Gujarat High Court
Gujarat State Co-Operative Union vs Commissioner Of Income-Tax on 7 February, 1992
Equivalent citations: [1992]195ITR279(GUJ)
JUDGMENT
R.K. Abichandani J.
1. The assessee, Gujarat State Co-operative Union, Ahmedabad, in its return for the assessment years 1972-73 to 1975-76, claimed before the Income-tax Officer that the surplus realised by it should be set off against the past losses which were determined and ascertained. The application was made under section 154 of the Income-tax Act, 1961 (hereinafter referred to as the said "Act"), after the original assessments were concluded The assessee-Co-operative Union also claimed that the activities carried on by it were covered by the provisions of section 10(22) of the Act as it was an educational institution existing solely for educational purposes and was, therefore, entitled to exemption from tax for the assessment years 1972-73 to 1977-78. The Income-tax Officer rejected the contention of the assessee on both the counts. The assessee, therefore, appealed to the Commissioner of Income-tax (Appeals) for some years and to the Appellate Assistant Commissioner for other years and these appeals were allowed on both the counts. The appellate authorities held that the assessee was entitled to carry forward and set off of past losses and further it was also entitled to exemption in respect of its income under section 10(22) of the Act. The Revenue challenged the order of the appellate authorities before the Income-tax Appellate Tribunal and the Tribunal, by its common order dated September 15, 1984, for all the assessment years, held that the assessee was not entitled to carry forward and set off of the past losses in rectification proceedings. The Tribunal, however, held that the past losses were ascertained by the concerned Income-tax Officer in their respective years and, therefore, the Income-tax Officer was bound to examine his records for deciding whether previous years losses were available for being carried forward and set of against the income in subsequent years. The Tribunal also held that, the assessee was of the assessee could not be considered to be educational in view of the meaning given to the word "education" by the Supreme Court in its decision in Sole Trustee, Loka Shikshana Trust v. CIT [1975] 101 ITR 234. The Tribunal, in the above background, referred, at the instance of the assessee-Co-operative Union, the following question under section 256(1) of the Act for the opinion of the High Court :
"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the applicant was not entitled to exemption from tax under section 10(22) of the Income-tax Act, 1961, for the assessment years 1972-73 to 1977-78 ?"
2. It was contended by learned counsel, Mr. K. H. Kaji, appearing for the assessee-Co-operative Union, that the objects of the assessee clearly discloses that it was an educational institution within the meaning of section 10(22) of the Act. He also submitted that the institution was not existing for purposes of profit but was existing solely for educational purposes. Mr. Shelat, learned counsel appearing for the Revenue, on the other hand, strongly contended that, since some of the objects of the objects of the assessee-Co-operative Union could not be described as educational in nature, the assessee was not an institution existing solely for educational purposes, and, therefore, it was not entitled to the benefit of section 10(22) of the Act. He submitted that, for an educational institution, it was essential that there should be a teacher and taught relationship which was absent in the present case, since education was not being imparted in the manner as is done in the universities. In support of this contention, Mr. Shelat placed strong reliance on the observations made by the Supreme Court in Loka Shikshana Trust's case [1975] 101 ITR 234 which are also relied upon by the Tribunal and reproduced in para 17 of its order.
3. The controversy which we are called upon to decide is, therefore, whether the assessee is an educational institution existing solely for educational purposes and not for purposes of profit within the meaning of section 10(22) of the Act, it is provided that, in computing the total income of a previous year of any person, any income falling within the said clause, i.e., any income of a university or other education institution existing solely for educational purposes and not for purposes of profit, shall not be included. The objects of the assessee Co-operative Union as also the activities actually carried on by it will throw considerable light on the question whether the assessee Co-operative Union is existing solely for educational purposes or not. Bye-law 2 of the bye-laws of the assessee-Co-operative Union, a copy of which is placed on record by the consent of both learned counsel for our consideration, enumerates therein eight objects of the assessee-Co-operative Union and they read as under :
(i) to impart education to members of co-operative societies and to workers in this co-operative movement;
(ii) to act as a co-ordinating agency on all matters pertaining to co-operatives education and function as a body of experts in matters relating to education;
(iii) to function as a focusing centre on non-official opinion on various subjects affecting the movement and for representing it in proper quarters;
(iv) to further the spread of the co-operative movement;
(v) to promote the study of problems connected with co-operation and carry on research in the same;
(vi) to open circulating libraries, to publish periodicals, books, pamphlets, and literature in general on co-operation rural development and allied subjects;
(vii) to conduct training classes, training centres, schools, colleges, prescribe courses of instruction for them, conduct examination and award certificates or diplomas; and
(viii) to run a printing press.
