RAJASTHAN STATE TEXT BOOK BOARD, JAIPUR V. ASSISTANT COMMISSIONER OF INCOME TAX (EXEMPTION)-CIRCLE, JAIPUR

ITA 252/JPR/2019

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 8538 (ITAT-JAIPUR)
• Duration Of Justice: 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 26-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VARINDER MEHTA
• Keywords: Gift; Depreciation; Charitable institution; Principle of natural justice; Earning of tax free income; Source of fund; Question of law; Difference of opinion; Benefit of exemption; Set aside
• Section: 143(3); 10

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S,A JAIPUR JH JESK LH0 KEKZ] YS[KK LNL; ,OA JH FOT; IKY JKO] U;KF;D LNL; DS LE{K BEFORE: SHRI RAMESH. C. SHARMA, AM & SHRI VIJAY PA L RAO, JM VK;DJ VIHY LA- @ ITA NO. 252 & 253/JP/2019 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2013-14 & 2014-15 RAJASTHAN STATE TEXT BOOK BOARD, 2-2A, JHALANA DOONGRI, JAIPUR. CUKE VS. THE ACIT(EXEMPTION), CIRCLE, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAAAR 6050 Q VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI VINOD GUPTA (C.A.) JKTLO DH VKSJ LS @ REVENUE BY : SHRI VARINDER MEHTA (CIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 28/03/2019 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 10/04/2019 VKNS'K@ ORDER PER: VIJAY PAL RAO, J.M. THESE TWO APPEALS BY THE ASSESSEE ARE DIRECTED AGA INST TWO SEPARATE ORDERS OF LD. CIT (A), JAIPUR BOTH DATED 1 1.02.2019 FOR THE ASSESSMENT YEARS 2013-14 & 2014-15 RESPECTIVELY. TH E ASSESSEE HAS RAISED COMMON GROUNDS IN THESE APPEALS AND THE GROU NDS RAISED FOR THE ASSESSMENT YEAR 2013-14 ARE AS UNDER:- 1. IMPUGNED ASSESSMENT ORDER PASSED U/S 143(3) IS BAD IN LAW AND ON FACTS BEING AGAINST THE PRINCIPAL OF NATURAL JUSTICE AND FOR ITA NO. 252 &253/JP/2019 RAJASTHAN STATE TEXT BOOK BOARD VS. ACIT(E) 2 MANY MORE OTHER REASONS. HENCE, THE ACTION OF LD. A O AS WELL AS CIT(A) IS AGAINST LAW. 2. UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. AO AS WELL AS LD. CIT(A) HAVE ERRED IN:- A) NOT CONSIDERING THE SUBMISSION OF THE APPELLANT ASSESSEE IN RIGHT PERSPECTIVE B) DENYING EXEMPTION UNDER SECTION 10(23C)(IIIAB) B ASED ON INCORRECT ASSUMPTION OF FACTS AND LAW. 3. UNDER THE FACTS AND CIRCUMSTANCES, LD AO HAS ERR ED IN MAKING ADDITION OF RS. 40,00,21,090/-. FURTHER, LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION. 4. THAT THE APPELLANT CRAVES YOUR INDULGENCE TO ADD , AMEND OR ALTER ALL OR ANY GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. 2. THE ONLY COMMON ISSUE ARISES IN THESE APPEALS OF THE ASSESSEE IS DENIAL OF EXEMPTION U/S 10(23C)(IIIAB) OF THE ACT. THE ASSESSEE IS SOCIETY REGISTERED UNDER THE RAJASTHAN SOCIETY ACT, 1958. THE ASSESSEE SOCIETY WAS SET UP BY THE GOVERNMENT OF RAJASTHAN A S AN AUTONOMOUS BODY AND REGISTERED ON 29.12.1973. THE PRE DOMINANT OBJECTS OF THE ASSESSEE SOCIETY INTER ALIA TO PREPARE, EDIT, PUBL ISH, PRINT, STOCK, SELL DISTRIBUTE, OR OTHERWISE DEAL IN TEXTBOOKS, SUPPLEM ENTARY BOOKS, REFERENCE BOOKS, EXTRA READING MATERIAL, WORKBOOKS AND EXERCISE BOOKS FOR PUPILS AND TEACHING AIDS, TEACHERS HAND BOOKS, AND CURRICULUM (HEREINAFTER REFERRED TO AS THE EDUCATION LITERATUR E) USEFUL FOR FURTHERANCE OF TEACHING AND LEARNING IN INSTITUTION S MEANT FOR LOWER AND HIGHER PRIMARY EDUCATION. TO PREPARE EDIT, PRINT, PUBLISH, STOCK, SELL ITA NO. 252 &253/JP/2019 RAJASTHAN STATE TEXT BOOK BOARD VS. ACIT(E) 3 AND DISTRIBUTE OR ENTER INTO ANY ARRANGEMENT FOR PR EPARING, EDITING, PRINTING, PUBLISHING, STOCKING, DISTRIBUTION AND SA LE OF TEXTBOOKS APPROVED OR ASSIGNED BY THE GOVERNMENT OF RAJASTHAN OR OTHER APPROPRIATE AUTHORITY APPOINTED BY THE BOARD AND AN Y OTHER EDUCATIONAL LITERATURE WHICH THE BOARD MAY DECIDE TO PUBLISH, W ITH A VIEW TO MAKING THE SAME AVAILABLE AT A PRICE, FIXED AT NOT PROFIT NO LOSS BASIS. THE ASSESSEE SOCIETY IS MANAGED, GOVERNED AND CONTROL B Y THE GOVERNMENT OF RAJASTHAN THROUGH THE GOVERNING BOARD AS APPOINT ED BY THE GOVERNMENT. INITIALLY THE ASSESSEE SOCIETY WAS CLAI MING EXEMPTION U/S 10(22) OF THE ACT TILL THE PROVISIONS WERE AMENDED E.W.F. 01.04.1999 WHEREBY THE SAID SECTION 10(22) WAS OMITTED AND A N EW PROVISIONS OF SECTION 10(23C) WAS INSERTED IN THE STATUTE. AFTER 01.04.1999 THE ASSESSEE HAS BEEN CLAIMING EXEMPTION U/S 10(23C)(II IAB) OF THE ACT. FOR THE YEARS UNDER CONSIDERATION, THE ASSESSEE FILED I TS RETURN OF INCOME DECLARING TOTAL INCOME AT NIL AFTER CLAIMING THE BE NEFIT OF SECTION 10(23C)(IIIAB) OF THE ACT. THE AO NOTED THAT THE AS SESSEE SOCIETY HAS SHOWN SURPLUS OF RS. 40,00,21,086/- AND CLAIMED AS EXEMPT INCOME U/S 10(23C)(IIIAB) OF THE ACT. THE AO HAS QUESTIONED TH E ALLOWABILITY OF THE EXEMPTION ON THE GROUND THAT THE INSTITUTION EXISTI NG SOLELY FOR EDUCATIONAL PURPOSE IS ELIGIBLE FOR EXEMPTION U/S 1 0(23C)(IIIAB) OF THE ITA NO. 252 &253/JP/2019 RAJASTHAN STATE TEXT BOOK BOARD VS. ACIT(E) 4 ACT AND NOT FOR THE PURPOSE OF PROFIT AND FURTHER T HE INSTITUTION WHICH IS WHOLLY AND SUBSTANTIALLY FINANCED BY THE GOVERNMENT IS ELIGIBLE FOR THE BENEFIT UNDER THE SAID PROVISIONS. ACCORDINGLY, THE AO ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE AND IN REPLY THE ASSES SEE FURNISHED THE NECESSARY DETAILS AND CLAIMED THAT THE ASSESSEE IS EXISTING SOLELY FOR THE EDUCATIONAL PURPOSE AS ITS OBJECT ARE MAINLY TO PRE PARE EDIT, PUBLISH, PRINT, STOCK, SELL DISTRIBUTE, OR OTHERWISE DEAL IN TEXT BOOKS FREE OF COST TO THE GOVERNMENT SCHOOLS AS WELL AS ON DISCOUNT RA TE TO THE PRIVATE DISTRIBUTOR FOR PRIVATE SCHOOLS. THE ENTIRE RECEIPT IS AGAINST THE SUPPLY OF SCHOOL BOOKS AS PER THE NCERT CURRICULUM. FURTHER, THE GOVERNMENT OF RAJASTHAN HAS FINANCED 100% CAPITAL OF THE ASSESSEE SOCIETY IN THE YEAR 1974 AND THEREAFTER THE ASSESSEE STARTED SELL GENER ATED SURPLUS WITHOUT COLLECTING THE MONEY FROM ANY PERSON EXCEPT THE AMO UNT RECEIVED FROM THE GOVERNMENT ON ACCOUNT OF TEXTBOOKS SUPPLIED FRE E OF COST TO THE STUDENTS OF GOVERNMENT SCHOOLS AND PRIVATE SCHOOLS ON DISCOUNT RATE. THE ASSESSEE HAS NOT RECEIVED ANY DEPOSIT, AID OR G RANT FROM ANY OTHER PERSON OR INSTITUTION. THUS, THE ASSESSEE CLAIMED I T CANNOT BE SAID THAT IT IS NOT WHOLLY AND SUBSTANTIALLY FINANCED BY THE GOVERNMENT. THE AO WAS NOT IMPRESSED WITH THE REPLY OF THE ASSESSEE AN D HELD THAT THE ASSESSEE HAS NOT FULFILLED THIRD CONTENTION LAID DO WN U/S 10(23C)(IIIAB) ITA NO. 252 &253/JP/2019 RAJASTHAN STATE TEXT BOOK BOARD VS. ACIT(E) 5 OF THE ACT I.E. WHOLLY OR SUBSTANTIALLY FINANCED BY THE GOVERNMENT. ACCORDINGLY, THE AO DENIED THE EXEMPTION U/S 10(23C )(IIIAB) OF THE ACT FOR BOTH THE ASSESSMENT YEARS. ON APPEAL, THOUGH TH E ASSESSEE HAS ADVANCED ELABORATED SUBMISSIONS AND CONTENTIONS HOW EVER, THE LD. CIT(A) HAS HELD THAT THE EXEMPTION U/S 10(23C)(IIIA B) OF THE ACT IS ELIGIBLE ONLY TO THE UNIVERSITY OR OTHER EDUCATIONA L INSTITUTION EXISTING SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR THE PUR POSE OF PROFIT AND WHICH IS WHOLLY OR SUBSTANTIALLY FINANCED BY THE GO VERNMENT. BUT THE ASSESSEE IS EARNING HUGE PROFIT FROM THE ACTIVITY O F PREPARING, PRINTING AND DISTRIBUTING THE TEXTBOOKS AND HAS ACCUMULATED THE RESERVE AND PROFIT TO THE TUNE OF RS. 206.51 CRORE. THE ASSESSE E RECEIVED ONLY CONTRIBUTION OF RS. 78,292/- FROM THE GOVERNMENT AN D ALL OTHER ACCUMULATION HAS BEEN MADE BY THE ASSESSEE FROM THE INCOME GENERATED ON THE ACTIVITY. THUS, THE LD. CIT(A) HAS HELD THAT THE ASSESSEE IS NOT EXISTED SOLELY FOR THE PURPOSE OF E DUCATION BUT IT IS FOR EARNING THE PROFIT. FURTHER, THE ASSESSEE HAS NOT R ECEIVED ANY AID OR FUND FROM THE GOVERNMENT THEREFORE, IT WAS HELD THA T THE ASSESSEE IS NOT SUBSTANTIALLY FINANCED BY THE GOVERNMENT. ACCOR DINGLY, THE LD. CIT(A) HAS CONFIRMED THE DENIAL OF EXEMPTION U/S 10 (23C)(IIIAB) OF THE ACT. ITA NO. 252 &253/JP/2019 RAJASTHAN STATE TEXT BOOK BOARD VS. ACIT(E) 6 3. BEFORE US, THE LD. AR OF THE ASSESSEE HAS SUBMIT TED THAT THE ASSESSEE INSTITUTION PERFORMED ITS FUNCTION AS A GO VERNMENT DEPARTMENT, STATE OF RAJASTHAN AND CONTINUED TO DO SO TILL THE STATE GOVERNMENT IN THE YEAR 1973, DECIDED TO FRAME AND C ONSTITUTE A SOCIETY UNDER THE RAJASTHAN SOCIETY REGISTRATION ACT, 1958 TO RUN THE SAME. INSPITE OF CHANGE OF ITS FORMAT THE ASSESSEE SOCIET Y CONTINUED EXISTENCE AND FUNCTIONING TO BE RUN AND OPERATED BY THE STAT E GOVERNMENT AS AN INSTRUMENTALITY OF THE GOVERNMENT OF RAJASTHAN. THU S, THE ASSESSEE SOCIETY IS REGARDED AS STATE WITHIN THE MEANING OF ARTICLE 12. THE LD. AR HAS REFERRED TO THE COMPOSITION OF THE BOARD OF THE ASSESSEE SOCIETY AND SUBMITTED THAT IT HAS BEEN MANAGED AND CONTROLL ED BY THE GOVERNMENT OF RAJASTHAN. HE HAS ALSO REFERRED TO TH E MEMORANDUM OF ASSOCIATION OF THE ASSESSEE AND SUBMITTED THAT NO A MENDMENT CAN BE MADE WITHOUT THE CONSENT OF THE GOVERNMENT, AS EVID ENT FROM CLAUSE (VIII) AND (IX). THE PRESIDENT OF THE ASSESSEE SOCI ETY IS THE EDUCATION MINISTER OF RAJASTHAN IN THE CAPACITY OF EX-OFFICIO . SIMILARLY THE SECRETARY EDUCATION, GOVERNMENT OF RAJASTHAN IS THE EX-OFFICIO VICE- PRESIDENT AND OTHER GOVERNMENT AUTHORITIES/BUREAUCR ATS ARE EX-OFFICIO MEMBERS OF THE BOARD OF THE SOCIETY. THEREFORE, THE ENTIRE BOARD IS CONSTITUTED BY THE OFFICIALS OF THE GOVERNMENT OF R AJASTHAN BEING EX- ITA NO. 252 &253/JP/2019 RAJASTHAN STATE TEXT BOOK BOARD VS. ACIT(E) 7 OFFICIO OR MEMBERS WHICH ARE NOMINATED BY THE GOVER NMENT. THEREFORE, THE