Additional Director of Income Tax Vs. Indo Soviet Medicare and Research - Court Judgment

Excerpt:
1. these appeals are preferred by the revenue against the orders of the cit(a) for different assessment years on common grounds. as such, these were heard together and are being disposed of by this consolidated order for the sake of convenience.2. the common ground in these appeals raised by the revenue is that the cit(a) has erred in allowing benefit of section 10(22) of the it act, 1961, since the work of the assessee relates to the performance of contract and not for providing regular education to anybody interested in learning russian language, etc.3. we have heard the rival submissions and carefully perused the orders of the authorities below and documents placed on record. the facts on the impugned issue borne out from the record are that the assessee is a society registered on 12th aug., 1988, having a separate trust deed mainly with the following aims and objects: "(a) to undertake scientific research in the areas of medical, sciences, technology, rehabilitation's healthcare services, development of formal and informal health delivery and education methods. (b) to provide research facilities for carrying out basic and applied researches in connection with bio-medical systems and disciplines of medicines. (c) to establish, operate, promote, run, maintain, manage institutions engaged in providing medical, dental and para-medical education. advancement of research pertaining, to medical and health technology. to establish collaboration with other national and international institutions. to arrange exchange of scientist, research workers, consultants and experts in various fields of medicine with other countries. (d) to conduct experiments and to undertake and carry on research experiments and tests, related to the concerned research disciplines. (e) to establish, maintain, provide and conduct or assist research laboratories and experimental institutions for scientific research. (f) to give advice or publish and as. otherwise, promote utilisation of research results in the field of medical sciences. (g) to promote, develop and improve scientific exchange of knowledge as well as technical co-operation between research institutions with similar interests and objections. (h) to conduct conferences, refresher courses, lectures, seminars, demonstrations and exhibitions relating to the research done, knowledge generated and results obtained. (i) to make available to others techniques and materials developed as a result of research. (j) to do all acts, matters and things as are identical or conducive to the attainments of the above aims and objectives or any one or more of them." 4. in pursuance of the aforementioned aims, an agreement was reached between the trust and the then ussr state committee (hereinafter called the committee) on public and 'specialised education and a necessary communication was received from the committee by the trust vide letter dt. 13th may, 1989. as a sequel to the 'committees' letter, an mou dt.1st aug., 1989, was executed, according to which students are to be sponsored by the trust in the year 1989-90 after informing/taking permission, of the ministry of human resources development, ministry of health, ministry of finance, ministry of external affairs and the rbi.in ussr, the language of studies has been russian language and as such the foreign students have to undergo one year extra studies for russian language and prepare the classes consisting of physics, chemistry, botany, geology and mathematics, etc., according to their courses. it was further agreed by the assessee that the students should be selected on merit based on the marks obtained in qualifying examination and the interviews would be conducted by the russian and indian experts and representative of the ussr, embassy in india and the office bearer of the trust. further, the selected students had to pay a sum of rs. 30,000 each in the form of demand draft in favour of the trust in the year 1989. the break-up of rs. 30,000 is as follows : rs. 9,000 for travelling expenses from new delhi to moscow rs. 4,000 for selection and interview and the miscellaneous chargesrs. 17,000 for establishment of a centre for russian language and preparatory courses in india.5. for the year 1990, in view of the mou dt. 8th aug., 1990, the selected students had to pay a sum of rs. 50,000 of which break-up is as under : rs. 9,000 for travelling expenses from new delhi to moscowrs. 17,000 for selection and interview and the miscellaneous charges;rs. 34,000 for establishment of a centre for russian language and preparatory courses in india.6. it was further envisaged that the federal government of the ussr would depute the teachers for teaching and training of the students in the proposed centre for russian language and preparatory courses.accordingly, the assessee-trust started school of russian language and preparatory studies in rental premises at 12a, bharati colony, vikas marg, new delhi-92, and employed teachers for russian language and other subjects for the preparatory courses, i.e., physics, chemistry, botany, geology and mathematics. efforts were also made to acquire a piece of land for construction of permanent building for this institution. in february, 1990, the authority of the federal government of the then ussr informed that it would not be possible to exempt the students for their one year study in russian language and preparatory course in ussr, and requested that the money can be utilised for sending various equipments including teaching aids, etc. to various institutions where sponsored indian institution students were going to study. accordingly, the assessee-trust purchased the equipment and wrote to ministry of finance, ministry of human resources development and the rbi for permission to send the equipment to the government of the then ussr. however, the permission was not granted by the aforesaid authorities and the rbi regretted their inability to accede to their request vide their letter dt. 28th june, 1990. in view of this, the trust could not send the equipment to the then ussr. as the equipments were no longer needed by the trust, they were disposed of in the financial year 1990-91, at a loss of rs. 9,79,000 which was debited directly in the balance sheet dt. 31st march, 1991, against the opening credit balance of rs. 40,63,000 under the head tuition fee payable.nonetheless, the committee vide its letter dt. 26th nov., 1991, informed the trust about their full satisfaction with the successful joint co-operation in the field of higher education.7. sometimes in august or september, there was a political restructuring of the republic of former ussr. as a result, the agreement between the trust and the government of former ussr became obsolete. the committee accordingly informed the trust that the monies collected from the selected students in 1989-90 for establishment of a centre for russian language and preparatory courses in india could not be used for that specified purpose and they gave liberty to the trust to utilise the aforementioned money for the object of the trust. in view of the cracking up of the former ussr, the trust could not and did not sponsor any students to the erstwhile ussr after 1990 academic session. accordingly, the trust decided to promote the main object of the trust by sponsoring a school of para-medical education and training in delhi and students were admitted for training and teaching of two years' diploma course in various branches for the sessions 1991-93 and 1992-94. the trust has also made its efforts to purchase its building where the para-medicos could be trained, but could not succeed and the matter is sub-judice. being unable to carry on educational activities on its own, the trust provided financial assistance to various educational institutions in the form of capital money as per the objects of the trust as follows :s. no. date name of the institutions amount1. 