TRUSTEES OF THE TAGORE EDUCATIONAL SOCIETY v. INCOME TAX OFFICER
[Citation -1984-LL-0602-1]

Citation 1984-LL-0602-1
Appellant Name TRUSTEES OF THE TAGORE EDUCATIONAL SOCIETY
Respondent Name INCOME TAX OFFICER
Court ITAT
Relevant Act Income-tax
Date of Order 02/06/1984
Assessment Year 1975-76, 1976-77 , 1977-78.
Judgment View Judgment
Keyword Tags period of limitation • educational activity • charity commissioner • educational society • refund of tax • earnest money • trust deed
Bot Summary: Section 10(22) lays down that in computing the total income of a university or other educational institution existing solely for educational purposes and not for purposes of profit shall not be included. In the circumstances, the assessee must be deemed to be an educational institution existing solely for educational purposes and not for purpose of profit, within the meaning of section 10(22). Grant of scholarship to students to assist them in prosecuting their studies is also an educational activity and an institution which is engaged solely in such activity and which has kept before it an aim of itself starting schools and colleges, provided it succeeds in obtaining the necessary premises, would be an educational institution within the meaning of section 10(22). The Commissioner has distinguished this case on the ground that it was conceded in that case that the Board was an educational institution and the dispute was whether it existed solely for educational purposes and not for purposes of profit. If the activities are directed solely for educational purposes, it would be an educational institution. Similarly in Victoria Technical Institute's case relied on by the learned departmental representative, the question before the Court was not whether the institution which had aim of establishing schools and colleges and whose only activity was to grant freeship and scholarship was an 'educational institution' or not. In the present case, the department took the stand in favour of the assessee for almost ten years after interpreting section 10(22) in revision under section 264.


These three appeals by assessee relate to assessment years 1975-76, 1976-77 and 1977-78. 2. Tagore Educational Society, Bombay, is assessee before us. assessee-society was registered in 1962 under Societies Registration Act, 1860. It has also been registered with Charity Commissioner and Commissioner of Income-tax. 3. aims and objects of society have been mentioned in following words in constitution of society: " aims and objects of society are to start schools and colleges and to found freeships and scholarships to help deserving students to prosecute their higher studies both at home and abroad. " Clause 28 of Constitution emphasises that donations received from public would not be used for objects which are inconsistent with objects of society. 4. first assessment was made for assessment year 1964-65. assessee filed revision before Commissioner under section 264 of Income-tax Act, 1961 ('the Act'). revision was allowed and it was held that assessee was educational institution within meaning of section 10(22) of Act and its income was exempt from tax under said provision. It was further observed that there was no question of applying provisions of section 11 of Act. Commissioner, accordingly, cancelled assessment and directed refund of tax levied by ITO under section 11. 5. assessee continued to obtain this exemption under section 10(22) till assessment year 1974-75. However, order of assessment for assessment year 1974-75 was revised by Commissioner under section 263 of Act by order dated 28-6-1977. assessee filed appeal before Tribunal and Tribunal by order dated 22-12-1978 in IT Appeal No. 3300 (Bom.) of 1976-77 set aside order of Commissioner and restored order of ITO granting exemption. Application for reference under section 256(1) of Act filed by department was dismissed by Tribunal on 28-9- 1979 in RA No. 520 (Bom.) of 1979. 6. In assessments for assessment years 1975-76, 1976-77 and 197778, assessee again claimed exemption under section 10(22). This exemption was not granted by ITO. assessee also sought permission for accumulation of surplus income but that permission was not granted because notice under section 11(2) for same had been filed after expiry of period of limitation prescribed for that purpose. 7. assessee filed appeals before Commissioner (Appeals) who heard them together and disposed them of by common order. He confirmed finding of ITO that assessee was not educational institution within meaning of that expression in section 10(22). He further held that permission t o accumulate surplus was rightly rejected because of delay in filing notice under section 11(2). 8. Before us, both findings are challenged by assessee. It was submitted that running of school or college was not one of essential conditions for bringing institution within ambit of 'educational institution' in section 10(22). Reliance is placed on decision of Tribunal to which reference shall be made subsequently. 9. learned departmental representative had relied on elaborate reasons given in order of Commissioner (Appeals) and cited decision in Addl. CIT v. Victoria Technical Institute [1979] 120 ITR 358 (Mad.). 10. We have considered rival submissions and facts on record. Section 10(22) lays down that in computing total income of university or other educational institution existing solely for educational purposes and not for purposes of profit shall not be included. As far as assessee is concerned, its aim is to start schools and colleges and to found freeships and scholarships to help deserving students to prosecute their higher studies both at home and abroad. There is no other aim and object. Till now, all its activities have been directed to grant freeships and scholarships to help deserving students. assessee has paid earnest money to acquire plot, but could not obtain possession and, hence, no school or college could be started. activity of grant of freeships and scholarships to deserving students to assist them in prosecuting their studies is educational activity. There is no allegation that earning of profits is motive. No activity other than educational was being carried on by assessee. In circumstances, assessee must be deemed to be educational institution existing solely for educational purposes and not for purpose of profit, within meaning of section 10(22). That is why department allowed exemption for ten years under said provision and when that exemption was subsequently withdrawn, Tribunal restored same. 11. It is true that words 'other educational institutions' occur in juxtaposition of word 'university' in section 10(22). reason which appealed Commissioner (Appeals) was that since imparting of education was one of functions of university, that function should also be present if institution has to claim that it is educational institution. We are unable to agree. There have been instances of affiliating universities, i.e., universities having no teaching departments of their own but which conduct examinations and confer degrees. educational activity may take many forms. Imparting of education may be one of them but not only one. Grant of scholarship to students to assist them in prosecuting their studies is also educational activity and institution which is engaged solely in such activity and which has kept before it aim of itself starting schools and colleges, provided it succeeds in obtaining necessary premises, would be educational institution within meaning of section 10(22). 