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TMI Blog2004 (11) TMI 288X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer noted that the assessee was approved by the prescribed authority in the category of 'institution' for the purpose of section 35(1)(ii) of the Act. The Assessing Officer further observed that hitherto, the assessee had been claiming exemption under section 10(21) read with section 35(1)(ii) and this claim had been accepted till assessment year 1995-96. However, according to the Assessing Officer, this claim of the assessee was not in order as exemption under section 10(21) was available only to a scientific research association subject to its approval under section 35(1)(ii) and other prescribed conditions. The argument of the assessee that the claim should be accepted since it had always been accepted in the past was also rejected on the ground that a wrong committed in the past cannot be allowed to be perpetuated. Accordingly, the claim of the assessee for exemption under section 10(21) of the Act was rejected on the ground that it was categorized as an "institution" and not as an "association". The assessee made a claim for exemption under section 11 but the same was denied as there was no registration under section 12A of the Act. Alternatively, the assessee c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... categorized as an "institution" and moreover, the change was brought about without any opportunity being given to the assessee of being heard. However, despite being categorized as an institution, the assessee was always granted exemption under section 10(21) till assessment year 1995-96. The learned counsel then drew our attention to the objections raised by A.D.I.T. (Exemptions) while considering the application for renewal of the approval under section 35(1)(ii) for the period1-4-1996to31-3-1999. The main objections were, (a) whether the activities carried out were for public benefit, and (b) whether the assessee was required to maintain separate books of account. The learned counsel pointed out as to how both these conditions stood fulfilled as was evident from the order dated23-9-1997of the D.G.I.T. (Exemptions). It was submitted that despite the conditions being fulfilled, the assessee was categorized as an 'institution' for the period 1996-99. It was contended that this defied the logic to draw distinction between the expressions "association" and "institution" which expressions otherwise also, according to the learned counsel were inter-changeable. Finally, it was contende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic research: Provided that such association, university, college or institution is for the time being approved for the purposes of this clause by the prescribed authority by notification in the Official Gazette." A plain reading of the above provision indicates that the organizations, the payments to whom qualify for deduction, are broadly classified into two categories. They are, (a) a scientific research association which has as its object the undertaking of scientific research, and (b) university, college or other institution which uses the money for scientific research. It is important to note the difference in wordings used for the two categories of organizations. For the first category the wordings used are "...which has as its object the undertaking of scientific research...". These wordings indicate that, an organization which has as its sole object of undertaking scientific research, the payment to such an organization will qualify for deduction once it is approved by the prescribed authority and notified in the official gazette. It also presupposes that the entire money received by such an organization will be utilized towards the object for which it is established an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings given by it, describes it as an established or organized society or corporation for educational purpose like college or university. Thus, the term "Association" will not mean or include an educational institution, whereas the term 'Institution', will include as one of its meanings, an educational institution. It is this distinction which appears to have been incorporated in section 35(1)(ii) and in the notifications issued under the said provision. In common parlance, the two expressions may seem to be interchangeable, but at least, so far as the provisions of section 35(1)(ii) are concerned, they are not. Further, so far as section 35(1)(ii) is concerned, the expression 'other institution' would necessarily mean an educational institution imparting education in any discipline, be it science, commerce, law, medicine, arts, fine arts etc. Further, the notifications issued under section 35(1)(ii) approving organizations as 'Association' do not require them to maintain separate accounts. This strengthens the view expressed earlier that the associations will have a sole object of scientific research. In contrast, notifications placing the organizations in the category of 'Institut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an "Association" up to31-3-1987. It was only while renewing the approval for the period1-4-1987to31-3-1989that the assessee was for the first time categorized as an "Institution" vide Notification dated27-10-1987. This sudden shift from one category to the other is quite intriguing given the fact that there has been no change in the objects of the assessee-society or in the activities carried out by it. This is evident from the correspondence that took place between the assessee and DG (Exemptions) in 1997 when certain objections were raised against the assessee while renewing its approval under section 35(1)(ii) for the period1-4-1996to31-3-1999. The objections raised by the ADIT (Exemptions) by his letter dated10-9-1997are summarized as follows: (a) all your research activities are sponsored by various private sector/public organizations. Thus, yours is a purely commercial research, the results of which are passed on to the sponsors and the public gets no benefit; (b) yours is a multi-object organization and Research is only one of those objects. As such you have been placed under the category of institution and the previous approvals were given subject to the condition that ..... 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