TaxTMI 
TaxTMI 
TaxTMI 
2019 (4) TMI 2193
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....)(iiiab) based on incorrect assumption of facts and law. 3. Under the facts and circumstances, Ld AO has erred in making addition of Rs. 40,00,21,090/-. Further, Ld. CIT(A) has erred in confirming the addition. 4. That the appellant craves your indulgence to add, amend or alter all or any grounds of appeal before or at the time of hearing." 2. The only common issue arises in these appeals of the assessee is denial of exemption U/s 10(23C)(iiiab) of the Act. The assessee is society registered under the Rajasthan Society Act, 1958. The assessee society was set up by the Government of Rajasthan as an autonomous body and registered on 29.12.1973. The pre dominant objects of the assessee society inter alia "to prepare, edit, publish, print, stock, sell distribute, or otherwise deal in textbooks, supplementary books, reference books, extra reading material, workbooks and exercise books for pupils and teaching aids, teacher's hand books, and curriculum (hereinafter referred to as the education literature) useful for furtherance of teaching and learning in institutions meant for Lower and higher primary education. To prepare edit, print, publish, stock, sell and di....
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.... and private schools on discount rate. The assessee has not received any deposit, aid or grant from any other person or institution. Thus, the assessee claimed it cannot be said that it is not wholly and substantially financed by the Government. The AO was not impressed with the reply of the assessee and held that the assessee has not fulfilled third contention laid down U/s 10(23C)(iiiab) of the Act i.e. wholly or substantially financed by the Government. Accordingly, the AO denied the exemption U/s 10(23C)(iiiab) of the Act for both the assessment years. On appeal, though the assessee has advanced elaborated submissions and contentions however, the ld. CIT(A) has held that the exemption U/s 10(23C)(iiiab) of the Act is eligible only to the university or other educational institution existing solely for educational purposes and not for the purpose of profit and which is wholly or substantially financed by the Government. But the assessee is earning huge profit from the activity of preparing, printing and distributing the textbooks and has accumulated the reserve and profit to the tune of Rs. 206.51 crore. The assessee received only contribution of Rs. 78,292/- from the Government ....
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....is to prepare edit, publish, print, stock, sell, distribute, or otherwise deal in textbooks, supplementary books, reference books, extra reading material for the students and teaching aids the useful for furtherance teaching and learning in institutions meant for lower and higher primary education. Thus, the assessee society which has taken over the work of the nationalized board of textbooks is solely existed for education and under the direction and control of Government of Rajasthan. In the state of Rajasthan education upto senior secondary is regulated and administered by the Education Department, Government of Rajasthan. The assessee being an educational institution is one of the element assisting Education Department in achieving its object or implementing its role in education in general of the State. The ld. AR has further submitted that prior to the omission of Section 10(22) of the Act w.e. f. 01.04.1999 the assessee had been claiming the exemption U/s 10(22) of the Act which was allowed since inception of the assessee society till the provision was omitted. Thereafter, the assessee has been claiming the exemption U/s 10(23C)(iiiab) of the Act and the Department has been ....
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....n'ble Supreme Court has upheld the decision of the Hon'ble jurisdictional High Court in the case of the assessee. Thus, the ld. AR has submitted that so far as, the assessee being an educational institution existed solely for education and not for the profit has been settled by the Hon'ble High Court as well as Hon'ble Supreme Court. 4. As regards the condition of wholly or substantially financed by the Government as per the provisions of Section 10(23C)(iiiab) of the Act the ld. AR has submitted that initially the assessee used to supply textbooks entirely to the government schools under the scheme of free of cost however, over the time the private educational institutions have taken the significant number of students the assessee has started supplying the textbooks to the private distributors at the same discounted rate at which the government is making the payment to the assessee-society. Even otherwise when more than 60% of the total supply is made to the Government school students under the scheme of free of cost supply of the textbooks by the Government then the finance of the assessee-society is substantially made by the State Government. The ld. AR has su....
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....ot be considered as financed by the Government but it is the Revenue generated by the assessee from the activity. Moreover, the assessee is selling the books to the private parties and therefore, is not eligible for exemption U/s 10(23C)(iiiab) of the Act being the activity of business. He has relied upon the orders of the authorities below. 6. We have considered the rival submissions as well as the relevant material on record. There is no dispute that the assessee-society was set up by the Government of Rajasthan as an autonomous body and registered under the Rajasthan Society Registration Act, 1958 on 29.12.1973. The assessee-society came into existence as a result of order of Government of Rajasthan whereby then the nationalization Board of textbooks Rajasthan Government Department was converted into autonomous body registered under Rajasthan Societies Act on 31.12.1973. As per the said order Government of Rajasthan, Department of Education a governing council of the Board was directed to be constituted as under :- (A) Ex-officio Member 1. Education Minister, Rajasthan President 2. Education Commissioner Government of Rajasthan Vice-presid....
