1992 (2) TMI 74 - HC - Income Tax

Tax Exemption Granted to Educational Institution by High Court in Landmark Ruling on Income Tax Act

Gujarat State Co-operative Union Versus Commissioner Of Income-Tax

Gujarat State Co-operative Union Versus Commissioner Of Income-Tax - [1992] 195 ITR 279, 103 CTR 206 Issues Involved:1. Entitlement to carry forward and set off past losses u/s 154 of the Income-tax Act, 1961.2. Entitlement to exemption from tax u/s 10(22) of the Income-tax Act, 1961.Summary:Issue 1: Entitlement to Carry Forward and Set Off Past Losses u/s 154The assessee, Gujarat State Co-operative Union, claimed that the surplus realized should be set off against past losses determined and ascertained. The Income-tax Officer rejected this claim, but the appellate authorities allowed it. The Tribunal, however, held that the assessee was not entitled to carry forward and set off past losses in rectification proceedings as it was debatable whether the assessee had any business income. The Tribunal stated that such questions could not be addressed in rectification proceedings.Issue 2: Entitlement to Exemption from Tax u/s 10(22)The assessee also claimed exemption u/s 10(22) of the Act, asserting it was an educational institution existing solely for educational purposes. The Income-tax Officer rejected this claim, but the appellate authorities allowed it. The Tribunal, however, denied the exemption, interpreting the Supreme Court's decision in Sole Trustee, Loka Shikshana Trust v. CIT [1975] 101 ITR 234 to mean that the assessee's objects were not solely educational.The High Court examined the objects and activities of the assessee, which included imparting education to members of co-operative societies, conducting training classes, and publishing educational literature. The Court concluded that the assessee existed solely for educational purposes and not for profit. The Court clarified that the Supreme Court's observations in Loka Shikshana Trust's case did not restrict the meaning of 'education' to traditional schooling but included systematic dissemination of knowledge and training in specialized subjects.The Court held that the Tribunal misread the Supreme Court's observations and that the assessee's activities qualified it as an educational institution under section 10(22). The Court emphasized that incidental income from educational activities does not disqualify an institution from exemption if its primary purpose is educational.Conclusion:The High Court concluded that the Tribunal was not right in law in holding that the assessee was not entitled to exemption from tax u/s 10(22) for the assessment years 1972-73 to 1977-78. The question was answered in the negative and against the Revenue, with no order as to costs.