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TMI Blog2003 (8) TMI 163X X X X Extracts X X X X X X X X Extracts X X X X ..... iran Mazumdar Bangalore 3. For both the years under consideration, the assessee had claimed exemption under s. 10(22) of the IT Act, 1961. The AO was of the view, that the assessee is not entitled to exemption, as there was surplus funds year after year. The trustees were employed in the educational institution and the trustees have visited foreign countries at the expenses of the trust. Huge amounts of donations have been received from the parents of the students and the trust received a sum of Rs. 1.5 crores from the United Breweries (UB) Ltd., Group of companies headed by Mr. Vijay Mallya, on the following terms and conditions: (a) The name 'Mallya' will be added to the name of the school. (b) Ms. Kiran Mazumdar shall be appointed as trustee on the board of trustees of assessee. Besides that, for the asst. yr. 1994-95, the assessee had received donations from Mrs. Valli Muthiah, a trustee at Rs. 1 Lakh and from TTK Biomed Ltd., at Rs. 5 Lakhs. Considering these aspects, the AO came to a conclusion, that Mallya Aditi International School is being run on commercial lines and does not qualify to be regarded as a charitable organisation within the meaning of s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counsel contended that there was no infirmity in the orders of the learned CIT(A). The first appellate authority has meticulously considered each and every point raised by the assessee and the objections raised by the AO while denying the exemption under s. 10(22) of the IT Act. The learned counsel for the assessee further contended that the AO himself had admitted in the assessment order that the trust exists solely for the purpose of education. Therefore, Revenue's stand that the assessee is run on commercial basis is incorrect. A major portion of the surplus was from the donation for the school building and all the surplus has been utilised for educational purposes. It is not the case of the Department that the surplus has been utilised for commercial reasons. The object for which the trust is founded is clear from the trust deed, that purpose is only education. 6. The learned counsel further submitted that it is not denied that there exists a regular surplus of income over expenditure over a period of years. The AO had overlooked the fact that there has also been years when the expenditure was excess than income and voluntary donations were major part of the surplus in other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion in a better manner. The learned counsel further stated that no stay allowances have been claimed by these persons and they have also not claimed any foreign exchange allowances for the purposes of foreign travel. The Principal and the Vice-Principal had intended to make the school as international school and for this purpose it was necessary for them to study the system abroad. They, did not draw any stay allowances and they did not take any benefit from the institution during the stay abroad and they have spent on their own. They as Principal and Vice-Principal have claimed only for their air tickets. Therefore, the learned counsel vehemently contended that the stand of the Revenue is without any basis. Submitting as above and also relying on the learned CIT(A)'s order in every aspect, the counsel for the assessee submitted that the order of the learned CIT(A) has to be confirmed. 10. We have heard the rival submissions and perused the records. To fall within the exemption provided under s. 10(22), the AO has to clarify whether the institution exists solely for the purpose of education. The learned CIT(A), while considering the apprehension of the AO that there was no b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 1961 (the Act), the assessee has been claiming the benefit under the provisions of s. 10(22) of the Act. This is evident by the following: (i) the claim as per the return of income for the assessment year is under s. 10(22); (ii) for the asst. yr. 1992-93, there was an assessment under s. 143(3) and, as per the order dt. 30th Sept., 1993, the AO has admitted that claim under s. 10(22); (iii) vide assessee's letter dt. 30th Jan., 1996, a specific request was made to the CIT, Karnataka-II, Bangalore to clarify whether any return has to be filed in view of the assessee falling under the provisions of s. 10(22) of the Act. Vide the letter of the ITO(Accounts), Bangalore, dt. 6th June, 1996, it was clarified that the trust is advised to file the return of income. All these facts will lead to only one conclusion that the assessee is solely existing for educational purposes and its activities are charitable in nature. 13. From the paper book filed by the assessee, we have had the benefit of going through the assessment orders for the asst. yrs. 1984-85, 1985-86 and 1992-93. In all these years, the assessee has been carrying out similar activities as in the year under con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The AO had not pointed out a single incident or activity as that of commercial in nature. 