ASSESSEE SOCIETY IS FULLY UNDER THE CONTROL AND MANAGEMENT OF GOVERNMENT TO PURSUE ITS OBJECTS. THE LD. AR HAS RE FERRED TO THE MEMORANDUM OF ASSOCIATION AND OBJECTS AS PER CLAUSE III OF THE MEMORANDUM OF ASSOCIATION AND SUBMITTED THAT ALL TH E OBJECTS OF THE SOCIETY ARE TO CARRY OUT WORK AND ACTIVITIES RELATI NG TO THE PUBLICATION OF NATIONALIZED BOOKS, TEACHERS HANDS BOOKS AND CURRIC ULUM MEANT FOR LOWER AND HIGHER EDUCATION. THE MAIN OBJECT OF THE ASSESSEE SOCIETY IS TO PREPARE EDIT, PUBLISH, PRINT, STOCK, SELL, DISTR IBUTE, OR OTHERWISE DEAL IN TEXTBOOKS, SUPPLEMENTARY BOOKS, REFERENCE BOOKS, EX TRA READING MATERIAL FOR THE STUDENTS AND TEACHING AIDS THE USE FUL FOR FURTHERANCE TEACHING AND LEARNING IN INSTITUTIONS MEANT FOR LOW ER AND HIGHER PRIMARY EDUCATION. THUS, THE ASSESSEE SOCIETY WHICH HAS TAK EN OVER THE WORK OF THE NATIONALIZED BOARD OF TEXTBOOKS IS SOLELY EXIST ED FOR EDUCATION AND UNDER THE DIRECTION AND CONTROL OF GOVERNMENT OF RA JASTHAN. IN THE STATE OF RAJASTHAN EDUCATION UPTO SENIOR SECONDARY IS REGULATED AND ADMINISTERED BY THE EDUCATION DEPARTMENT, GOVERNMEN T OF RAJASTHAN. THE ASSESSEE BEING AN EDUCATIONAL INSTITUTION IS ON E OF THE ELEMENT ASSISTING EDUCATION DEPARTMENT IN ACHIEVING ITS OBJ ECT OR IMPLEMENTING ITS ROLE IN EDUCATION IN GENERAL OF THE STATE. THE LD. AR HAS FURTHER ITA NO. 252 &253/JP/2019 RAJASTHAN STATE TEXT BOOK BOARD VS. ACIT(E) 8 SUBMITTED THAT PRIOR TO THE OMISSION OF SECTION 10( 22) OF THE ACT W.E. F. 01.04.1999 THE ASSESSEE HAD BEEN CLAIMING THE EXEMP TION U/S 10(22) OF THE ACT WHICH WAS ALLOWED SINCE INCEPTION OF THE ASSESSEE SOCIETY TILL THE PROVISION WAS OMITTED. THEREAFTER, THE ASSESSEE HAS BEEN CLAIMING THE EXEMPTION U/S 10(23C)(IIIAB) OF THE ACT AND THE DEPARTMENT HAS BEEN CONSISTENTLY ALLOWING THE SAME EXCEPT FOR THE YEARS UNDER CONSIDERATION. THUS, THE STATUS OF THE ASSESSEE SOC IETY BEING EDUCATIONAL INSTITUTION EXISTING SOLELY FOR EDUCATI ONAL PURPOSES AND NOT FOR PURPOSES OF PROFIT WAS ACCEPTED BY THE DEPARTME NT FOR LAST MORE THAN 45 YEARS. AS PER ARTICLE 21A OF THE CONSTITUTI ON OF INDIA THE STATE HAS PROVIDED FREE AND COMPULSORY EDUCATION TO ALL CHILDREN IN THE AGE GROUP OF 6 TO 14 YEARS AS A FUNDAMENTAL RIGHT IN S UCH A MANNER AS THE STATE MAY BY LAW, DETERMINE. ACCORDINGLY, THE BOOK S PUBLISHED BY THE ASSESSEE IS PROVIDED TO GOVERNMENT SCHOOL ON THE BA SIS OF REQUISITION RAISED FROM TIME TO TIME BY THE DIRECTORATE OF PRIM ARY EDUCATION AND DIRECTORATE OF SECONDARY EDUCATION UNDER FREE OF CO ST DISTRIBUTION OF BOOKS TO GOVERNMENT SCHOOLS STUDENTS SCHEME OF STAT E GOVERNMENT. THE ASSESSEE IS ACTING TO IMPLEMENT THE POLICY OF S TATEMENT GOVERNMENT THROUGH EDUCATION DEPARTMENT, GOVERNMENT OF RAJASTHAN. THUS, THE ACTIVITIES CARRIED OUT BY THE ASSESSEE AR E IN FURTHERANCE OF THE ITA NO. 252 &253/JP/2019 RAJASTHAN STATE TEXT BOOK BOARD VS. ACIT(E) 9 OBJECTS OF THE ASSESSEE-SOCIETY IN GENERAL AND PART ICULARLY CLAUSE III(28)(B) OF THE MEMORANDUM OF ASSOCIATION WHEREIN IT IS SPECIFICALLY STATED THAT IMPLEMENTING ANY SCHEME APPROVED BY THE GOVERNMENT OF RAJASTHAN FOR FREE SUPPLY OF BOOKS & RECOVER IN WH OLE OR IN PART THE COST OF THE BOOKS FROM THE AUTHORITY CONCERNED. THE LD. AR HAS FURTHER SUBMITTED THAT THE ISSUE WHETHER THE ASSESSEE IS AN EDUCATIONAL INSTITUTION EXISTED SOLELY FOR EDUCATION AND NOT FO R THE PURPOSE OF PROFIT WITHIN THE MEANING OF SECTION 10(22) WAS CONSIDERED AND DECIDED BY THIS TRIBUNAL IN THE APPEALS FOR THE ASSESSMENT YEA RS 1986-87, 1987-88 AND 1988-89 IN ITA NO. 1716 TO 1718/JP/1991. THE SA ID DECISION WAS CHALLENGED BY THE REVENUE BEFORE THE HONBLE HIGH C OURT AND WAS UPHELD VIDE DECISION REPORTED IN 244 ITR 667. THUS , THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT WHEN THERE IS NO CHANGE IN THE FACTS AND ACTIVITY OF THE ASSESSEE FOR THE YEAR UNDER CONSIDE RATION THEN, THE ASSESSEE-SOCIETY CANNOT BE TREATED AS NOT AN EDUCAT IONAL INSTITUTION EXISTING SOLELY FOR EDUCATION. THE FINDING OF THE L D. CIT(A) IS CONTRARY TO THE DECISION OF THIS TRIBUNAL AS WELL AS OF HONBLE HIGH COURT IN ASSESSEES OWN CASE. AN IDENTICAL ISSUE WAS AGAIN C ONSIDERED BY THE HONBLE SUPREME COURT IN CASE OF ASSAM STATE TEXT BOOKS PRODUCTION & PUBLICATION CORPORATION LTD. VS. CIT 3 19 ITR 317 ITA NO. 252 &253/JP/2019 RAJASTHAN STATE TEXT BOOK BOARD VS. ACIT(E) 10 AND THE HONBLE SUPREME COURT HAS UPHELD THE DECISI ON OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF THE ASSESS EE. THUS, THE LD. AR HAS SUBMITTED THAT SO FAR AS, THE ASSESSEE BEING AN EDUCATIONAL INSTITUTION EXISTED SOLELY FOR EDUCATION AND NOT FO R THE PROFIT HAS BEEN SETTLED BY THE HONBLE HIGH COURT AS WELL AS HONBL E SUPREME COURT. 4. AS REGARDS THE CONDITION OF WHOLLY OR SUBSTANTIA LLY FINANCED BY THE GOVERNMENT AS PER THE PROVISIONS OF SECTION 10(23C) (IIIAB) OF THE ACT THE LD. AR HAS SUBMITTED THAT INITIALLY THE ASSESSE E USED TO SUPPLY TEXTBOOKS ENTIRELY TO THE GOVERNMENT SCHOOLS UNDER THE SCHEME OF FREE OF COST HOWEVER, OVER THE TIME THE PRIVATE EDUCATIO NAL INSTITUTIONS HAVE TAKEN THE SIGNIFICANT NUMBER OF STUDENTS THE ASSESS EE HAS STARTED SUPPLYING THE TEXTBOOKS TO THE PRIVATE DISTRIBUTORS AT THE SAME DISCOUNTED RATE AT WHICH THE GOVERNMENT IS MAKING T HE PAYMENT TO THE ASSESSEE-SOCIETY. EVEN OTHERWISE WHEN MORE THAN 60% OF THE TOTAL SUPPLY IS MADE TO THE GOVERNMENT SCHOOL STUDENTS UN DER THE SCHEME OF FREE OF COST SUPPLY OF THE TEXTBOOKS BY THE GOVERNM ENT THEN THE FINANCE OF THE ASSESSEE-SOCIETY IS SUBSTANTIALLY MADE BY TH E STATE GOVERNMENT. THE LD. AR HAS SUBMITTED THAT INITIALLY THE ENTIRE FUND WAS CONTRIBUTED BY THE STATE GOVERNMENT AND THEREAFTER THE ASSESSEE HAS BEEN GENERATING THE REVENUE AND SURPLUS FROM THE ACTIVIT Y OF EDUCATION AND ITA NO. 252 &253/JP/2019 RAJASTHAN STATE TEXT BOOK BOARD VS. ACIT(E) 11 THE SAID REVENUE RECEIVED SUBSTANTIALLY FROM THE GO VERNMENT WAS TRANSFERRED TO THE SURPLUS RESERVE WHICH PRESENTS T HE FINANCE FROM THE GOVERNMENT. HENCE, THE LD. AR HAS SUBMITTED THAT TH E FUND RECEIVED BY THE ASSESSEE SOCIETY AGAINST FREE SUPPLY OF TEXT BO OKS SHALL BE CONSIDERED AS FINANCED BY THE GOVERNMENT. IN SUPPOR T OF HIS CONTENTION, HE HAS RELIED UPON THE DECISION OF INDO RE BENCHES OF THE TRIBUNAL DATED 25.04.2012 IN CASE OF M.P. RAJYA PATHYA PUSTAK NIGAM VS. DCIT IN ITA NO. 375 TO 394/IND/2011 AND SUBMITTED THAT AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY THE TRIBUNAL AND DECIDED IN FAVOUR OF THE ASSESSEE. THE LD. AR HAS ALSO RELI ED UPON THE DECISION OF HONBLE PATNA HIGH COURT IN CASE OF BIHAR STATE TEX BOOK PUBLISHING CORPORATION 241 CTR 403 . THUS, THE LD. AR HAS SUBMITTED THAT THERE ARE SERIES OF DECISIONS ON THI S ISSUE IN RESPECT OF THE TEXTBOOKS SOCIETIES OF VARIOUS STATES CARRYING OUT AN IDENTICAL ACTIVITY. HENCE, THE CLAIM OF EXEMPTION U/S 10(23C) (IIIAB) OF THE ACT BE ALLOWED AND THE ADDITION MADE BY THE AO MAY BE DELE TED. 5. ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THAT THE PRIMARY REQUIREMENT FOR AVAILING THE EXEMPTION U/S 10(23C)( IIIAB) OF THE ACT IS THAT AN INSTITUTION SHOULD BE AN EDUCATIONAL INSTIT UTION EXISTED SOLELY FOR EDUCATION AND WHOLLY OR SUBSTANTIALLY FINANCED BY T HE GOVERNMENT. THE ITA NO. 252 &253/JP/2019 RAJASTHAN STATE TEXT BOOK BOARD VS. ACIT(E) 12 ASSESSEE DOES NOT FULFILL ANY OF THE CONDITIONS AS PRESCRIBED U/S 10(23C)(IIIAB) OF THE ACT AS NEITHER THE ASSESSEE I S AN EDUCATIONAL INSTITUTION EXISTED SOLELY FOR EDUCATIONAL NOR IT I S WHOLLY OR SUBSTANTIALLY FINANCED BY THE GOVERNMENT. THE ACTIVITY OF PUBLISH ING THE TEXTBOOKS AND SELLING THE SAME AT A MARGIN WHICH IS SUBSTANTI ALLY HIGH IN THE COMPARISON TO THE NORMAL BUSINESS ACTIVITY CLEARLY ESTABLISHED THE FACT THAT THE ASSESSEE DOES NOT EXIST SOLELY FOR EDUCATI ON AND NOT FOR PROFIT MAKING. THE LD. CIT(A) HAS ANALYZED THE FACTS AND F OUND THAT THE ASSESSEE HAS BEEN CONSISTENTLY EARNING THE PROFIT F ROM THE ACTIVITY OF PUBLISHING AND SELLING OF TEXTBOOK. SECONDLY THE AS SESSEE HAS ACCUMULATED A HUGE FUND OF RS. 206.51 CRORE WHEREAS THE GOVERNMENT HAS INITIALLY PROVIDED THE FUNDS OF RS. 78,292/-. T HE AMOUNT RECEIVED BY THE ASSESSEE AGAINST THE SALE OF BOOKS CANNOT BE CO NSIDERED AS FINANCED BY THE GOVERNMENT BUT IT IS THE REVENUE GE NERATED BY THE ASSESSEE FROM THE ACTIVITY. MOREOVER, THE ASSESSEE IS SELLING THE BOOKS TO THE PRIVATE PARTIES AND THEREFORE, IS NOT ELIGIB LE FOR EXEMPTION U/S 10(23C)(IIIAB) OF THE ACT BEING THE ACTIVITY OF BUS INESS. HE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE THAT THE AS SESSEE-SOCIETY WAS ITA NO. 252 &253/JP/2019 RAJASTHAN STATE TEXT BOOK BOARD VS. ACIT(E) 13 SET UP BY THE GOVERNMENT OF RAJASTHAN AS AN AUTONOM OUS BODY AND REGISTERED UNDER THE RAJASTHAN SOCIETY REGISTRATION ACT, 1958 ON 29.12.1973. THE ASSESSEE-SOCIETY CAME INTO EXISTENC E AS A RESULT OF ORDER OF GOVERNMENT OF RAJASTHAN WHEREBY THEN THE N ATIONALIZATION BOARD OF TEXTBOOKS RAJASTHAN GOVERNMENT DEPARTMENT WAS CONVERTED INTO AUTONOMOUS BODY REGISTERED UNDER RAJASTHAN SOC IETIES ACT ON 31.12.1973. AS PER THE SAID ORDER GOVERNMENT OF RAJ ASTHAN, DEPARTMENT OF EDUCATION A GOVERNING COUNCIL OF THE BOARD WAS DIRECTED TO BE CONSTITUTED AS UNDER:- (A) EX - OFFICIO MEMBER 1. EDUCATION MINISTER, RAJASTHAN PRESIDENT 2. EDUCATION COMMISSIONER GOVERNMENT OF RAJASTHAN VICE - PRESIDENT 3. FINANCE COMMISSIONER, GOVERNMENT OF R AJASTHAN MEMBER 4. DIRECTOR ( P & R) EDUCATION, RAJASTHAN MEMBER 5. DIRECTOR, PRINTING & STATIONER, RAJASTHAN MEMBER 6. CHAIRMAN, BOARD OF SECONDARY EDUCATION, RAJASTHAN, AJMER MEMBER 7. DIRECTOR, STATE INSTITUT E OF EDUCATION, UDAIPUR MEMBER 8. DIREC TOR, INSTITUTE OF SCIENCE EDUCATION, UDAIPUR MEMBER 9. SECRETARY, RAJASTHAN STATE TEXTBOOK BOARD, JAIPUR. SECRETARY (B) GOVERNMENT NOMINEE 10. AN EMINENT EDUCATIONIST MEMBER ITA NO. 252 &253/JP/2019 RAJASTHAN STATE TEXT BOOK BOARD VS. ACIT(E) 14 11. AN EXPERT IN BOOK PRODUCTION & PUBLICATION MEMBER 12. AN EXPERT IN SCHOO L EDUCATION MEMBER THEREFORE, IT IS CLEAR THAT THE GOVERNING COUNCIL O F THE ASSESSEE-SOCIETY IS COMPRISING OF ALL GOVERNMENT OFFICIALS AND HEADE D BY EDUCATION MINISTER AS EX-OFFICIO, PRESIDENT AND EDUCATION SEC RETARY AS VICE- PRESIDENT WHICH MEANS THAT THE ASSESSEE-SOCIETY HAS BEEN MANAGED AND CONTROLLED BY THE GOVERNING COUNCIL COMPRISING OF ALL THE GOVERNMENT OFFICIALS AS WELL AS NOMINATION MADE BY THE GOVERNMENT. THE OBJECTS OF THE ASSESSEE-SOCIETY AS ENUMERATED I N CLAUSE-III OF THE MEMORANDUM OF ASSOCIATION, ARE REPRODUCED AS UNDER: - '(1) TO ACQUIRE AND TAKE OVER THE WORK AND ACTIVITI ES OF THE NATIONALIZATION BOARD OF TEXTBOOK, A GOVERNMENT OF RAJASTHAN DEPARTMENT, RELATING TO PUBLICATION OF NATIONALISED BOOKS, TEACHER'S HANDBOOKS, AND CURRICULUM MEANT FOR LOWER AND HIGHE R PRIMARY EDUCATION, TOGETHER WITH ALL ITS ASSETS, RIGHTS, PR IVILEGES AND LIABILITIES AS THE GOVERNMENT OF RAJASTHAN MAY TRAN SFER TO THE BOARD AND TO CARRY ON SUCH BUSINESS AND ACTIVITIES AND TO EXERCISE SUCH POWERS, PERFORM SUCH DUTIES AND CARRY OUT SUCH DIRECTIONS AS MAY FROM TIME TO TIME BE GIVEN BY THE GOVERNMENT OF RAJASTHAN, AND TO PROMOTE THE ADVANCEMENT OF EDUCATION IN GENE RAL AND LOWER AND HIGHER PRIMARY EDUCATION IN PARTICULAR; (2) TO PREPARE, EDIT, PUBLISH, PRINT, STOCK, SELL, DIST RIBUTE, OR OTHERWISE DEAL IN TEXTBOOKS, SUPPLEMENTARY BOOKS, R EFERENCE BOOKS, EXTRA READING MATERIAL, WORKBOOKS AND EXERCI SE BOOKS FOR ITA NO. 252 &253/JP/2019 RAJASTHAN STATE TEXT BOOK BOARD VS. ACIT(E) 15 PUPILS AND TEACHING AIDS, TEACHER'S HAND BOOKS, AND CURRICULUM (HEREINAFTER REFERRED TO AS EDUCATIONAL LITERATURE) USEFUL FOR FURTHERANCE OF TEACHING AND LEARNING IN INSTITUTION S MEANT FOR LOWER AND HIGHER PRIMARY EDUCATION; (3) TO PREPARE, EDIT, PRINT, PUBLISH, STOCK, SELL A ND DISTRIBUTE OR ENTER INTO ANY ARRANGEMENT FOR PREPARING, EDITING, PRINTING, PUBLISHING, STOCKING, DISTRIBUTION AND SALE OF TEXT BOOKS APPROVED OR ASSIGNED BY THE GOVT. OF RAJASTHAN OR OTHER APPROPR IATE AUTHORITY APPOINTED BY THE BOARD AND ANY OTHER EDUCATIONAL LI TERATURE WHICH THE BOARD MAY DECIDE TO PUBLISH, WITH A VIEW TO MAK ING THE SAME AVAILABLE AT A PRICE, FIXED AT NO PROFIT NO LOSS BA SIS. (4) TO UNDERTAKE AND PROMOTE RESEARCH FOR THE PREPA RATION, EVALUATION AND PRODUCTION OF SCHOOL TEXTBOOKS AND O THER EDUCATIONAL LITERATURE INTENDED FOR LOWER AND HIGHE R PRIMARY STAGES OF EDUCATION; (A) TO IMPART OR TO ASSIST IN IMPARTING EDUCATION A ND PROVIDE NECESSARY AID AND INCENTIVE IN THE SCHOOL AND OTHER EDUCATIONAL INSTITUTIONS, ESTABLISHED AND MAINTAINED BY R.S.TB. OR PANCHAYATI RAJ INSTITUTIONS OR THE GOVERNMENT OF RAJASTHAN AS THE CASE MAY BE, IN ORDER TO FACILITATE ALL ROUND DEVELOPMENT OF THE CHILDREN IN THE STATE. (5) TO ASSESS UTILITY OF EDUCATIONAL LITERATURE PRO DUCED BY THE BOARD OR ANY OTHER AGENCY; (6) TO PROMOTE RESEARCH FOR IMPROVEMENT OF CURRICUL UM AND RECOMMEND THE FINDINGS TO THE GOVERNMENT OF RAJASTH AN OR OTHER APPROPRIATE AUTHORITIES FOR MODIFICATION OF CURRICU LA FOR LOWER & HIGHER PRIMARY STAGES OF EDUCATION; (7) TO ESTABLISH AND MAINTAIN LIBRARIES TO FACILITA TE RESEARCH IN THE FIELD OF CURRICULA, SYLLABI AND TEXTBOOKS AND THE P REPARATION AND PRODUCTION OF TEXT BOOKS AND OTHER EDUCATIONAL LITE RATURE; ITA NO. 252 &253/JP/2019 RAJASTHAN STATE TEXT BOOK BOARD VS. ACIT(E) 16 (8) TO CARRY ON BUSINESS AS PUBLISHERS, PRINTERS, S ELLERS AND DISTRIBUTORS OF TEXT BOOK AND OTHER EDUCATIONAL LIT ERATURE SUITED TO THE REQUIREMENTS OF THE CURRICULUM APPROVED BY THE GOVERNMENT OF RAJASTHAN, WITHOUT ANY COMMERCIAL, PROFITEERING OR TRADING MOTIVE; (9) TO ENTER INTO AGREEMENT WITH WRITERS, EDITORS, ARTI STS, PHOTOGRAPHERS, PUBLISHERS AND OTHER RIGHTS IN RESPE CT OF THEIR BOOKS, PUBLICATIONS, WRITINGS, ARTICLES, DRAMAS, ES SAYS, POEMS, ARTWORK, OR PHOTOGRAPHS AND TO OBTAIN PURCHASES OR OTHERWISE ACQUIRE COPYRIGHT AND RIGHTS OF PUBLICATION, REPROD UCTION AND THE LIKE; (10) TO USE ENSIGN FOR THE PUBLICATIONS OF THE BOAR D AND FOR THE PURPOSE TO APPLY FOR, TAKEOUT, PURCHASE OR OTHERWIS E ACQUIRE ANY ENSIGN, COPYRIGHTS, DESIGNS OR OTHER PROCESS WHICH MAY SEEM USEFUL FOR THE BOARD; (11) TO REGULATE AND FIX PRICES OF THE PUBLICATIONS OF THE BOARD CONSISTENT WITH ITS OBJECTS; (12) TO RECEIVE DONATIONS, GRANTS, LOANS, ADVANCES OR OTHER MONEYS OR DEPOSITS OR OTHERWISE FROM THE CENTRAL GOVERNMEN T OR ANY STATE GOVERNMENT OR BANKS OR OTHER FINANCIAL INSTITUTIONS WITH OR WITHOUT ALLOWANCE OF INTEREST THEREON; ( THE BOARD SHALL NO T ACCEPT LOANS, GRANTS, OR DONATIONS TO WHICH CONDITIONS AND OBLIGA TIONS AGAINST THE OBJECTIVES OF THE BOARD ARE ATTACHED); (13) TO OWN, ESTABLISH, PURCHASE, EXCHANGE, ACQUIRE BY GIFT, TAKE ON LEASE, HIRE OR OTHERWISE HOWSOEVER ANY LANDS, BU ILDINGS, EASEMENT RIGHTS IN COMMON AND ANY PROPERLY MOVABLE OR IMMOVABLE INCLUDING A PRINTING PRESS OR ANY ESTATE OR INTEREST FOR THE FURTHERANCE OF ALL OR ANY OF THE OBJECTS OF THE BOARD; ITA NO. 252 &253/JP/2019 RAJASTHAN STATE TEXT BOOK BOARD VS. ACIT(E) 17 (14) TO CONSTRUCT, MAINTAIN, REPAIR, EXTEND , IMPRO VE OR DEVELOP ANY BUILDINGS, WAREHOUSES OR WORKS NECESSARY OR CON VENIENT FOR THE PURPOSES OF THE BOARD; (15) TO BORROW AND RAISE MONEY ON SECURITY IN THE F ORM OF MORTGAGE, CHARGE, HYPOTHECATION OR PLEDGE OVER ALL OR ANY OF THE IMMOVABLE OR MOVABLE PROPERTIES BELONGING TO THE BO ARD OR IN ANY OTHER MANNER WHATSOEVER AND TO SELL, LEASE, EXCHANG E, SUBLET, TRANSFER, OR DISPOSE OF ALL OR ANY PROPERTY WHOLLY OR IN PART, MOVABLE OR IMMOVABLE OF THE BOARD, ( THE BOARD WILL NOT RAI SE MONEY AS AFORESAID, IN LIEU OF THE PROPERTY, LOANS OR ADVANC ES RECEIVED FROM STATE OR CENTRAL GOVERNMENT EXCEPT WITH THE SPECIFI C CONSENT OF THE RESPECTIVE GOVERNMENT) (16) TO CREATE ANY DEPRECIATION FUND, RESERVE FUND, SINKING FUND OR ANY OTHER SPECIAL FUNDS, WHETHER FOR DEPRECIATION O R REPAIRS OR REPLACEMENT, IMPROVEMENT, EXTENSION OR MAINTENANCE OF THE PROPERTY OF THE BOARD OR FOR ANY OTHER PURPOSE COND UCIVE TO THE INTEREST OF THE BOARD OUT OF ITS RECEIPTS, HOWSOEVE R FROM DONATIONS, LOANS, ADVANCE, SALE OF BOOKS OR OTHERWISE; (17) TO INVEST IN SUCH SECURITIES AS THE BOARD MAY DETERMINE FROM TIME TO TIME AND TO DEAL WITH THE FUNDS OF THE BOAR D; (18) TO DRAW, MAKE, ACCEPT, ENDORSE AND NEGOTIATE C HEQUES, HUNDIES, PROMISSORY NOTES OR OTHER NEGOTIABLE INSTR UMENTS; (19) TO APPOINT, SUSPEND, OR DISMISS ANY AGENT OR P ERSON ENGAGED IN THE DISTRIBUTION OF THE PUBLICATIONS OF THE BOAR D AND TO ALLOW TRADE DISCOUNT TO ANY SUCH AGENT OR PERSON AT SUCH RATE AS DEEMED FIT BY THE BOARD; (20) TO APPOINT, COMMISSION OR CONTRACT ANY AGENCY OR PE RSON FOR WRITING, ILLUSTRATING , PRINTING, BINDING, BLOCK MA KING OR OTHER ALLIED JOBS OF BOOKS PRODUCTION, SUPPLY OF PAPER AND TRANS PORTATION ON ITA NO. 252 &253/JP/2019 RAJASTHAN STATE TEXT BOOK BOARD VS. ACIT(E) 18 SUCH RATES AS APPROVED OR OFFERED BY THE BOARD AND TO PENALIZE, DEBAR, DISMISS THE AGENCY OR PERSON SO ENGAGED IN T HE MANNER DEEMED FIT BY THE BOARD; (21)FOR THE PURPOSE AFORESAID, TO SIGN, EXECUTE AND DELIVER SUCH ASSURANCE, AGREEMENTS AND DEEDS AS MAY BE NECESSARY ; (22) TO PAY OUT OF THE FUNDS BELONGING TO THE BOARD OR OUT OF ANY PARTICULAR PART OF SUCH FUNDS, ALL EXPENSES OF OR I NCIDENTAL TO THE FORMATION OF THE BOARD AND MANAGEMENT AND ADMINISTR ATION OF THE BOARD INCLUDING ALL RENTS, RATES, TAXES, OUTGOING, AND THE SALARIES, ALLOWANCES, ADVANCES, CONTRIBUTIONS, GRATUITIES, HO NORARIA AND BONUSES OF THE EMPLOYEES; (23) TO REGULATE THE RECRUITMENT AND CONDITIONS OF SERVICE OF THE OFFICERS AND SERVANTS OF THE BOARD SUBJECT TO THE R ULES OF THE BOARD; (24) TO ESTABLISH AND MAINTAIN OR PROCURE THE ESTAB LISHMENT AND MAINTENANCE OF ANY CONTRIBUTORY OR NON-CONTRIBUTORY PROVIDENT FUND AND/OR PENSION ON SUPERANNUATION, GRATUITIES, ALLOW ANCES OR EMOLUMENTS TO ANY PERSON OR PERSONS WHO ARE OR WERE AT ANY TIME IN THE EMPLOYMENT OR SERVICES OF THE BOARD OR WHO A RE OR WERE AT ANY TIME OFFICERS OF THE BOARD AND THE WIDOWS AND F AMILIES OF ANY SUCH PERSONS AND ALSO ESTABLISH, SUBSIDISE AND SUBS CRIBE TO ANY INSTITUTIONS, ASSOCIATIONS, CLUBS OR FUNDS, CALCULA TED BY THE BOARD TO BE FOR THE BENEFIT OF OR TO ADVANCE THE INTEREST OF THE WELL- BEING OF THE EMPLOYEES OF THE BOARD OR TOWARDS INSURANCE OF ANY SUCH PERSONS AS AFORESAID AND DEAL WITH ANY SUCH OTHER A SSOCIATION AS AFORESAID. TO PAY THE LEAVE SALARY AND PENSION CONT RIBUTION OF GOVERNMENT SERVANTS DRAFTED TO THE BOARD. (25) TO PROVIDE FOR THE WELFARE OF EMPLOYEES OR EX- EMPLOYEES OF THE BOARD AND THEIR WIVES AND FAMILIES BY BUILDING OR CONTRIBUTING TO THE HOUSES OR DWELLINGS OR BY GRANT-IN AID SUCH AS FOR MARRIAGE AND MEDICAL EXPENSES AND RELIGIOUS CELEBRATIONS, BY ALLOWING ITA NO. 252 &253/JP/2019 RAJASTHAN STATE TEXT BOOK BOARD VS. ACIT(E) 19 BONUS OR LOANS AND BY PROVIDING OR CONTRIBUTING TOW ARDS CLUBS, CO- OPERATIVES, MEDICAL