1993 (3) TMI 155 - AT - Income Tax

Summary

Issues Involved:
1. Assessee's claim for exemption under section 10(22) of the Income-tax Act, 1961.
2. Alternative claim for exemption under section 11 of the Income-tax Act, 1961.
3. Treatment of balance amount as corpus donation.

Detailed Analysis:

1. Assessee's Claim for Exemption under Section 10(22):
The primary issue revolves around whether the trust qualifies for exemption under section 10(22) of the Income-tax Act, 1961. The trust, registered under section 12A(a), filed returns declaring nil income for the assessment years 1985-86, 1986-87, and 1987-88. The Income Tax Officer (ITO) rejected the exemption claim, stating the trust was not a university or an educational institution and was engaged in the regular business activity of publishing a journal called "Social Action." The ITO argued that the journal's publication and sale constituted a profit-making activity, thus not qualifying for exemption under section 10(22).

The Deputy Commissioner (Appeals) (DC (Appeals)) accepted the trust's claim, asserting that the journal served educational purposes and was subscribed to by educational institutions. The DC (Appeals) directed the ITO to allow the exemption, resulting in nil income for the trust.

The Tribunal, however, overturned the DC (Appeals)' decision, emphasizing that the trust did not run an educational institution or impart classroom education. Citing various judicial precedents, the Tribunal concluded that the activities of publishing a journal did not qualify as "education" under section 10(22). The Tribunal noted that the trust's activities were primarily profit-oriented and not solely for educational purposes, thus denying the exemption under section 10(22).

2. Alternative Claim for Exemption under Section 11:
The assessee argued that if the claim under section 10(22) failed, the matter should be considered for exemption under section 11. The Tribunal acknowledged that the claim under section 11 was raised before the tax authorities but not adjudicated upon. Therefore, the Tribunal directed the matter to be restored to the file of the first appellate authority for examination in accordance with the law. This decision was based on the interconnected nature of the claims under sections 10(22) and 11 and the need for a comprehensive review of the facts.

3. Treatment of Balance Amount as Corpus Donation:
The ITO added Rs. 23,113 to the trust's income, arguing that only Rs. 60,000 was certified as a corpus donation by the donor. The DC (Appeals) deleted the addition, accepting the trust's explanation that the entire amount of Rs. 83,113 received as assets of "Social Action" should be treated as corpus donation.

The Tribunal, however, set aside the DC (Appeals)' decision, emphasizing the need for specific intention from the donor regarding corpus donations. The Tribunal restored the issue to the file of the first appellate authority for re-adjudication, directing a fresh examination of the donor's certificate and the trust's claim in light of the provisions of the law.

Conclusion:
The Tribunal denied the trust's claim for exemption under section 10(22), restored the issue of exemption under section 11 to the first appellate authority for re-examination, and directed a fresh review of the treatment of the balance amount as corpus donation. The appeals were allowed for statistical purposes, requiring further adjudication by the first appellate authority.