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TMI Blog2009 (4) TMI 919X X X X Extracts X X X X X X X X Extracts X X X X ..... et of exemption as engrafted under the aforesaid provisions and whether the Tribunal has appositely applied the ratio of the decision rendered by the Apex Court in Oxford University v. CIT [2001] 3 SCC 359?" 2. The facts which are requisite to be stated for adjudication of the controversy in these appeals are that the assessee-M.P. Text-Book Corporation ('the Corporation') was registered with the Registrar of Societies under the M.P. Societies Registration Act, 1959 on 7-8-1968. The main objects of the society as per the Memorandum of Association are as under:- "(1) to aid and promote advancement of education in general and of primary and secondary education in particular; (2) to produce School text-books, hand-books for teachers work books for pupils and other educational literature useful for furtherance of teaching, learning and evaluation in educational institutions; (3) to encourage and procure expert authors having knowledge and experience of modern methods of education to write in different language text-books on various subjects suited to the requirements of the curricula and syllabi prescribed by Government or other appropriate authority in that behalf f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rks necessary or convenient for the purpose of the society; (16) to borrow and raise money on the security or a mortgage, charge, hypothecation or pledge over all or any of the immovable of movable properties belonging to the society or in any other manner whatsoever." 3. The assessee-Corporation filed its return for the assessment years 1969-70 to 1983-84 under Amnesty Scheme claiming exemption of its income under section 10(22) of the Act including the assessment year 1980-81 in respect of which the notice under section 148 was issued on 2-2-1985. The Assessing Officer by order dated 18-3-1988 allowed the exemption under section 10(22) to the assessee-Corporation on the basis of assessment made for the assessment year 1984-85. In subsequent assessment years, the Assessing Officer allowed the exemption till 1994-95 and the assessment was done accordingly. When the matter stood thus, for the assessment year 1995-96, the Assessing Officer issued notice under section 143(3) of the Act and required the Corporation to explain why exemption under section 10(22) of the Act should not be refused to them. A reply was filed by the assessee-Corporation stating, inter alia, that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion under section 10(22) of the Act. Thereafter, the Tribunal opined that for granting exemption under section 10(22) of the Act, it is necessary to consider whether the assessee plays a role in imparting education in the absence of which educational institution of the kind cannot be run or in other words as to whether by prescribing syllabus and supplying the study material based on it, extending financial aid, the assessee is making it possible to run those educational institutions which impart affordable education to the students. Considering the totality of facts and circumstances of the case, the Tribunal concluded that the Association was entitled to claim exemption which the revenue in earlier years had been rightly granting under the similar set of facts and circumstances. The Tribunal thereafter further came to hold as under :- "12. . . There may be several private publication houses which may also be publishing study materials, etc., helpful in study to the students in the school but when it is done with an aim and object to earn profit, these cannot be termed as existing solely for educational purposes and not for purposes of profit. Earning of a limited profit for sm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 your 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 students by formal schooling." (p. 241) 10. In Aditanar Educational Institution v. Addl. CIT [1997] 224 ITR 310 1 (SC) the Apex Court while dealing with the scope of section 10(22) of the Act expressed the view as follows :- ". . .We are of the view that an educational society or a Trust or other similar body running an educationa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct with which the institution is established and the source from which the income is earned are relevant considerations to determine whether the income earned by the assessee is exempted from tax under the provision. The section does not provide that the University or other educational institution should be one established or incorporated by or under an enactment in this country. Therefore, even a University or other educational institution established or incorporated outside India can be eligible for the exemption from tax under the provision provided that it exists solely for educational purposes and not for purposes of profit. On a closer examination of the provision it becomes clear that in using the expression 'existing solely for educational purposes and not for purpose of profit' the Legislature has made it clear that it intends to exempt the income of institutions established solely for the educational purposes and not for commercial activities. Such a provision is meant to encourage institutions (including University) engaged in educational activities and it is not intended to benefit institutions engaged in commercial activities with the intention of earning profit. In my ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on so long as it was imparting education in India. The basic requirement of the section is the existence of 'education purpose' which, in other words, means the imparting of education which has to be in India. A university established in a foreign country is not excluded from the ambit of section 10(22) in case it is imparting education in India or has some educational activity in India. It is not the case of the assessee nor is there any such finding that the assessee is imparting any education or has any educational activity in India. In this view the assessee is not entitled to claim exemption. Any other interpretation would be absurd and manifestly unjust. The absence of word 'India' in this provision is inconsequential. It has to be read into section 10(22). The literal construction would lead to manifestly unreasonable and absurd consequences as indicated above." (p. 685) 13. In this context, we may refer with profit to the decision rendered in Secondary Board of Education v. ITO [1972] 86 ITR 408 (Orissa). In the said case, the Division Bench was dealing with the entitlement of Board of Secondary Education, Orissa for getting exemption under section 10(22) of the Act. The B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case (supra), Katra Education Society v. ITO [1978] 111 ITR 420 (All.), Governing Body of Rangaraya Medical College v. ITO [1979] 117 ITR 284 (AP), Secondary Board of Education's case (supra) and came to hold that the assessee was a registered society and it carried on organised activities as per the objects set out in the memorandum. Its primary object was to establish, support, manage or conduct schools, colleges and such other educational institutions. It had income of its own. In its balance-sheet, neither the income of the twenty-two colleges or institutions established under separate trusts, nor the income of the nine schools which were run directly by the assessee had been included. The assessee out of its income had given outright grants to some of those schools. The assessee had not spent its income for any purpose unconnected with education. It was, therefore, an educational institution existing purely for educational purposes and not for profit. 15. The High Court of Gujarat in Gujarat State Co-operative Union v. CIT [1992] 195 ITR 279 referred to the purpose for which the Gujarat State Co-operative Union was established and scanning the activities of the society, held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... solely for education and not to earn profit. However, the purpose would not lose its character merely because some profit arises from the activity. That, it is not possible to carry on educational activity in such a way that the expenditure exactly balances the income and there is no resultant profit, for, to achieve this, would not only be difficult of practical realization but would reflect unsound principles of management. In order to ascertain whether the institute is carried on with the object of making profit or not it is duty of the prescribed authority to ascertain whether the balance of income is applied wholly and exclusively to the objects for which the applicant is established. In deciding the character of the recipient, it is not necessary to look at the profits of each year, but to consider the nature of the activities undertaken in India. If the Indian activity has no co-relation to education, exemption has to be denied, [see the judgment of this Court in Oxford University Press [2001] 247 ITR 658 (supra)]. Therefore, the character of the recipient of income must have character of educational institution in India to be ascertained from the nature of the activities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the first appellate authority. It is worth noting that the Assessing Officer has not ascribed any reason. 18. In view of the aforesaid analysis and regard being had to the concept of educational purpose as is understood in the context of section 10(22) of the Act, we are of the considered opinion that the forums below have really not applied their mind to the relevant issue. It is worth noting, there has been no dissection of the role played by the Corporation and whether its activity has any nexus with the educational purpose as per the principles laid down by their Lordships of the Apex Court and various High Courts. We are disposed to think that there has to be detailed analysis of the facts pertaining to the activities carried out by the Association from year to year and thereafter arrive at a conclusion whether the assessee is entitled to get the benefit of exemption. Be it noted, the exemption need not be in entirety or totality. There can be a case where there can be a partial exemption if the income of the previous year falls within the basic conceptuality of section 10(22) of the Act. Bereft of the aforesaid analysis, the orders are unsustainable. Hence, it would be ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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