3-3-1993 vidarbha medical/education and 20 lakhs2. 6-7-1993 integrated education development 25 lakhs3. 9-9-1993 dalmia educational trust 5 lakhs4. 9-4-1994 integrated education development 5 lakhs 8. all these organisations are duly registered and are engaged in providing education in different fields. the assessee received rs. 17,000 from 239 selected candidates sponsored in 1989 and the total amount of rs. 40,63,000 has been directly taken to the liability side of the balance sheet as on 31st march, 1990, according to the agreement with the committee. this money did not belong to the trust who as far as the money was concerned were trustees and were to utilise the money for establishing a center for russian language and preparatory course as per mou. similarly, rs. 59,84,000 (received from 176 students @ rs. 34,000 each student in 1990) were directly taken to the balance sheet as on 31st march, 1991. the loss of rs. 9,79,000 on sale of equipments was also taken directly to balance sheet and adjusted against the credit balance of rs. 40,63,000.9. the ao denied the exemption under section 10(22) of the act and taxed the surplus income on various grounds which are as under ; "(i) trust is not registered under section 12a of the it act. it has not obtained cbdt's order as envisaged in the proviso to sub-clause (i) of clause (c) of sub-section (2) of section 11 of the it act as its activities go outside india in the form of sending students to russia. . (iii) the institution set up by the foundation is not recognised by education directorate or ugc or any other authority with regard to education. (iv) the assessee has only acted as a via media for sending students to ussr and not conducted any educational activity. (v) the appellant has contravened provision of section 13(1)(c) of the it act r/w section 13(3) as it has paid rent of rs. 24,000 during the year to shri bari ram sahu who was also president of the foundation in december, 1989. (vi) the ao has relied on the decision of hon'ble supreme court in the case of mcd v. children book trust (1992) 63 taxman 385 (sc)." 10. against the denial of exemption, assessee preferred an appeal before the cit(a) with the submission that the ao is not justified in denying the exemption and taxing the surplus in these years which were utilised for educational purpose during the asst. yrs, 1990-91 and 1991-92 and also in subsequent assessment years. it was further contended that whatever amount was collected from the selected students, it was for establishment of a centre for russian language and preparatory course as per the mou executed between the assessee and the committee. as such, the trustees of the trust were not permitted to use this money for their own purposes. accordingly, the funds collected in these assessment years were not the income of the assessee and it was utilised for achieving the object of the assessee. it was further contended before the cit(a) that as per section 2(14)(iia) of the act, income includes voluntary contribution received by a trust created wholly or partly for charitable or religious purpose or by institution established wholly or partly for such purpose by an association or institution referred to in clause (21) or clause (23) or by a fund or trust or institution referred in sub-clause (iv) or sub-clause (v) of clause (23c) of section 10. as such, the contribution received by the trust which is exempted under section 10(22) of the act does not come within the mischief of provision of section 2(14)(iia) of the act.11. it was further contended that the assessee was engaged in educational activities as it entered into an agreement with the ussr committee. it also started school of russian language and preparatory studies in rental premises and employed teachers for russian language and other subjects of the preparatory courses. these teachers taught regular classes of the selected students who were eventually sponsored for higher studies in various institutions in ussr. the school was run for two years till its activities were frustrated by the political restructuring of the republic of former ussr. after this restructuring, the committee informed the assessee that money collected from the sponsored students in the year 1989-90 for establishment of a centre for russian language and preparatory courses in india could not be used for the purpose. the assessee was at liberty to utilise the aforementioned money for carrying out its object. accordingly, the trustees started a school of paramedical education and training where students were admitted and taught for two years diploma for the sessions 1991-93 and 1992-94. the trustees also took steps to have its own building and equipments for training. in the light of these facts, it has been established that the assessee-trust was existing for educational purpose and did not engage in other activities.12. learned counsel for the assessee further pointed out that although for the asst. yrs. 1990-91 and 1991-92, the income exceeded the expenditure of rs. 2,61,916 and rs. 1,51,321, respectively, for the year ending 31st march, 1992, relevant to asst. yr. 1992-93, the expenditure exceeded income by rs. 1,23,870. it was further contended that when the assessee was unable to run the educational activities, it donated rs. 70 lakhs in 1993 and 1994 to different educational institutions. it was further contended that for grant of exemption under section 10(22) requirements were completely different.registration under section 12a(a) is required only for taking exemption under section 11 of the it act. it was also urged that no permission from cbdt was required as the assessee at the time of signing of mou and even thereafter had never informed/envisaged sending money to foreign country. it was only at the request of the ussr committee, the assessee approached the rbi for permission to send medical equipment, but the permission was not granted. he further contended that for running educational activities, the institution may not be recognised by any university or government organisation and for grant of exemption under section 10(22) of the it act, provisions of section 13(1)(c) r/w section 13(3) were not applicable. in support of his contention, the assessee has relied on the following judgments before the cit(a) : (2) the governing body of rang raya medical college v. ito (1979) 117 itr 284 (ap); (6) addl. cit v. surat art silk & cloth manufacturers association (1980) 121 itr 1 (sc).13. the cit(a) reexamined the issue in detail in the light of various judicial pronouncements and arrived at a conclusion that the assessee-society is engaged in educational activities and is entitled for exemption under section 10(22). for grant of exemption under section 10(22), it is not necessary that the trust should be registered under section 12a(a) of the act, as registration under section 12a(a) is made only when the exemption under section 11 is sought. he further held that permission of the rbi or cbdt is only required when the money is required to be sent abroad. he further gave a finding that money collected by the society was to be utilised for setting up of an institution of russian studies for which assessee hired a building and subsequently tried to acquire a land and purchased a flat. he further observed that the assessee is also running a school of para-medical education and training and when it was not able to get land and start educational