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TMI Blog2004 (2) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... e court was delivered by M.S. Shah J. - In this reference under section 256(1) at the instance of the assessee, the following question has been referred for our opinion for the assessment year 1981-82:- "Whether, on the facts and in the circumstances of the case, the assessee would be entitled to exemption as contemplated under section 10(22) of the Income-tax Act, 1961?" The assessee is a trust registered as a public charitable trust on January 10, 1978. When the trust was registered on January 10, 1978 its objects were as under: (a) To raise and/or improve the standard of education of the students and for this purpose to run, conduct and/or manage bal mandirs, kinder-gardens, primary schools, colleges, degree courses, secondary schools, high schools, higher secondary schools, diploma courses, educational centres, libraries, reading rooms, and other institutions for imparting education. (b) To arrange and/or organise meetings, lectures, workshop classes, weekend courses, exhibitions, seminars, symposium and conferences with a view to raise and/or improve the standard of education. (c) To establish run, conduct and/or manage institutions for training of teachers, profes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er did not accept the assessee's claim for exemption under section 10(22) on the ground that the expression "educational institution existing solely for education" in section 10(22) of the Act must be given a narrower meaning than that given to the term "education" in section 2(15) of the Act and that section 10(22) only refers to formal education given in schools and colleges and not to other forms of education which is for development, advancement and betterment of education. In appeal, the Appellate Assistant Commissioner held in favour of the assessee that education need not mean only formal education but it refers to various activities carried on to provide education through modern techniques including holding of exhibitions, audio visual shows, etc., which is meant for students and teachers who are interested in the relevant fields. In appeal, at the instance of the Revenue, the Tribunal held that the assessee was not entitled to the benefit of section 10(22) of the Act and restored the order of the Income-tax Officer. Hence, this reference at the instance of the assessee. We have heard Mr. S.N. Soparkar, learned counsel for the applicant assessee and Mr. Manish R. Bhatt, l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... standing counsel for the Revenue has submitted that the Tribunal has applied the correct test laid down by the apex court in Sole Trustee, Loka Shikshana Trust v. CIT [1975] 101 ITR 234 which has also been subsequently applied by this court in CIT v. Sorabji Nusserwanji Parekh [1993] 201 ITR 939 and by the Patna High Court in Bihar Institute of Mining and Mine Surveying v. CIT [1994] 208 ITR 608. Before considering the rival submissions, it is necessary to refer to the relevant statutory provisions in this behalf. Chapter III of the Income-tax Act, 1961 specifies "Incomes which do not form part of total income". Section 10 commences with the heading "Incomes not included in total income", and the relevant clause reads as under: "10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included-... (22) any income of a university or other educational institution, existing solely for educational purposes and not for purposes of profit." This clause was omitted by the Finance (No. 2) Act, 1998 with effect from April 1, 1999 and the following relevant sub-clauses were added as parts of clause (23C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total exemption to income of a university or other educational institution, existing solely for educational purposes and not for purposes of profit. Two aspects stand out from clause (22) of section 10. The exemption is granted to the income of a university or other educational institution. The expression, "educational institution" would, therefore, take colour from the preceding word, "university". Noscitur a sociio (a word is known by the company its keeps) is a well settled rule of interpretation of a statute. A university is admittedly an educational institution set up for imparting formal education. Hence, applying the aforesaid rule of interpretation the expression, "other educational institution" would mean an institution imparting formal education in an organized and systematic training where the institution would be accountable to some authority and where there would be teachers and the taught the former having some degree of control over the latter. It is significant to note that while a trust holding property for the charitable purpose of education as defined by section 2(15) may also be an educational institution existing solely for the purpose of education, the tw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns, the Institute of Chartered Accountants of India has always been an institution set up, inter alia, for imparting formal education and for testing proficiency for entry to the profession of chartered accountants. The Institute imparts formal education in accountancy and connected subjects in an organised and systematic manner. The Institute is accountable as per the provisions of the Act establishing it and the Institute also has disciplinary control over the students who are required to be registered with it in the first place and who appear at the exams being held by the Institute. Hence, the example of the Institute of Chartered Accountants of India is not apposite and the assessee is not at all comparable to the said Institute. Similarly, open universities posses all the three indicia of an educational institution-imparting formal training, accountability to an authority and control over students. The assessee cannot, therefore, compare itself with any open university either. At this stage, we may refer to the decision of the apex court in Sole Trustee, Loka Shikshana Trust v. CIT [1975] 101 ITR 234 wherein the apex court enunciated the following principles while interpret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... connected with such formal schooling and filling the gaps in the present formal educational set-up. Mr. Soparkar, therefore, submitted that the decision in Sole Trustee, Loka Shikshana Trust v. CIT [1975] 101 ITR 234 (SC) does not rule out such activities as educational activities. It is true that the various activities referred to in the above quoted paragraph in the decision of the apex court in Sole Trustee, Loka Shikshana Trust v. CIT [1975] 101 ITR 234 may be considered as casual activities and, that there may be certain activities which, though not casual activities described above, and though not a part of formal education as such, would have some relation to education and, therefore, a trust carrying on such activities may be classified as a trust holding property for charitable purpose which includes education as per section 2(15) of the Act. Hence, there is nothing wrong with the assessee being recognised as a trust holding property for educational purposes. However, as indicated above, what section 10(22) contemplates is an institution imparting formal education, which institution is accountable to some authority and has control over the taught. Mr. Soparkar has sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal purposes. It appears that the real controversy in that case was whether the Revenue was justified in contending that though some of the activities of the assessee were educational activities, there were other activities which were not educational and, therefore, the assessee was not existing solely for educational purposes. It was in the context of that controversy that the court held that it cannot be doubted that the assessee was a society for diffusion of a certain branch of knowledge, namely, knowledge of the co-operative movement in various fields governing human life and the activities for the purpose were carried out in an organised and systematic manner by conducting regular courses for imparting instruction and training on various subjects included in the curricula as is reflected from the list of its activities. The court also noted that the assessee was given financial assistance by the Government and the Government Resolutions indicated that the grants sanctioned by the Government were for educational purposes. This court also referred to the above quoted observations of the hon'ble Supreme Court in Loka Shikshana Trust's case [1975] 101 ITR 234 (SC) and then furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it is clear that although the activities of the assessee are connected with formal education being given by other institutions running schools and colleges, the assessee itself does not have or exercise any control over the students who get the benefit of the activities being carried on by the assessee. In Bihar Institute of Mining and Mine Surveying v. CIT [1994] 208 ITR 608 (Patna) also, the hon'ble Mr. Justice S.B. Sinha speaking for the Division Bench of the Patna High Court (as his Lordship then was) has taken the view that where the principal project of the assessee institution running private tuition classes was the object of coaching and preparing the students for appearing in various examinations, it is not an institution for imparting of education and, therefore, cannot be said to be an educational institution. In view of the above discussion, we are of the view that the Tribunal was right in holding that the assessee was not an educational institution established solely for educational purposes and was, therefore, not entitled to exemption as contemplated under section 10(22) of the Income-tax Act. We accordingly answer the question in the negative, i.e., in favo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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