1. The question which arises in this reference is :
'Whether the assessee-trust is entitled to claim exemption in respect of its income under s. 10(22) of the I.T. Act, 1961 (hereinafter referred to as 'the Act' ?'
2. The assessee which is known as Sindhu Vidya Mandal Trust, Baroda, runs a primary and secondary school at Baroda. The object for which the assessee trust is established are :
(a) The advancement of education, the spread of all kinds of useful knowledge, and to work for mental, moral and physical welfare of the students; and
(b) To conduct and manage Shri Ladharam Sind Hindu High School and any other educational institution that may be started hereafter in any part of the Bombay State.
3. The assessee derives income from there sources, namely, the primary and secondary school run by it, interest on bank deposits and donations. The assessee filed its return of income for the assessment year 1971-72, claiming that its income was exempt from payment of income-tax under s. 10(22) of the Act. The ITO, however, rejected the claim of the assessee and proceeded to compute the total income of the assessee for the assessment year 1971-72, in the light of the provisions of s. 11(1) of the Act. He held that the assessee-trust's income to extent of Rs. 8,400 which was not applied for the purpose of the trust was liable to be taxed. Feeling aggrieved by the assessment framed by the ITO, the assessee carried the matter in appeal before the AAC. The AAC reversed the finding recorded by the ITO holding that the income derived by the assessee-trust was exempt under s. 10(22) of the Act. In his view the assessee-trust was an organisation existing for promotion of education and, therefore, it was an educational institution, whose income is exempt under s. 10(22) of the Act. The Revenue carried the matter in appeal before the Income-tax Appellate Tribunal (hereinafter referred to as the 'Tribunal).' After enumerating the objects of the assessee-trust, adverted to above, the Tribunal held that the assessee-trust was a body which existed solely for educational purposes and not for purpose of profit. The Tribunal referred to the Oxford Dictionary for the meaning of the word 'institution' and held that having regard to the objects of the assessee-trust, it was an educational institution within the meaning of the word 'institution' and held that having regard to the objects of the assessee-trust, it was an educational institution within the meaning of s. 10(22) of the Act. In the result, it upheld the view taken by the AAC. The Revenue has challenged the view taken by the Tribunal and at its instance the following questions have been referred to us for our opinion under s. 256(1) of the Act :
'(1) Whether, on the facts and in the circumstances of the case, the assessee was an educational institution within the meaning of section 10(22) of the Income-tax Act, 1961, entitled to exemption in respect of its income as such
(2) Whether, the finding of the Tribunal that the assessee was an educational institution within the meaning of section 10(22) of the Act and qualified for exemption in respect of its income as such is correct in law on the basis of the material on record ?'
4. Section 10(22), under which the assessee claims exemption from payment of income-tax, reads as under :
'10, In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included -
(22) any income of a University or other educational institution, existing solely for educational purposes and not for purposes of profit.'
5. Admittedly, the assessee-trust is not a university. The question which falls for our consideration is, whether, it comes within the purview of the expression 'other educational institution'. It is not in dispute that the assessee-trust exits solely for education purposes and not for purposes of profit. Thus the controversy in the present reference lies in a narrow compass what is the meaning to be attributed to words 'educational institution' If the assessee-trust is an educational institution, since there is no doubt that it exists solely for educational purposes and not for purposes of profit, it would be entitled to the exemption under s. 10(22). We have already adverted to the objects for which the assessee trust is established. The objects are 'the advancement of educational, the spread of all kinds of useful knowledge, and to work for mental, moral and physical welfare of the students' and 'to conduct and manage Shri Ladharam Sind Hindu School and any other educational institution that may be shattered hereafter in any part of the Bombay State'. It can hardly be disputed that the objects for which the assessee-trust is established are educational. Mr. S. N. Shelat, learned counsel for the Revenue, also did not dispute that the assessee-trust was an educational trust. The stand which the Revenue has taken is that though the assessee-trust is an educational trust, it is not an educational institution. It is the income of an educational institution which is exempt and not the income of an educational trust. What was sought to be argued was that the trust is not an institution. According to Mr. Shelat, any institution must have a physical form or existence. To clarify his argument, he gave the example of a school and submitted that a school is an institution. A trust which is not a juridical person has no physical existence and consequently it cannot be termed as an institution. Mr. Shelat did not dispute that the assessee-trust runs primary and secondary schools which are institutions but his contention was that the trust itself is not an institution, which would attract the application of s. 10(22).
