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V. K. Subramani

WHETHER an educational institution should file a return of income under Section 139(4A) was an issue before the Bombay High Court in Director of Income Tax (Exemptions) vs Malad Jain Yuvak Mandal Medical Relief Centre (250 HR 488). In the case, the assessee claimed that, in respect of the educational institution, return need not be filed as it was eligible for exemption under Section 10(22).

The court held that every person in receipt of income from a property held under trust for charitable or religious purposes should file return of income without giving effect to Sections 11 and 12 of the I-T Act.

The court held that whether the income of the educational institution was eligible for exemption must be decided by the Department, and, only after the relevant materials were placed before it, the exercise for evaluating the exemption could be made. Though the assessee's income was exempt under Section 10(22), a return had to be filed under Section 139 (4A). And, if no return was filed, then penalty under Section 272 A was leviable.

In Gangabai Charities vs CWT (250 ITR 666), the apex court affirmed the Madras High Court's (236 ITR 735) decision that where the property of the trust could be used for social, cultural and other allied purposes at the sole discretion of the trustees, then such trust would not be eligible for wealth tax exemption. The Andhra Pradesh High Court, in CIT vs Social Service Center (250 ITR 39), held that where a charitable trust engaged in religious activities gave a donation to the diocese as well as to the construction of a church, then such donation will not deny the trust the benefit of exemption under Section11.

The decision may, prima facie, look liberal. However, it is necessary to note that the trust was a wholly religious one and the diocese and the church were open to the public without any discrimination. The court held that the religious and charitable activities go together and the charity so given will not go to deny the exemption to the trust.

In CIT vs Shriram Education Foundation (250 ITR 504), the Delhi High Court had to decide about a trust running a vocational training centre and seeking exemption under Section11 of the I-T Act. In this case, the foundation (the trust), `Jugnu', was engaged in teaching women the art of stitching and embroidery.

The assessee held that the primary objective of the centre was general public utility, not profit. The court, applying the decision rendered in Addtional CIT vs Surat Art Silk Cloth Manufacturers Association (121 ITR 1 (SC)), upheld the assessee's contention. If a charitable trust advances a loan to its manager, then clause (cc) of sub-section 3 of Section13 will not be applicable as the section covers only "loan to trustee of a trust or manager of an institution." A manager of a charitable trust can utilise the advance from the trust and such an act of the trust will not be covered by Section13 (3)(cc) (CIT vs Rai Bahadur Bissweswarlal Motilal — 252 ITR 84 Cal.).

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