1988 (2) TMI 108 - AT - Income Tax

Summary

Issues:
1. Condonation of delay in filing appeals.
2. Eligibility of exemption under section 10(22) of the Income Tax Act, 1961 for an educational institution.

Analysis:
1. The appeals filed by the Department were time-barred by 6 days, but the delay was condoned due to transport dislocation caused by floods. The appeals were admitted despite the delay.
2. The assessee, a society registered under the Society Registration Act, was denied exemption under section 10(22) of the IT Act for the assessment years 1981-82 and 1982-83 by the Income Tax Officer (ITO). The denial was based on the objects mentioned in the Memorandum of Association, which the ITO claimed were not solely for educational purposes. However, the Appellate Assistant Commissioner (AAC) directed the ITO to treat the income of the assessee as exempt under section 10(22) as there was no evidence of funds being spent for non-educational purposes.
3. The Department appealed the AAC's decision, arguing that the objects in the Memorandum of Association were not solely for educational purposes, citing specific clauses. The Department relied on a previous court decision to support its stance that institutions must exist solely for educational purposes to qualify for exemption.
4. The representative for the assessee contended that the objects in the Memorandum were indeed related to educational purposes, and any deviation was minor and insignificant. The representative cited relevant court decisions to support the argument that primary objects determined the purpose of existence for an institution.
5. The Tribunal examined the Memorandum of Association and accounts provided by the assessee. It noted that most clauses referred to educational purposes, while the clause allowing donations for philanthropic purposes had not been acted upon. The Tribunal held that the presence of this clause did not disqualify the assessee from exemption under section 10(22) as there was no actual donation made for non-educational purposes.
6. Ultimately, the Tribunal upheld the AAC's decision, stating that the assessee was entitled to the relief under section 10(22) of the Act. The appeals filed by the Department were dismissed, affirming the exemption for the educational institution.