TaxTMI 
TaxTMI 
2003 (4) TMI 247
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....were placed in the newly constituted "The Assam State Text-book Production and Publication Corporation Ltd." The learned counsel for the assessee submitted that the main object of the assessee is to do research and printing and publishing of text-books for the school students as per the norms fixed by the advisory board. Since the printing and publication of the text-books for the school students is an activity for educational purposes the assessee must be allowed exemption under section 10(22) of the Act. The learned counsel further pointed out that the entire share capital of the assessee was borne by the Government of Assam and no share was issued in the name of private individual or corporation. The learned counsel invited to our attention to page 25 of the paper book and submitted that the majority of the share of the assessee is held by His Excellency, the Governor of Assam and the other shares are the Financial Commissioner and Secretary to the Govt. of Assam and the Chairman of the Board of Secondary Education. Since the entire share is held by the State Govt. of Assam, the company is a Govt. company within the meaning of the Companies Act. The learned counsel further submi....
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....ng those received by way of premium on shares or debentures issued at a premium by the corporation and any moneys received in respect of dividends accrued on forfeited shares and moneys arising from the re-issue by the corporation of forfeited shares or from unclaimed dividends. The learned Departmental Representative mainly relied upon these ancillary clauses contained in the Memorandum of Association and vehemently argued that these clauses are not in connection with the educational activities. In view of the above ancillary objects of the company, the learned Departmental Representative submitted that the assessee is not entitled for exemption under section 10(22) of the Act. The learned Departmental Representative also relied upon a large number of judgments out of which we are of the considered opinion that the majority of the judgments are not relevant to the facts of this case. However, we are referring the relevant judgments at our discussion in the appropriate place. 4. We have considered the rival contentions of both the learned counsels for the assessee any the learned Departmental Representative in the light of the materials available before us. Section 10(22) of the ....
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....er of Income-tax or C.B.D.T. for granting exemption in a blanket manner. The learned counsel further submitted that the C.B.D.T. has granted exemption to the Tamilnadu Text-books Society which also undertaking a similar activity of printing and publishing of text-books as per the letter dated 19-8-1975 and file No.184/26/75. In that case the C.B.D.T. held that the Tamilnadu Text-book Society was an educational institution existing solely for the purpose of education within the meaning of section 10(22) of the Act. In a similar set of facts in a reported case in Secondary Board of Education v. ITO [1972] 86 ITR 408 (Ori.) exemption was granted by the Hon'ble Orissa High Court. In a similar set of facts the Rajasthan State Text-Book Board was also granted exemption by the Hon'ble Rajasthan High Court in the case of CIT v. Rajasthan State Text-Book Board [2000] 244 ITR 667. The learned counsel for the assessee also relied upon another judgment of the Hon'ble Rajasthan High Court in the case of Dy. CIT v. Cosmopolitan Education Society [2000] 244 ITR 494. In the case of Katra Education Society v. ITO [1978] 111 ITR 420 (All). The Hon'ble Allahabad High Court held that an educational so....
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....ct. 7. With the above background, now we have to examine whether the present assessee is an institution existing solely for the educational purposes and not for the purpose of profit. We have perused the entire materials available before us. We have noticed that the entire activity of the assessee is restricted only in printing and publishing the text-books. As it was pointed out by the learned Departmental Representative that the assessee is having ancillary object of other business. Still it is an admitted case of both the parties that no such activity was carried on so far by the assessee except printing and publishing the text-books. It is also not disputed by the Revenue that an organisation which is printing and publishing text-books was treated as institution existing solely for educational purposes as per the notification issued by the C.B.D.T. in file No. 184/26/75 dated 19-8-1975 in the case of Tamilnadu Text-Book Society. It is also not disputed before us that the main object of the assessee was printing and publishing text-books as in the case of Tamilnadu Text-Book Society. It is also not the case of the Department that the surplus amount, if any, of the assessee is u....
