1987 (4) TMI 109 - AT - Income Tax

Summary

Issues Involved:
1. Entitlement to exemption u/s 10(22) of the Income-tax Act, 1961.
2. Alternative claim of exemption u/s 11 of the Income-tax Act, 1961.

Summary:

Issue 1: Entitlement to exemption u/s 10(22) of the Income-tax Act, 1961

The primary issue in these appeals was whether the assessee, S.R.M. Foundation of India, qualifies for exemption u/s 10(22) of the Income-tax Act, 1961, as an educational institution existing solely for educational purposes and not for profit. The assessee, a society registered under the Societies Registration Act and founded by Maharishi Mahesh Yogi, claimed exemption on its income. The Assessing Officer rejected this claim, arguing that the assessee was neither a university nor an educational institution recognized by any university or government and that its activities did not meet the Supreme Court's criteria in Sole Trustee, Loka Shikshana Trust v. CIT [1975] 101 ITR 234. The officer noted that the foundation charged fees and received donations, treating these as income.

Upon appeal, the Commissioner of Income-tax (Appeals) found that the assessee's activities met the Supreme Court's tests and directed the assessing officer to grant the exemption. The department, dissatisfied, argued that the instruction in Transcendental Meditation (T.M.) did not constitute education in the Indian context and cited the case of Rajneesh Foundation v. ITO [1983] 4 ITD 409 (Bom.) to support their stance. The assessee countered with various legal precedents and argued that the principle of ejusdem generis did not apply to section 10(22).

The Tribunal examined whether the assessee met the prerequisites of section 10(22): being an educational institution, existing solely for educational purposes, and not for profit. It concluded that the principle of ejusdem generis did not apply and that the assessee qualified as an educational institution. The Tribunal noted that the systematic instruction in T.M. satisfied the Supreme Court's definition of education in Sole Trustee, Loka Shikshana Trust. The Tribunal also found that the assessee did not exist for profit, as evidenced by its Memorandum of Association and financial statements. Consequently, the Tribunal upheld the Commissioner of Income-tax (Appeals)'s decision to grant the exemption u/s 10(22).

Issue 2: Alternative claim of exemption u/s 11 of the Income-tax Act, 1961

The alternative claim for exemption u/s 11 was not examined by the Commissioner of Income-tax (Appeals) because the primary claim u/s 10(22) was allowed. The Tribunal noted that since the primary claim was upheld, there was no need to address the alternative claim.

Conclusion:

The Tribunal dismissed the department's appeals, affirming the assessee's entitlement to exemption u/s 10(22) and rendering the alternative claim u/s 11 moot.