[Assam State Text Book Production And Publication Corporation
Ltd. v. CIT, (2009) 319 ITR 317 (SC)]
In the appeals before the Supreme Court, it was concerned
with the A.Ys. 1981-82 to 1996-97, except the A.Y. 1989-90. The question which
arose before the Assessing Officer was whether the Corporation could be termed
as an ‘educational institution’ in terms of S. 10(22) of the 1961 Act ?
According to the Assessing Officer, since the assessee, during the relevant
years, had income exclusively from publication and selling of textbooks to the
students, exemption u/s.10(22) of the Act, as it stood at the material time, was
not admissible. According to the Assessing Officer, the assessee did not exist
solely for educational purposes, particularly in view of clause 21 of the
memorandum of association which provided for distribution of dividends, hence,
its income was not exempt u/s. 10(22) of the Act. This decision of the Assessing
Officer was upheld by the Commissioner of Income-tax (Appeals). In the Tribunal,
there was a difference of opinion between the Member (Judicial) and the Member
(Accountant). By decision of the majority, it was held that the Corporation was
an educational institution and, consequently, the Corporation was entitled to
the benefit of exemption u/s.10(22) of the Act for the relevant assessment years
in question. However, in appeal filed by the Department, the High Court came to
the conclusion that the income of the Corporation, during the relevant
assessment years, was not exempt, particularly in view of the fact that the
assessee did not exist solely for education purposes; that it did not solely
impart education and that its income during the relevant assessment years was
only from publishing and sale of text-books, which according to the High Court,
constituted a profit-earning activity. Against the said decision, the assessee
has come to the Supreme Court by way of civil appeals.
On going through the records, the Supreme Court found that
the High Court had not taken into account the prior history of the case,
particularly in the context of incorporation of the Corporation under the
Companies Act, 1956, as a Government company. Initially, the assessee was a
State-controlled Committee and Board, which was attached to the Office of the
Director of Public Instruction, State of Assam. It was only in the year 1972,
that the Government company got constituted u/s.617 of the Companies Act, 1956;
that, prior to 1972, the entire funding for the working of the Committee/Board
was done by the State of Assam and that even the ownership of the assets
remained vested in the State of Assam, which stood transferred to the
Corporation in 1972, when it got incorporated under the Companies Act, 1956. The
Supreme Court observed that the assessee was a Government company. It was
controlled by the State of Assam. The aim of the said Corporation was to
implement the State’s policy on education; that, clause 21 of the memorandum and
articles of association provided a return on investment to the State of Assam;
that, in the year 1975, in a similar situation, the Central Board of Direct
Taxes (for short, ‘the CBDT’) had granted exemption u/s.10(22) of the Act, vide
letter dated August 19, 1975, to the Tamil Nadu Text Books Society, which
performed activities similar to those of the assessee. The letter dated August
19, 1975, was referred to in the judgment of the Rajasthan High Court in the
case of CIT v. Rajasthan State Text Book Board reported in (2000) 244 ITR
667. A similar question came up for consideration before the Rajasthan High
Court, namely, whether the Rajasthan State Text Book Board was entitled to
exemption u/s.10(22) of the Income-tax Act, 1961 ?
The Rajasthan High Court in its judgment recited that, under
a similar situation, the CBDT had also extended the benefit of exemption under
10(22) of the Act to the Orissa Secondary Board Education, as reported in
Secondary Board of Education v. ITO, (1972) 86 ITR 408 (Orissa). Following
these circulars/letters issued by the CBDT, the Rajasthan High Court had come to
the conclusion that the assessee in that case, namely, Rajasthan State Text Book
Board, was entitled to claim the benefit of exemption u/s.10(22) of the Act.
The Supreme Court, in view of the above, was of the opinion
that the High Court, in its impugned judgment, had not considered the historical
background in which the Corporation came to be constituted; secondly, the High
Court ought to have considered the source of funding, the sharehold-ing pattern
and aspects, such as return on investment; thirdly, it had not considered the
letters issued by the CBDT which are referred to in the judgment of the
Rajasthan High Court granting benefit of exemption to various Board/Societies in
the country u/s.10(22) of the Act; fourthly, it has failed to consider the
judgments mentioned hereinabove; and lastly, it had failed to consider the
letter of the Central Government dated July, 1973, to the effect that all
State-controlled Educational Committee(s)/Board(s) were constituted to implement
the educational policy of the State(s); consequently, they should be treated as
educational institutions.
For the aforesaid reasons, the Supreme Court was of the view
that, instead of remanding the matter to the High Court, it was appropriate that
the matter was remitted to the Assessing Officer to consider it de novo in the
light of the above.