4. The activities carried on by the assessee-Co-operative Union have been briefly summarised at annexure "A" to the order of the Commissioner of Income-tax (Appeals) dated November 22, 1983, and the said list of activities is referred to in para 5 of the order of the Commissioner of Income-tax. The fact that these activities are carried on by the assessee-Co-operative Union has not been disputed. The list of activities at annexure 'A' gives particulars of the courses conducted by the assessee-Co-operative Union and their duration. The assessee conducts courses for Higher Diploma in Co-operation (condensed) - 18 weeks, Diploma in Land Development Banking - 12 weeks, Certificate Course in Co-operative Credit and Banking - 10 weeks, and Specialised Short-term Courses/Orientation Courses. The assessee also conducts seminars. It also appears that the assessee has been running four co-operative training centres which conduct junior basic courses of 24 weeks duration for Diploma in Co-operation, Special Course for employees of Urban Co-operative Banks, District Co-operative Banks and Market Class, and also seminars. The assessee also conducts Co-operative Education Programme, Consumer Education Programmes (Project), Women Co-operative Education Programme, Special Training Classes in the District under Co-operative Education and Industrial Projects of the nature and duration as mentioned in detail in the said list of activities. It is not suggested that the assessee-Co-operative Union is doing any activity other than those enumerated in the said list.
5. From the nature of the activities of the assessee, it is abundantly clear to us that the assessee is existing solely for educational purposes. It was sought to be contended by learned counsel for the Revenue that having regard to the objects enumerated in clauses (iii), (iv), (vi) and (viii) of bye-law 2 of the bye-laws of the assessee, it cannot be said that the assessee was existing solely for educational purposes. In clause (iii) of bye-law 2, the object enumerated is that the assessee will function as a focusing centre on non-official opinion on various subjects affecting the movement and for representing it in proper quarters. Under clause (iv), its object is to further the spread of the co-operative movement. Clause (vi) refers to the objects of opening circulating libraries, publishing periodicals, books, pamphlets, and literature in general on co-operation, rural development and allied subjects, while clause (viii) refers to running of a printing press. It is difficult to accept the contention of the Revenue that these clauses indicate any object other than educational for which the assessee seems to have been established. On totality of the objects enumerated in bye-law 2, it is clear to us that the assessee-Co-operative Union is existing solely for educational purposes and even the objects which are enumerated in clauses (iii), (iv), (vi) and (viii) are referable to such purposes. It will not be open to read any of these clauses in isolation torn of its context for the purposes of urging that the assessee is not existing solely for educational purposes as envisaged under section 10(22) of the Act. It is obvious that the objects of functioning as a focusing centre on non-official opinion on various subjects affecting the movement and for representing it is proper quarters, promoting the study of problems connected with co-operation and carrying on research in the same and of opening circulating libraries, publishing periodicals, books, pamphlets and literature are connected with educational purposes for which the assessee-Co-operative Union is established. The object of running a printing press as enumerated in clause (viii) has to be read in the context of the object of publishing periodicals, books, pamphlets and literature. Therefore, so read, it becomes part of the educational activities of the assessee-Co-operative Union. The subsidiary objects such as printing and publishing books and literature on the relevant subjects are, in our judgment, ancillary and do not detract from its exclusively educational character. The question whether an educational institution whether an educational institution is existing solely for educational purposes or not can also be resolved with reference to the activities actually carried on by it and as noted above, the list of activities of the assessee clearly indicates that it is existing solely for educational purposes. It cannot be doubted that the assessee was a society for diffusion of a certain branch of knowledge, namely, knowledge of the co-operative movement in various fields governing human life and the activities for the purpose were carried out in an organised and systematic manner by conducting regular courses for imparting instruction and training on various subjects included in the curricula as is reflected from the list of its activities. There is no dispute about the fact that the assessee-Co-operative Union is given financial assistance by the Government. The resolutions of the Government dated February 15, 1968, and December 10, 1982 (mentioned in para 8 of the order of the Commissioner of Income-tax (Appeals)) clearly indicate that the grants sanctioned by the Government are for educational purposes. The Government had sanctioned Rs. 15 lakhs for the year 1982-83 which appears