Facts of the Case

The Appellant, Delhi Bureau of Text Books (DBTB), is a society registered under the Societies Registration Act, 1860 and established by the Ministry of Education and Government of NCT of Delhi for advancement of education through publication, printing, stocking and distribution of school text books and educational material.

The society was granted registration under Section 12A of the Income Tax Act and had consistently been allowed exemption under Sections 11 and 12 from Assessment Year 1971-72 to 2005-06.

For AYs 2006-07 to 2009-10, the Assessing Officer denied exemption on the ground that publication and sale of books constituted business activity and the society earned substantial profit margins. Accordingly, income was treated as taxable.

The Commissioner of Income Tax (Appeals) reversed the Assessing Officer’s order and restored exemption.

The Revenue challenged the same before ITAT, which allowed the Revenue’s appeal and denied exemption.

Aggrieved, the Assessee filed appeal before the Delhi High Court under Section 260A.

 Issues Involved

  1. Whether ITAT was justified in denying exemption under Sections 11 and 12 to the Assessee?
  2. Whether activities of printing and distribution of text books fall under “education” within Section 2(15) or under “general public utility”?
  3. Whether the Revenue could take a contrary stand after granting exemption for more than three decades without any change in facts?

 Petitioner’s Arguments (Assessee)

  • The dominant object of the society is advancement of education.
  • Publication and supply of text books is intrinsically connected with educational purposes.
  • Mere generation of surplus does not convert charitable activity into business.
  • Registration under Section 12A once granted cannot be casually disregarded.
  • Similar exemption had been consistently allowed for over 34 years.
  • Principle of consistency must apply.
  • Reliance was placed upon:
    • Assam State Text Book Production & Publication Corporation Ltd. v. CIT
    • CIT v. Rajasthan State Text Book Board
    • ACIT v. Surat City Gymkhana
    • CIT v. Excel Industries

 Respondent’s Arguments (Revenue Department)

  • The Assessee was earning substantial profit on sale of books.
  • Profit-oriented activity amounts to business.
  • Mere educational association does not automatically entitle exemption.
  • Every assessment year is separate and independent.
  • The Assessing Officer can verify compliance every year.

 Court Findings / Observations

1. Printing and distribution of text books is part of education

The Court clarified that education does not necessarily require running a school. Activities directly contributing to systematic learning and academic development fall within the meaning of “education”.

Preparation and supply of text books is an essential educational activity.

2. Mere surplus does not destroy charitable character

If surplus generated is reinvested for educational objectives, exemption cannot be denied merely because there is profit.

Dominant purpose test is relevant.

3. ITAT erred in treating the activity as business

The Court found that ITAT ignored the nature, background, object and utilization of funds.

The activity was not trade or commerce.

4. Principle of consistency applies

The Revenue had granted exemption for more than 34 years and there was no material change in facts.

The Revenue cannot arbitrarily alter its position.

 Court Order / Final Decision

 Set aside the common ITAT order
 Allowed the appeals of the Assessee
 Restored exemption under Sections 11 and 12
 Held that the Assessee’s activities fall under education and not general public utility

Decision in favour of the Assessee.

 Important Clarification

This judgment reinforces that:

  • Educational activity is broader than classroom teaching.
  • Publication and supply of textbooks can qualify as educational activity.
  • Profit generation alone does not convert charitable activity into commercial activity.
  • Consistency in tax treatment is a significant principle.

 Sections Involved

  • Section 2(15) – Definition of Charitable Purpose
  • Section 11 – Income from Property Held for Charitable Purposes
  • Section 12 – Income of Trusts or Institutions
  • Section 12A – Registration of Charitable Institution
  • Section 11(4A) – Business held under trust
  • Section 260A – Appeal before High Court

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2017:DHC:2374-DB/SMD03052017ITA8072015.pdf

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