Income Tax Appellate Tribunal - Allahabad
Maharishi Institute Of Creative ... vs Assistant Commissioner Of Income ... on 18 December, 1996
Equivalent citations: 1997 62 ITD 169 All
1. The appeal for asst. yr. 1991-92 has been filed by the Department, whereas the appeal for asst. yr. 1993-94 has been filed by the assessee. The issue is the same and, therefore, the two appeals are being disposed of by a common order.
2. For asst. yr. 1991-92, the assessee filed a return as an AOP/trust showing nil income. It was claimed that the income was exempt under s. 10(22) of the Act as an educational institution existing solely for educational purposes. An auditors' report under s. 12A(b) of the Act was enclosed along with the income and expenditure account and balance sheet.
3. In the course of the hearing, a copy of memorandum of association was filed according to which the objects of the society were as under :
"(i) To propagate and apply the science of yoga through the science of creative intelligence and its practical aspect the transcendental meditation (also abbreviated as TM) and TM-sidhi programme as propounded by his Holiness Maharishi Mahesh Yogi.
(ii) To fulfil the goals of the world plan as formulated in 1972 by His Holiness Maharishi Mahesh Yogi :
(a) To develop the full potential of the individual.
(b) To realise the highest ideal of education.
(c) To solve the problems of crime, drug abuse and all behaviour that brings unhappiness to the family of man.
(d) To maximise the intelligent use of the environment.
(e) To bring fulfilment to the economic and other aspiration of the individual and society.
(f) To achieve the spiritual goals of mankind in this generation.
(iii) To open training centres throughout India in accordance with the world plan formulated by His Holiness Maharishi Mahesh Yogi.
(iv) To get the science of creative intelligence made a subject of teaching and examination in all the different colleges.
(v) To take steps for the establishment in each university in India a separate faculty for the teaching of the science of creative intelligence.
(vi) To buy, build, lease, rent or otherwise acquire centres for training and practice of the programmes developed to fulfil the objects of the society.
(vii) To undertake and promote the training of various educational programmes and other skills.
(viii) To undertake and promote any activity that will enable the participants of the society's programmes to be self-sufficient or otherwise raise the fund for the society including agriculture, horticulture, dairy farming, bee farming, cottage and small scale industries, khadi udyog, architectural and constructional activities, etc. with the sole motive bringing fulfilment to the goals of the society and without any profit motive.
(ix) To accept, receive, give and take voluntary donations, grants, etc. from individuals, organisations and private and government bodies in India and abroad for the furtherance of the objects of the society."
3.1 After going through the objects, the AO took a view that the basic purpose of the society was to propagate the teachings of His Holiness Maharishi Mahesh Yogi, who was a religious Guru. He examined the other clauses also with reference to the following cases :
1. Rao Bahadur A. D. K. Dharmaraja Education Charity Trust vs. CIT (1990) 182 ITR 80 (Mad);
2. CIT vs. Radhaswami Satsangh Sabha (1981) 132 ITR 647 (All) and
3. Addl. CIT vs. Aditanar Educational Institution (1979) 118 ITR 235 (Mad).
4. Thereafter, he came to the conclusion that the exemption claimed by the assessee under s. 10(22) of the Act could not be given for the following reasons :
(i) The assessee was not existing solely for educational purposes, but for purpose of propagating religious faith and belief of Maharishi Mahesh Yogi.
(ii) Huge, annual payment by way of lease rent to Maharishi Institute of Creative Intelligence, New Delhi together with the fact that heavy amounts of surplus were generated from year to year showed that the society was siphoning out funds. The claim of existing not for profit was not acceptable.
The assessee-society had paid annual rent of building amounting to Rs. 3 lakhs to Maharishi Institute of Creative Intelligence, New Delhi.
(iii) Income from interest during the year was not relatable to the profit of running the institution.
There was interest on fixed deposit of Rs. 38,336 during the year.
(iv) Alternative possibility of application of s. 11 r/w ss. 12 and 13 was not acceptable since the objectives were not existing wholly for charitable purposes.
Further, there was no registration under s. 12A of the Act.
5. Thereafter, the AO held that the income was chargeable under s. 28 of the Act as income from business/profession. The surplus in the income and expenditure account of Rs. 9,52,237 was taken and after some small adjustments, the total income was computed at Rs. 9,56,260.
