1. This is an appeal filed by the assessee against the order of the learned first appellate authority in which the following grounds have been taken : "1. Because the learned CIT(A) has erred in law and on facts in holding that the appellant institution was not entitled to the exemption envisaged under s. 10(22) of the IT Act, 1991, and in holding that it was liable to be assessed at an income of Rs. 36,15,633 represented by the surplus shown in the P&L a/c as against 'Nil' income shown by appellant in the return filed in compliance with the notice under s. 142(1).
2. Because a correct reading of "Aims and Objects" of the appellant society coupled with the activities actually carried on by it ever since its inception, go to prove unmistakably that it existed solely for education purposes and not for purpose of profit and accordingly the appellant's claim for exemption under s. 10(22) was justified and true on facts as well as in law.
3. Because in any case, the findings given by the learned CIT(A) and the order passed by him amounted to : (a) finding out new source of income which was beyond the scope of his appellate jurisdiction, and (b) enhancement in the income of the appellant, without complying with the mandatory requirements in this regard, and the impugned order is, therefore, wholly vitiated illegal and without jurisdiction.
4. Because the learned CIT(A) has ened in law and on facts in holding that the appellant society did not exist solely for 'educational purpose' and in holding that the benefit of exemption as contained in s. 10(22) was not available to it.
5. Because various 'aims and objects' with which the appellant society came into existence/fall squarely within the category of 'educational purpose' and finding to the contrary is wholly inconsistent with the material and evidence as were on record.
6. Because the case law referred to and relied upon by the learned CIT(A) for coming to the conclusion that the appellant society did not exist solely for 'education purposes' and was, therefore, not entitled to relief under s. 10(22) of the IT Act, 1961 had been delivered in an altogether different context and background having no bearing on the case of the appellant and the finding that the entire surplus of Rs. 36,15,633 as revealed by the relevant P&L a/c attracted taxation under the IT Act, 1961, are not justified either on facts or in law.
7. Because in any case and without prejudice to the contention in than foregoing grounds, the learned CIT(A) after having himself found and accepted that the surplus of Rs. 36,15,633 as was revealed by the P&L a/c originated solely from the activities carried on for 'educational purposes' should have held that no part of the same was taxable and even the income of Rs. 9,12,760 which was subjected to tax in its hands by the AO was liable to be excluded.
8. Because the basic character of the appellant society that it carried all through its existence only such activities as were relevant for educational purposes, could not be said to have altered merely for the reason that by virtue of by-laws the society could have carried on some other objects which according to the learned CIT(A) were not connected with 'educational purposes' so long as the fact remained that : (b) the entire surplus had undisputedly originated from the activities connected with 'educational purposes'.
9. Because the order appealed against is contrary to the facts, law and principles of natural justice.
In support of the contentions raised in the grounds of appeal as many as 4 volumes of paper book were fined on behalf of the assessee and written submissions by the Department are also on record. So far as the facts of the case are concerned there is hardly any dispute.
In fact, there is no dispute. The controversial point in this appeal is whether the conditions laid down in s. 10(22) of the IT Act, 1961, are satisfied or not. The crux of the matter in this appeal is the applicability or otherwise of exemption under s. 10(22) of the IT Act, 1961. If it is found that the appellant institution can be said to be existing solely for educational purposes and not for purposes of profit, the income of the institution will be exempt under s. 10(22)-on the contrary if it is established that the institution is existing not solely for educational purposes but for purposes of profit then the exemption under s. 10(22) of the IT Act will not be available to the assessee. Before adjudicating upon the controversy not debated in this appeal, it will be necessary to narrate in some detail the sequence of events that took place in this case.
