Asst. DI.T. (Exemptions), Bangalore V. Karnataka Text Books Society, Bangalore

ITA 892/BANG/2011

• Counselvise Citation: 89221114 RSA 2011
• Duration Of Justice: 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-07-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 14-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K AMBASTHA
• Assessee Lawyers: S B SUBASH
• Section: 10; 11; 143(3); 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BANGALORE BANGALORE BANGALORE BENCH BENCH BENCH BENCH A AA A BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI N. N. N. N. BARAT BARAT BARAT BARATH HH HVAJA SANKAR, VICE VAJA SANKAR, VICE VAJA SANKAR, VICE VAJA SANKAR, VICE- -- -PRESIDENT PRESIDENT PRESIDENT PRESIDENT A AA AND NDND ND SHRI SHRI SHRI SHRI N.V.VASUDEVAN N.V.VASUDEVAN N.V.VASUDEVAN N.V.VASUDEVAN, JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER ITA NO.892 /BANG/2011 (ASSESSMENT YEAR: 2007-08) ASST. DIRECTOR OF INCOME-TAX(EXEMPTIONS), CIRCLE 17(1), BANGALORE. APPELLANT VS. KARNATAKA TEXT BOOK SOCIETY, NO.4, 100 FT. RING ROAD, BSK 3 RD STAGE, BANGALORE-560085. RESPONDENT PAN:AABAT 3059 Q APPELLANT BY: SHRI S.K.AMBASTHA, CIT RESPONDENT BY : SHRI S.B.SUBASH, C.A. DATE OF HEARING: 27-06-2012 DATE OF PRONOUNCEMENT: 04-07-2012 O R D E R O R D E R O R D E R O R D E R PER PER PER PER N. BARATHVAJA SANKAR, VP N. BARATHVAJA SANKAR, VP N. BARATHVAJA SANKAR, VP N. BARATHVAJA SANKAR, VP: :: : THIS IS AN APPEAL PREFERRED BY THE REVENUE AGAINST THE APPELLATE ORDER DATED 3-8-2011 OF THE CIT(A)-V, BAN GALORE, IN RESPECT OF KARNATAKA TEXT BOOK SOCIETY, BANGALORE, FOR THE ASSESSMENT YEAR 2007-08. 2. THE REVENUE HAS RAISED THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL: ITA 892/BANG/2011 PAGE 2 OF 6 I) THE LEARNED CIT(A) HAS ERRED IN NOT GIVING A F INDING ON DENIAL OF EXEMPTION U/S 11 OF THE INCOME-TAX ACT IN THE ABSENCE OF REGISTRATION U/S 12AA OF THE INCOME- TAX ACT WHEREBY THE ASSESSMENT WAS CONCLUDED IN THE STATUS OF AOP. II) THE LEARNED CIT(A) ERRED IN HOLDING THAT THE AS SESSEE IS ELIGIBLE FOR EXEMPTION U/S 10(23C)(IIIAB) EVEN T HOUGH NO CLAIM FOR EXEMPTION WAS MADE. III) THE LEARNED CIT(A) ERRED IN HOLDING THAT THE A SSESSEE IS ELIGIBLE FOR EXEMPTION U/S 10(23C)(IIIAB) WITHOU T APPRECIATING THE FACT THE SOCIETY IS NOT AN UNIVERS ITY OR EDUCATIONAL INSTITUTION EXISTING SOLELY FOR EDUCATI ONAL PURPOSES. IV) THE CIT(A) ERRED IN NOT APPRECIATING THE FACT T HAT THE ACTIVITIES CARRIED OUT BY SOCIETY CANNOT BE SAID TH AT THE SOCIETY EXISTS SOLELY FOR EDUCATION PURPOSE. THE ACTIVITIES CARRIED OUT BY THE SOCIETY