IMPORTANT POINTS
1. For admissibility of the claim of exemption from the tax under Section 10(22) of the Income Tax Act, 1961, it is necessary for the assessee to establish that it is a part of a University which is engaged solely or at least primarily for educational purposes and not for purposes of profit and the income in respect of which "the exemption is claimed is apart of the income of the university.
2. Oxford University Press, a part of the University of Oxford in the United Kingdom Is not entitled to claim exemption from tax under Section 10(22) of the Income Tax Act, 1961.

Headnote:Income Tax Act, 1961 - Section 10(22) - Income not included in total income - Claim of exemption under Section 10(22) - Maintainability - Held, provision is intended to cover any income of a University or other educational purposes and not for purposes of profit - Even a University or other educational institution established or incorporated outside India can be eligible for exemption from tax under the provision provided that it exists solely for educational purposes and not for purposes of profit - The word existing in the context means being - It has no locational sense.
       (i) Held:
       (ii) As per S.P. Bharucha, J.
       (iii) By reason of Section 10(22) any income of a University or other educational institute, existing solely for educational purpose and not for purpose ort profit, is not includible in its total income. A University is the creation of a Charter or a statute. It is created exclusively for educational purposes and not for profit. An educational institution while it may impart educational may yet have a profit motive. Strictly speaking, therefore, the phrase "existing solely for educational purposes and not for the purposes of profit" in clause (22) qualifies only the words " other educational institution " and not the words "a University". But this strict interpretation is of no great account for the purposes of this case and the expression may be read to quality both "a University" and "other educational institution". For the purposes of obtaining the exemption under clause (22) the University must be "existing solely for educational purposes of a University must be to impart education and not at all to make profit. The word "existing" in the context means " being" It has no locational sense. The clause does not require that the University must impart education in India before it can qualify for exemption thereunder. The High Court was in error in interpreting the clause differently. (Para 5)
       As Per D.P. Mohapatra, J. (Concurring)
       The provision is intended to cover any income of a University or other educational institution, existing solely for educational purposes and not for purposes of profit. The purposes for which and the object with which the institution is established and the source from which the income is earned are relevant consideration to determine whether the income earned by the assessee is exempted from tax under the provision.
       The section does not provide that the University or other educational institution should be one established or incorporated by or under an enactment in this country Therefore, even a University or other educational institution established or incorporated outside India can be eligible for the exemption from tax under the provision provided that it exists solely for educational purposes and not for purposes of profit. On a closer examination of the provision it becomes clear that in using the expression existing solely for educational purposes and not for purposes of profit the legislature has made it clear that it intends to exempt the income of institutions established solely for the educational purposes and not for commercial activities. Such a provision is meant to encourage institutions (including University) engaged in educational activities and it is not intended to benefit institutions engaged in commercial activities with the intention of earning profit. In my view this interpretation will not only serve the intent and purpose of the statutory provision but will also helsp in avoiding the criticism of want of rationale in granting the exemption. (Para 26)
       As per Y.K. Sabharwal, J. (Concurring)
       The absence of the words in India in Section 10(22) only leads to a conclusion that a university or other educational institution need not be constituted, set up or established in India to claim the benefit of exemption. It is not possible to infer anything more than this. While dealing with Point No. 2, I have already said that Section 10(22) of the Act applies not only to Indian universities but to other universities as well. Therefore, the constitution, setting up or establishment of a university in India to claim benefit of exemption under Section 10(22) is not necessary but that does not lead to the conclusion that imparting n of education or providing any educational d facilities in India is also not necessary for such a university to claim the benefit of exemption. (Para 52)
       Wherever the constitution, setting up or establishment in India , as the case may be, was intended by the legislature, it said so. The legislature did not say that in relation to Clause (22) of Section 10 of the Act. It is thus evident that the establishment, - constitution or setting up of a university - or other educational institution in India was not intended by the legislature. Thus the contention that Section 10(22) applies only to Indian universities cannot be accepted; it applies to all universities subject to fulfillment of other requirements of the section. (Para 50)
