ii) and Section 13(2)(a).
4. Availability of the second proviso to Section 13(1)(c).
5. Exemption of trustee's income from taxation.
6. Eligibility for exemption under Section 10(22) and Section 10(22A) of the Income-tax Act, 1961.
7. Eligibility for exemption under Section 80G(2)(a)(i) of the Income-tax Act, 1961.

Summary:

1. Applicability of Section 13 of the Income-tax Act, 1961:
The assessee, Shri Parama Kalyani Education Society, claimed exemption u/s 11 for the assessment years 1971-72 and 1972-73, which was rejected by the ITO citing Section 13(3) read with Section 13(2)(a). The Tribunal upheld the rejection of exemption u/s 11 but allowed the alternative claim for exemption u/s 10(22) and 10(22A).

2. Adequacy of Security Offered for the Advance:
The Tribunal concluded that the security offered for the advance was not adequate, which was one of the grounds for rejecting the exemption u/s 11.

3. Applicability of Section 13(1)(c)(ii) and Section 13(2)(a):
The Tribunal held that the provisions of Section 13(1)(c)(ii) were directly applicable, and the assessee's case fell within the provisions of Section 13(2)(a).

4. Availability of the Second Proviso to Section 13(1)(c):
The Tribunal concluded that the second proviso to Section 13(1)(c) would not be available to the assessee, further supporting the rejection of exemption u/s 11.

5. Exemption of Trustee's Income from Taxation:
The Tribunal's decision implied that the income of the trustee was not exempt from taxation under the circumstances of the case.

6. Eligibility for Exemption under Section 10(22) and Section 10(22A):
The Tribunal upheld the assessee's claim for exemption u/s 10(22) and 10(22A), stating that the assessee-society existed solely for educational purposes and not for profit. The High Court agreed, noting that the objects of the society, including running allied or auxiliary institutions, were aligned with educational purposes and aimed to be self-supporting rather than profit-making.

7. Eligibility for Exemption under Section 80G(2)(a)(i):
In T.Cs. Nos. 405 to 407 of 1978, the High Court upheld the Tribunal's decision that donations made to the assessee-society qualified for exemption u/s 80G(2)(a)(i), as the donee institution was deemed an educational institution.

Conclusion:
The High Court affirmed the Tribunal's decision granting exemption u/s 10(22) and 10(22A) for the assessee-society and upheld the donors' eligibility for exemption u/s 80G. The questions related to Section 13 and Section 11 were returned unanswered due to the broader exemption provided by Section 10(22). Leave to appeal to the Supreme Court was granted, following precedent from a related case.