Aditanar Educational Institution vs Addl.Commissioner of Income Tax (1997) 3 SCC 346

Dismissing the appeal filled by the Revenue and the cross appeal of the assessee, this Court HELD : 1.1. An educational society or Trust or other similar body running an educational institution solely for educational purposes and not for purposes of profits could be regarded as `other educational institution’ coming within Section 10(22) of the Act. [954-F] Katra Education Society v. Income Tax Officer, 111 ITR 420 (All); CIT v. Doon Foundation, 154 ITR 208 (Cal) and Agarwal Shiksha Samiti Trust v. CIT, 168 ITR 751 (Raj), approved. 1.2. On facts, the assessee society comes within the scope of `other educational institution’ under section 10(22) of the Act and was not only a financing body. The sole purpose of the existence of the Assessee society was to impart education at the levels of schools and colleges. The object was accomplished by establishing, running, managing or assisting colleges, schools or other educational institutions solely for educational purposes and in that regard, raise or collect funds, donations, gifts etc. [953-F] 2. As regard the assessee’s appeals, the High Court rightly observed that applicability of Section 10(22) is to be evaluated or investigated in each year to ascertain whether the institution existed during the relevant year solely for educational purposes and not for purposes of profits. In the event of profits arising, the income would be exempt as it was incidental to the main purpose of education. [955-F] Governing Body of Rangaraya Medical College v. ITO, 117 ITR 284 (AP) and Secondary Board of Education v. ITO, 86 ITR 408 (Orissa), ap-proved.

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 2578-80 of 1979 Etc.

Subject-Income Tax Act, 1961-Section 10(22)-

Interpretation and Scope of-Assessee, a Society established to run, manage or assist schools, colleges or other educational institutions solely for educational purposes and in that regard to raise or collect funds, donations etc.-Held, is an educational in- stitution within the ambit of the phrase-Entitlement of such an institution to exemption has to be evaluated annually. The assessee, (in appeal No. 2578-80/79) a society registered under the Societies Registration Act 1960 with objects to establish, run, manage or assist colleges, schools and other educational organisations existing solely for educational purposes, received certain sums of money as dona- tions during the previous years relevant for the assessment year 1965-66 to 1976-68. For these years, the assessee filed `nil’ returns. The Income Tax Officer accepted the stand of the assessee that for all the three years in question, the taxable income was `nil’ as the assessee was an educational institution. The Commissioner of Income Tax however set aside the order of the Income Tax Officer and directed him to make fresh assessments after taking into consideration the voluntary contributions received. The orders further stated that the exemption under section 10(22) would apply only to educational institutions as such and not to anyone who might be financing such an institution. On appeal by the assessee, the Income Tax Appellate Tribunal held that the assessee was an educational institution within the ambit of section 10(22) of the Act existing solely for educational purposes and not for earning profits. On further appeal by the assessee, the High Court upholding that view of the Tribunal also observed that the applicability of Section 10(22) should be evaluated or investigated every year and only if it is found that the `institution’ exists for educational purposes in the relevant year and even if any profit results, which is only incidental to the purpose of education, the income would be exempt. Aggrieved, the Revenue as also the assessee filed the appeals. The contention of the Revenue was that the assessee was not by itself an educational institution and thereby not eligible for exemption under Section 10(22) of the Act.