2. The institution City Montessori School is in existence since 1963 onwards. There are 16 branches and there are 18,000 students in all getting education in various branches of this institution, City Montessori School, Lucknow. Notice under s. 142(1) asking the assessee to furnish the return for the asst. yr. 1991-92 was issued. Return of income was filed on 25th February, 1992, in compliance with the above-mentioned notice. The assessee filed the return of income showing nil income claiming exemption under s. 10(22) of the IT Act, 1961. The observation and finding of the AO in the order dt. 31st March 1993/28th April, 1993, is as under : "The assessee is an educational institution which has sought exemption under s. 10(22) of the IT Act, 1961. From the details and accounts filed during the hearing and placed on record, it is seen that surplus during the year is shown at Rs. 36,15,633. The source of income is shown to be fees and fines, sales of forms miscellaneous income and profit on sale of assets. Interest income earned by the assessee shown during the year is Rs. 9,12,761.
In the succeeding paragraph also, the AO observed that during the year under consideration (1991-92), though the assessee is engaged in the running of educational institution in the name of City Montessori School, income of Rs. 9,12,761 shown under the head 'interest', according to the perception of the AO did not seem to have relation with the educational activities. The nature of this income was that of interest on fixed deposits. The AO further noted that the fixed deposits made by the assessee were not under any legal obligation to carry out educational activity. In the case of Addl. CIT vs. Aditanar Educational Institution (1979) 118 ITR 235 (Mad), it was held that income which was incidental to running of educational institution was not exempt under s. 10(22) of the IT Act. The assessee's contention before the AO was that ratio of the aforesaid Madras High Court's decision did not adversely affect the case of the assessee because in the case of the assessee interest arose out of the surplus funds available with the banks. However, the AO found that this interest income of Rs. 9,12,761 shown in the P&L a/c did not have any bearing to the educational activity and be brought to tax this amount of interest.
3. The assessee filed appeal against this order of the AO before the learned first appellate authority and the latter for the reasons discussed in the appellate order dt. 5th September, 1994 not only confirmed the ITO's action to bring the interest income to tax but also enhanced the assessment and after giving the assessee proper opportunity of being heard in accordance with law, assessed income of the assessee institution at Rs. 36,15,633 in the status of AOP. The assessee produced before the Departmental authorities copy of the assessee's constitution, filed replies dt. 10th August, 1994, placed reliance on CIT vs. St. Xaviers (1990) 184 ITR 284 (Pat) and produced all the voluminous material, copies of which were filed before the Tribunal also to convince the first appellate authority that all the conditions mentioned in s. 10.(22) of the IT Act were satisfied in this case but for the reasons discussed in paras 2.7 to 2.20, the first appellate authority negatived the contention of the assessee and as stated earlier enhanced the assessment of the assessee institution to Rs. 36,15,633 in the status of AOP.4. The assessee is in appeal before us with the grounds which have been reproduced above. It will be relevant to point out here that the appellant filed an application under r. 29 r/w r. 10 of IT (Appellate Tribunal) Rules, 1963 requesting the Tribunal to admit certain additional evidence in the special circumstances of this case. Rival submissions were heard on this petition and an order was passed by this Bench on 31st March, 1995. The Tribunal in the special circumstances of the case, allowed the additional pieces of evidence to be filed in this case for consideration and for adjudication on the controversy which is the crux of appeal here. It will be futile to reproduce the reasons for allowing additional evidence in this order, but it will be relevant and just to observe that the aforesaid order allowing the assessee's petition under r. 29 r/w r. 10 of IT (Appellate Tribunal) Rules, 1963 should be taken to be a part of this order as well. It will be sufficient if briefly the gist of the order is incorporated at this place. In this petition, an affidavit dt. 7th January, 1995, along with annexures and 22 documents mentioned in the index of the paper book had been filed. The learned Departmental Representative vehemently opposed the admission of these pieces of evidence, which were riot before the AO. Notwithstanding the situation, the Tribunal allowed the petition because it noted that the institution was in existence from 1963 onwards. No return was filed for earlier years. For the