With reference to the case of Mathew v. Chicory Marketing Board, the definition of Tax has been interpreted widely in this case – it says that “Tax is a compulsory exaction of money by public authority for public purpose enforceable by law and is not for payment of service rendered”.
But, under Section 10 of the Income Tax Act, 1961, provides a long list of tax exemptions especially for those who are paid salaries to reduce their burden on taxing like that of House Rent allowances, Children Education Allowances, Hostel Allowances, Gratuity, Leave Travel Allowance and many other such things are being covered.
As per this provision, there are hence certain types of income that are totally exempted from income tax.
Income must not be read narrow sense under Entry 82, List – I, Schedule VII. In the landmark case of Commissioner of Income Tax v. Shaw Wallace, Income has been defined, it stated that “Income denotes a periodical monetary return coming in with sort of regularity from a definite source must be one whose object is the production of definite return”.
FACTS IN BRIEF
The assessee – The Press (Oxford University) publishes books and carriers on similar business in India for the assessment year 1976 – 1977, the assess return an income of Rs19.94 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 exempted from the payment of Income Tax by virtue of the provisions of Section 10 (22) of the Income Tax Act, 1961.
Whether Income if University`s Press exempt under Section 10 clause 22 of Income Tax Act, 1961?
REASONING AND JUDGMENT
The Income Tax Officer rejected the contention which was stated by the press 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 Tribunal. The Tribunal dismissed the appeal.
On reference, High Court reversed the order of the Tribunal and stated that – even assuming that Oxford University Press is a part of the Oxford University, what is existing in India is only that “Oxford University Press”, which is assessee and in such a situation, the assessee cannot be regarded as a University or an educational institution existing solely for the educational purpose and not for the purpose of profit; therefore, the assessee is not entitled to the exemption provided under Section 10 (22) of the Act.
For the purpose of exemption under this provision, the legislature assumed existence of education activity in India by the University or other educational institutions. It was stated that the legislature under this provision did not want to restrict the exemption only to those universities or educational institutions that are being constituted and established in India. Hence, this provision was supposed to be interpreted widely by the judges. And it was said that even the foreign universities are also entitled under this provision as long as it was imparting education in India. The very existence of education purpose is the basic requirement of this provision. “Educational purpose”, here means imparting education in India.
Section 10 clause 22 of the Income Tax Act, 1961 – has been repealed. The provision states that – “any income of a university or other educational institution existing solely for educational purpose and not for the purpose of profit”.
Author: PRANJALI PANDYA,
Damodaram Sanjivayya National Law University, Visakhaptnam,