PARIPOORNAN, J. - (1.) LEAVE granted in Special LEAVE Petition Nos. 2357-59 of 1988, 3122 of 1987 and 6281 of 1986.
(2.) IN this batch of 18 cases, a common question of law - the scope of Section 10(22) of the INcome-tax Act, 1961 - arises for consideration. The main case is the decision rendered by the Madras High Court in Tax Case No. 114 of 1975, (Additional Commissioner of INcome-tax, Madras v. Aditanar Educational INstitution, (Madras). The said decision is reported in (1979) 118 ITR 235 : (1979 Tax LR 1149). The assessee as well as the Revenue have filed appeals from the said decision, which covered a period of three years 1965-66, 1966-67 and 1967-68. The appeals filed by the assessee are Civil Appeal Nos. 2578-80 of 1979, and the appeals filed by the Revenue are Civil Appeal Nos. 356, 356A and 356B of 1980. Civil Appeal Nos. 41 and 42 of 1988, as also the appeals relating to Special Leave Petition Nos. 2357-59 of 1988 and 3122 of 1987 relate to the same assessee. The assessees in the other cases are different. IN Civil Appeal Nos. 3881-82 of 1984 and 379-80 of 1985, the assessee is Sri Paramakalyani Education Society, Madras. IN Civil Appeal Nos. 8789 of 1995, the assessee is one Sattur Hindu Nadar' Edward School Committee. IN the appeal relating to Special Leave Petition No. 6281 of 1986, the assessee is one Rajagopal Educational Trust. As stated, the common question involved in this batch of 18 cases is the interpretation to be placed on Section 10(22) of the INcome-tax Act, 1961, (hereinafter referred to as "the Act"). The decision of the Madras High Court rendered in T.C. No. 114 of 1975, (Additional commissioner of INcome-tax, Madras v. Aditanar Educational INstitution, Madras), (1979) 118 ITR 235 : (1979 Tax LR 1149), was followed in all the other cases. The following table would show the parties and the relevant appeals and the assessment years : JUDGEMENT_346_3_1997Html1.htm It should be mentioned that in the appeal relating to Special Leave Petition No. 6281 of 1986, (CIT v. Rajagopal Educational Trust), the Madras High Court dismissed the application filed by the Revenue under section 256(2) of the Act. By this judgment, we withdraw the said application to the file of this Court and finally dispose of the same on merits along with the other appeals. We heard counsel. It is agreed before us that the decision rendered in the main appeals will govern the entire batch of cases. The question of law that arises for consideration in this batch of cases is to the following effect : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the income of the assessee is entitled for exemption under section 10(22) of the Income-tax Act, 1961?"
(3.) IT is sufficient to state the minimal facts in the main case, T.C. No. 114 of 1975, (Civil Appeal Nos. 2578-80 of 1979 and 356, 356A and 356B of 1980; the decision reported in (1979) 118 ITR 235 : (1979 Tax LR 1149). The assessee is a society registered under the Societies Registration Act, 1960. ITs objects are to establish, run manage or assist colleges, schools and other educational organisations existing solely for educational purposes. The assessee received donations from a Trust called 'Thanthi Trust' a sum of Rs. 15,71,370.00 during the previous year relevant for the assessment year 1965-66, a sum of Rs. 5,62,432.25 during the previous year relevant for the assessment year 1966-67 and a sum of Rs. 4,78,899.67 during the previous year relevant for the assessment year 1967-68. The assessee filed 'nil' returns for all these years. According to the assessee, its taxable income was 'nil' as it was an educational institution existing solely for educational purposes. The Income-tax Officer closed the assessments stating that there is no taxable income. There was no question of granting exemption under Section 10(22) of the Act since, according to the assessee, it incurred loss for all the three years. The commissioner of Income-tax initiated suo motu proceedings under Section 263 of the Act as, in his opinion, the assessments made by the Income-tax Officer were erroneous and prejudicial to the Revenue. He opined the that the Income-tax Officer failed to consider the question whether the assessee was entitled to exemption in respect of the receipts of voluntary contributions. According to him, the assessee was not entitled to any exemption. An order was passed on 30-3-1972, directing the Income-tax Officer, to make fresh assessments taking into consideration the voluntary contributions received from Thanthi Trust. The order so passed for the assessment year 1965-66, is dated 30-3-1972. For the other two years, the orders were passed on 2-3-1973. IT was stated in the order dated 2-3-1973, that Section 10(22) of the Act will apply only to exempt the income for a college, academy or school. In other words, the exemption under Section 10(22) would apply to educational institutions as such and not anyone who might be financing the running of such an institution. In the appeals filed by the assessee for all the three years, by a common order dated 22-4-1974, the Appellate Tribunal held that the assessee was an institution existing for educational purposes and not for purposes of earning any profit and the assessee itself could be termed as an educational institution within the ambit of Section 10(22) of the Act. IT is thereafter, at the instance of the Revenue, the question of law mentioned hereinabove was referred to the Madras High Court for its decision. Section 10(22) of the Act runs as follows : "10. Incomes not included in total income. - In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included - xxxxxxxxx (22) any income of a University or other educational institution existing solely for educational purposes and not for purposes of profit. xxxxxxxxx (Emphasis supplied) The sole question that arises for consideration is whether the assessee will be taken in by the words 'other educational institution'. On this aspect, the High Court held thus: "....'Any educational institution' would fall within the scope of section 10(22) even though it may have or may not have anything to do with the university. The categories are so different, that the University cannot be the genus, and the 'other educational institutions' the Species thereof. Thus, the college here could come under the 'other educational institutions'. Proceeding further the High Court held that the assessee came into existence for the purposes of establishing, running, managing or assisting colleges, schools and other educational organisations and in pursuance to its objects, the assessee has established a college. It was further held that the medium through which the assessee could effectuate its objects is the college and by employing this medium, the assessee imparts education. The High Court opined that it is not possible to accept the contention of the Revenue that the assessee is only a financing body and does not, on the facts, comes within the scope of 'other educational institution' occurring in Section 10(22). It was found that the sole purpose for which the assessee has come into existence is education at the levels of college and school and that an educational society could be regarded as an educational institution if the society was running an educational institution not for the purpose of profit, but its existence was solely for the purpose of education. One the basis of the above findings, the High Court answered the question referred to it in the affirmative and in favour of the assessee. It is this judgment which is objected to by the assessee as also by the Revenue in the main appeals - Civil Appeal Nos. 2578-80 of 1979 and 356, 356A and 356B of 1980. ;