first time, income-tax return was filed on 25th February, 1992, in response to notice under s. 142(1) issued by the Department claiming exemption under s. 10(22) of the Act. The ITO had noted that even though the assessee institution was exempt under s. 10(22), interest income, as discussed in para 3 of the assessment order was liable to be taxed under the head 'Other sources'. It was for the first time before the learned first appellate authority that the learned first appellate authority examined the aims and objects of the school and it was for the first time that the first appellate authority gave a finding that the school did not exist for the purpose of education. The first appellate authority formed the view that the assessee's claim for exemption under s. 10(22) was not acceptable and the assessee was given opportunity to explain. In the show-cause notice for enhancement, a few points had been raised by the first appellate authority and some of which were later on dropped. In the grounds of appeal before the Tribunal, this finding of the first appellate authority for enhancing the assessment of the AO was assailed. In para 2.19, the first appellate authority observed that the surplus of Rs. 36,15,633 with the appellant generated during this year could be applied on the objects, which in this perception, did not fall within the definition of educational purposes. According to the first appellate authority this was not the income of the educational institution existing solely for educational purposes. It was in this background that the question of admissibility of additional pieces of evidence, which were not before the AO arose. The Tribunal made it clear in the order admitting the additional evidence that the admission of additional evidence should not be considered in the slightest to mean the verdict of the Tribunal or adjudication on the merits of the case. Subsequently, however, all those pieces of evidence, which were admitted were relied upon and they were considered at the time of final hearing of the case. The Tribunal found it necessary to admit those pieces of evidence and allowed the petition under r. 29 r/w r. 10 in the interest of substantial justice to the assessee. Reasons were incorporated in that order of the Tribunal. The learned first appellate authority enhanced the assessment and attacked the very existence of the institution by holding that provisions of s. 10(22) of the Act were not applicable to the assessee even though the AO had found otherwise and the AO had assessed only interest income. Thus, as a matter of fact before the Tribunal, it was for the first time that the assessee was given opportunity to have its say against the finding of the first appellate authority. The principles of natural justice and fair play, therefore, dictated that even those additional pieces, which were not before the AO were entertained, of course subject to the condition that the Department was given proper opportunity to file counter-affidavit, which was no doubt filed and which was considered by the Tribunal. The Tribunal allowed the additional pieces of evidence also for the reasons that the rules of natural justice that have been held dear to heart by the highest judicial authority of the country, namely, the Hon'ble Supreme Court and earlier the Privy Council always believed that the doors of justice should not be shut or closed to the assessee for producing the evidence so that the Courts or the Tribunal are able to arrive at the proper and legal conclusion. The Tribunal was also guided by the decision of the Hon'ble High Court in Birla Vidya Vihar Trust vs. CIT (1981) 136 ITR 445 (Cal) wherein it has been held that all the factors will have to be taken into consideration and the expression existing in s. 10(22) must not be judged with reference to the facts of the relevant year only.
The facts of the relevant year would be very material to decide whether an institution existed for any particular purpose or not and the same cannot be judged only by the facts of one year. Further, the Tribunal was guided by the fact that fortuitous factor of having large surplus in any particular year or the solitary fact of diverting some of the income to objects charitable but not educational would not be decisive of the matter. The Tribunal also held that sophisticated and technical rules of evidence did not fetter the authorities under the IT Act. For any other substantial cause, additional evidence can be entertained, See 1965 AIR SC 1008. For proper disposal of the matter and for proper decision of the real controversy, the appellate Court should allow adduction of the document, though the appellant had failed to produce the same during trial (in the case before us during the course of proceedings before the AO and the first appellate authority. In exercise of the discretion, the Tribunal allowed those pieces of evidence in the interest of substantial justice.
