TMI Blog2003 (4) TMI 247X X X X Extracts X X X X X X X X Extracts X X X X ..... aced 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 submitted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner 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 educationa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. 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 assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In view 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Revenue's appeal 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 e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and has not been used in the wide 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation within the meaning of section 10(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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stantial question of law arises for consideration 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 U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... embers and nor intend to declare the same in future 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the issue under consideration. In this case the Hon'ble 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 incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ales 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 account the Assessing Officer found that some debit was made on account of expenses relating to earlier year. In absence of evidence he added Rs. 30,045 to the income of the assessee. The CIT(A), out of the above addition, restored the issue regarding the addition of Rs. 18,945 to the file of the Assessing Officer and sustained the addition of the balance amount of Rs. 11,100. 31. I have gone through the assessment order as well as the profit and loss account of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 cannot be sustained and the same is liable to be quashed with a direction to the authority concerned to pass a fresh speaking order after giving opportunity to the assessee. I have gone through the order of assessment and find that the same is not a speaking order in respect of the levy of interest under section 215. Hence, respectfully following the above decision, I hereby cancel the charging of interest under section 215 of the Act and direct the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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, Education Department, Govt. of Assam. 2. Financial Commissioner Secretary, 1 No. Rs. 1,000.00 Finance Department, Govt. of Assam. 3. Chairman, Board of Secondary 1 No. Rs. 1,000.00 Education, Assam. ---------------------- Rs. 1,00,00,000.00 ---------------------- Since the entire share capital is controlled and owned by the Government of Assam, the Corporation can be called a Government company as defined in section 617 of the Companies Act, 1956. 3. The main object of the Corporation is to do research and pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrying out the above objective by printing and publishing text-books of school students under the Government of Assam as prescribed by the authorities. The assessee has been assessed to income-tax as regular assessee as it did not claim exemption under section 10(22) of I.T. Act, 1961. It was only in the assessment year 1979-80 that it was claimed for the first time at the second stage of appeal before the Tribunal for exemption under section 10(22) of the I.T. Act, 1961. The Tribunal, however, did not entertain the same, observing as follows in M.P. No. 23/Gau/1989 in ITA No. 194/Gau/1987 dated 12-2-1990: "In this view of the matter, we are of the opinion that since the Appellate Tribunal would have no jurisdiction to entertain such point of fact, which had not been raised before the authorities below, this point of the assessee cannot be accepted. It is open to the assessee to take up the matter before the CIT(A), if such ground had been raised before the CIT(A) originally for taking appropriate action." The Tribunal, however, allowed reference to the High Court which the Hon'ble High Court declined to answer the question referred vide I.T.Reference No. 63 of 1990 of 3-6-1996 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, denied the exemption observing as follows: "The main objects listed in the Memorandum and numbered as 3, 4 and 5 together with the ancillary objects (No. 12 and 21) mentioned, above, clearly indicate that the assessee-company is a pofit earning organization. Also, there are no restrictive clauses in the Memorandum requiring the assessee to apply its income solely for the purpose of education. Moreover, the facts and issues involved in the case laws cited by the assessee are not identical with the assessee's case, In particular, it may be mentioned that the two cases decided by the Supreme Court of India referred to by the assessee viz. CIT v. A.P. Transport Corporation and the Surat Art Silk Manufacturers Associations case concerned the exemption of income under sections 11 and 12 of the I.T. Act, 1961. Section 10(22) of the I.T. Act, 1961 requires the Institution to exist solely for educational purposes and not for the purpose of profit. The example of the Tamilnadu Text-Book Society referred to by the assessee also does not lend support to the assessee's claim for exemption under section 10(22) as the assessee has not been able to establish with supporting evidence that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 shares of debentures issued at a premium by the Corporation and any money 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. 