TMI Blog2017 (5) TMI 430X X X X Extracts X X X X X X X X Extracts X X X X ..... e, in the facts and circumstances outlined above, in the affirmative. The Court, accordingly, concludes that the ITAT was incorrect in setting aside the order passed by the CIT (A) and in denying exemption to the Assessee under Section 11 and Section 12 of the Act. The ITAT erred in holding that the activities carried out by the Assessee fell under the 4th limb of Section 2 (15) of the Act, i.e., ‘the advancement of any other object of general public utility’ and that its activities were not solely for purpose of advancement of ‘education’. Questions (i) and (ii) framed by the Court are, therefore, answered in the negative, i.e., in favour of the Assessee and against the Revenue. Consistency - Held that:- On the issue of consistency, the Court notes that in the present case, continuously from AYs 1971-72 till 2005-06, exemption had been granted to the Assessee under Sections 11 and 12 of the Act. When for AYs 1975-76 and 1976-77 the AO sought to take a different view, the ITAT reversed that view and the decision of the ITAT was not challenged further by the Revenue. Apart from the fact that the Assessee was earning more profits from its essential activity of education, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ality of primary and secondary school education in Delhi schools. 4. The Assessee was registered as charitable under Section 12A (a) of the Act by an order dated 27th December 1973. The Assessee is attached to the Directorate of Education, GNCTD. Its activities are administered by the Board of Directors ( BoD ) comprising of seven officers of the Directorate of Education in an ex-officio capacity and two members nominated by the Lieutenant Governor of Delhi. The Director of Education is the Chairman of the Assessee Society. 5. The Assessee is engaged in printing and publication of text books for Class I to VIII of Government Schools, Municipal Corporation of Delhi ( MCD ) schools, New Delhi Municipal Council ( NDMC ) Schools and Delhi Cantonment Schools. The books are provided at subsidized rates by the Assessee. There is nominal profit to school students and wholesale dealers. The Assessee is also distributing free books, reading material and school bags to needy students. 6. Para 4 of the Memorandum of the Assessee Society sets out its aims and objectives and reads as under: 1) To aid and promote the advancement of education particularly elementary and secondary educ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t October 2007 declaring Nil income claiming exemption under Sections 11 and 12 of the Act. The AO called upon the Assessee to explain why the activity of publication and sale/purchase of books should not be treated as business activity. Secondly, the Assessee was asked whether it was maintaining books of accounts as mandated by Section 11 (4A) of the Act. The approach of the AO was to consider the Assessee as a General Public Utility. Referring to the decision of the Supreme Court in Sole Trustee Loka Shikshana Trust v. Commissioner of Income Tax (1975) 101 ITR 234 (SC), the AO observed that since the Assessee was earning huge profit margins of about 35.15%, the activity of publication and sale of books could not be said to be a charitable activity . Accordingly, the AO treated the income from the sale and publication of books as taxable for each of the AYs in question. Order of the CIT (A) 10. Aggrieved by the above order, the Assessee filed appeals before the CIT (A) who by order dated 31st March 2010 reversed the AO s decision. The CIT (A) noted that the AO had not returned a finding that the Assessee s activities were beyond the aims and objectives of the So ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (c) The ITAT held that its earlier order dated 30th September 1980 for AYs 1975-76 and 1976-77 had not considered the income and expenditure statements filed by the Assessee for those AYs and other relevant evidence. It was observed that the facts on hand were different. It further held that the Assessee has not maintained separate books of accounts for its activities of sale and purchase of books for the AY in question and thus has violated the provisions of Section 11 (4A) of the Act. The Assessee had made accumulation in excess and without specifying any purpose and was not wholly for the charitable purpose. Reliance was placed on the decision of the Supreme Court in Nachimuthu Industrial Association v. CIT (1999) 235 ITR 190 (SC). Submissions on behalf of the Assessee 14. Ms. Prem Lata Bansal, learned Senior counsel for the Assessee, submitted that the ITAT erred in not appreciating the law governing the grant of exemption to a charitable institution as defined under Section 2 (15) read with Sections 11 (1) and 12 of the Act. Ms. Bansal submitted that in terms of the law explained in Sole Trustee, Loka Shikshana Trust v. CIT (supra) , the Assessee s income w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion in Sole Trustee, Loka Shikshana Trust v. CIT (supra). While Mr. Kaushik was unable to dispute that the activity of the Appellant involved education , he maintained that the Appellant did not satisfy the requirement of the proviso under Section 2 (15) of the Act viz., that the activity should not be related to trade, commerce or business . 