5. Further as the hearing proceeded, the Tribunal felt necessary to appraise itself about the actual state of affairs at City Montessori School. With the consent of the parties, 4th November, 1996, was fixed as the date for spot inspection of the schools run by the C.M.S. For this purpose, the main branch situated at Gomtinagar, Lucknow, was chosen. At the time of spot inspection, the learned Senior Departmental Representative, Shri H. D. Dwivedi was present and for the appellant, Shri S. K. Garg, F.C.A. and Shri M. L. Agarwal. Advocate along with Shri Jagdish Gandhi were also present. On-the-spot inspection was made on the appointed date and are order dt. 19th January, 1995, factually incorporating various classes, classrooms, library and reading room, play ground, open air space and various other activities was made. We hereby observe that the order passed with regard to the on-the-spot inspection dt. 19th December, 1995, should also be taken to be a part of this order. This has been done to avoid unnecessary bulk of this order. The Tribunal considered it necessary to do so because a very crucial controversy namely, whether the institution existed for educational purposes or not was involved This controversy was generated because of the enhancement in the assessment and because of the finding of the learned first appellate authority in this case. For this very reason after ferreting the sequence of events and after charting out the background in which the controversy has to be adjudicated upon by us, we proceed to adjudicate upon the main controversy involved in this appeal. For this purpose, the voluminous material placed before us by the rival parties will be referred to briefly.
6. The main thrust of the arguments has been Oven in the synopsis filed by the learned counsel for the appellant which constitutes III paper book filed in this case, copy of which was made available to the learned Senior Departmental Representative also. In this III paper book after giving genesis of the dispute, analysis of ingredients of s.
10(22) of the IT Act, 1961, has been examined. During the course of assessment proceedings, detailed submissions were made by the assessee Profusely extracting from assessee's letters dt. 16th February, 1993 and 2nd March, 1993. The issue of taxability of Rs. 9,12,761 was sought to be covered in favour of the assessee in terms of Circular No. 712 dt. 25th July, 1995, which may reasonably be reproduced here : "Circular No. 712, dt. 25th July, 1995 - Extracted from 'Taxation' fortnightly magazine, Vol. Part I, 128, p. No. 2.
Subject : Sec. 10(22) of the IT Act, 1961 - Investments of funds by education institution covered under s. 10(22) of IT Act - Clarification regarding.
Under s. 10(22) of the IT Act any income of a University or other educational purposes and not for purposes of profit is exempt from tax.
2. The Board have received representation from various institutions which fulfil the condition laid down under s. 10(22) of the Act, but are denied exemption because their funds are not invested in accordance with the provisions of s. 11(5) of the Act. It is hereby clarified that since s. 10(22) does not impose any restriction regarding mode of investments of funds such institutions are not required to invest their funds in the modes specified under s. 11(5) of the IT Act. This clarification will not apply to the institution seeking exemption under s. 11 of the Act." The CIT(A), however, found that 'education' connoted the process of training and developing knowledge of a student by normal schooling. The CIT(A) further held that since the establishment of educational institution was not the sole object of the appellant and imparting of scholastic instructions alone may not be educational purpose, the objects connected with promoting material, mental, physical, cultural and domestic welfare could not be called educational purpose. The CIT(A) also held that since CMS was free to follow objects not related to educational purposes, it does not live with the sole object of education purposes. The surplus of Rs. 36,15,633 generated by the institution during this year could be properly brought to taxation under the IT Act, the CIT(A) held that cl. (3) of the 'Aims and Objects' did fall within the category of educational purposes, but other clauses in the 'Aims and Objects' of the assessee's institution did not fall within the term "educational purposes". It was held that cls. 1 and 2 of 'Aims and Objects' reading as under were outside the domain of activities for educational purposes : "1. To promote material, moral, physical, cultural and domestic welfare of the people.
