TMI Blog2003 (4) TMI 505X X X X Extracts X X X X X X X X Extracts X X X X ..... earned counsel for the assessee submitted that the main object of the assessee is to do research and printing and publishing of textbooks for the school students as per the norms fixed by the advisory board. Since the printing and publication of the textbooks for the school students is an activity for educational purposes the assessee must be allowed exemption under section 10(22) of the Act. 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. Learned counsel invited our attention to page 25 of the paper book and submitted that the majority of the shares of the assessee are held by His Excellency, the Governor of Assam, and the other shares are the Financial Commissioner and Secretary to the Government of Assam, and the Chairman of the Board of Secondary Education. Since the entire shares are held by the State Government of Assam, the company is a Government company within the meaning of the Companies Act. Learned counsel further submitted that the corporation even though has ancillary object, it has restricted its activity only in printing an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. We have considered the rival contentions of both learned counsel for the assessee and the learned Departmental Representative in the light of the materials available before us. Section 10(22) of the Act as it stood at the relevant point of time reads as follows : 10. (22) any income of a university or other educational ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irect Taxes for granting exemption in a blanket manner. Learned counsel further submitted that the Central Board of Direct Taxes has granted exemption to the Tamil Nadu Textbook Society which is also undertaking a similar activity of printing and publishing of textbooks as per the letter dated August 19, 1975, and file No. 184/26/75. In that case the Central Board of Direct Taxes held that the Tamil Nadu Textbook 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 (Orissa) exemption was granted by the Orissa High Court. In a similar set of facts the Rajasthan State Textbook Board was also granted exemption by the Rajasthan High Court in the case of CIT v. Rajasthan State Textbook Board [2000] 244 ITR 667. Learned counsel for the assessee also relied upon another judgment of the Rajasthan High Court in the case of Deputy CIT v. Cosmopolitan Education Society [2000] 244 ITR 494. In the case of Katra Education Society v. ITO [1978] 111 ITR 420, the Allahabad High Court held that an educational society r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xamine 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 textbooks. 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 textbooks. It is also not disputed by the Revenue that an organisation which is printing and publishing textbooks was treated as an institution existing solely for educational purposes as per the notification issued by the Central Board of Direct Taxes in file No. 184/26/75 dated August 19, 1975, in the case of Tamil Nadu Textbook Society. It is also not disputed before us that the main object of the assessee was printing and publishing textbooks as in the case of Tamil Nadu Textbook Society. It is also not the case of the Department that the surplus amount, if any, of the assessee is used for any other purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the 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 textbooks, 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. In another case of Aditanar Educational Institution v. Addl. CIT [1997] 224 ITR 310, the Supreme Court held that the registered educational society formed for the sole purpose of establishing, running, managing or assisting schools or colleges is 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 textbooks and other object, if any, is only incidental to achieve the objects of the main purpose. 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 since the assessee is an institution existed solely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Gauhati), 291 (Gauhati) of 1995 are allowed. The Revenue s appeal in I. T. A. Nos. 209 (Gauhati), 210 (Gauhati), 211 (Gauhati) and 212 (Gauhati) of 1996 are dismissed. N. S. Saini (Accountant Member).-I have gone through the proposed order of the learned Judicial Member in this case. With great respect, I regret my inability to agree with his conclusion for the reasons stated hereinafter : 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 Income-tax Act. Section 10(22) of the Act as it stood at the material time reads as under : 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 . . . 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 educatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used in the wide and extensive sense according to which acquisition of further knowledge constitutes education. In CIT v. Oxford University Press [1996] 221 ITR 77, 87 (Bom), the 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 carry on the primary activities of a university or educational institution, 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 publishers 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. 