AND OTHER ASSISTANCES AS THE BO ARD MAY DEEM FIT; (26) TO ADOPT SUCH MEANS FOR MAKING KNOW THE PUBLIC ATION AND ACTIVITIES OF THE BOARD AS MAY SEEM EXPEDIENT, AND IN PARTICULAR BY ADVERTISEMENT, PUBLICITY AND MASS COMMUNICATION MED IA, AND TO MAINTAIN EFFECTIVE PUBLIC RELATIONS,; (27) TO RECEIVE, FOR THE FULFILLMENT OF ITS OBJECTS , ASSISTANCE OF CENTRAL OR STATE GOVERNMENT, AND ACADEMIC AND SUCH OTHER INSTITUTIONS WHOSE OBJECTIVES, WHOLLY OR IN PART, A RE SIMILAR TO THE OBJECTIVES OF THE BOARD, (28) TO UNDERTAKE ON AGENCY BASIS OR OTHERWISE THE FOLLOWING FUNCTIONS FOR OR ON BEHALF OF THE GOVERNMENT OF RAJ ASTHAN OR THE GOVERNMENT OF INDIA:- (A) STOCKING, UTILIZATION AND ACCOUNTING FOR THE GIFT P APER RECEIVED FROM THE GOVERNMENT OF INDIA OR THE GOVERNMENT OF R AJASTHAN; (B) IMPLEMENTING ANY SCHEME APPROVED BY THE GOVERNMENT OF RAJASTHAN FOR FREE SUPPLY BOOKS & RECOVER IN WHOLE OR IN PART THE COST OF THE BOOKS FROM THE AUTHORITY CONCERNED; (C) UTILIZING THE FUNDS GIVEN BY THE GOVERNMENT OF RAJA STHAN, CENTRAL GOVERNMENT OR OTHER INSTITUTIONS FOR SCHEME S OF PUBLICATION OF AMENITIES OF EDUCATIONAL INTEREST, TEACHING AIDS REFERENCE BOOKS, AND THE LIKE. (29) TO DO AND EXECUTE, IN GENERAL, SUCH LAWFUL ACT S, DEEDS, MATTERS AND THINGS AS ARE CONDUCIVE OR INCIDENTAL T O OR FOR THE ATTAINMENT OF THE AFORESAID OBJECTS OR ANY OF THEM. ITA NO. 252 &253/JP/2019 RAJASTHAN STATE TEXT BOOK BOARD VS. ACIT(E) 20 THUS, THE PRE-DOMINANT OBJECTS OF THE ASSESSEE-SOCI ETY ARE TO TAKE OVER THE FUNCTIONING OF ERSTWHILE NATIONALIZATION BOARD OF TEXTBOOKS GOVERNMENT OF RAJASTHAN DEPARTMENT WHICH INCLUDES M AINLY TO PREPARE, EDIT, PUBLISH, PRINT, STOCK, SELL, DISTRIBUTE THE T EXTBOOKS, REFERENCE BOOKS, OR READING MATERIAL ON THE CURRICULUM OF LOW ER AND HIGHER PRIMARY/SECONDARY EDUCATION IN THE STATE OF RAJASTH AN. INITIALLY THE ASSESSEE WAS DISTRIBUTING THE TEXTBOOKS IN THE GOVE RNMENT SCHOOLS FREE OF COST HOWEVER, DUE TO MORE PARTICIPATION OF PRIVA TE SCHOOL IN THE EDUCATION, THE ASSESSEE HAS STARTED SUPPLYING/DISTR IBUTION OF THE BOOKS IN THE PRIVATE SCHOOLS ALSO. AS REGARDS THE BOOKS D ISTRIBUTED FREE OF COST TO THE STUDENTS IN THE GOVERNMENT SCHOOLS, THE GOVE RNMENT OF RAJASTHAN IS COMPENSATING THE ASSESSEE THROUGH BUDG ET ALLOCATION UNDER EDUCATION DEPARTMENT. THE ASSESSEE HAS BEEN F UNCTIONING UNDER THE DIRECT CONTROL AND INSTRUCTIONS OF THE DIRECTOR ATE OF PRIMARY AND SECONDARY EDUCATION GOVERNMENT OF RAJASTHAN. THEREF ORE, IN ORDER TO IMPLEMENT THE SCHEME APPROVED BY THE GOVERNMENT FOR FREE SUPPLYING OF BOOKS THE ASSESSEE HAS BEEN DISTRIBUTED THE BOOK S FREE OF COST TO THE STUDENTS IN THE GOVERNMENT SCHOOLS AND THE COST OF THE BOOKS ARE RECOVERED IN WHOLE OR PART FROM THE GOVERNMENT. THE ASSESSEE CHARGING THE SAME PRICE IN RESPECT OF THE BOOKS SUP PLIED TO THE ITA NO. 252 &253/JP/2019 RAJASTHAN STATE TEXT BOOK BOARD VS. ACIT(E) 21 STUDENTS OF PRIVATE SCHOOLS. THEREFORE, THERE IS NO DISCRIMINATION AS FAR AS THE COST RECOVERED BY THE ASSESSEE IN RESPECT OF THE BOOKS SUPPLIED TO THE STUDENTS OF GOVERNMENT SCHOOL AS WELL AS PRI VATE SCHOOL. THE TEXTBOOKS AS PER CURRICULUM PREPARED BY THE NCERT A RE BEING PRINTED BY THE ASSESSEE-SOCIETY AS PER APPROVAL OF THE NCER T. RIGHT FROM THE CREATION OF THE ASSESSEE IT HAS BEEN CLAIMING EXEMP TION U/S 10(22) OF THE ACT TILL THE SAID PROVISIONS WERE AMENDED W.E.F . 01.04.1994 AND SUBSTITUTED BY A NEW PROVISIONS U/S 10(23C)(IIIAB) OF THE ACT. THEREFORE, SO FAR AS THE OBJECTS OF THE ASSESSEE-SOCIETY AND T HE EXISTENCE OF THE ASSESSEE-SOCIETY SOLELY FOR EDUCATION AND NOT FOR T HE PURPOSE OF PROFIT THE SAME WAS ACCEPTED BY THE DEPARTMENT FOR ALL THE SE YEARS FROM 1973 TILL 1999 EXCEPT FOR THE ASSESSMENT YEARS 1986 -87 TO 1988-89 WHEN THE SAID ISSUE WAS CARRIED TO THIS TRIBUNAL AN D THEREAFTER BEFORE THE HONBLE HIGH COURT BY THE REVENUE. THE DECISION OF THIS TRIBUNAL DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOL DING THAT THE ASSESSEE IS AN EDUCATIONAL INSTITUTION EXISTING SOL ELY FOR EDUCATION AND NOT FOR THE PURPOSE OF PROFIT WITHIN THE MEANING OF SECTION 10(22) OF THE ACT WAS UPHELD BY THE HONBLE HIGH COURT REPORT ED IN 244 ITR 667 (RAJ.). FOR THE SAKE OF COMPLETION WE REPRODUCE THE DECISION OF THIS TRIBUNAL DATED 26.10.1998 IN CASE OF ACIT VS. RAJAS THAN STATE TEXT ITA NO. 252 &253/JP/2019 RAJASTHAN STATE TEXT BOOK BOARD VS. ACIT(E) 22 BOOK BOARD IN ITA NO. 1716 TO 1718/JP/1991 HAS HELD IN PARA 5 AS UNDER:- 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CONSIDER ED THEM CAREFULLY. WE HAVE ALSO PERUSED THE MATERIAL ON WHI CH OUR ATTENTION WAS DRAWN. AFTER PERUSING THE ORDER OF TH E CIT(A), WE DO NOT SEE ANY INFIRMITY IN THE ORDER OF THE CIT(A) . THE CIT(A) HAS DISCUSSED ALL THE FACTS OF THE CASE AND ALSO DI SCUSSED THE OTHER CASES LAWS AND THEN HE CAME TO CONCLUSION THA T THE ASSESSEE IS ENTITLED TO EXEMPTION UNDER SECTION 10( 22). THE OBSERVATIONS AND FINDINGS OF THE CIT(A) AS MENTIONE D IN PAGE 3 OF HIS ORDER ARE AS THE BASIC OBJECTION ABOUT EXEMPTION AVAILABLE U /S 10(22) GOES TO THE VERY ROOT OF THE VALIDITY OR OTHERWISE OF THE IMPUGNED ASSESSMENT, IT WOULD BE FAIR AND REASONABLE, IF THE SAME IS TAKEN INTO CONSIDERATION WITH A VIEW TO FIND OUT THE WORT H THEREOF. AFTER GOING THROUGH THE OBJECTS OF THE MEMORANDUM OF ASSO CIATION OF THE TAMIL NADU TEXT BOOKS SOCIETY, IT IS SEEN THAT THE OBJECTS OF THE APPELLANT, AS PER THE MEMORANDUM OF ASSOCIATION STANDS ON THE SAME FOOTING FOR ALL PRACTICAL PURPOSES AS THAT OF THE TAMIL NADU TEXT BOOKS SOCIETY. THE NATURE OF WORK OF BOTH THESE ARE PRACTICALLY THE SAME AND IN THE CASE OF TAMIL NADU TEXT BOOKS SOCIETY. CERTAIN REFERENCE WAS MADE BY THE CONCERNE D TO THE CBDT AND AS PER LETTER DATED 19.08.1975 AND F. NO. 184/26/15. ITAT CONVEYED AS UNDER:- ON A CAREFUL CONSIDERATION OF THE FACTS INVOLVED T HE BOARD IS OF THE OPINION THAT THE TAMIL NADU TEXT BOOK SOCIETY W OULD BE AN EDUCATIONAL INSTITUTION EXISTING SOLELY FOR THE PUR POSE OF EDUCATION WITHIN THE MEANING OF SECTION 10(22) OF THE I.T. AC T. IF THE ABOVE COMMUNICATION IS TAKEN INTO ACCOUNT, V IS--VIS THE OBJECTS OF THE APPELLANT SOCIETY AND THE TAMIL NADU TEXT BOOKS SOCIETY WHICH ARE PRACTICALLY THE SAME, IT APPEARS THAT EXEMPTION U/S 10(22) WAS AVAILABLE TO THE APPELLANT AS WELL A ND THERE WAS ITA NO. 252 &253/JP/2019 RAJASTHAN STATE TEXT BOOK BOARD VS. ACIT(E) 23 NO JUSTIFICATION IN REJECTING THE CLAIM OF THE APPE LLANT SO FAR AS THE EXEMPTION U/S 10(22) IS CONCERNED. A REFERENCE MAY ALSO BE MADE TO THE FINDINGS OF THE ORISSA HIGH COURT AS RE PORTED IN 86 ITR 416 IN THE CASE OF SECONDARY BOARD OF EDUCATION VS. ITO, AS UNDER:- UNDER THE ACT THE BOARD HAS A FUND. THERE ARE VARI OUS SOURCES OF INCOME CONSTITUTING THE FUNDS. ONE OF THE SOURCE S OF INCOME IS EARNING PROFITS BY COMPLIATION, PUBLICATION, PRINTI NG AND SALE OF TEXT BOOKS. THE PROFITS SO EARNED ENTERED INTO THE BOARD FUND. THE INCOME AND EXPENDITURE OF THE BOARD IS CONTROLL ED AND THE ENTIRE EXPENDITURE IS TO BE DIRECTED TOWARDS DEVELO PMENT AND EXPANSION OF EDUCATIONAL PURPOSE. EVEN IF THERE IS SOME SURPLUS, IT IS NOT APPROPRIATED BY OTHERS BUT REMAINS AS A P ART OF THE SINKING FUND TO BE DEVOTED TO THE CAUSE OF EDUCATIO N AS AND WHEN NECESSARY. THIS BEING THE OBJECTIVE AND THERE BEING VARIOUS WAYS OF CONTROL OF THE INCOME AND EXPENDITURE, THE BOARD OF SECONDARY EDUCATION CANNOT BE SAID TO BE EXISTING F OR PURPOSES OF PROFITS. IT EXISTS SOLELY FOR PURPOSES OF EDUCAT ION. THE INCOME OF THE BOARD CANNOT, THEREFORE, BE COMPUTED IN THE TOTAL INCOME OF THE PREVIOUS YEAR UNDER SECTION 10(22) OF THE IN COME-TAX ACT, 1961. IF THE ABOVE FINDINGS ARE ALSO TAKEN INTO ACCOUNT A ND THE COMMUNICATION GIVEN BY THE CBDT IN THE CASE REFERRE D TO EARLIER IS CONSIDERED, VIS-A-VIS THE FACTS OF THE CASE OF T HE APPELLANT WHICH ARE PRACTICALLY ON THE SAME FOOTING, IT APPEA RS THAT THE APPELLANT WAS ENTITLED FOR EXEMPTION U/S 10(22). IN VIEW OF THIS, THE BASIC OBJECTION SO RAISED BY THE APPELLANT IN R EGARD TO AVAILABILITY OF EXEMPTION U/S 10(22) OF THE IT ACT, 1961 DESERVES TO SUCCEED AND ACCORDINGLY THE CONCERNED AUTHORITY IS DIRECTED TO ALLOW THE SAID EXEMPTION. SINCE THE EXEMPTION U/S 1 0(22) WAS AVAILABLE TO THE APPELLANT, THERE APPEARS TO BE NO JUSTIFICATION IN SUBJECTING THE SURPLUS ETC. TO TAX AND COMPLETING T HE ASSESSMENT. AS SUCH, ASSESSMENT SO COMPLETED APPEAR TO BE BAD I N LW AND STANDS CANCELLED. ITA NO. 252 &253/JP/2019 RAJASTHAN STATE TEXT BOOK BOARD VS. ACIT(E) 24 FROM THE ABOVE OBSERVATION AND FINDINGS OF THE CIT( A) IT IS CLEAR THAT THE ASSESSEE IS ENTITLED TO EXEMPTION UNDER SE CTION 10(22) BECAUSE IN CASE OF TAMIL NADU TEXT BOOK SOCIETY TO WHOM THE EXEMPTION UNDER SECTION 10(22) IS ALLOWED BY THE RE VNUE, THE AIMS AND OBJECTS OF THE ASSESSEE IS SIMILAR TO TAMI L NADU TEXT BOOKS SOCIETY. THEREFORE, THERE IS NO POINT TO DECL INE THE EXEMPTION TO THE ASSESSEE. 