16. The assessee filed an appeal before the CIT(A). In the statement of facts, it was mentioned that the assessee society had established an educational institution Maharishi Vidya Mandir (Public School) Sitapur Road, Lucknow, which had a distinct personality and existence separate from the parent body i.e. the society. Separate accounts for the two entities were wholly justified wherein those for the school would be exclusively with reference of the educational activities entitled for exemption under s. 10(22) of the Act, while that of the parent body showing other income, which will have benefit of exemption under ss. 11 and 12 of the Act. Reliance was placed on Birla Vidhya Trust vs. CIT (1982) 136 ITR 445 (Cal).
7. In the grounds of appeal, it was stated that the memorandum of association clearly indicated that it had educational objects besides others. The society was running Maharishi Vidya Mandir (Public School) through a separately constituted managing committee since 1984. No other activity had been carried out by the assessee besides running the School during the year. The school was affiliated with Central Board of Secondary Education, Delhi and its syllabus was approved by it.
8. It is further denied in the grounds of appeal that the school was running for profit motive. The lease rent has been paid taking into consideration the building made available for running the school and huge investment made therein. The surplus in the income and expenditure account was utilised in the expansion of educational facilities. The surplus had not been diverted to any person or individual.
9. It was further denied that the society was siphoning out the funds to the parent society. The Maharishi Institute of Creative Intelligence, New Delhi was not a parent society but a separate entity. No funds had been transferred to it. The surplus was utilised for expansion of educational facilities and no person or individual was entitled to any portion of it. Reliance was placed on Governing Body of Rangaraya Medical College vs. ITO (1979) 117 ITR 284 (AP).
10. It was further submitted that the income from interest was relatable to the profit for running the institution.
11. In the end in Ground No. 6, it was stated that the AO had erred in holding that s. 11 r/w ss. 12 and 13 of the Act was not applicable.
12. In the course of hearing before the CIT(A), some further submissions were made. It was stated that although during the year the assessee did not carry out transcendental meditation (TM), yet TM itself was an education. Reliance was placed on a decision of A-Bench, Delhi of the Tribunal in ITA No. 983 (Del)/1985 for asst. yr. 1981-82 in the case of ITO vs. S. R. M. Foundation of India, New Delhi. It was next stated that the decision in the case of CIT vs. Radhaswami Satsang Sabha (supra) was not applicable since the facts were distinguishable. The decision of the Hon'ble Supreme Court in the case of Sole Trustees of Loka Shikshana Trust vs. CIT (1975) 101 ITR 234 (SC) was also stated to be distinguishable on fact. In the end, it was claimed that the educational institution existed solely for educational purposes without profit motive during the year under consideration and, therefore, exemption under s. 10(22) should be given.
13. The CIT(A) took into consideration the following decisions :
1. Birla Vidhya Vihar Trust vs. CIT (supra)
2. Addl. CIT vs. Aditanar Educational Institution (supra)
4. CIT vs. Devi Educational Institution (1984) 18 Taxman 221 (Mad).
14. Thereafter, the CIT(A) came to the conclusion that the assessee-society qualified for exemption under s. 10(22) of the Act for the following reasons :
(i) Besides other objects, it has an object to undertake and promote the training of various educational programmes and other such kinds.
(ii) In the year under consideration it existed solely for educational purposes and not for purposes of profit, and
(iii) The surplus generated through its educational activities was not for profit motive as the same was to be used for the expansion of the educational facility.
15. The CIT(A) further held that the funds were not being siphoned out, but merely rent was paid. T.M. itself was in the nature of education, although in this year the assessee did not propagate or carry out TM activities. The interest income from fixed deposits also related to educational activity because the fixed deposits had come out of educational activities in the past and were made to ensure repayment of liabilities. The society existed solely for educational purposes and not for purposes of profit in this year. He, therefore, held that the income was exempt under s. 10(22) of the Act.
16. Having held as above, he further observed that the contentions in all other grounds were not being considered as they became infructuous. Thus, he did not give any finding whether the income was exempt under s. 11 r/w ss. 12 and 13 of the Act.
