IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.2879 OF 2007

Assam State Text Book Production  and Publication Corporation Limited        ...Appellant(s)

Versus

Commissioner of Income Tax, Gauhati-I     ...Respondent(s)

With  Civil  Appeal  Nos.2880-2887/2007  2895/2007,  2897- 2898/2007, 2901/2007, 2905/2007 and 2908/2007.

O  R  D  E  R

Heard learned counsel on both sides.

Appellant-Corporation  [Assessee]  was  initially  

constituted as `Central Text Book Committee', which was  

attached  to  the  office  of  the  Director  of  Public  

Instruction.  In 1950, the name was changed to `Assam Text  

Book Committee' with ten members nominated by the State  

Government.   In  the  year  1968,  the  Government  re-

constituted  the  said  Committee  as  `Board  of  Text  Book  

Production and Research'.  The said Board was converted  

into  Corporation  in  1972  and  the  name  was  changed  to  

`Assam  State  Text  Book  Production  and  Publication  

Corporation  Limited'  vide Notification  dated  26th July,  

1972 [for short, “the Corporation”].  All the assets of  

the said Board stood transferred to the Corporation with  

effect from 1st July, 1972.  The Corporation had paid-up  

share capital of Rupees one crore and the break-up of the  

share holding was as follows:

...2/-

- 2 -  

NAME SHARES FACE VALUE

1.  Governor  of  Assam,  represented  by  the  Secretary,  Education  Department, Govt. of Assam

9998 nos. Rs.99,98,000/-

2. Financial Commissioner &  Secretary,  Finance  Department, Govt. of Assam

1 nos. Rs.1,000/-

3. The Chairman, Board of  Secondary Education, Assam

1 nos. Rs.1,000/-

As  can  be  seen  from  the  share  holding  pattern,  

quoted  above,  almost  the  entire  share  capital  of  the  

Corporation  was  owned  by  the  Government  of  Assam  and,  

consequently,  the  said  Corporation  became  a  Government  

Company,  as defined  under Section  617 of  the Companies  

Act, 1956.  In other words, the control of the Government  

ceased to exist after 26th July, 1972, and the erstwhile  

Board came to be corporatorised under the Companies Act,  

1956.  The main object of the Government Company was to do  

research, printing and publishing of text books for school  

students as per the norms prescribed and approved by the  

Education Department, State of Assam.   

In these appeals, we are concerned with Assessment  

Years 1981-1982 to 1996-1997, except Assessment Year 1989-

1990.   The  question  which  arose  before  the  Assessing  

Officer was whether the Corporation could be termed as an  

`Educational Institution' in terms of Section 10(22) of  

the 1961 Act”?  According to the Assessing Officer, since  

the  assessee,  during  the  relevant  years,  had  income  

exclusively from publication and selling of text books to  

the students, exemption under Section 10(22) of the Income

...3/-

- 3 -  

Tax Act, 1961 [for short, “the Act”], as it stood at the  

material  time,  was  not  admissible.   According  to  the  

Assessing Officer, the assessee did not exist solely for  

educational purposes, particularly in view of Clause 21 of  

the  Memorandum  of  Association  which  provides  for  

distribution  of  dividends,  hence,  its  income  was  not  

exempt under Section 10(22) of the Act.  This decision of  

the Assessing Officer was upheld by Commissioner of Income  

Tax (Appeals].  In the Tribunal, there was difference of  

opinion between Member [Judicial] and Member [Accountant].  

By  decision  of  the  majority,  it  was  held  that  the  

Corporation  was  an  Educational  Institution  and,  

consequently, the Corporation was entitled to the benefit  

of  exemption  under  Section  10(22)  of  the  Act  for  the  

relevant Assessment Years in question.  However, in appeal  

filed  by  the  Department,  the  High  Court  came  to  the  

conclusion that the income of the Corporation, during the  

relevant Assessment Years, was not exempt, particularly in  

view of the fact that the assessee did not exist solely  

for educational purposes; that it did not solely impart  

education  and  that  its  income  during  the  relevant  

assessment years was only from publishing and sale of text  

books, which, according to the High Court, constituted a  

profit earning activity.  Against the said decision, the  

assessee has come to this Court by way of civil appeals.

On going through the records, we find that the High  

Court has not taken into account the prior history of the  

case, particularly in the context of incorporation of the  

Corporation under the Companies Act, 1956, as a Government  

Company.  Initially, as stated above, the assessee was a  

State-controlled  Committee and Board, which were attached

...4/-

- 4 -  

to the office of the Director of Public Instruction, State  

of Assam.  It is only in the year 1972 that the Government  

Company got constituted under Section 617 of the Companies  

Act, 1956. That, prior to 1972, the entire funding for the  

working of the Committee/Board was done by the State of  

Assam and that even the ownership of the assets remained  

vested in the State of Assam which stood transferred to  

the  Corporation in  1972 when  it got  incorporated under  

Companies Act, 1956.  It is important to note that the  

assessee is a Government Company.  It is controlled by the  

State of Assam.  The aim of the said Corporation is to  

implement the State's policy on Education.   That, Clause  

21 of the Memorandum and Articles of Association provides  

a Return on Investment to the State of Assam.  That, in  

the year 1975, in a similar situation, Central Board of  

Direct Taxes [for short, “C.B.D.T.”] had granted exemption  

under  Section  10(22)  of  the  Act  vide letter  dated  19th  

August,  1975,  to  Tamilnadu  Text  Books  Society,  which  

performed  activities  similar  to  those  of  the  assessee.  

