Statutory educational activity is not business merely because fees are charged; Section 263 revision failed on true character analysis.

Revision under Section 263 of the Income-tax Act was examined in the context of whether coaching classes conducted by a chartered accountancy institution constituted a business activity requiring separate books of account and affecting exemption. The court's analysis turned on the true character of the activity: the coaching formed part of the institution's statutory function of education and training, and did not become business merely because fees were charged or study material was supplied. The revisional authority had not properly assessed the institution's nature, object, or the legal meaning of business, and the Tribunal's view that the activity was integral to the statutory objects was upheld.

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Issues: Whether the revisionary order under Section 263 of the Income-tax Act, 1961 was justified on the footing that the assessee's coaching classes constituted a business activity requiring separate books of account and affecting exemption.

Analysis: The Court held that the revisional authority had not merely directed a fresh enquiry, but had recorded a conclusive finding that the coaching activity was business income and that separate books were required. The correctness of that conclusion therefore had to be examined on merits. On the record, the assessee's coaching activities formed part of its statutory function of education and training in the chartered accountancy scheme. The revisional order did not properly examine the nature, object, and role of the institution or the legal meaning of "business". An activity does not become business merely because fee is charged or classes are conducted; the relevant inquiry is whether the activity is carried on as an organized commercial venture with the requisite business character. The Tribunal's view that the coaching activity was integral to the assessee's statutory objects and not a commercial activity was upheld.

Conclusion: The revision under Section 263 was not sustainable and the assessee succeeded on the issue.

Final Conclusion: No question of law arose for interference, and the appeal was dismissed.

Ratio Decidendi: An activity undertaken in discharge of a statutory educational function does not amount to business merely because it involves charging fees or providing study material, and revision under Section 263 cannot be sustained unless the order is shown to be both erroneous and prejudicial on a correct appreciation of the activity's true character.

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