17. The Department is in appeal before us for this year and it is stated that the society did not exist solely for educational purposes and had a profit motive, due to which exemption under s. 10(22) cannot be allowed.
18. For asst. yr. 1993-94, a similar claim for exemption of income was made under s. 10(22) of the Act by the assessee. Both sides agreed before us that the reasons for rejecting the claim by the AO were similar. We may, however, note that he further relied on the decision of the Supreme Court in the case of Loka Shikshana Trust (Sole Trustee) vs. CIT (supra), where it was held that the sense in which the word "education" has been used in s. 2(15) is the systematic instruction, schooling and training given to the young in preparation for the work of life. Finally he adopted the surplus of Rs. 16,94,900 in the income and expenditure account as the income of the assessee. The income was taxed at maximum marginal rate under s. 167B of the Act.
19. This year, the CIT(A) confirmed the order of the AO. He went through the objects given in the memorandum of association and observed that the society had not been explicitly authorised by any of its clauses to open and run schools. Thereafter, he examined the objects with a view to ascertain whether they fell within the meaning of the term "education" as given in s. 10(22) of the Act. For this purpose, he relied on the decision of the Supreme Court in Loka Shikshana Trust (Sole Trustee) vs. CIT (supra), where the meaning of the terms "education" in the context of s. 2(15) of the Act had been explained. The sense in which the word "education" has been used in s. 2(15) is the systematic instruction, schooling or training given to the young in preparation for the work of life. The word "education" has not been used in that wide and extended sense according to which every acquisition of further knowledge constitutes education. It connotes the process of "training and developing the knowledge, skill, mind and character of students by normal schooling." The CIT(A) noted that the Rajasthan High Court had held in CIT vs. Maharaja Sawai Man Singhji Musuem Trust (1988) 169 ITR 379 (Raj) that the pronouncements were wise enough to cover the case of educational institution for the purpose of s. 10(22) of the Act. Following these decisions, the CIT(A) found that none of the objects of the assessee-society fell within the meaning of the term "education." The school, Maharishi Vidya Mandir was one of its units and the financial affairs were managed by the same set of managers.
20. The CIT(A) further took a view that to be entitled for benefit under s. 10(22) of the Act, the educational institution must continue to live for all time to come for the sole and exclusive object of "educational purpose." The fact that school money could be used for non-educational purposes showed that the society was not existing solely for purposes of education. He also took an adverse view of the fact that the society had interest income, donation income and income from running of a bus.
21. Finally, the CIT(A) held that the school run by the appellant-society cannot be said to be existing solely for the purposes of education. In other words, the condition laid down in s. 10(22) remains unfulfilled. He upheld the levy of tax on the surplus of income over expenditure.
22. The assessee is in appeal before us for this year. One set of grounds of appeal are directed against the CIT(A)'s not considering exemption under s. 11 of the Act, although ground No. 4 before him related to this alternative contention. The second set of grounds relate to exemption under s. 10(22) of the Act.
23. Ground No. 6 relating to recognition of the assessee as a registered society under the Societies Registration Act, 1860 was not pressed before us. Ground No. 13 regarding initiation of proceedings under s. 271(1)(c) was also not pressed. Ground No. 14 regarding tax calculations was also not pressed. These grounds are accordingly rejected.
24. On similar facts, exemption under s. 10(22) as well as under s. 11 of the Act has been denied in the assessment orders for asst. yrs. 1991-92 and 1993-94. The CIT(A) has allowed exemption in asst. yr. 1991-92, but confirmed denial of exemption in asst. yr. 1993-94 under s. 10(22) of the Act. No finding has been given by the CIT(A) in respect of exemption under s. 11 for any of the two years.
25. The learned Departmental Representative relied on the reasoning in the order of the CIT(A) for asst. yr. 1993-94 in respect of both the years before us. Our attention was also invited to the income and expenditure account, which showed surplus of Rs. 9,52,237 in asst. yr. 1991-92 and Rs. 16,94,895 in asst. yr. 1993-94. He submitted that the huge surplus was a clear indicator of profit motive. He further emphasised that several objects of the society were for non-educational purposes including that for TM, which could not be treated as education in view of the judgment of the Hon'ble Supreme Court in Loka Shikshana Trust (Sole Trustee) (supra). Reiterating the reasons given by the CIT(A) in asst. yr. 1993-94, he submitted that exemption under s. 10(22) of the Act could not be given in any of the two years.
