JUDGMENT [ENTITY], J.
1. On being moved under [SECTION] of the [ACT], the Income-tax Tribunal has referred the following question of law for our opinion :
"Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that the income the assessee is entitled to exemption under [SECTION] of the [ACT] ?"
2. In order to answer the aforesaid question, it is necessary to set out relevant facts herein :
(i) The assessee is an association of persons, which is a public trust registered under the provisions of the [ACT]. The relevant assessment year is 1972-73. The institute came into existence by a covenant, dated September 13, 1933, with the object of imparting technical education to the boys belonging to the Zoroastrian society. Initially, the institute was running under the name and style of "Surat Parsi Technical and Industrial Institute Surat". On October 8, 1943, [ENTITY] and [ENTITY], two sisters donated a sum of Rs. 4 lakhs to this institute under certain terms and conditions, one of them being to name the institute as "Sorabji Naseerwanji Paruck Parsi Polytechnic Institute" in order to perpetuate the memory of the parents of the donor-sisters. In course of time, due to paucity of funds, the trustees of the institute found it impossible to carry on the institution. An attempt was, therefore, made to enter into an agreement with the then Bombay Government to take over the institute. However, before the agreement could be entered into one [ENTITY] of Bombay moved the Surat Court with a plea that, instead of handing over the institute to the Government, it would be beneficial to the interest of the boys of the Parsi Community to see that the institute is shifted to Bombay. While the proceedings were pending before the court, the trustees of Sheth Manekji Cooper Trust, Bombay, moved the court with a request to permit them to run the institute at Bombay, under their control. The request was granted. The court permitted Manekji Cooper Trust to sell off the immovable properties and equipments to the Government realising about Rs. 6,08,000. Subsequent thereto, Sheth Manekji Cooper Trust also found it difficult to run the institute with the result that a request was, once again, made to the court to vacate the scheme approved by the court earlier and to relieve Manekji Cooper Trust from its responsibility under the scheme. The said request was granted by the court and the Manekji Cooper Trust was relieved of the obligation to run the institute. The said trust handed over the amount realised from the sale of immovable properties with all accumulations to the Surat Parsi Panchayat Trust. The Bombay Parsi Panchayat and Surat Parsi Panchayat, at this stage, entered into an agreement under which Surat Parsi Panchayat, at this stage, entered into an agreement under which Surat Parsi Panchayat handed over the aforesaid amounts to the Bombay Parsi Panchayat with the stipulation that the Bombay Parsi Panchayat will accommodate a certain number of students nominated by the Surat Parsi Panchayat in the Gamadia Technical Institute at Bombay, Rural Home for Boys at Golwad run by the Bombay Parsi Panchayat for training in technical subjects. This agreement was submitted to the court for its sanction, but the proceedings for sanction of the court are stated to be still pending. Since the agreement between the Bombay Parsi Panchayat and the Surat Parsi Panchayat could not be worked out in the absence of sanction from the court, the Surat Parsi Panchayat started utilising the income of the trust to grant scholarships to deserving students studying in various branches of technical education such as aeronautics wireless telegraphy, mechanical engineering diplomas, etc.
(ii) It may be stated that, when the return of income together with statement of audited accounts was filed before the Income-tax Officer on April 3, 1972, the Income-tax Officer noticed the following note of the chartered accountant of the institute :
"The Institute was an educational one until it was closed down in January, 1956, as per Schedule approved by the court. After that, the Institution granted scholarships, etc., from the income of Endowment Fund which from the letter of the Charity Commissioner, Baroda, letter No. 11/12/58, dated January 21, 1958, is exempted under [SECTION] of the [ACT]."
(iii) From the aforesaid note, it becomes clear that the Income-tax Officer has noted that since January, 1956, onwards, the institution has not continued to be an educational institution inasmuch as it stopped carrying on educational activities, and started merely granting scholarships to Parsi students. He was, therefore, of the opinion that the institution could not be termed as an educational institution within the meaning of [SECTION] of the Act. He also found that the institution was established for "charitable purposes" within the meaning of [SECTION] of the Act, and hence, the income was exempted under [SECTION] of the Act to the extent of its application on the objects. He, accordingly, disallowed the claim of the assessee to exempt it fully under [SECTION] of the Act to the extent of its application on the objects.
