TaxTMI 
TaxTMI 
2011 (4) TMI 866
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....nor of Bihar or his official nominees. The assessee is engaged in the business of printing and sale of text books, and job works relating to printing etc. It had submitted its returns for the period in question claiming exemption from taxation, and also claimed to be an educational institution for charitable purpose within the meaning of section 2(15) of the Act. The affairs of the assessee are controlled by the State Government. In view of its policy decision, the State Government extends cash subsidy to the assessee for print and sale of text books at low rates to reach the children of the deprived sections of the society in an effort to fulfil the constitutional mandate of spread of education. The assessee had during the period in question disclosed total income of Rs.34,29,88,490/-, and additional income of Rs.1,65,10,570. The case was assessed under section 43(i) of the Act. It was selected for scrutiny and the statutory notices were issued. After a detailed scrutiny and hearing, the learned assessing officer held that the subsidies from the State Government, either already received or receivable in future, had to be accounted for as per the mercantile system and was taxable v....
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....historic interest], and the advancement of any other object of general public utility. Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity." It is relevant to state that the proviso was appended to section 2(15) by a Parliamentary amendment with effect from 1.4.2009, and is obviously inapplicable to the present situation. Sections 4 and 5 of the Act, if we may use the expression with respect to fiscal laws, are the charging sections. Section 4 is headed `Charge of income-tax', and generally speaking seeks to charge every income in this country. Section 5 is headed `Scope of total income'. There are certain incomes exempt from taxation spread over the Act. We shall notice the relevant ones in view of the assessee's stand that the subsidies received by it from the State Government qualifies for exem....
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....tution or any hospital or other medical institution where such assets form part of the corpus of the fund, trust or institution or any university or other educational institution or any hospital or other medical institution as on the 1st day of June 1973; ................ ............. Provided also that nothing contained in sub-clause (iv) or sub-clause (v) or sub-clause (via) shall apply in relation to any income of the fund or trust or institution or any university or other educational institution or any hospital or other medical institution, being profits and gains of business, unless the business is incidental to the attainment of its objectives and separate books of account are maintained by it in respect of such business : ................. ................. Provided also that where the fund or institution referred to in sub-clause (iv) or trust or institution referred to in sub-clause (v) is notified by the Central Government or is approved by the prescribed authority, as the case may be, or any other university or other educational institution referred to in sub-clause (vi) or any hospital or other medical institution referred to in sub-clause (via), is approved by the pre....
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....ction 10(23C), that the spirit of exemption from taxability of the income of the university or other educational institution without profit motive runs through the newly inserted provision with details added therein. Section 10(23C)(iii ab) appears to us to be of paramount importance in the present case and has been reproduced hereinabove. There is no denying the position that the assessee is an instrumentality of the State Government, and a government company within the meaning of section 617 of the Companies Act, which carries out the mandate of the State Government, enshrined in Chapter- IV of the Constitution and summarized hereinabove. It strives to carry out the directive principles of Chapter -IV of the Constitution and as per the direction of the State Government supplies books to students at low prices, the subsidy coming from the State Government. In such a situation, its charitable nature and character is in no doubt, and is dependent on the State finance. The fact that, in pursuit of its charitable purpose, it registers some income in its balance-sheet will not per se make it to be a profit-making organization. An organization of this size has to maintain its infrastru....
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....d not deal with `charitable purpose' within the meaning of section 2(15), nor the `benefits of exemption available to educational institutions from the State Government', within the meaning of section 10(23C), of the Act. Sahney Steel & Press Works Ltd. was really concerned with industrial subsidy from the Government which is fundamentally different and distinct from educational institutions to which has to be added Chapter-IV of the Constitution of India which lays down the governmental duty to promote education amongst all, particularly the downtrodden sections, of this country. In view of the facts and circumstances of the case, the Supreme Court held that the amount paid to the assessee in that case was in the nature of subsidy from public funds. The funds were made available to the assessee to assist it in carrying on its trade or business. The Supreme Court held that, having regard to the scheme of the notification, there was no doubt that the object of various assistances under the subsidy scheme was to enable the assessee to run the business more profitably. 11. We wish to notice some of the judgments discussed in Sahney Steel & Press Works Ltd. (supra), to the extent rele....
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....om home-grown beet. The company was paid various sums under the British Sugar Industry (Assistance) Act 1931, out of monies provided by Parliament. The question was whether these monies were to be taken into account as trade receipts or not. The object of the grant was that in the year 1931, in view of the heavy fall in prices of sugar, sugar industries were in difficulty. The government decided to give financial assistance to certain industries in respect of sugar manufactured by them from home-grown beet during the relevant period. Lord Macmillan held that : "What to my mind is decisive is that these payments were made to the company in order that the money might be used in their business." He further observed that : " I think that they were supplementary trade receipts bestowed upon the company by the Government and proper to be taken into computation in arriving at the balance of the company's profits and gains for the year in which they were received." Applying these principles in the case of Sahney Steel & Press Works Ltd., the Supreme Court observed that the payments were made to assist the new industries at the commencement of business to carry on their business. Th....