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.... of the above observation of the Hon'ble Supreme Court even if the activity contained in the ancillary clause of the Memorandum of Association is carried out in order to achieve objective of printing and publishing the text-books, the said ancillary objective is only an incidental to the attainment of main objective of the organisation. Hence, merely because the assessee contained an ancillary clause it cannot be said that the assessee is not an educational institution existed solely for the purpose of education. 8. In another case of Aditanar Educational Institution v. Addl. CIT [1997] 224 ITR 310 the Hon'ble Supreme Court held that registered educational society formed for the sole purpose of establishing, running, managing or assisting schools or colleges in an educational institution and entitled to exemption. In view of the above fact, it is very clear that the assessee existed solely for the purpose of printing and publishing text-books and other object, if any, is only incidental to achieve the objects of the main purpose. 9. In view of our above discussion, we have no hesitation to hold that the assessee is entitled to exemption under section 10(22) of the Act since the a....
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....al in I.T.A. Nos. 209 (Gau.), 210 (Gau.), 211 (Gau.) and 212 (Gau.) of 1996 are dismissed. ORDER Per Shri N.S. Saini, Accountant Member--I have gone through the proposed order of learned Judicial Member in this case with great respect I regret my inability to agree with his conclusion for the reasons stated hereinafter:-- 1. The main issue in this case is in a narrow campus and the determination thereof depends upon the true and correct interpretation of section 10(22) of the I.T. Act. Section 10(22) of the Act as it stood at the material time reads as under:-- "Section 10--Incomes not included in total income--In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included .................................................. (22) any income of a university or other educational institution, existing solely for educational purposes and not for purposes of profit........" 2. On examination of the provisions of section 10(22), the condition precedent to the availability of the exemption can be stated as thus:-- (a) Income should be that of a character of a university or other educational institution; an....
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.... and extensive sense according to which acquisition of further knowledge constitutes education. 8. In CIT v. Oxford University Press [1996] 221 ITR 77, the Hon'ble Bombay High Court has held that if the assessee concerned does not exist as a university or an educational institution solely for such purposes and does not carryon the primary activities of a university or educational institutions, but merely runs the business of press in India for printing and publishing books and selling and supplying the same as well as books published by other publisher for the purpose of profits it cannot be held to be a "university" within the meaning of section 10(22) of the Act merely by reason of the fact that it is run by a university existing outside India for educational purposes or that it is a part of such university. 9. Now, coming to the facts of the instant case, as elaborately discussed in the order of the learned Judicial Member, the main object of the assessee-company is to carryon business as publisher and printers in all its branches and of all kinds and all other objects are incidental or ancillary to this main object. This fact is not disputed by both the parties and it has bee....
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....(22) of the Act. However, before us no copy of the said letter of the C.B.D.T. was filed and neither any material to indicate the objects and activities of Tamilnadu Text-books Society was filed. In absence of these the letter of the C.B.D.T. cannot be properly appreciated and how the activities of the Tamilnadu Textbooks Society was same as that of the assessee also could not be verified. However, be that as it may be, if the letter of the C.B.D.T. is contrary to the provisions of law, the same is not binding on us. 13. Now let us examine the decisions relied upon by the learned counsel for the assessee. In Secondary Board of Education's case, the point at issue before the Court was whether the board of secondary education exists solely for educational purposes and not for the purpose of profit. It was not in dispute before the court that the Board of secondary education is not an educational institution. Thus, the court has examine and found that as per the Act under which the Board was constituted the surplus earned by the Board entered into the Board's fund and its entire expenditure is to be directed towards development and expansion of educational purposes. In the circumstan....
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....tion in this appeal, so as to admit it. Coming to this conclusion, the High Court rejected the appeal. Thus, from this decision also support for claim of the assessee that its character is that of an educational institution eligible for exemption under section 10(22) cannot be derived. 16. In Katra Education Society's case the Hon'ble Allahabad High Court has observed that there is no reason why an educational society cannot be regarded as an educational institution if that educational society is running educational institution or institutions. In the present case, it is an admitted fact that the assessee-company is not running any educational institution or institutions. Thus, the above decision of the Hon'ble Allahabad High Court is not applicable to the facts of the instant case. Similar to the decision of the Hon'ble Allahabad High Court was the decision of the Hon'ble Madras High Court in the case of CIT v. Devi Educational Institution [1985] 153 ITR 571 wherein it was held that the actual existence of the educational institution is a pre-condition for application of section 10(22) of the Act. 17. In Gujarat State Co-operative Union's case the Hon'ble Gujarat High Court has ....