HAVE NO CO-RE LATION TO EDUCATION. AT THE MOST SOCIETY CAN ONLY BE CALL ED A FACILITATOR AND NOT ENGAGED IN IMPARTING EDUCATION. IN THE ABSENCE OF ACTUAL ACTIVITY OF IMPARTING EDUCATI ON BY NORMAL SCHOOLING OR NORMAL CONDUCT OF CLASSES THE ACTIVITIES/OBJECTS OF THE SOCIETY DO NOT FALL WITHI N THE AMBIT OF SECTION 10(23C)(IIIAB). V) THE LEARNED CIT(A) HAS ERRED IN NOT APPRECIATING THE FACT THAT THE RECEIPTS OF ASSESSEE ALSO CONSISTS OF INCOME FROM ROYALTY AND JOB WORK CHARGES WHICH ARE COMMERCIAL IN NATURE AND HIT BY THE PROVISO TO SECT ION 2(15) OF THE INCOME TAX ACT. 3. THE BRIEF FACTS AS GATHERED FROM THE RECORDS ARE THAT THE ASSESSEE IS A SOCIETY PROMOTED BY THE GOVERNMENT OF KARNATAKA FOR PRINTING AND PUBLICATION AND FREE DISTRIBUTION OF SCHOOL TEXT BOOKS IN VARIOUS LANGUAGES FOR CLASS 1 ST TO 10 TH STANDARDS IN GOVERNMENT SCHOOLS. THE ASSESSEE-SOCIETY CAME INTO EXISTENCE ON 12-5-2006. FOR THE ASSESSMENT YEAR 2007-08, THE ASSESSEE FILED RETURN OF INCOME DECLARING A DEFICIT OF `8,35,141/- . THE AO COMPLETED THE ASSESSMENT U/S 143(3) OF THE INCOME-T AX ACT, 1961 [HEREINAFTER REFERRED TO AS 'THE ACT'] DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT `7,34,15,430/-. DURING THE COUR SE OF SCRUTINY ITA 892/BANG/2011 PAGE 3 OF 6 ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT DURING THE FINANCIAL YEAR RELEVANT TO ASSESSMENT YEAR 2007-08, THE ASSES SEE RECEIVED A GRANT OF `13,01,21,594/- FROM THE GOVERNMENT OF K ARNATAKA OUT OF WHICH AN AMOUNT OF `7,42,30,576/- WAS UNSPENT DU RING THE YEAR AND THE SAME WAS CARRIED OVER TO THE FINANCIAL YEAR 2007-08. THE AO FOUND THAT THE ASSESSEE WAS NOT REGISTERED U/S 1 2AA OF THE ACT AND HENCE EXEMPTION U/S 11 WAS NOT AVAILABLE TO THE ASSESSEE AND ACCORDINGLY THE AO TREATED THE AMOUNT AS THE INCOME OF THE ASSESSEE AND COMPLETED THE ASSESSMENT. AGGRIEVED, THE ASSESSEE MOVED THE MATTER IN APPEAL BEFORE THE FIRST APPELLA TE AUTHORITY. 4. BEFORE THE FIRST APPELLATE AUTHORITY, THE ASSES SEE ARGUED THAT IT IS A SOCIETY ESTABLISHED BY THE GOVERNMENT OF KARNATAKA FOR EDUCATION PURPOSES AND HENCE IT IS ENTITLED FOR EXE MPTION U/S 10(23C)(IIIAB) OF THE ACT. THE CIT(A) FOUND THAT C LAUSE (IIIAB) OF SEC.10(23C) EXEMPTS THE INCOME RECEIVED BY ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION EXISTING SOLELY FOR E DUCATIONAL PURPOSES AND NOT FOR PURPOSES OF PROFIT AND WHICH I S WHOLLY OR SUBSTANTIALLY FINANCED BY THE GOVERNMENT. AFTER EXAMINING THE FACTS OF THE CASE, THE CIT(A) FOUND THAT THE ASSESS EE IS MAINLY ENGAGED IN THE PRINTING OF SCHOOL TEXT BOOKS AND FR EE DISTRIBUTION TO THE