# OXFORD UNIVERSITY PRESS v. COMMISSIONER OF INCOME TAX JANUARY 24, 200 I . [S.P. BHARUCHA, D.P. MOHAPATRA AND

- **Citation:** [2001] 1 S.C.R. 574
- **Court:** Supreme Court of India
- **Decided:** 2001
- **Case number:** Civil Appeal No. 533 of 1970
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/oxford-university-press-v-commissioner-of-income-tax-january-24-200-i-s-p-17683
- **Pages:** 34

## Headnote

A
B
OXFORD UNIVERSITY PRESS
v.
COMMISSIONER OF INCOME TAX
JANUARY 24, 200 I
. [S.P. BHARUCHA, D.P. MOHAPATRA AND
Y.K. SABHARWAL, JJ.]
Income Tax :
C
Income Tax Act, 1961-Section 10(22)--Assessee, a part of foreign
D
E
Unil-ersity, engaged in business of printing, publishing and selling booksEntitlement for exemption-Hehl, exemption arnilable for foreign Universities
if it carries on educational activities in lndia-Ho11·ever on facts of the case,
assessee not entitled for exemption since it was not imparting education in
India.
Interpretation of Statutes:
literal Interpretation -Held, strict literal interpretation should be
avoided if it leads to absurdity and mischief which was not the intention of
the legislature.
Appellant-assessee is a part of a foreign University engaged in the
business of printing, publishing and selling books in India. The assessee,
treating itself to be a brancll of the foreign University, claimed exemption
from income tax under Section 10 (22) of the Income Tax Act, 1961 for the
F
assessment year 1976-77. Income Tax Officer rejected the claim of exemption
-"'·
of the assessee and brought the income to tax. Commissioner (Appeals) and
Tribunal held in favour of the assessee. On a reference under Sec.tion 256(1)
of the Act, High Court held in favour of the Revenue.
In appeal to this Court, the assessee contended.that Oxford University
G Press is a part of the Oxford University of U.K., that the income earned b~ it
is the income of the University and therefore, entitled to exemption from tax
under Section 10(22) of the Act, that to qualify for the exemption, it is not
necessary that the University should be incorporated in India or should be
engaged in any activity relating to education or concerning the field of ..
H education in India; that 'University' under Section 10 (22) of the Act includes
574
OXFORD UNIVERSITY PRESS v. C.l.T.
575
a foreign University; and that Parlianient had not intended to limit exemption A
for University stated in India.
Revenue contended that the word 'University' used in Section 10(22)
of the Act means University as defined in University Grants Commission
Act, 1956; that the Section applies only to Universities and educational
institutions which existed in India or imparted education in India; that B
Parliament never intended to forego tax revenue for the purpose of education
people outside India; that even though the assessee is a part of the Oxford
University, it does not qualify for exemption since the Oxford University
does not exist solely for educational purposes in India; and that purposive
and meaningful interpretation should be given to the Section to avoid absurd C
position.
Dismissing the appeals by majority, the Court
HELO: Per D.P. Mohapatra, J.
I. I. A University or other educational institution established or D
incorporated outside India can be eligible for the exemption from tax under
Section 10(22) of the Income Tax Act, 1961 provided, it exists solely for
educational purposes and not for purposes of profit. On examination of the
expression 'existing solely for educational purpqses and not for purposes of
profit' in the provision, the Legislature has made it clear that it intends to E
exempt the income of institutions established solely for educational purposes
had not for commercial activities. Such a provision is meant to encourage
institutions, including Universities, engaged in educational activities and it
is not intended to benefit institutions engaged in commercial activities with
the intention of earning profit.1582-C-01
1.2. The assessee is nothing more than a commercial establishment/
business enterprise engaged in the business of printing, publishing and
selling of books in this country. The label "University Press" is not sufficient
to establish that it is engaged in any educational activity. The purpose of the
existence of the assessee in this country is possibly to earn profit.1583-GI
State of Tamil Nad11 v. Kodaikanal Motor Union. (P) Ltd. 11986

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A
B
OXFORD UNIVERSITY PRESS
v.
