TaxTMI 
TaxTMI 
TaxTMI 
2017 (5) TMI 430
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.... (A) and thereby denying exemption to the Assessee under Sections 11 and 12 of the Income Tax Act? (ii) Whether the ITAT was correct in law and on facts in holding that the activities carried out by the Assessee fall under the 4th limb i.e., "the advancement of any other object of General Public Utility" of the definition of the term "charitable purpose" under Section 2 (15) of the Act and not under the 2nd limb "education"? (iii) Whether ITAT could re-examine the issue already decided by it vide order dated 30.09.1980 in favour of the Assessee for AY 197576 and 1976-77, without referring the same to the large Bench particularly when there is no change in the activities carried out by the Assessee throughout these years? Background facts 3. The background facts are that the Assessee is a society registered under the Societies Registration Act, 1860. It was set up by the Ministry of Education, Government of India as well as by the Government of NCT of Delhi ('GNCTD'). It was registered on 28th March 1970. The Assessee was set up to ensure timely supply of prescribed text books at fair prices to school students and to improve the quality of primary and secondary school education ....
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....of the Society derived from the Government Loans or sale of books or other sources shall be applied only towards the promotions of its objectives and Society, as laid down under this "Memorandum of Association." Past tax history 8. The Assessee's income was exempt from tax under Section 11 of the Act during the AYs 1971-72 to 2005-06. When in AYs 1975-76 and 1976-77, the benefit of exemption from payment of income tax was denied by the concerned Assessing Officer ('AO'), the Assessee went in appeal before the Commissioner of Income Tax (Appeals) ['CIT (A)'] who allowed the appeal and restored the exemption. The Revenue's appeals against the said order were dismissed by the ITAT vide order dated 30th September 1980 in ITA Nos.1239/Del/1979 & 4448/Del/1979. Those orders of the ITAT for AYs 1975-76 and 1976-77 attained finality. The net result is that continuously from AY 1971-72 to AY 2005-06 the Assessee has had the benefit of exemption from payment of income tax. Order of the AO for the AYs in question 9. For AY 2006-07, the Assessee filed its return of income on 31st October 2007 declaring 'Nil' income claiming exemption under Sections 11 and 12 of the Act. The AO called ....
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...., the Revenue went in appeal before the ITAT which by a common order allowed the appeals. The impugned order of the ITAT may be summarised as under: (a) After perusing the income and expenditure statement for the AYs in question, the ITAT observed that the AO had rightly held that the activity of the Assessee was prima facie in the nature of a business activity of sale and purchase of books. The books had been sold at a huge profit margin about 40% which showed that the Assessee was engaged in the activities of earning profit. Accordingly, it was held that the activities of the Assessee society are in the nature of business and not charitable purpose. The decisions in Sole Trustee, Loka Shikshana Trust v. CIT (supra) and Oxford University Press v. Commissioner of Income Tax (2001) 247 ITR 658 (SC) were referred to. (b) Even if the registration is granted to the Assessee under Section 12 AA of the Act, the AO was not precluded from examining whether the Assessee complied with the requirement of Section 11 of the Act in every AY. (c) The ITAT held that its earlier order dated 30th September 1980 for AYs 1975-76 and 1976-77 had not considered the income and expenditure statements f....
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....s earnings were for charitable purposes. 16. Finally, Ms. Bansal submitted that the rule of consistency should also apply. She pointed out that from AY 1974-75 till 2005-06, exemption has been granted to the Appellant and with absolutely no change of circumstances there was no occasion for a different approach to be taken for the AYs in question. She also placed reliance on the decisions of the Supreme Court in CIT v. Excel Industries (2013) 262 CTR 261 (SC) and Radhasoami Satsang Saomi Bagh, Agra v. Commissioner of Income Tax (1992) 193 ITR 321 (SC) Submissions on behalf of the Revenue 17. Countering the above submissions, Mr. Rahul Kaushik, learned Senior standing counsel for the Revenue, sought to support the impugned order of the ITAT by pointing out that the level of profits earned by the Appellant during the AYs in question took its activity outside the ambit of a 'charitable purpose'. He submitted that the ITAT was justified in negativing the plea by relying on the decision in Sole Trustee, Loka Shikshana Trust v. CIT (supra). While Mr. Kaushik was unable to dispute that the activity of the Appellant involved 'education', he maintained that the Appellant did not satisfy t....
