1987-VIL-482-RAJ-DT

Equivalent Citation: [1987] 168 ITR 751, 66 CTR 95, 36 TAXMANN 165

RAJASTHAN HIGH COURT

Date: 12.08.1987

AGARWAL SHIKSHA SAMITI TRUST

Vs

COMMISSIONER OF INCOME-TAX

BENCH

Judge(s)  : J. S. VERMA., INDER SEN ISRANI 

JUDGMENT

The judgment of the court was delivered by

ISRANI J.-This is a reference made at the instance of the assessee under section 256(1) of the Income-tax Act, 1961 (hereafter referred to as " the Act "), in which the learned Tribunal has referred the following two questions for the opinion of this court :

"1. Whether, on the facts and in the circumstances of the case, Agarwal Shiksha Samiti Trust was a part and parcel of Agarwal Shiksha Samiti or whether it was a separate assessable entity under the income-tax law ?

2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee-trust was not an educational institution within the meaning of section 10(22) of the Act ? "

This reference arises out of the return filed by the assessee, Agarwal Shiksha Samiti Trust, Jaipur, for the assessment year 1973-74. The assessee-trust was formed by a trust deed dated July 31, 1958, which was registered on October 29, 1958, with the Sub-Registrar, Jaipur City. The assessee claimed exemption of income as per the provisions of section 10(22) of the Act. The learned Income-tax Officer found that, the assessee-trust has been giving donations to Agarwal Shiksha Samiti, which is running several educational institutions. He was of the opinion that since the assessee-trust is not running any educational institution as contemplated under section 10(22) of the Act, it was not entitled to any exemption under the above-mentioned provision. He, therefore, issued a show-cause notice to the assessee to explain why the exemption under section 10(22) of the Act be not refused. After considering the evidence on record and the contentions of the assessee, the learned Income-tax Officer came to the conclusion that the assessee-trust did not fulfil the necessary conditions to entitle it for exemption of income under section 10(22) of the Act. Feeling aggrieved with the above order, the assessee took up the matter before the learned Appellate Assistant Commissioner, who after considering various contentions raised by the assessee, came to the conclusion that the function of running the educational institutions is performed by Agarwal Shiksha Samiti, which is maintaining separate accounts in respect of tuition fees, grant-in-aid, etc., whereas the assessee-trust is only receiving and disbursing the donations. He, therefore, came to the conclusion that the assessee-trust is not an institution like the universities or colleges, which solely exist for educational purposes, and upheld the order of the Income-tax Officer and rejected the claim of the assessee for exemption under section 10(22) of the Act. The assessee raised more or less similar contentions before the Tribunal and it was contended that the authorities below had wrongly interpreted section 10(22) of the Act as also the provisions of the trust deed dated July 31, 1958. Learned Tribunal held that from the material on record it is proved that since the assessee-trust does not actually run any educational institution within the meaning of the words " university or other educational institution " existing solely for educational purposes, the authorities below had rightly held that the assessee-trust is not entitled to exemption under section 10(22) of the Act.

We have heard Shri V. K. Singhal, learned counsel for the assessee, and Shri R. N. Surolia, learned counsel for the Revenue, and have also gone through the material on record.