       (ii) Income Tax Act, 1961-Section 10(22) - Income not included in total-Claim of exemption under Section 10(22) - Assessee, a branch of Oxford University Press which is part of University of Oxford in United Kingdom-Assessee publishes books and carries on similar - Claim of exemption from payment of income tax by virtue of provisions of Section 10(22), assessee being a branch of University of Oxford-Whether maintainable? - Held, No-Assessee, being nothing more than a commercial establishment business enterprise engaged in business of printing, publishing and selling of books in India Label university press is not sufficient to establish that it is engaged in any educational activity-Purpose of existence of assessee in this country is possibly to earn profit-Requirement of existing solely for educational purposes and not for purposes of profit will also be applicable to universities-High Court rightly held that the assessee, Oxford University Press, was not entitled to exemption from tax under Section 10(22).
       Held:
       Majority Opinion (D.P. Mohapatra & Y.K. Sabharwal, JJ.)
       As per D.P. Mohapatra, J.
       The expression existing solely for the educational purpose and not for the purpose of profit qualifies a university or other educational institution . In a case where a dispute is raised whether the claim of exemption from the tax by the assessee is admissible or not it is necessary for the assessee to establish that it is a part of a university which is engaged solely or at least primarily for educational purposes and not for purposes of profit and the income in respect of which the exemption is claimed is a part of the income of the university. This question assumes importance in a case like the one in hand where the assessee is nothing more than a commercial establishment/business enterprise engaged in the business of printing, publishing and selling of books in this country. The label "university press" is not sufficient to establish that it is engaged in any educational activity. The purpose of the existence of the s assessee in this country as appears from the material on record, is possibly to earn profit. If the interpretation of the provision" in Section 1 0(22) of the Act as urged on behalf of the assessee is accepted the provision will be exposed to challenge on the ground of being irrational and therefore arbitrary. Then the question will arise for what purpose is this exemption from tax it extended to the assessee? How is it different from the large number of such establishments engaged in the business of printing, publishing and selling of books. (Para 33)
       Income of the public exchequer and expenditure from it is a matter of considerable public importance. Citizens of this country, particularly the tax payers are entitled to know the rational basis for granting exemption from income-tax to an assessee. In extending the exemption to Universities which exist solely for educational purposes and not for the purposes of profit, there is a rational basis and a valid a reason. If establishment/institutions which are engaged solely in commercial activities is are included in the expression University and are treated at par for the purpose of a granting exemption from the tax then it will amount to treating unequal as equals and, therefore, discriminatory. A provision in of exemption from tax in a fiscal statute is to be strictly construed. Interpretation of such a statutory provision which does not stand the test of rationality and will lead to is absurd results cannot be accepted. (Para 36)
       As per Y.K. Sabharwal, J. (Concurring)
       For the purposes of granting exemption the legislature assumed the existence of educational activity in India by a university or other educational institution but did not want to restrict the exemption only to such university or educational institution which is established or constituted or set up in India. That seems to be the reason for not placing limitation as to the setting e up of such a body in India. In this view a foreign university would also be entitled to claim exemption so long as it was imparting education in India. The basic requirement of the section is the existence of education purpose which, in other words, means the imparting of education which has to be in India. A university established in a foreign country is not excluded from the ambit of Section 10(22) in case it is imparting education in India or has some educational activity in India. It is not the case of the assessee nor is there any such finding that the assessee is imparting any education or has any educational activity in India. In this view the assessee is not entitled to claim exemption. Any other interpretation would be absurd and man festly unjust. The absence or word India" in this provision is inconsequential. It has to be read into Section 10(22). The literal construction would lead to manifestly unreasonable and absurd consequences as indicated above.
       (Para 65)
       Minority Opinion (As per S.P. Bharucha, J.)
       The High Court failed to appreciate that the assessee was a part of the University of Oxford, as the Tribunal had found and the question before it indicated, and that the income that was under consideration for assessment was, therefore, the income of the University of Oxford. The "person" that was being taxed was not and could not be a branch of the University of Oxford; it could only be the University of Oxford. That the University of Oxford is a hallowed institution of learning that exists, or is, solely for educational purposes is not, and cannot reasonably be, in dispute. That the income is derived by the printing, publishing and selling of books has no relevance because it is still the income of an University that exists for educational purposes.
       (Para 6)
       (iii) Interpretation of Statutes - Taxing Statute-Rule -of interpretation of-A provision of exemption from tax in a fiscal statute is to be strictly construed-Interpretation of such a statutory provision which does not stand test of rationality and will lead to absurd results cannot be accepted-Purposeful interpretation of the provision-A statutory provision must be so construed if possible that absurdity and mischief may be avoided.
       (Paras 36 and 59)

