1999 (8) TMI 13 - HC - Income Tax

Educational society's alleged fund misuse and property purchases u/s10(22) exemption scrutinised; exemption upheld, revenue appeal dismissed

The dominant issue was whether an educational society was disentitled to exemption under s.10(22) on allegations that its funds were misutilised for ... Claim for benefit of exemption u/s 10(22) - funds are being misutilised by the members of the society - Educational Institution - property is used for personal gain - surplus funds or profits are invested in creating personal properties - HELD THAT:- The Commissioner of Income-tax (Appeals) has recorded a finding of fact ; it was not known that any part of the income of the assessee-society was misutilised. For so saying, the appellate authority referred to the balance-sheet. The appellate authority further noticed that the assessee-society is a registered society under the Rajasthan Societies Act and that it is also recognised by the CBSE ; if there was any misutilisation or mismanagement, action could be taken against the members of the society, but, from the records and facts, it is not possible to say that any amount of funds of the society was not utilised for educational purposes. The Tribunal concurred with this finding of fact. The authorities also referred to a decision of the apex court, in the case of Aditnar Educational Institution v. Addl. CIT [ [1997 (2) TMI 3 - SUPREME COURT], in which, it is held that an overall view is to be taken and without being hypertechnical in granting exemption under section 10(22) of the Act, which include the objects of the society. Having regard to the finding of fact recorded, it is not possible for us to say that any substantial questaon of law arises for consideration, in this appeal, so as to admit it. Hence, the appeal is rejected. Issues Involved: The issues involved in this case are (1) whether the assessee-society is entitled to claim exemption under section 10(22) of the Income-tax Act, 1961, even if its funds are misutilized by its members, and (2) whether the relief under section 10(22) can be granted when the society's property is used for personal gain by its members.Judgment Details:Issue 1: Entitlement for Exemption under Section 10(22): The Deputy Commissioner of Income-tax, Central Circle-2, Jaipur, filed an appeal under section 260A of the Act, challenging the order of the Income-tax Appellate Tribunal granting exemption to the Cosmopolitan Educational Society, Jaipur, under section 10(22) of the Act for the assessment year 1990-91. The assessing authority initially denied the exemption, citing misutilization of funds by society members. However, the Commissioner of Income-tax (Appeals) and the Tribunal both ruled in favor of the society, stating that there was no evidence of funds being misutilized for non-educational purposes. The Tribunal emphasized the need for an overall view and not being hyper-technical in granting exemptions under section 10(22) of the Act.Issue 2: Misutilization of Society Funds: The appellant contended that the society's funds were misutilized by its members and should not qualify for exemption under section 10(22). However, both the Commissioner of Income-tax (Appeals) and the Tribunal found no evidence of misutilization based on the balance-sheet and the society's registration under the Rajasthan Societies Act. They highlighted that any mismanagement could be addressed separately, but there was no indication that funds were not used for educational purposes.Conclusion: The High Court rejected the appeal, stating that no substantial question of law arose for consideration based on the factual findings that the society's funds were utilized for educational purposes and there was no evidence of misutilization. The Court upheld the decision to grant exemption under section 10(22) to the Cosmopolitan Educational Society, Jaipur.