institution, it donated its money to leading educational institutions for educational purposes as per its aims and objects and as per the permission given by the ussr committee.14. accordingly, permission under section 10(22) was granted and ao was also directed in succeeding years to grant exemption under section 10(22) of the act.15. aggrieved with the orders of the cit(a) for impugned assessment years, revenue has preferred an appeal before the tribunal with the submissions that the assessee has claimed that it was involved in educational activities whereas its activity was confined to sending willing persons to the erstwhile ussr for education. during asst. yrs.1990-91 and 1991-92, the assessee acted as a via media or a conduit for sending persons to educational institutions in ussr whereas these activities are not permitted under the objects of the assessee. learned departmental representative further invited out attention to the bulletin of information for the academic session 1990-91 issued by the assessee with the submission that the assessee did not merely send students for medical courses only, but was willing even to send students for non-science courses, such as journalism, history and physiology for which there was no need of coaching these students in preparatory courses. he further contended that as per bulletin for academic session 1990-91, which was printed before june, 1990, dates of interview are shown as mid-july and the departure schedule as 1st september. in these circumstances, the assessee's contention that it had given exhaustive training to students before sending them to ussr is not tenable as no exhausted training could be given in less than 1-1/2 months' time. thus, the cit(a) has based himself upon incorrect appreciation of facts. furthermore, bulletin nowhere refers to any kind of training or coaching. learned departmental representative further contended that the assessee had received rs. 30,000 from prospective students in the academic year 1989, relevant to the asst. yr. 1990-91, out of which rs. 17,000 were for establishment of a centre for russian language and preparatory course in india, rs. 4,000 for selection and interviews and the miscellaneous charges and rs. 9,000 for travelling expenses. similarly, for academic year 1990, relevant to the asst. yr.1990-91, the assessee had received rs. 50,000 out of which rs. 34,000 were for establishment of a centre for russian language and preparatory courses in india and rs. 7,000 for selection and interviews and the miscellaneous charges and rs. 9,000 for travelling expenses. the amounts received for establishing the so-called centre for russian language and preparatory courses in india were nothing but a revenue receipt which was not brought to tax by the assessee.16. learned departmental representative further invited our attention to the letter written by the assessee to secretaries of ministries of external affairs and finance and the exchange control department of the rbi in which the assessee has stated its objective for supplying technical aids, audio visual aids and computer, etc., whereas as per the bulletin, fund was collected for different purposes. like-wise, in asst. yr. 1991-92 for academic year 1990, assessee has charged rs. 50,000 from each prospective candidate as per the mou dt. 8th aug., 1990, and even before authorisation, the assessee has started charging rs. 50,000 from the prospective candidates as is borne out from the bulletin of information published by it before june, 1990.17. it was further contended that it is not clear from the record how the money for establishing centre for russian language and preparatory courses was sought to be utilised for buying computers, etc. he further contended that permission to supply 100 computers to ussr was sought from the rbi whereas 35 computers were demanded by the ussr republic.this goes to prove that the assessee was never serious about the end use of the funds received from prospective candidates. the permissions being sought by the assessee are merely self-serving. it is also evident from the record that the assessee had not bought these equipments in asst. yr. 1990-91, but in balance sheet for asst. yr.1990-91, the assessee claimed loss of rs. 9,79,000 on account of sale of such equipments. relying on these facts, learned departmental representative emphatically argued that the assessee was never engaged in educational activities. it was rather acting as a conduit or as an agent of the committee for sending students to ussr for further education.18. as such, the ao was right in denying the exemption under section 10(22) of the it act. but, the cit(a) ignored these facts while allowing the appeal of the assessee.19. learned counsellor the assessee, on the other hand, has submitted that the group of eminent people including some senior medical educationists founded a trust in the name of indo-soviet medical education and care research foundation with a main object to promote education specially in the field of medical, technical, allied sciences. the trust in pursuance to its objective, had entered into a collaboration agreement with the then ussr state committee on public and specialised education and the assessee was authorised to sponsor 250 students annually for various courses for the year 1989-95 vide their letter dt. 13th may, 1989. consequently, an mou was signed on 1st aug., 1989, according to which students to be sponsored by the trust, i.e., assessee for study in ussr institution for higher learning and the government of ussr will provide free education, accommodation, books and stipend @ 90 roubles per month in the first year and 100 roubles per month for the subsequent period of stay. accordingly, the trust started a school of russian language and preparatory courses in rental premises at 12a, bharati artist colony, vikas marg, delhi-92, where the prospective students were given comprehensive training and teaching in russian language and other subjects. copies of details of syllabus, study material and question papers are placed on record. as per the terms of collaboration, it was envisaged that the government of former ussr would also depute teachers in these subjects for teaching and training of the prospective students in the aforementioned school as per objectives of the trust, but, due to certain circumstances in the ussr, it could not be materialised. sometimes in february, 1990, the authorities of the government of ussr requested the trust that the fee payable for the asst. yr. 1990-91 can be utilised for sending equipment for teaching aids including computers, etc. to various institutions where indian students were studying to enhance teaching skills of the staff and make the training more effective. accordingly, the trust wrote to the rbi for permission to send the equipments, but it could not obtain the said permission.20. learned, counsel for the assessee further refuted the contention of the learned departmental representative with the submission that learned departmental representative's contentions are based on frivolous arguments on the basis of documents of its own suitability without any substance. learned departmental representative failed to appreciate and consider the relevant documents submitted by the trust regarding the details of course, curriculum, syllabus, study material, question paper and details of teachers in the centre for russian language and preparatory courses where the prospective students were given training for a period of 6 months before sponsoring them to institutions of higher learning in ussr instead of 1-1/2 months as contended by the learned departmental representative, vide their letter dt. 5th jan., 