COMMISSIONER OF INCOME TAX
JANUARY 24, 200 I
. [S.P. BHARUCHA, D.P. MOHAPATRA AND
Y.K. SABHARWAL, JJ.]
Income Tax :
C
Income Tax Act, 1961-Section 10(22)--Assessee, a part of foreign
D
E
Unil-ersity, engaged in business of printing, publishing and selling booksEntitlement for exemption-Hehl, exemption arnilable for foreign Universities
if it carries on educational activities in lndia-Ho11·ever on facts of the case,
assessee not entitled for exemption since it was not imparting education in
India.
Interpretation of Statutes:
literal Interpretation -Held, strict literal interpretation should be
avoided if it leads to absurdity and mischief which was not the intention of
the legislature.
Appellant-assessee is a part of a foreign University engaged in the
business of printing, publishing and selling books in India. The assessee,
treating itself to be a brancll of the foreign University, claimed exemption
from income tax under Section 10 (22) of the Income Tax Act, 1961 for the
F
assessment year 1976-77. Income Tax Officer rejected the claim of exemption
-"'·
of the assessee and brought the income to tax. Commissioner (Appeals) and
Tribunal held in favour of the assessee. On a reference under Sec.tion 256(1)
of the Act, High Court held in favour of the Revenue.
In appeal to this Court, the assessee contended.that Oxford University
G Press is a part of the Oxford University of U.K., that the income earned b~ it
is the income of the University and therefore, entitled to exemption from tax
under Section 10(22) of the Act, that to qualify for the exemption, it is not
necessary that the University should be incorporated in India or should be
engaged in any activity relating to education or concerning the field of ..
H education in India; that 'University' under Section 10 (22) of the Act includes
574
OXFORD UNIVERSITY PRESS v. C.l.T.
575
a foreign University; and that Parlianient had not intended to limit exemption A
for University stated in India.
Revenue contended that the word 'University' used in Section 10(22)
of the Act means University as defined in University Grants Commission
Act, 1956; that the Section applies only to Universities and educational
institutions which existed in India or imparted education in India; that B
Parliament never intended to forego tax revenue for the purpose of education
people outside India; that even though the assessee is a part of the Oxford
University, it does not qualify for exemption since the Oxford University
does not exist solely for educational purposes in India; and that purposive
and meaningful interpretation should be given to the Section to avoid absurd C
position.
Dismissing the appeals by majority, the Court
HELO: Per D.P. Mohapatra, J.
I. I. A University or other educational institution established or D
incorporated outside India can be eligible for the exemption from tax under
Section 10(22) of the Income Tax Act, 1961 provided, it exists solely for
educational purposes and not for purposes of profit. On examination of the
expression 'existing solely for educational purpqses and not for purposes of
profit' in the provision, the Legislature has made it clear that it intends to E
exempt the income of institutions established solely for educational purposes
had not for commercial activities. Such a provision is meant to encourage
institutions, including Universities, engaged in educational activities and it
is not intended to benefit institutions engaged in commercial activities with
the intention of earning profit.1582-C-01
1.2. The assessee is nothing more than a commercial establishment/
business enterprise engaged in the business of printing, publishing and
selling of books in this country. The label "University Press" is not sufficient
to establish that it is engaged in any educational activity. The purpose of the
existence of the assessee in this country is possibly to earn profit.1583-GI
State of Tamil Nad11 v. Kodaikanal Motor Union. (P) Ltd. 119861 3
SCC 91; K.f'. Varghesev. I.TO., 1198114SCC 173; lukev. lnlund Revenue
Commissioners, ll 96c! I Sci ITR 692 (II I) and Kesln'}i Ravji & Co & Ors. \!.
Commissioner 0/1111.:ome Tax, f 1990( 2 SCC 231, referred to.
G
law of'fornt1011 hy Thomas M. Cooley, (Vol. 2 Page 2431, referred to, H
576
Slil'REME COURT REPORTS 1200111 S.C.R.