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....e also but, he admitted that the assessee-company is not registered under section 25 of the Companies Act, 1956, and the Memorandum of Association and the Articles of Association of the assessee-company does not restrict the payment of dividend and issue of bonus share to its members. 21. In this connection reference may be made to the circular of the C.B.D.T. being circular No. F. No. 194/16-17-IT(AI) reproduced from Birla Vidhya Vihar Trust v. CIT [1982] 136 ITR 445, 453-54 (Cal.) which states that:-- "3. The question for consideration is whether an educational institution existing solely for educational purposes but which shows some surplus at the end of the year is eligible for this exemption. If the profit of the educational institution can be diverted for the personal use of the proprietor thereof, then the income of the educational trust will be subject to tax. However, there may be cases where the educational institution may be owned by the trust or societies to whom the provisions of section 11 may be applicable. Where all the objects of the trust are educational, and the surplus, if any, from running the educational institution is used for educational purposes only, it....
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....e High Court has held that when the trustees had the indefensible alternative right to apply the funds to non-charitable purposes, without making donation to charitable purpose, the matter is hit by the principles that if there are several objects of a trust of which some are charitable and some are non-charitable, and the trustees in their discretion are to apply the income to any of the objects, the whole trust fails and no part of the income is exempt from tax. 24. In view of the above, it is very difficult for me to hold that the assessee was existing solely for educational purposes and not for the purposes of profit during the periods under consideration. 25. As I have already held that the income of the assessee-company cannot be held to be bearing the character same as of the income of a university or other educational institution and further the assessee-company cannot be held to be existing solely for educational purposes and not for the purpose of profit, exemption under section 10(22) of the Act cannot be granted to the assessee-company. In my opinion, the assessee-company was correct in law in offering its income for assessment all throughout in the past from its ince....
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.... it reveals that the closing stock was valued on the basis of actual stock found at the end to the year. Thus, the excess stock found as per remark of the auditor was already accounted for by the assessee in its closing stock, the Assessing Officer was not justified in making again an addition on that count and the CIT(A) was not justified in confirming the same. Further regarding actual shortage of stock found on physical verification was treated as unaccounted sales of the assessee without being any material on record. In my considered opinion, merely finding shortages on the basis of physical verification, it cannot be concluded that the same was on account of unaccounted sales only. The same may be on account of other reasons also like damages, pilferages etc. Thus, as the addition was made without bringing any material on record and merely on the basis of surmises and conjectures, the same cannot be sustained in law. Hence, the addition of Rs. 95,552 is deleted. 30. The next ground of appeal was directed against confirmation by the CIT(A) of the addition of Rs. 11,100 being short provision for expenses relating to the earlier years. From the profit and loss appropriation acco....
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....ese provisions were not applicable for the year under appeal. In the circumstances, the CIT(A) was not justified in directing the Assessing Officer to allow the deduction in respect of the bonus related to the year under consideration in the year in which it was actually paid and the same was allowable as deduction in the year to which it pertains. Hence, the order of the CIT(A) is modified to the above extent. 35. The other ground of appeal was directed against the upholding by the CIT(A) of the order of the Assessing Officer in levying interest under section 139(8) and section 215 of the Act without giving an opportunity of being heard to the assessee. 36. In Bansidhar Sewbhagowan & Co. v. CIT [1996] 222 ITR 16 (Gau.) it has been held that the assessee cannot claim an opportunity of hearing as of right before the interest is levied under section 139(8). Thus, the order of the CIT(A) in respect of interest under section 139(8) is hereby confirmed. 37. In Oriental Hotels Ltd. v. CIT [1999] 102 Taxman 451 (Mad.) it has been held that where interest has been charged under section 215 without giving an opportunity to the assessee and without passing a speaking order, such an order ....
