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1992 Supreme(Guj) 200
Gujarat High Court
Judgename :S.B.MAJMUDAR, S.D.Shah
Commissioner of Income-tax, ahmedabad - Appellant
Versus
Sorabji Nusservanji Parekh, Surat - Respondent
I.T.R. 138 of 1978
Decided On : 08/17/1992
Headnote:
Income-tax Act, 1961 – Section 256 – Section 2, 10, 11 – Bombay Public Trusts Act, 1950 – Rule 32 – Manekji cooper Trust to sell off immovable properties and equipments to government realising – Request was, once again made to court to vacate scheme approved by court earlier and to relieve – Cooper trust from its responsibility under the scheme said request was granted by the court and Manekji Cooper Trust was relieved of the obligation to run the institute said trust handed over amount realised from the sale of immovable properties with all accumulation to Trust – Bombay at this stage entered into an agreement under which handed over the aforesaid amounts to Bombay Parsi Panchayat with stipulation that Bombay Parsi panchayat will accommodate certain number of students nominated in Technical Institute at Bombay, rural Home for Boys at Golwad run by bombay Parsi Panchayat for training in technical subjects agreement was submitted to the court for its sanction, but the proceedings for sanction of the court are staled to be still pending. Since agreement between Bombay could not be worked out in the absence of sanction from the court, the Surat parsi Panchyat started utilising the income of Trust to grant scholarships to deserving students standing in various branches of technical Education such as Aeronautics, wireless, Telegraphy, Mechanical Engineering diplomas – It may be stated that when return of income together with statement of audit accounts was filed before the Income-tax officer Income-tax Officer noticed the following note of Chartered accountant of institute – Held, Educational institution may be run by someone, but the income of the institution should be utilised for the activity of imparting education should be activity of normal schooling or actual imparting of education by the institution or by some other institution to which institution 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 educational institution – It is, thus, clear that the decision of Division Bench of Karnalaka high Court-in Academy of General Education cannot be pressed into service to the fact situation prevailing before us, and in fact said decision is distinguished subsequently in case of Saraswath Poor Students Fund and we are in full agreement with the reasoning which has found with the division Bench in the case of Saraswath Poor students Fund – Adverting to case before us it is clear that the trust in question though primarily found to establish 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 institute was simply giving scholarships to needy 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 10 (22) of Act – Appeal is allowed.
( 1 ) ON being moved under Section 256 (1) of the Income-tax Act, 1961, 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 of the assessee is entitled to exemption under sub-Section (22) of Section 10 of the Income-tax Act, 1961 ?"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 Bombay Public Trusts Act, 1950. The relevant assessment year is 1972- 73. The institute came into existence by a covenant, dated 13-9-1933 with the object of imparting technical education to the boys belonging to Zoroastrian society. Initially, the institute was running under the name and style of "surat PARSI TECHNICAL and industrial INSTITUTE, SURAT". On 8- 10-1943, Shirinbai and Dhabbai Sorabji Paruck, two sisters donated a sum of Rs. 4 lacs to this institute with 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 the 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 R. K. Kanga 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 Parsi community to see that the institute is shifted to Bombay. While the proceeding, 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 accumulation to the Surat Parsi Panchayat Trust. The Bombay parsi Panchayat and Surat Parsi Panchyat at this stage entered into an agreement under which Surat Parsi Panchayat handed over the aforesaid amounts to Bombay Parsi Panchayat with the stipulation that Bombay Parsi panchayat will accommodate certain number of students nominated by 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 staled to be still pending. Since the agreement between the Bombay Parsi Panchayat and Surat Parsi panchyat could not be worked out in the absence of sanction from the court, the Surat parsi Panchyat started utilising the income of the Trust to grant scholarships to deserving students standing 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 audit accounts was filed before the Income-tax officer on 3-4-72, the Income-tax Officer noticed the following note of the Chartered accountant of the institute :"the Institute was Ed
