1. These three appeals by the assessee relate to the assessment years 1975-76, 1976-77 and 1977-78.
2. Tagore Educational Society, Bombay, is the assessee before us. The assessee-society was registered in 1962 under the Societies Registration Act, 1860. It has also been registered with the Charity Commissioner and the Commissioner of Income-tax.
3. The aims and objects of the society have been mentioned in the following words in the constitution of the society : The aims and objects of the society are to start schools and colleges and to found freeships and scholarships to help deserving students to prosecute their higher studies both at home and abroad.
Clause 28 of the Constitution emphasises that the donations received from public would not be used for objects which are inconsistent with the objects of the society.
4. The first assessment was made for the assessment year 1964-65. The assessee filed revision before the Commissioner under Section 264 of the Income-tax Act, 1961 ('the Act'). The revision was allowed and it was held that the assessee was an educational institution within the meaning of Section 10(22) of the Act and its income was exempt from tax under the said provision. It was further observed that there was no question of applying provisions of Section 11 of the Act. The Commissioner, accordingly, cancelled the assessment and directed refund of tax levied by the ITO under Section 11.
5. The assessee continued to obtain this exemption under Section 10(22) till the assessment year 1974-75. However, the order of assessment for the assessment year 1974-75 was revised by the Commissioner under Section 263 of the Act by order dated 28-6-1977, The assessee filed appeal before the Tribunal and the Tribunal by order dated 22-12-1978 in IT Appeal No. 3300 (Bom.) of 1976-77 set aside the order of the Commissioner and restored the order of the ITO granting exemption.
Application for reference under Section 256(1) of the Act filed by the department was dismissed by the Tribunal on 28-9-1979 in RA No. 520 (Bom.) of 1979.
6. In the assessments for the assessment years 1975-76, 1976-77 and 1977-78, the assessee again claimed exemption under Section 10(22).
This exemption was not granted by the ITO. The assessee also sought permission for accumulation of surplus income but that permission was not granted because notice under Section 11(2) for the same had been filed after expiry of period of limitation prescribed for that purpose.
7. The assessee filed appeals before the Commissioner (Appeals) who heard them together and disposed them of by a common order. He confirmed the finding of the ITO that the assessee was not an educational institution within the meaning of that expression in Section 10(22). He further held that permission to accumulate the surplus was rightly rejected because of the delay in filing notice under Section 11(2).
8. Before us, both the findings are challenged by the assessee. It was submitted that running of school or college was not one of the essential conditions for bringing an institution within the ambit of 'educational institution' in Section 10(22). Reliance is placed on a decision of the Tribunal to which reference shall be made subsequently.
9. The learned departmental representative had relied on the elaborate reasons given in the order of the Commissioner (Appeals) and cited the decision in Addl. CIT v. Victoria Technical Institute  120 ITR 358 (Mad.).
10. We have considered the rival submissions and facts on record.
Section 10(22) lays down that in computing the total income of a university or other educational institution existing solely for educational purposes and not for purposes of profit shall not be included. As far as the assessee is concerned, its aim is to start schools and colleges and to found freeships and scholarships to help deserving students to prosecute their higher studies both at home and abroad. There is no other aim and object. Till now, all its activities have been directed to grant freeships and scholarships to help deserving students. The assessee has paid earnest money to acquire a plot, but could not obtain possession and, hence, no school or college could be started. The activity of grant of freeships and scholarships to the deserving students to assist them in prosecuting their studies is an educational activity. There is no allegation that earning of profits is the motive. No activity other than educational was being carried on by the assessee. In the circumstances, the assessee must be deemed to be an educational institution existing solely for educational purposes and not for purpose of profit, within the meaning of Section 10(22). That is why the department allowed exemption for ten years under the said provision and when that exemption was subsequently withdrawn, the Tribunal restored the same.
11. It is true that the words 'other educational institutions' occur in juxtaposition of the word 'university' in Section 10(22). The reason which appealed the Commissioner (Appeals) was that since imparting of education was one of the functions of the university, that function should also be present if an institution has to claim that it is an educational institution. We are unable to agree. There have been instances of affiliating universities, i.e., universities having no teaching departments of their own but which conduct examinations and confer degrees. The educational activity may take many forms. Imparting of education may be one of them but not the only one. Grant of scholarship to students to assist them in prosecuting their studies is also an educational activity and an institution which is engaged solely in such activity and which has kept before it an aim of itself starting schools and colleges, provided it succeeds in obtaining the necessary premises, would be an educational institution within the meaning of Section 10(22).