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 carry on 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 by both the partie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Society was an educational institution existing solely for the purpose of education within the meaning of section 10(22) of the Act. However, before us no copy of the said letter of the Central Board of Direct Taxes was filed and neither any material to indicate the objects and activities of the Tamil Nadu Textbooks Society was filed. In absence of these, the letter of the Central Board of Direct Taxes cannot be properly appreciated and how the activities of the Tamil Nadu Textbooks Society was the same as that of the assessee also could not be verified. However, be that as it may be, if the letter of the Central Board of Direct Taxes is contrary to the provisions of law, the same is not binding on us. Now let us examine the decisions relied upon by learned counsel for the assessee. In Secondary Board of Education v. ITO [1972] 86 ITR 408 (Orissa), 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 examined and found that as per the Act under whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... members and surplus funds or profit are invested in creating personal properties. Having regard to the facts of the case, the High Court concluded that it is not possible to say that any substantial 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. In Katra Education Society v. ITO [1978] 111 ITR 420, the 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 Allahabad High Court is not applicable to the facts of the instant case. Similar to the decision of the Allahabad High Court was the decision of the Madras High Court in the case of CIT v. Devi Educational Institution [1985] 153 ITR 571 whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it cannot be said that the institution exists for profit. Though learned counsel for the assessee vehemently contended that the assessee-company has never declared any dividend to its members 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. In this connection reference may be made to the circular of the Central Board of Direct Taxes being Circular No. F. No. 194/16-17-IT(AI), reproduced from Birla Vidhya Vihar Trust v. CIT [1982] 136 ITR 445, 453 (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of any activity for profit. Further, a decision of the jurisdictional High Court in the case of CIT v. P. K. Barooah [1970] 77 ITR 967 (Assam) is also relevant to the issue under consideration. In this case the High Court has held that when the trustees had the indefeasible alternative right to apply the funds to non-charitable purposes, without making donation to charitable purposes, the matter is hit by the principle 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. 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. 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 purposes of profit, exemption un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Commissioner of Income-tax (Appeals) was not justified in confirming the same. Further regarding actual shortage of stock found on physical verification was treated as unaccounted sales of the assessee without bring 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. The next ground of appeal was directed against confirmation by the Commissioner of Income-tax (Appeals) 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 years. In the absence of evidence he added Rs. 30,045 to the income of the assessee. The Commissioner of Income-tax (Appeals), out of the above addition, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Income-tax (Appeals) was not justified in directing the Assessing Officer to allow the deduction in respect of the bonus related to the year under consideration in the year in which it was actually paid and the same was allowable as deduction in the year to which it pertains. Hence, the order of the Commissioner of Income-tax (Appeals) is modified to the above extent. The other ground of appeal was directed against the upholding by the Commissioner of Income-tax (Appeals) 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. In Bansidhar Sewbhagowan and Co. v. CIT [1996] 222 ITR 16, 26 (Gauhati) 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 Commissioner of Income-tax (Appeals) in respect of interest under section 139(8) is hereby confirmed. In Oriental Hotels Ltd. v. CIT [1999] 240 ITR 648 (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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions. In 1950, the name was changed to Assam Text-book Committee with ten members nominated by the State Government. Again in 1968, the Government constituted it as the Board for Textbook Production and Research. In 1972, the Board was converted into a corporation by the name of the Assam State Text-book Production and Publication Corporation Ltd. by dissolving the Board for Production of Text-books and Research through the Notification of the Governor of Assam dated July 26, 1972. All the assets of the Board for Production of Textbook and Research were transferred to the Assam State Text-book Production and Publication Corporation Ltd., Guwahati, with effect from July 1, 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 (Rs.) 1. Governor of Assam, represented by Secretary, Education Department, Govt. of Assam. 9998 Nos. 99,98,000 2. Financial Commissioner and Secretary, Finance Department, Govt. of Assam. 1 No. 1,000 3. Chairman, Board of Secondary Education, Assam 1 No. 1,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e considered by the corporation likely to assist the corporation business and to provide grants for such purpose. The corporation also has objects incidental or ancillary to the main objects as listed in the said memorandum of association. The assessee has been religiously doing and carrying 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 Income-tax 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 Income-tax Act, 1961. The Tribunal, however, did not entertain the same, observing as follows in M.P. No. 23/Gau/1989 in I.T.A.No. 194/Gau/1987 dated February 12, 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 asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... feited shares or from unclaimed dividends. Having regard to the above ancillary objects read with the main objects at paragraphs 3, 4 and 5, the Assessing Officer came to the conclusion that the assessee is a profit-earning organization. There is no restrictive clause in the memorandum requiring the assessee to apply its income solely for the purpose of education. He, therefore, 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 (Nos. 12 and 21) mentioned, above, clearly indicate that the assessee-company is a profit 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 [1986] 159 ITR 1 and the Surat