5.1 THE CONTENTION OF THE LD. D/R THAT ASSESSEE IS PRINTING BOOKS AND SELLING THEREOF CANNOT BE TREATED AS EDUC ATIONAL INSTITUTION. THE ASSESSEE IS EARNING PROFIT OUT OF SALE OF BOOKS. IT WAS FURTHER STATED THAT IF THE EXEMPTION IS GRANTED LIKS THAT THEN BUSWALLA WHO RUNS BUSES FOR SCHOOL WILL COME FOR EX EMPTION UNDER SECTION 10(22). THEREFORE, THE EXEMPTION SHOU LD NOT BE GRANTED IN SUCH TYPE OF CASES. THESE CONTENTIONS OF THE LD. D/R HAVE NO WEIGHT BECAUSE THE APPEAL OF THE ASSESSEE W AS ALLOWED AFTER FOLLOWING THE DECISION IN THE CASE OF TAMIL N ADU TEXT BOOKS SOCIETY AND FACTS IN CASE OF TAMIL NADU TEXT BOOKS SOCIETY ARE SIMILAR TO THE FACTS OF THE PRESENT CASE. THE D/R W AS NOT ABLE TO DISTINGUISH THE FACTS OF THE CASE OF TAMIL NADU TEX T BOOKS SOCIETY OR THE FACTS OF THE PRESENT ASSESSEE. THE EXEMPTION IN CASE OF TAMIL NADU TEXT BOOKS SOCIETY WAS ALLOWED BY THE TR IBUNAL AND THE DECISION OF THE TRIBUNAL IS NOT REVERSED TILL DATE. THEREFORE, THERE IS NO POINT TO DIFFER WITH THE DECISION IN C ASE OF TAMIL NADU TEXT BOOKS SOCIETY. WE HAVE ALSO SEEN OTHER CASE LA WS RELIED UPON BY THE LD. DR AND FACT OF THOSE CASES ARE DIF FERENT, WHEREAS FACTS IN THOSE CASES ON WHICH RELIANCE WAS PLACED B Y THE LD. A/R ARE SIMILAR TO THE FACTS OF THE ASSESSEES CASE. TH EREFORE, IN VIEW OF ALL THESE FACTS AND CIRCUMSTANCES, WE UPHOLD THA T FINDING OF THE CIT(A) AND APPEALS OF THE DEPARTMENT FOR ALL THE TH REE YEARS, THEREFORE, DISMISSED. ITA NO. 252 &253/JP/2019 RAJASTHAN STATE TEXT BOOK BOARD VS. ACIT(E) 25 THE SAID DECISION OF THE TRIBUNAL WAS UPHELD BY THE HONBLE JURISDICTIONAL HIGH COURT IN CASE OF ACIT VS. RAJAS THAN TEXT BOOK BOARD (SUPRA) IN PARA 1 TO 3 AS UNDER:- HEARD THE LEARNED COUNSEL FOR THE APPELLANTS IN TH ESE APPEALS. THESE THREE APPEALS ARE DIRECTED AGAINST THE COMMON ORDER DT. 26TH OCT., 1998, MADE BY THE TRIBUNAL, JAIPUR BENCH , JAIPUR, IN ITA NO. 1716/JP/1991. SINCE THE ORDER COVERS DIFFER ENT ASSESSMENT ORDERS, THREE SEPARATE APPEALS ARE FILED . BUT, THE FACTS AND QUESTIONS OF LAW THAT ARISE FOR CONSIDERA TION, ARE THE SAME IN THESE THREE APPEALS. THE QUESTION THAT CAME UP FOR CONSIDERATION BEFORE THE CIT(A) AND THE TRIBUNAL, W AS WHETHER THE RAJASTHAN STATE TEXT BOOK BOARD, JALANA DOONGRI , JAIPUR, WAS ENTITLED FOR EXEMPTION UNDER S. 10(22) OF THE IT AC T, (HEREINAFTER CALLED, 'THE ACT'). THOUGH THE ASSESSING AUTHORITY TOOK THE VIEW THAT THE RESPONDENT-ASSESSEE WAS NOT ENTITLED FOR E XEMPTION UNDER S. 10(22) OF THE ACT, THE CIT(A) DID NOT AGRE E WITH THE ORDER OF THE ASSESSING AUTHORITY AND REVERSED THE S AME. IN THE APPEAL, FILED BY THE DEPARTMENT, BEFORE THE TRIBUNA L, THE TRIBUNAL CONCURRED WITH THE ORDER, PASSED BY THE CIT(A). 2. THE LEARNED COUNSEL FOR THE APPELLANT STRONGLY CONT ENDED THAT THE CIT(A) AS WELL AS THE TRIBUNAL WERE NOT RIGHT I N HOLDING THAT THE ASSESSEE WAS ENTITLED FOR EXEMPTION UNDER S. 10 (22) OF THE ACT. ACCORDING TO HIM, THE RESPONDENT-ASSESSEE IS M AKING PROFIT, HENCE, IT DEPRIVES ITSELF OF THE BENEFIT OF EXEMPTI ON UNDER S. 10(22) OF THE ACT; AS CAN BE SEEN FROM THE ORDERS O F THE CIT(A) AS WELL AS THE TRIBUNAL. THAT IN A SIMILAR SITUATIO N, IN THE CASE OF TAMIL NADU TEXT BOOK SOCIETY, THE CBDT, AS PER THE LETTER DT. 19TH AUG., 1975, AND FILE NO. 184/26/75, STATED THA T THE TAMIL NADU TEXT BOOK SOCIETY WAS AN EDUCATIONAL INSTITUTI ON, EXISTING SOLELY FOR THE PURPOSE OF EDUCATION, WITHIN THE MEA NING OF S. 10(22) OF THE ACT. FURTHER, REFERENCE WAS MADE TO A DECISION OF ITA NO. 252 &253/JP/2019 RAJASTHAN STATE TEXT BOOK BOARD VS. ACIT(E) 26 THE ORISSA HIGH COURT, IN THE CASE OF BOARD OF SECO NDARY EDUCATION VS. ITO (1972) 86 ITR 408 (ORI) : TC 32R. 757 DEALING WITH SIMILAR FACTS. 3. IT IS NOT DISPUTED BEFORE US THAT THE AIMS AND OBJE CTS OF THE TAMIL NADU TEXT BOOK SOCIETY AND THAT OF THE RESPON DENT- ASSESSEE ARE ALMOST IDENTICAL. IT IS ALSO NOT SHOWN TO US THAT THE SURPLUS AMOUNT, IT ANY, OF THE RESPONDENT-ASSESSEE, IS USED FOR ANY OTHER PURPOSE OR DISTRIBUTED TO OTHER MEMBERS. THE CIT(A) AS WELL AS THE TRIBUNAL HAVE NOTICED THAT EVEN IF S OME AMOUNT REMAINS SURPLUS, THAT IS UTILISED ONLY FOR THE PURP OSES OF EDUCATION. THUS, HAVING REGARD TO THE CONCURRENT FI NDINGS OF FACTS, RECORDED BY THE CIT(A) AND THE TRIBUNAL AND ALSO TAKING NOTE OF THE LETTER OF THE CBDT ITSELF, IT IS NOT PO SSIBLE FOR US TO SAY THAT THE ORDER OF THE TRIBUNAL IS ERRONEOUS IN ANYW AY. IN THIS WAY, NO QUESTION OF LAW ARISES FOR CONSIDERATION LE SS A SUBSTANTIAL QUESTION OF LAW. HENCE, THE APPEALS ARE REJECTED. THEREFORE, THE HONBLE HIGH COURT HAS UPHELD THE F INDINGS OF THE TRIBUNAL THAT THE ASSESSEE-SOCIETY IS AN EDUCATIONA L INSTITUTION EXISTING SOLELY FOR THE PURPOSE OF EDUCATION WITHIN THE MEAN ING OF SECTION 10(22) OF THE ACT AND FURTHER IT WAS ALSO FOUND THA T THE SURPLUS IF ANY OF THE ASSESSEE-SOCIETY WAS NOT USED FOR ANY PURPOSE O R DISTRIBUTED TO OTHER MEMBERS. THEREFORE, TO THE EXTENT OF THE ASSE SSEE BEING EDUCATIONAL INSTITUTION EXISTING SOLELY FOR EDUCATI ON AND NOT FOR THE PURPOSE OF PROFIT WAS SETTLED LONG BACK AND WAS ALS O ACCEPTED BY THE DEPARTMENT TILL THE PROVISIONS OF SECTION 10(22) OF THE ACT WAS OMITTED ITA NO. 252 &253/JP/2019 RAJASTHAN STATE TEXT BOOK BOARD VS. ACIT(E) 27 FROM THE STATUTE BOOKS AND NEW PROVISIONS OF SECTIO N 10(23C)(IIIAB) OF THE ACT WAS INSERTED. THE ASSESSING OFFICER WHILE P ASSING THE ASSESSMENT ORDERS FOR THESE TWO ASSESSMENT YEARS HA S ALSO NOT DISPUTED THE STATUS OF THE ASSESSEE BEING EDUCATION AL INSTITUTION EXISTING SOLELY FOR EDUCATIONAL PURPOSE BUT THE AO HAD DENIE D THE EXEMPTION U/S 10(23C)(IIIAB) OF THE ACT ON THE GROUND THAT THE AS SESSEE HAS NOT FULFILLED THE CONDITION THAT IT IS WHOLLY AND SUBST ANTIALLY FINANCED BY THE GOVERNMENT DURING THE YEAR UNDER CONSIDERATION. THE RELEVANT PART OF THE ASSESSING OFFICER AS UNDER:- YOU HAVE NOT FULFILLED 3 RD CONDITION LAID DOWN IN SECTION 10(23C)(IIIAB) OF THE I.T. ACT, 1961. YOU HAVE ALSO ACCEPTED THE FACTS IN YOUR REPLY FILED ON 09.02.2016 WHEREIN IT IS CLEARLY STATED THAT THE ASSESSEE (RAJASTHAN STATE TEXT BOOK BOARD ) HAS NOT FINANCED BY THE GOVERNMENT DURING THE YEAR UNDER CONSIDERATION. THEREFORE, YOU ARE NOT ENTITLED TO CLAIM EXEMPTION OF INCOME U/S 10(23C)(IIIAB) OF THE I.T. ACT, 1961. IN VIEW OF AB OVE, YOU ARE REQUIRED TO EXPLAIN AS TO WHY THE CLAIM OF EXEMPTIO N OF INCOME U/S 10(23C)(IIIAB) OF THE I.T. ACT, 1961 SHOULD NOT BE DENIED FOR COMPUTING OF TOTAL TAXABLE INCOME AND ASSESSMENT SH ALL BE COMPLETED BY TREATING YOU AS AOP AND SURPLUS OF RS. 40,00,21,086/- SHALL BE TAXED ACCORDINGLY EXCEPT TH E OTHER ADDITIONS MADE DURING ASSESSMENT. THE LD. CIT(A) WHILE PASSING THE IMPUGNED ORDER HAS APART FROM CONFIRMING THE ORDER OF THE ASSESSING OFFICER ALSO HELD THAT THE ASSESSEE ITA NO. 252 &253/JP/2019 RAJASTHAN STATE TEXT BOOK BOARD VS. ACIT(E) 28 IS NOT EXISTING SOLELY FOR EDUCATION PURPOSE BUT IS DOING COMMERCIAL ACTIVITY. THE RELEVANT FINDINGS OF THE LD. CIT(A) H AS HELD AS UNDER:- I PERUSED THE RECORD I FIND THAT THE APPELLANT HAS CLAIMED EXEMPTION U/S 10(23C)(IIIAB). AS PER THIS SECTION E XEMPTION IS AVAILABLE TO ANY UNIVERSITY OR OTHER EDUCATION INST ITUTION EXISTING SOLELY FOR EDUCATION PURPOSE AND NOT FOR THE PURPOS E OF PROFIT AND WHICH IS WHOLLY OR SUBSTANTIALLY FINANCED BY THE GO VERNMENT. IN THE PRESENT CASE AS EVIDENCE FROM THE FINANCIAL STATEMENT, THE APPELLANT IS EARNING HUGE PROFIT AS EVIDENT FROM TH E FOLLOWING TABLE:- A.Y. TURNOVER PROFIT % OF PROFIT 2012-13 2290977602 57564539 25% 2013-14 1879652330 400021086 21% FROM THE ABOVE TABLE IT CAN BE NOTED THAT THE PERCE NTAGE OF PROFIT EARNED IS MORE THAN THE NORMAL PROFIT WHICH ITSELF SHOWS THAT THIS IS EXISTING FOR EARNING PROFIT. THI S IS MORE EVIDENT FROM BALANCE SHEET THAT IT IS HAVING CAPITA L CONTRIBUTION OF RS.78292/- ONLY WHEREAS ACCUMULATED PROFIT EARNED IS RS.2 06,51,32,282/-. IT IS FURTHER SEEN THAT NO FINANCE IS RECEIVED FROM THE GOVERNMENT DURING THE YEAR OR IN LAST MORE THAN 20 YEARS. THE CONTRIBUTION OF THE GOVERNMENT IS ONLY RS.78292 /- WHICH IS ALSO IN THE YEAR OF SETUP LONG BACK. THE H ON'BLE SUPREME COURT IN THE CASE OF VISVESVARYA TECHNOLOGI CAL UNIVERSITY IN CIVIL APPEAL NO. 4361-4366 & 2016 WHE RE FACTS AND CONSIDERATIONS WERE 'THAT WITHIN A SHORT PERIOD OF A DECADE FROM THE YEAR 1999 TO 2010 THE APPELLANT UNI VERSITY HAD GENERATED A SURPLUS OF RS. 500 CRORES'. THERE I S NO DOUBT THAT THE HUGE SURPLUS HAS BEEN COLLECTED/ACCU MULATED BY REALIZING FEES UNDER DIFFERENT HEADS IN CONSONAN CE WITH THE POWERS VESTED IN THE UNIVERSITY U/S 23 OF THE V TU ACT. THE DIFFERENCE FEE COLLECTED AND THE ACTUAL EXPENDI TURE ITA NO. 252 &253/JP/2019 RAJASTHAN STATE TEXT BOOK BOARD VS. ACIT(E) 29 INCURRED FOR THE PURPOSE FOR WHICH FESS WERE COLLEC TED IS SIGNIFICANT. IN FACT THE EXPENDITURE INCURRED REPRE SENTS ONLY MINISCULE PART OF THE FEES COLLECTED. NO REMISSION, REBATE OR CONCESSION IN THE AMOUNT OF FEES CHARGED UNDER THE DIFFERENT HEADS FOR THE NEXT ACADEMIC YEAR(S) HAS B EEN GRANTED TO THE STUDENTS. THE SURPLUS GENERATED IS F AR IN EXCESS OF WHAT HAS BEEN HELD BY THIS COURT TO BE PERMISSIB LE (6 TO 15%) IN 'ISLAMIC ACADEMY OF EDUCATION AND ANR. V/S STATE OF KARNATAKA & ANR. (2003) 6 SCC 697 ''WAS IN THE CONTEXT OF THE REASONABLE FEES TO BE CHARGED PRIVATE EDUCATIONAL BODIES.THIS CASE IS TOTALLY APPLICABLE IN THIS CASE THAT COURT HAVE GIVEN THE F INDING THAT UNIVERSITIES AND EDUCATIONAL INSTITUTIONS ENTITLED TO EXEMPTION ,UNDER THE ACT HAVE BEEN CATEGORIZED UNDER THREE DI FFERENT HEADS, NAMELY, THOSE COVERED BY SECTION 10(23C)(III AB); SECTION 10(23C)(IIIAD) AND 10(23C)(VI) OF THE ACT. THE REQUIREMENT OF THE UNIVERSITY OR THE EDUCATIONAL IN STITUTION EXISTING 'SOLELY FOR EDUCATIONAL PURPOSES AND NOT F OR, PURPOSES OF PROFIT' IS THE CONSISTENT REQUIREMENT UNDER SECT ION 10(23C)(IIIAB), 10(23C)(IIIAD) AND 10(23C)(VI). HOW EVER, IN CASES OF UNIVERSITIES