2020 (5) TMI 516 - HC - Income Tax

Exemption u/s 10(23C)(iiiab) - denial of exemption as assessee is neither a University nor educational institution existing solely for educational purposes - Addition deleted by ITAT - HELD THAT - The Supreme Court in ASSAM TEXT BOOK PRODUCTION AND PUBLICATION CORPORATION LTD. 2009 (10) TMI 60 - SUPREME COURT has interpreted the definition of an educational institution and it is evident that all State controlled educational committees / boards that have been constituted to implement the educational policy of the States have to be treated as educational institutions. From enunciation of law by the Supreme Court, the assessee, which has been constituted to implement the educational policy of the State has to be treated as an educational institution and is consequently entitled to the benefit of exemption under Section 10(22) of the Act. In view of preceding analysis, the substantial questions of law framed by this court are answered against revenue.

Summary

Issues:
1. Eligibility for exemption under Section 10(23C)(iiiab) of the Income Tax Act.
2. Approval requirement for carrying out activities falling under Section 10(23C)(iv) of the Act.

Analysis:
1. The appeal involved the question of whether the assessee was eligible for exemption under Section 10(23C)(iiiab) of the Income Tax Act for the assessment year 2007-08. The society, promoted by the Government of Karnataka, was engaged in activities related to school textbooks and educational materials. The assessing officer initially rejected the claim under Section 11 of the Act due to the lack of registration under Section 12AA. However, the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal allowed the exemption under Section 10(23C)(iiiab) based on a Supreme Court decision related to state text book societies' entitlement to exemption under similar provisions.

2. Another issue raised was regarding the approval requirement for activities falling under Section 10(23C)(iv) of the Act. The revenue contended that the assessee did not fall under the category of an educational institution and needed approval from the prescribed authority. The revenue challenged the order of the Appellate Authority and the Tribunal, arguing that the judgment relied upon was in the context of a now-omitted provision. However, the Government Advocate supported the decisions of the lower authorities.

Judgment:
The High Court analyzed the interpretation of an educational institution as per the Supreme Court's decision in a related case. The Court held that all state-controlled educational committees/boards constituted to implement state educational policies should be treated as educational institutions. Consequently, the Court concluded that the assessee, established to implement the state's educational policy, should be considered an educational institution entitled to exemption under Section 10(22) of the Act. Therefore, the substantial questions of law were answered against the revenue, and the appeal was dismissed for lack of merit.