A
2. If establishments/institutions, which are engaged solely in
B
C.
commercial activities are included in the expression 'University' and are
treated at par for the purpose of granting exemption from tax, then it will
amount to treating unequals as. equals and, therefore, discriminatory. A
provision of ~xemptiBll ftom tax in a fiscal statute is to be strictly construed.
Interpretation of such a statutory provision which does not stand the test of
rationality and wlll lead to absurd results cannot be accepted. 1585-DI
Per Y. K. Sabhanval, J. (concurring)
I.I. Section 10(22) of the Income Tax Act per se does not stipulate that
a universiiy or other educational institution should be an Indian University.
The definition of 'University' in University Grants Commission Act, 1956
Clltjnot be read in Section 10(22) of the Income Tax Act. 1588-BI
1.2. Under Section 10(22) of the Income Tax Act, 1961 the establishment,
constit1Jtion or Htting up of 'a university or other educational institution' in
D
India was not intended by the Legislature. It applies to all universities subject
to fulfilment of other requirements of the section. The absence of the words
'in India' in Section 10(22) only leads to conclusion that 'a university or
other educational lnstitutienal, need not be constituted, set up or established
in India to claim the benefit of exemption. The constitution, setting up or
establishment of a univenity in India to claim benefit of exemption under
E
Section I 0(22) is not necessary but that does not lead to the conclusion that
imparting of education or providing any educational facilities in India is also
not necessary for such a university to claim the benefit of exemption. A
foreign university would also be entitled to claim exemption so long as it is
imparting education in India. A university established in a foreign country
F
is not excluded from the ambit of Section 10(22) in case it is imparting
education in India or Ills some educational activity in India. In this view, the
assessee is not entitled to claim exemption. 1600-C-Ef
Orissa Slate Warehousing Corporation v. Commissioner of Income-tax,
(1999) 237 ITR 589; Commissioner of Income-Tax v. Gujarat State
G
Warehousing Corporation ltd., (2000) 245 ITR 1 and KP. Varghese v. !ncome
Tax Officer, Ernakulam & Anr., f 19811 4 SCC 173, referred to.
2. It is well recognised rule of construction that a statutory provision
must be so construed as to avoid absurdity and mischief, if possible; where
the plain literal interpretation of a statutory provision produces a manifestly
H
absurd and unjust result which could never have been intended by the
·--T-
..
~-.
OXFORD UNIVERSITY PRESS v. C.l.T.
577
legislature, Cour(may modify the language used by the legislature or even A
'do some violence' to it, so as to achieve the obvious intention of the legislature
and produce a rational construction. 1594-Ci
Commissioner oflncome Tax, Bangalore v. J.H. Got/a, Yadagri, 119851
4 SCC 343 and State of Tamil Nadu v. Kodaikanal Motor Union (P) ltd.,
1198613 sec 91, referred to.
B
Per SP. Bharucha, J (dissenting)
I. I. For the purpose of obtaining exemption under clause (22) of Section
to of the Income Tax Act, 1961, the University must be "existing solely for
educational purposes and nut for the purposes of profit". This means the sole
purpose of ii University must be to-impart a education and not to make profit.
__,
The word "existing" in the context niearls "being" It has no vocational sense.
The clause does not say "existing in India" and the words "in India" cannot
c
be read into it. The clause does not require that the University must impart
education in india before it can qualify for exemption thereunder.1605-DI
D
1.2. The assessee was a part of a foreign University ·and that the income
was the income of the foreign, University. The "person" that was being taxed
~
was not a branch of the foreign University but the foreign University itself.