2. To help the people develop the spirit of natural help, love of labour, and spirit of service to the nation and to the humanity in general." The assessee's reply in this regard was that "Document on Social Moral and Spiritual Values in Education" is an authoritative publication of National Council of Educational Research and Training (NCERT) and this is official authoritative organ of educational policy, copy of which appears at pp. 104 to 159 of the paper book and in the foreword of this document, the following deserves to be incorporated in this order. This is reproduction of p. 16 of the III paper book filed by the assessee : "A school curriculum has to respond to the needs and aspiration of a changing society and so it undergoes transformation. This is a growing realisation today that amongst other things, a fresh look at the place of values in the school curriculum in needed. The Indian society presents a pluralistic composite culture shared by various linguistic, religious and other groups, your pupils coming from different castes, creeds, economic and cultural background study in the same classroom. We are however, an ancient civilisation and carry with us the message of peace, non-violence, human brotherhood and such other positive values to the world at large. It is against this backdrop that the question of moral values in education has to be considered today." The British policy of religious neutrality was devoid of any education programmes for cultivating spiritual and moral values through formal education. After independence, there has all along been a researching of values necessary for our system of education have strongly recommended the inculcation of values through education.
In order to facilitate the development of programmes/activities on values in the school curriculum, it was considered that the various documents on social, moral and spiritual in the first instance. Such a document could serve a few purposes. viz., it could be used as background material for curriculum development for the promotion of values, it could provide a context in which the various terminologies pertaining to values have been used by the different commissions and committees, and it could also serve as reference material to the researchers working on the problems of moral education.
I am thankful to Dr. B. R. Goyal for preparing the manuscript and I hope that it will be found useful by educators." This document is a compilation of the educational policies of post-British period and the policies that were recommended to be followed by various committees and commissions that had been appointed in post-British. India by the Government of independent India. With reference to the recommendations of various committees as had been set up from time to time. NCERT laid down a list of values development and .......
7. Planning Commission of India also accepted the promotion of which was required to form part of educational system of independent India.
The said document was referred to, besides the report of various committees and commissions, the document "Education for our People" prepared under the Chairmanship of Justice V. M. Tarkunde. The following passage as extracted at p. 17 of the III paper book deserves to be incorporated in this order as well : "The existing education system lays greater emphasis on individualist, competition, verbal fluency or linguistic ability, and more acquisition of information. What is even worse, the ethos of the existing system in highly authoritarian where values such as equality, love or truth or spirit of enquiry cannot be fostered. In the new concepts of education, we should recognise the significance of social objectives co-operations and team work, and commentary of intellectual and manual work, and promotion of skills and building up of character, similarly, great emphasis will have to be placed on promoting a scientific outlook on life and the basic values of pursuit of truth, equality, freedom, justice and dignity of the individual." This is relevant in the context of the present appeal. Later on Ministry of Education. Government of India brought out in 1985 a document styled as "Challenge Of Education A Policy Perspective". The entire document is devoted to the development of society as a whole through media of education. We do not propose to make this order unwieldy or unnecessarily bulky by reproducing all those paragraphs and all those documents, which formed part of the records filed before us.
Specifically we would like to observe that all the extracts and quotations appears at pp. 18, 19 and 20 specially at p. 21 of III paper book should be read as part of this order which has a direct bearing on the main controversy involved in this appeal. We order accordingly.