6. The term 'educational institution' or 'institution' is not defined under the Act. In the Oxford English Dictionary, Vol. V, at p. 354, the word 'institution' is defined to mean 'an establishment, organisation, or association, instituted for the promotion of some object, especially one of public or general utility, religious, charitable, educational, etc.' There are several other meanings also of the word 'institution' but they are not relevant for the purpose of this reference. The question is whether the assessee trust can be described as an establishment, organisation or association instituted for the promotion of some object. In our opinion, the answer to this question has to be in the affirmative. The assessee-trust can be described as an organisation or association and its object indisputably is promotion of education. Trust is an association of persons, the trustees. It can also be described as body of individuals, namely trustees. Its a body which carries on organised activities enumerated in the trust deed which creates it. In that sense it can also be described as an organisation. Therefore, if we were to resolve the controversy before us with reference to the dictionary meaning of the word 'institution', it must be held that the assessee-trust is an educational institution.
7. Mr. Shelat, however, urged that the word 'institution' will have to be given a meaning having regard to the context in which it is used. If the word is so construed, submitted Mr. Shelat, the assessee-trust, though an educational trust, cannot be termed as an institution. The schools which are brought into existence to translate the object or purpose is conceived by the settlor or founder of the trust may be an institution but not the assessee-trust which brought them into existence. In support of his argument, Mr. Shelat, relied on the following observations made by Lord Macnaghten in Mayor & C. of Manchester v. McAdam  AC 500;  3 TC 491 :
'It is a little difficult to define the meaning of the term 'institution' in the modern acceptation of the word. It means, I suppose, an undertaking formed to promote some defined purpose, having in view, generally the instruction or education of the public. It is the body (so to speak) called into existence to translate the purpose as conceived in the mind of the founders into a living and active principle.'
8. We are unable to see how the above observations help the Revenue in placing a narrow construction on the word 'institution' as canvassed by Mr. Shelat. Mayor of Manchester was a case where exemption from income-tax was claimed in respect of buildings owned by the Municipal Borough of Manchester on the ground that the buildings were being used as public libraries. Under the I.T. Act (of the UK), exemption was available in respect of the property owned by literary or scientific institution used solely for the purposes of such institution and, in which, no payment is made or demanded for any instruction there afforded by lectures or otherwise. The House of Lords by a majority held that undoubtedly a public free library is a literary institution, its object being the spread of knowledge and love of literature among the people. The difficulty was, however, experienced because the law further required that such a building must be 'the property' of a literary institution. The court took the view that for satisfying the requirements of law, one must first ascertain who is the owner of the building in respect of which the exemption is claimed and that only if the owner of the building can be called a literary institution, exemption is available to the building and not otherwise. The House of Lords, however, did not approve such a strict construction and it was held (p. 495) :
'... even though the Corporation of Manchester in whom the buildings, the taxation of which is now in question, are vested, cannot be said to be itself a literary institution, nevertheless, the buildings being appropriated for the purpose of free public libraries, being devoted exclusively to that use, and incapable of being legally applied to any other purpose, may properly be said to be the property of a literary institution.'
9. Similar meaning was attached to the property owned by a religious and charitable institution, namely, Dayalbaugh Satsang Sabha, by the Allahabad High Court in its decision in CIT v. Radhaswami Satsang Sabha : 25ITR472(All) . The above decisions, in our opinion, instead of helping the Revenue support the view canvassed on behalf of the assessee-trust. The objects of the assessee-trust are the advancement of education, the spread of all kinds of useful knowledge, to work for mental, moral and physical welfare of the students and to run high school and other institutions. It is not in dispute that it runs a primary school and a secondary school. The schools as conceded by Mr. Shelat are institutions. The schools are run by the assessee-trust and they are part of the assessee-trust. In other words, the schools are not different from the assessee-trust. To put it differently there is a union of identity of the schools which are admittedly institutions and the assessee-trust. Therefore, if we apply the reasoning of the majority decision of the House of Lords in the case of Mayor of Manchester  AC 500; 3 TC 491, the assessee-trust must be held to be an educational institution.
