Printing & Selling Books Is Also ‘Education’ – ITAT Restores Section 11 Exemption to Charitable Trust

Rashtrotthana Sahitya and Mudrana Trust Vs ITO (ITAT Bangalore)

Printing & Selling Books Is Also ‘Education’ – ITAT Restores Section 11 Exemption to Charitable Trust

In a major relief to charitable publishing trusts, the Bangalore ITAT held that a trust engaged in printing, publication and sale of educational books continues to carry on “educational activity” and does not lose exemption merely because it earns surplus from such activities. The Tribunal restored exemption u/s 11 & 12 to Rashtrotthana Sahitya and Mudrana Trust and rejected the department’s attempt to treat the activity as “general public utility” hit by the proviso to section 2(15).

The trust was registered u/s 12AA since 1987 and was engaged in publication of books relating to history, culture, science, mathematics, biographies, health, environment and personality development. The AO denied exemption alleging that printing and publication activities generated receipts of over ₹8.40 crore and surplus of ₹1.49 crore, thereby constituting commercial activity.

However, the ITAT strongly disagreed and observed that merely because books are sold for consideration or surplus arises, the activity does not cease to be educational in nature. The Tribunal relied heavily on the Delhi High Court ruling in Delhi Bureau of Text Books, holding that preparation and distribution of books contributes to training and development of students’ minds and character and therefore squarely falls within “education”.

The Tribunal also noted an important inconsistency in the department’s stand. In earlier as well as subsequent scrutiny assessments, the Revenue itself had accepted the assessee’s eligibility for exemption u/s 11 and treated its activities as educational. Relying on the Supreme Court decision in Radhasoami Satsang, the ITAT remarked that the Revenue “cannot blow hot and cold together” and emphasized that consistency is the hallmark of public administration.

Importantly, the Tribunal further held that the AO had even exceeded the scope of limited scrutiny, since the case was originally selected only to verify accumulation u/s 11(2) vis-à-vis gross receipts, but the AO went on to question the charitable nature of activities itself.

Finally, the ITAT concluded that the assessee was carrying on educational activities and not advancement of general public utility, and therefore the proviso to section 2(15) had no application. The AO was directed to grant exemption u/s 11 & 12 including accumulation benefit u/s 11(2).

FULL TEXT OF THE ORDER OF ITAT BANGALORE

1. ITA No. 2146/Bang/2025 is filed by M/s. Rashtrotthana Sahitya and Mudrana Trust (the Assessee/Appellant) against the Appellate Order passed by the National Faceless Appeal Centre (NFAC), Delhi (the Ld.CIT(A)) dated 17.07.2025 wherein the Appeal filed by the Assessee against the Assessment Order dated 23.03.2021 passed u/s. 143(3) r.w.s. 143(3A) and 143(3B) of the Income Tax Act, 1961 (the Act) of the National e-Assessment Centre, Delhi (the Ld. Assessing Officer) was dismissed. The Assessee is aggrieved with the same and is in appeal before us. The only dispute in this case is denial of exemption u/s. 11 and 12 of the Act to the Assessee Trust.

2. Brief facts of the case shows that Assessee Trust filed its return of income on 10.2018 disclosing NIL income after claiming deduction u/s. 11. The case of the Assessee was selected for scrutiny on limited issue that the Assessee has accumulated substantial surplus u/s. 11(2) vis-a-vis gross receipts. The notice u/s. 143(2) of the Act was issued. The Assessee is already granted registration u/s. 12AA, by the Commissioner of Income Tax (Exemption), Karnataka on 08.07.1987.

3. The object of the Assessee as per trust deed was printing and publication of books of educative value for the benefit of people and rendering educational activities. The Ld. Assessing Officer was of the view that the printing and publication of books, the Assessee was having total receipt of Rs. 8,40,28,752/-and has arisen surplus of Rs. 1,49,15,806/-. Thus, according to the Ld. Assessing officer, the activity carried out is falling in the category of “advancement of the object of general public utility”.Therefore, the notice was issued to the Assessee to show cause as to why the exemption claimed by the Assessee u/s. 11 of the Act should not be disallowed. The main reason for issue of show cause notice was that the receipts of the Assessee of printing and publication of books is required to be taxed as per the provisions of section 13(8) of the Act.

