TaxTMI 
TaxTMI 
2014 (9) TMI 41
X X X X Extracts X X X X
X X X X Extracts X X X X
....he material available on record. The facts, in brief, are that the assessee is a society originally registered in the name of M.P. State Corporation of Text Book Production And Education Research, later on changed to Madhya Pradesh Pathya Pustak Nigam, declared nil income in its return filed on 30.9.2009. The total income was subsequently determined at Rs. 15,10,38,400/- u/s 143(3) of the Act which includes all additions/disallowances which were deleted by learned CIT(A) and the Revenue is in appeal before the Tribunal. The relevant finding of the ld. CIT(A) is reproduced hereunder: "6. I have carefully gone through the written submissions of the appellant and also the assessment order. It is seen that the appellant was granted registration u/s 12A vide order dated 23.10.2009 consequent upon order of the Hon'ble ITAT Indore Bench dated 23.9.2009. It is also seen that the appellant did claim exemption u/s 11 in the return of income filed on 30.9.2009. The appellant also furnished the audit report in form No.10B dated 5.11.2009. It is seen that the Assessing Officer has rejected the claim of exemption u/s 11 for the reasons mentioned by his predecessor in respect of assessment pro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....also pointed out that the grounds raised in the cross-objection are covered by the decision of the Tribunal dated 25.4.2012. This factual matrix was not controverted by the Revenue. 5.1 We have considered the rival submissions and perused the material available on record. In view of the above assertion, we are reproducing hereunder the relevant portion of aforesaid order dated 25.4.2012 in ITA Nos.375 to 394/Ind/2011 in assessee's own case for AYs 1988-89 to 2006-07 and 2008-09: These appeals filed by the assessee arise out of order of CIT(A)-I, Bhopal, dated 28.11.2011 for the assessment years 1988 89 to 2006-07 and 2008-09 2. The following common grounds have been taken by the assessee in ITA No. 375 to 385/Ind/2011 :- "1) That impugned order passed by the Ld. Commissioner of Income Tax (Appeals) is bad in law as well as on the facts. It is based on incorrect interpretation of law and the facts have also been incorrectly construed. 2.1) That on the facts and in the circumstances of the case of the Ld. CIT(A) erred in not allowing the benefit of section 11 to 13 by stating the fact that the audit report in Form 10B was not file during the course of assessment proceedin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....binding on the Ld. CIT(A) and Ld. A.O." 3. Whereas the following common grounds have been taken by the assessee in ITA No. 386 to 394/Ind/2011 :- "1) That impugned order passed by the Ld. Commissioner of Income Tax (Appeals) is bad in law as well as on the facts. It is based on incorrect interpretation of law and the facts have also been incorrectly construed. 2.1) That on the facts and in the circumstances of the case of the Ld. CIT(A) erred in not allowing the benefit of section 11 to 13 by stating the fact that the audit report in Form 10B was not file during the course of assessment proceedings before the A.O. and filing of the audit report is mandatory and not directory in nature. 2.2] That on the facts and in the circumstances of the case the Ld. CIT(A) erred in stating the fact that audit report in form 10B is dated 10.10.2010 and as such same is not available with the appellant at the time of filing of return. As a matter of fact the audit report is dated 10.12.2010 and ready at the time of assessment proceedings. 2.3] That on the facts and in the circumstances of the case the Ld. CIT(A) and Ld. A.O. erred in not following the direction of Hon'ble I.T.A.T....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s are taken by the State Government under the scheme of "Sarva Siksha Abhiyan" for free distribution. 3.5] That the Ld.CIT(A) failed to appreciate the fact that no part of the surplus is distributed to anyone and used for the educational purpose as per the directions of State Government without any exception." 4. Rival contentions have been heard and records perused. The Brief facts of this case are that assessee is a society originally registered in the name of M. P. State Corporation of Text Book Production and Educational Research from 07.08.1968. Since 1st October, 1974, its name was changed to Madhya Pradesh Pathya Pustak Nigam. As per the memorandum of association, objects of the assessee society are to aid and promote advancement of education in general and of primary and secondary education in particular, to produce school text books, books for teachers, work books for pupils, other educational registers useful in performing teaching, learning and evaluation in the educational institutions, to print, publish, stock, distribute to sell or enter into any arrangement for printing, publishing, stocking, distribution and