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Issues involved:
The judgment involves a challenge to orders passed by the Income-tax Appellate Tribunal regarding the income tax exemption u/s 10(22) of the Income-tax Act, 1961 for the assessment years from 1981-82 to 1996-97, excluding 1989-90. Summary: Issue 1: The core issue is whether the assessee can be considered an educational institution solely for educational purposes u/s 10(22) of the Act. The assessee, a Government company, claimed exemption from income tax under section 10(22) of the Act. The Commissioner of Income-tax (Appeals) rejected the claim, leading to an appeal before the Income-tax Appellate Tribunal. The Tribunal, after a difference of opinion, referred the matter to the Third Member. The Judicial Member and the Third Member viewed the assessee as an educational institution, while the Accountant Member disagreed. Issue 2: The question is whether the assessee qualifies as a non-profit making organization despite engaging in commercial activities beyond education. The main objects of the assessee involve production, printing, and sale of books, along with other commercial activities. The appellant argued that the assessee is a profit-earning corporation engaged in various business activities directed by the Government. The assessee contended that its activities, including printing and sale of textbooks, qualify it as an educational institution solely for educational purposes. Judgment: Upon examination of the main objects and activities of the assessee, the court found that the assessee's commercial activities did not align with the definition of an educational institution under section 10(22) of the Act. Citing precedents, the court emphasized the requirement of imparting education or training for an entity to qualify as an educational institution. The court noted that the assessee did not engage in teaching or training activities, leading to the conclusion that it did not meet the criteria for exemption under section 10(22). The court also considered the distribution of dividends among members and contributions to charitable funds as factors indicating the assessee was not solely focused on educational purposes. Despite the absence of actual dividend distribution, the court held that the object of potential dividend distribution was inconsistent with the requirements of section 10(22). In conclusion, the court quashed the Tribunal's orders and ruled in favor of the appellant, determining that the assessee did not qualify as an educational institution for income tax exemption under section 10(22) of the Act.
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