26. On the other hand, the learned counsel for the assessee relied on the reasoning given by the CIT(A) in asst. yr. 1991-92. He emphasised that the only activity of the society in these two years, was running of Maharishi Vidya Mandir (Public School) through a separately constituted managing committee. The school was affiliated with Central Board of Secondary Education, Delhi and, therefore, there could be no doubt that this purpose was solely for education.
27. It was further stated that in fact, right from inception, the only activity of the assessee was running the above school. Our attention was also invited to a copy of assessment order for asst. yr. 1983-84 when the claim for exemption was accepted and the income was assessed at nil unders. 143(3) of the Act. Similarly, exemption had been allowed in the assessment orders for asst. yrs. 1984-85 and 1985-86. Copies of the assessment orders were available in the paper-book.
28. The learned counsel for the assessee made a statement at the Bar that even in subsequent years there was no other activity apart from running of the above school. In fact, he stated that the memorandum of association had been amended on 24th September, 1996 to confine the activities to education and a copy of the same was available with him. The Bench asked the learned counsel to file a copy as additional evidence under r. 29 of the Appellate Tribunal Rules, 1963. This evidence was considered relevant for determining the true nature of the activities of the society. A copy of the same was made available to the learned Departmental Representative also. It was seen that the aims and objects were revised from 24th September, 1996 as follows :
1. To import the education and thereby to realise the highest ideal of education in this generation.
2. To set up, establish, run and manage schools/institutions on Central Board of Secondary Education (CBSE) pattern or any other pattern approved by State/Central Government or any other authority for promoting the education.
3. To set up, establish run and manage educational institutions, to provide education through vocational course, correspondence course, audio-visual system in various fields useful for the community at large.
4. To acquire, set up, establish, own, conduct, subsidise, manage and run schools, public schools, colleges.
5. To impart the education/knowledge in the field of transcendental meditation and science of creative intelligence.
6. To undertake, carry on, promote and impart education.
7. To set up, establish, manage and run educational centres and to provide teaching for the mental and physical development of common man.
8. To provide moral and ethical education in the schools, universities and other educational institutions.
9. To do or perform any other act which may be incidental or conductive to the attainment of any of the objects of the society.
29. The learned counsel thereafter stated that it was a fact that the surplus of the income and expenditure account had been actually utilised for expansion of school activities. Our attention was invited to the income and expenditure account for asst. yr. 1991-92, where the surplus was Rs. 9,52,237. The schedule of fixed assets showed that additions to fixed assets during the year were Rs. 5,38,458, which consisted primarily of Rs. 2,00,000 to furniture and fixture, Rs. 2,18,000 to laboratory and school equipment, and computer Rs. 1 lac. It was stated that all these were for the school. The remaining surplus was lying in the bank. The balance sheet showed cash and bank balance of Rs. 13,19,985 as against last year's figure of Rs. 6,00,832. There were no loans and advances to any party.
30. Similarly, the surplus for asst. yr. 1993-94 was Rs. 16,94,895 and additions to fixed assets during the year were Rs. 10,48,238. These consisted mainly of Furniture and fixtures Rs. 2,24,032, computer Rs. 2,47,250, building under construction Rs. 3,47,395. All the additions to fixed assets were for the school. Construction had been started for the school's own building in this year which would enable the assessee to have its own premises and save the lease rent being paid for hired premises. It was further submitted that the remaining surplus had gone to the bank, the balance this year being Rs. 26,15,570 as against Rs. 20,99,830 last year. Here again, the balance sheet did not show any loans and advances to any party.
31. On the basis of the above, the learned counsel for the assessee reiterated that there was no profit motive of the school and the surplus was being used for expansion of the school, and no part of it went to any individual. This position was stated to have continued till 24th September, 1996 when the objects itself became solely for educational purposes. Thus, there was no possibility of the surplus being utilised for any other purposes even in future.
32. The learned counsel thereafter stated that in both years there were Miscellaneous receipts, which were entirely from school activities. The CIT(A) had erroneously come to the conclusion that the assessee was running a bus service as if it was for outsiders. The buses were only for school children and receipts from buses were the receipts for bus charges from school children. This was a part of school activity.