1990. learned counsel for the assessee contended that all students after their successful completion of the studies of 5-6 years in ussr were awarded md (physician) equivalent to mbbs which is recognised by the medical council of india. after the cracking of former ussr, in order to promote the main objective of the trust, the trust established a school for para-medical education and training and students were admitted for training of two year's diploma course for the sessions 1991-92 and 1992-93 in mlt, x-ray and imaging, ecg and ultrasonography, anaesthetic and operation theatre technology, and were awarded the diploma to successful candidates after examination and all of them are gainfully employed, 21. because of political restructuring of the former ussr and formation of cis state, the trust could not continue its collaboration and the society gave liberty to the trust to utilise the fee payable for the objects of the trust. being unable to carry on educational activities of its own, the trust provided financial assistance/donations to various recognised educational institutions in the form of capital money as per the objects of the trust.22. learned counsel for the assessee further contended that trust was neither involved in commercial activities nor its funds were ever used for its trustees or for their personal gain.23. having considered the rival submissions and from a careful perusal of the record, we find that the assessee has placed the enormous evidence on record to prove that it was engaged in educational activities and was giving primary education to the students sponsored to former ussr for higher studies. it is also evident from the record that the assessee had sponsored the students after collecting a consolidated amount of rs. 30,000 in the asst. yr. 1990-91 and rs. 50,000 in asst. yr. 1991-92 for sponsoring their candidature to ussr for higher studies. though the assessee has placed enormous evidence on record to prove that it has given initial coaching to selected candidates before sending them to ussr, but the revenue did not bring anything on record to falsify the contention of the assessee. the contentions of the assessee that they have taken an accommodation on rent at 12a bharati artists colony, vikas marg, delhi-92, and started a school for russian language in preparatory courses and the prospective students were given comprehensive training in russian language and also in the other subjects, were simply denied by the revenue, but they did not bring anything on record to falsify the claim of the assessee by doing necessary investigation. the main issue before us is "whether the assessee is entitled for exemption under section 10(22) of the it act ?". before allowing an exemption, assessee is required to prove that it is engaged in educational activities and imparting education to the students. assessee has also placed the relevant correspondence exchanged with the state committee of ussr to prove that the assessee was solely engaged in educational activities and after the cracking of the former ussr, assessee started its own school to provide para-medical education and training and students were admitted for training of two years' course for the sessions 1991-93 and 1992-94. it is also evident from the. record that when the assessee was unable to continue with this educational activity, it provided financial assistance of rs. 70 lakhs to various educational institutions in the form of capital money and admittedly all the educational institutions are solely engaged in educational activities. the cit(a) examined the issue exhaustively in his order from all angles and after being convinced with the explanations of the assessee, he directed the ao to grant exemption under section 10(22) of the act, while dealing with the impugned issue, the cit(a) has examined various case law on the subject. learned departmental representative, except oral submission, did not bring out anything contrary on record to establish that the assessee was not engaged in educational activities and was doing something for its personal benefit. though the cit(a) has dealt with this issue in various paras, but we feel to reproduce the relevant portion which is as under: "from the foregoing, it is clear that the appellant-society is engaged in educational activities and it is entitled to exemption under section 10(22). for getting exemption under section 10(22), it is not necessary that the trust should be registered under section 12a(a) of the it act as registration under section 12a(a) is required only when exemption under section 11 is sought. besides, the appellant was not required to the take permission either from cbdt or rbi as it was not intending to send money abroad and it never sent money abroad. the money collected by it was to be utilised for setting up an institution of russian studies for which the appellant hired a building and subsequently tried to acquire a land and purchased a flat. the appellant also ran a school of para medical education and training and when it was not able to get land and start educational institution, and it donated all its money to leading educational institutions, educational purposes as per its aims and objects and as per permission given by the ussr committee at whose instance money was collected. the trustees have not got any personal benefit. paying a rent of rs. 2,000 for the entire ground floor in a building on main vikas marg in delhi cannot be said to be excessive or unreasonable so as to attract provision of section 13(1)(c) r/w section 13(3) of the it act. besides, provision of section 13 is not applicable to the appellant as its case is covered under section 10(22) of the it act. the surplus for both the assessment years were in the nature of capital receipts and were also covered under overriding title as the appellant had no control over the same during these two years. as per mou these surpluses were to be utilised for setting up a centre for russian language and preparatory courses in india which was again an educational purpose and when this purpose was not achieved in subsequent years due to break up of the ussr and the money and equipments could not be sent to the ussr, the trustees in their wisdom thought it fit to donate the amount of rs. 70 lakhs to leading educational institutions after receiving intimation and permission from the ussr committee. the trustees cannot be faulted with for the same as the trustees had carried out educational activities as per the aims and objects of the appellant-trust. the ratios of decisions relied upon by the ad are not applicable to the facts of the case. the decision of the supreme court in the case of mcd (supra) is not applicable to the provisions of it act as that has application to the delhi municipal act. similarly, ratio of decision in the case of bihar institute of mining & office surveys v. cit (1994) 208 itr 608 (pat) is not applicable to the appellant which was not running any coaching centre or holding any tutorial classes. it held regular courses in russian language as well as in para-medical and training courses. it is not necessary to spend any surplus money in the same year. the requirement of section 10(22) is fulfilled if the appellant carries on educational activities and spends money collected while carrying educational activities for educational purposes." 24. since the assessee has successfully proved that it was engaged in educational activities and the revenue did not bring anything on record to prove contrary, we agree with the findings of the cit(a), who directed the ao to allow exemption under section 10(22) of the act in the impugned assessment years. we, therefore, confirm the orders of the cit(a).

