9911796707
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Issues:
- Appeal against orders of CIT(A) for assessment years 1995-96 and 1996-97. - Dispute over the benefit of s. 10(22) of the IT Act, 1961 for the assessee trust. - Allegation of diverting funds for profit and business interests. - CIT(A) directing AO to allow exemption under s. 10(22) for both years. - Disallowance of depreciation in assessment year 1996-97. Analysis: 1. The Department appealed against the orders of CIT(A) for assessment years 1995-96 and 1996-97, challenging the allowance of the benefit of s. 10(22) of the IT Act, 1961 to the assessee trust. The main grievance was that the trust had diverted funds for profit and business interests, thereby not existing solely for educational purposes. The AO observed substantial investments in equity shares and alleged benefiting managing committee members' business interests. 2. The CIT(A) found that the assessee trust had not engaged in business activities but had invested in shares for educational purposes. The surplus generated was utilized solely for educational activities, leading to the direction to allow exemption under s. 10(22) for both years. The Department contended that despite charging high tuition fees, the trust invested in shares, generating surplus not solely used for education, citing the Supreme Court's decision in Aditanar Educational Institute case. 3. The assessee's counsel argued that the surplus generated was not significant, with most shares acquired long ago as corpus. The returns from investments were utilized for educational purposes, and restrictions under ss. 11 and 12 did not apply to s. 10(22). The counsel refuted claims of substantial Birla family control over the trust and cited various judicial precedents supporting exemption for educational trusts. 4. The Tribunal analyzed the facts and contentions, emphasizing the need to evaluate exemption eligibility realistically without being hyper-technical. It noted that the trust's surplus was primarily applied to educational activities, not solely for share investments. The legislative intent focused on the predominant educational purpose, allowing surplus utilization for better returns for educational goals. Relying on judicial precedents, the Tribunal upheld CIT(A)'s decision, affirming the trust's existence solely for educational purposes. 5. In the assessment year 1996-97, the Department challenged the disallowance of depreciation due to lack of business income. However, as the Tribunal allowed exemption under s. 10(22) for the trust, the depreciation issue became academic. Following relevant case law, the Tribunal allowed the trust's claim for depreciation. Consequently, both Department appeals were dismissed, affirming the CIT(A)'s orders granting exemption under s. 10(22) and allowing depreciation.
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