(iv) Being aggrieved by the order of the Income-tax Officer, the assessee preferred an appeal to the Appellate Assistant Commissioner who allowed the appeal holding that the assessee was an institution for the propagation and advancement of secular education, and that it was on that basis that the assessee continued to have exemption from payment of the contribution otherwise due under the [ACT]. He also took the view that the assessee-institution was established for the purpose of education and despite various changes and developments that took place in between, the basic character of the institution continued to be the same and that was advancement and propagation of education. He was, therefore, of the view that the assessee was entitled to full exemption under [SECTION] of the said Act. On further appeal to the Tribunal, the Tribunal confirmed the order of the Appellate Assistant Commissioner mainly on the ground that, for the assessment year 1963-64 with respect to this very assessee, an identical question was raised which was decided by the Tribunal in [CASE NUMBER]-72, dated June 25, 1973. The Tribunal was of the view that, in view of the fact that in an identical fact-situation in the case of the assessee itself when the view was taken that it was entitled to exemption under [SECTION] of the Act, the appeal of the Revenue was liable to fail, and hence, the Tribunal dismissed the appeal.
(v) The aforesaid decision of the Tribunal has given rise to the question of law which is referred to us for our opinion.
3. Before we proceed to set out and discuss the relevant provisions of law by reference to which we are required to answer the question under reference, it would be necessary to set out the objects for which the trust was established. It may be noted that the original trust deed is in the vernacular (Gujarati language) and the English translation of the same is supplied to us and as per the said translation, the objects for which the trust is established are as under :
"(i) To start an Art and Industrial School at Surat under the auspices of your Surat Parsi Panchayat at your convenience during a period of two years from this day and to give benefit of the said school to the inmates of your Surat Parsi Orphanage and other Zoroastrian boys outside of any place and the interest of my said amount be utilised towards its expenses.
(ii) Till the school as referred to above is founded, from the amount of interest that may be available after deducting the centage charges of both the Panchayats, be accumulated and securities be purchased from time to time and be added to the corpus. When the school for imparting education as stated above is started, the interest on the entire amount be utilised towards its expenses.
(iii) I have delivered this amount to you with the aim of giving benefit of the new institution to Zoroastrian day-scholars of any outside place over and above the inmates of the orphanage because you may collect the share of expenditure from the funds of the orphanage as per its trust deed for the inmates of the said orphanage who may get benefit of this institution, however, it is absolutely at your discretion whether to collect such a share and if to collect at what rate and for what reason, taking into consideration the condition from time to time of this fund. You are given full power to act in this direction at your entire discretion.
(iv) If the Zoroastrian boys of Surat or of any place other than Surat desire to take advantage of the proposed new institution it may be given to them. If it is found essential to make boarding and lodging arrangements for such boys who may be from outside Surat, such arrangements be made by you and, if you do so, you are at liberty to make use of the interest of any amount towards the expenses of the same."
4. From the aforesaid objects as gathered from the original trust deed, it becomes clear that the institution is established to start an Art and Industrial School at Surat and to give benefit of said school to the inmates of the Surat Parsi Orphanage and other Zoroastrian boys of outside places i.e., the places beyond Surat. However, it is also stipulated that, till the school is established, the trust should accumulate the income and add the same to the corpus. It is further stipulated that as and when the school is started for imparting education, the interest on the entire amount so accumulated should be used for the school. It is thus clear that, even as per the trust deed, establishment of school of Art and Industry for the benefit of inmates of Surat Parsi Orphanage and other Zoroastrian boys of outside Surat was the primary object with which the trust was established.
5. In order, now, to appreciate the controversy, it would be necessary to set out herein the provisions of [SECTION] and [SECTION] along with definition of "charitable or religious purposes" as given under [SECTION] of the Act.