GOVERNMENT SCHOOLS IN THE STATE OF KARNATAKA AND THE ASSESSEE IS FULFILLING ALL THE CONDITIONS PRESCRIBE D IN SECTION 10(23C)(IIIAB). HE FOUND THAT THE SUPREME COURT IN THE CASE OF ASSAM STATE TEXT BOOK PRODUCTION & PUBLICATION CORP ORATION LTD. VS. CIT (319 ITR 317) HELD THAT THE STATE TEXT BOOK SOCIETI ES ARE ENTITLED FOR EXEMPTION U/S 10(22) WHICH WAS SIMILAR TO THE PRESENT SECTION 10(23C) BEFORE ITS AMENDMENT. HE NOTICED T HAT THE ITA 892/BANG/2011 PAGE 4 OF 6 HONBLE SUPREME COURT HAD REFERRED TO THE LETTER OF THE CENTRAL GOVERNMENT DATED 9-7-1973 TO THE EFFECT THAT ALL ST ATE CONTROLLED EDUCATIONAL COMMITTEES/BOARDS HAVE BEEN CONSTITUTED TO IMPLEMENT THE EDUCATIONAL POLICIES OF THE STATES, C ONSEQUENTLY THEY SHOULD BE TREATED AS EDUCATIONAL INSTITUTIONS. HE ALSO NOTICED THAT IN THE CASE OF CIT VS. RAJASTHAN STATE TEXT BOOK BOARD (244 ITR 667) THE HONBLE RAJASTHAN HIGH COURT ALSO HELD THAT THE TEXT BOOK BOARD WAS ENTITLED TO EXEMPTION U/S 10(22). I T WAS ALSO MENTIONED IN THAT JUDGMENT THAT THE CBDT GRANTED E XEMPTION U/S 10(22) TO THE TAMIL NADU TEXT BOOK SOCIETY ON 19-8- 1975. THE HONBLE PATNA HIGH COURT IN ITS JUDGMENT DATED 1-4- 2011 HAS ALSO HELD IN THE CASE OF BIHAR STATE TEXT BOOK PUBLISHING CORPORATION VS. CIT (JUDGMENT DATED 1-4-2011) THAT THE TEXT BOOK PUBLI SHING CORPORATION IS ENTITLED FOR EXEMPTION U/S 10(23C)(I IIAB) OF THE ACT. THE CIT(A) ALSO FOUND THAT THE ASSESSEE DID NOT DIV ERT THE UNSPENT AMOUNT FOR ANY OTHER PURPOSES AND ONLY CARRIED OVER TO THE NEXT YEAR FOR CARRYING OUT ITS MAIN ACTIVITY OF PRINTING OF TEXTBOOKS. THEREFORE, THE CIT(A) HELD THAT THE ASSESSEE IS ENT ITLED FOR EXEMPTION U/S 10(23)(IIIAB) OF THE ACT AND DELETED THE ADDITION MADE BY THE AO. 5. NOW, THE REVENUE IS AGGRIEVED AND IS ON APPEAL BEFORE US WITH THE GROUNDS OF APPEAL EXTRACTED ELSEWHERE OF T HIS ORDER. AT THE TIME OF HEARING, LEARNED DEPARTMENTAL REPRESENT ATIVE REITERATED THE GROUNDS OF APPEALS AS HIS SUBMISSION S. HE ALSO RELIED ON THE DECISION OF THE APEX COURT IN THE CAS E OF OXFORD UNIVERSITY PRESS VS. CIT (247 ITR 658)(SC) WHEREIN THE HONBLE ITA 892/BANG/2011 PAGE 5 OF 6 APEX COURT HELD THAT EXEMPTION U/S 10(22) IS NOT AV AILABLE FOR THE ACTIVITY OF PUBLICATION OF BOOKS IN INDIA. PER CONTRA, LEARNED COUNSEL FOR THE ASSESSEE SUPPO RTED THE ORDER OF THE CIT(A) AND REITERATED THE CONTENTS OF THE SAME AS HIS SUBMISSIONS. HE PLACED STRONG RELIANCE ON THE DECI SION OF THE APEX COURT IN THE CASE OF ASSAM STATE TEXT BOOK PRODUCTION & PUBLICATION CORPORATION LTD. (SUPRA) AND THE PATNA HIGH COURT IN THE CASE OF BIHAR STATE TEXT BOOK PUBLISHING CORPORATION VS. CIT (2011) 10 TAXMAN.COM 267(PAT). 