Through: Mr.Abhishek Maratha, Sr. Standing
Counsel with Ms. Anshul Sharma,
Adv.
CORAM:
HON'BLE MR. JUSTICE SANJIV KHANNA
HON'BLE MR. JUSTICE R.V. EASWAR
SANJIV KHANNA,J: (ORAL)
1. Council for the Indian School Certificate Examinations, a Society
registered under the Societies Registration Act, 1860 has filed the present
writ petition under article 226 & 227 of the constitution of india
impugning order dated 08.10.2008 passed by the Director General of
Income Tax (Exemptions), Delhi („DG‟, for short) denying them
exemption under Section 10(23C)(vi) of the Income Tax Act, 1961 („Act‟,
for short). The operative portion of the impugned order which also
records the reasoning reads as under: -
"Perusal of the documents submitted by the applicant reveal
that it conducts examinations for ICSE and ISC; awards
certificates to those who have passed the examination and
conduct other incidental activities. The applicant's income
comes from various sources and mainly from sources such as
Registration and Affiliation fees, Examination Fees, Re-
check & Miscellaneous fees. The above facts indicate that
the applicant Council is not an educational institution but an
examination body. This has been further strengthened by
another document produced by the applicant viz. Extract of
Delhi School Education Act wherein its examinations are
recognized as public examination for the purpose of the Act.
On the facts and in the circumstance stated herein
above, I am not satisfied that the applicant is an educational
institution existing solely for educational purposes.
Therefore the application u/s 10(23C) (vi) for the A.Y.2008-
09 to 2010-11 is rejected."
2. It is not disputed before us that the petitioner institute does not
conduct classes or is directly engaged in teaching the students. The
petitioner affiliates schools, prescribes syllabus and conducts examination
of students. The petitioner is authorised and permitted to conduct the said
exams and the results enable the students to get admission at the graduate
level. It is not disputed before us that the exams conducted by the
petitioner society are recognised. In the writ petition it is stated that about
1750 schools all over India are affiliated with the petitioner society and
are imparting education from nursery to twelfth standard. In other words
the petitioner is performing the similar functions if not identical functions
performed/ undertaken by the Central Board of Secondary Education and
the State Boards.
3. The question raised is whether or not the petitioner can be regarded
as an educational institution for the purpose of Section 10(23C)(vi) of the
Act. The said provision reads as under: -
"(23C) any income received by any person on behalf of-
(vi) any university or other educational institution existing
solely for educational purposes and not for purposes of
profit, other than those mentioned in sub-clause (iiiab) of
sub-clause (iiiad) and which may be approved by the
prescribed authority;"
4. Reading of the said provision shows that any University or other
educational institution existing solely for educational purposes qualify
under the clause. The University and the educational institution should
not be for the purposes of profit. The second requirement is negative in
nature, whereas the first requirement is positive. We cannot accept the
contention of the Revenue and the reasoning given in the impugned order
that the petitioner is not an educational institution because it is an
examination body and its principal work is to conduct examination and
charge examination fee, etc. The words "educational institution" used in
Section 10(23C)(vi) and the phrase "educational purpose" have been
interpreted and examined in several cases. We have a direct decision of
Orissa High Court in the case of Secondary Board of Education v. ITO,
(1972) 86 ITR 408 (Orissa). The Secondary Board of Education was
conducting examinations and a question arose whether it was an
educational institute or not. It was held that the Secondary Board of
Education exists solely for educational purpose and, therefore, an
educational institution. The aforesaid Board had been created to control
secondary education, prescribe courses of study and award certificates to
the successful candidates. It was to conduct examinations, etc. The
aforesaid activities undertaken by the Board, it was observed, qualify and
were for the purpose of education. Thus, the Board was an educational
institution. The High Court rejected the contention that fee, etc. for the
said services, constitute and should be regarded as activities for purpose
of profit. We may note that there is no allegation in the impugned order
dated 08.10.2008 that the petitioner is engaged in activities for purposes
of profit.
5. An institution established for educational purpose need not conduct
teaching classes, is no longer a matter of doubt or ambiguity and was
examined by the Supreme Court in Assam State Text Book Production
and Publication Corporation Ltd. v. CIT, (2009) 319 ITR 317 (SC).
The said corporation was engaged in publication of text books for the
students and had claimed exemption under Section 10(22) of the Act. The
Revenue disputed and claimed that the corporation was not an educational
institution. The Supreme Court reversed the finding of the High Court
and held that the said corporation was engaged in educational purposes
and, therefore, an educational institution entitled exemption under Section
10(22) of the Act. The said corporation was not engaged or conducting
teaching classes or directly imparting education through teachers. In the
said case the Supreme Court noticed the judgment of Orissa High Court in
the case of Orissa Secondary Board Education and approved the ratio and
principle enunciated therein. Reference was made to the judgment of the
Rajasthan High Court in CIT v. Rajasthan State Text Book Board,
(2000) 244 ITR 667 (Raj.). This judgment was approved. Rajasthan
State Text Book Board (supra) was not engaged in teaching students or
holding classes but publication of text books.
6. In American Hotel and Lodging Association Educational Institute
reported in (2008) 301 ITR 86 (SC), a number of issues had come up for
consideration but one of the aspects examined was whether the appellant
institute who was providing services in the form of curriculum, re-
production of text books, course material, software, faculty development
programme, evaluation system, entrance test and comprehensive
certification and registration programme was established and engaged in
educational purpose and, therefore, was an educational institution. The
Supreme Court distinguished the earlier decision in the case of Oxford University Press v. Commissioner Of Income Tax, (2001) 247 ITR 658 (SC) and held
that the American Hotel and Lodging Association was entitled to
exemption as an educational institute under Section 10(23C)(vi) of the
Act. We may only record here that the aforesaid institute was not directly
imparting education and had not employed teachers who were teaching or
giving lectures to the students. Decision in Oxford University Press
(supra) is distinguishable as the said assessee was in publication business
and engaged in sale of books as a business venture. The assessee had
therefore claimed exemption on the ground that it was a university and not
on the ground that it is an educational institution. For reasons set out in
the majority decision, the claim of the assessee was rejected.
7. Recently, the Madhya Pradesh High Court in CIT v. M.P. Rajya
Pathya Pustak Nigam, (2009) 226 CTR (MP) 497 examined a similar
question and after referring to several decisions has held that the term
educational purpose was not restricted merely to holding of teaching class
or lectures but educational purpose was equally served when educational
text books were published. It is, therefore, clear that courts have laid
emphasis on the activity undertaken, while construing or deciding whether
or not a particular institution can be regarded as an educational institution.
The courts have repeatedly held that the holding of classes is not
mandatory for an institution to qualify and to be treated as an educational
institution. If the activity undertaken and engaged is educational, it is
sufficient.
8. When we apply the aforesaid principle to the admitted nature of
activity undertaken by the petitioner, we have no hesitation in quashing
the impugned order dated 08.10.2008 and holding that the petitioner is an
educational institution. Writ of certiorari is accordingly issued. The
petitioner/ authorised representative will appear before the competent
authority on 10.04.2012, when a hearing will be provided and thereafter
an order in accordance with law will be passed within 60 days of the said
hearing. We may clarify that we have not examined other issues and with
reference to the order dated 23.03.2010 rejecting the application filed by
the petitioner under Section 10(23C)(iv) of the Act for exemption. These
issues and questions are left open. The writ petition is disposed of. No
costs.
SANJIV KHANNA, J
R.V.EASWAR, J
MARCH 20, 2012
hs