18. As regards the submission regarding the issue for grant of registration under Section 12A of the Act precluding the AO from re-examining the question of eligibility of the Assessee to examine, Mr. Kaushik referred to the case law referred to by the ITAT and submitted that the AO was within his rights to again examine whether those conditions were satisfied in every one of the AYs in question. 19. Lastly, it was submitted by Mr. Kaushik that every AY was separate. Merely because in an earlier AY another point of view was expressed would not preclude the AO from re-visiting the issue if he found that the facts and circumstances warranted it. He placed reliance on the decisions in C.K. Gangadharan v. Commissioner of Income Tax, Cochin (2008) 8 SCC 739 and Commissioner of Central Excise, Raipur v. Hira Cement (2006) 2 SCC 439. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ol 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 normal schooling. 22. The preparation and distribution of text books certainly contributes to the process of training and development of the mind and the character of students. There does not have to be a physical school for an institution to be eligible for exemption. What is important is the activity. It has to be intrinsically connected to 'education'. 23.1 In Assam State Text Book Production and Publication Corporation Limited v. CIT (supra), the facts were more or less similar. There, the Assessee which was initially constituted as Central Text Book Committee changed its name to the Assam Text Book Committee with ten members nominated by the State Government. The Board was then converted into a corporation in 1972. The entire share capital of the corporation was owned by the Government of Assam. 23.2 There again, the AO sought to deny exemption on the ground that the Corporation was not an educational institutio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , in its impugned judgement, 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 funding, the share-holding pattern and aspects, such as return on Investment; thirdly, it has not considered the letters issued by C.B.D.T. which are referred to in the judgement of the Rajasthan High Court granting benefit of exemption to various Board/Societies in the country under Section 10(22) of the Act; fourthly, it has failed to consider the judgements mentioned hereinabove; and lastly, it has failed to consider the letter of the Central Government dated 9th July, 1973, to the effect that all State- controlled Educational Committee(s)/Board(s) have been constituted to implement the educational policy of the State(s); consequently, they should be treated as educational institution. 24. In Institute of Chartered Accountants of India v. DGIT (supra), the question that arose before this Court was whether the Petitioner-Institute could be denied exemption in view of the proviso to Section 2 (15) of the Act since it was engaged in activity of advancement of any other object of general p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecisions. The ITAT came to the erroneous conclusion that merely because the Assessee had generated profits out of the activity of publishing and selling of school text books it ceased carrying on the activity of education. The ITAT failed to address the issue in the background of the setting up of the Assessee, its control and management and the sources of its income and the pattern of its expenditure. The ITAT failed to notice that the surplus amount was again ploughed back into the main activity of 'education'. The question to be asked was whether the activity of the Assessee contributed to the training and development of the knowledge, skill, mind and character of students? In the considered view of the Court, the answer to that question had to be, in the facts and circumstances outlined above, in the affirmative. 28. The Court, accordingly, concludes that the ITAT was incorrect in setting aside the order passed by the CIT (A) and in denying exemption to the Assessee under Section 11 and Section 12 of the Act. The ITAT erred in holding that the activities carried out by the Assessee fell under the 4th limb of Section 2 (15) of the Act, i.e., the advancement of any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they present as to what should be a proper apprehension by the court of the legal result either of the construction of the documents or the weight of certain circumstances. If this were permitted, litigation would have no end, except when legal ingenuity is exhausted. It is a principle of law that this cannot be permitted and there is abundant authority reiterating that principle. Thirdly, the same principle, namely, that of setting to rest rights of litigants, applies to the case where a point, fundamental to the decision, taken or assumed by the Plaintiff and traversable by the Defendant, has not been traversed. In that case also a Defendant is bound by the judgment, although it may be true enough that subsequent light or ingenuity might suggest some traverse which had not been taken. 32. Recently, in CIT v. Excel Industries (supra), the above legal position was reaffirmed by the Supreme Court. On the facts of that case it was held: 31. It appears from the record that in several assessment years, the Revenue accepted the order of the Tribunal in favour of the Assessee and did not pursue the matter any further but in respect of some assessment years the matter was ta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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