Oct162013
Maharishi Institute Of Creative Intelligence. Versus Assistant Commissioner Of Income-Tax. – Income Tax – ITAT ALLAHABAD-B – Tri – Assessing Officer, Assessment Year, Fixed Deposit, Interest Income, Society For Educational Purposes – 1996 (12) TMI 93 – ITAT ALLAHABAD-B – ITD 062, 169, TTJ 058, 658, – - – Dated:- 18-12-1996 – Member(s) : R. K. GUPTA., V. K. SINHA. ORDER Per V.K Sinha, A.M.
— The appeal for assessment year 1991-92 has been filed by the department, whereas the appeal for assessment year 1993-94 has been filed by the assessee. The issue is the same and, therefore, the two appeals are being disposed of by a common order.
2. For assessment year 1991-92, the assessee filed a return as an A.O.P. Trust showing nil income. It was claimed that the income was exempt under section 10(22) of the Act as an educational institution existing solely for educational purposes. An Auditors report under section 12A(b) of the Act was enclosed along with the Income and Expenditure Account and Balance Sheet.
3. In the course of the hearing, a copy of Memorandum of Association was filed according to which the objects of the society were as under :– (i) To propagate and apply the science of yoga through the science of creative intelligence and its practical aspect the transcendental meditation (also abbreviated as TM) and TM-sidhi programme as propounded by his Holiness Maharishi Mahesh Yogi. (ii) To fulfil the goals of the world plan as formulated in 1972 by His Holiness Maharishi Mahesh Yogi : (a) To develop the full potential of the individual. (b) To realise the highest ideal of education. (c) To solve the problems of crime, drug abuse and all behaviour that brings unhappiness to the family of man. (d) To maximise the intelligent use of the environment. (e) To bring fulfilment to the economic and other aspiration of the individual and society. (f) To achieve the spiritual goals of mankind in this generation. (iii) To open training centres throughout India in accordance with the world plan formulated by His Holiness Maharishi Mahesh Yogi. (iv) To get the science of creative intelligence made a subject of teaching and examination in all the different colleges. (v) To take steps for the establishment in each University in India a separate faculty for the teaching of the science of creative intelligence. (vi) To buy build, lease, rent or otherwise acquire centres for training and practice of the programmes developed to fulfil the objects of the society. (vii) To undertake and promote the training of various educational programmes and other skills. (viii) To undertake and promote any activity that will enable the participants of the society s programmes to be self-sufficient or otherwise raise the fund for the society including Agriculture, Horticulture, Dairy Farming, Bee Farming, Cottage and Small Scale Industries, Khadi Udyog, architectural and constructional activities, etc., with the sole motive bringing fulfilment to the goals of the society and without any profit motive. (ix) To accept, receive, give and take voluntary donations, grants etc. from individuals, organisations and private and government bodies in India and abroad for the furtherance of the objects of the society.
3A. After going through the objects, the Assessing Officer took a view that the basic purpose of the society was to propagate the teachings of His Holiness Maharishi Mahesh Yogi, who was a religious Guru.
He examined the other clauses also with reference to the following cases :– 1. Rao Bahadur A.K.D. Dharmaraja Education Charity Trust v. CIT [1990] 182 ITR 80 (Mad.). 2. CIT v. Radhaswami Satsangh [1981] 132 ITR 647/[1980] 4 Taxman 512 (All.). 3. Addl. CIT v. Aditanar Educational Institution [1979] 118 ITR 235 (Mad.).
4. Thereafter, he came to the conclusion that the exemption claimed by the assessee under section 10(22) of the Act could not be given for the following reasons :–
(i) The assessee was not existing solely for educational purposes, but for purpose of propagating religious faith and belief of Maharishi Mahesh Yogi.
(ii) Huge annual payment by way of lease rent to Maharishi Institute of Creative Intelligence, New Delhi together with the fact that heavy amounts of surplus were generated from year to year showed that the society was siphoning out funds. The claim of existing not for profit was not acceptable. The assessee-society had paid annual rent of building amounting to Rs. 3 lakhs to Maharishi Institute of Creative Intelligence, New Delhi.