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....s nominated by the State Government. Again in 1968, the Government constituted it as the Board of Textbook Production and Research. In 1972, the Board was converted into a Corporation by the name of the Assam State Text-book Production and Publication Corpn. Ltd. by dissolving the Board for Production of Text-books and Research through the Notification of the Governor of Assam dated 26th July, 1972. All the assets of the Board for Production of Textbook and Research were transferred to the Assam State Text-book Production and Publication Corpn. Ltd., Guwahati w.e.f. 1st July, 1972. The Corporation had authorized and paid-up share capital of Rs. 1,00,00,000 and the break-up of the shareholding is as follows: Name Shares Face value 1. Governor of Assam, represented by 9998 Nos. Rs. 99,98,000.00 Secretary, Educatio....
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....s of the said board and to carryon such business and activities, and do, exercise, perform and carryon such functions, powers, and authorities as may from time to time be given, assigned and directed by the Government of Assam in that regard or with regard to any other like matter and objects. 2. To prepare, print, publish, sell, supply or otherwise deal in text-books, supplementary books and literature on all subjects and in all languages for primary, secondary and Teachers' education in the State of Assam and elsewhere prescribed and approved by the competent authorities and/or approved or required by the Government of Assam or other educational authorities, institutions and bodies, statutory or otherwise. 3. To carryon business as publishers and printers in all its branches and of all kinds. 4. To purchase or otherwise acquire, own, establish, either wholly or in part and print, publish, edit and sell, import or export or otherwise deal in any magazines, pamphlets, leaflets, posters, journals, reviews, pictorials, books of all kinds, pictures, atlases, and maps, to carryon business of press; to manufacture and deal in pictures, charts. 5. (a) To regulate and fix prices of th....
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....ds, pictures, atlases, and maps, to carryon business of press, to manufacture and deal in pictures, charts. 5(a) To regulate and fix prices of the publication of the Corporation consistent with its objects. (b) To establish and conduct research work and promote studies in connection with the preparing, printing and publishing Text-books, reference books and other instructional literature, and other allied business and trade that may be considered by the Corporation likely to assist the Corporation business and to provide grants for such purpose, Further, the objects incidental or ancillary to the main objects listed in the Memorandum of Association and numbered 6 to 28 also include the following: (12) To carryon any other trade or business whatsoever which can in the opinion of the directors of the Corporation be advantageously carried on by the Corporation in connection with or ancillary to the general business of the Corporation, (21) To place, to reserve or to distribute as dividend or bonus shares among the members or otherwise to apply as the Corporation may from time to time think fit any money belonging to the Corporation including those received by way of premium on sh....
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....r the purpose of profit is not includible in the income of a person. To identify whether the income of the appellant corporation is to be exempted or not as profit under section 10(22) of the I.T. Act, the Memorandum of Association of the appellant Corporation is to be referred to. On going through the Memorandum of Association, it is to be noted that besides the objects of publication or production of textbooks etc., the main objects listed in the Memorandum of Association also includes the following as noted by the Assessing Officer which it is necessary to reproduce even at the cost of repetition: (3) To carry on business and publishers and printers in all its branches and of all kinds. (4) To purchase or otherwise acquire, own establish, either wholly or in part and print, publish, edit and sell, import or export or otherwise deal in any magazines, pamphlets, leaflets, posters, journals, reviews, pictorials, books of all kinds, pictures, atlases and maps, to carryon businesses of press; to manufacture and deal in pictures, charts. (5)(a) To regulate and fix prices of the publication of the Corporation consistent with its objects. (b) To establish and conduct research work a....
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....of the I.T. Act is not be allowed on the total income." 9. Aggrieved by the said order, the assessee took up the matter in appeal before the Tribunal. The learned Judicial Member considered the rival submissions and it was his view that the assessee would be entitled to exemption under section 10(22) of the Act. According to him the provisions of section 10(22) provide for exemption of any income of university or other educational institutions existing solely for educational purposes and not for purpose of profit. In this regard, the first issue was whether the assessee comes within the definition of other educational institutions existing for educational purpose and not profit. For this definition, reliance was place on the clarification made by the Department of Revenue and Insurance as communicated to Ministry of Education, Social Welfare (Department of Education) vide letter No. F.68 /71-72-12; of 9-7-1973 wherein it was decided that all State Text-books Publication Boards should be treated as educational institutions as a matter of policy and the power has to be given to the Commissioner of Income-tax to decide the case on factual aspect. The learned judicial Member further f....