COVERED BY SECTION 10(23C)(II IAB) FUNDING MUST BE WHOLLY OR SUBSTANTIALLY BY THE GOVERNMENT W HEREAS IN CASES OF UNIVERSITIES COVERED BY SECTION 10(23C)(II IAD) THE AGGREGATE ANNUAL RECEIPTS SHOULD NOT EXCEED THE AMO UNT AS MAY BE PRESCRIBED. UNIVERSITIES COVERED BY SECTION 10(23C)(VI) AXE THOSE OTHER THAN MENTIONED IN SUB-CLAUSE (IIIAB ) OR SUB- CLAUSE (IIIAD) AND, WHICH ARE REQUIRED TO BE SPECIF ICALLY APPROVED BY TRIE PRESCRIBED AUTHORITY.' IN THIS CASE AS STATED SUPRA NO SUCH REGULAR/ SUBST ANTIAL FINANCIAL GRANT IN MADE BY GOVT. THUS THE ASSESSEE DOES NOT FULFIL THE BASIS CONDITION OF EXEMPTION U/S 10(23)( IIIB). IT IS FURTHER SEEN THAT TO CLARIFY THIS AN EXPLANAT ION HAS BEEN INSERTED W.E.F. 1/04/2015 THAT AN INSTITUTION CAN B E SAID TO BE SUBSTANTIALLY FINANCED BY GOVT. IF IT RECEIVED 50% OF THE RECEIPT FROM GOVT GRANTS. ITA NO. 252 &253/JP/2019 RAJASTHAN STATE TEXT BOOK BOARD VS. ACIT(E) 30 IN THIS CASE THE APPELLANT IS NOT EXISTING SOLELY F OR EDUCATIONAL PURPOSES BUT HE IS DOING THE COMMERCIAL ACTIVITY. O N PERUSAL OF BALANCE SHEET AND PROFIT AND LOSS ACCOUNT IT IS FIN D THAT APPELLANT IS SELLING THE BOOKS TO BOOK SELLER AND D OING THE COMMERCIAL ACTIVITY WITH MOTO TO EARN THE PROFIT. T HUS THE APPELLANT VIOLATIVE THE PROVISION OF SECTION 10(23C ) (IIIAB) OF THE I.T. ACT. CONSIDERING THIS AMENDMENT AND THE FACTS OF THE CAS E, I AM OF THE VIEW THAT THE ASSESSEE DOES NOT FULFIL THE COND ITION REFERRED IN SECTION 10(23C)(IIIAB) REGARDING NOT FOR THE PURPOS E OF PROFIT AND SUBSTANTIALLY FINANCED BY GOVT. ACCORDINGLY THE CLA IM OF THE ASSESSEE DISALLOWED BY THE ASSESSING OFFICER IS CON FIRMED AND THE ASSESSING OFFICER RIGHTLY COMPLETED ASSESSMENT BY T REATING THE APPELLANT AS AOP AND THE SURPLUS OF RS. 40,00,21,09 0/- IS RIGHTLY TAXED BY THE ASSESSING OFFICER. THESE GROUNDS ARE N OT ALLOWED. THEREFORE, AS FAR AS THE FINDING OF THE LD. CIT(A) THAT THE ASSESSEE IS NOT EXISTING SOLELY FOR EDUCATION PURPOSE BUT IS DO ING COMMERCIAL ACTIVITY THE ISSUE IS COVERED BY THE EARLIER DECISI ON OF THIS TRIBUNAL AS WELL AS THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT. HENCE, THE SAID FINDING OF THE LD. CIT(A) IS CONTRARY TO THE BINDIN G PRECEDENT AND THEREFORE IS NOT SUSTAINABLE. EVEN OTHERWISE THERE ARE SERIES OF DECISIONS ON THIS POINT WHICH INCLUDES THE DECISION OF HONBLE MADRAS HIGH COURT IN CASE OF DCIT VS. TAMIL NADU TEXT BOOK CORPORATION IN ITA NO. 1519 TO 1521/MDS/2008 DATED 27.07.2012 A S WELL AS DECISION OF HONBLE SUPREME COURT IN CASE OF ASSAM STATE TEXT BOOK ITA NO. 252 &253/JP/2019 RAJASTHAN STATE TEXT BOOK BOARD VS. ACIT(E) 31 PRODUCTION & PUBLICATION CORPORATION LTD. VS. CIT 319 ITR 317. THE HONBLE SUPREME COURT WHILE CONSIDERING THE QUE STION WHETHER THE ASSAM STATE TEXT BOOK PRODUCTION AND PUBLICATION CO RPORATION LTD. COULD BE TERMED AS EDUCATIONAL INSTITUTION IN TERMS OF SECTION 10(22) HAS HELD IN PARA 4 TO 6 AS UNDER:- 4. IN THESE APPEALS, WE ARE CONCERNED WITH ASST. YRS. 1981-82 TO 1996-97, EXCEPT ASST. YR. 1989-90. THE QUESTION WHI CH AROSE BEFORE THE AO WAS WHETHER THE CORPORATION COULD BE TERMED AS AN EDUCATIONAL INSTITUTION IN TERMS OF S. 10(22) OF THE 1961 ACT ? ACCORDING TO THE AO, SINCE THE ASSESSEE, DURING THE RELEVANT YEARS, HAD INCOME EXCLUSIVELY FROM PUBLICATION AND SELLING OF TEXT BOOKS TO THE STUDENTS, EXEMPTION UNDER S. 10(22) OF THE IT ACT, 1961 (FOR SHORT, 'THE ACT'), AS IT STOOD AT THE MAT ERIAL TIME, WAS NOT ADMISSIBLE. ACCORDING TO THE AO, THE ASSESSEE D ID NOT EXIST SOLELY FOR EDUCATIONAL PURPOSES, PARTICULARLY IN VI EW OF CL. 21 OF THE MEMORANDUM OF ASSOCIATION WHICH PROVIDES FOR DI STRIBUTION OF DIVIDENDS, HENCE, ITS INCOME WAS NOT EXEMPT UNDER S . 10(22) OF THE ACT. THIS DECISION OF THE AO WAS UPHELD BY CIT( A). IN THE TRIBUNAL, THERE WAS DIFFERENCE OF OPINION BETWEEN M EMBER (JUDICIAL) AND MEMBER (ACCOUNTANT). BY DECISION OF THE MAJORITY [REPORTED AS THE ASSAM STATE TEXTBOOK PRODUCTION AN D PUBLICATION CORPN. LTD. VS. DY. CIT (2003) 81 TTJ ( GAU)(TM) 10 ED.], IT WAS HELD THAT THE CORPORATION WAS AN EDUCA TIONAL INSTITUTION AND, CONSEQUENTLY, THE CORPORATION WAS ENTITLED TO THE BENEFIT OF EXEMPTION UNDER S. 10(22) OF THE ACT FOR THE RELEVANT ASSESSMENT YEARS IN QUESTION. HOWEVER, IN APPEAL FI LED BY THE DEPARTMENT, THE HIGH COURT CAME TO THE CONCLUSION T HAT THE INCOME OF THE CORPORATION, DURING THE RELEVANT ASSE SSMENT YEARS, WAS NOT EXEMPT, PARTICULARLY IN VIEW OF THE FACT TH AT THE ASSESSEE DID NOT EXIST SOLELY FOR EDUCATIONAL PURPOSES; THAT IT DID NOT SOLELY ITA NO. 252 &253/JP/2019 RAJASTHAN STATE TEXT BOOK BOARD VS. ACIT(E) 32 IMPART EDUCATION AND THAT ITS INCOME DURING THE REL EVANT ASSESSMENT YEARS WAS ONLY FROM PUBLISHING AND SALE OF TEXT BOOKS, WHICH, ACCORDING TO THE HIGH COURT, CONSTITU TED A PROFIT- EARNING ACTIVITY. AGAINST THE SAID DECISION, THE AS SESSEE HAS COME TO THIS COURT BY WAY OF CIVIL APPEALS. 5. ON GOING THROUGH THE RECORDS, WE FIND THAT THE HIGH COURT HAS NOT TAKEN INTO ACCOUNT THE PRIOR HISTORY OF THE CAS E, PARTICULARLY IN THE CONTEXT OF INCORPORATION OF THE CORPORATION UND ER THE COMPANIES ACT, 1956, AS A GOVERNMENT COMPANY. INITI ALLY, AS STATED ABOVE, THE ASSESSEE WAS A STATE-CONTROLLED C OMMITTEE AND BOARD, WHICH WERE ATTACHED TO THE OFFICE OF THE DIR ECTOR OF PUBLIC INSTRUCTION, STATE OF ASSAM. IT IS ONLY IN THE YEAR 1972 THAT THE GOVERNMENT COMPANY GOT CONSTITUTED UNDER S. 617 OF THE COMPANIES ACT, 1956. THAT, PRIOR TO 1972, THE ENTIR E FUNDING FOR THE WORKING OF THE COMMITTEE/BOARD WAS DONE BY THE STATE OF ASSAM AND THAT EVEN THE OWNERSHIP OF THE ASSETS REM AINED VESTED IN THE STATE OF ASSAM WHICH STOOD TRANSFERRE D TO THE CORPORATION IN 1972 WHEN IT GOT INCORPORATED UNDER COMPANIES ACT, 1956. IT IS IMPORTANT TO NOTE THAT THE ASSESSE E IS A GOVERNMENT COMPANY. IT IS CONTROLLED BY THE STATE O F ASSAM. THE AIM OF THE SAID CORPORATION IS TO IMPLEMENT THE STA TES POLICY ON EDUCATION. THAT, CL. 21 OF THE MEMORANDUM AND ARTIC LES OF ASSOCIATION PROVIDES A RETURN ON INVESTMENT TO THE STATE OF ASSAM. THAT, IN THE YEAR 1975, IN A SIMILAR SITUATI ON, CBDT HAD GRANTED EXEMPTION UNDER S. 10(22) OF THE ACT VIDE L ETTER DT. 19TH AUG., 1975, TO TAMILNADU TEXT BOOKS SOCIETY, WHICH PERFORMED ACTIVITIES SIMILAR TO THOSE OF THE ASSESSEE. THE LE TTER DT. 19TH AUG., 1975, IS REFERRED TO IN THE JUDGMENT OF THE R AJASTHAN HIGH COURT IN THE CASE OF CIT VS. RAJASTHAN STATE TEXT B OOK BOARD (1999) 157 CTR (RAJ) 207 : (2000) 244 ITR 667 (RAJ) . AS CAN BE SEEN FROM THE FACTS OF THAT CASE, A SIMILAR QUESTIO N CAME UP FOR CONSIDERATION BEFORE THE RAJASTHAN HIGH COURT, NAME LY, WHETHER RAJASTHAN STATE TEXT BOOK BOARD WAS ENTITLED TO EXE MPTION UNDER S. 10(22) OF THE IT ACT, 1961 ? ONE OF THE ARGUMENT S ADVANCED IN ITA NO. 252 &253/JP/2019 RAJASTHAN STATE TEXT BOOK BOARD VS. ACIT(E) 33 THAT CASE ON BEHALF OF THE REVENUE WAS THAT THE ASS ESSEE WAS MAKING PROFIT ON ACCOUNT OF PUBLISHING AND SALE OF TEXT BOOKS AND, CONSEQUENTLY, IT WAS NOT ENTITLED TO THE BENEF IT OF EXEMPTION UNDER S. 10(22) OF THE ACT. HOWEVER, THE HIGH COURT NOTICED THE LETTER ISSUED BY CBDT ON 19TH AUG., 1975 IN THE CAS E OF TAMILNADU TEXT BOOK SOCIETY WHICH, AS STATED ABOVE, IN SIMILAR CIRCUMSTANCES HAD GRANTED EXEMPTION TO THE TAMILNAD U TEXT BOOK SOCIETY AS AN EDUCATIONAL INSTITUTION WITHIN T HE MEANING OF S. 10(22) OF THE ACT. THE JUDGMENT OF THE HIGH COUR T FURTHER RECITES THAT, UNDER A SIMILAR SITUATION, THE CBDT H AD ALSO EXTENDED BENEFIT OF EXEMPTION UNDER S. 10(22) OF TH E ACT TO THE ORISSA SECONDARY BOARD EDUCATION, AS REPORTED IN SE CONDARY BOARD OF EDUCATION VS. ITO (1972) 86 ITR 408 (ORI). FOLLOWING THESE CIRCULARS/LETTERS ISSUED BY CBDT, THE RAJASTH AN HIGH COURT CAME TO THE CONCLUSION THAT THE ASSESSEE IN THAT CA SE, NAMELY, RAJASTHAN STATE TEXT BOOK BOARD (SUPRA), WAS ENTITL ED TO CLAIM THE BENEFIT OF EXEMPTION UNDER S. 10(22) OF THE ACT . THE OPERATIVE PART OF THE RAJASTHAN HIGH COURTS JUDGME NT READS AS UNDER : 'IT IS NOT DISPUTED BEFORE US THAT THE AIMS AND OBJ ECTS OF THE TAMIL NADU TEXT BOOK SOCIETY AND THOSE OF THE RESPO NDENT- ASSESSEE ARE ALMOST IDENTICAL. IT IS ALSO NOT SHOWN TO US THAT THE SURPLUS AMOUNT, IF ANY, OF THE RESPONDENT-ASSESSEE, IS USED FOR ANY OTHER PURPOSE OR DISTRIBUTED TO OTHER MEMBERS. THE CIT(A) AS WELL AS THE TRIBUNAL HAVE NOTICED THAT EVEN IF S OME AMOUNT REMAINS SURPLUS, THAT IS UTILISED ONLY FOR THE PURP OSES OF EDUCATION. THUS, HAVING REGARD TO THE CONCURRENT FI NDINGS OF FACT RECORDED BY THE CIT(A) AND THE TRIBUNAL AND ALSO TA KING NOTE OF THE LETTER OF THE CBDT ITSELF, IT IS NOT POSSIBLE F OR US TO SAY THAT THE ORDER OF THE TRIBUNAL IS ERRONEOUS IN ANY WAY. IN THIS WAY, NO QUESTION OF LAW ARISES FOR CONSIDERATION MUCH LESS A SUBSTANTIAL QUESTION OF LAW.' ITA NO. 252 &253/JP/2019 RAJASTHAN STATE TEXT BOOK BOARD VS. ACIT(E) 34 6. FOLLOWING THE JUDGMENT OF THE RAJASTHAN HIGH COURT, WE ARE OF THE VIEW THAT, IN THIS CASE, THE HIGH COURT, IN ITS IMPUGNED JUDGMENT, HAS NOT CONSIDERED THE HISTORICAL BACKGRO UND IN WHICH THE CORPORATION CAME TO BE CONSTITUTED; SECONDLY, T HE HIGH COURT OUGHT TO HAVE CONSIDERED THE SOURCE OF FUNDING, THE SHAREHOLDING PATTERN AND ASPECTS, SUCH AS RETURN ON INVESTMENT; THIRDLY, IT HAS NOT CONSIDERED THE LETTERS ISSUED BY CBDT WHICH ARE REFERRED TO IN THE JUDGMENT OF THE RAJASTHAN HIGH COURT GRANTIN G BENEFIT OF EXEMPTION TO VARIOUS BOARD/SOCIETIES IN THE COUNTRY UNDER S. 10(22) OF THE ACT; FOURTHLY, IT HAS FAILED TO CONSI DER THE JUDGMENTS MENTIONED HEREINABOVE; AND LASTLY, IT HAS FAILED TO CONSIDER THE LETTER OF THE CENTRAL GOVERNMENT DT. 9TH JULY, 1973 , TO THE EFFECT THAT ALL STATE-CONTROLLED EDUCATIONAL COMMITTEE(S)/ BOARD(S) HAVE BEEN CONSTITUTED TO IMPLEMENT THE EDUCATIONAL POLIC Y OF THE STATE(S), CONSEQUENTLY, THEY SHOULD BE TREATED AS E DUCATIONAL INSTITUTION. THUS, IT IS CLEAR THAT THE HONBLE SUPREME COURT H AS FOLLOWED THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN CA SE OF THE ASSESSEE BEFORE US REPORTED 244 ITR 667 AND HELD THAT IT IS CONTROLLED BY THE STATE OF ASSAM. FURTHER, THE STATE CONTROLLED COMMI TTEE/BOARD HAVE BEEN CONSTITUTED TO IMPLEMENT THE EDUCATION POLICY OF THE STATE THEREFORE, THEY SHOULD BE TREATED AS EDUCATIONAL IN STITUTION. 