sale of text books approved, sanctioned or assigned ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ation of the society filed by the assessee, it is found that the society has the following objects:- (1) to aid and promote advancement of education in general and of primary and secondary education in particular; (2) to produce School text books, hand-books for teachers work books of pupils and other educational ,literature useful for furtherance of teaching,learning and evaluation in educational institutions; (3) to encourage and procure expert authors having knowledge and experience of modem methods of education to write in different languages text books on various subjects suited to the requirement of the curricula and syllabi prescribed by Government or other appropriate authority in that behalf for various coursesof ducation and so apply for and obtain the approval or sanction of Government or other appropriate authority thereto; (4) to print, publish, stock distribute and sell or enter into any arrangement for printing, publishing, stocking, distribution and sale of text books approved, sanctioned or assigned by Government or other appropriate authority and any other publications which the corporation may decide to publish with a view to making the same available....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fer of dispose of all or, any property moveable or immoveable of the society; (18) to payout of the funds belonging to the society or out of any particular part of such funds all expenses of or incidental to the formation of the society including all rents rates, taxes, a outgoings and the salaries of the employees; (19) to draw make, accept, endorse and negotiate charges,hundies, promissory notes or other negotiable instruments; (20) for the purposes aforesaid, to sign execute an deliversuch assurances and deeds as may be necessary : (21) to undertake on agency basis or otherwise the following functions for or on behalf of the Govt. of Madhya Pradesh or the Government of India:- (i) Stocking, utilization and accounting for the gift paper received by the Government of India or the Govt. of Madhya Pradesh. (ii) Implementing any scheme for the free supply or books; (iii) Assisting and advising the Government of Madhya Pradesh Board of Secondary Education, the Director of Public Instruction or other appropriate authority in sanctioning school text books for standards I to XII submitted by private authors, or publishers; (iv) and generally to do and execute all ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y of the facts and circumstances of the case, the answer of these questions comes in positive. The assessee is therefore, an educational institution solely exists for educational purposes and entitled to the claimed exemptions which the department in earlier years had been rightly granting under the similar set of facts & circumstances. There may be several private publication houses which may also be publishing study material etc. helpful in study to the students in the school but when it is done with an aim and object to earn profit, these cannot be termed as existing solely for education purpose and not for purpose of profit. Earning of a limited profit for smooth running of an institution or society is not prohibited, what is to be seen is the approach of the society from its activities and conduct as to whether it is commercial or solely for educational purpose. The issue involved in ground 1 to 4 is thus decided in favour of the assessee with the direction to the AO to allow the claimed exemption to the assessee. " Therefore the assessee is an educational institution existing solely for educational purpose and not for profit. The Similar institutions engaged in printing an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e treated as educational institution." Since MP, Text Book Corporation is also working on the same lines as cited in the above case, it is an educational institution existing solely for the purpose of education. " 10. However, the Assessing Officer did not accept the assessee's contention and held that the main activity of the assessee society is merely printing and sale of books on commercial basis, therefore, assessee is not eligible for claim of exemption u/s 10(22)/10(23C) of Income-tax Act, 1961. 11. In all the years under consideration starting from assessment year 1988-89 to 2006-07 the issues involved are common. Consolidated order has been passed by the Assessing Officer dated 30th December, 2010, wherein assessee's claim for exemption u/s 10(22) was declined on the plea that the assessee does not depend upon on Government grants. The Assessing Officer observed that as per annual reports for financial year 2002-03 to, 2005-06, initially the society started its operation by taking a loan of Rs. 10 lakhs from the State Government and Rs. 4.75 lakhs from the M.P. Board of Secondary Education. The Assessing Officer further observed that work of society was carried out....