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TMI Blog1980 (9) TMI 116X X X X Extracts X X X X X X X X Extracts X X X X ..... icula, text books and other instructional material. (5) To make available at subsidised cost or free of cost or in some other suitable manner text books and other learning material to the children of economically weak families and similarly to make teaching material and aid available to teachers at subsidised cost or free of cost or in other suitable manner so as to promote better teaching in Delhi Schools with the prior approval of Delhi Admn., and (6) To obtain manuscripts of subject text books prepared by the Text Book Branch of the Directorate of Education on such terms and conditions as may be determined by the Director of Education for printing, publishing and distribution in the Union Territory of Delhi." The Rules and Regulations of the Society contain the following provision: "4. Without prejudice to the generality of the provisions made in the preceding article, the Bureau shall have the full authority to perform the following functions: (1) To borrow and raise money on loan, security, mortgage or pledge or in any other suitable manner with the prior approval of the Administrator of Delhi; (16) To assist and advise the Delhi Administration, the Director ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years earlier to the present assessment was as under: Asst. yr. Amount 1971-72 Rs. 24,237 1972-73 Rs. 3,39,074 1973-74 Rs. 5,25,043 1974-75 Rs. 6,70,097 The CIT, Delhi-IV in his letter No. JE 3(106)/71/6079 dt. 25th Feb., 1972 addressed to the Chairman, Delhi Bureau of Text Books confirmed that donations made to it would be eligible for tax relief under s. 80G in the hands of the donees. 4. For the asst. yr. 1975-76 the previous year ended on 31st March, 1975. Even though for the asst. yrs. 1971-72 to 1974-75 the assessee was treated as a charitable society entitled to the benefits of s. 11 but in this year the ITO held that the Society would not be entitled to the benefits of s. 11. The reasons for changing the position in this year are given in paragraph 4 of the assessment orders: "4. Assessment for the years 1971-72 to 1974-75 have since been framed holding the assessee society as a charitable Society entitled to benefits of s. 11. The ITO (Internal Audit) vide his D.O. No. IAP/VI/8831 dt. 28th March, 1978 has pointed out that the assessee has been wrongly allowed the benefits of s. 11 in thos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and determined the total income of the assessee at Rs. 3,51,190. 5. Similarly for the asst. yr. 1976-77 for which the previous year ended on 31st March, 1976 the ITO denied the benefit of s. 11 to the assessee and by his order dt. 7th May, 1979 determined the total income at Rs. 4,50,000. Aggrieved by these orders, the assessee filed appeals to the CIT (A). 6. The first point made before the CIT (A) was that the sole and exclusive object of the assessee fall within the term "education" appearing in s. 2(15) as accepted by the Department in all the earlier years. Proceeding from this promise and without prejudice to its case that the assessee intended to facilitate the successful fulfilment of the main object. The CIT (A) observed that this was the stand taken by the Department in earlier years and in his view that stand was sound and valid. He, therefore, did not agree with the ITO that object No. 1, viz., the production of high quality text books and other instructional material such as teacher's handbooks, work-books, etc., and object No. 2, viz., the printing, publishing, supply and sale of such text books and other teaching, learning materials could be isolated from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ject of the assessee was "the advancement of any other object of general public utility". He submitted that the word "education" as defined in the aforesaid judgment connotes the process of training and developing the knowledge, skill, mind and character of students by normal schooling, and has not been used in the wide sense according to which every acquisition of further knowledge constitutes education. According to the ld. Deptl. Rep. like any other publishing house of books, the object of the assessee was to publish books. He further submitted that since the activity of the assessee of publishing books and distributing them was an activity for profit, the assessee was not covered by the definition of 'charitable purposes' contained in s. 2(15). He also referred to the judgments in Lakshmi Narain Nath Temple Trust vs. CIT (2) and CIT, New Delhi vs. Jaipur Charitable Trust (1) and pleaded that even if the assessee's one of the objects was of a non-charitable nature, the assessee would still not be entitled to the benefit under s. 11 r/w s. 2(15). According to him, the first and second objects of the Society pertaining to production, printing, publishing and distribution of approv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er instructional material, such as, teachers hand-books, work-books etc. He then referred to s. 12A, and pointed out that Society was registered under s. 12A as charitable with the CIT vide Registration No. DLI (c)(1-10) 1793-74. A reference to the certificate was made in a letter dt. 7th Jan., 1979 addressed to the CIT (A). He pointed out that the pre-requisite for claiming the exemption under s. 12A was that provisions of ss. 11 and 12 were satisfied. He referred to the Certificate No. JE-3(106)/71/6079 dt. 25th Feb., 1972 granted by the CIT to the effect that donations made to the assessee will be