(iii) Income from interest during the year was not relatable to the profit of running the institution. There was interest on fixed deposit of Rs. 30,336 during the year.
(vi) Alternative possibility of application of section 11 read with sections 12 and 13 was not acceptable since the objectives were not existing wholly for charitable purposes. Further there was no registration under section 12A of the Act.
5. Thereafter, the Assessing Officer held that the income was chargeable under section 28 of the Act as income from business/profession. The surplus in the Income and Expenditure Account of Rs. 9,52,237 was taken and after some small adjustments, the total income was computed at Rs. 9,56,260.
6. The assessee filed an appeal before the CIT(A).
In the statement of facts, it was mentioned that the assessee-society had established an educational institution Maharishi Vidya Mandir (Public School), Sitapur Road, Lucknow, which had a distinct personality and existence separate from the parent body i.e., the society. Separate accounts for the two entities were wholly justified wherein those for the School would be exclusively with reference of the educational activities entitled for exemption under section 10(22) of the Act, while that of the parent body showing other income, which will have benefit of exemption under sections 11 and 12 of the Act. Reliance was placed on Birla Vidya Vihar Trust v. CIT [1982] 136 ITR 445/[1981] 7 Taxman 391 (Cal.).
7. In the grounds of appeal, it was stated that the Memorandum of Association clearly indicated that it had educational objects besides others. The society was running Maharishi Vidya Mandir (Public School) through a separately constituted Managing Committee since 1984. No other activity had been carried out by the assessee besides running the School during the year. The School was affiliated with Central Board of Secondary Education, Delhi and its syllabus was approved by it.
8. It is further denied in the Grounds of Appeal that the school was running for profit motive. The lease rent has been paid taking into consideration the building made available for running the school and huge investment made therein. The surplus in the income and Expenditure Account was utilised in the expansion of educational facilities. The surplus had not been diverted to any person or individual.
9. It was further denied that the society was siphoning out the funds to the parent society. The Maharishi Institute of Creative Intelligence, New Delhi was not a parent society but a separate entity. No funds had been transferred to it. The surplus was utilised for expansion of educational facilities and no person or individual was entitled to any portion of it. Reliance was placed on Governing Body of Rangaraya Medical College v. ITO [1979] 117 ITR 284 (AP).
10. It was further submitted that the income from interest was relatable to the profit or running the institution.
11. In the end in Ground No. 6, it was stated that the Assessing Officer had erred in holding that section 11, read with sections 12 and 13, of the Act was not applicable.
12. In the course of hearing before the CIT(A), some further submissions was made. It was stated that although during the year the assessee did not carry out Transcendental Meditation (T.M.), yet T.M. itself was an education. Reliance was placed on a decision of A-Bench, Delhi of the Tribunal for assessment year 1981-82 in the case of ITO v. S.R.M. Foundation of India [IT Appeal No. 983 (Delhi) of 1985]. It was next stated that the decision in the case of Radhaswami Satsang was not applicable since the facts were distinguishable. The decision of the Hon ble Supreme Court in the case of Sole Trustee, Loka Shikshana Trust v. CIT [1975] 101 ITR 234 was also stated to be distinguishable on fact. In the end, it was claimed that the educational institution existed solely for educational purposes without profit motive during the year under consideration and, therefore, exemption under section 10(22) should be given.
13. The CIT(A) took into consideration the following decisions :– 1. Birla Vidya Vihar Trust s case. 2. Addl. CIT v. Aditanar Educational Institution s case. 3. Governing Body of Rangaraya Medical College s case. 4. CIT v. Devi Educational Institution [1984] 18 Taxman 221 (Mad.).
14. Thereafter, the CIT(A) came to the conclusion that the assessee-society qualified for exemption under section 10(22) of the Act for the following reasons : (i) Besides other objects, in his an object to undertake and promote the training of various educational programmes and other such kinds. (ii) In the year under consideration it exited solely for educational purposes and not for purposes of profit, and (iii) The surplus generated through its educational activities was not for profit motive as the same was to be used for the expansion of the educational facility.
