An institution claiming exemption under s. 10(22) need not necessarily impart education to students, but must primarily engage in educational activities and utilize its income exclusively for educational purposes.

Jagannatha Shetty, J.—These tax reference cases are under s. 256(1) of the I.T. Act, 1961. The common questions referred for the opinion of this court are :

"(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that the income of the assesses-trust is exempt under section 10(22) of the Income Tax Act since the assessee is an educational institution ?

(2) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in confirming the AAC's view that the assesses-trust would be entitled to exemption under section 11 and also in not permitting the Department from taking the ground on this issue ?"

2. The assessee is a society registered under the Societies Registration Act of 1860. The Society came to be registered on September 3, 1946. The objects of the society, inter alia, are as follows :

"(i) to constitute the existing Saraswath Students's Fund into a registered body.

(ii) to extend financial assistance to poor and deserving Saraswath Student's Study in South Kanara District and outside by instituting scholarships by way of loans or otherwise, awarding grants for the purchase of books or other educational requisites and the payment of examination fees and other charges.

(iii) to undertake the management of any moneys or funds for educational or allied purposes intended for members of the Saraswath Community on trust and on such conditions as the fund may agree to.

(iv) to further the object of extending financial help to Saraswath Students by such other ways and means as may be necessary and proper."

3. For the assessment years 1977-78 to 1979-80, the assessee, while filing returns, claimed exemption under s. 10(22) of the Act. Alternatively, the Society claimed that its income, at least to the extent of the application to charitable purposes, must be exempt under s. 11. The ITO while rejecting the primary contention accepted the alternative claim. He granted relief under s. 11 while computing the income of the assessee although the order of assessment does not specifically state so in so many words.

4. The assessee appealed to the AAC. During the pendency of those appeals, the Appellate Tribunal disposed of the appeal relating to the assessment year 1975-76. There the Tribunal accepted the claim of the assessee under s. 10(22) of the Act. It was also observed by the Tribunal in that order that the assessee was entitled to deduction of 25 per cent of its income under s. 11. The AAC, following that judgment of the Tribunal, allowed the appeals for all the three years with a direction to the ITO to allow deductions under s. 11 of the Act.

5. The Revenue appealed to the Tribunal. But the Tribunal could not do anything better. It had to follow its earlier decision for the assessment year 1975-76 holding that the assessee was an educational institution falling within the ambit of s. 10(22). Before the Tribunal, the Revenue appears to have objected to the direction issued by the AAC to the ITO to allow deduction of 25 per cent under s. 11. Although the order of the Tribunal is not clear, it appears to us that the question raised was that the assessee was not entitled to the benefit of s. 11. The Tribunal rejected that contention on the ground that the Revenue did not object before the ITO for treating the assessee as a charitable institution for the purpose of application of s. 11. The Tribunal noted that the ITO while computing the assessment had followed the order of the AAC for the year 1975-76 wherein he has held that the assessee was entitled to the benefit of s. 11.

6. It is this order of the Tribunal that has given rise to the questions set out above.

7. Before proceeding further, it will be necessary to clarify and narrow down scope of the enquiry in this matter. If the assessee is held entitled to the benefit of exemption under s. 10(22), it will be unnecessary to go into the question as to whether the assessee will b