16. The learned counsel at the time of hearing pointed out that the fees charged by the trust from the general category students are not sufficient to meet the expenditure. It is only on account of very high fees charged from a small section of foreign expatriate students, the operational results appear satisfactory. He referred to p. 30 of the paper book, wherein the details of contributions of establishment charges and tuition fees collected from the regular students and non-resident students have been shown. On looking into these details, we are of the view that the assessee had clearly established how the fees are collected and how they were applied. The AO did not look into the vital points of material in proper perspective but, on the other hand, had attempted to cement his conclusion with the help of isolated observations. 17. The learned counsel had relied on the decision of the Hon'ble Andhra Pradesh High Court in the case of Governing Body of Rangaraya Medical College vs. ITO (1979) 117 ITR 284 (AP). The facts in relation to calling of donation and fees from students in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19. The learned Departmental Representative while making his submissions stated that the contribution received from some donors were not voluntary and therefore, exemption under s. 10(22) is not available to the assessee. For the above said contention, he relied on the decision of the Hon'ble apex Court in the case of Municipal Corporation of Delhi vs. Children Book Trust AIR 1992 SC 1456. The contention of the assessee that any income of the educational institution complying for the cause of the trust namely, education in accordance with the provisions under s. 10(22) of the IT Act is excludible, this was not accepted by the AO. To apply the decision of the Hon'ble apex Court cited supra, the AO had not pointed out any single instance of receipt of donation which is involuntary. No single instance has been pointed out by the AO. Therefore, the decision will not help the case of the Revenue. On the other hand, in para 10 of the aforesaid Supreme Court decision, it has been observed as under: "Education per se is charitable purpose. Therefore, even if the school charges a fee, that would be irrelevant. The society must satisfy the following conditions: i. that is supported by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Narayanan-Vice-Principal. (a) B.Sc (Hons.), Central College, Bangalore. (b) B.Ed., Gold Medalist. (c) Teaching experience of 13 years (1971-1984). As on date (a) Certificate in 'Managing Educational Systems'. (b) MA in International Education from Oxford Brooks University, with distinction. Teaching experience—26 years (1971-1997). 2. Qualification of employees under serial Nos. 3-25—Salary list of March, 94 and February, 1997—Lists enclosed. 3. Whether any of the trustees have gone abroad. Consequent to the change in the status of the school to an international school in 1994, Mrs. Warrior went to the USA to visit: (a) The International School of Minnesota. (b) Minnesota Educational Computing Corporation—a premier software centre for schools, to expand facilities, and to seek advice on upgrading educational software and other facilities. (c) Chanhassen Elementary School, to set up links. (d) Other local schools in the area. Mrs. Narayanan visited Kathmandu to meet the Director, Lincoln School, Kathmandu, to have a discussion regarding a uniform fee structure for international students within the sub-continent. 4. Donations received— ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vice-Principal and not as trustees. It is to be noted that no stay allowances have been claimed by the trustees and they have also not claimed any foreign exchange for the purpose of foreign travel. In the absence of any claim of stay allowance and foreign exchange, which clearly show that they have not actually derived any financial benefit from the trust. For these reasons, we are unable to accept the stand taken by the Revenue. We have had the benefit of going through the assessment order and the written submission by the assessee and various documents and also the order of the learned CIT(A). Considering the totality of the facts and the circumstances of the case and also various decisions of High Courts and Supreme Courts the learned CIT(A) granted benefit to the assessee. Before us, the learned Departmental Representative was unable to lodge any conclusion drawn by the learned CIT(A) with any convincing materials. 22. On the issue regarding receiving huge donations, the learned Departmental Representative fully supported the order of assessment. We have considered the above submissions and we find that by insisting that his family name should be added to the name of the sc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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