to have been raised to Rs. 20 lakhs from the year 1988-89. We are fully satisfied from the nature of the activities of the assessee-Co-operative Union and its objects that the assessee is existing exclusively for educational purposes and not for the purposes of profit. The assessee was publishing two journals : (1) "Sahakar", a weekly journal having a circulation of 6,700 copies, and (2) "Gram Swaraj", a monthly magazine having a circulation of 7,150 copies. Both these journals were published in connection with the activities of the assessee and on the subject of co-operative movement. The assessee was also having an audio-visual unit for exhibiting films on the co-operative movement to educate the masses. It also appears that the assessee maintained a rich library on the subject of co-operation. As noticed above, from the objects of the assessee, it is conducting training centres and colleges for various courses having a bearing on the field of co-operative movement. It appears to us that the decision of the Tribunal which seeks to rest it on the observations made by the Supreme Court in Loka Shikshana Trust's case [1975] 101 ITR 234, for holding that, the assessee is not entitled to exemption under section 10(22) of the Act is based on a complete misreading of the observations of the Supreme Court. In Loka Shikshana Trust's case [1975] 101 ITR 234, the Supreme Court, while dealing with the provisions of section 11 read with section 2(15) of the Act which defines "charitable purpose" observed as under (at page 241) :
"The sense in which the word 'education' has been used in section 2(15) in the systematic instruction, schooling or training given to the young is preparation for the work of life. It also connotes the whole course of scholastic instruction which a person has received. The word 'education' has not been used in that wide and extended sense, according to which every acquisition of further knowledge constitutes education. According to this wide and extended sense, travelling is education, because as a result of travelling you acquire fresh knowledge...... But that is not the sense in which the word 'education' is used in clause (15) of section 2. What 'education' connotes in that clause is the process of training and developing the knowledge, skill, mind and character of students by normal schooling."
6. The Supreme Court, in the above observations, by referring to the systematic instruction, schooling or training given to the young has only cited an instance in order to indicate as to what the word 'education' appearing in section 2(15) of the Act which defines "charitable purposes" is intended to mean. We are certain that these observations were not intended to keep out of the meaning of the word "education", persons other than "young". The expression "schooling" also means "that schools, instructs or educates" (The Oxford English Dictionary, Vol. IX, page 217). The Supreme Court has observed that the word "education" also connotes the whole course of scholastic instruction which a person has received. This clearly indicates that the observations of the Supreme Court were not intended to give a narrow or pedantic sense to the word "education". By giving further illustrations of a traveller gaining knowledge, victims of swindlers and thieves becoming wiser, the visitors to night clubs adding to their knowledge the hidden mysteries of life, the supreme Court has indicated that the word "education" is not used in a loose sense so as to include acquisition of even such knowledge. The observations of the Supreme Court only indicate the proper confines of the word "education" in the context of the provisions of section 2(15) of the Act. It will not be proper to construe these observations in a manner in which they are construed by the Tribunal when it infers from these observations, in para 17 of its judgment, that the word "education" is limited to schools, colleges and similar institutions and does not extend to any other media for such acquisition of knowledge. The observations of the Supreme Court do not confine the word "education" only to scholastic instructions but other forms of education also are included in the word "education". As noticed above, the word "schooling" also means instructing or educating. It, therefore, cannot be said that the word "education" has been given an unduly restricted meaning by the Supreme Court in the said decision. Though, in the context of the provisions of section 10(22), the concept of education need not be given any wide or extended meaning, it surely would encompass systematic dissemination of knowledge and training in specialised subjects as is done by the assessee. The changing times and the ever widening horizons of knowledge may bring in changes in the methodology of teaching a shift for the better in the institution set up. Advancement of knowledge brings within its fold suitable methods of its dissemination and though the primary methods of sitting in classroom may remain ideal for most of the initial education, it may become necessary to have a different outlook for further education. It is not necessary to nail down the concept of education to a particular formula or to flow it only through a defined channel. Its progress lies in the acceptance of new ideas and development of appropriate means to reach them to the recipients.
