HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 458/2009 CIT Appellant Versus M/S Modern School Society Respondent For Appellant(s) : Mr. Sameer Jain For Respondent(s) : Mr. Sanjay Jhanwar HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS Order 16/05/2017 1. By way of this appeal, appellant has assailed judgment and order of Tribunal whereby Tribunal has dismissed appeal preferred by department. 2. This court while admitting appeal has framed no substantial questions of law, therefore, all questions which are framed by counsel for appellant reads as under:- i) Whether in facts and circumstances of case ITAT has not acted perversely and illegally in allowing exemption when exemptions u/s 10(23C) (vi) is not available to assessee society for year under consideration as no exemption from prescribed authority has been allowed for assessment year 1998-99. ii) Whether on facts and in law ITAT was justified in law and has acted perversely in holding that assessee income is exempt u/s holding that assessee income is exempt u/s 10(23C) (vi) ignoring findings of Assessing Officer that huge surplus exists and assessee is running with profit motive. (2 of 16) [ ITA-458/2009] iii) Whether in facts and circumstances of case ITAT was justified on facts and in law in allowing exemption in view of decision delivered by Hon ble Uttranchal High Court in cause of M/s. Queen s Education Society, Haldwani Nainital relying upon decision of Delhi High Court (1992) 3 SSC 390. 3. Counsel for appellant has contended that in view of decision of Supreme Court in Municipal Corporation Of Delhi Versus Children Book Trust with Safdarjung Enclave Education Society Versus Municipal Corporation Of Delhi, AIR 1992 SC 1456, issue is required to be answered in favour of department. 4. However, counsel for respondent has relied upon decision of Supreme Court in Chief Commissioner of Income Tax, Chandigarh vs. St. Peter s Educational Society reported in (2016) 385 ITR 66 wherein it has been held as under:- In all those appeals which have come from High Court of Punjab and Haryana and filed by Department of Income-tax except one from Gujarat High Court, High Court has followed its aforesaid judgment in Pinegrove International Charitable Trust. Since this view stands approved, all these appeals are dismissed. We, however, make it clear that observations made in para. 25, reproduced above, shall apply in these cases. One appeal is from Gujarat High Court which has also followed view taken by Punjab and Haryana High Court in Pinegrove International Charitable Trust, which also stands dismissed. We also make it clear that observations made in para. 25 in Queen's Educational Society v. CIT MANU/SC/0287/2015 : [2015] 8 SCC 47 : [2015] 372 ITR 699, 729 (SC) shall be followed. 5. In other decision of Supreme Court in Queen s Educational (3 of 16) [ ITA-458/2009] Society vs. Commissioner of Income Tax reported in (2015) 372 ITR 699 (SC) and decision of this court in D.B. ITA No.123/2016 Jhunjhunu Academcy Sammittee vs. Income Tax Officer Jhunjhunu & other connected cases decided on 8.2.2017 wherein it has been held as under:- 1. Both these appeals involve common question of law and facts and therefore are decided by this common judgment. 2. By way of these appeals, appellants have assailed judgment and order of Tribunal whereby Tribunal has dismissed appeal preferred by assessee and confirmed order of CIT(A) as well as AO. 3. facts of case are that survey u/s 133A was carried out at institution on 29.10.2003. during course of survey, it was noticed that during previous year relevant to assessment year 2001-02, society earned profit of Rs. 10,07,650/- but it was not furnishing its return of income. Therefore notice u/s 148 was issued after recording reasons for issue of notice u/s 148. In response to this return of income was filed on 15.2.2005 declaring nil income and claiming its total receipts exempt u/s 10(23C)(iiiad) of I.T Act. Notice u/s 141(1) was issued alongwith questionary in response to which Shri M.S. Dhankar, C.A. appeared and produced books of accounts consisting of cash book, ledger, receipts books and expenses vouchers which were examined on test check basis and case was discussed with him. Assessee has claimed his status as Educational society. However, there is no such independent status namely Educational society defined in section 2(31) of I.T. Act. Therefore, status of society is taken as AOP. assessee AOP is registered with Registrar (Societies), Jhunjhunu and running Educational institute namely M/s Jhunjhunu Academy, Jhunjhunu with hostel. Perusal of Income & expenditure account for year under consideration reveals that apart from receipt of regular fees, it has also shown receipts of donation amounting to Rs. 18,49,725/-. after claiming expenses under various heads, excess of Income of Rs. 10,07,650/- over expenditure