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2009 (4) TMI 919 - HC - Income TaxExemption u/s 10(22) - engaged in printing, sale of text-books - revenue allowed the exemption in earlier years but assessee - but AY 1995-96, notice issued u/s 143(3) - Corporation stated that the Corporation is fully owned by the Government of Madhya Pradesh which published the text-books only for the students who are imparted education in all sections of Madhya Pradesh - AO did not accept the stand put forth by the Association and came to hold that the Association is only engaged in printing of books and selling of the same and hence, it cannot be said that it is engaged in the activity of education - not entitled for exemption u/s 10(22) - directed initiation of penalty proceeding under the provisions of the statute - CIT(A) concurred with the view expressed by AO - ITAT concluded that the Association was entitled to claim exemption. HELD THAT - In Sole Trustee Lok Shikshana Trust v. CIT 1975 (8) TMI 1 - SUPREME COURT , Apex Court was considering the term education 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 institute to undertake commercial activity, the institute would not be entitled to approval u/s 10(22). '' In Oxford University Press 2001 (1) TMI 79 - SUPREME COURT this Court found that the applicant was a branch of Oxford Press which was part of the Oxford University but its activity in India was restricted to publishing books, journals, periodicals, etc. The Tribunal held that because Oxford Press is part of the University its income was exempt u/s 10(22) as it stood at the relevant time. From a perusal of the 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. 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), 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). Bereft of the aforesaid analysis, the orders are unsustainable. Hence, it would be apposite to set aside the order passed by the forums in all the appeals and remit the matter to the AO to consider the case after affording an opportunity of hearing to the assessee. It would be open to the assessee-Corporation 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.
Issues Involved:
1. Entitlement to exemption under section 10(22) of the Income-tax Act, 1961. 2. Interpretation and application of section 10(22) of the Income-tax Act. 3. Analysis of the activities of the assessee in relation to educational purposes. 4. Assessment of whether the income/profit is applied for non-educational purposes. Issue-wise Detailed Analysis: 1. Entitlement to exemption under section 10(22) of the Income-tax Act, 1961: The primary issue in this case is whether the respondent-assessee, M.P. Text-Book Corporation, is entitled to exemption under section 10(22) of the Income-tax Act, 1961. The Tribunal had held that the Corporation was entitled to this exemption, but the revenue challenged this decision. 2. Interpretation and application of section 10(22) of the Income-tax Act: The court examined the interpretation of section 10(22) of the Act, which exempts "any income of a University or other educational institution, existing solely for educational purposes and not for purposes of profit." The court referenced several Supreme Court decisions to elucidate the meaning of "educational purposes" and "not for profit." 3. Analysis of the activities of the assessee in relation to educational purposes: The court scrutinized the activities of the M.P. Text-Book Corporation to determine if they aligned with the definition of "educational purposes." The Corporation's main objectives included aiding and promoting education, producing and distributing textbooks, and undertaking research for educational improvement. The Tribunal had previously found that these activities were in line with educational purposes, but the Assessing Officer and CIT(A) disagreed, viewing the Corporation's activities as primarily commercial. 4. Assessment of whether the income/profit is applied for non-educational purposes: The court emphasized the need to assess whether the income or profit generated by the Corporation was applied for educational purposes. Citing various precedents, the court highlighted that incidental surplus from educational activities does not disqualify an institution from exemption, provided the primary objective is not profit-making. The court noted that the lower authorities had not adequately analyzed whether the Corporation's activities and income utilization met these criteria. Conclusion and Remand: The court concluded that the lower authorities had not properly applied their minds to the relevant issues, particularly the detailed analysis of the Corporation's activities and their nexus to educational purposes. The court set aside the orders of the lower authorities and remitted the matter back to the Assessing Officer for a fresh examination, allowing the assessee to present requisite documents to support its claim for exemption under section 10(22) of the Act. The appeals were allowed to this extent, with no order as to costs.
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