12. In this connection, decision in the case of Secondary Board of Education v. ITO  86 ITR 408 (Ori.) is significant. The income involved was that derived from compilation, publication, printing and sale of text books. The Board itself was not imparting education. Yet, it was held that its income was exempt under Section 10(22). The Commissioner (Appeals) has distinguished this case on the ground that it was conceded in that case that the Board was an educational institution and the dispute was whether it existed solely for educational purposes and not for purposes of profit. It is true that the second point was examined in detail in that case, but the very fact that it was assumed that it was an educational institution indicated that the point was obvious and was not capable of being controversial.
13. Similarly, in the case of Governing Body of Rangaraya Medical College v. ITO  117 ITR 284 (AP), the object with which the society was founded was only to manage Rangaraya College and its ancillary institution. Its object was not to impart education. Yet, it was held that it was an educational institution. Thus, imparting of education by the society itself is not necessary before it can claim to be an educational institution. If the activities are directed solely for educational purposes, it would be an educational institution.
14. The AAC has strongly relied on the decision of the Supreme Court in Sole Trustee, Loka Shikshana Trust v. CIT  101 ITR 234. In that decision, the question, with which we are concerned, was not involved.
The object of the trust in that case was to educate people of India, in general and of Karnataka, in particular by (a) establishing, conducting and helping, directly or indirectly, institutions calculated to educate the people by spread of knowledge on all matters of general interest and welfare ; (b) founding and running reading rooms and libraries and keeping and conducting printing presses and publishing or enabling publication of books with the object of educating the people ; and (c) supplying the Kannada speaking public with an organ or organs of educated public opinion and conducting journals. The trustees were empowered to utilise moneys and property of the trust in any manner they liked. It was held that the object was not 'education' within the meaning of Section 2(15) of the Act, but an object of general public utility.
15. Thus, the controversy was that when the object was stated in such general words of wide import, whether it could be said that the object was 'education' and not 'general public utility'. It was held that the object was 'general public utility' and not 'education' within the meaning of Section 2(75). According to the Supreme Court, the term 'education' in the said section connoted the process of training and developing the knowledge, skill, the mind and the character of the students by normal schooling and that term had not been used in the wide extensive sense according to which every acquisition of further knowledge constituted education.
16. In the present case, we are not including activity of assisting in acquisition of further knowledge in the general sense of the term 'education' which occurs twice with its grammatical variation in Section 10(22). An institution which grants scholarships to students for prosecuting studies and which has an aim of itself starting schools and colleges (though the latter aim had not been fulfilled in the relevant assessment years) would be an 'educational institution'.
Nothing in the said decision militates against this view.
17. Similarly in Victoria Technical Institute's case (supra) relied on by the learned departmental representative, the question before the Court was not whether the institution which had aim of establishing schools and colleges and whose only activity was to grant freeship and scholarship was an 'educational institution' or not. In the trust deed of that case, there were several clauses which indicated that education was not the predominant object. For that reason, it was held that the object was 'general public utility'.
18. The view which we have taken is supported by the decision of the Calcutta Bench of the Tribunal in Saraswat Poor Students Fund v. ITO  11 TTJ 1 which was considered in Sole Trustee, Loka Shikshana Trust's case (supra). In that case, it was contended that since no school was run by the fund, exemption under Section 10(22) was not available. This contention was rejected and it was held that imparting of education was not one of the conditions for claiming the exemption under Section 10(22) and that the fund was an educational institution existing solely for educational purposes. As such, exemption under the said provisions was available. The present case stands on stronger footing because in addition to grant of scholarships, starting schools and colleges also form an aim and object of the society, although the latter aim had not been achieved in the relevant assessment years. We would follow the said decision of the Tribunal which clinches the issue in favour of the assessee.
19. In any case, it is an established principle that where two reasonable views can be fairly taken while interpreting the provisions of a taxing statute, one in favour of the assessee should be preferred.
In the present case, the department took the stand in favour of the assessee for almost ten years after interpreting Section 10(22) in revision under Section 264. There after, no decision had been reported which rendered the earlier view untenable. The Supreme Court's decision in Sole Trustee, Loka Shikshana Trust's case (supra), as already stated, dealt with a different aspect and nothing stated therein required a change of view on the interpretation of Section 10(22).
20. and 21. [These paras are not reproduced here as they involve minor issues.]