The engagement of a Trust in activities beyond educational purposes can render it ineligible for exemption under Section 11 and 12, as well as benefits under Section 10(22) and Section 10(23c) of the Income Tax Act, 1961.

(Chitra Venkataraman, J.)

1. The assessee has come on appeal as against the order of the Income Tax Appellate Tribunal, Madras "B" Bench, Chennai, dated 03.03.2004 made in ITA Nos.847 to 851/Mds/2003 for the assessment years 1995-1996 to 1999-2000 by raising the following substantial questions of law.

"1. Whether in the facts and circumstances of the case, the Tribunal erred in law in upholding the reassessment when no case was made out for invoking the provisions of Section 147 and Section 148 of the Income Tax Act, 1961?

2. Whether in the facts and circumstances of the case, the Tribunal was justified in denying exemption under Section 11 even though corpus donations were received which are capital receipts not liable for taxation?

3. Whether the Tribunal was justified in denying exemption under Section 10(22) without directing the lower authorities to go into the facts of the case?

4. Whether the Tribunal was justified in considering the applicability of Section 10(22) when the departmental appeal merely disputed the action of CIT (Appeals) in setting aside the assessment without giving a finding himself?

5. Whether the Tribunal was justified in law in overlooking the fact that the deposits in Ramalingam Investments were received by the Trust as bequest as per the Wills executed by the wife and the brother of the testator?

2. Having regard to the common issue involves, common judgment is passed.

3. The assessee herein is a Trust created under the Trust Deed dated 07.06.1989 and the rectification deed dated 18.09.1989. A perusal of the Trust deed shows that apart from providing education, the Trust has objects to construct, renovate, revive or contribute or help in any manner places of education, public halls, choultries, Thirumana mandapams, schools and Colleges etc, to establish, run and maintain the educational institutions, orphanages and to do all activities of advancement of education.

4. A perusal of the Trust Deed further shows that the object is not just restricted to advancement of education alone. It is stated that during the relevant assessment years, the Trust was running two schools for primary and for higher education in Salem. The Trust has also received corpus donations as per the Will executed by R.Susila, wife of Ramalingam, the author of the Trust. The Trust received donations to the tune of Rs.8,81,500/-, which is lying in deposit with M/s Ramalingam Investments, a sister concern of the Trust. These deposits were made in the sister concern by the testators and not by the Trust. It is stated that the Trust enjoyed exemption under Section 11 of the Act. As regards the assessment years in question viz., 1995-1996 to 1999-2000, the 'nil' returns filed were processed under Section 143(1)(a) and the same were accepted. However, the assessments were sought to be re-opened under Section 147 of the Act on the ground that the Trust had made deposits in a sister concern in which the Trustees were interested and hence, there was violation of the provisions of Section 11(5) of the Act, thereby, attracting the provisions of Section 13(1)(d) of the Act. The assessee, however, pleaded that the Trust received contributions to the corpus only and as per Section 12, such capital receipts should not be brought to tax. The objection taken by the assessee was however rejected, which has resulted in the assessee filing the appeals before the Commissioner of Income Tax(Appeals). The Commissioner of Income Tax (Appeals) remanded the matter back to the assessing authority to consider the case of the assessee with reference to the object clause contained in the Trust deed to examine the claim of exemption under Section 10(22) of the Act.

5. Aggrieved by the same, the assessee as well as the revenue came on appeal before the Tribunal. By a common order, the Tribunal considered the claim of the revenue as well as the assessee and pointed out that having regard to the fact that the Trust deed was not existing solely for the ed