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... distribute and sell or enter into any arrangement for printing, publishing, stocking, distribution and sell of text books approved, sanctioned or assigned by the M. P. Government or other appropriate authorities. 16. With regard to assessee's eligibility u/s 11, the contention of ld. Authorized Representative was as under :- "The said ground relates to the denial of exemption u/s 11 of the I.T.Act even when the assessee is holding registration u/s 12AA. 1.1(i) The Ld.A.O. denied the benefit of section 11 to 13 on the two grounds which in brief are as under:- (a) The assessee has neither claimed benefit of section 11 to 13 in the return filed u/s 139 nor by filing a revised return u/s 139(5) of the I.T.Act. (b) As per the provision of section 12A(1)(b) read with rule 17B of the I.T.Rules the assessee has not filed audit report in form 10B along with the Return of Income for the assessment years 1988-89 to2006-07. 1.1(ii) The Ld.CIT (A) confirmed the denial of exemption by holding as under:- Page 10 of the CIT(A) order:- "It may be noticed that section 12A(I)(b) of IT Act stipulated specific condition that provisions of section 11 & 12 shall not apply unless in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rn was not carried out by the appellant. In these circumstances, when an essential requirement and very foundation for claim of benefit was lacking in the appellant case, the claim of the appellant for exemption u/s 11 cannot be accepted. The ground of appeal is accordingly, dismissed. 1.2 From the above it is clear that the Ld.CIT(A) dismissed the appeal merely for the reason that the audit report in Form No.10B are not available at the time of filing of return of income for respective assessment years as same is dated 10.10.2010 by referring to the judgement of Hon'ble Gujarat High Court in the case of Zenith Processing Mills Vs. CIT reported in 219 ITR 721 (Guj.). In this regard we have to submit as under:- (i) That in the case of Zenith Processing Mills there is nothing that the audit report in Form No.10B should be obtained by the assessee prior to the filing of return of income. (ii) The Ld.CIT (A) failed to appreciate the fact that the reason for not obtaining and enclosing audit report along with the return of income was that the registration u/s 12AA(1) (b) (i) of the IT Act was granted by the Ld.CIT (A) in compliance to the direction given by the Hon'ble ITAT ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... also worth noting that before the Tribunal, the complete details were disclosed in respect of the production in the second unit. Asregards the claim under section 80-IA(2) the statement have been found to be supported by the date and figures and the Tribunal has found that the proper books of account were maintained and were audited and the audit report in prescribed forms were filed. Ld. Counsel appearing for the appellant could not point out any error or infirmity in the aforesaid facts recorded by the Tribunal and the conclusions drawn by it. In view of the aforesaid position on facts, the Tribunal has not committed any error of law in holding that the respondent was entitled to the benefit of deduction under section 80-IA(2) of the Income-Tax Act. (b) CIT Vs. Hardeodas Agarwalla Trust (1992) 198 ITR 511 (Cal) "In the instant case it was held that balance sheet and income and expenditure statement of a trust or institution would necessarily contain the particulars of the application of income and non-user of income or property and the certificate of the auditor only affirms the same. The Assessing Officer can rely on the certificate for allowing the benefit of exemption. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d audit report in Form No.10B along with the return of income. The reason for non filing of audit report in Form 10B was that it was not known to the assessee society that it is entitled for benefit of section 11 to 13 by getting registration under section 12AA. First time in the year 2007-08 the counsel of the assessee who was dealing with its appeal before the ITAT advice the society to obtained registration under section 12AA. Accordingly the society applied for registration under section 12AA and the Ld.Commissioner of Income Tax granted registration on 23.10.2009 since the inception of the society i.e. w.e.f. 07.08.1968 as per the direction of Hon'ble ITAT, therefore the assessee society could not filed audit report in prescribed Form 10B along with the return of income. This is a reasonable cause for non filing of audit report along with the return of income. (vi) It is also undisputed that during the course of remand assessment proceeding no opportunity to file audit report in Form 10B was allowed to the appellant society which is clear from the remand assessment order itself. When a particular provision of the IT Act is directory in that case the Ld.A.O. should allow an ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....9 to 2006-07 and 2007-08, prescribed audit report in form 10-B was obtained by the assessee only on 10.10.2010, which is violation of statutory provisions u/s 12A(1)(b) which required getting aforesaid audit report from the auditor before filing of return. 