7. Planning Commission of India also accepted the role of education system for promoting natural development. It will be relevant to mention here that even the Ministry of Education has now been renamed as Human Resources Ministry and not merely Ministry of Education. In this connection, the learned counsel for the assessee relied on 195 ITR 299 (sic), CIT vs. Sorabji Nusserwanji Parkeh (1993) 201 ITR 939 (Guj), Union of India & Anr. vs. Dhrangadhra Chemical Works & Anr. (1977) 106 ITR 443 (SC) and distinguished the assessee's case from the cases relied on by the Department namely : CIT vs. Maharaja Sawai Man Singhji Museum Trust (1988) 169 ITR 379 (Raj), which was a case of Museum and Sole Trustee, Loka Sikshan Sansthan Trust vs. CIT (1975) 101 ITR 234 (SC). The learned counsel for the assessee also drew our attention to the fact that the passage quoted by the CIT is from High Court's order and not from Hon'ble Supreme Court's decision in (1975) 101 ITR 234 (SC) (supra). These are not only high sounding words and ideals. The thrust of the arguments advanced by the learned counsel before us was that all-round development and all those activities which go in the making of a complete man in addition to the regular traditional school education, should be taken to be for education. It has been argued that CMS is a recognised institution for imparting education to students for being eligible to Indian Certificate of Secondary Education Examination (ICSE). The curriculum of the said course provides for a special course of "socially useful and productive work" and community services and for a student seeking the certificate it is not only mandatory to take the said course, but also to obtain pass marks in it. The scope of the subject 'SUPW' has been defined by the ICSE Board itself in its document named as "Social Service in Schools". Besides, CMS has also started L.T. classes from 1989-90 in terms of the permission letter dt.
8th February, 1989, issued by the office of the Director of Education, U.P. (copy appearing at p. 65 of the supplementary paper book). In the L.T. classes, development of educational theory and practices is a part of their curriculum. In the additional paper book which contains an affidavit under r. 10, reference was made to the compilation running to 250 pages and annexures thereto running into pp. 1 to 75 showing as to how the various objects, for which CMS has been formed, have been implemented, achieved and the same remain uncontroverted even in the counter-affidavit filed by the Asstt. CIT on behalf of the respondent.
8. On behalf of the Department, the learned Departmental Representative filed a letter dt. 8th December, 1995, in which certain facts were brought to our knowledge which according to the learned Departmental Representative militated against the grant of exemption under s. 10(22) of the IT Act. These facts are that the school has started coaching classes for the preparation of MBA, Banks, Insurance Co. for which they are charging Rs. 2,500 and this is open to all persons interested in the coaching; that CMS held a world peace prayer ceremony under the auspicious of Society of Prayer of World Peace founded in Japan. This aims to awaken the spirit of love, beauty and harmony in all humanity.
According to the learned Departmental Representative this activity was non-educational. Another factor militating against the assessee's claim of exemption is that at a function at Gomti Nagar Branch, where the Lucknow Sports Journalists Association honoured 12 outstanding sports person of the State and this was also according to the learned Departmental Representative non-educational purpose. Then CMS has also organized summer village camps under the aegis of CISV (Children International Summer Village) which, according to the learned Departmental Representative, is also an activity not relating to education. The thrust of the argument of the learned Departmental Representative was that the surplus for the year under consideration without the assistance from the State, claim of depreciation, high fee charged (Rs. 300 to Rs. 900 per month), payment of salary to Mrs.
Gandhi and non-payment of any salary to Mr. Jagdish Gandhi, coupled with the facts given in the letter dt. 8th December, 1995, referred to above support the order of the learned first appellate authority to the effect that the institution did not merit exemption under s. 10(22) of the IT Act, 1961.
9. We have given our anxious consideration to the voluminous material brought before us by both the parties. In this connection, we are of the view that the appellant i.e. City Montessori School is an educational institution existing solely for educational purposes and not for sources of profit. We have found that the arguments advanced on behalf of the assessee and various case law and documents brought on record, indicate only in the direction i.e., the income of this educational institution has to be exempted under s. 10(22) of the IT Act, 1961, because it is existing solely for educational purposes and not for purposes of profit. At the risk of repetition, the reasons which have persuaded us to record this finding follows : 10. First of all the objections raised by the learned Departmental Representative may briefly be discussed. The first objection of the Department is that there is a surplus. This, by itself, does not help the Department's case much because surplus has to be there if there is any income of any university or any educational institution. The concept of surplus is embedded in the expression "Income". Unless there is surplus or income, there was no question of granting exemption. The clinching factors will be whether the institution is existing solely for educational purposes or for purposes of profit. On this test, all the papers filed before us convince us that CMS, the assessee exists solely for educational purposes and not for purposes of profit. The first objection and probably the most important objection taken by the learned Departmental Representative has no legs to stand. The basic reason as to why additional evidence was allowed by us to be admitted in this appeal and the aim of on-the-spot inspection was to examine the entire infrastructure of the appellant institution because it Would not have been fair to see and evaluate the material for one year in isolation. Once the taxing authority gives a finding that the institution exists for profit, the appellant's existence has been attacked. Having examined the entire material produced before us and having made an on the spot inspection of the institution, we are of categorical finding that, notwithstanding surplus in any year, the appellant is an institution which exists solely for educational purposes and not for purposes of profit. The fine distinction between the expression "educational purposes" and "education" has also been kept in view while recording the aforesaid finding in favour of the appellant-the former expression being wider and broader than the latter.
