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Director Of Income-Tax (Exemptions) v. National Safety Council
Factual and Procedural Background
This opinion arises from an appeal challenging the Income-tax Appellate Tribunal's confirmation of the Commissioner of Income-tax (Appeals) order that the respondent-assessee (a society) was entitled to exemption under section 10(22) of the Income-tax Act. The appeal framed two questions of law about whether the Tribunal was correct in holding that the assessee qualified as "any other educational institution" and in treating the assessee's activities as education, particularly without regard to certain Supreme Court decisions cited by the appellant. The Tribunal had engaged in detailed discussion and concluded that the assessee fell within the term "any other educational institution" under section 10(22) and was therefore entitled to exemption.
The court (R.S. Mohite, J.) examined the memorandum and rules of the association-assessee (a society registered under the Societies Registration Act, 1860, and the Bombay Public Trust Act, 1950), considered the objects and rules, noted reliance by the respondent on a Supreme Court precedent (Aditanar Educational Institution), observed utilisation of income in the relevant assessment year, and held that the Tribunal's factual and legal conclusion was a possible view on the facts; accordingly the appeal was dismissed.
Legal Issues Presented
- Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in upholding the order of the Commissioner of Income-tax (Appeals) and consequently directing the Assessing Officer to allow exemption under section 10(22) without appreciating that the assessee trust is not a university or other educational institute existing solely for educational purposes.
- Whether, on the facts and in the circumstances of the case, and in law, the Income-tax Appellate Tribunal was right in holding that the activities carried out by the assessee are education activities without considering the decision of the Supreme Court in Sole Trustee, Lok Shikshana Trust v. CIT, Mysore [1975] 101 ITR 234 and Addl. CTT v. Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR 1.
Arguments of the Parties
Appellant's Arguments
- The Tribunal erred in law by upholding the Commissioner (Appeals) and directing the Assessing Officer to grant exemption under section 10(22) without appreciating that the assessee trust is not a university or other educational institution existing solely for educational purposes.
- The Tribunal was wrong to characterise the assessee's activities as educational, particularly without considering the Supreme Court decisions in Sole Trustee, Lok Shikshana Trust v. CIT, Mysore and Addl. CTT v. Surat Art Silk Cloth Manufacturers Association.
Respondent's Arguments
- The advocate for the respondent drew attention to the Supreme Court decision in Aditanar Educational Institution v. Additional Commissioner of Income Tax [1997] 224 ITR 310, where a society registered under the Societies Registration Act, established to support educational organizations, was held to fall within "other educational institution" under section 10(22) even though it had no colleges or institutions of its own; it would be unreal and hypertechnical to treat it as merely a financing body.
- The respondent pointed to the society's memorandum and rules (National Safety Council) which show its main objects are educating the public about safety, organising programmes, lectures, conferences, educational campaigns and promoting safety measures; its rules provide that income and property be utilised solely for the council's aims and that it be independent, non-commercial and non-profit.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Sole Trustee, Lok Shikshana Trust v. CIT, Mysore [1975] 101 ITR 234 | Referenced in the appeal memo as a decision bearing on whether activities qualify as educational. | The appeal raised whether the Tribunal had considered this decision; the present judgment does not analyse or apply this precedent further but records it as one of the authorities mentioned in the appeal memo. |
| Addl. CTT v. Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR 1 | Referenced in the appeal memo as a decision bearing on the characterisation of activities as educational. | The appeal raised whether the Tribunal had considered this decision; the present judgment does not analyse or apply this precedent further but records it as one of the authorities mentioned in the appeal memo. |
| Aditanar Educational Institution v. Additional Commissioner Of Income Tax [1997] 224 ITR 310 | Holds that a society registered under the Societies Registration Act set up to establish, run, manage or assist educational organisations may be treated as an "other educational institution" under section 10(22) even if it has no colleges or institutions of its own. | The respondent relied on this apex court decision. The bench summarised that decision and treated it as supportive of the view that a society like the assessee could fall within the scope of "other educational institution." |
Court's Reasoning and Analysis
The court identified the central factual-legal question: whether the respondent's income could be characterised as "any income of a university or any other educational institution existing solely for the purpose of education and not for the purpose of profit" under section 10(22).
The court noted that the Income-tax Appellate Tribunal had, after detailed discussion and reasoning, held that the assessee was within the term "any other educational institution" for the purposes of section 10(22) and thus entitled to exemption.
Although the question was essentially factual, the court examined the assessee's memorandum and rules. It recorded the principal objects of the National Safety Council as given in the memorandum: educating the public about safety, protection and health among industrial workers; organising programmes, lectures, conferences and activities to promote discussion, research, campaigns to arouse public opinion and interest of employers and workers in safety and accident prevention; and encouraging adoption and support of safety measures. Other objects were described as ancillary.
