2006 (7) TMI 355 - AT - Income Tax

Trust Denied Tax Exemption for Lack of Educational Activities

Assistant Director of Income-tax (E) *, Trust Circle-I, New Delhi Versus Bhartiya Education Foundation

Assistant Director of Income-tax (E) *, Trust Circle-I, New Delhi Versus Bhartiya Education Foundation - [2006] 9 SOT 589 (DELHI) Issues:- Entitlement to exemption under section 10(22) of the Income-tax ActDetailed Analysis:The judgment by the Appellate Tribunal ITAT Delhi involved the issue of whether the assessee, a trust registered under section 12A of the Income-tax Act, is entitled to exemption under section 10(22) of the Act. The Assessing Officer initially denied the exemption under section 10(22) on the grounds that the assessee was not running any educational institution during the relevant year. The learned CIT(A) also held that the assessee was not entitled to exemption under sections 11 and 12 due to certain infringements under section 13(1)(c) of the Act. However, the CIT(A) allowed the exemption under section 10(22) after considering the educational nature of the trust's objects and activities, including efforts to acquire land for educational purposes and granting scholarships to students. The Tribunal noted that the assessee had been granted exemption under section 10(22) for several years based on its educational activities, even though there was a temporary discontinuation of the primary school. The Tribunal emphasized that the grant of scholarships for educational purposes also qualified as an educational activity. Therefore, the Tribunal directed the Assessing Officer to allow exemption under section 10(22) for the income of the appellant foundation for the relevant year.The revenue appealed the decision, arguing that the assessee was not engaged in educational activities during the relevant financial year and therefore was not eligible for exemption under section 10(22). The revenue contended that merely granting scholarships, while charitable, did not meet the criteria for exemption under section 10(22) as no educational activities were carried out. The revenue also highlighted that eligibility for exemption under section 10(22) should be evaluated annually, and past eligibility does not guarantee automatic exemption. The revenue relied on legal precedents to support its argument that without actual educational activities, the exemption under section 10(22) should not be granted.The Tribunal, in its analysis, referred to the provisions of section 10(22) which required the assessee to be an educational institution existing solely for educational purposes to qualify for exemption. The Tribunal emphasized that the eligibility for exemption under section 10(22) should be evaluated annually based on the existence of educational activities during the relevant year. Citing legal precedents, the Tribunal reiterated that the mere existence of charitable objects related to education was not sufficient to claim exemption under section 10(22) if no actual educational activities were carried out. The Tribunal highlighted that the primary object should be the imparting of education, and incidental activities like granting scholarships were not adequate to qualify as an educational institution under section 10(22). Since the assessee was not running an educational institution during the relevant year and only engaged in providing scholarships, the Tribunal concluded that the assessee was not entitled to exemption under section 10(22) of the Act.In conclusion, the Tribunal allowed the revenue's appeal, holding that the assessee was not entitled to exemption under section 10(22) of the Income-tax Act for the relevant year due to the absence of actual educational activities being conducted by the assessee during that period.