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....or enter into any arrangement for preparing, editing, printing, publishing, stocking, distribution and sale of textbooks approved or assigned by the Govt. of Rajasthan or other appropriate authority appointed by the Board and any other educational literature which the Board may decide to publish, with a view to making the same available at a price, fixed at no profit no loss basis. (4) To undertake and promote research for the preparation, evaluation and production of school textbooks and other educational literature intended for Lower and Higher Primary stages of education; (a) To impart or to assist in imparting education and provide necessary aid and incentive in the school and other educational institutions, established and maintained by R.S.TB. or Panchayati Raj Institutions or the Government of Rajasthan as the case may be, in order to facilitate all round development of the children in the state. (5) To assess utility of educational literature produced by the Board or any other agency; (6) To promote research for improvement of curriculum and recommend the findings to the Government of Rajasthan or other appropriate authorities for modific....
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....e of the Board, (The Board will not raise money as aforesaid, in lieu of the property, loans or advances received from State or Central Government except with the specific consent of the respective Government) (16) To create any depreciation fund, reserve fund, sinking fund or any other special funds, whether for depreciation or repairs or replacement, improvement, extension or maintenance of the property of the Board or for any other purpose conducive to the interest of the Board out of its receipts, howsoever from donations, loans, advance, sale of books or otherwise; (17) To invest in such securities as the Board may determine from time to time and to deal with the funds of the Board; (18) To draw, make, accept, endorse and negotiate cheques, hundies, promissory notes or other negotiable instruments; (19) To appoint, suspend, or dismiss any agent or person engaged in the distribution of the publications of the Board and to allow trade discount to any such agent or person at such rate as deemed fit by the Board; (20) To appoint, commission or contract any agency or person for writing, illustrating, printing, binding, block making or ot....
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....istance of Central or State Government, and academic and such other institutions whose objectives, wholly or in part, are similar to the objectives of the Board, (28) To undertake on agency basis or otherwise the following functions for or on behalf of the Government of Rajasthan or the Government of India :- (a) Stocking, utilization and accounting for the gift paper received from the Government of India or the Government of Rajasthan; (b) Implementing any scheme approved by the Government of Rajasthan for free supply books & recover in whole or in part the cost of the books from the authority concerned; (c) Utilizing the funds given by the Government of Rajasthan, Central Government or other institutions for schemes of publication of amenities of educational interest, teaching aids reference books, and the like. (29) To do and execute, in general, such lawful acts, deeds, matters and things as are conducive or incidental to or for the attainment of the aforesaid objects or any of them." Thus, the pre-dominant objects of the assessee-society are to take over the functioning of erstwhile nationalization Board of Textbooks Government o....
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....e Act was upheld by the Hon'ble High Court reported in 244 ITR 667 (Raj.). For the sake of completion we reproduce the decision of this Tribunal dated 26.10.1998 in case of ACIT Vs. Rajasthan State Text Book Board in ITA No. 1716 to 1718/JP/1991 has held in para 5 as under :- "5. We have heard the rival submissions and considered them carefully. We have also perused the material on which our attention was drawn. After perusing the order of the CIT(A), we do not see any infirmity in the order of the CIT(A). The CIT(A) has discussed all the facts of the case and also discussed the other cases laws and then he came to conclusion that the assessee is entitled to exemption under section 10(22). The observations and findings of the CIT(A) as mentioned in page 3 of his order are "As the basic objection about exemption available u/s 10(22) goes to the very root of the validity or otherwise of the impugned assessment, it would be fair and reasonable, if the same is taken into consideration with a view to find out the worth thereof. After going through the objects of the Memorandum of Association of the Tamil Nadu Text Books Society, it is seen that the objects of the appellant,....
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....s that the appellant was entitled for exemption u/s 10(22). In view of this, the basic objection so raised by the appellant in regard to availability of exemption u/s 10(22) of the IT Act, 1961 deserves to succeed and accordingly the concerned authority is directed to allow the said exemption. Since the exemption u/s 10(22) was available to the appellant, there appears to be no justification in subjecting the surplus etc. to tax and completing the assessment. As such, assessment so completed appear to be bad in law and stands cancelled. From the above observation and findings of the CIT(A) it is clear that the assessee is entitled to exemption under section 10(22) because in case of Tamil Nadu Text Book Society to whom the exemption under section 10(22) is allowed by the revenue, the aims and objects of the assessee is similar to Tamil Nadu Text Books Society. Therefore, there is no point to decline the exemption to the assessee. 5.1 The contention of the ld. D/R that assessee is printing books and selling thereof cannot be treated as educational institution. The assessee is earning profit out of sale of books. It was further stated that if the exemption is grante....
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....counsel for the appellant strongly contended that the CIT(A) as well as the Tribunal were not right in holding that the assessee was entitled for exemption under s. 10(22) of the Act. According to him, the respondent-assessee is making profit, hence, it deprives itself of the benefit of exemption under s. 10(22) of the Act; as can be seen from the orders of the CIT(A) as well as the Tribunal. That in a similar situation, in the case of Tamil Nadu Text Book Society, the CBDT, as per the letter dt. 19th Aug., 1975, and File No. 184/26/75, stated that the Tamil Nadu Text Book Society was an educational institution, existing solely for the purpose of education, within the meaning of s. 10(22) of the Act. Further, reference was made to a decision of the Orissa High Court, in the case of Board of Secondary Education vs. ITO (1972) 86 ITR 408 (Ori) : TC 32R.757 dealing with similar facts. 3. It is not disputed before us that the aims and objects of the Tamil Nadu Text Book Society and that of the respondent- assessee are almost identical. It is also not shown to us that the surplus amount, it any, of the respondent-assessee, is used for any other purpose or distributed to other m....