11. As to the point that the income on fixed deposits has to be taxed, in any case, it is sufficient to refer to the balance sheet and P&L a/c filed by the assessee, which appear at pp. 10 of the III paper book, wherefrom it can be seen that interest received was Rs. 9,12,761 and the interest paid was Rs. 20,48,317. Therefore, even in the interest account, there is no surplus. While taxing interest, it will be highly unjust, illegal and unlawful to tax credit side without allowing adjustment for the debit side. Here, on the overdrafts with the banks, the appellant has paid interest of Rs. 20,48,317. Therefore, it will be fantastic proposition if the Department were allowed to tax interest received to the extent of Rs. 9,12,761 without considering the interest paid to the extent of Rs. 20,48,317. Therefore, the Department's argument that interest received has to be taxed ignoring the quantum of interest paid, is summarily rejected without any further elaborate discussion on that issue. This point is decided in favour of the appellant.
12. As regards the other objections of the learned Departmental Representative, we notice that simply because some accommodation had been allowed for holding coaching classes in the premises charging Rs. 2,500. That by itself, will not disentitle the assessee-educational institution from claiming exemption as long as the income is for the purposes of the education. There is nothing to suggest that huge profit has been made out of this charging of Rs. 2,500 for coaching classes.
Orally, we are given to understand that it was an accommodation allowed to an a ex. Vice Chancellor of Lucknow University and directly the institution has nothing to do with it. This reply in the Court is not evidenced, but we are not on that at the moment. Even if it is presumed that this was charged, that does not militate against the exemption under s. 10(22) of the Act to the assessee. Holding of world peace prayer ceremony under the auspicious of Society of Prayer of World Peace founded in Japan means nothing and we fail to understand as to how holding this prayer ceremony militated against the grant of exemption under s. 10(22) of the IT Act. What profit motive was there in holding this prayer ceremony, is not borne out from records and the same has also not been alleged by the respondent. Similarly holding of function of Lucknow Sports Journalists Association itself means nothing and it cannot be interpreted against the assessee's claim of exemption.
On the contrary sponsoring of Sports Journalists Meet supports the assessee's case if it is considered in depth and in its proper perspective (sic). Lastly, Organisation of Summer village camps under the aegis of CISV (Children International Summer Village) is a point which goes in favour of the aims and objects of the appellant-institution, which aims achieving world brotherhood through education (Vasudhaiv Kutombkam). Achievement of this objective does not militate against the appellant's claim of exemption under s. 10(22) of the IT Act. In fact, this was cited as a concrete step taken by the institution towards achievement of the highest ideals preached in the aims and objects of the deed governing the constitution of appellant educational institution.
13. Before parting, a serious objection raised by the learned Departmental Representative has to be met. There is a claim of depreciation in the balance sheet and P&L a/c of the assessee. The contention of the learned Departmental Representative was that it should be pre-supposed that some business or profession is being carried on and depreciation can be claimed only by an assessee for professional or business purposes. The reply given by the learned counsel for the assessee on this aspect of the matter was that depreciation only reflected decline in the value of assets. It was argued that this issue did not arise out of the order of the CIT(A).
