1 IN HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS 18TH DAY OF MAY 2020 PRESENT HON BLE MR. JUSTICE ALOK ARADHE AND HON BLE MR. JUSTICE M. NAGAPRASANNA I.T.A. NO.398 OF 2012 BETWEEN: 1. DIRECTOR OF INCOME-TAX EXEMPTIONS C.R.BUILDING QUEENS ROAD BANGALORE. 2. ASSISTANT DIRECTOR OF INCOME-TAX (EXEMPTIONS) CIRCLE 17(1) C.R.BUILDING QUEENS ROAD BANGALORE. APPELLANTS (By Sri.K.V.ARAVIND, ADV.,) AND: KARNATAKA TEXT BOOK SOCIETY NO.4, 100 FT RING ROAD BSK 3RD STAGE BANGALORE 560 085 BANGALORE 560 005. (BY GOVT ADV., ) ... RESPONDENT 2 THIS ITA IS FILED UNDER SECTION 260-A OF I.T. ACT, 1961 ARISING OUT OF ORDER DATED 04.07.2012 PASSED IN ITA NO.892/BANG/2011, FOR ASSESSMENT YEAR 2007-08, PRAYING THAT THIS HON BLE COURT MAY BE PLEASED TO: (I) FORMULATE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN AND ETC. THIS ITA COMING ON FOR HEARING, THIS DAY, ALOK ARADHE J., DELIVERED FOLLOWING: JUDGMENT This appeal has under Section 260A of Income Tax Act, 1961 (hereinafter referred to as Act for short) has been preferred by revenue. subject matter of appeal pertains to assessment year 2007-08. appeal was admitted by bench of this Court by order dated 28.02.2013 on following substantial questions of law: (i) Whether appellate authorities were correct in holding that assessee is eligible for exemption under Section 10(23C)(iiiab) of Act even though no claim for exemption was made in return of income? (ii) Whether Appellate Authorities were correct in allowing exemption under Section 10(23C)(iiiab) of Act when assessee is neither University nor 3 educational institution existing solely for educational purposes? 2. Facts giving rise to filing of this appeal briefly stated are that assessee is society promoted by Government of Karnataka to acquire and to take over business and other activities of Government of Karnataka relating to preparation, printing, publication and distribution of school text books, as well as to publish, print, sale, supply or otherwise being text books, note books and other books and literature on all subjects in different languages and to make same available at reasonable prices before commencement of academic session. society is also required to get books in different languages written by committee of experts on various subjects as per syllabi approved by Government of Karnataka and other competent authority etc. assessee filed its return of income for assessment year 2007-08 and deducted unspent amount of Rs.7,42,50,576/- to utilized in financial year 2007- 2008 out of total grant received by government to extent of Rs.13,01,21,594/-. aforesaid amount was claimed as exemption under Section 11 read with 4 Explanation 2 of Act. Society came into existence with effect from 1.04.2006. assessing officer by order dated 30.12.2009 rejected claim under Section 11 of Act on ground that assessee has not obtained registration under Section 12AA of Act. It was further held that in absence of registration under Section 12AA of Act, exemption under Section 11 cannot be allowed. Accordingly, it was held that assessee is liable to pay tax, surcharge as well as interest to tune of Rs.3,45,17,734/-. 3. Being aggrieved, assessee filed appeal. Commissioner of Income Tax (Appeals) inter alia by placing reliance n decision of Supreme Court in case of ASSAM TEXT BOOK PRODUCTION AND PUBLICATION CORPORATION LTD. VS. CIT , [2009] 319 ITR 317 held that state text books societies are entitled for exemption under Section 10(22) of Act, which was similar to Section 10(23C) of Act before its amendment. Thus, it was held that assessee was held entitled to exemption under Section 10(23C)(iiiab) of Act and 5 addition made by assessing officer was deleted and appeal was allowed. Revenue challenged aforesaid order in appeal before Income Tax Appellate Tribunal. tribunal by order dated 04.07.2012 affirmed order passed by Appellate Authority. Being aggrieved, Revenue is in appeal before us. 4. Learned counsel for revenue submitted that assessee would not fall within category of educational institution and assessee is carrying on activity which falls under Section 10(23C)(iv) of Act and therefore, approval from prescribed authority is mandatory. It is further submitted that since, assessee has not obtained any approval, therefore, Commissioner of Income Tax (Appeals) as well as Income Tax Appellate Tribunal erred in setting aside order passed by Assessing Officer. It is further submitted that judgment relied upon by tribunal in case of ASSAM TEXT BOOK PRODUCTION AND PUBLICATION CORPORATION LTD., supra is in context of Section 10(22), which has now been omitted by virtue of amendment. 6 5. On other hand, learned Government Advocate has supported order passed by Commissioner of Income Tax (Appeals) as well as Income Tax Appellate Tribunal. 6. We have considered submissions made on both sides and have perused record. Supreme Court in ASSAM TEXT BOOK PRODUCTION AND PUBLICATION CORPORATION LTD., supra has interpreted definition of educational institution in para 6. relevant extract of which is reproduced below for facility of reference: Following judgment of Rajasthan High Court, we are of view that, in this case, High Court, in its impugned judgment, has not considered historical background in which Corporation came to be constituted; secondly, High Court ought to have considered source of funding, share-holding pattern and aspects, such as Return on Investment; thirdly, it has not considered letters issued by 7 C.B.D.T. which are referred to in judgment of Rajasthan High Court granting benefit of exemption to various Board/Societies in country under Section 10(22) of Act; fourthly, it has failed to consider judgments mentioned hereinabove; and lastly, it has failed to consider letter of Central Government dated 9th July, 1973, to effect that all State- controlled Educational Committee(s)/Board(s) have been constituted to implement Educational policy of State(s); consequently, they should be treated as Educational Institution. 7. In view of aforesaid enunciation of law by Supreme Court, it is evident that all State controlled educational committees / boards that have been constituted to implement educational policy of States have to be treated as educational institutions. 8. In view of aforesaid enunciation of law by Supreme Court, assessee, which has been constituted to implement educational policy of State has to be 8 treated as educational institution and is consequently entitled to benefit of exemption under Section 10(22) of Act. In view of preceding analysis, substantial questions of law framed by this court are answered against revenue. In result, we do not find any merit in this appeal. same fails and is hereby dismissed. Sd/- JUDGE Sd/- JUDGE ss Director of Income-tax Exemptions, Bangalore / Assistant Director of Income-tax (Exemptions) Circle 17(1), Bangalore v. Karnataka Text Book Society