An educational institution that exists solely for educational purposes and not for profit is entitled to exemption from tax under section 10(22) of the Income-tax Act, 1961.

JUDGMENT :

R. K. Abichandani, J.

The assessee, Gujarat State Co-operative Union, Ahmedabad, in its return for the assessment years 1972-73 to 1975-76, claimed before the Income-tax Officer that the surplus realised by it should be set off against the past losses which were determined and ascertained. The application was made under section 154 of the Income-tax Act, 1961 (hereinafter referred to as the said "Act"), after the original assessments were concluded. The assessee-Co-operative Union also claimed that the activities carried on by it were covered by the provisions of section 10(22) of the Act as it was an educational institution existing solely for educational purposes and was, therefore, entitled to exemption from tax for the assessment years 1972-73 to 1977-78. The Income-tax Officer rejected the contention of the assessee on both the counts. The assessee, therefore, appealed to the Commissioner of Income-tax (Appeals) for some years and to the Appellate Assistant Commissioner for other years and these appeals were allowed on both the counts. The appellate authorities held that the assessee was entitled to carry forward and set off of past losses and further it was also entitled to exemption in respect of its income under section 10(22) of the Act. The Revenue challenged the order of the appellate authorities before the Income-tax Appellate Tribunal and the Tribunal, by its common order dated September 15, 1984, for all the assessment years, held that the assessee was not entitled to carry forward and set off of the past losses in rectification proceedings as it was debatable as to whether the assessee had any business income and such questions could not be gone into in rectification proceedings. The Tribunal, however, held that the past losses were ascertained by the concerned Income- tax Officer in their respective years and, therefore, the Income-tax Officer was bound to examine his records for deciding whether previous years' losses were available for being carried forward and set off against the income in subsequent years. The Tribunal also held that, the assessee was not entitled to exemption under section 10(22) of the Act since the objects of the assessee could not be considered to be educational in view of the meaning given to the word "education" by the Supreme Court in its decision in Sole Trustee, Loka Shikshana Trust v. CIT 1975 (101) ITR 234 (SC). The Tribunal, in the above background, referred, at the instance of the assessee-Co-operative Union, the following question under section 256(1) of the Act for the opinion of the High Court :

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the applicant was not entitled to exemption from tax under section 10(22) of the Income-tax Act, 1961, for the assessment years 1972-73 to 1977-78 ?"

2. It was contended by learned counsel, Mr. K. H. Kaji, appearing for the assessee-Co-operative Union, that the objects of the assessee clearly disclose that it was an educational institution within the meaning of section 10(22) of the Act. He also submitted that the institution was not existing for purposes of profit but was existing solely for educational purposes. Mr. Shelat, learned counsel appearing for the Revenue, on the other hand, strongly contended that, since some of the objects of the assessee-Co-operative Union could not be described as educational in nature, the assessee was not an institution existing solely for educational purposes, and, therefore, it was not entitled to the benefit of section 10(22) of the Act. He submitted that, for an educational institution, it was essential that there should be a teacher and taught relationship which was absent in the present case, since education was not being imparted in the manner as is done in the universities. In support of this contention, Mr. Shelat placed strong reliance on the observations made by the Supreme Court in Loka Shikshana Trust's case 1975 (101) ITR 2