1984 (9) TMI 73 - AT - Income Tax

Assessment Order Assessment Year Business Loss Carry Forward And Set Off Educational Institutions Educational Purposes Rectification Of Mistakes Set Off Of Loss

Summary

Issues Involved:
1. Carry forward and set off of earlier years' losses.
2. Exemption under section 10(22) of the Income-tax Act, 1961.

Detailed Analysis:

1. Carry Forward and Set Off of Earlier Years' Losses:
- Revenue's Appeal: The revenue argued that the AAC erred in directing the ITO to allow the carry forward and set off of earlier years' losses. They contended that the assessee did not claim the same in the return and that the question of business profit was debatable.
- Departmental Representative's Argument: The representative emphasized that the ITO had previously disallowed the set off of losses due to the lack of business income, and this decision was challenged in appeal.
- Assessee's Argument: The assessee argued that the ITO was obligated to examine his records and allow the set off of losses as determined in earlier assessments. They cited the Supreme Court decision in CIT v. Manmohan Das [1966] 59 ITR 699 (SC) to support their claim.
- Tribunal's Decision: The Tribunal held that the ITO was duty-bound to examine the records to ascertain the extent of previous losses available for carry forward and set off. However, it was noted that the issue of whether property income could be considered business income was debatable and not a clear mistake apparent from the records. Therefore, the ITO could not have set off the previous losses against property income under section 154.

2. Exemption under Section 10(22) of the Income-tax Act, 1961:
- Revenue's Appeal: The revenue argued that the AAC erred in treating the assessee's income as exempt under section 10(22). They contended that the assessee did not qualify as an educational institution existing solely for educational purposes.
- Departmental Representative's Argument: The representative highlighted that the assessee's various objects did not solely pertain to education and included activities like running a printing press, which could be considered commercial. They cited the Supreme Court judgment in S. Azeez Basha v. Union of India AIR 1968 SC 662 to argue that an educational institution should have a student-teacher relationship.
- Assessee's Argument: The assessee argued that their activities were primarily educational and supervised by the Registrar of Co-operative Societies. They cited several case laws to support their claim that their objects were educational.
- Tribunal's Decision: The Tribunal examined the objects of the assessee and concluded that they did not fall wholly under educational purposes as defined by the Supreme Court in Sole Trustee, Loka Shikshana Trust v. CIT [1975] 101 ITR 234. The Tribunal noted that the term 'education' connotes the process of training and developing knowledge through normal schooling, which did not align with the assessee's activities. Therefore, the assessee was not entitled to exemption under section 10(22).

Conclusion:
- IT Appeal Nos. 396 to 399: Partly allowed, acknowledging the duty of the ITO to examine records for carry forward and set off of losses but denying the set off against property income under section 154.
- IT Appeal Nos. 363, 364, 1121, and 1122 of 1984: Allowed, denying the exemption under section 10(22) as the assessee did not qualify as an educational institution existing solely for educational purposes.