has been shown under school and hostel accounts. excess amount has been claimed to be exempt u/s 10(23C)(iiiad) of I.T. Act thereby showing taxable income at NIL. 4. Counsel for appellant-assessee has contended (4 of 16) [ ITA-458/2009] that appellant is running educational institute namely M/s Jhunjhunu Academy and is established since many years. He contended that for relevant year 2001-02 & 2002-03, assessee has received income in terms of donations from students which has been considered by Assessing Officer, CIT(A) & tribunal, as income and has not been considered eligible for exemption under Section 23C(iiiad) of Income Tax Act. 5. Counsel for appellant has taken us to definition of Section 10 (23C) (iiiad) of Income Tax Act which reads as under:- Section 10:- In computing total income of previous year of any person, any income falling within any of following clauses shall not be included- . (23C)- any income received by any person on behalf of- . (iiiad)- any university or other educational institution existing solely for educational purposes and not for purposes of profit if aggregate annual receipts of such university or educational institution do not exceed amount of annual receipts as may be prescribed; or. 6. He therefore contended that income received by appellant is eligible for exemption as income which has been derived by way of donation. 7. He has relied upon following decisions:- (i) In Queen s Education Society vs. CIT reported in (2015) 372 ITR 699 (SC), Supreme Court held as under:- 19. It is clear, therefore, that Uttarakhand High Court has erred by quoting non existent passage from applicable judgment, namely, Aditanar and quoting portion of property tax judgment which expressly stated that rulings arising out of Income Tax Act would not be applicable. Quite apart from this, it also went on to further quote from portion of said property tax judgment which was rendered in context of whether educational society is supported wholly or in part by voluntary contributions, something which is completely foreign to Section 10(23C) (iiiad). final conclusion that if surplus is made by educational society and ploughed back to construct its own premises would fall foul of Section 10(23C) is to ignore language of Section and to ignore tests laid down in Surat Art Silk Cloth case, (5 of 16) [ ITA-458/2009] Aditanar case and American Hotel and Lodging case. It is clear that when surplus is ploughed back for educational purposes, educational institution exists solely for educational purposes and not for purposes of profit. In fact, in S.RM.M.CT.M. Tiruppani Trust v. Commissioner of Income Tax MANU/SC/0107/1998 : (1998) 2 SCC 584, this Court in context of benefit claimed Under Section 11 of Act held: 9. In present case, Assessee is not claiming any benefit Under Section 11(2) as it cannot; because in respect of this assessment year, Assessee has not complied with conditions laid down in Section 11(2). Assessee, however, is entitled to claim benefit of Section 11(1)(a). In present case, Assessee has applied Rs. 8 lakhs for charitable purposes in India by purchasing building which is to be utilised as hospital. This income, therefore, is entitled to exemption Under Section 11(1). In addition, Under Section 11(1)(a), Assessee can accumulate 25% of its total income pertaining to relevant assessment year and claim exemption in respect thereof. Section 11(1)(a) does not require investment of this limited accumulation in government securities. balance income of Rs. 1,64,210.03 constitutes less than 25% of income for Assessment Year 1970-71. Therefore, Assessee is entitled to accumulate this income and claim exemption from income tax Under Section 11(1)(a). We set aside judgment of Uttarakhand High Court dated 24th September, 2007. reasoning of ITAT (set aside by High Court) is more in consonance with law laid down by this Court, and we approve its decision. (ii) In Chief Commissioner of Income Tax, Chandigarh vs. St. Peter s Education Society (2016) 385 ITR 66 (SC), Supreme Court observed as under:- We may record at this stage that there was difference of opinion among various High Courts on aforesaid issue. While summarizing law, this Court approved judgments of Punjab and Haryana High Court, Delhi and Bombay High Courts and reversed view taken by Uttarakhand High Court. In so far as judgment of Punjab and Haryana High Court is concerned, it was given in case of Pinegrove International Charitable Trust v. Union of (6 of 16) [ ITA-458/2009] India MANU/PH/0146/2010 : [2010] 327 ITR 73 (P&H). relevant para in this behalf which also states as to how such cases are to be dealt with reads as under: "25. We approve judgments of Punjab and Haryana, Delhi and Bombay High Courts. Since we have set aside judgment of Uttarakhand High Court and since Chief Commissioner of Income- tax's orders cancelling exemption