JUDGMENT

Bhamcha, J. - (Minority Opinion)

These appeals by special leave are filed by the assessee. They impugn the correctness of the judgment and order-of the High Court at Bombay dated 21st December, 1995 in respect of the Assessment Year 1976-77 and subsequent orders of the High Court following the fore stated judgment for the Assessment Years 1972-73, 1973,74, 1974-75, 1977-78, 1979-80 & 1983-84. The question that arose for consideration in references to the High Court under Section 256(1) of the Income Tax Act, 1961 read:

"Whether on the facts and in the circumstances of the case the Tribunal was justified in holding that oxford University, Press, Bombay, which is Part of Oxford University, is exempt under Section 10(22) of the Income Tax Act, 1961?"

The question was answered by the High Court in the negative and in favour of the Revenue.

2. The assessee is a branch of the Oxford

University Press, which, as the question itself notes, is a part of the University of Oxford in the United Kingdom. The assessee publishes books and carries on similar business in India. It was treated as a non resident company under the terms of a Notification issued by the Central Board of Revenue on 31st July, J 954 at its request from the Assessment Year 195253 onwards. For the Assessment Year 197677 the assessee returned an income of Rs. 19.94 lakhs, but, in the course of the assessment proceedings before the Income-tax Officer, it claimed that, as it was a branch of the University of Oxford, the same was exempt from the payment of income tax by virtue of the provisions of Section 10; clause (22) of the Income Tax: Act, 1961. The Income tax Officer rejected the contention and brought the income to tax, The Commissioner (Appeals), in the appeal filed by the assessee, overturned the assessment by the Income-tax Officer. Aggrieved by the order of the Commissioner (Appeals); the Revenue approached the Income Tax Appellate Tribunal. The Tribunal dismissed the appeal. Arising out of the judgment and order of the Tribunal, the question aforestated was referred to the, High Court.

3. The High, Court stated in the judgment and order under challenge that, admittedly, the assessee was the Oxford University Press and not, the University of Oxford, but there was a finding of the Tribunal to the effect that the assessee was a part of the University of Oxford. In its view, what was necessary for availing the benefit of the exemption under Section or (22) was that the income should be the income an University or an education institution existing solely for educational purposes and nor for the purposes of profit in the context and setting of cause (22), the word "existing" in the expression "existing solely for educational purposes and not for the purposes of profit meant and referred to the existence of such University or institution solely for educational purposes in India. In other words, a University or an educational institution, whether established in India or abroad, had to retain the character of a University or an educational institution in India, and the income in respect of which the exemption Was claimed had to be income derived by inn its capacity as a University or an educational institution. If it did not carry on its activities as a University or educational institution in India, it could not be regarded as a University or educational institution existing solely for educational purposes and, hence, the income derived by it from any other activities would not qualify for exemption under Section 10(22). The assessee was the Oxford University Press and not the University of Oxford. The University of Oxford did not exist in India nor did it carry on the activities of a University in India. What existed in India was the Oxford University Press. The only activity carried on by the Press, which was the assessee, in India was the activity of printing and publishing books and selling them as well as publications of other publishers to earn profit. This ac

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2001 Supreme(SC) 142

Cases Referred (5)