15. The CIT(A) further held that the funds were not being siphoned out, but merely rent was paid. T.M. itself was in the nature of education, although in this year the assessee did not propagate or carry out T.M. activities. The interest income from fixed deposits also related to educational activity because the Fixed Deposits had come out of educational activities in the past and were made to ensure repayment of liabilities. The society existed solely for educational purposes and not for purposes of profit in this year. He, therefore, held that the income was exempt under section 10(22) of the Act.
16. Having held as above, he further observed that the contentions in all other grounds were not being considered as they became infructuous. Thus, he did not give any finding whether the income was exempt under section 11, read with sections 12 and 13, of the Act.
17. The department is in appeal before us for this year and it is stated that the society did not exist solely for educational purposes and had a profit motive, due to which exemption under section 10(22) cannot be allowed.
18. For assessment year 1993-94, a similar claim for exemption of income was made under section 10(22) of the Act by the assessee. Both sides agreed before us that the reasons for rejecting the claim by the Assessing Officer were similar. We may, however, note that he further relied on the decision of the Supreme Court in the case of Sole Trustee, Loka Shikshana Trust, where it was held that the sense in which the word education has been used in section 2(15) is the systematic instruction, schooling and training given to the young in preparation for the work of life. Finally he adopted the surplus of Rs. 16,94,900 in the Income and Expenditure Account as the income of the assessee. The income was taxed at maximum marginal rate under section 167B of the Act.
19. This year, the CIT(A) confirmed the order of the Assessing Officer. He went through the objects given in the Memorandum of Association and observed that the society had not been explicitly authorised by any of its clauses to open and run schools. Thereafter, he examined the objects with a view to ascertain whether they fell within the meaning of the term education as given in section 10(22) of the Act. For this purpose, he relied on the decision of the Supreme Court in Sole Trustee, Loka Shikshana Trust s case, where the meaning of the terms education in the context of section 2(15) of the Act had been explained. The sense in which the word education has been used in section 2(15) is the systematic instruction, schooling or training given to the young in preparation for the work of life. The word education had not been used in that wide and extended sense according to which every acquisition of further knowledge constitutes education. It connotes the process of training and developing the knowledge, skill, mind and character of students by normal schooling . The CIT(A) noted that the Rajasthan High Court had held in CIT v. Maharaja Sawai Mansinghji Musuem Trust [1988] 169 ITR 379 that the pronouncements were wise enough to cover the case of educational institution for the purpose of section 10(22) of the Act. Following these decisions, the CIT(A) found that none of the objects of the assessee-society fell within the meaning of the term education . The school, Maharishi Vidya Mandir was one of its units and the financial affairs were managed by the same set of Managers.
20. The CIT(A) further took a view that to be entitled for, benefit under section 10(22) of the Act, the educational institution must continue to live for all time to come for the sole and exclusive object of educational purpose . The fact that school money could be used for non-educational purposes showed that the society was not existing solely for purposes of education. He also took an adverse view of the fact that the society had interest income, donation income and income from running of a bus.
21. Finally, the CIT(A) held that the school run by the appellant-society cannot be said to be existing solely for the purposes of education. In other words, the condition laid down in section 10(22) remains unfulfilled. He upheld the levy of tax on the surplus of income over expenditure.
22. The assessee is in appeal before us for this year. One set of grounds of appeal are directed against the CIT(A) s not considering exemption under section 11 of the Act, although ground No. 4 before him related to this alternative contention. The second set of grounds relate to exemption under section 10(22) of the Act.
23. Ground No. 6 relating to recognition of the assessee as a registered society under the Societies Registration Act, 1860 was not pressed before us. Ground No. 13 regarding initiation of proceedings under section 271(1)(c) was also not pressed. Ground No. 14 regarding tax calculations was also not pressed. These grounds are accordingly rejected.
24. On similar facts, exemption under section 10(22) as well as under section 11 of the Act has been denied in the assessment orders for assessment years 1991-92 and 1993-94. The CIT(A) has allowed exemption in assessment year 1991-92, but confirmed denial of exemption in assessment year 1993-94 under section 10(22) of the Act. No finding has been given by the CIT(A) in respect of exemption under section 11 for any of the two years.
