Commissioner of Income Tax vs Shree Vidayadhiraja Vidya Samajam

H.L. Dattu, C.J.—The assessee is a society, registered under the provisions of Travancore Cochin Literary Scientific and Charitable Societies Act. The assessee runs 16 educational institutions in different parts of the State.

For the assessment year 1988-89, the assessee had not filed its return of income before the assessing authority. Therefore, the assessing authority had issued a notice u/s 148 of the Income Tax Act ("Act" for short). After receipt of the notice, the assessee had filed its return of income and also had claimed exemption from payment of tax u/s 10(22) of the Act.

The assessing authority has completed the assessments u/s 144 of the Act, denying the exemption claimed by the assessee u/s 10(22) of the Act, on the sole ground that the assessee did not produce enough evidence to prove that the income was exclusively used by the assessee for the educational purpose.

The findings and conclusions reached by the assessing authority were called in question by the assessee before the first appellate authority. The first appellate authoritys view is, that, the burden is on the assessee to prove that the income of the assessee is primarily used for educational purpose and since the assessee had not discharged its burden, the thinking of the first appellate authority is, that, the assessing authority is justified in passing the assessment order u/s 144 of the Act, denying the exemption claimed by the assessee u/s 10(22) of the Act.

The assessee had carried the matter by filing the second appeal before the Tribunal. The Tribunal is of the view that the burden of proof is on the department, to prove that the assessee had utilised the income derived from the educational institutions for any purpose other than the educational purpose. Since the assessing authority has not discharged its burden, the assessee is entitled to the exemption as provided u/s 10(22) of the Act.

Revenue, being aggrieved by the orders so passed by the Tribunal, is before us in these appeals.

The revenue has framed the following questions of law for our consideration and decision. They are as under:

Whether, on the facts and in the circumstances of the case and by placing the burden on the revenue the Tribunal is right in law and fact in holding that unless it is proved that any institution or society was running for profit making and not for educational purposes the exemption u/s 10(22) cannot be denied and is not the finding wrong and to be ignored, the same being one wrongly placing the burden on the revenue ?

Whether, on the facts and in the circumstances of the case did the assessee discharge the burden of proof that lay on it ?

Whether, on the facts and in the circumstances of the case the Tribunal is right in law and fact in finding that since the assessing officer has not specifically pointed any instance of the funds of the society being used for any other activity than educational activity and is not the finding in Parimisetti Seetharamamma Vs. Commissioner of Income Tax, Hyderabad, wrong and to be ignored in view of the same being formed by putting the burden on the revenue ?

Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact in holding that the onus was on the department to prove that the assessee is indulging in any profit-making activity and is not the approach and the conclusion of the Tribunal vitiated ?

Whether, on the facts and in the circumstances of the case, is not for the assessee who claims the exemption to prove the same and is not the very approach of the Tribunal wrong and the conclusion vitiated and nonest?

Whether, on the facts and in the circumstances of the case the Tribunal is right in law and fact in holding that the assessees receipts are exempt as the assessee is an institution existing solely for educational purposes and, not for the purpose of profit And is not the above finding perverse ?

Whether, on the facts and in the circumstances of the case the Tribunal is right in law and fact in not holding that assessing officer is right in estimating the income of the assessee as a percentage of the gross receipts and estimating and excluding a part of the donations from that of building fund as no evidence was produced ?

Whether, on the facts and in the circumstances of the case the Tribunal is right in law and fact in not holding that assessing officer is right in estimating the income of the assessee as a percentage of its receipts when the accounts are found to be defective and reliable ?

Whettter, on the facts and in the circumstances of the case the Tribunal is right in law and fact in not holding that the Commissioner (Appeals) is wrong in directing to adopt the book results of the assessee, as against estimating the income as a percentage of the gross receipts when the books were found to be defective and not reliable ?

It is the case of the assessee, that, it is managing sixteen educational institutions. It is its further case that the entire income derived is primarily used for the educational purpose and, therefore, entitled for exemption u/s 10(22) of the Act. The assessing authority, while completing the assessment proceedings u/s 144 of the Act, has not stated that the income of the assessee has been utilised for any purpose other than the educational purpose. In order to deny the claim/benefit u/s 10(22) of the Act, the assessing authority is expected to give a finding that the income of the assessee has been utilised for a purpose other than the educational purpose. In the instant case, the assessing authority merely proceeds on an assumption that the assessee has purchased some property sometime in the year 1992-93.

The Tribunal, in our opinion, having carefully perused the orders of assessment passed by the assessing authority and the orders passed by the first appellate authority, has rightly reversed those findings and has come to the conclusion that the income of the assessee is primarily used for the educational purpose and, therefore, it is entitled for exemption u/s 10(22) of the Act. In our view, the Tribunal has not committed any error, whatsoever, which would call for our interference in this appeal. Therefore, while answering the questions of law framed by the revenue against the revenue and in favour of the assessee, we reject this appeal.

Ordered accordingly.