which were set aside by Punjab and Haryana High Court were passed almost solely upon law declared by Uttarakhand High Court, it is clear that these orders cannot stand. Consequently, Revenue's appeals from Punjab and Haryana High Court's judgment dated January 29, 2010, and judgments following it are dismissed. We reiterate that correct tests which have been culled out in three Supreme Court judgments stated above, namely, Surat Art Silk Cloth, Aditanar and American Hotel and Lodging, would all apply to determine whether educational institution exists solely for educational purposes and not for purposes of profit. In addition, we hasten to add that 13th proviso to Section 10(23C) is of great importance in that assessing authorities must continuously monitor from assessment year to assessment year whether such institutions continue to apply their income and invest or deposit their funds in accordance with law laid down. Further, it is of great importance that activities of such institutions be looked at carefully. If they are not genuine, or are not being carried out in accordance with all or any of conditions subject to which approval has been given, such approval and exemption must forthwith be withdrawn. All these cases are disposed of making it clear that Revenue is at liberty to pass fresh orders if such necessity is felt after taking into consideration various provisions of law contained in Section 10(23C)read with Section 11 of Income-tax Act." In all those appeals which have come from High Court of Punjab and Haryana and filed by Department of Income-tax except one from Gujarat High Court, High Court has followed its aforesaid judgment in Pinegrove International Charitable Trust. Since this view stands approved, all these appeals are dismissed. We, however, make it clear that observations made in para. 25, reproduced above, shall apply in these cases. One appeal is from Gujarat High Court which has also followed view taken by Punjab and (7 of 16) [ ITA-458/2009] Haryana High Court in Pinegrove International Charitable Trust, which also stands dismissed. We also make it clear that observations made in para. 25 in Queen's Educational Society v. CIT MANU/SC/0287/2015 : [2015] 8 SCC 47 : [2015] 372 ITR 699, 729 (SC) shall be followed. 7.1 On previous occasion, when matter was listed, he has relied upon following decisions of different High Courts:- 7.2. In Brahmin Education Society vs. Assistant Commissioner of Income Tax & anr. reported in (1997) 227 ITR 317 (Ker.) it has been held as under:- first point to be decided is whether it was justified on part of Commissioner to deny exemption under Section 80G on ground that society is deriving income from running chits. There is no dispute that income derived from chits is being made use of for educational purposes. Section 10(22) of Income Tax Act states as follows : "any income of university or other educational institution, existing solely for educational purposes and not for purposes of profit. "The position is well established on strength of decisions that if society exists solely for educational purposes and it runs educational institution, its income will be income of educational institution, and, therefore, exempt under Section 10(22). fact that assessee had other objects, will not disentitle it to exemption so long as activity carried on by it is that of running educational institution and its activities are not for profit. question was considered by Division Bench of this court in CIT v. Sree Narayana Chandrika Trust MANU/KE/0114/1994 : [1995] 212 ITR 456. Their Lordships were considering Section 10(22A) which is analogous to Section 10(22). Section 10(22A) deals with income of hospital while Section 10(22) deals with income of educational institution. In that case question was whether income derived from securities can be treated as income of hospital. Their Lordships considered various decisions which were mostly on Section 10(22). It was held as follows (page 469) : " emphasis, in our opinion, is not on whether income was derived from educational (8 of 16) [ ITA-458/2009] institution or hospital itself, but on purpose for which institution, trust or society was existing and utilising income." Their Lordships referred to decisions in CIT v. Academy of General Education MANU/KA/0041/1983 : [1984]150ITR135(KAR) -where income sought to be exempted included income from securities, properties and from other sources like dividends, interest, registration fee, donations, etc., and also Governing Body of Rangaraya Medical College v. ITO MANU/AP/0168/1975 : [1979]117ITR284(AP) , where income was by way of compulsory contribution for seats in college. Thus, going by reasoning of Division Bench in CIT v. Sree Narayana Chandrika Trust MANU/KE/0114/1994 : [1995] 212 ITR 456 and other decisions, it is clear that if ah institution exists solely for purpose