1994 (9) TMI 142 - AT - Income Tax

Charitable Or Religious Trust, Educational Institutions, Income From Property, Scientific Research, Voluntary Contributions

Summary

Issues Involved:
1. Exemption under section 10(22)
2. Exemption under section 10(21)
3. Exemption under section 11
4. Levy of interest under sections 139 and 217

Detailed Analysis:

(A) Exemption under section 10(22) of the Act:

Facts and Arguments:
- The assessee, a society registered under the Societies Registration Act, claimed exemption under section 10(22) as an educational institution.
- The assessee argued that its activities, including lectures and research in mathematics, constituted educational purposes.
- The assessee cited recognitions from various universities and institutions to support its claim.

Findings:
- The Tribunal found that the assessee was not engaged in regular teaching or imparting systematic education. It organized occasional lectures and seminars without regular classes, teaching staff, or a structured management system.
- The Tribunal noted that the assessee's income and expenditure did not reflect the activities of an educational institution. The income was primarily from donations, and there was no significant expenditure on educational activities.
- The Tribunal concluded that the assessee did not exist solely for educational purposes but rather for private profit, as evidenced by the misappropriation of funds.

Conclusion:
- The Tribunal upheld the CIT (Appeals) decision, denying exemption under section 10(22), stating that the assessee was not an educational institution existing solely for educational purposes.

(B) Exemption under section 10(21):

Facts and Arguments:
- The assessee also claimed exemption under section 10(21) as a scientific research association.
- The assessee argued that its activities in mathematical research qualified it for exemption.

Findings:
- The Tribunal found that the assessee did not apply its income wholly and exclusively to scientific research. The expenditure claimed on books, scholarships, and allowances was found to be bogus.
- The Tribunal noted that the assessee had contravened the provisions of section 11(5) by making disproportionate payments to a contractor, which were not considered as advance payments but as deposits or investments.

Conclusion:
- The Tribunal upheld the CIT (Appeals) decision, denying exemption under section 10(21), as the assessee failed to meet the required conditions and had not applied its income for the intended purposes.

(C) Exemption under section 11:

Facts and Arguments:
- The assessee claimed exemption under section 11, arguing that it was a charitable trust.
- The assessee contended that the donations received were towards the corpus and should not be considered as income.

Findings:
- The Tribunal found that the assessee had not applied its income or accumulated it in the manner prescribed under section 11.
- The Tribunal rejected the additional evidence presented by the assessee, as it was not produced during the earlier proceedings and emanated from sources suspected of being involved in the misappropriation of funds.

Conclusion:
- The Tribunal upheld the CIT (Appeals) decision, denying exemption under section 11, as the assessee failed to comply with the relevant provisions.

(D) Levy of interest under sections 139 and 217:

Facts and Arguments:
- The assessee raised the issue of the levy of interest under sections 139 and 217, arguing that it was consequential.

Findings:
- The Tribunal agreed that the issue was consequential and would depend on the outcome of the appeals.

Conclusion:
- The Tribunal dismissed the appeals, upholding the levy of interest as a consequence of the denial of exemptions.

Final Decision:
- The appeals were dismissed, and the Tribunal upheld the CIT (Appeals) decision to tax the entire income of the assessee at the maximum marginal rate for the assessment years 1986-87 and 1987-88.