Decided on November 27,2012



BARIN GHOSH, J. - (1.) CHAPTER III of the Income Tax Act, 1961 (hereinafter referred to as "the Act") specifies those incomes, which do not form part of the total income. Section 10 of the Act is included in Chapter III thereof. Section 10 (23C)(iiiad) of the Act provides as follows : - "any income received by any person on behalf of - any university or other educational institution existing solely for educational purposes and not for purposes of profit if the aggregate annual receipts of such university or educational institution do not exceed the amount of annual receipts as may be prescribed."
(2.) THE amount of annual receipt has been prescribed at Rs.1 crore. During the relevant year, the assessee received less than Rs.1 crore. To that, there is no dispute. The assessee held out that it being an educational institution and is existing solely for educational purposes and not for the purposes of profit, the income it has made out of the receipts will not form part of its total income. The Assessing Officer, having noted the expression "any university or other educational institution", applied the principle of ejusdem2 generis in order to give meaning to the expression "other educational institution" without any just reason and without appreciating the true principle of ejusdem generis. However, the Assessing Officer did not conclude the matter thus and expressed only a doubt as to whether the assessee constituted initially to run a school with nursery and kindergarten class will qualify as such educational institution. The Assessing Officer, thereafter, culled out 12 aims and objects from the memorandum of association of the assessee society. Those are as follows : - "1 - To spread education in rural areas. 2 - To associate learned people with the society. 3 - To put all our manpower and knowhow into spread of Audit education and propagate night schools. 4 - To gain meetings and seminars to enlighten people about afforestation ecology and destruction of our natural resources. 5 - To spread education to the weaker sections of the society. 6 - To spread job oriented and more meaningful education. 7 - Special efforts to make the SC/ST students join the main stream. 8 - To make every student learn the national language/culture/heritage of our proud nation so that they don't forget the struggle and the sacrifices of our great leaders. 9 - To bring in latest techniques in the education so that the child does not consider education a burden. 10 - To promote extracurricular activities and teach the student local art and crafts. 11 - Special stress towards children of ex -servicemen, widows and handicaps, for whom education is a burden. 12 - Enlighten through visual and black board ways and means to protect themselves and from contagious and other diseases." The Assessing Officer observed that the said objects of the society make it clear that the society has been established to earn profit as excess of receipt over expenditure will be utilized for religious and charitable purposes. Only a prudent person as that of the Assessing Officer could come to that conclusion. The prudence 3 that he had used, however, is not acceptable in the prudent world as is known in law. A look at each of those clauses will show that to fulfill any of them, the assessee will undertake only educational activity and accordingly, the conclusion would be that the whole purpose of establishment of the assessee was to engage it solely for educational purposes. It will further be seen from those objects that the assessee was not established for the purpose of profit. None of the said 12 objects would show that the activities contemplated therein suggested even a hidden intent of making profit. At the same time, those objects will also not show that while carrying out those objects, the assessee will be discharging any religious or charitable activity. The conclusion, therefore, would be that the object of establishment of the assessee was solely for educational purposes and not for the purposes of profit. However, object of establishing the assessee was of no consequence in the instant case. What the Assessing Officer was required to see was, whether the assessee was existing solely for educational purpose, inasmuch as, the statute imposes such obligation on the part of the Assessing Officer and not an obligation to determine the objects, for which the assessee was originally established. The Assessing Officer has merely recorded that the receipts of the assessee were more than its expenditure. He did not record a finding that the assessee used or is using any part of the excess of receipt over expenditure for any other purpose. The Assessing Officer held that the assessee is not existing solely for educational purposes, but, at the same time, it clearly and in no uncertain terms recorded a finding that the assessee is running a school with Nursery and Kindergarten classes. No other existence of the assessee was noticed. Therefore, the conclusion would be that the assessee was existing for the purpose of running the said school with Nursery with Kindergarten classes and, accordingly, was existing solely for educational purposes and not for purposes of profit. If the existence of the assessee was not for the purposes of profit, but solely for educational purpose, then 4 the receipts of the assessee, if the same did not exceed Rs.1 crore per annum, will be outside the purview of total income as is the mandate contained in Section 10 (23C)(iiiad) of the Act. That having not been held by the Assessing Officer was reversed by the Commissioner of Appeals and the same having been affirmed by the Tribunal, there is no scope of interference.
(3.) THE appeal fails and the same is dismissed.;

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