6. [SECTION] of the Act of 1961 defines "charitable purposes" to include relief of the poor, education, medical relief and the advancement of any other object of general public utility not involving the carrying on of any activity for profit. By reason of this definition, income derived from a business which is carried on for the advancement of an object of general public utility has to be included in the assessee's total income, if it involves the carrying on of any activity for profit. In other words, as put by Justice [ENTITY] in the following words in the case of [PRECEDENT] :
"[SECTION] excludes from exemption the carrying on of activities for profit even if they are linked with the objectives of general public utility, because the statute interdicts, for purposes of tax relief, the advancement of such object by involvement in the carrying on of activities for profit."
7. The provision as it existed under the Act of 1922 was that once the purpose of the trust was relief of the poor, education, medical relief or advancement of any other object of general public utility, the trust was considered to be for a charitable purpose. As a result of the addition of the words "not involving the carrying on of any activity for profit" at the end of the definition in [SECTION] of the Act even if the purpose of the trust is "advancement of any other object of general public utility", it would not be considered to be "charitable purpose" unless it is shown that the above purpose does not involve the carrying of any activity for profit. The result, thus, of the change in the definition is that in order to bring a case within the fourth category of charitable purpose, it would be necessary to show that :
(i) the purpose of the trust is advancement of any other object of general public utility, and
(ii) the above purpose does not involve the carrying on of any activity for profit.
Both the above conditions must be satisfied before the purpose of the trust can be held to be charitable purpose.
8. In the above context, it shall have to be seen as to what meaning should be given to the word "education" which occurs in [SECTION] of the Act. In the case of [PRECEDENT] in the context of institution carrying on activities to educate the people of India in general, and of Karnataka in particular the Supreme Court had an occasion to deal with the definition of "charitable purposes" to ascertain the meaning and scope of the word "education" as it occurs in [SECTION] of the Act. It was in this context the Supreme Court observed as under (at page 241) :
"The sense in which the word 'education' has been used in [SECTION] in the systematic instruction, schooling or training given to the young is preparation for the work of life. It also connotes the whole course of scholastic instruction which a person has received. The word 'education' has not been used in that wide and extended sense, according to which every acquisition of further knowledge constitutes education. According to this wide and extended sense, travelling is education, because as a result of travelling, you acquire fresh knowledge. Likewise, if you read newspapers and magazines, see pictures, visit art galleries, museums and zoos, you thereby add to your knowledge. Again, when you grow up and have dealings with other people, some of whom are not straight, you learn by experience and thus add to your knowledge of the ways of the world. If you are not careful, your wallet is liable to be stolen or you are liable to be cheated by some unscrupulous person. The thief who removes your wallet and the swindler who cheats you teach you a lesson and in the process make you wiser though poorer. If you visit a night club, you get acquainted with and add to your knowledge about some of the not much revealed realities and mysteries of life. All this in a way is education in the great school of life. But that is not the sense in which the word 'education' is used in [SECTION]. What education connotes in that clause is the process of training and developing the knowledge, skill, mind and character of students by normal schooling."
9. From the aforesaid observations, it becomes clear that what the word "education" connotes is the process of training and developing the knowledge, skill, mind and character of students by normal schooling.
10. At this stage, we may also refer to the provisions of [SECTION] which reads as under :
"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.
11. It becomes clear from the aforesaid provision that in order to be eligible to gain total exemption under [SECTION] of the Act, it is necessary that there must exist an educational institution. Secondly, such institution must solely exist for educational purposes, and thirdly, the institution should not exist for the purpose of profit. It is not disputed before us that the assessee is an institution which was existing at the relevant time. It is not necessary therefore for us to undertake the exercise of ascertaining the meaning of the word "institution" and to find out as to whether the assessee is an institution or not. The Revenue has, however, seriously urged before us that the assessee was not an educational institution and was therefore not entitled to the total exemption under [SECTION] of the Act.