of education and it derives income from any other source and if that income is used only for purpose of education, then it will come under Section 10(22) of Income Tax Act, It is clear from memorandum of association of society that chits are being conducted in order to make use of commission for purpose of education. There is no case for Department that this amount is being used for any other purpose. In such circumstances, I hold that Commissioner was wrong in holding that since chit is being conducted, which is business activity, petitioner is not entitled to exemption under Section 10(22) of Income Tax Act. refusal is based under provisions of Section 11(4A). According to me, this is mistake committed by authorities. Exemption sought for was under Section 10(22). Section 11(4) is applicable only with regard to income from various properties. It cannot override Section 10(22). Hence, this reasoning is also not correct. 7.3 In Additional Commissioner of Income Tax vs. Aditanar Educational Institution (1979) 118 ITR 235 (Mad.) it has been held as under:- 9. word " University " does not represent genus in present case, so that subsequent words will have to be considered as taking their colour from this genus. As pointed out by Supreme Court in S. Azeez Basha v. Union of India, MANU/SC/0039/1967 : [1968]1SCR833 , there was no law in India which prohibited any private individual or body from establishing University and it was, therefore, open to private individual or body to establish University. There is good deal in common (9 of 16) [ ITA-458/2009] between educational institutions which are not universities and those which are universities. Both teach students and both have teachers for purpose. But what distinguishes University from any other educational institution is that University grants degrees of its own while other educational institutions cannot. It is this granting of degrees by University which distinguishes it from ordinary run of educational institutions. Thus, in law, in India there was no prohibition against establishment of Universities by private individuals or bodies and in fact famous Viswabharathi University was started by Rabindranath Tagore as private individual. It was only in 1956 by Sub-section (1) of Section 22 of University Grants Commission Act (III of 1956) it was laid down that right of conferring or granting degrees should be exercised only by University established or incorporated by or under Central Act or State legislature. other " educational institution " cannot come within category " University ". term " University " stands for higher degree of education than scholastic level. " Any educational institution " would fall within scope of Section 10(22) even though it may have or may not have anything to do with University. categories are so different that University cannot be genus, and " other educational institution " species thereof. Thus, college here could come under " other educational institution ". 10. further contention was that institution, in order to qualify for exemption under Section 10(22) should itself be educational institution and that it was not enough if it ran educational institution. It was pointed out that assessee could assist colleges and that in case it merely rendered assistance, it would be in nature of financial body, which did not itself impart education. It is difficult to accept argument that, in present case, assessee is not educational institution. assessee has come into existence for purpose of establishing, running, managing or assisting colleges, schools and other educational organisations. In pursuance of its objects, as seen earlier, assessee has established college. It is stated that management of college had to be vested in registered body. It is not clear whether two registered bodies were contemplated, one being assessee and other managing body. In para. 8 of its order, Tribunal has observed as follows. (10 of 16) [ ITA-458/2009] "Ultimately, affiliation for P.U.C. course was granted to college by Madras University on condition that management of college should be by registered body." 7.4 In Commissioner of Income Tax vs. A.M.M. Arunachalam Educational Society (2000) 243 ITR 229 (Mad.) it has been held as under:- Counsel for Revenue fairly stated that first question is required to be answered in favour of assessee, having regard to decision of Supreme Court in case of Aditanar Educational Institution v. Addl. CIT MANU/SC/0338/1997 : [1997] 224 ITR 310(SC) . Having perused decision of apex court we must hold that law laid down therein applies to facts of case. object of assessee is to run educational institution and that is what it has been doing. It has been held by apex court in case of Aditanar Educational Institution v. Addl. CIT MANU/SC/0338/1997 : [1997] 224 ITR 310(SC) , that petitioner educational society formed for sole