The letter dated 19th August, 1975, is referred to in the  

judgement  of  the  Rajasthan  High  Court  in  the  case  of  

Commissioner of Income Tax vs.  Rajasthan State Text Book  

Board, reported in 244 I.T.R. 667.  As can be seen from  

the facts of that case, a similar question came up for  

consideration  before  the  Rajasthan  High  Court,  namely,  

whether Rajasthan State Text Book Board was entitled to  

exemption  under  Section  10(22)  of  the  Income  Tax  Act,  

1961?   One  of  the  arguments  advanced  in  that  case  on  

behalf of the Revenue was that the assessee was making  

profit on  account of  publishing and  sale of  text books

...5/-

- 5 -  

and, consequently, it was not entitled to the benefit of  

exemption under Section 10(22) of the Act.  However, the  

High Court noticed the letter issued by C.B.D.T. on 19th  

August, 1975 in the case of Tamilnadu Text Book Society  

which,  as  stated  above,  in  similar  circumstances  had  

granted exemption to the Tamilnadu Text Book Society as an  

Educational  Institution  within  the  meaning  of  Section  

10(22) of the Act.  The judgment of the High Court further  

recites that, under a similar situation, the C.B.D.T. had  

also extended benefit of exemption under Section 10(22) of  

the  Act  to  the  Orissa  Secondary  Board  Education,  as  

reported in  Secondary Board of Education vs.  Income Tax  

Officer [86  I.T.R.  408].   Following  these  

circulars/letters issued by C.B.D.T., the Rajasthan High  

Court came to the conclusion that the assessee in that  

case,  namely,  Rajasthan  State  Text  Book  Board,  was  

entitled to claim the benefit of exemption under Section  

10(22) of the Act.  The operative part of the Rajasthan  

High Court's judgement reads as under:

“It is not disputed before us that the aims and  objects of the Tamil Nadu Text Book Society and  those  of  the  respondent-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 Commissioner  of Income-tax (Appeals) as well as the Tribunal  have noticed that even if some amount remains  surplus, that is utilised only for the purposes  of  education.   Thus,  having  regard  to  the  concurrent  findings  of  fact  recorded  by  the  Commissioner  of  Income-tax  (Appeals)  and  the  Tribunal and also taking note of the letter of  the Central Board of Direct Taxes itself, it is  not possible for 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.”

...6/-

- 6 -  Following  the  judgement  of  the  Rajasthan  High  

Court, we are of the view that, in this case, the High  

Court, in its impugned judgement, has not considered the  

historical background in which the Corporation came to be  

constituted;  secondly,  the  High  Court  ought  to  have  

considered  the  source  of  funding,  the  share-holding  

pattern  and  aspects,  such  as  Return  on  Investment;  

thirdly,  it  has  not  considered  the  letters  issued  by  

C.B.D.T. which are referred to in the judgement of the  

Rajasthan  High  Court  granting  benefit  of  exemption  to  

various  Board/Societies  in  the  country  under  Section  

10(22) of the Act; fourthly, it has failed to consider the  

judgements  mentioned  hereinabove;  and  lastly,  it  has  

failed to consider the letter of the Central Government  

dated  9th July,  1973,  to  the  effect  that  all  State-

controlled  Educational  Committee(s)/Board(s)  have  been  

constituted  to  implement  the  Educational  policy  of  the  

State(s),  consequently,  they  should  be  treated  as  

Educational Institution.

For the afore-stated reasons, we are of the view  

that, instead of remanding the matter to the High Court,  

it  would  be  in  the  fitness  of  things  that  the  matter  

stands remitted to the Assessing Officer to consider it de  

novo in the light of the judgements of the Rajasthan High  

Court  and  the  Orissa  High  Courts,  particularly,  with  

reference  to  the  letter  of  C.B.D.T.  dated  19th August,  

1975, referred to in the judgement of the Rajasthan High  

Court  in the  case  of  Rajasthan State  Text Book  Board

...7/-

- 7 -  

(supra) as also the letter of Central Government dated 9th  

July, 1973, referred to above.   

Accordingly,  the  appeals  stand  allowed  with  no  

order as to costs.

......................J.            [S.H. KAPADIA]

......................J.            [AFTAB ALAM]

New Delhi, October 20, 2009.