12. At this stage, we may also refer to [SECTION] of the Act, which grants exemption to income from property held for charitable or religious purposes. It may be noted that it is not at all disputed before us by the Revenue that to the extent the assessee trust has applied for exemption of its income for the purposes of educational activities of the institution, its income would be exempted under [SECTION] of the said Act. [SECTION] in so far as it is material is reproduced herein :
"11. Income from property held for charitable or religious purposes. - (1) Subject to the provisions of [SECTION], the following income shall not be included in the total income of the previous year of the person in receipt of the income -
(a) income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India; and, where any such income is accumulated or set apart for application to such purposes in India, to the extent to which the income so accumulated or set apart is not in excess of twenty-five per cent. of the income from such property."
13. Mrs. [ENTITY], the learned advocate for the assessee has, on the other hand, submitted that the Tribunal was right in holding that the assessee is an educational institution established solely for educational purposes within the meaning of [SECTION] of the Act. She submitted that it is not disputed that the assessee is an institution. It is also not disputed that it is an existing institution. She further submitted that the institution was established with specific objectives and it has continued to exist for the very objectives. To impart technical education to students of the Parsi community was the primary object and, according to her, with the very object the institution has continued to exist. She further submitted that since it was not possible for the assessee to establish and run the school or college to impart technical education to students of the Parsi community, despite the best efforts made by the institution, the institution has started giving scholarships to students of the Parsi community to help them in continuing their studies. She, therefore, submitted that the activity which the trust was carrying on in the relevant assessment year was in the broader sense of the term "educational activity", and therefore, all the requirements for earning total exemption under [SECTION] of the Act were satisfied. Mrs. [ENTITY] has also further submitted that the word "education" would not necessarily mean actual imparting of education to the students, but any activity which would facilitate the imparting of education would also fall within the wide sweep of "educational activities"
14. The aforesaid rival contentions of the parties shall have now to be examined in the light of the statutory provisions set out hereinabove, and the judicial pronouncements on the subject. In the case of [PRECEDENT], the Division Bench of the Madras High Court was called upon to decide the question in a partially similar situation. Before the Madras High Court, the assessee-institute was a society registered under the [ACT], and was established to impart or to assist in imparting instruction to persons of either sex in scientific or artistic principles which underlie the commercial and industrial occupations of the people as well as instruction in the manual and other practice involved in the application of such principles and to assist persons of either sex who are engaged in artistic, industrial or commercial occupations. The claim of the assessee before the court was that the objects of the institute fall within the concept of "education" on the ground that the primary object of the assessee was to impart instruction in handicrafts and the institute was a charitable trust and hence the income realised by the sale of the products made by indigenous craftsmen and skilled artisans was exempt under [SECTION] of the Act. The said claim of the institute was negatived by the Income-tax Officer because no training or educational institution was run by the assessee. The Income-tax Officer also took the view that the said trust also cannot be said to be for charitable purpose and the object involved was that of carrying on of an activity for profit. The Appellate Assistant Commissioner confirmed the view of the Income-tax Officer. The Tribunal, however, accepted the case of the assessee that the main object of the assessee fell within the ambit of the word "education" as running an educational institution like a school or college was not the only way to impart education and there were other ways also by which education can be imparted by awarding scholarships, etc., and the persons connected with the institute go to various places where handicrafts articles were made by artisans and advise them on improving production, method, finish of articles, etc. It was in this factsituation that the Division Bench of the High Court, found after reference to the decision of the Supreme Court in the case of [PRECEDENT], that the word "education" has been used in the sense of systematic instruction, schooling or training given to young in preparation for the work of life. It is, in fact, a process of training and development of knowledge, skill, mind and character of students by normal schooling. The Division Bench also found that the assessee was not running any educational institution like a school or college. The activity of the assessee in granting scholarships to students studying in school of Arts and Crafts and sending them to various other places would fall under the head of "Advancement of any other object of general public utility" as used in [SECTION] of the Act. Such an activity, according to the Division Bench, would not fall within the scope of educational activity to be carried on by an educational institution established solely for educational purposes as understood under [SECTION] of the said Act. The Division Bench of the court, therefore, found not only that there must exist an institution, but that it must be an educational institution to impart education to students. It must be very close to normal schooling. Therefore, when the activity of the institution is that of only giving scholarships to a class of beneficiaries for the purpose of enabling them to pursue their educational activity elsewhere, the institute cannot be said to be carrying on educational activity for educational purposes as stipulated by [SECTION] of the said Act.