18. Further contention of the ld. CIT DR was that the assessee is not approved by prescribed authority and, therefore, exemption u/s 10(23C)(vi) is not available to the assessee from assessment year 1999-2000 always. Further since the assessee is not fully or substantially financed by the Government, therefore, even benefit u/s 10(23C)(iiiab) is not available to the assessee. Reliance was placed on the decision of Hon'ble Supreme Court in the case of Sole Trustee Loka Shikshan Trust, 101 ITR 234, wherein education has been defined as process of training and developing the knowledge, skill, mind and the character of the students by normal schooling. He further submitted that in the later decision of the Hon'ble Supreme Court in the case of Assam State Text Book Production and Publicity Corporation Limited, 319 ITR 317, the printing and publication of text books for students by Government Controlling Company was held as ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 20th October, 2009, which is subsequent to the date of decision of the Jurisdictional High Court in assessee's case, which was dated 21.4.2009. Since the decision of the Jurisdictional High Court in assessee's own case, was prior to decision of the Hon'ble Supreme Court in the case of Assam State Text Book (supra) in the fitness of things, the lower authorities while again deciding the issue in remand proceedings should have taken into account the verdict laid down by the Hon'ble Supreme Court in the latter decision in the case of Assam State Text Book Production and Publication Corporation (supra). Hon'ble Supreme Court, in this case, was deciding the case of Society which was engaged in similar activity to that of the assessee i.e. printing and publishing of school text books. It was also engaged in printing and publishing of text book for school students confirming to the norms prescribed by the Education Department of State. The main issue before the Hon'ble Supreme Court was whether the assessee Corporation could be termed as Educational Institution in terms of Section 10(22) of the Income-tax Act, 1961. The Assessing Officer held that since the assessee had i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Act. However, the High Court noticed the letter issued by the CBDT on 19th August, 1975, in the case of Tamil Nadu Text Book Society, which, in similar circumstances, had granted exemption to the Tamil Nadu Text Book Society as an educational institution within the meaning of Section 10(22) of the Act. The judgment of the High Court further recites that under similar situation, the CBDT had also extended the benefit of exemption u/s 10(22) of the Act to the Orissa Secondary Board Education reported at 86 ITR 408. After taking into account these circulars/letters issued by the CBDT, 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 u/s 10(22) of the Act. The Court observed that it is not disputed before us that the aims and objects of the Tamil Nadu Text Books Society and those of the respondent-assessee are almost identical. It is also not shown to us that the surplus amount, if any, of the respondent-assessee, is used for any other purpose or distributed to other members. The CIT(A) as well as the Tribunal have noticed that even if some amount remains surplus, the same....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 07. 2000-01 377317263 30556884 8.10 % 25. The close scrutiny of the audited accounts also reveals that no part of the surplus generated by the assessee was parted by it for the purpose other than aid to Government schools for construction of building, repairing of building, furniture, scholarships to the students etc. It is also clear from the audited accounts of the Society that it has not distributed any profit to anybody in any of the assessment years under consideration. Our this observation is further fortified by the fact that all the shares of the society is with the Government of M.P. and Board of Governors of the Society, his ministers and Secretaries of various Departments of M.P. Government and there is no provision for distribution of profit, in the registration of the society itself. Furthermore, as per the judicial pronouncements in the case of Haryana State Counselling Society, 223 CTR 402, Maa Saraswati Education Trust, 234 CTGR 400 and Vanita Vishram Trust, 327 ITR 121, merely because an educational institution accumulates income, it does not go out of the purview of Section 10(22)/10(23C)(vi). Furthermore, there is nothing in the Income Tax Act to support