33. Our attention was also invited that income from interest was Rs. 38,336 in asst. yr. 1991-92 and Rs. 1,66,317 in asst. yr. 1993-94. It was stated that surplus funds were available in bank for a temporary period till they were utilised for expansion of school facilities.
It was only in such circumstances that the monies were put in fixed deposit. Thus, the interest income was incidental to school activities and could not be segregated. The activity continued to be solely for educational purposes even with the interest income.
34. It was next submitted that the CIT(A) had referred to income from donation in asst. yr. 1993-94. However, there was no such donation income in that year. Our attention was invited to the income and expenditure account. He, however, stated very fairly that there was a small income from donation of Rs. 7,000 only in asst. yr. 1991-92 out of total receipts of Rs. 40,09,709. It was a very petty amount and incidental to school activity. It had been utilised for school activity. The activity continued to be solely for educational purposes even with this small donation income.
35. For the above, reasons, it was submitted that the assessee was entitled to exemption under s. 10(22) of the Act for both the years.
36. Alternatively and without prejudice, it was submitted that the assessee was entitled to exemption under s. 11 r/w ss. 12 and 13 of the Act as income from property held for charitable or religious purposes. The claim had not been adjudicated upon by the CIT(A) in either of the two years. It was, therefore, submitted that either a finding should be given by the Tribunal on this alternative submission or the matter should be restored to the file of the CIT(A) for a decision.
37. In reply, the learned Departmental Representative stated that even after the amendment to the memorandum of association on 24th September, 1996, object No. 5 included TM, which was not education according to the ratio of the decision of the Supreme Court in the case of Sole Trustee Loka Shikshana Trust (supra).
38. The learned counsel for the assessee, however, invited our attention to the decision of the A-Bench of the Tribunal, Delhi in the case of S.R.M. Foundation of India for asst. yr. 1981-82 in ITA No. 983(Del)/1985, dt. 14th April, 1987. The Tribunal had taken into account, the decision of the Supreme Court in the case of Sole Trustee Loka Shikshana Trust (supra) and following the ratio came to the conclusion that transcendental meditation (TM) and science of creative intelligence (SCI) amounted to medical education. In coming to this conclusion, a detailed analysis of the procedure, method and effects of the above had been taken into consideration as expressed by the Supreme Court in Hira Lal vs. State of Bihar AIR 1977 SC 2236 at 2243. It was described as a science having a therapeutic effect on the human body and mind. The literature on the subject pointed out that TM was not religion, but was like physics applied to human consciousness. It was held by the Tribunal that the test of "systematic schooling" laid down by the Supreme Court in the case of Sole Trustee Loka Shikshana Trust was satisfied by the assessee. In view of the above, the learned counsel submitted that from 24th September, 1996 even the objects of the society were solely for educational purposes.
39. We have considered the rival submissions carefully. It is seen that the relevant facts are scattered over the assessment order, grounds of appeal before the CIT(A), order of the CIT(A) and submissions before us. We will, therefore, first place together the relevant facts in brief in order to provide continuity of thought. The assessee is a society registered under the Societies Registration Act 1960. It has been assessed as 'AOP/trust'. It was called 'Maharishi Institute of Creative Intelligence, Uttar Pradesh'. Admittedly, some of the objects given in the memorandum of association were not for educational purposes. However, in pursuance of its objects, particularly object No. 7, a separate management committee was formed and Maharishi Vidya Mandir (Public School) was started in 1984. The school is affiliated with Central Board of Secondary Education, Delhi, and its syllabus has been approved by it. The society did not carry on any other activity apart from the running the above School. The memorandum of association was revised on 24th September, 1996 to confine the activities to education, including transcendental meditation and science of creative intelligence, which are claimed to be education.
