Scholarship-only trust not treated as an educational institution for income-tax exemption

A trust that merely grants scholarships, without establishing or running a school or college or otherwise carrying on real educational activity, does not qualify as an educational institution established solely for educational purposes. Where the trust neither imparts instruction nor exercises control over the students receiving assistance, it falls outside section 10(22) of the Income-tax Act, 1961. On these facts, the exemption was denied and the issue was decided in favour of the Revenue.

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Issues: Whether the assessee trust was entitled to exemption under section 10(22) of the Income-tax Act, 1961, on the facts that it had not established a school or college and was only granting scholarships to needy students.

Analysis: The trust was found not to have carried on any real educational activity since 1956. It had not established or run a school or college, nor did it impart instruction or exercise control over the students receiving scholarships. On these facts, the trust could not be regarded as an educational institution established solely for educational purposes within the meaning of section 10(22).

Conclusion: The assessee was not entitled to exemption under section 10(22) of the Income-tax Act, 1961, and the question was answered in favour of the Revenue and against the assessee.

Ratio Decidendi: A trust that merely grants scholarships without itself conducting educational activity or functioning as an educational institution established for educational purposes is not entitled to exemption under section 10(22) of the Income-tax Act, 1961.

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