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.... the income from chit fund business was exempt from tax under section 2(15) of the Act. 11. The learned Judicial Member distinguished the decision of the Hon'ble Gujarat High Court in the case of Sorabji Nusserwanji Parekh and that of the Hon'ble Rajasthan High Court in the case of Maharaja Sawai Mansinghji Museum Trust. 12. Having regard to the above facts and considering that the ancillary objectives were only for the purpose of achieving the main objective and there being no violation of the provisions of the Memorandum and Article of Association and the assessee having concentrated exclusively for the publication and printing of text-books, it was held by him that the assessee is entitled to exemption under section 10(22) of the Act. 13. The learned Judicial Member also further cited the decision of the Hon'ble Supreme Court in the case of Aditanar Educational Institution for the proposition that since the assessee existed solely for the purpose of printing and publishing text-books and other object is only incidental to achieve the object of the main purpose and, therefore, it will not deprive of the benefit of section 10(22) of the Act. 14. On the other hand, the learned ....
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....on, the Bench referred the above question under section 255(4) of the Act. At the time of hearing before me, Shri U.K. Barthakur, learned counsel appeared for the assessee and Shir B.B. Dev, learned Departmental Representative appeared for the revenue. They were heard at length. 17. On careful consideration of the rival submissions in the light of the material on record, I am of the view that this controversy is set at rest by the decisions of the Hon'ble High Courts and the Hon'ble Supreme Court. The Hon'ble Supreme Court considered the scope of the provisions of section 10(22) of the I.T. Act, 1961 in the case of Aditanar Educational Institution. The Hon'ble Supreme Court held that it would be unreal and hypertechnical to hold that the assessee which was only a financing body and would not come within the scope of "other educational institution" as specified in section 10(22). The object of the society was to establish, run, manage or assist colleges or schools or other educational institutions solely for educational purposes and in that regard to raise or collect funds, donations, gifts, etc. Colleges and schools were the media through which the assessee imparted education and ....
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....facts, it was held by the Hon'ble High Court that the Tribunal was right in upholding the order of the CIT(Appeals) allowing the exemption under section 10(22) of the Act. 20. If the case of the assessee is examined in the light of the above decisions, it is seen that the facts of the case are identical to the facts of the decisions in the case of Aditanar Educational Institution and in the case of Rajasthan State Text-Book Board. The assessee in this case is a Corporation established in the year 1972. The paid-up share capital of the Corporation was held by the Government of Assam represented by the Governor of Assam, through the Secretary, Education Department, the Financial Commissioner & Secretary, Finance Department, and the Chairman, Board of Secondary Education in their official capacity. The entire share capital is, therefore, controlled and owned by the Government of Assam. 21. The main object of the Corporation is to do research and printing and publishing of text-books for the school students as per the norms prescribed and approved by the competent authorities and or approved or required by the Government of Assam or other educational authorities, institutions and bod....
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....emption should be evaluated each year to find out whether the institution existed during the relevant year solely for educational purposes and not for purposes of profit. This acid or decisive test prescribed by the Hon'ble Supreme Court is fully satisfied and complied with by the assessee corporation during the relevant assessment years. There has never been any utilization of the income for the purpose other than for printing and publication of the text-books prescribed by the authorities. The surplus income has never been distributed as dividend nor any bonus shares have been issued by the corporation. It is, therefore, seen that the assessee has fully qualified the test prescribed by the Hon'ble Supreme Court in this regard. 25. As regards the question whether the assessee being the Assam State Text-Books Production & Publication Corporation Limited can be treated as educational institutions as contemplated under section 10(22), it is seen that the Hon'ble Rajasthan High Court in the case of Rajasthan State TextBook Board settled the issue by citing the case of Tamilnadu TextBook Society which the Central Board of Direct Taxes has recognized as an educational institution exist....