The foreign University is a liallowed institution of learning that exists solely
for education purposes. The income derived by printing, publishing and selling E
of books has no relevance because it is still the income of the foreign
Unh·ersity that exists for educational purposes.1603-F-GI
1.3. There is no unjustn.ess, unreasonableness, irrationality or absurdity
in the provisions of clause (22) of Section l 0. Parliament could not possibly
meant it was not willing to forego a very small percentage of tax revenue for F
the purposes of education, even though it might lllean the education of people
outside India, if that education was being provided by a University or other
educational institution whose sole purpose was to provide education and not
at all to make a profit. It cannot be.that Parliament yet again failed to express
its true intendment. If Parliament had meant to provide an exemption with a G
locational limitation in clause (22A) it would have made it clear, and it would
have amended clause (22). 1606-E-G I
K.P. l'arghese v. Income Tax Officer, Emakulum & Anr., 119811 4 SCC
(173) and Commissi()ner of Income Tax, Bangalore''· J.H. G()tfa, Yadagiri,
1198514 sec 343, referred to.
H
578
SUPREME cou1n REPORTS 1200111 S.C.R.
A
2.
It is triie law and now needs no authority that a taxing statute must
B
c
D
E
he read as it stands: no words may be added, no; words subtracted. It is not
permissible to read the definition of a word in one Act into another Act
unless the latter Act so requires. A definition in University Grants
Commission Act, 1956 cannot be read to limit the scope ofa word which was
first used in Indian Income Tax Act, 1922 and then incorporated in the Income
Tax Act, 1961.1603-H; 604-BI
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 533 of 197071.
From the Judgment and Order dated 21.12.95 of the Bombay High Court
in l.T.R. No. 82of1984.
With
C.A. Nos 534/97, 4406/97 & 7275/99.
S.E. Dastur, Jehangita Mistry, J.B. Dadachanji. T. Pooran, Mrs. A.K.
Verma and B.A. Ranganathan for the Appellants.
M.L. Verma, Nikhil Sakhardande, S.K. Dwivedi. Ajay Sharma and Ms.
Sushma Suri for the Respondents.
The following Judgments/Order of the Court were delilvered :
D.P. MOHAPATRA, J. I have had the privilege of reading the drati
judgment prepared by my learned brother Bharucha, J .. in which he has taken
the view that the High Court erred in holding that the assessee is not entitled
F
to exemption. from tax under section 10(22) of the Income Tax Act, I 961 (for
short 'the Act"). With respect, I am unable to agree with the view taken in
the draft judgment.
G
The question whicli was referred by the Income Tax Appellate Tribunal.
to the High Court reads "'Whether, on the facts and in the circumstances of
the case the tribunal was justified in holding that ·o:dord University Press'.
Bombay. which is a part of "'Oxford University"" is exempted under section
10(22) of the Income Tax Act'!"' The High Court in the judgment under
challenge, answered the question in the negative and in favour of the Revenue.
H
The relevant facts appearing from the orders pa>scd by the statutory
-
__,,..--
OXFORD UNIVERSITY PRESS v. l".l.T. [D.P. MOllAl'AlRA . .I.I 579
· authorities may be stated thus :
A
· The assessee, Oxford University. Press, is engaged in the business of
. printing, publishing and selling of books. It has been assessed to income-tax
as a coinpaily from the assessment year 1952-53 onwards on the basis of the
notification issued by the Central Board of Revenue. The said notification was
issued on the application filed by the assessee. For the assessment year B
1976-77 the asscssec filed a return showing income of Rs. 19.94 lacs. It claimed
exemption from payment of tax under section I 0(22) of the Act mainly on the
basis that it is a part of the Oxford University incorporated in the United
Kingdom. The assessing oOicer did not accept the claim of exemption and
passed the order of assessment under section 144-B of the Act. On appeal C
the Commissioner of Income-Tax (Appeals) accepted the assessee's contention
that being a part and parcel of the University of Oxford of U.K. it is entitled
to the exemption under ser.tion I 0(22) of the Act. On the said finding the
appeal was allowed and the assessment order was set aside. A further appeal
filed by the Revenue before the l.T.A.T. proved futile. Thereafter the Tribunal
referred the question as noted earlier to the High Court under section 256(1) D
of the Act. The High Court accepted the contention raised on behalf of the
Revenue that the assessee, in the facts and circumstances of the case, did
not qualify for the exemption provided under section I 0(22) of the Act.