25. The learned Departmental Representative relied on the reasoning in the order of the CIT(A) for assessment year 1993-94 in respect of both the years before us. Our attention was also invited to the Income and Expenditure Account………………
— The appeal for assessment year 1991-92 has been filed by the department, whereas the appeal for assessment year 1993-94 has been filed by the assessee. The issue is the same and, therefore, the two appeals are being disposed of by a common order.
2. For assessment year 1991-92, the assessee filed a return as an A.O.P. Trust showing nil income. It was claimed that the income was exempt under section 10(22) of the Act as an educational institution existing solely for educational purposes. An Auditors report under section 12A(b) of the Act was enclosed along with the Income and Expenditure Account and Balance Sheet.
3. In the course of the hearing, a copy of Memorandum of Association was filed according to which the objects of the society were as under :– (i) To propagate and apply the science of yoga through the science of creative intelligence and its practical aspect the transcendental meditation (also abbreviated as TM) and TM-sidhi programme as propounded by his Holiness Maharishi Mahesh Yogi. (ii) To fulfil the goals of the world plan as formulated in 1972 by His Holiness Maharishi Mahesh Yogi : (a) To develop the full potential of the individual. (b) To realise the highest ideal of education. (c) To solve the problems of crime, drug abuse and all behaviour that brings unhappiness to the family of man. (d) To maximise the intelligent use of the environment. (e) To bring fulfilment to the economic and other aspiration of the individual and society. (f) To achieve the spiritual goals of mankind in this generation. (iii) To open training centres throughout India in accordance with the world plan formulated by His Holiness Maharishi Mahesh Yogi. (iv) To get the science of creative intelligence made a subject of teaching and examination in all the different colleges. (v) To take steps for the establishment in each University in India a separate faculty for the teaching of the science of creative intelligence. (vi) To buy build, lease, rent or otherwise acquire centres for training and practice of the programmes developed to fulfil the objects of the society. (vii) To undertake and promote the training of various educational programmes and other skills. (viii) To undertake and promote any activity that will enable the participants of the society s programmes to be self-sufficient or otherwise raise the fund for the society including Agriculture, Horticulture, Dairy Farming, Bee Farming, Cottage and Small Scale Industries, Khadi Udyog, architectural and constructional activities, etc., with the sole motive bringing fulfilment to the goals of the society and without any profit motive. (ix) To accept, receive, give and take voluntary donations, grants etc. from individuals, organisations and private and government bodies in India and abroad for the furtherance of the objects of the society.
3A. After going through the objects, the Assessing Officer took a view that the basic purpose of the society was to propagate the teachings of His Holiness Maharishi Mahesh Yogi, who was a religious Guru.
He examined the other clauses also with reference to the following cases :– 1. Rao Bahadur A.K.D. Dharmaraja Education Charity Trust v. CIT [1990] 182 ITR 80 (Mad.). 2. CIT v. Radhaswami Satsangh [1981] 132 ITR 647/[1980] 4 Taxman 512 (All.). 3. Addl. CIT v. Aditanar Educational Institution [1979] 118 ITR 235 (Mad.).
4. Thereafter, he came to the conclusion that the exemption claimed by the assessee under section 10(22) of the Act could not be given for the following reasons :–
(i) The assessee was not existing solely for educational purposes, but for purpose of propagating religious faith and belief of Maharishi Mahesh Yogi.
(ii) Huge annual payment by way of lease rent to Maharishi Institute of Creative Intelligence, New Delhi together with the fact that heavy amounts of surplus were generated from year to year showed that the society was siphoning out funds. The claim of existing not for profit was not acceptable. The assessee-society had paid annual rent of building amounting to Rs. 3 lakhs to Maharishi Institute of Creative Intelligence, New Delhi.
(iii) Income from interest during the year was not relatable to the profit of running the institution. There was interest on fixed deposit of Rs. 30,336 during the year.
(vi) Alternative possibility of application of section 11 read with sections 12 and 13 was not acceptable since the objectives were not existing wholly for charitable purposes. Further there was no registration under section 12A of the Act.