Judgment:
1. These appeals are preferred by the Revenue against the orders of the CIT(A) for different assessment years on common grounds. As such, these were heard together and are being disposed of by this consolidated order for the sake of convenience.

2. The common ground in these appeals raised by the Revenue is that the CIT(A) has erred in allowing benefit of Section 10(22) of the IT Act, 1961, since the work of the assessee relates to the performance of contract and not for providing regular education to anybody interested in learning Russian language, etc.

3. We have heard the rival submissions and carefully perused the orders of the authorities below and documents placed on record. The facts on the impugned issue borne out from the record are that the assessee is a society registered on 12th Aug., 1988, having a separate trust deed mainly with the following aims and objects: "(a) To undertake scientific research in the areas of medical, sciences, technology, rehabilitation's healthcare services, development of formal and informal health delivery and education methods.

(b) To provide research facilities for carrying out basic and applied researches in connection with bio-medical systems and disciplines of medicines.

(c) To establish, operate, promote, run, maintain, manage institutions engaged in providing medical, dental and para-medical education. Advancement of research pertaining, to medical and health technology. To establish collaboration with other national and international institutions. To arrange exchange of scientist, research workers, consultants and experts in various fields of medicine with other countries.

(d) To conduct experiments and to undertake and carry on research experiments and tests, related to the concerned research disciplines.

(e) To establish, maintain, provide and conduct or assist research laboratories and experimental institutions for scientific research.

(f) To give advice or publish and as. otherwise, promote utilisation of research results in the field of medical sciences.

(g) To promote, develop and improve scientific exchange of knowledge as well as technical co-operation between research institutions with similar interests and objections.

(h) To conduct conferences, refresher courses, lectures, seminars, demonstrations and exhibitions relating to the research done, knowledge generated and results obtained.

(i) To make available to others techniques and materials developed as a result of research.

(j) To do all acts, matters and things as are identical or conducive to the attainments of the above aims and objectives or any one or more of them." 4. In pursuance of the aforementioned aims, an agreement was reached between the trust and the then USSR State Committee (hereinafter called the Committee) on public and 'specialised education and a necessary communication was received from the Committee by the trust vide letter dt. 13th May, 1989. As a sequel to the 'Committees' letter, an MOU dt.

1st Aug., 1989, was executed, according to which students are to be sponsored by the trust in the year 1989-90 after informing/taking permission, of the Ministry of Human Resources Development, Ministry of Health, Ministry of Finance, Ministry of External Affairs and the RBI.In USSR, the language of studies has been Russian language and as such the foreign students have to undergo one year extra studies for Russian language and prepare the classes consisting of physics, chemistry, botany, geology and mathematics, etc., according to their courses. It was further agreed by the assessee that the students should be selected on merit based on the marks obtained in qualifying examination and the interviews would be conducted by the Russian and Indian experts and representative of the USSR, Embassy in India and the office bearer of the trust. Further, the selected students had to pay a sum of Rs. 30,000 each in the form of demand draft in favour of the trust in the year 1989. The break-up of Rs. 30,000 is as follows : Rs. 9,000 For travelling expenses from New Delhi to Moscow Rs. 4,000 For selection and interview and the miscellaneous chargesRs. 17,000 For establishment of a Centre for Russian language and preparatory courses in India.

5. For the year 1990, in view of the MOU dt. 8th Aug., 1990, the selected students had to pay a sum of Rs. 50,000 of Which break-up is as under : Rs. 9,000 For travelling expenses from New Delhi to MoscowRs. 17,000 For selection and interview and the miscellaneous charges;Rs. 34,000 For establishment of a Centre for Russian language and preparatory courses in India.

6. It was further envisaged that the Federal Government of the USSR would depute the teachers for teaching and training of the students in the proposed Centre for Russian language and preparatory courses.

Accordingly, the assessee-trust started school of Russian language and preparatory studies in rental premises at 12A, Bharati Colony, Vikas Marg, New Delhi-92, and employed teachers for Russian language and other subjects for the preparatory courses, i.e., physics, chemistry, botany, geology and mathematics. Efforts were also made to acquire a piece of land for construction of permanent building for this institution. In February, 1990, the authority of the Federal Government of the then USSR informed that it would not be possible to exempt the students for their one year study in Russian language and preparatory course in USSR, and requested that the money can be utilised for sending various equipments including teaching aids, etc. to various institutions where sponsored Indian institution students were going to study. Accordingly, the assessee-trust purchased the equipment and wrote to Ministry of Finance, Ministry of Human Resources Development and the RBI for permission to send the equipment to the Government of the then USSR. However, the permission was not granted by the aforesaid authorities and the RBI regretted their inability to accede to their request vide their letter dt. 28th June, 1990. In view of this, the trust could not send the equipment to the then USSR. As the equipments were no longer needed by the trust, they were disposed of in the financial year 1990-91, at a loss of Rs. 9,79,000 which was debited directly in the balance sheet dt. 31st March, 1991, against the opening credit balance of Rs. 40,63,000 under the head tuition fee payable.

Nonetheless, the Committee vide its letter dt. 26th Nov., 1991, informed the trust about their full satisfaction with the successful joint co-operation in the field of higher education.

7. Sometimes in August or September, there was a political restructuring of the Republic of former USSR. As a result, the agreement between the trust and the Government of former USSR became obsolete. The Committee accordingly informed the trust that the monies collected from the selected students in 1989-90 for establishment of a Centre for Russian language and preparatory courses in India could not be used for that specified purpose and they gave liberty to the trust to utilise the aforementioned money for the object of the trust. In view of the cracking up of the former USSR, the trust could not and did not sponsor any students to the erstwhile USSR after 1990 academic session. Accordingly, the trust decided to promote the main object of the trust by sponsoring a school of para-medical education and training in Delhi and students were admitted for training and teaching of two years' diploma course in various branches for the sessions 1991-93 and 1992-94. The trust has also made its efforts to purchase its building where the para-medicos could be trained, but could not succeed and the matter is sub-judice. Being unable to carry on educational activities on its own, the trust provided financial assistance to various educational institutions in the form of capital money as per the objects of the trust as follows :S. No. Date Name of the Institutions Amount1.

3-3-1993 Vidarbha Medical/Education and 20 lakhs2.

6-7-1993 Integrated Education Development 25 lakhs3.

9-9-1993 Dalmia Educational Trust 5 lakhs4.