7. Even if it were to be held that the observations of the Supreme Court would apply only to the schools, colleges and similar institutions as held by the Tribunal, we are satisfied from the nature of the activities of the assessee-Co-operative Union of running colleges and training centres for various courses for the purposes of imparting training and/or awarding diplomas and certificates, that the assessee is an educational institution existing solely for educational purposes and not for the purposes of profit.
8. The question before the Supreme Court, in the above case was as to whether exemption under section 11 read with section 2(15) of the Act could be given to a trust which was at the relevant time publishing newspapers and journals. Section 11(a) applies to income derived from property held under trust wholly for charitable or religious purpose while section 10(22) covers any income of a university or other educational institution existing solely for educational purposes and not for purposes of profit. The exemption incorporated in section 11(a) is only in respect of the extent to which the income derived from the property is applied for charitable purpose which includes educational charity. If the income is only accumulated or set apart for such purpose, the exemption is limited to the extent of 25 per cent. of the income of the property held under such trust. The exemption under section 10(22), on the other hand, is without any such limitation. The language of section 10(22) emphasizes that the sole purpose of the existence of the institution should be educational. The very provision of exemption under section 10(22) indicates that the income of such institutions is contemplated. Therefore, mere existence of profit will not disqualify the institution if the sole purpose of its existence is not profit-making but is educational activity. Incidental activities connected with the educational purposes for which the institution exists which result in income will not disqualify the institution, for section 10(22), by its very nature, contemplates income of such institutions which is to be exempted under that provision. It is, therefore, difficult to accept the contention canvassed on behalf of the Revenue by the learned advocate, Mr. Shelat, that because the assessee was having income from its properties, it was not qualified to get exemption under section 10(22) of the Act.
9. Learned counsel for the Revenue, relied upon the decision of the Rajasthan High Court in CIT v. Maharaja Sawai Mansinghji Museum Trust [1988] 169 ITR 379, in support of his contention that the assessee should not be treated as an educational institution. It will be seen from the said decision that the assessee was a public charitable trust having a museum in a portion of the City Palace, Jaipur, for the benefit of the public. Some properties were settled on the trust and it was treated and accepted as a trust for charitable purposes within the meaning of section 2(15) and had enjoyed the exemption from tax under section 11 of the said Act. The assessee later on contended that it was an educational institution within the meaning of section 10(22) of the Act. It is in this context that, drawing upon the observations of the Supreme Court in Loka Shikshana Trust's case [1975] 101 ITR 234, in which the Supreme Court indicated that the word "education" was not used in a wide or extended sense so as to include addition to the knowledge of a visitor to a zoo or a museum, the High Court held that the museum cannot be taken to be an educational institution existing solely for education purposes. The said decision, therefore, cannot held the Revenue. Since, in the present case, we have found that the assessee, having regard to its objects and nature of its activities, is clearly an educational institution existing solely for educational purposes, the decision of the Madras High Court in Rao Bahadur A. K. D. Dharmaraja Education Charity Trust v. CIT [1990] 182 ITR 80, also cannot help the Revenue because it was found in that case that only a very small amount was spent for educational purposes by the assessee which was a public charitable trust leaving a huge surplus for other charitable purposes and, therefore, it was held that it could not be said that the institution was existing solely for educational purposes in order to attract section 10(22) of the Act. It was found that the said trust was carrying on the business of leasing a cinema theatre out of the income for which a small portion was spent for maintaining an educational institution while a larger portion was spent for other charitable purposes.
10. In view of the above discussion, we hold that the Tribunal was not right in law in holding that the assessee was not entitled to exemption from tax under section 10(22) of the Act for the assessment years 1972-73 to 1977-78 and answer the question in the negative and against the Revenue.
11. The reference stands disposed of, accordingly, with no order as to costs.