TaxTMI 
TaxTMI 
2005 (6) TMI 17
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....oviding gymnasiums, playgrounds, etc., incidental to the educational activities. The trust filed return for the assessment year 1978-79 showing interest income earned from the investment of surplus income (funds) of the schools run by it and claimed exemption under section 10(22) of the Act. The said exemption was denied by the Income-tax Officer ("the ITO" for short) holding that the source from which the income was generated was interest earned from investment of surplus, thus, it was not an income directly earned from the educational activities qualifying exemption. The Appellate Assistant Commissioner was pleased to affirm the decision of the Income-tax Officer in appeal holding that the income having direct relation or incidental to the running of the educational institution could only qualify for exemption under section 10(22) of the Act and no other income. The said decision was followed and accepted by the assessee for the assessment year 1978-79. For the assessment years 1979-80 and 1980-81 the assessee claimed exemption under section 10(22), which came to be denied by the Income-tax Officer as well as the Commissioner of Income-tax (Appeals) and chose to follow the earl....
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....opment Foundation [1991] 188 ITR 540 (Cal) and Director of Income-tax (Exemptions) v. A.M.M. Hospitals and Medical Benefit Society [2003] 262 ITR 241 (Mad) in support of his contention. Per contra, Mr. Vyas, learned counsel appearing for the respondent-Revenue, urged that the income directly received from the educational activities of the educational institution, is only exempt under section 10(22) of the Act and no other income. He further urged that the interest income in question has neither been earned directly from and out of the educational activities nor has it incidental relation with the running of the educational institution, as such it cannot be said to be exempt under section 10(22) of the Act. In other words, the submission is that the interest income in question had no direct nexus with the running of the educational institution, as such no exemption with respect to such income can be claimed. Thus, in his submission such income does not qualify for exemption under section 10(22) of the Act. Consideration: We have heard the parties at length. The question of exemption from income of the educational institution has been a perennial teaser for the assessee as well as....
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.... as attributable to the educational activities of the assessee-society. In the case of Addl. CIT v. Aditanar Educational Institution [1979] 118 ITR 235 (Mad), the assessee was a society registered under the Societies Registration Act constituted to establish, run, manage or assist colleges, schools and other educational organisations existing solely for educational purposes. The assessee received donations from a trust. It started a college and utilised the entire donation for the college, the question was whether the assessee was an educational institution entitled to the exemption under section 10(22). The Departmental view was that this provision applied only to educational institutions as such and not to anyone else who might be financing the running of the institution. In that context, the High Court upheld the assessee's plea, holding that the purpose for which it had come into existence was education at the level of colleges and schools. In order to effectuate its objects, the assessee had necessarily to impart education only through the medium of a college consisting of professors and students. Unless a college itself is brought into existence by the professors, a college ....
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....fulfil the requirements under section 10(22). Admittedly, the assessee collected money for the purposes of education; it had no profit motive at all. Therefore, it was entitled to exemption under section 10(22). The decision of the Andhra Pradesh High Court in the case of Governing Body of Rangaraya Medical College [1979] 117 ITR 284 is in point. The governing body of the Rangaraya Medical College was a society registered under the Societies Registration Act to manage the college which had been started by another society, the Medical Educational Society, six years earlier. The college had not been formally transferred to the assessee, as the assessee was awaiting orders from the Government on its application for exemption from payment of stamp duty and registration charges. The assessee had collected compulsory donations of Rs. 12,000 per seat and the bank accounts and deposits were maintained in the name of the society itself and not in the name of the college. The objects of the society were widely worded, to manage the medical college and ancillary institutions and various others. The question was whether the society could claim exemption under section 10(22). The High Court he....
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.... also held that one should also bear in mind the distinction/difference between the corpus, the objects and the powers of the concerned entity. The apex court recorded this finding while dismissing the assessee's appeals against the observations of the Madras High Court; wherein the High Court had ruled that the applicability of section 10(22) should be evaluated or investigated every year and only if it was found that the "institution" existed solely for educational purposes in that relevant year, then even if any profit is resulted; may be from the activities incidental to the purpose of education, such income would also be exempted. The legal position is thus well established on the strength of the above decisions that if a trust or society exists solely for educational purposes and it runs an educational institution, its income will be the income of the educational institution and, therefore, exempted under section 10(22). The fact that the assessee had other objects will not disentitle it to the exemption so long as the activity carried on by it in that assessment year was that of running an educational institution and not for profit. In the instant case, there is no dispute....