1979 (2) TMI 81 - HC - Income Tax

Summary

Issues Involved:
1. Whether the income of the assessee is entitled to exemption u/s 10(22) of the Income-tax Act, 1961.
2. Whether the assessee qualifies as an educational institution existing solely for educational purposes and not for profit.
3. Application of the rule of ejusdem generis in interpreting "other educational institution" u/s 10(22).

Summary:

Issue 1: Exemption u/s 10(22)
The primary issue was whether the income of the assessee, a society registered under the Societies Registration Act, 1960, is entitled to exemption u/s 10(22) of the Income-tax Act, 1961. The assessee received substantial donations from "Thanthi Trust" during the relevant assessment years and filed returns showing nil taxable income, claiming it was an educational institution existing solely for educational purposes. The ITO closed the assessments without granting the exemption, as there was no taxable income. The CIT, however, took proceedings u/s 263, arguing that the ITO's assessment was erroneous and prejudicial to the revenue, as the voluntary contributions were not considered for exemption.

Issue 2: Qualification as an Educational Institution
The Tribunal held that the assessee was an institution existing for educational purposes and not for profit, thus qualifying as an educational institution under s. 10(22). The assessee's objects included establishing, running, managing, or assisting colleges, schools, and other educational organizations. The assessee had established a college, "Aditanar College of Arts and Science," and complied with conditions for affiliation with the University, demonstrating its sole purpose of education.

Issue 3: Application of Ejusdem Generis
The CIT argued that the term "other educational institution" should be construed by applying the rule of ejusdem generis, limiting the exemption to entities similar to universities. However, the court found that the word "University" does not represent a genus that restricts the subsequent words. The court noted that both universities and other educational institutions teach students and employ teachers, but universities grant degrees, distinguishing them from other educational institutions. The court concluded that the term "other educational institution" in s. 10(22) includes entities like the assessee's college.

Conclusion:
The court affirmed that the assessee qualifies for exemption u/s 10(22) as it exists solely for educational purposes and not for profit. The court emphasized that the exemption applies as long as the institution's income is directly related to or incidental to its educational activities. The question was answered in the affirmative and in favor of the assessee, with costs awarded to the assessee.