7. IT IS PERTINENT TO NOTE THAT ONLY DIFFERENCE BET WEEN SECTION 10(22) AND NEWLY INSERTED SECTION 10(23C)(IIIAB) OF THE AC T IS AN EXTRA CONDITION THAT THE INSTITUTION SHOULD BE WHOLLY OR SUBSTANTIALLY FINANCED BY THE GOVERNMENT. THERE IS NO DISPUTE THAT AT THE TIME OF CREATION OF ITA NO. 252 &253/JP/2019 RAJASTHAN STATE TEXT BOOK BOARD VS. ACIT(E) 35 THE ASSESSEE-SOCIETY THE ENTIRE CAPITAL OF RS. 78,2 92/- WAS INDUCED/ CONTRIBUTED BY THE STATE GOVERNMENT AND THEREAFTER THE ASSESSEE HAS NOT RECEIVED ANY CONTRIBUTION FROM ANY OTHER PERSON OR PARTY. THE ONLY SOURCE OF THE ASSESSEES RECEIPT IS THE COMPENSATIO N/RECOVERY OF COST OF BOOKS PUBLISHED BY THE ASSESSEE AND SUPPLIED FREE O F COST TO THE STUDENTS OF GOVERNMENT SCHOOLS AS WELL AS THE COST OF SUCH BOOKS WHICH WERE DISTRIBUTED TO PRIVATE SCHOOLS. THEREFOR E, THE INITIAL CAPITAL AS WELL AS EVERY YEAR REVENUE RECEIVED BY THE ASSES SEE IS SUBSTANTIALLY FROM THE STATE GOVERNMENT AND THE SURPLUS FROM SUCH RECEIPT FROM THE GOVERNMENT IS TRANSFERRED TO THE RESERVE. FOR THE P URPOSE OF SECTION 10(23C)(IIIAB) OF THE ACT THE WHOLLY OR SUBSTANTIAL LY FINANCED BY THE GOVERNMENT HAS TO BE SEEN FOR EACH ASSESSMENT YEAR. FROM THE DETAILS OF THE REVENUE RECEIVED BY THE ASSESSEE FOR THESE T WO ASSESSMENT YEARS IT IS CLEAR THAT MORE THAN 50% OF THE REVENUE IS RECEIVED FROM THE GOVERNMENT OF RAJASTHAN. THE COMPARATIVE DETAIL S OF THE AMOUNT RECEIVED FROM THE GOVERNMENT AGAINST THE FREE DISTR IBUTION OF BOOKS UNDER THE SCHEME OF GOVERNMENT FOR THESE TWO ASSESS MENT YEARS AS WELL AS THE AMOUNT RECEIVED AGAINST SUPPLY TO PRIVA TE DISTRIBUTORS ARE AS UNDER:- ITA NO. 252 &253/JP/2019 RAJASTHAN STATE TEXT BOOK BOARD VS. ACIT(E) 36 PARTICULARS FY 2012 - 13 FY 2013 - 14 AMOUNT % AMOUNT % NET SUP PLY TO STATE GOVERNMENT 1249204326 66.46% 882879232 59.21% NET SUPPLY TO PRIVATE DISTRIBUTORS 630448004 33.54% 608233387 40.79% THEREFORE, IT IS CLEAR FROM THE ABOVE DETAILS OF TH E RECEIPT FROM THE GOVERNMENT AS AGAINST THE SUPPLY TO THE PRIVATE DIS TRIBUTOR THAT FOR THE ASSESSMENT YEAR 2013-14 THE ASSESSEE HAS RECEIVED M ORE THAN 66% TO THE TOTAL RECEIPT FROM STATE GOVERNMENT AND FOR THE ASSESSMENT YEAR 2014-15 THE RECEIPT FROM THE GOVERNMENT IS MORE THA N 59%. IF WE SEE IN TERMS OF PROVISIONS OF SECTION 10(23C)(IIIAB) OF THE ACT IT IS MORE THAN PRESCRIBED LIMIT OF 50% TO CONSTITUTE SUBSTANTIALLY FINANCED BY THE GOVERNMENT. EVEN IF RESERVES AND SURPLUS OF THE ASS ESSEE ARE TO BE TAKEN INTO CONSIDERATION THE COMPONENT OF THE RESER VE AND SURPLUS FROM THE RECEIPT OF THE GOVERNMENT IS MORE THAN 50%. THE REFORE, APPLYING THE PARAMETER OF MORE THAN 50% OF THE REVENUE IS RE CEIVED FROM THE GOVERNMENT AGAINST THE SUPPLY OF BOOKS FREE OF COST UNDER THE SCHEME OF THE STATE GOVERNMENT IT IS REGARDED AS SUBSTANTI ALLY FINANCED BY THE GOVERNMENT. THE INDORE BENCHES OF THE TRIBUNAL VIDE ORDER DATED ITA NO. 252 &253/JP/2019 RAJASTHAN STATE TEXT BOOK BOARD VS. ACIT(E) 37 25.04.2012 IN CASE OF MP RAJYA PATHYA PUSTAK NIGAM VS. DCIT IN ITA NO. 375 TO 394/IND/2011 HAS DEALT WITH AN IDENTICAL ISSUE AND HELD IN PARA 29 TO 39 AS UNDER:- 29. AS PER THE AUDITED ACCOUNTS OF THE ASSESSEE, WE FOUND THAT OUT OF ITS SURPLUS, THE ASSESSEE HAS PAID ROYALTY TO THE B OARD OF SECONDARY EDUCATION, GOVERNMENT OF M.P. AND MANY AUTHORS OF T HE BOOKS. THE ASSESSEE HAD CONTRIBUTED FOR CONSTRUCTION OF SCHOOL BUILDING AND HAD ALSO DISTRIBUTED FREE BOOKS TO THE DESERVING STUDEN TS. THE ASSESSEE PUBLISHES ONLY TEXT BOOKS, SO THAT STUDENTS GET BO OKS AT A CHEAPER PRICE. THE ASSESSEE CANNOT BE COMPARED WITH GENERAL /PRIVATE PUBLISHERS AND BOOK SELLERS. THUS, THE OBSERVATION OF THE ASSE SSING OFFICER TO THE EFFECT THAT ACTIVITY OF THE ASSESSEE SOCIETY IS MER ELY PRINTING AND SALE OF BOOKS AS A COMMERCIAL VENTURE IS CONTRARY TO THE MA TERIAL PLACED ON RECORD. WE FOUND THAT M.P. STATE COUNCIL FOR EDUCAT IONAL RESEARCH AND TRAINING IS WORKING WITH THE ASSESSEE SOCIETY WHICH IS AN ACADEMIC COUNCIL. AS PER THE AUDITED ACCOUNTS, WE FOUND THAT THE ASSESSEE HAS PAID SUBSTANTIAL AMOUNT OF ROYALTY TO THE AUTHORS A ND MPBSE. OBSERVATIONS OF THE LOWER AUTHORITIES TO THE EFFECT THAT ROYALTY IS ONLY PAID TO MPBSE IS NOT CORRECT. IT IS CLEAR FROM THE FOLLOWING YEAR-WISE CHART INDICATING PAYMENT OF ROYALTY BY THE ASSESSEE . FINANCIAL YEAR AMOUNT OF ROYALTY PAID (IN RS.) 2007 - 08 48,09,507 2006 - 07 16,00,000 2005 - 06 16,10,623 2004 - 05 10,04,050 2003 - 04 10 ,04,050 2002 - 03 9,73,313 2001 - 02 11,30,196 1999 - 2000 12,10,054 1998 - 99 28,37,672 ITA NO. 252 &253/JP/2019 RAJASTHAN STATE TEXT BOOK BOARD VS. ACIT(E) 38 1997 - 98 10,70,794 1996 - 97 7,73,362 1995 - 96 7,82,584 1994 - 95 12,65,307 30. THE OBSERVATION OF LD. LOWER AUTHORITIES TO THE EFFECT THAT THE ASSESSEE SOCIETY IS NOT SUBSTANTIALLY FINANCED BY T HE GOVERNMENT OF M.P. IS MISPLACED, IN VIEW OF THE AUDITED ACCOUNTS PLACED IN PAPER BOOK WHICH INDICATE THAT THE STATE GOVERNMENT UNDER THE SCHEME OF SARVA SHIKSHA ABHIYAN ADVANCED FOLLOWING AMOUNT TO THE A PPELLANT AGAINST SUPPLY OF NISHULK PATHYA PUSTAK VITRAN YOJNA :- FINANCIAL YEAR ENDED AMOUNT OF ADVANCE 31.03.2008 60,04,17,713 31.03.2007 35,96,23,390 31.03.2006 52,45,85,713 31.03.2005 40,43,93,518 31. WE FOUND THAT EVEN AFTER DIRECTION OF THE HON'B LE HIGH COURT AND I.T.A.T. IN THE REMAND PROCEEDINGS, BOTH THE LOWER AUTHORITIES HAVE NOT CONSIDERED THE MAIN OBJECT OF THE SOCIETY WHICH IS TO PRINTING AND PUBLISHING OF TEXT BOOKS TO THE STUDENTS OF CLASS I TO XII AT CHEAPER RATE TO COMPLY WITH THE STATUTORY REQUIREMENT OF AR TICLE 21-A AND 41 OF THE CONSTITUTION OF INDIA, WHICH MAKE THE RIGHT OF EDUCATION AS FUNDAMENTAL RIGHTS OF CHILDREN, WHICH READS AS UNDE R :- 21-A- RIGHT TO EDUCATION THE STATE SHALL PROVID E FREE AND COMPULSORY EDUCATION TO ALL CHILDREN OF THE AGE OF 6 TO, 14 YEARS IN SUCH MANNER AS THE STATE MAY BY LAW DETERMINE. ARTICLE 41 : THE STATE SHALL WITHIN THE LIMITS OF ITS ECONOMIC CAPACITY AND DEVELOPMENT MAKE EFFECTIVE PROVISION FOR SECURITY T HE RIGHT TO WORK, TO ITA NO. 252 &253/JP/2019 RAJASTHAN STATE TEXT BOOK BOARD VS. ACIT(E) 39 EDUCATION AND TO PUBLIC ASSISTANCE IN CASE OF UNEMP LOYMENT, OLD AGE SICKNESS DISABILITIES AND IN OTHER CASES OF UNDESER VED WANT. PROVIDING OF SCHOOL TEXT BOOKS AND INCIDENTAL PUBLI CATION AT CHEAPER RATES IS DEFINITELY TO AID KIND PROMOTE ADVANCEMENT OF EDUCATION TO THE CHILDREN. 32. TO COMPLY WITH THE STATUTORY REQUIREMENT ON ART ICLE 21A AND 41, THE ASSESSEE SOCIETY IS FOLLOWING SYLLABUS PRESCRIB ED BY THE M. P. GOVERNMENT AND PRINTING AND PUBLISHING BOOKS FOR TH E USE OF STUDENTS OF CLASS I TO XII OF THE STATE OF M. P. THE ASSESSE E SOCIETY IS DOING THIS JOB UNDER THE POLICY OF THE GOVERNMENT IN THE ABSEN CE OF WHICH, AN INSTITUTION OF THAT TYPE CANNOT BE RUN. THUS, THE A SSESSEE IS DIRECTLY AND INDIRECTLY FULFILLING THE OBJECTIVE LAID DOWN UNDER ARTICLE 21A AND 41 OF THE CONSTITUTION OF INDIA, WHICH PROVIDES THAT IT I S THE PRIMARY DUTY OF STATE TO SECURE THE RIGHT TO EDUCATION AND TO ESTAB LISH EDUCATIONAL INSTITUTION, ADMISSION OF STUDENTS ETC. FURTHERMORE , THE EDUCATION IS SUBJECT MATTER OF CONCURRENT LIST UNDER SCHEDULE VI I 111 OF THE CONSTITUTION OF INDIA AND TO ACHIEVE THIS DATE, THE STATE GOVERNMENT FRAMED A POLICY AND TO IMPLEMENT IT EFFECTIVELY IT HAS CONSTITUTED BODIES LIKE THE ASSESSEE SOCIETY. IT IS ALSO EVIDENT FROM RECORD THAT THE ASSESSEE SOCIETY IS CONSTITUTED BY THE STATE GOVERN MENT WITH THE OBJECT TO PROVIDE TEXT BOOKS TO THE STUDENTS OF CLASS I TO XII AT A CHEAPER RATE AND THE STATE GOVERNMENT HAS ACHIEVED THIS OBJECT V ERY SUCCESSFULLY, WHICH IS CLEAR FROM THE FACT THAT SELLING PRICE OF THE BOOK PRINTED BY THE SOCIETY IS JUST 1/3RD IN COMPARISON TO THE TEXT BOO KS PUBLISHED BY THE PRIVATE PUBLISHERS. THE ASSESSEE HAS ALSO PLACED ON RECORD LIST CONTAINING DETAILS REGARDING SELLING PRICE OF THE B OOKS PUBLISHED BY THE SOCIETY VIS--VIS PRIVATE PUBLISHERS IN PART III AS PLACED AT PAGE 931 & 932 OF THE PAPER BOOK. IT IS ALSO EVIDENT FROM THE AUDITED ACCOUNTS FOR THE ASSESSMENT YEAR 1988-89 TO 2008-09 THAT THE ASS ESSEE SOCIETY HAS NOT INCURRED ANY EXPENDITURE FOR NON-EDUCATIONAL PU RPOSES. EVEN BOTH THE LOWER AUTHORITIES HAVE NOT GIVEN ANY FINDING NO R BROUGHT ANY MATERIAL ON RECORD EVEN DURING REMAND ASSESSMENT PR OCEEDINGS, TO SUGGEST THAT THE ASSESSEE HAS INCURRED ANY EXPENDIT URE FOR NON- EDUCATIONAL PURPOSES. THUS, WE FOUND THAT ENTIRE FU ND OF THE ASSESSEE ITA NO. 252 &253/JP/2019 RAJASTHAN STATE TEXT BOOK BOARD VS. ACIT(E) 40 SOCIETY WAS UTILIZED ONLY FOR THE EDUCATIONAL PURPO SES AND NOTHING WAS BROUGHT ON RECORD BY ANY OF THE LOWER AUTHORITIES T O INDICATE THAT THE ASSESSEE SOCIETY HAS UTILIZED FUND FOR PURPOSE OTHE R THAN EDUCATIONAL ACTIVITIES. AS PER OBJECT CLAUSE NO. (2), THE ASSES SEE IS PRODUCING SCHOOL TEXT BOOKS AND HAND BOOKS FOR TEACHES, WORK BOOKS F OR PUPILS AND OTHER EDUCATIONAL LITERATURE, WHICH IS USEFUL FOR FURTHER ANCE OF TEACHING, LEARNING AND FOR EVALUATION -: ANY EDUCATIONAL INS TITUTION. IN ADDITION TO PRINTING OF TEXT BOOKS, THE ASSESSEE ALSO ENCOURAGE S AND PROCURES EXPERTS AUTHORS TO WRITE TEXT BOOKS ON VARIOUS SUBJ ECTS AS PER THE SYLLABUS PRESCRIBED BY THE GOVERNMENT FOR VARIOUS C OURSES OF EDUCATION. AS PER OBJECT NO.