Foreign university's income-tax exemption claim u/s 10(22) rejected because it carried out no education activity in India.

Section 10(22) of the Income-tax Act, 1961 exempts income of a university or other educational institution only if it exists solely for educational purposes and carries on the activity of imparting education in India. Although the provision does not expressly confine eligibility to institutions established in India, the SC held that exemption presupposes educational activity within India; otherwise, a literal reading would produce absurd and unjust results, warranting reading "in India" into the section. Since there was neither a case nor a finding that the assessee imparted education or undertook any educational activity in India, it was held not entitled to exemption, and the appeals were dismissed.

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Issues: (i) Whether the words "existing solely for educational purposes and not for purposes of profit" in section 10(22) qualify only "other educational institution" and not "a university"; (ii) Whether section 10(22) applies only to universities established in India; (iii) Whether imparting education or having educational activity in India is a prerequisite for a university or other educational institution to claim exemption under section 10(22).

Issue (i): Whether the qualification "existing solely for educational purposes and not for purposes of profit" applies to both "a university" and "other educational institution" or only to the latter.

Analysis: The clause's language does not indicate that the qualifying words are limited to "other educational institution" alone. Comparable clause usage (for example clause (22A)) employs similar qualifying words which are understood to apply to both the principal noun and the qualifying noun. The plain text and context support applying the qualification to universities as well.

Conclusion: The qualifying phrase applies to both "a university" and "other educational institution"; conclusion adverse to the assessee (in favour of Revenue).

Issue (ii): Whether section 10(22) applies only to universities established in India.

Analysis: Section 10(22) does not include words restricting its operation to institutions "in India"; where the Legislature intended a territorial or constitutive limitation it did so expressly in other clauses of section 10. Reading the definition of "university" from the University Grants Commission Act into section 10(22) is impermissible. Thus clause (22) on its face is not confined to Indian universities.

Conclusion: Section 10(22) is not limited to universities constituted or established in India; conclusion partially favourable to the assessee on territorial scope but not determinative of exemption entitlement.

Issue (iii): Whether imparting education or having educational activity in India is a prerequisite for claiming exemption under section 10(22).

Analysis: The purpose and object of clause (22) is to exempt income of institutions that exist for educational (non-profit) purposes; the statutory scheme and fiscal policy require a rational basis for exemption. Interpreting clause (22) to allow a foreign university with no educational activity in India to claim blanket exemption for income earned in India from commercial activities would produce an absurd and unjust result and would be discriminatory toward domestic institutions. The provision should be construed to require that the university or institution have some educational activity or impart education in India for income attributable to Indian activities to be exempt.

Conclusion: Imparting education or having educational activity in India is a necessary condition for a university or other educational institution to claim exemption under section 10(22); conclusion adverse to the assessee (in favour of Revenue).

Final Conclusion: Applying the above conclusions to the present facts (where the Oxford University Press, though treated as part of the University of Oxford, had no finding or evidence of educational activity in India and carried on commercial publishing activities), the exemption under section 10(22) is not available; the majority therefore dismiss the appeals.

Ratio Decidendi: Section 10(22) exempts income of a university or other educational institution that exists solely for educational and non-profit purposes, and while the clause is not limited to institutions constituted in India, a foreign university can claim the exemption only insofar as it has educational activity or imparts education in India; absent such Indian educational activity, income derived from commercial operations in India is not exempt under section 10(22).

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