From the discussions in the judgment of the High Court it appears that E
the main thrust of the contentions raised on behalf of the assessee was that
the Oxford University Press being a part of the Oxford University of U.K. the
income earned by it is the income of the University and as such entitled to
exemption from the tax_. It was also urged on behalf of the assessee that in
order to qualify for the exemption it is not necessary that the University
should be incorporated in India or should be engaged in any activity relating F
to education or concerning the field of education in India. The High Court
held that even assuming that the Oxford University Press is a part of the
Oxford University, what is existing in India is only the 'Oxford University
Press' which is the assessee and in such a· situation the assessee cannot be
regarded as a University or an educational institution existing solely for G
educational purposes and not for the purpose of profit; therefore, the assessee
is not entitled to the exemption provided under section I 0(22) of the Act.
Shri S.E. Dastur, learned counsel appearing for the appellant. contended
that only a person can be assessed to income-tax as provided in section 4
of the Act and such a person in the present case is the Oxford University of H
580
SUPREME COlJRl REPORTS [2001] IS.CR.
A which the Oxford University Press is a part; any i~come earned by the Oxford
University Press has to be taken as the income of the University and in that
event the entire income is totally exe!npted from tax under section I 0(22) of
the Act. It was the further contention of Shri Da;;tur that in the case of a
University the nature of the activities unde1iaken by it in India arid the form
and character of the establishment of the University in this country, are not
B relevant. According to the learned counsel once an institution or establishment
in the country which earns the income is accepted as a part of a University,
r '
no matter whether it is incorporated in India or in a foreign country, the
exemption from tax extends to such income.
C
Shri M.L. Verma. learned senior counsel appearing for the Revenue. on
the other hand contended that the expression 'existing solely for educational
purposes etc.' qualifies the expression 'inconie of a University or other
educational institutions'. Therefore even assuming that the Oxford University
Press is a part of the Oxford University still it does not qualify for exemption
since the Oxford University does not exist solely for education put'poses in
D India. According to Shri Verma the Oxford University has no existence in this
country as a University. The Oxford University Press, assuming that it is a part
of that University, is engaged in commercial activities like printing, publishing
and selling of books from which the amount has been earned during the
assessment year in question. According to Shri Verma accepting the contention
E raised on behalf of the assessee will lead to an absurd position that a
University which is not engaged in any educational activity in this country
is given total exemption of tax in respect of income entirely earned from
business activities in this country. It was the further submission ofShri Verma
that though the provision to be interpreted is a part of a taxing statute still
a purposive and meaningful interpretation is necessary to avoid such absurd
F resu It as aforementioned.
As noted earlier the main basis for the claim for exemption from the tax
is that the Oxford University Press is apart of the Oxford University in U .K.
and therefore its income is exempted from tax under section I 0(22) of the Act.
G This contention which found favour with the Tribunal appears to have been
based on the name of the assessee in this case, the Oxford University Press
and the avennent made in the petition filed by the assessee for being treated
as a company that it is a part of the University. The Tribunal has also noted
that no material was produced by the Revenue to show that the assessee is
an independent entity having no connection either with the Oxford University
H in U .K. or the Oxford University Press.
..
OXFORD UNIVl'RSITY l'lffSSr. C.I. I'. ID.I'. MOllAl'.\I RA. I.I 581
In para 8 of its order the Tribunal has observed .. it is well within A
everybody's knowledge that Oxford University is purely an educational
institution ... The discussions in paragraph 9 are based on the assumption that
the assessee being a pa11 of the Oxford University which is engaged in
educational activities claim of exemption is to be accepted. The position
that emerges from the discussion in the order of the Tribunal, as I read it, is
that since the name of the assessee is Oxford .University Press and it claims
to be a part of the Oxford University in U.K. that is sufficient to enable it
to get exemption from the tax. To 'put it differently the description of the
name of the assessee has been accepted as a major factor for determination
B
of the question whether its claim for exemption is acceptable or not. If a
business establisl1ment has the word 'university' as a part of its name but C
is engaged in commercial activities and has earned the amount by such
activities then its claim of exemption of tax as a pa11 of a university has to
be accepted. Another reason stated by the Tribunal in support of its finding
in this regard is that no material has been placed by the Revenue to show
that the assessee has an identity independent of the University, whil:h in
other words places the onus of proving the contrary in·a claim for exemption
by the assessee. There is no consideration in the order of the Tribunal on
the question whether the income earned by the assessee is a part of the funds
of the Oxford University. The approach of the Tribunal in this regard is clearly
erroneous and the finding recorded by it vitiated. The contention raised by
D
Shri Dastur that the real assessee in the case is the Oxford University, cannot E
be accepted.