5. Thereafter, the Assessing Officer held that the income was chargeable under section 28 of the Act as income from business/profession. The surplus in the Income and Expenditure Account of Rs. 9,52,237 was taken and after some small adjustments, the total income was computed at Rs. 9,56,260.
6. The assessee filed an appeal before the CIT(A).
In the statement of facts, it was mentioned that the assessee-society had established an educational institution Maharishi Vidya Mandir (Public School), Sitapur Road, Lucknow, which had a distinct personality and existence separate from the parent body i.e., the society. Separate accounts for the two entities were wholly justified wherein those for the School would be exclusively with reference of the educational activities entitled for exemption under section 10(22) of the Act, while that of the parent body showing other income, which will have benefit of exemption under sections 11 and 12 of the Act. Reliance was placed on Birla Vidya Vihar Trust v. CIT [1982] 136 ITR 445/[1981] 7 Taxman 391 (Cal.).
7. In the grounds of appeal, it was stated that the Memorandum of Association clearly indicated that it had educational objects besides others. The society was running Maharishi Vidya Mandir (Public School) through a separately constituted Managing Committee since 1984. No other activity had been carried out by the assessee besides running the School during the year. The School was affiliated with Central Board of Secondary Education, Delhi and its syllabus was approved by it.
8. It is further denied in the Grounds of Appeal that the school was running for profit motive. The lease rent has been paid taking into consideration the building made available for running the school and huge investment made therein. The surplus in the income and Expenditure Account was utilised in the expansion of educational facilities. The surplus had not been diverted to any person or individual.
9. It was further denied that the society was siphoning out the funds to the parent society. The Maharishi Institute of Creative Intelligence, New Delhi was not a parent society but a separate entity. No funds had been transferred to it. The surplus was utilised for expansion of educational facilities and no person or individual was entitled to any portion of it. Reliance was placed on Governing Body of Rangaraya Medical College v. ITO [1979] 117 ITR 284 (AP).
10. It was further submitted that the income from interest was relatable to the profit or running the institution.
11. In the end in Ground No. 6, it was stated that the Assessing Officer had erred in holding that section 11, read with sections 12 and 13, of the Act was not applicable.
12. In the course of hearing before the CIT(A), some further submissions was made. It was stated that although during the year the assessee did not carry out Transcendental Meditation (T.M.), yet T.M. itself was an education. Reliance was placed on a decision of A-Bench, Delhi of the Tribunal for assessment year 1981-82 in the case of ITO v. S.R.M. Foundation of India [IT Appeal No. 983 (Delhi) of 1985]. It was next stated that the decision in the case of Radhaswami Satsang was not applicable since the facts were distinguishable. The decision of the Hon ble Supreme Court in the case of Sole Trustee, Loka Shikshana Trust v. CIT [1975] 101 ITR 234 was also stated to be distinguishable on fact. In the end, it was claimed that the educational institution existed solely for educational purposes without profit motive during the year under consideration and, therefore, exemption under section 10(22) should be given.
13. The CIT(A) took into consideration the following decisions :– 1. Birla Vidya Vihar Trust s case. 2. Addl. CIT v. Aditanar Educational Institution s case. 3. Governing Body of Rangaraya Medical College s case. 4. CIT v. Devi Educational Institution [1984] 18 Taxman 221 (Mad.).
14. Thereafter, the CIT(A) came to the conclusion that the assessee-society qualified for exemption under section 10(22) of the Act for the following reasons : (i) Besides other objects, in his an object to undertake and promote the training of various educational programmes and other such kinds. (ii) In the year under consideration it exited solely for educational purposes and not for purposes of profit, and (iii) The surplus generated through its educational activities was not for profit motive as the same was to be used for the expansion of the educational facility.
15. The CIT(A) further held that the funds were not being siphoned out, but merely rent was paid. T.M. itself was in the nature of education, although in this year the assessee did not propagate or carry out T.M. activities. The interest income from fixed deposits also related to educational activity because the Fixed Deposits had come out of educational activities in the past and were made to ensure repayment of liabilities. The society existed solely for educational purposes and not for purposes of profit in this year. He, therefore, held that the income was exempt under section 10(22) of the Act.
