Decided on December 23,1982



K.S. Viswanathan, Accountant Member - (1.) THIS is an appeal by the department against the findings of the Commissioner (Appeals) that the assessee-institution is exempt under Section 10(22) of the Income-tax Act, 1961 ('the Act').
(2.) The deed of trust was executed by the Academy of General Education, Manipal, a registered body for the purpose of spread of education, by which, the Society had decided to start a college at Karkala in South Kanara District. The college was called Sri Bhuvanendra College. The trust deed is dated 18-8-1960. As per clause 2 of the trust deed, the settlor, i.e., the Academy of General Education ('Academy' for short) transferred to the trustees library books of value of Rs. 2,000 to be held by the trustees for the benefit and use of the trust. Clause 3 stated that the trust would be irrevocable so long as the object for which the college was founded exists. The trust deed does not give the names of the trustees but clause 4 of the deed states that the trust will be managed by the Board of Trustees and the names of the first 17 persons who would be in the Board of Trustees are given in that clause. There is no separate object clause for which the trust is created except the preamble which makes it clear that the object was to establish Arts, Science and Commerce College at Karkala. The rest of the clauses in the trust deed deal with the powers of the trustees in the administration of the college. In the return filed by the trust for the assessment year 1977-78, the trust claimed exemption under Section 11 of the Act. It also claimed that the donations of Rs. 1,85,209 received by the trust would not form part of the income for the purpose of Section 11. The ITO did not accept the assessee's claim. He made out a draft assessment order in which he had held that the assessee was fully taxable.
(3.) WHEN the draft assessment order was forwarded to the IAC, the assessee made out a new claim before him that the income of the trust would the exempt under Section 10(22). The IAC, however, did not accept this claim. According to him, the exemption under Section 10(22) is available only for the educational institutions and since the assessee was a trust which was running an educational institution it cannot claim exemption.;

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