1988 (8) TMI 156 - AT - Income Tax

Summary

Issues:
1. Interpretation of provisions under sections 10(22) and 10(22A) of the IT Act, 1961 regarding exemption of income for educational and medical institutions.
2. Validity of orders made by the Commissioner under section 263 challenging the computation of taxable income for two societies managing educational and medical institutions.

Analysis:

Issue 1: Interpretation of provisions under sections 10(22) and 10(22A)
The case involved two societies, A.M.M. Educational Society and A.M.M. Medical Society, managing educational and medical institutions, respectively. The Revenue contended that these societies were not entitled to exemption under sections 10(22) and 10(22A) as they were not the educational or medical institutions themselves. However, the Tribunal referred to precedents and held that the societies could be considered as institutions falling within the scope of the aforementioned sections. The Tribunal emphasized that the societies were formed for the sole purpose of running the institutions and had been managing them effectively. The decision of the Madras High Court in a similar case supported this interpretation, concluding that the societies qualified for exemption under the relevant sections.

Issue 2: Validity of orders under section 263
The Commissioner had set aside the original assessment orders and directed the Income Tax Officer (ITO) to recompute the taxable income for the two societies, denying exemptions under sections 11, 12, 13, 12A, 10(22), and 10(22A) of the IT Act. The Revenue argued that the exemption claims had been rejected by the ITO in the initial assessments, and thus, were not subject to the Commissioner's orders under section 263. However, the Tribunal disagreed, stating that the entire assessment was under review, and the question of exemption under sections 10(22) and 10(22A) needed to be addressed. The Tribunal clarified that the income of the societies, including dividends, qualified for exemption under the relevant sections, as long as the institutions existed solely for educational or medical purposes and not for profit. Citing various court decisions, the Tribunal concluded that the income of both societies was exempt under sections 10(22) and 10(22A), overturning the Commissioner's orders under section 263.

In conclusion, the Tribunal allowed the appeals, canceling the Commissioner's orders and directing the ITO to exempt the entire income of the societies under sections 10(22) and 10(22A) for the respective assessment years.