eligible for tax relief under s. 80G. He then referred to the provisions of s. 2(15) and pleaded that the words "the carrying on of any activity for profit" were relevant for the fourth limb of the definition of 'charitable purposes' viz., the advancement of any other object of general public utility. He referred to the judgment in Addl. CIT, Gujarat vs. Surat Art Silk Cloth Manufacturers Association (7) and pointed out that the judgment in Indian Chamber of Commerce vs. CIT (3) had been overruled. He submitted that the real object of the Society was "education" but even if it was held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ief and exemption under s. 11 was granted to the assessee. He then submitted that it was only under s. 13 that the exemption under s. 11 could be denied. He referred to the assessment order for the asst. yr. 1973-74 wherein it is noted that the income would be accumulated and utilised for the charitable purposes. He pointed out that the earlier to the establishment of the Society the activities that the assessee was carrying on, used to be carried on by the Directorate of Education, Delhi Administration. He referred to cl. 3 of the Rules and Regulations which states that the assessee registered under the Societies Act, 1860 shall be having perpetual succession. He referred to cl. 17(1) of the Rules and Regulations which lays down that the income of the Society shall be applied only towards the promotion and objectives of the Society as laid down under this "Memorandum of Association". He submitted that the definition of the term "education" in the judgment in Sole Trustee, Loka Shikshana Trust vs. CIT, Mysore (6) will be of no hindrance in holding that the activities of the assessee were covered by the term "education" used in s. 2(15). He relied on the judgment in Addl. CIT, Gujar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the assessee would be entitled to exemption under s. 11. The main object of the Society is to aid and promote the advancement of education and for this purpose the assessee had undertaken to produce, print, publish and distribute high quality text-books, work-books etc. It was also the object of the assessee to make available at subsidised cost or even at free of cost text books to children of economically weaker families and similarly to make teaching material available to teachers at subsidised cost or even free of cost so as to promote better teaching in Delhi schools. The submission made on behalf of the assessee is that the activities of the assessee are covered by the term "education" used in s. 2(15). This submission has found favour of the CIT (A). The submission of the Revenue, on the other hand, is that like any other publishing house, the assessee is printing and publishing books and this object could at best be considered the advancement of any other activity of general public utility but since the carrying on of this activity is for profit the assessee is not entitled to the exemption under s. 11. The term "education" has not been defined in the IT Act. This term cam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who removes your wallet and the swindler who cheats you teach you a lesson and in the process make you wiser though poorer. If you visit a night club, you get acquainted with and add to your knowledge about some of the not much revealed realities and mysteries of life. 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 cl. (15) of s. 2. What education connotes in that clause is the process of training and developing the knowledge, skill, mind and character of students of normal schooling." The CIT (A) had gone into these observations very carefully, and has held that though the word "education" has not been given a wide meaning but it has not been confined to bare objects of teaching by teachers and learning by students in the class-room of a school, a college or university. In the opinion of the CIT (A), the assessee's objects undoubtedly cover the "the process of training and developing the knowledge, skill, mind and character of students by normal schooling," which according, to the Supreme Court, is meant by the word "education" used in s. 2(15). In our opinion, the CIT (A) has taken a very reasonabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mely, the advancement of any other object of general public utility. The true meaning of the words "not involving the carrying on of any activity for profit" is that when the purpose of trust or institution is the advancement of an object of general public utility, it is that object of general public utility and not its accomplishment or carrying which must not involve the carrying on of any activity for. So long as the purpose does not involve the carrying on of any activity for profit, the requirement of the definition would be met and it is immaterial how the monies for achieving or implementing such purpose are found, whether by carrying on an activity for profit or not. The test which has to be applied is whether the predominant object of the activity involved in carrying out the object of general public utility is to subserve the charitable purpose or to earn profit. Where profit making is the predominant object of the activity, the purpose, though an object of general public utility, would cease to be a charitable purpose. But where the predominant object of the activity is to carry out the charitable purpose and not to earn profit, it would not lose its character of a chari ..... X X X X Extracts X X X X X X X X Extracts X X X X
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