Arijit Pasayat C.J. 1. At the instance of the Revenue, the following questions have been referred to this court for opinion under Section 256(1) of the Income-tax Act, 1961 (in short "the Act'), by the Income-tax Appellate Tribunal, Cochin Bench (in short "the Tribunal").
"1. Whether, on the facts and in the circumstances of the case does the assessee come within the true ambit of 'other educational institutions' in Section 10(22) of the Income-tax Act and did the Legislature intend to take in an institution like the assessee in Section 10(22) ?
2. Whether, on the facts and in the circumstances of the case and also in the light of the facts noted in the enclosure, the Tribunal is right in law and fact in holding that the institution is existing solely for educational purposes and not for purposes of profit ?
3. Whether, on the facts and in the circumstances of the case, the assessee is entitled to exemption under Section 10(22) of the Income-tax Act, 1961 ?"
2. The assessment years involved were 1987-88 and 1988-89. The benefit was claimed by the assessee in terms of Section 10(22) of the Act. It was the case of the assessee that the activities are clearly relatable to educational functions. It is registered under the Travancore-Cochin Literary Scientific and Charitable Societies Act, 1955 (in short "the Societies Act"), No return was filed by it voluntarily. Proceedings under Section 147 of the Act were initiated for both the years. Returns were filed claiming that the income, if any, was exempt under Section 10(22) of the Act. The Assessing Officer held that the exemption was not available because the assessee seems to have paid amounts by way of licence fees and computer hire charges to two concerns, which are partnership firms, where the founders and patrons of the assessee are partners and the courses run by the assessee are not recognised by any authority. In other words, it was concluded that the assessee can be considered only as an institution run for profit. The matter was carried in appeal before the Commissioner of Income-tax (Appeals), Trivandrum (in short "the CIT (A)"). The said authority held that the assessee could not be considered as an institution solely for educational purposes. The matter was carried in further appeal before the Tribunal. It was observed by the Tribunal that notwithstanding payments made to concerns, where the founders and patrons of the assessee are partners, it cannot be said to be a case of diversion of income and there was no motive to earn profit. Except making payment of salary, no amount was utilised for any purpose other than for the objects of the institution. The assessee is an educational institution and, therefore, was clearly covered by Section 10(22) of the Act.
3. Learned counsel for the Revenue with reference to the memorandum of association of the society pointed out that there was no prohibition in carrying on the business or making profit. Reliance was placed on the decision of the apex court in Sole Trustee, Loka Shikshana Trust v. CIT [1975] 101 ITR 234, to contend that the Assessing Officer would be well within his jurisdiction to assume that the object of the trust involves the carrying on of any activity for profit. There is no appearance on behalf of the assessee, in spite of notice.
4. We have considered the materials on record, referred to by the Tribunal to arrive at its conclusions. Several clauses of the memorandum of association throw sufficient light on the controversy. Memorandum of association :
"Clause 4 : The property and income of the society shall be applied solely towards the promotion of the objects of the society and no portion thereof shall be paid or transferred to the members of the society, provided that nothing herein contained shall prevent the payment of remuneration or salary to any one for service rendered or for any work done to or for and on behalf of the society." Rules and Regulations :
"Clause 25(5): The funds shall be spent only to the attainment of the objects of the society and no portion thereof shall be paid or transferred directly or indirectly to any of its members through any means except by way of remuneration or salary for service rendered or work done for the institute."
5. Obviously there was restriction in making payments of the income to the members. In fact it is clearly stated that the funds shall be spent only for attainment of the objects of the society and no portion thereof shall be paid or transferred directly or indirectly to any of its members through any means. It is the admitted case that the payments were made to concerns, where members/partners were partners. The Tribunal seems not to have considered the effect of the restrictions to find out whether they apply to the facts of the case. Further, the applicability of the ratio of the decision, Sole Trustee's case [1975] 101 ITR 234 (SC), as highlighted by the Revenue has not been examined. As factual aspects have not been considered, we think it appropriate to direct the Tribunal to re-examine the matter after taking into account the materials already on record and to be produced'by the parties, if any. Since the matter is being remanded for fresh hearing any observations made by the Tribunal earlier should not be held to be conclusive and are to be re-examined.
6. The references are answered accordingly.