2017 (11) TMI 2002 - HC - Income Tax

Exemption u/s 10(23C)(iiiab)/10(23C) (iv) - appellant assessee is registered and granted exemption u/s 12AA vide certificate on 7.11.2007 and carrying on their activity only for the purpose of publication of the educational books which are given to the educational institutions - assessee appellant is an autonomous body established for the purpose of publication of books in Hindi language for post graduate student of Universities in India as per the Education Policy decision of the Ministry of Education Social Welfare Department of Education Government of India - HELD THAT - Rajasthan Hindi Granth Academy is established by the State Government to see that the books are available to the students of the educational institutions at the grass root level therefore while considering the matter we have considered that mainly the substantive amount out of receipts as received by the assessee from State Government by way of subsidy. Even if name of the institution i.e. Rajasthan Hindi Granth Academy is considered it is established that it is for the purpose of publication of Hindi Granth i.e. for education. In that view of the matter in our considered opinion in view of decisions referred by Mr. Ranka this is an educational institution activity. We are of the opinion that this academy is running only with a view to publish educational books and we have no hesitation in accepting the submissions of Mr. Ranka that this is only for the purpose of academy which is educational in nature. Assessee will be entitled for the benefit u/s 10(23)(iiiab). Even from the table looking to the turnover the profit is negligible therefore it is clear that the institution has no profit motive. - Decided in favour of the assessee.

Issues Involved:
1. Entitlement to exemption under Section 10(23C)(iiiab) and Section 10(23C)(iv) of the Income Tax Act, 1961.

Detailed Analysis:

Issue 1: Entitlement to Exemption under Section 10(23C)(iiiab) and Section 10(23C)(iv):

The appellant challenged the judgment of the tribunal which partly allowed the appeal filed by the assessee and modified the order of CIT(A). The substantial question of law framed was whether the ITAT was justified in holding that the assessee was not entitled to exemption under Section 10(23C)(iiiab) and Section 10(23C)(iv) of the Income Tax Act, 1961.

The assessee, an autonomous body established for the publication of Hindi books for postgraduate students, claimed exemption under Section 10(23C)(iv) in its return of income for the assessment year 2010-11. The AO denied the exemption, stating that the income was not earned from educational activities and classified the activities as trade, commerce, and industry.

The relevant provisions of Section 10(23C)(iiiab) and Section 10(23C)(iv) were examined. Section 10(23C)(iiiab) exempts income of any university or educational institution existing solely for educational purposes and not for profit, substantially financed by the State Government. Section 10(23C)(iv) exempts income of any fund or institution established for charitable purposes, approved by the prescribed authority.

Counsel for the appellant argued that the assessee was registered and granted exemption under Section 12AA and carried out activities solely for publishing educational books. The tribunal and CIT(A) were contended to have wrongly rejected the appeal by not considering relevant judgments.

The appellant relied on several judicial precedents:

1. Delhi High Court in Council for the Indian School Certificate Examinations vs. DGIT: It was held that an educational institution need not conduct teaching classes to qualify for exemption if its activities are educational in nature.

2. Delhi High Court in Delhi Bureau of Text Books vs. DIT (E): The court emphasized that the publication and distribution of textbooks at subsidized rates constitute educational activities.

3. Patna High Court in Bihar State Text Book Publication Corpn. vs. CIT: The court held that an institution carrying out activities under the directive principles of the State Government, even if registering some income, does not lose its charitable nature.

4. Supreme Court in Assam State Text Book Production & Publication Corpn. vs. CIT: The court recognized the publication and sale of textbooks by a government-controlled corporation as educational activities entitled to exemption.

5. Rajasthan High Court in CIT vs. Rajasthan State Text Book Board: Similar to the appellant's case, the court held that a state textbook board's surplus used for educational purposes qualifies for exemption.

6. Orissa High Court in Secondary Board of Education vs. ITO: The court held that the profits from educational activities devoted to education do not disqualify an institution from being considered educational.

7. Madhya Pradesh High Court in CIT vs. Madhya Pradesh Rajya Pathya Pustak Nigam: The court emphasized the importance of the nature of activities rather than the income generated.

8. Karnataka High Court in DIT vs. Dharmakasha Rajakarya Prasakta B.M. Sreenivasiah Educational Trust: The court held that substantial government financing and non-profit nature qualify an institution for exemption.

Counsel for the respondent argued that the activities of the appellant did not fall under the ambit of education and were more of general public utility, thus not eligible for exemption under Section 10(23C)(iiiab) or Section 10(23C)(iv). The respondent relied on the Supreme Court decision in The Sole Trustee Loka Shikshana Trust vs. CIT, which defined education as systematic instruction and not in a broad sense.

After hearing the arguments, the court noted that the appellant was established by the State Government to ensure the availability of educational books at the grass root level. The substantial amount of receipts from the State Government subsidy indicated that the institution was not profit-motivated. The court concluded that the appellant's activities were educational in nature and entitled to exemption under Section 10(23C)(iiiab).

Conclusion: The court answered the issue in favor of the assessee, holding that the appellant was entitled to the benefit under Section 10(23C)(iiiab) as the activities were educational and not profit-oriented. The appeal was allowed.

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