S. Sankarasubban, J.
1. The petitioner is Brahmin Educational Society,Nurani. It is a society registered under the Societies Registration Act, 1860.According to the memorandum of association, it is a society formed solelyfor educational purposes and with a non-profit motive. The objects of thesociety are to establish, maintain and run schools, colleges, polytechnics,etc., to promote studies of Sanskrit and promote research work in art,literature, science and technology, etc. In order to attain the main objects,the society receives donations, grants from persons and also conductschits for raising funds for the purpose of running the educational institutions.
2. The petitioner claimed exemption under Section 80G of the Income-tax Act for donations received. By proceedings dated February 5, 1981, the Commissioner of Income-tax granted exemption under Section 80G for the assessment years 1980-81 and 1981-82. Exemption was renewed for the years 1982-83, 1983-84, 1984-85 and 1985-86. Thereafter, the petitioner filed applications for exemption on various dates for the assessment years 1988-89, 1989-90, 1990-91 and 1991-92. By exhibit P-7, the Income-tax Officer, Palakkad, wanted to know whether the donations received are being used for kuri business. He also wanted to know whether the petitioner claimed exemption under Sections 11 and 12 of the Income-tax Act and whether the petitioner has fulfilled the conditions laid down in Section 12A(a) and (b). To exhibit P-7, the petitioner sent exhibit P-8 reply. In the reply, the petitioner stated that the object of the society is solely to run educational institutions and it runs five educational institutions. The income from the chit business is used for educational purposes. The petitioner further contended that it claimed exemption under Section 10(22) of the Income-tax Act. It also submitted that the donations are used only for the purpose of education. It was further stated that the petitioner is not claiming exemption under Section 11 or Section 12 of the Income-tax Act. By exhibit P-9, the petitioner was informed that as the society derives income from running chits not connected with its objects, exemption cannot be granted. Thereafter, the petitioner filed exhibit P-10 giving details of the transactions and claiming reconsideration of exhibit P-9. Subsequently, the Commissioner passed exhibit P-11 order. In exhibit P-11 it is stated that in view of the provisions of Section 11(4A), the petitioner is not entitled to exemption. The original petition is filed challenging exhibits P-7, P-9 and P-11.
3. Learned counsel for the petitioner, Shri P. Balachandran, contended that exemption had been granted to the petitioner-society regarding the donations, under Section 80G for the various assessment years up to 1987-88. The same position was existing in the assessment years in question. According to learned counsel for the petitioner, the Commissioner has not .applied his mind in passing exhibits P-7, P-9 and P-11 orders. Income of a university or other educational institution existing solely for educational purposes and not for the purpose of profit is not liable to be included in the total income. He further submitted that under Section 80G donations to certain funds and charitable institutions are liable to be deducted in computing the total income of the assessee. The relevant clause in question for the present case is Section 80G(2)(a)(iv) : 'any other fund or any institution to which this section applies'. Sub-section (5)(i) of Section 80G of the Income-tax Act states as follows :
' This section applies to donations to any institution or fund referred to in sub-clause (iv) of Clause (a) of Sub-section (2), only if it is established in India for a charitable purpose and if it fulfils the following conditions, namely : (i) where the institution or fund derives any income, such income would not be liable to inclusion in its total income under the provisions of Sections 11 and 12 or Clause (22) or Clause (22A) or Clause (23) or Clause (23C) of Section 10.'
4. According to learned counsel, if the income is used for the purposeof education, then thp income is not liable to be included. Kuri businessis being done to augment the income of the educational institution andhence the authorities went wrong in denying exemption on the groundthat kuri business is being done. Learned counsel further submitted thatexhibit P-11 refers to section 11(4A). Section 11 is not applicable. Therelevant section is Section 10(22) and hence the conditions in Section 11(4A)are not applicable.
5. Learned counsel for the Revenue submitted that originally the assessee claimed exemption invoking Sections 11 and 12 of the Income-tax Act. He further contended that separate accounts were not maintained with regard to the income from the business and securities. It is also contended that the petitioner is not entitled to exemption with regard to the business income derived and supported exhibits P-7, P-9 and P-11.
6. The first point to be decided is whether it was justified on the part of the Commissioner to deny exemption under Section 80G on the ground that the society is deriving income from running chits. There is no dispute that the income derived from the chits is being made use of for educational purposes. Section 10(22) of the Income-tax Act states as follows :
' any income of a university or other educational institution, existing solely for educational purposes and not for purposes of profit.'
7. The position is well established on the strength of decisions that if a society exists solely for educational purposes and it runs an educational institution, its income will be the income of the educational institution, and, therefore, exempt under Section 10(22). The fact that the assessee had other objects, will not disentitle it to the exemption so long as the activity carried on by it is that of running an educational institution and its activities are not for profit. The question was considered by a Division Bench of this court in CIT v. Sree Narayana Chandrika Trust [1995] 212 ITR 456. Their Lordships were considering Section 10(22A) which is analogous to Section 10(22). Section 10(22A) deals with income of a hospital while Section 10(22) deals with income of an educational institution. In that case tl)e question was whether the income derived from securities can be treated as the income of the hospital. Their Lordships considered various decisions which were mostly on Section 10(22). It was held as follows (page 469) :
' The emphasis, in our opinion, is not on whether the income was derived from the educational institution or hospital itself, but on the purpose for which the institution, trust or society was existing and utilising the income.'
8. Their Lordships referred to the decisions in CIT v. Academy of General Education : [1984]150ITR135(KAR) -where the income sought to be exempted included income from securities, properties and from other sources like dividends, interest, registration fee, donations, etc., and also Governing Body of Rangaraya Medical College v. ITO : [1979]117ITR284(AP) , where the income was by way of compulsory contribution for seats in the college.
9. Thus, going by the reasoning of the Division Bench in CIT v. Sree Narayana Chandrika Trust [1995] 212 ITR 456 and other decisions, it is clear that if ah institution exists solely for the purpose of education and it derives income from any other source and if that income is used only for the purpose of education, then it will come under Section 10(22) of the Income-tax Act, It is clear from the memorandum of association of the society that chits are being conducted in order to make use of the commission for the purpose of education. There is no case for the Department that this amount is being used for any other purpose. In such circumstances, I hold that the Commissioner was wrong in holding that since chit is being conducted, which is a business activity, the petitioner is not entitled to exemption under Section 10(22) of the Income-tax Act. The refusal is based under the provisions of Section 11(4A). According to me, this is a mistake committed by the authorities. Exemption sought for was under Section 10(22). Section 11(4) is applicable only with regard to the income from various properties. It cannot override Section 10(22). Hence, this reasoning is also not correct.
10. In the above view of the matter, I quash exhibits P-7, P-9 and P-11 and direct the respondents to grant certificates under Section 80G of the Income-tax Act to the petitioner for the assessment years required by it. The original petition is allowed.