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....ted by treating you as AOP and surplus of Rs. 40,00,21,086/- shall be taxed accordingly except the other additions made during assessment." The ld. CIT(A) while passing the impugned order has apart from confirming the order of the Assessing Officer also held that the assessee is not existing solely for education purpose but is doing commercial activity. The relevant findings of the ld. CIT(A) has held as under:- "I perused the record I find that the appellant has claimed exemption U/s 10(23C)(iiiab). As per this section exemption is available to any university or other education institution existing solely for education purpose and not for the purpose of profit and which is wholly or substantially financed by the Government. In the present case as evidence from the financial statement, the appellant is earning huge profit as evident from the following table :- A.Y. Turnover Profit % of profit 2012-13 2290977602 57564539 25% 2013-14 1879652330 400021086 21% From the above table it can be noted that the percentage of profit earned is more than the normal profit which itself shows that this is existing for earning profit. This i....
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....ub-clause (iiiab) or sub- clause (iiiad) and, which are required to be specifically approved by trie prescribed authority." In this case as stated supra no such regular/ substantial financial grant in made by Govt. Thus the assessee does not fulfil the basis condition of exemption u/s 10(23)(iiib). It is further seen that to clarify this an explanation has been inserted w.e.f. 1/04/2015 that an institution can be said to be substantially financed by Govt. if it received 50% of the receipt from Govt grants. In this case the appellant is not existing solely for educational purposes but he is doing the commercial activity. On perusal of balance sheet and profit and loss account it is find that appellant is selling the books to book Seller and doing the commercial activity with moto to earn the profit. Thus the appellant violative the provision of Section 10(23C) (iiiab) of the I.T. Act. Considering this amendment and the facts of the case, I am of the view that the assessee does not fulfil the condition referred in section 10(23C)(iiiab) regarding not for the purpose of profit and substantially financed by Govt. Accordingly the claim of the assessee....
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....nal institution and, consequently, the Corporation was entitled to the benefit of exemption under s. 10(22) of the Act for the relevant assessment years in question. However, in appeal filed by the Department, the High Court came to the conclusion that the income of the Corporation, during the relevant assessment years, was not exempt, particularly in view of the fact that the assessee did not exist solely for educational purposes; that it did not solely impart education and that its income during the relevant assessment years was only from publishing and sale of text books, which, according to the High Court, constituted a profit- earning activity. Against the said decision, the assessee has come to this Court by way of civil appeals. 5. On going through the records, we find that the High Court has not taken into account the prior history of the case, particularly in the context of incorporation of the Corporation under the Companies Act, 1956, as a Government company. Initially, as stated above, the assessee was a State-controlled Committee and Board, which were attached to the office of the Director of Public Instruction, State of Assam. It is only in the year 1972 that....
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.... 10(22) of the Act. The operative part of the Rajasthan High Court's judgment reads as under : "It is not disputed before us that the aims and objects of the Tamil Nadu Text Book 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, that is utilised only for the purposes of education. Thus, having regard to the concurrent findings of fact recorded by the CIT(A) and the Tribunal and also taking note of the letter of the CBDT 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." 6. Following the judgment of the Rajasthan High Court, we are of the view that, in this case, the High Court, in its impugned judgment, 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 fundi....
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....f the amount received from the Government against the free distribution of books under the scheme of government for these two assessment years as well as the amount received against supply to private distributors are as under :- Particulars FY 2012-13 FY 2013-14 Amount % Amount % Net supply to State Government 1249204326 66.46% 882879232 59.21% Net supply to Private distributors 630448004 33.54% 608233387 40.79% Therefore, it is clear from the above details of the receipt from the Government as against the supply to the private distributor that for the assessment year 2013-14 the assessee has received more than 66% to the total receipt from State Government and for the assessment year 2014-15 the receipt from the Government is more than 59%. If we see in terms of provisions of Section 10(23C)(iiiab) of the Act it is more than prescribed limit of 50% to constitute substantially financed by the Government. Even if reserves and surplus of the assessee are to be taken into consideration the component of the reserve and surplus from the receipt of the Government is more than 50%. Therefore, applying the parameter of more....
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....03.2008 60,04,17,713 31.03.2007 35,96,23,390 31.03.2006 52,45,85,713 31.03.2005 40,43,93,518 31. We found that even after direction of the Hon'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 a....
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.... teaches, work books for pupils and other educational literature, which is useful for furtherance of teaching, learning and for evaluation -: any educational institution. In addition to printing of text books, 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 Soc....
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.... the said students, the assessee was held to be not entitled for exemption u/s 10(22). In the case of Sole Trustee, Lok Shikshan Trust (supra), the issue before SC was claim of exemption u/s 11, where the assessee trust was doing printing, publishing, 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). Ev....