40. The income and expenditure accounts of the two years before us show income from school fees, Miscellaneous receipts, interest on FDs. and a small donation income. All are stated to be from school activities or incidental to it. The total receipts were Rs. 40,09,709 in asst. yr. 1991-92 and Rs. 68,98,829 in asst. yr. 1993-94, the break-up of which is given below :
Asst. yr. 1991-92 Rs. By fee 28,80,179.00 By Miscellaneous receipts. 10,84,193.09 By Donation received 7,000.00 By interest earned 38,336.95 -------------- Total : 40,09,709.04 -------------- Asst. yr. 1993-94 Rs. By fee received 59,20,357.00 By Miscellaneous receipts 8,12,155.10 By interest earned 1,66,317.00 -------------- Total : 68,98,829.10 --------------
41. The expenses include lease rent of hired premises of the school of Rs. 3 lacs per year to Maharishi Institute of Creative Intelligence, Delhi, which is a separate society. The surplus was Rs. 9,52,237 for asst. yr. 1991-92 and Rs. 16,94,895 for asst. yr. 1993-94. Almost the entire surplus has gone to increase in fixed assets for the school and increase in bank balances. There are no loans and advances in the balance sheet. Building construction of the school commenced in asst. yr. 1993-94 and Rs. 3,47,395 was spent on the same during that year.
42. It will also be useful at this stage to note the provisions of s. 10(22) of the Act :
"Sec. 10. 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 -
(22) any income of a university or other educational institution, existing solely for educational purposes and not for purposes of profit.
43. It is necessary to keep in mind the distinction between the entire assessee-society, which had for its objects some non-educational purposes also and the managing committee of Maharishi Vidya Mandir (Public School). The School existed solely for educational purposes. It was running classes, imparting systematic schooling and the syllabus was recognised by the Central Board of Secondary Education, Delhi. At no stage whatsoever has the Department pointed out any non-educational purpose as far as the school is concerned.
44. The question arises whether exemption under s. 10(22) of the Act can be denied to the income from school, which was solely for educational purposes, because the assessee-society had some non-educational purposes also. The only direct decision on this aspect placed before us is the decision of the Calcutta High Court in Birla Vidhya Vihar Trust vs. CIT (supra). It was held therein that the trust which owned the educational institution may have other charitable though not educational purposes but if taking all the relevant factors the educational institution generating the income was existing for only educational purposes, then the assessee was entitled to exemption under s. 10(22) of the Act. The material facts are similar in this case. We also note that the assessee-society had no other activity apart from running the school. We would respectfully follow the above decision.
45. In this context, it should also be noted that the considerations for grant of exemption under s. 11 of the Act are different. Under s. 11(1) (a) of the Act exemption is available to income derived from property "held under trust wholly for charitable or religious purposes." Thus, even if the trust is partly for non-charitable and non religious purposes, exemption will be denied. Such is not the case under s. 10(22) of the Act. It is not the entire income of the trust, which should be solely for educational purposes, but that part, which is solely for educational purposes, is entitled for exemption. Thus is the ratio of the decision in Birla Vidhya Vihar Trust vs. CIT (supra). The distinction was not kept in mind by the AO and, therefore, he relied on the decision in CIT vs. Radhaswami Satsang, (supra), which has been rendered in relation to religious institution underss. 11 and 12 of the Act.
46. The AO has also referred to the decision in Rao Bahadur A. K. D. Dharmaraja Education Charitable Trust vs. CIT (supra). In that case, the assessee was a public charitable trust and was receiving income from running theatre, leasing, etc. Only a small portion of the income was spent for educational purposes and part of the income was spent on religious purposes. On the facts of the case, it was noticed that factually only a very small amount had been spent for educational purposes leaving a huge surplus for other charitable purposes. It was held that it could not be said that the institution was solely for educational purposes and, thus, entitled to exemption under s. 10(22) of the Act. However, the facts in the present case are distinguishable. The assessee-society did not carry out any of the non-educational purposes. The only activity was solely for educational purposes. No amount was spent for religious or non-educational purpose. The surplus has been shown to have been utilised for expansion of school activity. We have noticed that the surplus went towards procurement of fixed assets for the school and building construction was also started. The remaining surplus was kept available in bank and not diverted as loans and advances. The ratio of the case relied upon cannot be applied to the materially different facts of the present case.