From the case of the parties and the contentions raised on their behalf
the question that arises for determination is whether in the facts and
circumstances of the case the claim for exemption from tax under section
10(22) of the Act by the assessee on the ground that the Oxford University F
Press is a part of the Oxford University of U.K. can be accepted?
The answer to this question depends on the interpretation of the
provision under section 10(22). The section reads:
'"I 0. In computing the total income of a previous year of any person. G
any income falling within any of the following clauses shall not be
included-·
xxx
(22) any income of a university or other educational institution. existing H
/
A
8
582
SlJl'RFMI' ('OlJR I Rl:l'ORlS 1200111 S.C.R.
soldy for educationai purposes and not for purposes of profit.'.
On a plain reading of the section it is clear tlwt the provision is intended
to cover any income of a University or other educational institution, existing
solely for educational purposes and not for purposes of profit. The purpose
for which and the object with which the institution is established and the
source from which the income is earned are relevant considerations to determine
whether the income earned by the assessec is exempted from tax under the
provision. The section does not provide that the University or other educational
institution should be one established or incorporated by or under an enactment
in this country. Therefore, even a University or other educational institution
C established or incorporated outside India can be eligible for the exemption
from tax under the provision provided that it exists solely for educational
purposes and not for purposes of profit. On a closer examination of the
-......_
provision it becomes clear that in using the expression 'existing solely for
educational purposes and not for purposes of profit' the legislature has made
it clear that it intends to exempt the income of institutions established solely
D for the educational purposes and not for commercial activities. Such a provision
is meant to encourage institutions (including University) engaged in educational
activities and it is not intended to benefit institutions engaged in commercial
activities with the intention of earning profit. In my view this interpretation
will not only serve the intent and purpose of the statutory provision but will
E also help in avoiding the criticism of want of rationale in granting the exemption.
F
On examination of the different provisions in section 10 dealing with
exemption from the tax it would be clear that each one of the said provisions
is intended to serve a definite public purpose and is meant to achieve a
special object.
Section 10(20A) provides for exemptirig the income of an authority
constituted in India by or under any law enacted either for the purpose of
dealing with the satisfying the need for housing accommodation or for the
purpose of planning, development or improvement of cities, towns and villages,
G or for both.
Section I 0(21) provides for exemption of income of an approved scientific
research association, the income of which is applied wholly or exclusively to
the objects for which it is established.
H
Under Section (22A) any income of a hospital or other institution for
OXFORD lJNIVERSITY PRESS r. Cl.T. ID.P. MOllAPATRA . .I.] 583
•y
the reception and treatment of persons suffering from illness or mental A
defectiveness- or for the reception and treatment of persons during
convalescence or of persons requiring medical attention or rehabilitation ..
existing solely for philanthropic purposes and not for purposes of profit is,
exempted.
Section 10(228} provides for exemption of any income of such news B
"._,-·
agency set up in India solely for c<Jllection and distribution of news as the
Central Government may, by notification in the Official Gazette, specify in that
behalf provided that the news agency supplies its income or accumulates it
for application solely for collection and distribution of news and does not
distribute its income in any manner to its members.
Similarly Section I 0 (23) deals with exemption of any income of an
association or institution established in India whid1 may be notified by the
Central Government in the Official Gazette having regard to the fact that the
association or institution has as its object the control, supervision, regulation
or encouragement in India of the games of cricket, hockey, football, tennis or
such other games or sports as the Central Government may, by notification
in the Official Gazette, specify in that behalf. The proviso to the said clause
makes provision regarding accumulation and applicatic!1 of the income wholly
and exclusively for the objects for which the association is established.