The court highlighted provisions in the memorandum and rules relevant to the characterisation:
- Article 4: the income and property of the council shall be utilised solely towards promotion of its aims and objects and no part shall be paid or transferred to members by way of dividend, bonus or profit.
- Rule 2: the council shall be an independent, non-commercial, non-profit-making, non-political and autonomous society.
The court considered the respondent's reliance on Aditanar (a Supreme Court decision in which a society without its own colleges was nonetheless treated as an "other educational institution") and noted the factual position that in the assessment year 1993–94 almost the entire income had been utilised for the purposes of the society's objects.
Synthesising these facts, documents and precedent, the court concluded that the Tribunal's finding was not perverse or untenable in law. The view taken by the Tribunal was a possible view on the facts. Therefore the framed questions of law did not arise for decision.
Holding and Implications
APPEAL DISMISSED.
Implications:
- The Tribunal's conclusion that the assessee fell within "any other educational institution" under section 10(22) and was entitled to exemption is upheld.
- Accordingly, the Assessing Officer is to allow the exemption under section 10(22) as directed by the Tribunal/Commissioner (Appeals) (as reflected in the framing of the appeal issues).
- The court observed that the Tribunal's view was a tenable factual/legal view; the judgment does not purport to lay down a new legal principle or wider precedent beyond affirming the Tribunal's decision on the facts of this case.
R.S Mohite, J.:— Heard both sides.
2. Two questions of law as framed in the appeal memo are as under :
(a) Whether on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law upholding the order of the Commissioner of Income-tax (Appeals) and consequently directing the Assessing Officer to allow exemption under section 10(22) without appreciating the fact that the assessee trust is not university or other educational institute existing solely for educational purposes?
(b) Whether on the facts and in the circumstances of the case, and in law, the Income-tax Appellate Tribunal was right in holding that the activities carried out by the assessee are education activities without considering the decision of the hon'ble Supreme Court in Sole Trustee, Sole Trustee, Lok Shikshana Trust v. Cit, Mysore, [1975] 101 ITR 234 and Addl. CTT v. Surat Art Silk Cloth Manufacturers Association, [1980] 121 ITR 1 ?”
3. The questions as framed turned upon the basic question as to whether the income of the respondent can be said to be “any income of a university or any other educational institution existing solely for the purpose of education and not for the purpose of profit”.
4. On this question the Income-tax Appellate Tribunal, after a detailed discussion and elaborate reasoning held that the assessee fell within the term “any other educational institution” within the meaning of section 10(22) of the Income-tax Act and was therefore, entitled to exemption under that provision of the Act.
5. Though this is essentially a question of fact, we have perused the memorandum and rules and regulations of the association-assessee which is a society registered under the Societies Registration Act 1860 as well as Bombay Public Trust Act, 1950.
6. It appears from the memorandum of association that the main objects of the assessee, i.e, National Safety Council appears to be educating the public in regard to safety, protection and health among industrial workers, to organise and conduct programmes, lectures conferences and other activities for promoting free discussions on all matters and questions relating to safety measures, procedures and research, to conduct educational campaigns with a view to arouse and maintain public opinion and interest of the employers and workers and their support to safety and accident prevention and to encourage all persons and other associations to adopt, institute and support safety measures and accident prevention programmes. The other objects are ancillary to the above.
7. Article 4 of the memorandum provides that the income and property of the council shall be utilised solely towards the promotion of the aims and objects of the council and no part of the same shall be paid or transferred directly or indirectly by way of dividend, bonus and profit to the members of the council.
8. Rule 2 of its rules and regulations categorically lays down that the council shall be an independent, non commercial, non profit making, non political and autonomous society.
9. The advocate appearing on behalf of the respondent drew our attention to the judgment of the apex court in the case of Aditanar Educational Institution v. Additional Commissioner Of Income Tax, [1997] 224 ITR 310. In that case the assessee was a society registered under the Societies Registration Act, 1860, established with the objective of establishing, running, managing or assisting colleges, schools and other educational organizations existing solely for educational purposes. Though it had no colleges or institutions of its own, the apex court held that it would be unreal and hypertechnical to hold that the assessee society was only a financing body and would not come within the scope of “other educational institution” as specified in section 10(22) of the Act.
10. The present appeal pertains to assessment year 1993-94 and from the return filed we find that almost its entire income has been utilised for the purpose of its objects.
11. In this background, it cannot be said that the finding of the Income-tax Appellate Tribunal is perverse on the facts or untenable in law. The view taken is a possible view in the facts of the case. In the circumstances, the questions of law as framed do not arise and the appeal is dismissed.
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