Thirdly, it was argued that it is a matter or book-keeping record and even a charitable institution could make adjustment on account of depreciation. We agree with the reply of the learned counsel for the assessee in this behalf. The claim of depreciation by itself, does not hit, the assessee's claim of exemption under s. 10(22) of the IT Act.
Presuming, without conceding, that some income has been earned by the appellant institution where depreciation has been claimed, as long as it is established that the income has been earned by the institution which exists solely for educational purposes and not for purposes of profit any income of that educational institution will be exempt. After all, what are the ingredients of s. 10(22) of the IT Act, 1961.
Firstly, there should be "any income". Secondly, that income should be of an university or other educational institution. Thirdly, educational institution should exist solely for educational purposes and fourthly, educational institution should not exist for purposes of profit. In view of the aforesaid discussion and in view of the voluminous material placed before us, we are of the opinion that we are concerned with the income of the appellant-educational institution, which does exist solely for educational purposes, and not for purposes of profit. There is another angle which is quite significant. That angle is that in section "Profit" has been used in a particular sense. If the surplus fund had been used for the purposes of comering shares in the share market or for the purposes of acquiring property in the individual names of the organisers of the trust or for any personal purposes of organisers or for the creatures of the trust or institution, then the story would have been different. But that is not the case here. The balance sheet figures indicate that the sources of income are from fees and fines, sales of forms, and saleable material, interest on fixed deposits, miscellaneous income and profit on sale of assets. There are the figures from P&L a/c appearing at p. 31 of the first paper book. In the balance sheet, we notice that under the head "building, furniture and other assets" there are additions of Rs. 25,21,684, Rs. 8,37,588 and Rs. 17,79,893 totalling Rs. 51,39,167 and all these buildings, furniture and other assets belong to the educational institution City Montessori School and they do not stand in the name of any member or relative of the members or any person interested in the management of the institution. These figures go to show that this is an educational institution which solely exists for the purposes of education and not for purposes of profit. Education cannot be confined within the narrow limits of three Rs. reading, writing and arithmetic. Much water has flown down the river Ganges since Macaulay introduced in India the education system, where only three Rs. reigned supreme. Without astray and without going off the mark, the voluminous documents produced before us do indicate that the dogmatic aspect of education had been attempted to be achieved by the present institution, we do not want to be eulogistic of the achievement of this institution because we have to confine ourselves to the controversy raised in this appeal, but we do feel impressed by the fact that without the assistance of the Government, this institution has stood on its own catering to the needs of 18,000 students spread over 16 branches. While holding so, we have been guided by the decision in AIR 1995 SC 293, the relevant para 7 is reproduced below for ready reference : "7. As we are concerned in these cases with the teaching in the secondary schools, we may say something about the importance of education in its early stages. It has been well recognised that it is this education which lays the foundation for a full and intense life and so this education must carefully keep alive the spark of curiosity and fan it into a beautiful, bright flame whenever it comes. It has been stated that it is the education received in early stages which widens the contacts of child or youth with the surroundings of the worlds, and with every new and fruitful contacts with the world of things, the world of men and the world of ideas, life of the young becomes richer and broader, it is early education which seeks to broaden the mind by exposing the learner to the world of thought and reflection, which can inspire him with lofty idealism by giving him the glimpses of a good life which a worthy education is capable of bringing." 14. It is in this context that we may relevantly quote the ideal that was set for education in ancient Sanskrit text .......... (knowledge or education is that which brings out emancipation). That is being quoted by us to demonstrate that the narrow concept of education confined to the 3Rs will not do justice to the assessee's case, which squarely fulfils all the conditions necessary for grant of exemption under s.
10(22) of the IT Act, 1961. All the contentions to the contrary raised by the learned Departmental Representative are found not tenable, and are rejected. The appeal filed by the assessee succeeds and is allowed.