9-4-1994 Integrated Education Development 5 lakhs 8. All these organisations are duly registered and are engaged in providing education in different fields. The assessee received Rs. 17,000 from 239 selected candidates sponsored in 1989 and the total amount of Rs. 40,63,000 has been directly taken to the liability side of the balance sheet as on 31st March, 1990, according to the agreement with the Committee. This money did not belong to the trust who as far as the money was concerned were trustees and were to utilise the money for establishing a Center for Russian language and preparatory course as per MOU. Similarly, Rs. 59,84,000 (received from 176 students @ Rs. 34,000 each student in 1990) were directly taken to the balance sheet as on 31st March, 1991. The loss of Rs. 9,79,000 on sale of equipments was also taken directly to balance sheet and adjusted against the credit balance of Rs. 40,63,000.

9. The AO denied the exemption under Section 10(22) of the Act and taxed the surplus income on various grounds which are as under ; "(i) Trust is not registered under Section 12A of the IT Act. It has not obtained CBDT's order as envisaged in the proviso to Sub-clause (i) of Clause (c) of Sub-section (2) of Section 11 of the IT Act as its activities go outside India in the form of sending students to Russia. .

(iii) The institution set up by the foundation is not recognised by Education Directorate or UGC or any other authority with regard to education.

(iv) The assessee has only acted as a via media for sending students to USSR and not conducted any educational activity.

(v) The appellant has contravened provision of Section 13(1)(c) of the IT Act r/w Section 13(3) as it has paid rent of Rs. 24,000 during the year to Shri Bari Ram Sahu who was also president of the foundation in December, 1989.

(vi) The AO has relied on the decision of Hon'ble Supreme Court in the case of MCD v. Children Book Trust (1992) 63 Taxman 385 (SC)." 10. Against the denial of exemption, assessee preferred an appeal before the CIT(A) with the submission that the AO is not justified in denying the exemption and taxing the surplus in these years which were utilised for educational purpose during the asst. yrs, 1990-91 and 1991-92 and also in subsequent assessment years. It was further contended that whatever amount was collected from the selected students, it was for establishment of a Centre for Russian language and preparatory course as per the MOU executed between the assessee and the Committee. As such, the trustees of the trust were not permitted to use this money for their own purposes. Accordingly, the funds collected in these assessment years were not the income of the assessee and it was utilised for achieving the object of the assessee. It was further contended before the CIT(A) that as per Section 2(14)(iia) of the Act, income includes voluntary contribution received by a trust created wholly or partly for charitable or religious purpose or by institution established wholly or partly for such purpose by an association or institution referred to in Clause (21) or Clause (23) or by a fund or trust or institution referred in Sub-clause (iv) or Sub-clause (v) of Clause (23c) of Section 10. As such, the contribution received by the trust which is exempted under Section 10(22) of the Act does not come within the mischief of provision of Section 2(14)(iia) of the Act.

11. It was further contended that the assessee was engaged in educational activities as it entered into an agreement with the USSR Committee. It also started school of Russian language and preparatory studies in rental premises and employed teachers for Russian language and other subjects of the preparatory courses. These teachers taught regular classes of the selected students who were eventually sponsored for higher studies in various institutions in USSR. The school was run for two years till its activities were frustrated by the political restructuring of the republic of former USSR. After this restructuring, the Committee informed the assessee that money collected from the sponsored students in the year 1989-90 for establishment of a Centre for Russian language and preparatory courses in India could not be used for the purpose. The assessee was at liberty to utilise the aforementioned money for carrying out its object. Accordingly, the trustees started a school of paramedical education and training where students were admitted and taught for two years diploma for the sessions 1991-93 and 1992-94. The trustees also took steps to have its own building and equipments for training. In the light of these facts, it has been established that the assessee-trust was existing for educational purpose and did not engage in other activities.

12. Learned counsel for the assessee further pointed out that although for the asst. yrs. 1990-91 and 1991-92, the income exceeded the expenditure of Rs. 2,61,916 and Rs. 1,51,321, respectively, for the year ending 31st March, 1992, relevant to asst. yr. 1992-93, the expenditure exceeded income by Rs. 1,23,870. It was further contended that when the assessee was unable to run the educational activities, it donated Rs. 70 lakhs in 1993 and 1994 to different educational institutions. It was further contended that for grant of exemption under Section 10(22) requirements were completely different.

Registration under Section 12A(a) is required only for taking exemption under Section 11 of the IT Act. It was also urged that no permission from CBDT was required as the assessee at the time of signing of MOU and even thereafter had never informed/envisaged sending money to foreign country. It was only at the request of the USSR Committee, the assessee approached the RBI for permission to send medical equipment, but the permission was not granted. He further contended that for running educational activities, the institution may not be recognised by any university or Government organisation and for grant of exemption under Section 10(22) of the IT Act, provisions of Section 13(1)(c) r/w Section 13(3) were not applicable. In support of his contention, the assessee has relied on the following judgments before the CIT(A) : (2) The Governing Body of Rang Raya Medical College v. ITO (1979) 117 ITR 284 (AP); (6) Addl. CIT v. Surat Art Silk & Cloth Manufacturers Association (1980) 121 ITR 1 (SC).

13. The CIT(A) reexamined the issue in detail in the light of various judicial pronouncements and arrived at a conclusion that the assessee-society is engaged in educational activities and is entitled for exemption under Section 10(22). For grant of exemption under Section 10(22), it is not necessary that the trust should be registered under Section 12A(a) of the Act, as registration under Section 12A(a) is made only when the exemption under Section 11 is sought. He further held that permission of the RBI or CBDT is only required when the money is required to be sent abroad. He further gave a finding that money collected by the society was to be utilised for setting up of an institution of Russian studies for which assessee hired a building and subsequently tried to acquire a land and purchased a flat. He further observed that the assessee is also running a school of para-medical education and training and when it was not able to get land and start educational institution, it donated its money to leading educational institutions for educational purposes as per its aims and objects and as per the permission given by the USSR Committee.

