2001 (1) TMI 79 - SC - Income Tax

Whether the Oxford University Press, Bombay, which, is part of the Oxford University, is exempt under section 10(22) of the Income-tax Act, 1961? Held that - It is evident that for the purposes of granting exemption the Legislature assumed the existence of educational activity in India by a University or other educational institution but did not want to restrict the exemption only to such university or educational institution which is established or constituted or set up in India. That seems to be the reason for not placing limitation as to the setting up of such a body in India. In this view a foreign university would also be entitled to claim exemption 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 the 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. Thus the assessee is not entitled to exemption as held by the High Court. The appeals deserve to be dismissed.

Issues Involved:
1. Whether the Oxford University Press, Bombay, qualifies for exemption under section 10(22) of the Income-tax Act, 1961.
2. Interpretation of section 10(22) of the Income-tax Act, 1961.
3. Applicability of section 10(22) to foreign universities.
4. Requirement of educational activity in India for claiming exemption under section 10(22).

Issue-wise Detailed Analysis:

1. Whether the Oxford University Press, Bombay, qualifies for exemption under section 10(22) of the Income-tax Act, 1961:
The core issue was whether the Oxford University Press, Bombay, as part of the University of Oxford, was exempt under section 10(22). The High Court had ruled against the assessee, stating that the Press did not qualify as a University existing solely for educational purposes in India. The Supreme Court, however, found that the income derived from the Press, being part of the University of Oxford, should be considered the income of the University, which exists solely for educational purposes.

2. Interpretation of section 10(22) of the Income-tax Act, 1961:
Section 10(22) exempts "any income of a university or other educational institution, existing solely for educational purposes and not for purposes of profit." The Supreme Court held that the term "existing solely for educational purposes" applies to both universities and other educational institutions. The Court emphasized that the clause does not have a locational sense, meaning it does not require the institution to exist in India to qualify for the exemption.

3. Applicability of section 10(22) to foreign universities:
The High Court had interpreted that the exemption under section 10(22) should apply only to universities existing in India. The Supreme Court disagreed, stating that the clause does not specify that the University must be in India. The Court held that the University of Oxford, despite being a foreign institution, qualifies for the exemption as it exists solely for educational purposes.

4. Requirement of educational activity in India for claiming exemption under section 10(22):
The High Court had ruled that for a university to claim exemption, it must carry out educational activities in India. The Supreme Court found this interpretation erroneous, stating that the clause does not impose such a locational requirement. The Court clarified that the income derived from the Press, being part of the University of Oxford, is exempt as it is income of a University existing solely for educational purposes.

Separate Judgments:

Majority Judgment:
The majority judgment, delivered by Justice S. P. Bharucha, concluded that the High Court erred in its interpretation of section 10(22). The judgment emphasized that the clause does not require the University to exist in India or carry out educational activities in India. The income derived by the Oxford University Press, being part of the University of Oxford, qualifies for exemption under section 10(22).

Dissenting Judgment:
Justice D. P. Mohapatra dissented, holding that the exemption under section 10(22) should only apply to universities or educational institutions engaged in educational activities in India. He argued that the purpose of the exemption is to benefit educational institutions serving the Indian public, and extending this benefit to foreign institutions without any educational activity in India would be irrational and absurd.

Concurring Judgment with Dissent:
Justice Y. K. Sabharwal concurred with Justice Mohapatra, asserting that the exemption should be limited to universities or educational institutions that impart education or provide educational facilities in India. He emphasized the need for a purposive interpretation of section 10(22) to avoid absurd results and ensure that the exemption serves its intended purpose of benefiting educational activities within India.

Conclusion:
The Supreme Court, by majority, allowed the appeals, holding that the Oxford University Press, being part of the University of Oxford, qualifies for exemption under section 10(22) of the Income-tax Act, 1961. The majority judgment emphasized a literal interpretation of the clause, without adding locational restrictions not present in the statutory language. The dissenting opinion, however, stressed the need for educational activities in India to qualify for the exemption, reflecting a purposive approach to statutory interpretation.

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