15. Mr. [ENTITY], learned counsel for the Revenue, has invited our attention to the decision of the Division Bench of the Karnataka High Court in the case of [PRECEDENT]. The assessee before the Karnataka High Court was a society registered under the [ACT] with the main object to extend financial assistance to poor and deserving students belonging to the Saraswath Community by way of loans, scholarships and assistance for purchase of books and other educational requisites. Unlike the case before us, even the objects of the trust before the Karnataka High Court did not stipulate establishment of an educational institution to impart education to the students. The primary object of the assessee was to extend financial help to the students. The question before the Division Bench was as to whether such an institution can be described to be an educational institution solely for the purpose of education as stipulated by [SECTION] of the Act so that it can avail of the exemption available to it under [SECTION] of the said Act to the extent it utilised its income for charitable purposes. The Division Bench of the Karnataka High Court speaking through [ENTITY] J. (as his Lordship then was) firstly noticed that the scope of exemption under [SECTION] of the Act is wider than that granted under [SECTION]. The exemption under [SECTION] is in respect of the whole of the income of the assessee and not restricted to such income applied or exempted for charitable purposes as provided under [SECTION]. In order to be entitled to exemption under [SECTION], the assessee must prove that it is an educational institution existing solely for educational purposes. By reference to the objects for which the institution was established, the court took the view that, in order to qualify to be an educational institution, the institution must be one in which education should be imparted to the students. It must teach the students and must have teachers for such purpose of teaching. By referring to the decision of the Supreme Court in the case of [PRECEDENT], the court examined the possibility of giving to the words "educational institutions" the same meaning as was given to it under [SECTION] of the [ACT]. The court also made reference to its earlier decision in the case of [PRECEDENT] and relied upon the following observations which, in our opinion, are relevant for the purpose of deciding the controversy before us (at page 146 of 150 ITR) :
" We may state at the outset that the assessee in order to claim the benefit of [SECTION] need not necessarily be a school or a college, where education is imparted. Nor should such school or college by different from the assessee who claims the benefit of [SECTION]. That would be clear if we peruse the provisions of various sub-sections of [SECTION], viz., [SECTION], [SECTION], [SECTION], [SECTION], [SECTION], [SECTION], [SECTION] and [SECTION]. It will be, therefore, obvious that the income of the assessee is exempt under [SECTION] if the assessee is an educational institution or an establishment which primarily engages itself in educational activities. The institution, however, may incidentally take other activities for the benefit of the students or in furtherance of their education. It may invest its funds in any manner, but the income generated therefrom must be utilised exclusively for educational activities. If these requirements are complied with, the assessee's income shall be exempt under [SECTION] of the Act."
16. From the aforesaid observations, it becomes clear that, in order to earn total exemption under [SECTION] of the Act, an assessee should be an educational institution or an establishment which primarily engages itself in educational activities. Though the words "educational activities" are words of very wide amplitude, we would like to add that the element of imparting education to students or the element of normal schooling where there are teachers and taught must be present so as to fall within the sweep of [SECTION] of the Act. We would, at the same time, like to add that such an institution may, incidentally, take other activities for the benefit of students or in furtherance of their education. It may invest its funds in any manner it likes or it may provide scholarships or other financial assistance which may be helpful to the students in pursuing their studies. However, such incidental activities alone, in the absence of actual activity of imparting education by normal schooling or normal conduction of classes, should not be sufficient for the purpose of qualifying the institution to earn the benefit of [SECTION] of the said Act.