purposes of establishing, running and managing or assisting schools and colleges is educational institution and is entitled to exemption under Section 10(22) of Act. first question referred to us is, therefore, answered in favour of assessee and against Revenue. There is no dispute about fact that assessee exists only for educational purposes, namely, for running school and not for purposes of profit. It is educational institution. Section 10(22) of Act exempts "any income" of such institution. That would clearly include dividend income as well. It is obvious that granting exemption to income of educational institutions is to enable such institutions to utilise monies available with them for purpose of running educational institutions. source from which money is received is not of any consequence, what is relevant is application. So long as institution is educational institution which is not engaged in earning profit, income of such institution is exempt under Section 10(22) . 7.5 In Commissioner of Income Tax vs. Doon Foundation (1985) 154 ITR 208 (Cal.) it has been held as under:- (11 of 16) [ ITA-458/2009] memorandum of association clearly shows that assessee had for its objects, inter alia, to establish, run, manage or assist colleges, schools, technical and vocational institutes. objects indicate that society is existing solely for educational purposes. Clause 7 provides that if any activity as enumerated in Clause 3 is found to be outside scope of educational purpose, it shall be deemed as non est and shall be deemed to be excluded from objects of foundation. contention of Mr. Maitra that assessee-society is neither university nor educational institution and, therefore, cannot get any exemption under Section 10(22) cannot be accepted. Section 10 provides that in computing total income of previous year of any person, any income falling within any of clauses of Section 10 shall not be included. Sub-section (22) of Section 10 provides that any income of university or other educational institution existing solely foreducational purposes and not for purposes of profit will not be included in total income. assessee runs educational institution. If educational institution run by assessee exists solely for educational purposes, in that event, income of such institution cannot be included in total income of assessee-society. If educational institution exists solely for educational purposes and not for purposes of profit, in that event fact that recipient or owner of income is person other than educational institution or university, would not affect position. word "institution" has not been defined in Act. society registered under Societies Registration Act whose primary objects are to establish, support, manage or conduct schools, colleges, etc., would also come within purview of educational institution. If society primarily engages itself in educational activities or runs school or college, it is entitled to claim exemption under Section 10(22). It is immaterial whether society itself is educational institution or it runs educational institution. We are also unable to accept contention of Mr. Maitra that educational institution to be eligible for exemption under Section 10(22)should be affiliated to any university or any board. Section 10(22) does not impose such condition. So long as income is derived from educational institution existing solely for educational purposes and not for purposes of profit, such income is entitled to exemption under Section 10(22), whether or not such educational institution is affiliated to any university or college or board. If contention of Revenue is accepted, then many of societies running institutions solely for imparting education (12 of 16) [ ITA-458/2009] would not get benefit of Section 10(22). Education as envisaged in Section 10(22) may be imparted in school or college or institution which may or may not be affiliated to, or recognised by, university or board. In this case, ITO has not rejected claim of assessee on ground that assessee has any object of profit or society exists for purposes of profit. assessee-society has no motive for profit or personal gain. It is neither tutorial home nor coaching institution which runs solely for purpose of profit or personal gain. ground on which claim was rejected was that assessee had objects other than educational objects. From objects as enumerated hereinabove, it would be clear that all objects of assessee are educational objects or are connected with education. It has not been shown to us which of objects are unconnected with education. Even where society or trust which owns educational institution has charitable objects other than educational objects, even then, taking all relevant factors into consideration like aims and objects, power enabling society or trust to function, its activities, etc., if it is found that source generating income exists solely for purpose of education, such society or trust is entitled to exemption underSection 10(22) in respect of only income derived from educational institution. 