6. WE HAVE HEARD RIVAL SUBMISSIONS AND CONSIDERED THE FACTS AND MATERIAL ON RECORD. IN OUR CONSIDERED OPINION, DECISION OF THE APEX COURT IN THE CASE OF OXFORD UNIVERSITY PRESS (SUPRA) RELIED ON BY THE LEARNED DEPARTMENTAL REPRESENTATIVE CANNOT H ELP THE REVENUE. IN THAT CASE, THE OXFORD UNIVERSITY WAS O UTSIDE INDIA AND ONLY OXFORD UNIVERSITY PRESS WAS PRINTING BOOKS IN INDIA AND HENCE THE APEX COURT HELD THAT THE ACTIVITY DOES NOT ENTI TLE THE ASSESSEE FOR CLAIMING EXEMPTION U/S 10(22) OF THE ACT. WE F IND THAT THE FACTS OF THE PRESENT CASE ARE TOTALLY DIFFERENT FRO M THAT OF OXFORD UNIVERSITY PRESS. WHEREAS, IN THE CASE OF ASSAM STATE TEXT BOOK PRODUCTION & PUBLICATION CORPORATION LTD. (SUPRA) THE HONBLE APEX COURT HAS DEALT WITH SEC.10(22) AND HELD THAT THE A SSESSEE WAS ENTITLED TO EXEMPTION U/S 10(22). THE HONBLE APEX COURT HAS HELD AS UNDER: THE ASSESSEE WAS A GOVERNMENT COMPANY AND IT WAS CONTROLLED BY THE STATE OF ASSAM; THE CENTRAL BOARD OF DIRECT TAXES HAD GRANTED SIMILAR EXEMPTION BY LETTE R DATED AUGUST 19, 1975 TO THE TAMIL NADU TEXT BOOKS SOCIETY WHICH PERFORMED ACTIVITIES SIMILAR TO THOSE OF THE ASSESSEE; AND THE CENTRAL GOVERNMENT HAD BY LET TER DATED JULY 9, 1973, STATED THAT ALL STATE-CONTROLLE D ITA 892/BANG/2011 PAGE 6 OF 6 EDUCATIONAL COMMITTEES/BOARDS HAD BEEN CONSTITUTED TO IMPLEMENT THE EDUCATIONAL POLICY OF THE STATES AND CONSEQUENTLY THEY SHOULD BE TREATED AS EDUCATIONAL INSTITUTIONS. HENCE, FOLLOWING THE APEX COURT DECISION CITED SUPR A AND ALSO THE DECISION OF THE PATNA HIGH COURT IN THE CASE OF BIHAR STATE TEXT BOOK PUBLISHING CORPORATION VS. CIT (2011) 10 TAXMAN.COM 267(PAT.), WE HOLD THAT THE ASSESSEE IS TO BE TREAT ED AS EDUCATIONAL INSTITUTION. ONCE IT IS TREATED AS EDU CATIONAL INSTITUTION, IT IS ELIGIBLE FOR EXEMPTION U/S 10(23 C)(IIIAB) OF THE ACT. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDE R OF THE FIRST APPELLATE AUTHORITY AND AS SUCH WE UPHOLD THE SAME. 7. IN THE RESULT, THE REVENUES APPEAL IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH JULY,2012 . SD/- SD/- (N. (N. (N. (N.V. V.V. V.VASUDEVAN VASUDEVAN VASUDEVAN VASUDEVAN) )) ) JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER (N.BARATHVAJA SANKAR) (N.BARATHVAJA SANKAR) (N.BARATHVAJA SANKAR) (N.BARATHVAJA SANKAR) VICE VICE VICE VICE- -- -PRESIDENT PRESIDENT PRESIDENT PRESIDENT EKS COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) CONCERNED 4. CIT 5. DR, ITAT, BANGALORE 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY ITAT, BANGALORE