14. Accordingly, permission under Section 10(22) was granted and AO was also directed in succeeding years to grant exemption under Section 10(22) of the Act.

15. Aggrieved with the orders of the CIT(A) for impugned assessment years, Revenue has preferred an appeal before the Tribunal with the submissions that the assessee has claimed that it was involved in educational activities whereas its activity was confined to sending willing persons to the erstwhile USSR for education. During asst. yrs.

1990-91 and 1991-92, the assessee acted as a via media or a conduit for sending persons to educational institutions in USSR whereas these activities are not permitted under the objects of the assessee. Learned Departmental Representative further invited out attention to the bulletin of information for the academic session 1990-91 issued by the assessee with the submission that the assessee did not merely send students for medical courses only, but was willing even to send students for non-science courses, such as journalism, history and physiology for which there was no need of coaching these students in preparatory courses. He further contended that as per bulletin for academic session 1990-91, which was printed before June, 1990, dates of interview are shown as mid-July and the departure schedule as 1st September. In these circumstances, the assessee's contention that it had given exhaustive training to students before sending them to USSR is not tenable as no exhausted training could be given in less than 1-1/2 months' time. Thus, the CIT(A) has based himself upon incorrect appreciation of facts. Furthermore, bulletin nowhere refers to any kind of training or coaching. Learned Departmental Representative further contended that the assessee had received Rs. 30,000 from prospective students in the academic year 1989, relevant to the asst. yr. 1990-91, out of which Rs. 17,000 were for establishment of a Centre for Russian language and preparatory course in India, Rs. 4,000 for selection and interviews and the miscellaneous charges and Rs. 9,000 for travelling expenses. Similarly, for academic year 1990, relevant to the asst. yr.

1990-91, the assessee had received Rs. 50,000 out of which Rs. 34,000 were for establishment of a Centre for Russian language and preparatory courses in India and Rs. 7,000 for selection and interviews and the miscellaneous charges and Rs. 9,000 for travelling expenses. The amounts received for establishing the so-called Centre for Russian language and preparatory courses in India were nothing but a revenue receipt which was not brought to tax by the assessee.

16. Learned Departmental Representative further invited our attention to the letter written by the assessee to Secretaries of Ministries of External Affairs and Finance and the Exchange Control Department of the RBI in which the assessee has stated its objective for supplying technical aids, audio visual aids and computer, etc., whereas as per the bulletin, fund was collected for different purposes. Like-wise, in asst. yr. 1991-92 for academic year 1990, assessee has charged Rs. 50,000 from each prospective candidate as per the MOU dt. 8th Aug., 1990, and even before authorisation, the assessee has started charging Rs. 50,000 from the prospective candidates as is borne out from the bulletin of information published by it before June, 1990.

17. It was further contended that it is not clear from the record how the money for establishing centre for Russian language and preparatory courses was sought to be utilised for buying computers, etc. He further contended that permission to supply 100 computers to USSR was sought from the RBI whereas 35 computers were demanded by the USSR Republic.

This goes to prove that the assessee was never serious about the end use of the funds received from prospective candidates. The permissions being sought by the assessee are merely self-serving. It is also evident from the record that the assessee had not bought these equipments in asst. yr. 1990-91, but in balance sheet for asst. yr.

1990-91, the assessee claimed loss of Rs. 9,79,000 on account of sale of such equipments. Relying on these facts, learned Departmental Representative emphatically argued that the assessee was never engaged in educational activities. It was rather acting as a conduit or as an agent of the Committee for sending students to USSR for further education.

18. As such, the AO was right in denying the exemption under Section 10(22) of the IT Act. But, the CIT(A) ignored these facts while allowing the appeal of the assessee.

19. Learned counsellor the assessee, on the other hand, has submitted that the group of eminent people including some senior medical educationists founded a trust in the name of Indo-Soviet Medical Education and Care Research Foundation with a main object to promote education specially in the field of medical, technical, allied sciences. The trust in pursuance to its objective, had entered into a collaboration agreement with the then USSR State Committee on public and specialised education and the assessee was authorised to sponsor 250 students annually for various courses for the year 1989-95 vide their letter dt. 13th May, 1989. Consequently, an MOU was signed on 1st Aug., 1989, according to which students to be sponsored by the trust, i.e., assessee for study in USSR institution for higher learning and the Government of USSR will provide free education, accommodation, books and stipend @ 90 Roubles per month in the first year and 100 Roubles per month for the subsequent period of stay. Accordingly, the trust started a school of Russian language and preparatory courses in rental premises at 12A, Bharati Artist Colony, Vikas Marg, Delhi-92, where the prospective students were given comprehensive training and teaching in Russian language and other subjects. Copies of details of syllabus, study material and question papers are placed on record. As per the terms of collaboration, it was envisaged that the Government of former USSR would also depute teachers in these subjects for teaching and training of the prospective students in the aforementioned school as per objectives of the trust, but, due to certain circumstances in the USSR, it could not be materialised. Sometimes in February, 1990, the authorities of the Government of USSR requested the trust that the fee payable for the asst. yr. 1990-91 can be utilised for sending equipment for teaching aids including computers, etc. to various institutions where Indian students were studying to enhance teaching skills of the staff and make the training more effective. Accordingly, the trust wrote to the RBI for permission to send the equipments, but it could not obtain the said permission.