14. further contention of Mr. Maitra is that in this case, assessee has not yet set up educational institution and cannot, therefore, get exemption. According to Mr. Maitra, assessee has only taken some steps for holding regular classes for teaching Hindi and purchased some books and periodicals for library and it cannot be said that during relevant previous year, assessee was running any educational institution. condition precedent for claiming exemption under Section 10(22) is, whether educational institution exists solely for educational purposes and not for purposes of profit. There is no dispute nor can it be disputed that assessee- society exists solely for educational purposes. assessee has commenced activities connected with imparting of education. For purpose of holding regular classes for teaching of Hindi, assessee has taken all preliminary steps including purchase of books and periodicals. Such activities are steps towards running of full-fledged teaching course. We are, therefore, unable to accept contention of Revenue that assessee did not start running any educational institution during previous year in question. educational institution has been established or set on foot during relevant previous year. In our opinion, decision in case of Saraswath Poor Students Fund MANU/KA/0080/1984 : (13 of 16) [ ITA-458/2009] [1984]150ITR142(KAR) , has no application to facts of this case inasmuch as in that case primary object of assessee was to extend financial help to students and not to establish any educational institution or to impart education to students. Here, objects are to establish and run educational institution and to impart education to students and for that purpose, steps have been taken by assessee-society. 7.6 In Secondary Board of Education vs. Income Tax Officer (1972) 86 ITR 408 (Ori.) it has been held as under:- There are other classes of educational institutions which exist solely for educational purposes. Those institutions cannot be run efficiently without substantial income made from different sources. sources of income generally are collection of fees from students, grants given by Government and donations. Such income may however be insufficient to cope with growing needs when dynamic progress is intended to be made in educational sphere. To supplement such income those institutions may taken recourse to some profit earning business. profit would go to general fund and would be appropriated towards expansion and development of educational schemes taken up by those institutions. In such case, though incidentally profit is earned to meet growing needs, all same institution exists solely for educational purposes and not for purposes of profit. Thus distinction is to be kept in mind by looking into dominant object of institution. It is on basis of these tests that this case is to be examined. 7.7 In Educational Institute of American Hotel and Motel Association vs. Commissioner of Income Tax (1996) 219 ITR 183 (AAR) it has been held as under:- 9. On examination, conditions precedent to availability of exemption to educational institution can be stated thus : (a) educational institution must actually exist for application of said Section and mere taking of steps would not be sufficient to attract exemption ; (b) educational institution need not be affiliated to any university or Board, in fact society need not itself be imparting education and it is enough if it runs some schools or colleges ; (c) educational institution must exist solely for educational purposes and not for purposes of profit but merely because there is surplus that is to say, surplus of receipts over expenditure, it cannot be said that educational institution exists for profit ; (14 of 16) [ ITA-458/2009] (d) entity may be having income from different sources but if particular income is from educational institution which exists solely for educational purposes and not for purposes of profit, then that income would be entitled to exemption and further income should be directly relatable to educational activity. 8. Supreme Court judgment which sought to be relied upon by subsequent judgment in Additional Commissioner of Income Tax, Gujarat vs. Surat Art Silk Cloth Manufacturers Association (1980) 121 ITR 1 wherein observation of majority view of J. Khanna and J. Gupta referred in Sole Trustee, Lokashikshana Trust vs. CIT (1975) 101 ITR 234 (SC), has been disapproved and minority view of Beg J. has been approved. 9. Counsel for respondent Mr. Jain has taken us to order of AO as well as CIT(A) and Tribunal and contended that it is totally family affair and income which has been derived is only for purpose of profit. Therefore, one of condition of Section 23C(iiiad) of Act is not complied with on basis of his profit motive. 