t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ligible for claim of exemption. Sub clause (vi) of Section 10(23C) provides that University or other educational institution existing solely for educational purposes and not for the purpose of profit, other than those mentioned in sub clause (iiiab) or sub clause (iiiad) and which may be approved by the prescribed authority. Thus, the approval is required only in cases where the university and other educational institution is not wholly or substantially financed by the Government. In the instant case, we found that entire fund has been invested by the State Government either in the form of initial contribution or through accumulation of surplus, therefore, the assessee was not required to be approved by prescribed authority for the purpose of claim of exemption u/s 10(23-C). Assessee's case is falling within sub clause (iiiab), which reads as under :- "any university or educational institution existing solely for educational purposes and not for purposes of profit and which is wholly or substantially financed by the Government/" Thus, from assessment year 1999-2000 to 2008-09, the assessee is entitled for claim of exemption u/s 10(23C)(iiiab). 28. As the object of the asse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on'ble High Court and I.T.A.T. in the remand proceedings, both the lower authorities have not considered the main object of the society which is to Printing and Publishing of Text Books to the students of Class I to XII at cheaper rate to comply with the statutory requirement of Article 21-A and 41 of the Constitution of India, which make the right of education as fundamental rights of children, which reads as under :- "21-A- Right to education - The state shall provide Free and compulsory education to all children of the age of 6 to, 14 years in such manner as the state may by law determine. Article 41 : " The State shall within the limits of its economic capacity and development make effective provision for security the right to work, to education and to public assistance in case of unemployment, old age sickness disabilities and in other cases of undeserved want." Providing of school text books and incidental publication at cheaper rates is definitely to aid kind promote advancement of education to the children." 32. To comply with the statutory requirement on article 21A and 41, the assessee society is following syllabus prescribed by the M. P. Government and pr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s, the assessee also encourages and procures experts authors to write text books on various subjects as per the syllabus prescribed by the Government for various courses of education. As per Object No.(14), printing, publishing and sale of books., is approved by Government and page (5) and (6) prescribed for undertaking research for education. 33. It is pertinent to mention here that like assessee society which is engaged in printing and publishing of text books as prescribed by the State of M.P., similar type of institution is also working in other states like Tamil Nadu, Rajasthan, Delhi, Orissa, Bihar. In case of similar institutions exemptions have been allowed by the Tribunal and High Court. Hon'ble Rajasthan High Court has dealt with in detail the activity of Rajasthan State Text Book Code, 224 ITR 668 and allowed exemption u/s 10(22) of Income-tax Act, 1961. Hon'ble High Court has observed at page 668 that the facts in the case of Tamil Nadu Text Book Society are similar. In the case of Tamil Nadu Text Book Society, the C.B.D.T. itself has taken the view vide its letter dated 19.8.1975 that Tamil Nadu Text Book Society is entitled for exemption u/s 10(22) of the I....
X X X X Extracts X X X X
X X X X Extracts X X X X
....blishing, news papers and journals for earning profit, it was held that such printing and publication of news paper was not education within the meaning of sec 2(15). However, the facts of instant case are quite distinguishable where assessee was printing and publishing text books for students of Class I to XII without any profit motive. Thus, it will not help the Revenue for holding that present assessee was not falling within the definition of "Other educational institution". However, in the instant case before us, undisputedly, the assessee society was established only for the purpose of advancement of education by printing and publishing of text books as prescribed by the Government. As discussed above, all such institutions working in all other States of India were held to be eligible for claim of exemption u/s 10(22). Thus, there was no justification on the part of lower authorities for decline of claim of exemption u/s 10(22)/10(23C). Even in the case of Academy of General Education, 150 ITR 135, it was observed that the assessee itself need not impart education to the students and it need not be necessarily school or college for the claim of benefit. It was found that in it....