9. It is, therefore, clear that the main objects listed in the Memorandum of Association Nos. 3, 4 and 5 together with ancillary objects (12) and (21) mentioned above indicates that the appellant corporation is a profit earning organisation. On close scrutiny of the Memorandum of Association, there are no restrictive clauses mentioned in the Memorandum requiring the appellant to apply its income solely for the purpose of education. I agree with the Assessing Officer that in the case referred to by the AIR i.e. CIT v. A.P. Transport Corpn. the exemption sought for as far as the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares to the shareholders. It was further found by him that the shareholders consist of the Government and the Financial Commissioner and Chairman, Board of Secondary in their official capacity and no shares were held by any private party. The learned Judicial member also noticed that out of the combined order passed by the learned CIT (Appeals) for assessment years 1989-90 to 1993-94, the Department has only challenged the order for assessment years 1989-90 to 1992-93 only. It was, therefore, opined by him that the revenue cannot accept one assessment year and challenge the other. According to him it is well-settled principle of law that when a common order is passed an appeal has to be filed against all the orders of the appellate authority. Since the order of the first appellate authority is allowed to become final for assessment year 199394, it was his view that the appeals of the assessee for the earlier years also have to be allowed as the issue stands settled in the assessment year 1993-94. 10. The learned Judicial Member also noticed that the Tamil Nadu Textbook Society was granted exemption by the Department itself. It is also noticed by him that the Secondary Board of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of text-books. Secondly, it was his view that the assessee has not existed solely for the educational purpose and, therefore, it cannot be said that it was not for the purpose of profit. According to him the assessee corporation was not registered under section 25 of the Companies Act, 1956. The Memorandum of Association and Articles of Association of the assessee corporation did not restrict the payment of dividend and issue of bonus shares to its members. In that view of the matter and considering the decision in the case of Birla Vidhya Villar Trust and the Circular of the C.B.D.T. F.No. 194/16-17-IT reproduced therein, it was held by him that the assessee cannot be given the benefit as the profit can be diverted for any other purpose than for the purpose for which it was created. 15. Relying further on the decision of the Hon'ble Supreme Court in the case of Jogiraj Charity Trust wherein it has been held that when the trust deed confers full discretion on the trustees to spend the trust fund for an object other than of a religious or charitable nature, the exemption from tax under section 4(3)(i) of the IT. Act, 1922 is not available to the assessee. Similar view was tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 10(22) of the Act. 18. The Hon'ble Supreme Court further observed that the language of section 10(22) of the Act is plain and clear and the availability of the exemption 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. After meeting the expenditure, if any surplus results incidentally from the activity lawfully carried on by the educational institution, it will not cease to be one existing solely for educational purposes, since the object is not one to make profit. The decisive or acid test is whether, on an overall view of the matter, the object is to make profit. In evaluating or appraising the above, one should also bear in mind the distinction/difference between the corpus, the objects and the powers of the concerned entity. By holding this view, the Hon'ble Supreme Court approved the decision of the Hon'ble Orissa High Court in the case of Secondary Board of Education. 19. It is further seen that the Hon'ble Rajasthan High Court considered exactly identical issue in the case of Rajasthan State Text-Book Board. In that case, it was observed by the Hon'bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also seen that the assessee failed to claim exemption due to its ignorance and it was only from assessment year 1979-80 that it made a claim by way of additional ground which was rejected on technical grounds. There has never been any claim of such exemption in the earlier years due to ignorance of the corporation. This, however, is not a valid reason for rejecting the claim of the assessee, if otherwise entitled. 23. The Hon'ble Supreme Court in the case of Aditanar Educational Institution considered the scope of exemption under section 10(22) and it was held that if the claim of society which was only a financing body was held not to come within the scope of "other educational institutions" as specified in section 10(22) of the Act, it would be unreal and hypertechnical as 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. The assessee in this case has also fully concentrated on printing and publication of text-books for the use entirely of the educational institutions and in substance and reality the sole purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ember, I am of the view that the apprehensions and reservations harbour by him have been fully considered by the Hon'ble Supreme Court and the Central Board of Direct Taxes itself. There is, therefore, no scope for harbouring such apprehensions or reservations in this regard. Firstly, with regard to the question whether the assessee can be an educational institution for the purpose of section 10(22) of the Act, it is directly settled by the Circular of the CBDT cited by the Hon'ble Rajasthan High Court in the case referred to above. Until and unless the decision of the Hon'ble Rajasthan High Court in the case of Rajasthan State TextBook Board is reversed the said decision has to be taken as final. It is also seen that the decision of the Hon'ble Supreme Court in the case of Aditanar Educational Institution covers the claim of the assessee in that the assessee corporation can come within the scope of "other educational institution" as specified in section 10(22) of the Act. 27. With regard to the next ground regarding registration under section 25 of the Companies Act, 1956 and also the absence of restriction on the payment of dividend and issue of bonus shares etc. it is seen tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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