17. We may also mention at this stage that our attention was also invited to the decision of the Supreme Court in the case of [PRECEDENT]. In the said decision, the court was called upon to decide the question as to whether the institution deriving income from the business of conducting kuries can be said to be one for "charitable purpose" as defined under [SECTION] of the Act, and whether it would be entitled to the benefit flowing from [SECTION] despite the fact that it was making profit. It was in this context that the court was called upon to decide the question as to whether the activity carried on by the institution for advancement of another object of general public utility would not be sufficient to enable the institution to qualify itself for exemption under [SECTION] if such activity involved the carrying on of an activity for profit. It was in this context that the Supreme Court held that in the facts and circumstances of the case, the assessee was entitled to exemption under [SECTION] of the [ACT]. In our opinion, this decision does not take the case of the assessee in the present case any further. It would only establish that, since the activity of the assessee would fall within the wide sweep of "charitable purpose" as defined under [SECTION] of the Act it would be entitled to the benefit flowing from [SECTION] of the said Act. The Income-tax Officer has already granted the benefit flowing from [SECTION] of the said Act.
18. It will not be out of place at this stage to mention that Mrs. [ENTITY], learned counsel for the assessee, has sought reliance on the decision of the Division Bench of the Karnataka High Court in the case of [PRECEDENT], which decision, as stated hereinabove, is distinguished in the subsequent decision in the case of [PRECEDENT]. It may be noted that in the case of [PRECEDENT] the assessee was a society with the object to make available technical and commercial education in as many as 47 subjects with a number of other ancillary objectives. The academy was, in fact, running nine educational institutions and also supervised 22 aided educational institutions Prior to the assessment year 1970-71, the income of the assessee was treated as exempted under [SECTION] of the Act. However, for the relevant assessment year, the claim of the assessee under [SECTION] was disallowed which ultimately resulted in reference of a question of law to the High Court and the High Court found that the primary object of the institute was to establish, support, manage or conduct schools, colleges and such other educational institutions. The society has income of its own.
19. The society, out of its income, has given outright grants to some schools. It has not spent its income for any purpose unconnected with education. It was, therefore, an educational institution existing purely for educational purposes and not for profit. The court, therefore, held that the assessee, in order to claim the benefit of [SECTION], need not necessarily be a school or a college where education imparted. Nor such school or college should be different from the assessee who claims the benefit of [SECTION]. It will therefore, be obvious that the income of the assessee is exempt under [SECTION], if the assessee in an educational institution or an establishment which primarily engages itself in educational activities. The institution, however, may incidentally take other activities for the benefit of the students or in furtherance of their education. It may invest its funds in any manner, but the income derived therefrom must be utilised exclusively for educational activities.
20. In our opinion, the aforesaid decision does not help the assessee in the facts and circumstances of the present case. True it is, that it is not necessary for the institution to run the educational institution itself. The educational institution may be run by someone, but the income of the institution should be utilised for the activity of imparting education. There should be activity of normal schooling or actual imparting of education by the institution or by some other institution to which the assessee-in-stitution is attached. Simply by giving scholarships or grants to the students to enable them to pursue their educational activities without any control whatsoever on such students, an institution cannot be said to be an educational institution. It is, thus, clear that the decision of the Division Bench of the Karnataka High Court in [PRECEDENT] cannot be pressed into service to the fact situation prevailing before us, and, in fact, the said decision is distinguished subsequently in the case of [PRECEDENT], and we are in full agreement with the reasoning which has found favour with the Division Bench in the case of Saraswath Poor Students Fund [1984] 150 ITR 142
21. Now, adverting to the case before us, it is clear that the trust in question though primarily founded to establish a school or college for imparting education to Zoroastrian students, it has not been successful in establishing any school or college. Admittedly, since 1956, no educational activity in the sense of normal schooling or actual imparting of knowledge or learning to the students is carried on by the trust. Admittedly, since 1956, the institute was simply giving scholarships to needy Parsi students for technical education without keeping any control over such students or without actually imparting any knowledge to the said students. Therefore, it cannot be said that the trust was carrying on educational activities or that it was an educational institution established for educational purposes. Therefore, the said trust was not entitled to total exemption under [SECTION] of the Act. Therefore, the Tribunal was not right in holding that the trust was entitled to total exemption.
22. In the result, we answer the question referred to us in the negative, i.e., in favour of the Revenue and against the assessee. No costs.