I am of the view that the expression 'existing solely for the educational
purpose and not for the purpose of profit' qualifies and 'university or other
educational institution'. In a case where a dispute is raised whether the claim
of exemption form the tax by the assessee is admissible or not it is necessary
c
D
E
for the assessee to establish that it is a part of a university which is engaged
solely or at least primarily for educational pmposes and not for purposes of . F
profit and the income in respect of which the exemption is claimed is a part
of the income of the university. This question assumes importance in a case
like the one in hand where the assessee is nothing more than a commercial
establishment/business enterprise engaged in the business of printing,
publishing and selling of books in this cotintry. The lebel "university press" G
is not sufficient to establish that it i~ engaged in any educational activities.
The purpose of the existence of he assessee in this country as appears from
the material on record, is possibly to earn profit. If the interpretation of the
provision in section I 0(22) of the Act a~ urged oii behalf of the assessee is
accepted the provision will be expc»ed to challenge on the ground of being
irrational and therefore arbitrary. Then the questi<Jn ivili drise for what purpose H
584
SUPREME COURT REPORTS !2001] I S.C.R.
A is this exemption from tax extended to the assessee? How is it different from
the large number of such establishments engaged in the business of printing,
publishing and selling of books.
In State of Tamil Nadu v. Kodaikanal Motor Union (P) ltd, (1963] 3
SCC 91 this Court referring to K. P. Verghese v. !. T.O., [ 1981 J 4 SCC 173 and
B Luke v. In/and Revenue Commissioners, (1964) 54 ITR 692 (IIL) observed:
'C
D
"The courts must always seek to find out the intention of the
legislature. Though the courts must find out the intention of the
statute from the language used, but language more often than not is
an imperfect instrument of expression of human though. As Lord
Denning said it would be idle to expect every statutory provision to
be drafted with divine prescience and perfect clarity. As Judge Learned
Hand said. we must not make a fo11ress out of dictionary but remember
that statutes must have some purpose or object, whose imaginative
discovery is judicial craftsmanship. We need not always cling to
literalness and should seek to endeavour to avoid and unjust or
absurd result We should not make a mockery of legislation. To make
sense out of an unhappily worded provision, where the purpose is
apparent to the judicial eye 'sqme' violence to language is permissible."
~--
E
In Keshvaji Ravji and co. and others v. Commissioner of Income Tax,
F
G
[ 1990] 2 SCC 23 l this Court held that in a taxation statue where literal
interpretation leads to a result not intended to subserve the object of the
legislation another construction in consonance with the object should be
adopted. Therein referring to the WC'rds of Thomas M. Cooley in Law of
Taxation Vol. 2, this Court observed: (at p. 243).
·'Artificial and unduly latituJinarian rules of construction which, with
their general tendency to "give the tax payer the breaks", are out of
place where the legislation has a fiscal mission. Indeed, taxation has
ceased to be regarded as an "impertinent intrusion into the sacred
rights of private property" and it is now increasingly regarded as a
potent fiscal tool of State policy to strike the required balance-required
in a context of the felt needs of the times - between citizen's claim to
enjoyment of his property on the one hand and the need for an
equitable distribution of the burdens of the community to sustain
social services and purposes on the other. These words of Thomas
H
M. Cooley in Law of Taxation Vol. 2 are worth mentioning:
OXFORIJ UNIVERSITY l'Rl:SS 1. C.IT. [Y.K. SABHARW/\L . .I.]