20. Learned, counsel for the assessee further refuted the contention of the learned Departmental Representative with the submission that learned Departmental Representative's contentions are based on frivolous arguments on the basis of documents of its own suitability without any substance. Learned Departmental Representative failed to appreciate and consider the relevant documents submitted by the trust regarding the details of course, curriculum, syllabus, study material, question paper and details of teachers in the Centre for Russian language and preparatory courses where the prospective students were given training for a period of 6 months before sponsoring them to institutions of higher learning in USSR instead of 1-1/2 months as contended by the learned Departmental Representative, vide their letter dt. 5th Jan., 1990. Learned counsel for the assessee contended that all students after their successful completion of the studies of 5-6 years in USSR were awarded MD (Physician) equivalent to MBBS which is recognised by the Medical Council of India. After the cracking of former USSR, in order to promote the main objective of the trust, the trust established a school for para-medical education and training and students were admitted for training of two year's diploma course for the sessions 1991-92 and 1992-93 in MLT, X-ray and Imaging, ECG and Ultrasonography, Anaesthetic and operation theatre technology, and were awarded the diploma to successful candidates after examination and all of them are gainfully employed, 21. Because of political restructuring of the former USSR and formation of CIS State, the trust could not continue its collaboration and the society gave liberty to the trust to utilise the fee payable for the objects of the trust. Being unable to carry on educational activities of its own, the trust provided financial assistance/donations to various recognised educational institutions in the form of capital money as per the objects of the trust.

22. Learned counsel for the assessee further contended that trust was neither involved in commercial activities nor its funds were ever used for its trustees or for their personal gain.

23. Having considered the rival submissions and from a careful perusal of the record, we find that the assessee has placed the enormous evidence on record to prove that it was engaged in educational activities and was giving primary education to the students sponsored to former USSR for higher studies. It is also evident from the record that the assessee had sponsored the students after collecting a consolidated amount of Rs. 30,000 in the asst. yr. 1990-91 and Rs. 50,000 in asst. yr. 1991-92 for sponsoring their candidature to USSR for higher studies. Though the assessee has placed enormous evidence on record to prove that it has given initial coaching to selected candidates before sending them to USSR, but the Revenue did not bring anything on record to falsify the contention of the assessee. The contentions of the assessee that they have taken an accommodation on rent at 12A Bharati Artists Colony, Vikas Marg, Delhi-92, and started a school for Russian language in preparatory courses and the prospective students were given comprehensive training in Russian language and also in the other subjects, were simply denied by the Revenue, but they did not bring anything on record to falsify the claim of the assessee by doing necessary investigation. The main issue before us is "whether the assessee is entitled for exemption under Section 10(22) of the IT Act ?". Before allowing an exemption, assessee is required to prove that it is engaged in educational activities and imparting education to the students. Assessee has also placed the relevant correspondence exchanged with the State Committee of USSR to prove that the assessee was solely engaged in educational activities and after the cracking of the former USSR, assessee started its own school to provide para-medical education and training and students were admitted for training of two years' course for the sessions 1991-93 and 1992-94. It is also evident from the. record that when the assessee was unable to continue with this educational activity, it provided financial assistance of Rs. 70 lakhs to various educational institutions in the form of capital money and admittedly all the educational institutions are solely engaged in educational activities. The CIT(A) examined the issue exhaustively in his order from all angles and after being convinced with the explanations of the assessee, he directed the AO to grant exemption under Section 10(22) of the Act, While dealing with the impugned issue, the CIT(A) has examined various case law on the subject. Learned Departmental Representative, except oral submission, did not bring out anything contrary on record to establish that the assessee was not engaged in educational activities and was doing something for its personal benefit. Though the CIT(A) has dealt with this issue in various paras, but we feel to reproduce the relevant portion which is as under: "From the foregoing, it is clear that the appellant-society is engaged in educational activities and it is entitled to exemption under Section 10(22). For getting exemption under Section 10(22), it is not necessary that the trust should be registered under Section 12A(a) of the IT Act as registration under Section 12A(a) is required only when exemption under Section 11 is sought. Besides, the appellant was not required to the take permission either from CBDT or RBI as it was not intending to send money abroad and it never sent money abroad. The money collected by it was to be utilised for setting up an Institution of Russian Studies for which the appellant hired a building and subsequently tried to acquire a land and purchased a flat. The appellant also ran a school of para medical education and training and when it was not able to get land and start educational institution, and it donated all its money to leading educational institutions, educational purposes as per its aims and objects and as per permission given by the USSR Committee at whose instance money was collected. The trustees have not got any personal benefit. Paying a rent of Rs. 2,000 for the entire ground floor in a building on main Vikas Marg in Delhi cannot be said to be excessive or unreasonable so as to attract provision of Section 13(1)(c) r/w Section 13(3) of the IT Act. Besides, provision of Section 13 is not applicable to the appellant as its case is covered under Section 10(22) of the IT Act. The surplus for both the assessment years were in the nature of capital receipts and were also covered under overriding title as the appellant had no control over the same during these two years. As per MOU these surpluses were to be utilised for setting up a Centre for Russian language and preparatory courses in India which was again an educational purpose and when this purpose was not achieved in subsequent years due to break up of the USSR and the money and equipments could not be sent to the USSR, the trustees in their wisdom thought it fit to donate the amount of Rs. 70 lakhs to leading educational institutions after receiving intimation and permission from the USSR Committee. The trustees cannot be faulted with for the same as the trustees had carried out educational activities as per the aims and objects of the appellant-trust. The ratios of decisions relied upon by the Ad are not applicable to the facts of the case. The decision of the Supreme Court in the case of MCD (supra) is not applicable to the provisions of IT Act as that has application to the Delhi Municipal Act. Similarly, ratio of decision in the case of Bihar Institute of Mining & Office Surveys v. CIT (1994) 208 ITR 608 (Pat) is not applicable to the appellant which was not running any coaching centre or holding any tutorial classes. It held regular courses in Russian language as well as in para-medical and training courses. It is not necessary to spend any surplus money in the same year. The requirement of Section 10(22) is fulfilled if the appellant carries on educational activities and spends money collected while carrying educational activities for educational purposes." 24. Since the assessee has successfully proved that it was engaged in educational activities and the Revenue did not bring anything on record to prove contrary, we agree with the findings of the CIT(A), who directed the AO to allow exemption under Section 10(22) of the Act in the impugned assessment years. We, therefore, confirm the orders of the CIT(A).