10. He has relied upon paragraph no.4,5,6, 11, 25 & 26 of Supreme Court Judgment in Queen s Educational Society (supra) which is sought to be relied upon by Mr. Jhanwar and contended that in view of Clause (4) & (5) of paragrpah 11 which is reproduced as under:- 11. Thus, law common to Section 10(23C) (iiiad) and (vi) may be summed up as follows: (1) Where educational institution carries on activity of education primarily for educating persons, fact that it makes surplus does not lead to conclusion that it ceases to exist solely for educational purposes and becomes institution for purpose of making profit. (2) predominant object test must be applied-the purpose of education should not be submerged by profit making motive. (3) distinction must be drawn between making of surplus and institution being carried on "for profit". No inference arises that merely because imparting education results in making profit, it becomes activity for profit. (4) If after meeting expenditure, surplus arises incidentally from activity carried on by (15 of 16) [ ITA-458/2009] educational institution, it will not be cease to be one existing solely for educational purposes. (5) ultimate test is whether on overall view of matter in concerned assessment year object is to make profit as opposed to educating persons. 11.He contended that since conditions are not fulfilled by appellant-trust, therefore, view taken by tribunal and all authorities in view of concurrent finding is required to be upheld and no interference is called for. 12.He has relied upon decision in Sole Trustee (supra) para no.21, 42 & 45 in answer to Mr. Jhanwar s submissions that assessement for subsequent year be accepted. He has submitted that they were registered under Section 12A therefore, assessee has accepted order of earlier year. 13.While admitting matter this court has framed following substantial question of law vide order dated 26.7.2007:- (i) whether once appellant society has been considered to be eligible for exemption under section 110(23C) (iiiad) of Act as educational institution, and words used in said section are any income , whether donations received by socirty would also not qualify for such exemption? (ii) Even when donation received by appellant are considered to be income from other sources , whether same would not qualify for exemption under section 10 (23C) (iiiad) when said section exempts all income of qualifying educational institutions? 14.We have heard counsel for parties. 15.Before coming to basic contentions, it is not in dispute that appellant is as by name itself suggests that it is academic Samiti carrying on activities of educational purpose for establishing any educational institution. There is need of infrastructure and expansion of every activity whether it is residential accommodation or physical or competitive requirement or other requirement and also maintenance of institution is mandatory for which one has to collect funds. 16.From record it seems that endeavour is made that during relevant year they have surplus fund which is prescribed or described by authority as (16 of 16) [ ITA-458/2009] profit and compared to expenses or other income which has been received as 34,91,251/-. Thus, it has been stated that there is profit of 33 per cent. 17.In our view, any educational institution which is required to be run they have to have surplus fund for educational activity to sustain consistency in efficiency and very purpose of collecting donation is to sustain activity of institution. Merely, because surplus fund it cannot be envisaged as profit, institution has not crossed one crore limit and they are well within their prescribed limit. income was received by trust which is reflected in books of accounts. 18.In our view, view taken by authority is required to be reversed and it is required to be looked into foundation of ratio laid down by Supreme Court in case of Queen s Education Society (supra) where funds which has been surplus is within corpus fund and it has been kept as reserve fund which is not in dispute and they have not crossed limit of one crore. 19.Taking into consideration aforesaid, we are of opinion that contention raised by Mr. Jhanwar is required to accepted. 20.Therefore, first question, we answering in favour of assessee that it is income entitled for exemption under Section 23C(iiiad) of Act. 21.In view of answer to first issue, second issue will not arise. 22.The appeal is allowed to aforesaid extent. 6. We have heard counsel for parties. 7. Taking into consideration law which is prevailing today, view taken by tribunal is just and proper. issue is answered in favour of assessee and against department. appeal stands dismissed. (VIJAY KUMAR VYAS),J. (K.S. JHAVERI),J. Brijesh 13. CIT v. Modern School Society