12. In this connection, decision in case of Secondary Board of Education v. ITO [1972] 86 ITR 408 (Ori.) is significant. income involved was that derived from compilation, publication, printing and sale of text books. Board itself was not imparting education. Yet, it was held that its income was exempt under section 10(22). Commissioner (Appeals) has distinguished this case on ground that it was conceded in that case that Board was educational institution and dispute was whether it existed solely for educational purposes and not for purposes of profit. It is true that second point was examined in detail in that case, but very fact that it was assumed that it was educational institution indicated that point was obvious and that it was educational institution indicated that point was obvious and was not capable of being controversial. 13. Similarly, in case of Governing Body of Rangaraya Medical College v. ITO [1979] 117 ITR 284 (AP), object with which society was founded was only to manage Rangaraya College and its ancillary institution. Its object w s not to impart education. Yet, it was held that it was educational institution. Thus, imparting of education by society itself is not necessary before it can claim to be educational institution. If activities are directed solely for educational purposes, it would be educational institution. 14. AAC has kly relied on decision of Supreme Court in Sole Trustee, Loka Shikshana Trust v. CIT [1975] 101 ITR 234. In that decision, question, with which we are concerned, was not involved. object of trust in that case was to educate people of India, in general, and of Karnataka, in particular by (a) establishing, conducting and helping, directly or indirectly, institutions calculated to educate people by spread of knowledge on all matters of general interest and welfare; (b) founding and running reading rooms and libraries and keeping and conducting printing presses and publishing or enabling publication of books with object of educating people; and (c) supplying Kannada speaking public with organ or organs of educated public opinion and conducting journals. trustees were empowered to utilise moneys and property of trust in any manner they liked. It was held that object was not 'education' within meaning of section 2(15) of Act, but object of general public utility. 15. Thus, controversy was that when object was stated in such general words of wide import, whether it could be said that object was 'education' and not 'general public utility'. It was held that object was 'general public utility' and not 'education' within meaning of section 2(15). According to Supreme Court, term 'education' in said section connoted process of training and developing knowledge, skill, mind and character of students by normal schooling and that term had not been used in wide extensive sense according to which every acquisition of further knowledge constituted education. 16. In present case, we are not including activity of assisting in acquisition of further knowledge in general sense of term 'education' which occurs twice with its grammatical variation in section 10(22). institution which grants scholarships to students for prosecuting studies and which has aim of itself starting schools and colleges (though latter aim had not been fulfilled in relevant assessment years) would be 'educational institution'. Nothing in said decision militates against this view. 17. Similarly in Victoria Technical Institute's case relied on by learned departmental representative, question before Court was not whether institution which had aim of establishing schools and colleges and whose only activity was to grant freeship and scholarship was 'educational institution' or not. In trust deed of that case, there were several clauses which indicated that education was not predominant object. For that reason, it was held that object was 'general public utility'. 18. view which we have taken is supported by decision of Calcutta Bench of Tribunal in Saraswat Poor Students Fund v. ITO [1981] 11 TTJ 1 which was considered in Sole Trustee, Loka Shikshana Trust's case. In that case, it was contended that since no school was run by fund, exemption under section 10(22) was not available. This contention was rejected and it was held that imparting of education was not one of conditions for claiming exemption under section 10(22) and that fund was educational institution existing solely for educational purposes. As such, exemption under said provisions was available. present case stands on ker footing because in addition to grant of scholarships, starting schools and colleges also form aim and object of society, although latter aim had not been achieved in relevant assessment years. We would follow said decision of Tribunal which clinches issue in favour of assessee. 19. In any case, it is established principle that where two reasonable views can be fairly taken while interpreting provisions of taxing statute, one in favour of assessee should be preferred. In present case, department took stand in favour of assessee for almost ten years after interpreting section 10(22) in revision under section 264. Thereafter, no decision had been reported which rendered earlier view untenable. Supreme Court's decision in Sole Trustee, Loka Shikshana Trust's case, as already stated, dealt with different aspect and nothing stated therein required change of view on interpretation of section 10(22). 20 and 21. [These paras are not reproduced here as they involve minor issues.] 22. In result, appeals are allowed. *** TRUSTEES OF TAGORE EDUCATIONAL SOCIETY v. INCOME TAX OFFICER
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