M.M.KUMAR, J. - (1.) AT the instance of the applicant -assessee Regional Computer Centre, Chandigarh (for brevity, 'the assessee RCC'), the instant reference has been made under s. 256(1) of the IT Act, 1961 (for brevity, 'the Act'), by the Income -tax Appellant Tribunal, Chandigarh Bench, Chandigarh (for brevity, 'the Tribunal'). The Tribunal has referred the following questions of of the asst. yr. 1984 -85 : "1. Whether in the facts and circumstances of the case, the Tribunal is right to hold that the RCC is not a charitable institute of general public utility, entitled to exemption after asst. yr. 1983 -84, consequent upon simultaneous amendment of ss. 11 and 2(15) of the IT Act, 1961 ? 2. Whether in the facts and circumstances of the case, the activities and object of teaching and imparting training in computer science with no profit motive as per memorandum of association, do not qualify for exemption under s. 10(22) as 'educational institute ?'"
(2.) FACTS in brief may first be noticed. The assessee RCC is a Society registered under the Society Registration Act, 1860. the claim of exemption under ss. 11 and 10(22) of the Act. However, the AO rejected the claim of the assessee RCC for taxable income of the assessee RCC has been assessed at Rs. 19,64,024.
(3.) THE assessee RCC went in appeal before the CIT(A), who examined the provisions of s. 11(4A) r/w 10(22) of the Act under s. 11 of the Act because it was carrying on the activity of a computer centre by providing consultancy, taking of projects and imparting training programme with the object of promoting computer science. Accordingly, it has been charging fee for that purpose. The CIT(A) further held that the benefit of s. 10(22) of the Act is also not available to the assessee RCC, inasmuch as, consultancy was a major activity of the assessee RCC and training programme represented only a small portion of its activities. It was still further held that the computer centre run by the assessee RCC could not be termed as an educational institution. On further appeal preferred by the assessee RCC, the Tribunal while rejecting the ground of exemption under s. 11(4) of the Act observed as under : "7. We have carefully considered the rival submissions as also the facts on record. s. 11(4) of the Act contemplates that for the purposes of s. 11, 'property held under trust' would include a business undertaking so held. The assessee is being treated as a trust because of the business undertaking carried on by it. Otherwise it would not be a trust at all. In our opinion, the assessee is main and predominant object was to promote development and progress of electronic data processing etc. and whether profit motive was there or not, the fact remains that the assessee has been carrying on business and by virtue of s. 11(4) of the Act had to be deemed as a trust. The question to be decided is whether the through the speech the mover of the bill and by the plain reading of s. 11(4A), it is clear to us that the purpose of the insertion of s. 11(4A) was to bring business income of the trusts to tax. Certain exceptions were, however, carved out. The first exception was in respect of public religious trusts engaged in the business of printing and/or publication of books. This obviously does not cover the case of the assessee because the assessee is neither a public religious trust nor is it engaged in the business of printing and/or publication of books. The second limb of s. 11(4A) is regarding institutions wholly for charitable purposes where the work in connection with the business is mainly carried on by the beneficiaries of the institution. While the purpose of the assessee is no doubt charitable in nature, the work in connection with the business is not mainly carried on by the beneficiaries of the institution. We, therefore, hold that whatever may be the position for the earlier years, the position for asst. yr. 1984 -85 has to be determined in the light of the amendment of s. 2(15) and insertion of s. 11(4A) of the Act. We, therefore, uphold the finding of the learned CIT(A) that the assessees income is not exempt under s. 11 of the Act. This ground is, therefore, rejected." ;