Art Silk Manufacturers Association [1980] 121 ITR 1 case concerned the exemption of income under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ishing text-books, reference books and other instructional literature, and other allied business and trade that may be considered by the corporation likely to assist the corporation business and to provide grants for such purpose. Further, the objects incidental or ancillary to the main objects listed in the memorandum of association and numbered 6 to 28 also include the following : (12) To carry on any other trade or business whatsoever which can in the opinion of the directors of the corporation 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 or 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tual aspect. The learned Judicial Member further found that the question of taking up the issue from year to year by the Commissioner was considered necessary as to whether there was any violation in the form of utilization of the income for any purpose other than for educational purposes. The learned Judicial Member, further examined the case of the assessee and it was found by him that there was no such violation or misuse of the income by the assessee. The assessee has been restricting its entire activity to printing and publishing the text-books. There was never any declaration of dividend or issue of bonus 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 Commissioner of Income-tax (Appeals) for the assessment years 1989-90 to 1993-94, the Department has only challenged the order for the assessment years 1989-90 to 1992-93 only. It was, therefore, opined by him that the Revenue cannot accept one a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olely for the purpose of printing and publishing text-books and other object is only incidental to achieve the object of the main purpose and, therefore, it will not deprive of the benefit of section 10(22) of the Act. On the other hand, the learned Accountant Member agreed with the view taken by the learned Commissioner of Income-tax (Appeals) and held a view different from that of the learned Judicial Member. The learned Accountant Member considered the various decisions cited before the Bench and eventually came to the conclusion that the assessee-company did not exist as university or other educational institution as contemplated under section 10(22) of the Act as it does not carry on the primary activities of university or educational institution of imparting education but merely runs the business of printing and publishing 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me within the scope of other educational institution as specified in section 10(22). 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. Colleges and schools were the media through which the assessee imparted education and effectuated its objects. In substance and reality, the sole purpose for which the assessee had come into existence was to impart education at the levels of colleges and schools and so, such an educational society should be regarded as an educational institution coming within section 10(22) of the Act. It was further observed that an educational society or a trust or other similar body running an educational institution solely for educational purposes and not for the purposes of profit could be regarded as other educational institution coming within section 10(22) of the Act. The 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 durin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent, and the Chairman, Board of Secondary Education in their official capacity. The entire share capital is, therefore, controlled and owned by the Government of Assam. The main object of the corporation is to do research and printing and publishing of text-books for the school students as per the norms prescribed and approved by the competent authorities and/or approved or required by the Government of Assam or other educational authorities, institutions and bodies, statutory or otherwise, etc. The corporation has the main objects and the objects incidental or ancillary to the main objects for achieving the main objective. The corporation has been restricting its entire activities to printing and publishing text-books as required by the Government of Assam. There was no declaration of dividend or issue of bonus shares to the shareholders. There was no concessional loan or advances made to the members of governing body in violation of the provisions of the articles and memorandum of association. It is also seen that the assessee failed to claim exemption due to its ignorance and it was only from the assessment year 1979-80 that it made a claim by way of additional ground which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds the question whether the assessee being the Assam State TextBook Production and Publication Corporation Limited can be treated as educational institutions as contemplated under section 10(22), it is seen that the Rajasthan High Court in the case of CIT v. Rajasthan State Text-Book Board [2000] 244 ITR 667, settled the issue by citing the case of Tamil Nadu TextBook Society which the Central Board of Direct Taxes has recognized as an educational institution existing solely for the purpose of education within the meaning of section 10(22) of the Income-tax Act, 1961. The Rajasthan High Court, therefore, held that the Rajasthan State Text-Book Board also fulfils the conditions and, therefore, the Tribunal was justified in holding that the assessee was entitled to exemption under section 10(22) of the Act. Respectfully, following the above decisions, I have no hesitation in concurring with the view taken by the learned Judicial Member. With regard to the objections raised by the learned Accountant Member, I am of the view that the apprehensions and reservations harboured by him have been fully considered by the hon ble Supreme Court and the Central Board of Direct Taxes itself. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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