47. We now come to the Department's objection in relation to income from running of bus and interest income. It has been laid down in Addl. CIT vs. Aditanar Educational Institution (supra) that income of a society running a college would not be exempt under s. 10(22) of the Act. Only the income which "has a direct relation or is incidental to the running of the institution as such, would qualify for exemption." Thus, the test to be applied is whether the income from running of buses and interest income fulfil the above conditions. As far as running of buses is concerned, there is no material to show that they were being used for outsiders. In fact, there is no such allegation in the assessment orders either. The CIT(A) has taken this objection without going into the matter in the asst. yr. 1993-94. We are satisfied on the basis of material before us and the submissions that the buses were only school buses and the receipts from the buses were fees from the school children. We, therefore, held that the above test is satisfied. Regarding interest income we have noticed from the balance sheets that the surplus was being utilised in a substantial manner for increase in fixed assets of the school. The school's own building construction started in asst. yr. 1993-94, the expenditure in that year being about Rs. 3.47 lacs. Considering that lease rent for the hired building was Rs. 3 lacs per year, it is evident that a fairly large sum would be required for the school building and would have to be built up gradually from yearly surplus. Thus, putting of some surplus money in fixed deposit for the interim period would also constitute an incidental activity to the school and interest income would also be incidental to running of the school. It also fulfils the conditions. Respectfully following the above decision, we hold that both these incomes would be treated at part with income from educational purposes for the purpose ofs. 10(22) of the Act. Similar is the position with regard to petty donation of Rs. 7,000 which was evidently for school activities and has been utilised as such. We, therefore, hold similarly for this income also.
48. The CIT(A) has relied upon the decision of the Supreme Court in the case of Sole Trustee Loka Shikshana Trust vs. CIT (supra) in coming to the conclusion that the objects of the society are not educational and, therefore, it does not exist solely for educational purposes. It is an admitted fact that some of the objects of the society were not for educational purposes. We have already noted this. However, the activity of running Maharishi Vidya Mandir (Public School) under a separate managing committee, authorised, inter alia by cl. (vii) of the objects, was undoubtedly solely for educational purposes. We have drawn out this distinction earlier also. This distinction was not kept in view by the CIT(A) either. The decision of the Supreme Court relied upon by him, along with the decision of the Rajasthan High Court in (1987) 169 ITR 379 (Raj) (supra) does not, therefore, help us in coming to a proper conclusion, the facts of the case being materially different.
49. We have also to examine the allegation of the AO in asst. yr. 1991-92 that the assessee was siphoning out its funds to its parent society by paying huge lease rent. We do not find merit in this allegation, and it has been rightly rejected by the CIT(A) in that year. The assessee was paying lease rent of Rs. 3 lacs annually to a separate society, not its parent society. The lease rent was being paid for hire charges of the school building. There is no material before us to show that it was excessive. Even, the AO has allowed full deduction for the same, both in asst. yrs. 1991-92 and 1993-94. We, therefore, reject the contention of the learned Departmental Representative based on the above allegation.
50. We now come to the second part of s. 10(22) of the Act, and will examine whether the school existed not only solely for educational purposes, but also "not for purposes of profit." The Department has relied on large surplus in the income and expenditure account for both the years and possibility of use for non-educational purposes. It was held in Birla Vidhya Vihar Trust vs. CIT (supra) that the expression existing in s. 10(22) must not be judged with reference to the facts of the relevant year, though the facts of the relevant year would be very material. All the factors will have to be taken into consideration. Respectfully following the guideline, we find that in fact, the surplus was used for expansion of school facilities as we have already noticed above in detail. There were no loans and advances. After the amendment to the memorandum of association on 24th September, 1996, the purposes were solely educational, which included TM and SCI. These have been held to be educational purposes by the Tribunal as we have already noticed above. Thus, looking to the entirety of facts and circumstances, we are satisfied that the educational institution did not exist for purposes of profit. The second condition is also satisfied.
51. For the reasons given above, we hold that the assessee's income was entitled to exemption under s. 10(22) of the Act for asst. yrs. 1991-92 and 1993-94. This disposes of the Departmental appeal for asst. yr. 1991-92, which is dismissed.
52. This also disposes of the assessee's appeal for asst. yr. 1993-94, which is allowed to the above extent. The remaining grounds in the assessee's appeal regarding exemption under ss. 11 and 12need not be disposed of at this stage in view of the above decision. They are, therefore, filed and for statistical purposes, treated as dismissed. Some grounds have been dismissed as not pressed being ground Nos. 6, 13 and 14. The assessee's appeal is, therefore, partly allowed.
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