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....according to which every acquisition of further knowledge constitutes education. According to this wide and extended sense, travelling is education, because as a result of travelling you acquire fresh knowledge. Likewise, if you read newspapers and magazines, see pictures, visit art galleries, museums and zoos, you thereby add to your knowledge. Again, when you grow up and have dealings with other people, some of whom are not straight you learn by experience and thus add to your knowledge of the ways of the world. If you are not careful, your wallet is liable to be stolen or you are liable to be cheated by some unscrupulous person. The thief who removes our wallet and the swindler who cheats you teach you a lesson and in the process make you wiser though poorer. If you visit a night club, you get acquainted with and add to your knowledge about some of the not much revealed realities and mysteries of life. All this in a way is education in the great school of life. But that is not the sense in which the word "education" is used in clause (15) of Section 2. What education connotes in that clause is the process of training and developing the knowledge, skill, mind and character of stu....
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....at the surplus amount, if any, of the Respondent-Assessee, is used for any other purpose or distributed to other members. The Commissioner of Income-tax (Appeals) as well as the Tribunal have noticed that even if some amount remains surplus, that is utilised only for the purposes of education. Thus, having regard to the concurrent findings of fact recorded by the Commissioner of Income-tax (Appeals) and the Tribunal and also taking note of the letter of the Central Board of Direct Taxes itself, it is not possible for us to say that the order of the Tribunal is erroneous in any way. In this way, no question of law arises for consideration much less a substantial question of law." 23.5 The Supreme Court in Assam State Text Book Production and Publication Corporation Limited v. CIT (supra) concluded as under: "Following the judgement of the Rajasthan High Court, 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,....
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....xaminations v. Director General of Income-Tax (Exemptions) (2014) 362 ITR 436 (Del) the Court held the Council for the Indian School Certificate Examinations to be an educational institution and quashed the order which denied it exemption under Section 10 (23c) (vi) of the Act. It was reiterated as under: "It is, therefore, clear that courts have laid emphasis on the activity undertaken, while construing or deciding whether or not a particular institution can be regarded as an educational institution. The courts have repeatedly held that the holding of classes is not mandatory for an institution to qualify and to be treated as an educational institution. If the activity undertaken and engaged is educational, it is sufficient." 27. Reverting to the case on hand, the Court finds that what the ITAT has held in the impugned order is contrary to the settled law as explained in the above decisions. The ITAT came to the erroneous conclusion that merely because the Assessee had generated profits out of the activity of publishing and selling of school text books it ceased carrying on the activity of 'education.' The ITAT failed to address the issue in the background of the setting up of t....
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....appropriate to allow the position to be changed in a subsequent year. "On these reasonings in the absence of any material change justifying the Revenue to take a different view of the matter - and if there was no change it was in support of the Assessee - we do not think the question should have been reopened and contrary to what had been decided by the Commissioner of Income Tax in the earlier proceedings, a different and contradictory stand should have been taken." 31. In Radhasoami Satsang Saomi Bagh v. Commissioner of Income Tax (supra), the Supreme Court reiterated the above legal position. This time it quoted with approval the following extract from Hoystead v. Commissioner of Taxation 1926 AC 155 (PC): "Parties are not permitted to begin fresh litigation because of new views they may entertain of the law of the case, or new versions which they present as to what should be a proper apprehension by the court of the legal result either of the construction of the documents or the weight of certain circumstances. If this were permitted, litigation would have no end, except when legal ingenuity is exhausted. It is a principle of law that this cannot be permitted and there is ab....