The contention of learned counsel for the assessee is two-fold, firstly, that the requirement of section 10(22) of the Act is that there should be in existence an educational institution which was existing solely for the purpose of education and, secondly, there should be no motive of profit in the same, meaning thereby, that the purpose should not be to derive any profit by such an institution. According to learned counsel, both these conditions are fulfilled as the assessee-trust has been created solely for carrying out the objects of Agarwal Shiksha Samiti which runs several educational institutions and has been given exemption under section 10(22) of the Act. Learned counsel frankly admitted that since Agarwal Shiksha Samiti is registered under the Societies Registration Act, 1860, and the assessee-trust is registered with the Devasthan Department, both were separate entities and the assessee-trust cannot be said to be part and parcel of Agarwal Shiksha Samiti and, therefore, the assessee trust was a separate entity under the income-tax law. However, the contention of learned counsel for the assessee is that merely because the assessee-trust is a separate legal entity, it cannot be said that it is not entitled to exemption under the provisions of section 10(22) of the Act. It is contended that the assessee-trust has been created solely for the purposes of carrying out the means and objects of Agarwal Shiksha Samiti which admittedly runs several educational institutions. It was pointed out by learned counsel that the word " education " used in section 10(22) has a much wider sense than the word used in section 2(15) of the Act. It is further contended that since the assessee-trust is collecting donations solely, with the object of disbursing the same for running the educational institutions run by Agarwal Shiksha Samiti, it is only natural that it will maintain separate accounts for that purpose. It was pointed out by learned counsel that the trust deed dated July 31, 1958, which is t duly registered document, clearly shows that the only purpose for which the assessee-trust has been formed was to see that whatever funds the trust possesses shall be used for promotion of the educational institutions run under the auspices of Agarwal Shiksha Samiti and all efforts will be made to achieve the objects for which the educational institutions have been established under Agarwal Shiksha Samiti. It is further contended that admittedly Agarwal Shiksha Samiti, as is evident from its aims and objects mentioned in its constitution, is to make arrangements, suitable to the trend of times for educating the children, youth and adults irrespective of caste, creed or sect, in various branches of education, vocations in life and professions and to maintain run, expand, develop and raise the educational institutions run under the auspices of the Samiti to the status of the highest academic educational institutions and to start and take up other educational, vocational and professional institutions, as the Samiti may deem fit. Our attention was drawn to the case of CIT v. Sindhu Vidhya Mandal Trust [1983] 142 ITR 633 (Guj), in which it was observed by the Division Bench of the Gujarat High Court that " the terms `institution' and 'educational institution' have not been defined under the Act. In the Oxford English Dictionary, the word `institution' is defined to mean 'an establishment, organisation or association, instituted for the promotion of some object, specially one of public or general utility, religious, charitable, educational, etc. It cannot be held that since the word `trust' is not used in section 10(22) of the Income-tax Act, 1961, that provision has no application to a trust ". In the matter of CIT v. Doon Foundation [1985] 154 ITR 208 (Cal), it was pointed out that " sub-section (22) of section 10 of the Income-tax Act, 1961, provides that any income of a university or other educational institution existing solely for educational purposes and not for purposes of profit will not be included in the total income. If the educational institution exists solely for educational purposes and not for purposes of profit, in that event, the fact that the recipient or owner of the income is person other than the educational institution or university, would not affect the position. The word `institution' has not been defined in the Act. A society registered under the Societies Registration Act whose primary objects are to establish, support, manage or conduct schools, colleges, etc., would also come within the purview of educational institution ". In the matter of CIT v. Academy of General Education [1984] 150 ITR 135 (Kar), it was held that an assessee in order to claim the benefit of section 10(22) of the Income-tax Act, 1961, need not necessarily be school or a college where education is imparted. Nor should such school or college be different from the assessee who claims the benefit of section 10(22). In this case, the assessee was a registered society and it carried on organised activities is per the objects set out in the memorandum. Its primary object was to establish, support, manage or conduct schools, colleges and such other educational institutions. It had income of its own. In its balance-sheet, the income of the twenty-two colleges or institutions established under separate trusts had not been included, nor the income of the nine schools which were run directly by the assessee. The assessee out of its income had given outright grants to some of these schools. The assessee had not spent its income for any purpose unconnected with education. It was, therefore, an educational institution existing purely for educational purposes and not for profit. It was, therefore, held that the assessee was an educational institution, the income of which was exempted under section 10(22) of the Act.

Learned counsel appearing for the Revenue has contended that since the assessee-trust is a separate legal entity and maintains separate accounts and does not run a school or a college, it is not entitled to exemption under the provisions of section 10(22) of the Act. It was further pointed out that the assessee-trust is only receiving and disbursing donations for the educational institutions run under the auspices of Agarwal Shiksha Samiti and, therefore, evidently, it will be incorrect to say that it is an institution like a college or university, which solely exist for educational purposes. Our attention has been drawn to the case of Sole Trustee, Loka Shikshana Trust v. CIT [1975] 101 ITR 234 (SC). This was a case of a charitable trust for running newspapers and journals. The trust was also carrying on the business of printing and, inter alia, one of the purposes of the trust was to educate the people of India in general and of Karnataka in particular by establishing, conducting and helping directly or indirectly the institutions calculated to educate the people by spread of knowledge on all matters of general interest and welfare. It was, therefore, held by the apex court that the object of the trust was not " education " within the meaning of section 2(15) of the Act, but the object was of general public utility. This authority is not relevant for the purposes of the matter before us.

It is clear from the discussion made above that the assessee-trust collects all donations with the sole purpose of disbursing the same among the educational institutions run under the auspices of Agarwal Shiksha Samiti. Merely because these educational institutions are not run and managed directly by the assessee-trust, it cannot be said that the trust does not fulfil the requirements of section 10(22) of the Act. Admittedly, the trust collects money by way of donations for the purposes of education and it has no motive of profit in the same. A bare reading of section 10(22) of the Act will show that what is required for exemption is that the educational institutions should exist solely for the purposes of education and not for the purpose of any profit. In our considered opinion, the assessee-trust fulfils the necessary requirements as laid down in section 10(22) of the Act.

Consequently, the reference is answered as under:

1. Answer to question No. 1.

Reference is answered against the assessee and in favour of the Revenue by holding that the trust is not a part and parcel of Agarwal Shiksha Samiti and is a separate legal entity for assessment under the income-tax law.

2. Answer to question No. 2:

Reference is answered against the Revenue and in favour of the assessee by holding that the Tribunal was not justified in holding that the assessee-trust was not an educational institution within the meaning of section 10(22) of the Act.

No order as to costs.

 

 

 

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