THE COMMISSIONER OF INCOME-TAX, TVM. vs. SHREE VIDYADHIRAJA VIDYA SAMAJAM
What did the High Court hold?
The High Court upheld the Tribunal's decision. The Court found that the Tribunal had rightly reversed the orders of the AO and the first appellate authority. The Tribunal's view was that the burden of proof rested on the Department (Revenue) to demonstrate that the assessee utilized its income for purposes other than educational activities. Since the AO had not discharged this burden, the assessee was entitled to the exemption under Section 10(22). The High Court found no error in the Tribunal's reasoning and concluded that the assessee's income was primarily used for educational purposes, making it eligible for exemption. The Court answered the questions of law framed by the Revenue against the Revenue and in favour of the assessee, thereby rejecting the appeal.
What were the facts?
The assessee, Shree Vidayadhiraja Vidya Samajam, a society running 16 educational institutions, failed to file its income tax return for assessment year 1988-89. Following a notice under Section 148, the assessee filed a return claiming exemption under Section 10(22). The Assessing Officer (AO) completed the assessment under Section 144, denying the exemption, stating the assessee did not provide sufficient evidence that income was exclusively used for educational purposes. The first appellate authority upheld the AO's view, holding the burden was on the assessee. The Income Tax Appellate Tribunal (ITAT) reversed this, stating the burden was on the Revenue to prove income was used for non-educational purposes. The Revenue is now appealing this ITAT order before the High Court.
What were the issues?
The High Court was asked to decide nine questions of law framed by the Revenue. The core issues revolved around the burden of proof for claiming exemption under Section 10(22) of the Income Tax Act, 1961. The Revenue argued that the assessee, claiming exemption, must discharge the burden of proving its income was solely used for educational purposes and not for profit. They contended the Tribunal wrongly placed the burden on the Revenue and that the Tribunal's findings were perverse, particularly concerning the AO's estimation of income and exclusion of donations. The Revenue questioned whether the Tribunal was right in holding that exemption cannot be denied unless it's proved the institution runs for profit, and whether the assessee discharged its burden. The assessee's contention, as understood from the Tribunal's decision, was that the Revenue failed to prove the income was utilized for purposes other than education, thus entitling them to the exemption.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
JUDGMENT H.L.Dattu,C.J. 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. (2) For the assessment year 1988-89, 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. (3) The assessing authority has completed the assessments under Section 144 of the Act, denying the exemption claimed by the assessee 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. (4) 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 - 2 - 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. (5) 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. (6) Revenue, being aggrieved by the orders so passed by the Tribunal, is before us in these appeals. (7) 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 - 3 - 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?
Whether, on the facts and in the circumstances of the case did the assessee discharge the burden of proof that lay on it?
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?
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?
Whether, on the facts and in the circumstances 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?”
Whether, on the facts and in the circumstances of the case the Tribunal is right in law and fact in holding that “the assessee's receipts are exempt as the assessee is an institution existing solely for educational purposes and not for the purpose of profit? And is not the above finding perverse?
Whether, on the facts and in the circumstances of the case the Tribunal is right in law and fact in not holding that Assessing Officer is right in estimating the income of the assessee as a percentage of the gross receipts and estimating and excluding a part of the donations from that of building fund as no evidence was produced?
Whether, on the facts and in the circumstances of the case the Tribunal is right in law and fact in not holding that Assessing Officer is right in estimating the income of the assessee as a percentage of its receipts when the accounts are found to be defective and reliable? 9. Whether, on the facts and in the circumstances of the case the Tribunal is right in law and fact in not holding that the Commissioner of Income Tax (Appeals) is wrong in directing to adopt the book results of the assessee, as against estimating the income as a percentage of the gross receipts when the books were found to be defective and not reliable?” (8) 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 - 5 - 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. (9) 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 error, whatsoever, which would call for our interference in this appeal. Therefore, while answering the questions of law framed by the Revenue against the Revenue and in favour of the assessee, we reject this appeal. Ordered accordingly.
H.L.Dattu Chief Justice
A.K.Basheer Judge vku/-
More judgments on Section 10(22)
- DCIT(Exemptions)-1(1), Mumbai vs Indian Institute of Banking and Finance…ITA 3394/MUM/2026[2018-19]Status: Disposed19 Aug 2026AY 2018-19
- DCIT(Exemptions)-1(1), Mumbai vs Indian Institute of Banking and Finance…ITA 3393/MUM/2026[2017-18]Status: Disposed19 Aug 2026AY 2017-18
- DCIT(Exemptions)-1(1), Mumbai vs Indian Institute of Banking and Finance…ITA 3392/MUM/2026[2016-17]Status: Disposed7 Aug 2026AY 2016-17
- DCIT(Exemptions)-1(1), Mumbai vs Indian Institute of Banking and Finance…ITA 3391/MUM/2026[2015-16]Status: Disposed7 Aug 2026AY 2015-16
- DCIT(Exemptions)-1(1), Mumbai vs Indian Institute of Banking and Finance…ITA 3390/MUM/2026[2014-15]Status: Disposed7 Aug 2026AY 2014-15
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