2009 (10) TMI 60 - SC - Income Tax

Appeals allowed and matter remitted for de novo Assessing Officer review of whether corporation qualifies as educational institution under s.10(22)

SC allowed the appeals and remitted the matter to the Assessing Officer for fresh consideration whether the corporation qualifies as an 'educational ... Eligibility to exemption u/s 10(22) - Whether the Corporation could be termed as an `Educational Institution' in terms of Section 10(22) of the 1961 Act? - Corporation was primarily engaged in research, printing, and publishing of textbooks for school students in Assam - HELD THAT:- Following the circulars/letters issued by C.B.D.T., the Rajasthan High Court came to the conclusion that the assessee in that case, namely, Rajasthan State Text Book Board, was entitled to claim the benefit of exemption under Section 10(22) of the Act. We are of the view that, in this case, the High Court, in its impugned judgement, has not considered the historical background in which the Corporation came to be constituted; secondly, the High Court ought to have considered the source of funding, the share-holding pattern and aspects, such as Return on Investment; thirdly, it has not considered the letters issued by C.B.D.T. which are referred to in the judgement of the Rajasthan High Court [1999 (8) TMI 14 - RAJASTHAN HIGH COURT] granting benefit of exemption to various Board/Societies in the country under Section 10(22) of the Act; fourthly, it has failed to consider the judgements mentioned hereinabove; and lastly, it has failed to consider the letter of the Central Government dated 9th July, 1973, to the effect that all State-controlled Educational Committee(s)/Board(s) have been constituted to implement the Educational policy of the State(s), consequently, they should be treated as Educational Institution. Thus, we are of the view that, instead of remanding the matter to the High Court, it would be in the fitness of things that the matter stands remitted to the Assessing Officer to consider it de novo in the light of the judgements of the Rajasthan High Court and the Orissa High Courts, particularly, with reference to the letter of C.B.D.T. dated 19th August, 1975, referred to in the judgement of the Rajasthan High Court in the case of Rajasthan State Text Book Board (supra) as also the letter of Central Government dated 9th July, 1973, referred to above. Accordingly, the appeals stand allowed Issues:1. Whether the Corporation qualifies as an 'Educational Institution' under Section 10(22) of the Income Tax Act, 1961 for the relevant Assessment Years.Analysis:The case involved the appeal of a Corporation, initially constituted as the 'Central Text Book Committee' and later transformed into the 'Assam State Text Book Production and Publication Corporation Limited'. The Corporation was primarily engaged in research, printing, and publishing of textbooks for school students in Assam. The main issue was whether the Corporation could be considered an 'Educational Institution' under Section 10(22) of the Income Tax Act, 1961 for the relevant Assessment Years spanning from 1981-1982 to 1996-1997.The Assessing Officer contended that since the Corporation's income was derived solely from the publication and sale of textbooks, it did not qualify for exemption under Section 10(22) as it did not exist solely for educational purposes. This decision was upheld by the Commissioner of Income Tax (Appeals). However, the Tribunal, by majority decision, ruled in favor of the Corporation, considering it an Educational Institution eligible for exemption.The High Court, on appeal by the Department, disagreed with the Tribunal's decision, emphasizing that the Corporation's income was not exempt as it did not exclusively impart education and engaged in profit-earning activities through the publication and sale of textbooks. The Supreme Court noted the historical background of the Corporation's formation, its government ownership, and control by the State of Assam. It highlighted the Corporation's aim to implement the state's education policy and the provision for Return on Investment to the state.The Supreme Court referred to circulars issued by the Central Board of Direct Taxes granting exemption under Section 10(22) to similar educational bodies in other states. Citing the judgments of the Rajasthan High Court and the Orissa High Court, the Supreme Court concluded that the Corporation should be treated as an Educational Institution entitled to exemption under Section 10(22). The matter was remitted back to the Assessing Officer for reconsideration in light of the precedents and circulars mentioned. The appeals were allowed with no order as to costs.