IN THE HIGH COURT OF KERALA AT ERNAKULAM
ITA.No. 107 of 2008()
1. THE COMMISSIONER OF INCOME TAX,
... Petitioner
Vs
1. SHREE VIDYADHIRAJA VIDYA SAMAJAM,
... Respondent
For Petitioner :SRI.GEORGE K. GEORGE, SC FOR IT
For Respondent : No Appearance
The Hon'ble the Chief Justice MR.H.L.DATTU
The Hon'ble MR. Justice A.K.BASHEER
Dated :23/10/2008
O R D E R
H.L.Dattu,C.J. & A.K.Basheer, J.
-------------------------------------------
I.T.A.No.107 of 2008, 10 of 2006,
51 of 2008 & 110 of 2008
--------------------------------------------
Dated, this the 23rd October, 2008
JUDGMENT
H.L.Dattu,C.J.
Since the assessee is common and the legal issues involved are
also identical, these appeals are clubbed, heard and disposed of by this
common order.
(2) For the purpose of narrating the facts, we refer to
I.T.A.No.107 of 2008.
(3) 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.
(4) For the assessment year 1995-96, the assessee had not filed
its return of income before the assessing authority. Therefore, the assessing
authority had issued a notice under Section 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 under
Section 10(22) of the Act.
(5) The assessing authority has completed the assessments
under Section 144 of the Act, denying the exemption claimed by the assessee
I.T.A.No.107 of 2008 &
connected cases. – 2 –
under Section 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.
(6) The findings and conclusions reached by the assessing
authority was called in question by the assessee before the first appellate
authority. The first appellate authority’s 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 under Section 144 of the Act,
denying the exemption claimed by the assessee under Section 10(22) of the
Act.
(7) 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 under Section
10(22) of the Act. The reasoning of the Tribunal in this regard is as under:
“A plain reading of the above (Aims and Objects)
makes it clear that whatever income or financial gain
I.T.A.No.107 of 2008 &
connected cases. – 3 –
acquired from the normal course of activity of the society was
to be utilised only for fulfilling the aims and objects of the
society which were educational and other related activities. It
is not the case of the Department that the assessee-society was
not running the educational institutions. They had only a
doubt that since some properties were sold during the year
1996, a profit motive cannot be ruled out. Since the assessing
officer has not specifically pointed out any instance of the
funds of the society being used for any other activity than
educational activity, we are not inclined to agree with the
finding of the assessing officer. The CIT(Appeals) was wrong
in saying that it was the duty of the assessee to prove that it is
not indulging in any profit making activity. It was the
assessing officer who issued notice u/s 148 to the assessee-
society to file its return of income on the ground that
exemption u/s 10(22) is available to it only if it is running the
educational institutions without any profit motive, and hence,
the onus was on the Department to prove that the assessee is
indulging in any profit making activity. This onus has not
been discharged by the Department. In the circumstances, in
the light of the Board’s Circulars and the case laws relied on
by the ld. representative of the assessee, we deem it necessary
to set aside the orders of the lower authorities and direct the
assessing officer to grant exemption u/s 10(22) of the I.T. Act
to the assessee for all these years under appeal. We do so.”
(8) Revenue, being aggrieved by the orders so passed by the
Tribunal, is before us in these appeals.
I.T.A.No.107 of 2008 &
connected cases. – 4 –(9) The Revenue has framed the following questions of law
for our consideration and decision. They are as under:
“1. 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 under
section 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?
2. Whether, on the facts and in the circumstances
of the case did the assessee discharge the burden of proof that
lay on it?
3. 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 the
light Parimseth Seetharamamma (57 ITR 532) wrong and to
be ignored in view of the same being formed by putting the
burden on the Revenue?
4. 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?
5. Whether, on the facts and in the circumstances
I.T.A.No.107 of 2008 &
connected cases. – 5 –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?”
(10) 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 under Section 10(22) of the Act. The assessing authority, while
completing the assessment proceedings under Section 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 under
Section 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.
(11) 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 under
Section 10(22) of the Act. In our view, the Tribunal has not committed any
I.T.A.No.107 of 2008 &
connected cases. – 6 –
error, whatsoever, which would call for our interference in these appeals.
Therefore, while answering the questions of law framed by the Revenue
against the Revenue and in favour of the assessee, we reject these appeals.
Ordered accordingly.
H.L.Dattu
Chief Justice
A.K.Basheer
Judge
vku/dk