IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE THE CHIEF JUSTICE MR.H.L.DATTU & THE HONOURABLE MR. JUSTICE A.K.BASHEER THURSDAY, THE 23RD OCTOBER 2008 / 1ST KARTHIKA 1930 I.T.A.No.107 of 2008 ---------------------------------- ORDER DATED 30.4.2003 IN ITA.477/COCH/1999 OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH. (ASSESSMENT YEAR 1995-96) .................... APPELLANT/RESPONDENT:- ---------------------------------------- THE COMMISSIONER OF INCOME TAX, THIRUVANANTHAPURAM. BY ADV. SRI.GEORGE K. GEORGE, SC FOR IT SRI.JOSE JOSEPH, STANDING COUNSEL FOR INCOME TAX RESPONDENT/APPELLANT: --------------------------------------- SHREE VIDYADHIRAJA VIDYA SAMAJAM, CHETTIKULANGARA, THIRUVANANTHAPURAM - 1. THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 23/10/2008, ALONG WITH I.T.A.NO.10 OF 2006 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:- 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