4. The Assessee submitted that for Assessment Year 2003-04, the coordinate bench in ITA No. 48/Bang/2006 dated 31.01.2017 has decided this issue in favour of the Assessee and allowed the claim of the Assessee in the status of charitable trust. It was stated that the services of printing activity are rendered to the public, it is an educational activity and therefore the exemption cannot be denied.

5. The Ld. Assessing Officer held that the trust whose charitable purpose is an object of general public utility has ventured in the nature of trade and commerce and has also received a fee as a consideration for the services rendered which is in excess of 20% of the gross receipts, proviso to section 2(15) of the Act gets invoked. Accordingly, he held the Assessee Trust is not eligible for exemption u/s. 11 and 12. Accordingly, he found that surplus of Rs. 1,49,15,806/- is chargeable to tax as business income. Assessment Order was passed on 23.03.2021.

6. Assessee preferred Appeal before the Ld. CIT(A) wherein Assessee submitted the same facts which Assessee submitted before the Ld. Assessing Officer. The Ld. CIT(A) held that the trust is solely engaged in the business of printing and publication of books and magazines, for which consideration was received. There is no record of funds being spent on education or other objects. The computation sheet annexed to the Assessment Order shows that no amount was applied for charitable purpose under the revenue or capital account. Therefore, there was no valid claim u/s. 11(2) for accumulation nor was form 10 was filed. Thus, the claim that the surplus was used for charitable purpose stands unsubstantiated. He further held that the printing businesses of the Assessee where the receipts are received are commercial in nature. The amendment made by the Finance Act, 2015 from Assessment Year 2009-10 onwards clearly shows that the amount of receipts exceeding the prescribed monetary limit would constitute the trade and the benefit of section 11 and 12 would be not available. He further stated that the order of the ITAT was related to Assessment Year 2003-04 and because of change in the Act reliance on the same is misplaced. The Assessee further challenged that notices have been issued to the Assessee without following the proper provisions under the faceless assessment scheme was also dismissed. Accordingly, the Appeal was dismissed.

7. The Ld. Authorized Representative submitted that the case of the Assessee was selected for a limited scrutiny as stated at para no. 1 of the Assessment Order for verification of substantial surplus u/s. 11(2) vis-a-vis gross receipts. The Ld. Assessing Officer has exceeded his jurisdiction by invoking other issues involved in the Appeal which were not part of limited scrutiny.

8. He further submitted that in this case the Ld. Assessing Officer has disputed that Assessee is not eligible for exemption u/s. 11(2) of the Act holding that Assessee is engaged in the object of any other general public utility. In fact, according to him, the Assessee is engaged in educational activity. On identical facts and circumstances, the Ld. Assessing Officer for Assessment Year 2016­17, in 143(3) proceedings as per order dated 13.12.2018 has allowed the Assessee the benefit of section 11 and 12 of the Act wherein the Assessee’s gross receipt was Rs. 5,87,62,034/-. Further for Assessment Year 2022-23, the Ld. Assessing Officer in 143(3) r.w.s. 144B of the Income Tax Act Assessment Proceedings has accepted that printing and publication of the books is for educational purposes. He submitted that detailed query was raised by the Ld. Assessing Officer on this issue and after examination of the same the claim of the Assessee was allowed on that account. Though in that Assessment year as the loan repayment as deduction of income was also considered and wherein the repayment of loan was not considered and allowed as same. Further, for both these Assessment Years, the Ld. Assessing Officer himself has accepted the claim of the Assessee. He further referred to the decision of the Hon’ble Supreme Court in case ofRadhasoami Satsang vs. Commissioner of Income-tax [1992] 60 Taxman 248 (SC)/[1992] 193 ITR 321 (SC)/[1991] 100 CTR 267 (SC)[15-11-1991]and stated that Ld. Assessing Officer cannot take a different stand when in one year before and one year after. In scrutiny assessment proceedings takes a stand that the Assessee is eligible for deduction u/s. 11 and 12 of the Act but denies the same in this year. He otherwise stated that Assessee is engaged in publication of books and materials for educational purposes.

9. He further submitted that Rashtrotthana Sahitya was started in 1965 to create, promote and publish literature that enshrines into the hearts and minds of people the Bharatiya life-values and to remind the true history of India, its culture, traditions and lifestyle so that they take deep roots in each and every person’s minds. History, culture, traditions, literature, health, biographies, economy, environment, science, mathematics. Personality development etc. are some of the many topics of publications.Thus, all these books are educational only. He further submitted that this trust won Ankita Puraskara for Rashtrotthana Sahitya by Kannada Sahitya Parishat, Academy Award for Torberalu, Ajeya, Adamya, Shatamanada Tiruvinalli Bharata, Gandheeya Arthashastra by Karnataka Sahitya Academy, Best Translation for Samajika Kranti Surya Dr. Babasaheb Ambedkar by Kuvembu Bhasha Bharati Pradhikara, Institution Award for Utkarsha Patha by Gandhi Sahitya Sangha ,Best Publisher Award for the year 2021 by Kannada Pustaka Pradhikara etc.

10. He submitted that the expression “educational purpose” should not be construed narrowly. He relied on the Coordinate Bench decision for Assessment Year 2014-15 in ITA No. 8/Del/2019, World Institution Development Programme v. ITO, where it was held that the development of study material constitutes an educational activity and qualifies for exemption under sections 11 and 12 of the Act. He also pointed out that, in that case, the trust had earned course material fees of Rs. 4.11 crores. Accordingly, he argued that the Assessee’s claim for exemption under section 11(2) cannot be denied. He further relied on the decisions of the Hon’ble Delhi High Court in DIT v. Delhi Public School and CIT v. SPIC MACAY, which hold that mere receipt of consideration does not by itself mean that the Assessee is engaged in trade or business. He therefore contended that the Assessee’s object is education, not advancement of general public utility, and that, if the activity is held to be educational, the proviso to section 2(15) has no application.

11. He also submitted that facts of this case are identical to the faces of the case decided by the HonourableDelhi high court in case of Delhi Text book BureauITA 807/2015 dt 03.05.2017Delhi Bureau of Text Books vs. Director of Income-tax (E) [2017] 81 com 412 (Delhi)/[2017] 248 Taxman 272 (Delhi)/[2017] 394 ITR 387 (Delhi)/[2018] 300 CTR 195 (Delhi)[03-05-2017]where the assessee was printing text book at a price and in this case assessee is selling books at a price , both are non-profit making entities. Honourable Delhi high court has held that such is an educational activity.

12. The Ld. Departmental Representative vehemently supported the orders of the Ld. lower authorities and submitted that Assessee is engaged in printing and publication of books and selling them and therefore such activity cannot constitute educational activity but fall into the definition of object of general public utility.

13. We have carefully considered the rival contentions and perused the orders of the Ld. lower authorities. The facts clearly show that the case of the Assessee was picked for limited scrutiny for the purpose of examining the proportionate exemption claim u/s. 11(2) of the Act compared to the accumulation made by the Assessee. However, the Ld. Assessing Officer went to held that Assessee is not carrying on charitable activities. Infact, the above adjustment is beyond the scope of limited scrutiny. Further when entering into that dispute we are of the view in the subsequent year as well as in the earlier year to the impugned Assessment Year, the Ld. lower authorities have accepted the claim of the Assessee for exemption u/s. 11(2) of the Act and held that it carries on the educational activities. For both these Assessment Years, the Assessment Order framed after examining the claim of the Assessee and whether the printing and sale of books was beyond 20% of the gross receipts. Thus, the Ld. Assessing Officer in these 2 Appeals have taken a view that Assessee is entitled to claim the benefit of section 11 and 12 of the Act. However, in this year, the Ld. Assessing Officer has taken a opposite view and denied the claim to the Assessee holding that Assessee is engaged in the object of general public utility and therefore the proviso to section 2(15) of the Act applies to the Assessee. As the gross receipt exceeds the 20%, the Assessee was held to be carrying on the activity of trade and commerce. We are of the view that as held by the Hon’ble Supreme Court in case of Radhasoami Satsang vs. Commissioner of Income-tax [1992] 60 Taxman 248 (SC)/ [1992] 193 ITR 321 (SC)/ [1991] 100 CTR 267 (SC) [15-11-1991] the Revenue cannot blow a hot and cold together. The consistency is the hallmark of the public administration.

14. Further honourable Delhi High court in Delhi Bureau of Text Books vs. Director of Income-tax (E) [2017] 81 com 412 (Delhi)/[2017] 248 Taxman 272 (Delhi)/[2017] 394 ITR 387 (Delhi)/[2018] 300 CTR 195 (Delhi)[03-05-2017] has held that The Court first considers the question of the interpretation placed on the word education occurring in section 2(15). The exclusive activity of the assessee is the publication and printing of textbooks and their distribution to Government schools and schools of the MCD, NDMC, etc. This activity has continued uninterruptedly since the time of its inception. The fact that the assessee is a non-profit organization is not in dispute. Its essential activities are administered by the Board of Directors comprising of officers of the Government of India as well as Directorate of Education, GNCTD, in its ex officio capacity. The textbooks are provided by the assessee to the students at subsidized rates. Even the textbooks, reading materials and school bags are being distributed free to deserving students. The essential activity of the assessee is connected with ‘education’ and nothing else.The preparation and distribution of textbooks certainly contribute to the process of training and development of the mind and the character of students. There does not have to be a physical school or an institution to be eligible for exemption. What is important is the activity. It has to be intrinsically connected to ‘education’. In the case on hand, the Court finds that what the Tribunal has held in the impugned order is contrary to the settled law as explained in the above decisions. The Tribunal came to the erroneous conclusion that merely because the assessee had generated profits out of the activity of publishing and selling of school textbooks it ceased carrying on the activity of ‘education.’ The Tribunal failed to address the issue in the background of the setting up of the Assessee, its control and management and the sources of its income and the pattern of its expenditure. The Tribunal failed to notice that the surplus amount was again ploughed back into the main activity of ‘education’. The question to be asked was whether the activity of the Assessee contributed to the training and development of the knowledge, skill, mind and character of students? In the considered view of the Court, the answer to that question had to be, in the facts and circumstances outlined above, in the affirmative. In the present case before us, the assessee trust is also publishing the books at the subsidised rate or at free rate. Such books are for the purpose of advancement of the education, and various objects as stated before us. Merely because it does not produce the textbooks, but it produces the books which guides the life of youth could not be distinguished on that ground. Further as like in the Delhi textbook bureau case, we are also for assessment year 75 – 76 et cetera the issue was decided in favour of the assessee holding that it is an educational activity, similarly in the case of the assessee also it is held that activity of the assessee are eligible for exemption under section 11 and 12 of the act as facts stated above.

15. In view of this, we hold that the Assessee is carrying on educational activity by printing books and not carrying on the advancement of any otherobject ofpublic utility. As the Assessee is carrying on the educational activities, there is no application of proviso to section 2(15) of the Act. Accordingly, the Ld. Assessing Officer was not correct in holding that Assessee is not entitled to exemption u/s. 11 and 12 of the Act.

16. In the result, we reverse the orders of the Ld. lower authorities and allow the Appeal of the Assessee directing the Ld. Assessing Officer to grant benefit of section 11 and 12 of the Act and to accumulation specifically u/s. 11(2) of the Act.

In the result, Appeal of the Assessee is allowed.

Order pronounced in the open court on 25^th May, 2026.