10. In the case of Governing Body of Rangaraya Medical College v. ITO : 117ITR284(AP) a question arose as to whether a society formed to manage a medical college could claim exemption in respect of its income under s. 10(22) of the Act. The governing body of Rangaraya Medical College was a society founded in 1964 under the Societies Registration Act to manage the college, which was started by another society, namely, Medical Education Society, Kakinada, six years earlier. There was no registered document transferring the buildings to the society, as the society was awaiting the orders of the Government on the exemption claimed by the society from registration charges and stamp duty. As the transfer was not complete in accordance with law, the construction of the building had to be undertaken in the name of the society. The society was collecting a compulsory contribution of Rs. 12,000 per seat and the bank accounts and deposits were maintained in the name of the society itself and not in the name of the college. The society claimed exemption in respect of its income under s. 10(22) of the act. The ITO, however, rejected claim. On a write petition filed by the society, the Division Bench of the Andhra Pradesh High Court held that the society was not different from the medical college. It was only because of the pendency of the petition claiming exemption from stamp duty and registration fees, which was pending with the Government, that the construction of the building had to be undertaken in the name of the Medical Education Society. Further, there was no distinction between the petitioner-society and the college and the society was an educational institution with no motive of private of personal profit. Merely because certain surplus arose from the society's operations, it cannot be held that the institution was run for purpose of profit so long as no person or individual was entitled to any portion of the said profit and the said profit was utilised for the purpose and for the promotion of the objects of the institution, and hence the income of the petitioner was entitled to exemption from income-tax under s. 10(22) of the Act. In reaching the above conclusion, the Division Bench placed reliance on the decisions in Mayor & C. of Manchester's case  AC 500; 3 TC 491 and CIT v. Radhaswami Satsang Sabha : 25ITR472(All) . In the instant case also, there is no distinction between the school run by the assessee-trust and the assessee-trust. Therefore, if the schools are educational institutions, as conceded by Mr. Shelat, the assessee-trust would be an educational institution within the meaning of s. 10(22) of the Act.
11. Similar view was taken by the Allahabad High Court in Katra Education Society v. ITO : 111ITR420(All) . The question before the court in that case was whether a society could, by running an institution, claim exemption under s. 10(22) of the Act. It was held that an educational society could be regarded as an educational institution in the society was running an educational institution. On a parity of reasoning the assessee-trust must also be held to be an educational institution.
12. In Addl. CIT v. Aditanar Educational Institution : 118ITR235(Mad) , the assessee, a society registered under the Societies Registration Act, 1960, had for its objects to establish, run, manage or assist colleges, schools and other educational organisations existing solely for educational purposes. The assessee received donation from a trust. The assessee started a college and utilised the entire donation for the college. The assessee claimed that as it was an educational institution existing solely for education purposes, its income was nil for the purposes of income tax. Though this plea was accepted by the ITO, the Commissioner held that the assessee was not entitled to any exemption under ss. 11 and 12(2) of the Act and accordingly he set aside the nil assessments and directed the ITO to redo the assessments taking into consideration the voluntary contributions received from the trust. The Commissioner also held that the assessee will not be eligible for exemption under s. 10(22) as the exemption under that provision would apply only to the educational institution as such and not to anyone else who might be financing the running of the institution. The Tribunal, however, held that the assessee was an educational institution existing for educational purposes and not for purposes of earning any profit and hence the assessee itself could be termed as an educational institution so as to come within the ambit of s. 10(22). On a reference to the High Court two questions arose, namely, (i) whether any educational institution would fall within the scope of s. 10(22) even though it may have or may not have anything to do with a University; and (ii) whether the assessee does not come within the expression 'other educational institution' in s. 10(22). The first question which arose before the Madras High Court does not arise before us. So far as the second question is concerned, the Madras High Court held that the sole purpose for which the assessee had come into existence was education at the level of college and school and hence it cannot be said that the assessee was only a financing body and did not come within the expression 'other educational institution' in s. 10(22). In the instant case also, the assessee has come into existence for the purpose of education. This is evident from the objects for which the assessee-trust is established. In our opinion, therefore, the assessee-trust would come within the meaning of the expression 'educational institution' used in s. 10(22) of the Act.
13. We are not inclined to agree with Mr. Shelat that the Legislature has deliberately and advisedly used the expression 'educational institution' so as to exclude the application of s. 10(22) to the educational trust. Mr. Shelat pointed out that whenever the Legislature wanted to refer to the trust it has specifically done so, for example, in s. 11 since s. 10(22) does not make a reference to or mention 'trust', the said provision would not apply to the trust. We do not see any force in this argument. As already observed above, the word 'institution' is not used in the narrow sense as urged by Mr. Shelat. We are not prepared to hold that since the word 'trust' is not mentioned in s. 10(22), that provision has no application to a trust. If the argument advanced by Mr. Shelat were to be accepted, it would mean that a trust would never fall within the meaning of 'institution'. This, as already pointed out above, is not correct. 'Institution' is a word of wide import. If the view canvassed by Mr. Shelat were to be accepted it is likely to create complications in application of clauses (22A), (23) and (23B) of s. 10 and s. 80G of the Act. We do not think that the point needs any elaborate discussion. We reject Mr. Shelat's contention that since a trust is not specifically referred to in s. 10(22), that provision does not apply to a trust.
14. In the light of what is discussed above, we hold that the assessee-trust is an educational trust which comes within the expression 'other educational institution' in s. 10(22) of the Act. The Assessee-trust is, therefore, entitled to claim exemption in respect of its income under that provision. We, therefore, agree with the view taken by the Tribunal and answer both the question referred to us in the affirmative and against Revenue.
15. Reference answered accordingly with no order as to costs.