(14), PRINTING, PUBLISHING AND SAL E OF BOOKS., IS APPROVED BY GOVERNMENT AND PAGE (5) AND (6) PRESCRI BED FOR UNDERTAKING RESEARCH FOR EDUCATION. 33. IT IS PERTINENT TO MENTION HERE THAT LIKE ASSES SEE SOCIETY WHICH IS ENGAGED IN PRINTING AND PUBLISHING OF TEXT BOOKS AS PRESCRIBED BY THE STATE OF M.P., SIMILAR TYPE OF INSTITUTION IS ALSO WORKING IN OTHER STATES LIKE TAMIL NADU, RAJASTHAN, DELHI, ORISSA, BIHAR. I N CASE OF SIMILAR INSTITUTIONS EXEMPTIONS HAVE BEEN ALLOWED BY THE TR IBUNAL AND HIGH COURT. HON'BLE RAJASTHAN HIGH COURT HAS DEALT WITH IN DETAIL THE ACTIVITY OF RAJASTHAN STATE TEXT BOOK CODE, 224 ITR 668 AND ALLOWED EXEMPTION U/S 10(22) OF INCOME-TAX ACT, 1961. HON'B LE HIGH COURT HAS OBSERVED AT PAGE 668 THAT THE FACTS IN THE CASE OF TAMIL NADU TEXT BOOK SOCIETY ARE SIMILAR. IN THE CASE OF TAMIL NADU TEXT BOOK SOCIETY, THE C.B.D.T. ITSELF HAS TAKEN THE VIEW VIDE ITS LET TER DATED 19.8.1975 THAT TAMIL NADU TEXT BOOK SOCIETY IS ENTITLED FOR E XEMPTION U/S 10(22) OF THE INCOME-TAX ACT. THE SAID LETTER READS AS UND ER :- ON CAREFUL CONSIDERATION OF FACTS INVOLVED THE BO ARD IS OF OPINION THAT THE TAMILNADU TEXT BOOK SOCIETY WOULD BE AN EDUCATI ONAL INSTITUTION EXISTING SOLELY FOR THE PURPOSE OF EDUCATION WITHIN THE MEANING OF SECTION 10(22) OF THE INCOME-TAX ACT. 34. IT IS CLEAR FROM THE ABOVE LETTER THAT CBDT ITS ELF HAS RECOGNIZED THE RIGHT OF EXEMPTION U/S 10(22), TO SUCH INSTITUTION ENGAGED IN PRINTING AND PUBLISHING OF BOOKS FOR STUDENTS. ITA NO. 252 &253/JP/2019 RAJASTHAN STATE TEXT BOOK BOARD VS. ACIT(E) 41 35. NOW COMING TO THE DECISION RELIED ON BY THE ASS ESSING OFFICER IN THE CASE OF SORABJI, 201 ITR 939, WHEREIN OBSERVATION O F THE HON'BLE SUPREME COURT IN THE CASE OF LOKA SHIKSHANA TRUST, 101 ITR 234, WAS REFERRED. THE SAME IS RESTRICTED TO SECTION 2(15) O F THE ACT, WHICH IS APPLICABLE FOR CHARITABLE PURPOSES. HOWEVER, THE EX PRESSION IN SECTION 10(22) WITH REGARD TO EDUCATIONAL INSTITUTION IS WI DER AND INCLUDES ACTIVITIES OF EDUCATIONAL PURPOSES. THUS, THE CLAIM OF EXEMPTION U/S 10(22) CANNOT BE RESTRICTED TO ONLY THOSE ASSESSEES , WHO ARE RUNNING EDUCATIONAL INSTITUTION. THUS, FOR FALLING WITHIN T HE PURVIEW OF EDUCATIONAL INSTITUTION, IT IS NOT MANDATORY THAT T HE ASSESSEE SHOULD CARRY ON EDUCATIONAL INSTITUTION BY ITSELF. IT WILL BE SUFFICIENT THAT THE ASSESSEE IS EXISTING SOLELY FOR EDUCATIONAL PURPOSE S. EVEN IN CASE OF SORABJI (SUPRA) AS RELIED ON BY THE LD.CIT(A), HON' BLE COURT HAS OBSERVED AS UNDER :- TRUE IT IS, THAT IT IS NOT NECESSARY FOR THE INSTI TUTION TO RUN EDUCATION ITSELF. THE EDUCATIONAL INSTITUTION MAY BE RUN BY S OME ONE BUT THE INCOME OF THE INSTITUTION SHOULD BE UTILIZED FOR IM PARTING EDUCATION. 36. IN THE ABOVE CASE, IT WAS FOUND THAT THE ASSESS EE WAS GIVING SCHOLARSHIPS OR GRANT TO THE STUDENTS WITHOUT HAVIN G ANY CONTROL WHATSOEVER ON SUCH STUDENTS. THE COURT OBSERVED THA T SINCE NO EDUCATIONAL ACTIVITIES IN THE SENSE OF NORMAL SCHOO LING OR ACTUAL IMPARTING OF KNOWLEDGE OR LEARNING TO THE STUDENTS WAS CARRIED ON BY THE TRUST AND THE INSTITUTE WAS SIMPLY GIVING SCHOL ARSHIPS TO THE NEEDY PARSI STUDENTS FOR TECHNICAL EDUCATION WITHOUT GETT ING ANY CONTROL OVER SUCH STUDENTS OR WITHOUT IMPARTING ANY KNOWLEDGE TO THE SAID STUDENTS, THE ASSESSEE WAS HELD TO BE NOT ENTITLED FOR EXEMPT ION U/S 10(22). IN THE CASE OF SOLE TRUSTEE, LOK SHIKSHAN TRUST (SUPRA ), THE ISSUE BEFORE SC WAS CLAIM OF EXEMPTION U/S 11, WHERE THE ASSESSE E TRUST WAS DOING PRINTING, PUBLISHING, NEWS PAPERS AND JOURNALS FOR EARNING PROFIT, IT WAS HELD THAT SUCH PRINTING AND PUBLICATION OF NEWS PAP ER WAS NOT EDUCATION WITHIN THE MEANING OF SEC 2(15). HOWEVER, THE FACTS OF INSTANT CASE ARE QUITE DISTINGUISHABLE WHERE ASSESSEE WAS PRINTING A ND PUBLISHING TEXT BOOKS FOR STUDENTS OF CLASS I TO XII WITHOUT ANY PR OFIT MOTIVE. THUS, IT WILL NOT HELP THE REVENUE FOR HOLDING THAT PRESENT ASSESSEE WAS NOT ITA NO. 252 &253/JP/2019 RAJASTHAN STATE TEXT BOOK BOARD VS. ACIT(E) 42 FALLING WITHIN THE DEFINITION OF OTHER EDUCATIONAL INSTITUTION. HOWEVER, IN THE INSTANT CASE BEFORE US, UNDISPUTEDLY, THE AS SESSEE SOCIETY WAS ESTABLISHED ONLY FOR THE PURPOSE OF ADVANCEMENT OF EDUCATION BY PRINTING AND PUBLISHING OF TEXT BOOKS AS PRESCRIBED BY THE GOVERNMENT. AS DISCUSSED ABOVE, ALL SUCH INSTITUTIONS WORKING I N ALL OTHER STATES OF INDIA WERE HELD TO BE ELIGIBLE FOR CLAIM OF EXEMPTI ON U/S 10(22). THUS, THERE WAS NO JUSTIFICATION ON THE PART OF LOWER AUT HORITIES FOR DECLINE OF CLAIM OF EXEMPTION U/S 10(22)/10(23C). EVEN IN THE CASE OF ACADEMY OF GENERAL EDUCATION, 150 ITR 135, IT WAS OBSERVED THA T THE ASSESSEE ITSELF NEED NOT IMPART EDUCATION TO THE STUDENTS AN D IT NEED NOT BE NECESSARILY SCHOOL OR COLLEGE FOR THE CLAIM OF BENE FIT. IT WAS FOUND THAT IN ITS ACCOUNT EVEN THOUGH THE ASSESSEE HAS NOT INC LUDED INCOME OF COLLEGES, ESTABLISHED UNDER SEPARATE TRUST. HOWEVER , IT WAS FOUND THAT THE ASSESSEE HAS GIVEN GRANTS TO SOME OF THOSE SCHO OLS, IT WAS HELD THAT THE ASSESSEE WAS ENTITLED FOR CLAIM OF EXEMPTION U/ S. 10(22). 37. IN LETTER F.NO.184/26/75-INCOME-TAX ACT, 1961,- 1 DATED THE 19TH AUGUST, 1975, OF THE CBDT, IT WAS OBSERVED BY THE C BDT THAT ON CAREFUL CONSIDERATION OF FACTS INVOLVED, THE BOARD IS OF THE OPINION THAT THE TAMIL NADU TEXT BOOK SOCIETY WOULD BE AN EDUCAT IONAL INSTITUTION EXITING SOLELY FOR THE PURPOSE OF EDUCATION WITHIN THE MEANING OF SECTION 10(22) OF THE INCOME-TAX ACT. 38. APPLYING THE FACTS OF THE ASSESSEE TO THE FACTS DISCUSSED BY THE CBDT, WE HAVE NO HESITATION TO HOLD THAT ASSESSEE I S ENTITLED FOR CLAIM OF EXEMPTION U/S 10(22). AS A MATTER OF FACT, RECEN TLY HON'BLE SUPREME COURT IN THE CASE OF ASSAM STATE TEXT BOOKS PRODUCT ION PUBLICATION (SUPRA), HAS MADE A REFERENCE TO THE SAID LETTER, A T PAGE 21 OF THE HON'BLE SUPREME COURT STATED AS UNDER :- HOWEVER, THE HIGH COURT NOTICED THE LETTER ISSUED BY THE CBDT ON AUGUST 19,1975, IN THE CASE OF TAMIL NADU TEXT BOOK SOCIETY, WHICH AS STATED ABOVE IN THE SIMILAR ` CIRCUMSTANCES HAD GRA NTED EXEMPTION TO THE TAMIL NADU TEXT BOOK SOCIETY AS EDUCATIONAL INS TITUTION WITHIN THE MEANING OF SECTION 10(22) OF THE ACT. THE JUDGMENT OF THE HIGH COURT FURTHER RECITES THAT UNDER A SIMILAR SITUATION, THE CBDT HAD ALSO EXTENDED THE BENEFIT OF EXEMPTION U/S 10(22) OF THE ACT TO THE ORISSA ITA NO. 252 &253/JP/2019 RAJASTHAN STATE TEXT BOOK BOARD VS. ACIT(E) 43 SECONDARY BOARD EDUCATION AS REPORTED IN SECONDARY BOARD EDUCATION VS. ITO, (1972) 86 ITR 408 (ORISSA), FOLLOWING THES E CIRCULARS/LETTERS ISSUED BY THE CBDT, THE RAJASTHAN HIGH COURT CAME T O THE CONCLUSION THAT THE ASSESSEE IN THAT CASE NAMELY THE RAJSTHAN HIGH COURT CAME TO THE CONCLUSION THAT THE ASSESSEE IN THAT CASE NAMEL Y THE RAJASTHAN STATE TEXT BOOK WAS ENTITLED TO CLAIM THE BENEFIT O F EXEMPTION U/S 10(22) OF THE ACT. 39. IN VIEW OF THE ABOVE DISCUS SION AND APPLYING THE JUDICIAL PRONOUNCEMENTS TO THE FACTS OF THE INSTANT CASE VIS--VIS AIMS AND OBJECTS REFERRED ABOVE, WE HOLD THAT LOWER AUTH ORITIES WERE NOT JUSTIFIED IN DECLINING CLAIM OF EXEMPTION TO THE AS SESSEE SOCIETY U/S 10(22)/10(23C) OF THE INCOME-TAX ACT, 1961, IN RESP ECT OF ALL THE YEARS UNDER CONSIDERATION, FOR THE DETAILED REASONS DISCU SSED HEREINABOVE. THUS, INDORE BENCHES OF THE TRIBUNAL HAS ANALYSED A LL THE RELEVANT DECISIONS ON THE POINT AND AFTER FOLLOWING THE DECI SION OF HONBLE HIGH COURT AS WELL AS THE DECISION OF HONBLE SUPREME CO URT HAS HELD THAT MP RAJYA PATHYA PUSTAK NIGAM WHICH IS SOCIETY HAVIN G SIMILAR OBJECTS AS OF THE ASSESSEE BEFORE US IS ELIGIBLE FOR EXEMPT ION U/S 10(23C)(IIIAB) OF THE ACT. HAVING REGARD TO THE FACTS AND CIRCUMST ANCES OF THE CASE AS WELL AS VARIOUS DECISIONS AS DISCUSSED ABOVE, WE HO LD THAT THE ASSESSEE-SOCIETY WHICH WAS ALREADY HELD AS EDUCATIO NAL INSTITUTION EXISTING SOLELY FOR EDUCATION AND NOT FOR PURPOSES OF PROFIT IS ALSO SUBSTANTIALLY FINANCED BY THE STATE GOVERNMENT AND THEREFORE, IS ELIGIBLE FOR EXEMPTION U/S 10(23C)(IIIAB) OF THE ACT. ACCOR DINGLY, THE ORDERS OF ITA NO. 252 &253/JP/2019 RAJASTHAN STATE TEXT BOOK BOARD VS. ACIT(E) 44 THE AUTHORITIES BELOW ARE SET ASIDE AND THE CLAIM O F THE ASSESSEE IS ALLOWED. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED ORDER PRONOUNCED IN THE OPEN COURT ON 10/04/2019. SD/- SD/- JESK LH0 KEKZ FOT; IKY JKO (RAMESH. C. SHARMA) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 10/04/2019. * SANTOSH. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- RAJASTHAN STATE TEXT BOOK BOARD, JAI PUR. 2. IZR;FKHZ@ THE RESPONDENT- ACIT(EXEMPTION), CIRCLE, JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 252 & 253/JP/2019} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR