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
