TMI Blog2009 (4) TMI 919X X X X Extracts X X X X X X X X Extracts X X X X ..... ducation as has been used in the dictionary clause in section 2(15). Khanna, J while dealing with the said facet has stated thus :- '' The sense in which the word education has been used in section 2(15) is the systematic instructions, schooling or training given to the young in preparation for the work of life. 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. 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.'' In American Hotel Lodging Association Educational Institute v. Central Board of Direct Taxes [ 2008 (5) TMI 17 - SUPREME COURT] wherein their Lordships, while dealing with the scope of section 10(22), expressed as follows :- ''Under section 10(22), one had to closely analyse the activities of the institute, the objects of the institute and its source of income and its utilisation. Even if one of the objects enabled the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... poration to file requisite documents to bring the case within the parameters of law which we have referred to above. Consequently, the appeals are allowed to the extent indicated herein above. - DIPAK MISRA AND R.K. GUPTA, JJ. Rohit Arya and Sanjay Lal : for the Appellant. H.S. Shrivastava and Sandesh Jain : for the Respondent. ORDER Dipak Misra, J. In this batch of appeals preferred under section 260A of the Income-tax Act, 1961 ( the Act ), the concept of exemption under section 10(22) of the Act arises for consideration. Though the questions in different appeals have been couched in different language and project a similar issue, yet on consent of the learned counsel for the appellant-revenue and the respondent-assessee, the question is reframed for the sake of clarity and uniformity. On such reframing, the substantial question of law would read as under:- Whether in the obtaining factual matrix the Income Tax Appellate Tribunal is justified in coming to hold that the respondent-assessee is entitled to exemption under section 10(22) of the Income-tax Act, 1961 when the element of imparting education to the student is absent to attract the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ucational standard; (9) to advise Government and other appropriate authorities in all matters concerning syllabi, curricula, evaluation, examination, reform and production of text-books and ancillary aids and educational literature; (10) to assess utility of text-books, teachers hand-books and other educational aids and other educational literature whether produced by the Corporation or not; (11) to undertake printing, sale and distribution of books and literature useful or necessary for advancement of education in all its branches; (12) to establish and maintain libraries to facilitate research in general and in curricula, syllabi, evaluation and text-book production in particular; (13) to invest and deal with the funds of the Society; (14) to acquire by gift, purchase, exchange, lease, hire or otherwise howsoever any lands, building, easements rights in common and any property movable or immovable including a printing press or any estate or interest for the furtherance of all or any of the objects of the Society; (15) to construct, maintain, repair, extend, alter, improve or develop any buildings or works necessary or convenient for the purpose of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce sheet, income and expenditure account and other details filed with the return that show that the funds of the assessee-society are for providing hospitality to the senior officers and other VIPs; that the society is basically engaged in printing, sale of text-books and hence, it is actually engaged in business and, accordingly concurred with the view expressed by the Assessing Officer. 5. Being aggrieved by the orders, appeals were preferred before the Tribunal and the Tribunal relying on certain decisions expressed the view that the first and foremost aim of the Association as per the Memorandum of Association is to aid and promote advancement of education in general and of primary and secondary education in particular and in furtherance thereto, it publishes school text-books, hand-books for teachers, work books for pupils and other educational institutions. It has the sole aim to impart affordable quality education; that it is established by the State Government keeping in view the avowed purpose of spreading education; and that from the assessment years 1969-70 to 1994-95, the assessee had been enjoying the benefit of exemption under section 10(22) of the Act. Thereafter, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the basic elements and ingredients of the aforesaid provision, it is appropriate to refer to certain citations. Mr. Rohit Arya, learned senior counsel, has placed heavy reliance on the decision rendered in Sole Trustee Lok Shikshana Trust v. CIT [1975] 101 ITR 234 (SC). In the said case, the Apex Court was considering the term education as has been used in the dictionary clause in section 2(15) of the Act. Khanna, J while dealing with the said facet has stated thus :- The sense in which the word education has been used in section 2(15) is the systematic instructions, schooling or training given to the young in preparation for the work of life. It also connotes the whole course of scholastic instruction which a person has received. The word education has not been used in that wide and extended sense 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 ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. The following decisions are relevant in this context : Governing Body of Rangarava Medical College v. ITO [1979] 117 ITR 284 (AP) and Secondary Board of Education v. ITO [1972] 86 ITR 408 (Orissa). We make this position clear in order to allay the apprehensions expressed by counsel. (p. 318) 11. In Oxford University Press v. CIT [2001] 247 ITR 6582 (SC), D.P. Mohapatra, J. expressed the view as follows :- 25. On a plain reading of the section it is clear that the provision is intended to cover any income of a University or other educational institution, existing solely for educational purposes and not for purposes of profit. The purpose for which and the object with which the institution is esta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is country as appears from the material on record, is possibly to earn profit. If the interpretation of the provisions in section 10(22) of the Act as urged on behalf of the assessee is accepted the provision will be exposed to challenge on the ground of being irrational and therefore arbitrary. Then the question will arise for what purpose is this exemption from tax extended to the assessee? How is it different from the large number of such establishments engaged in the business of printing, publishing and selling of books. (p. 670) 12. Y.K. Sabharwal, J, (as his Lordship then was), in his concurring opinion, expressed the view as follows :- Thus, it is evident that for the purposes of granting exemption the Legislature assumed the existence of educational activity in India by a University or other educational institution but did not want to restrict the exemption only to such University or educational institution which is established or constituted or set up in India. That seems to be the reason for not placing limitation as to the setting up of such a body in India. In this view a foreign university would also be entitled to claim exemption so long as it was imparting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l purposes. Even if there is some surplus it is not appropriated by others but remains as a part of the sinking fund to be devoted to the cause of education as and when necessary. This being the objective and there being various ways of control of the income and expenditure, the Board of Secondary Education cannot be said to be existing for purposes of profits. It exists solely for purposes of education. The income of the Board cannot, therefore, be computed in the total income of the previous year under section 10(22) of the Income-tax Act, 1961. . . . (p. 416) 14. The High Court of Karnataka in CIT v. Academy of General Education [1984] 150 ITR 1351 , while dealing with the entitlement of exemption by the Academy of General Education, Manipal, analysed the object of the academy which was to make available technical and commercial educa-tion in as many as 47 subjects to give training in technical, commercial or any other form of education to train the students to eke out their livelihood and such other activities. Their Lordships referred to the decisions rendered in Sole Trustee, Loka Shikshana Trust s case (supra), Aditanar Educational Institution s case (supra), Katra Educa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ofit-making but educational activities as section 10(22) by its very nature contemplated income of such institution to be exempted. Under section 10(22), the test was restricted to the character of the recipient of income, viz., whether it had the character of educational institution in India, its character outside India was irrelevant for deciding whether its income would be exempt under section 10(22). The moot question in section 10(22) was - whether the activities of the applicant came within the definition of income of educational institution . Under section 10(22), one had to closely analyse the activities of the institute, the objects of the institute and its source of income and its utilisation. Even if one of the objects enabled the institute to undertake commercial activity, the institute would not be entitled to approval under section 10(22). The said section, inter alia, excludes the income of the educational institute from the total income. In Addl. CIT v. Surat Art Silk Cloth Manufacturers Association reported in [1980] 121 ITR 1, it has been held by this court that the test of predominant object of the activity is to be seen whether it exists solely for educat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10(23C)( vi), came for consideration. This court held that location of the University is not relevant what is relevant is - whether there is imparting of education in India. . . . (p. 104) Thereafter, their Lordships referred to the insertion of the proviso to section 10(23C)(vi ) and distinguished the decision rendered in Oxford University Press case (supra). 17. From a perusal of the aforesaid decisions, it is lucid that for the entitlement for getting exemption for the assessment year, it is required to see the activities of the assessee. That is the acid test. If the income/profit is applied for non-educational purposes, it is decided only at the end of the financial year. It is to be seen whether the assessee is engaged in any kind of educational activities. The authorities which we have referred to above have laid down the criteria under what circumstances an assessee can claim exemption being involved in educational purposes and how the income is spent. We have already referred to the memorandum of association and also stated about reasonings assigned by the CIT (Appeals) to deny the exemption and the analysis made by the Tribunal to dislodge the finding of the first ..... X X X X Extracts X X X X X X X X Extracts X X X X
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