16. Having held as above, he further observed that the contentions in all other grounds were not being considered as they became infructuous. Thus, he did not give any finding whether the income was exempt under section 11, read with sections 12 and 13, of the Act.
17. The department is in appeal before us for this year and it is stated that the society did not exist solely for educational purposes and had a profit motive, due to which exemption under section 10(22) cannot be allowed.
18. For assessment year 1993-94, a similar claim for exemption of income was made under section 10(22) of the Act by the assessee. Both sides agreed before us that the reasons for rejecting the claim by the Assessing Officer were similar. We may, however, note that he further relied on the decision of the Supreme Court in the case of Sole Trustee, Loka Shikshana Trust, where it was held that the sense in which the word education has been used in section 2(15) is the systematic instruction, schooling and training given to the young in preparation for the work of life. Finally he adopted the surplus of Rs. 16,94,900 in the Income and Expenditure Account as the income of the assessee. The income was taxed at maximum marginal rate under section 167B of the Act.
19. This year, the CIT(A) confirmed the order of the Assessing Officer. He went through the objects given in the Memorandum of Association and observed that the society had not been explicitly authorised by any of its clauses to open and run schools. Thereafter, he examined the objects with a view to ascertain whether they fell within the meaning of the term education as given in section 10(22) of the Act. For this purpose, he relied on the decision of the Supreme Court in Sole Trustee, Loka Shikshana Trust s case, where the meaning of the terms education in the context of section 2(15) of the Act had been explained. The sense in which the word education has been used in section 2(15) is the systematic instruction, schooling or training given to the young in preparation for the work of life. The word education had not been used in that wide and extended sense according to which every acquisition of further knowledge constitutes education. It connotes the process of training and developing the knowledge, skill, mind and character of students by normal schooling . The CIT(A) noted that the Rajasthan High Court had held in CIT v. Maharaja Sawai Mansinghji Musuem Trust [1988] 169 ITR 379 that the pronouncements were wise enough to cover the case of educational institution for the purpose of section 10(22) of the Act. Following these decisions, the CIT(A) found that none of the objects of the assessee-society fell within the meaning of the term education . The school, Maharishi Vidya Mandir was one of its units and the financial affairs were managed by the same set of Managers.
20. The CIT(A) further took a view that to be entitled for, benefit under section 10(22) of the Act, the educational institution must continue to live for all time to come for the sole and exclusive object of educational purpose . The fact that school money could be used for non-educational purposes showed that the society was not existing solely for purposes of education. He also took an adverse view of the fact that the society had interest income, donation income and income from running of a bus.
21. Finally, the CIT(A) held that the school run by the appellant-society cannot be said to be existing solely for the purposes of education. In other words, the condition laid down in section 10(22) remains unfulfilled. He upheld the levy of tax on the surplus of income over expenditure.
22. The assessee is in appeal before us for this year. One set of grounds of appeal are directed against the CIT(A) s not considering exemption under section 11 of the Act, although ground No. 4 before him related to this alternative contention. The second set of grounds relate to exemption under section 10(22) of the Act.
23. Ground No. 6 relating to recognition of the assessee as a registered society under the Societies Registration Act, 1860 was not pressed before us. Ground No. 13 regarding initiation of proceedings under section 271(1)(c) was also not pressed. Ground No. 14 regarding tax calculations was also not pressed. These grounds are accordingly rejected.
24. On similar facts, exemption under section 10(22) as well as under section 11 of the Act has been denied in the assessment orders for assessment years 1991-92 and 1993-94. The CIT(A) has allowed exemption in assessment year 1991-92, but confirmed denial of exemption in assessment year 1993-94 under section 10(22) of the Act. No finding has been given by the CIT(A) in respect of exemption under section 11 for any of the two years.
25. The learned Departmental Representative relied on the reasoning in the order of the CIT(A) for assessment year 1993-94 in respect of both the years before us. Our attention was also invited to the Income and Expenditure Account………………