585
"'Artificial rules of constructio11 has probably found more favour A
with the courts than they have ever deserved. Their application
in legal controversies has often times been pushed to an extreme
which has defeated the plain and man;fP.st purpose in enacting
the laws. Penal laws have sometimes had all their meaning
construed away and in remedial laws, remedies have been found B
which the legislature never intended to give. Something akin to
this has befallen the revenue laws .... "
Income of the public exchequer and expendiiLire from it is a matter of
considerable public importance. Citizens of this country, particularly the tax
payers. are entitled to know the rational basis for granting exemption from C
income-tax to an assessee. In extending the exemption to Universities which
exist solely for educational purposes and not for the purposes of profit, there
is a rational basis and a valid reason. If establishments/institutions which are
engaged solely in commercial activities are included in the expression
'University' and are treated at par for the purpose of granting exemption from
the tax then it will amount to treating unequals as equals and, therefore, D
discriminatory. A provision of exemption from tax in a fiscal statute is to be
strictly construed. Interpretation of such a statutory provision which does
not stand the test of rationality and will lead to absurd results cannot be
accepted.
Giving a purposeful interpretation of the provision it will be reasonable
to hold that in order to be eligible to claim exemption from tax under section
E
. I 0(22) of the Act the assessee has to establish that it is engaged in some
educational activity in India and its existence in this country is not for profit
only. This interpretation of section I 0(22) neither causes violence to the
language of the provision not does it amount to re-writing the same. On the F
other hand it only gives a harmonious construction of the provision which
subserves the object and purpose for which the provision is intended to
serve.
For the reasons stated in the preceding paragraphs, l am persuaded to G
take the view that in the facts and circumstances of the case the High Court
rightly held that the assessee, Oxford University Press, was not entitled to
the exemption from the tax under Section l 0(22) of the Act. The appeals are
accordingly dismissed. There will however be no order for costs .
•
Y.K. SABHARWAL, J. The main question for consideration in this H
586
SUPREME COlJRT RU'ORTS [200111 S.C.R.
A matter is about the interpretation of Clause (22) of Section I 0 of the lncometax Act, 1961 (for short 'the Act'). I have gone through the judgments
proposed by Hon'ble Mr. Justice S.P. Bharucha and Hon'ble Mr. Justice D.P.
Mahapatra. Justice Bharucha has come to the conclusion that the question
must be answered in favour of the assessee and appeal be allowed. Justice
B
c
D
E
Mahapatra, on the other hand, has expressed the view that the assessee is
not entitled to the exemption from the tax under Section I 0(22) of the Act.
With utmost respect, I am unable to agree with the conclusion arrived at by
Justice Bharucha. The reasons for my conclusion that the assessee is not
entitled to the exemption under Section 10(22) and the appeals merit dismissal
are set out hereinafter.
The question referring to the High Court under Section 256( I) of the
Act was :
"Whether on the facts and in the circumstances of the case, the
Tribunal was justified in holding that Oxford University Press, Bombay,
which is part of Oxford University, is ex~mpt under Section 10(22) of
the Income-tax Act, 1961 ?"
The High Court answered the question in the negative and in favour
of the revenue. Resultantly, the assessee is in appeal before us. The facts
have been incorporated in the judgments and of Justice Bharucha and Justice
Mohaptra and I do not consider it necessary to again set out the facts.
The finding of fact record by the Tribunal, which I will assume as
correct. and on that basis examine the matter, is that the assessee. Oxford
University Press, is a part of the Oxford University. The question referred to
F
the High Court also proceeds on that basis. Further I will assume that the sole
>.
G
H
purpose of the University of Oxford is educational and not profit and the
income of the Press, which is part of the university, is the income of the
university. At the same time, it may also be noticed that the University of
Oxford is not imparting any education or providing any educational facility
in India: none argued it.
Can exemption be denied to the assessee despite aforesaid findings and
assumptions, is the question to be decided, the answer of \\hich depends on
the interpretation of Section I 0(22) which reads as under :
''I 0(22) Income not included in total income :--In computing the total
_>
OXFORD UNIVERSITY PRESS"· C.l.T. rv.K. SABHAR w AL, .I.] 587
income of a p1'evious year of any person, any income falling withii1 A
any of the following clauses shall not be included.
(22) any income of a university or other educational institution,
existing solely for educational purposes and not for purposes of
profit."
The points to be considered are
(I) Whether the words 'existing solely for educational purposes
and not for purposes of profit' qualify the words 'other
educational institution' and not the words 'a university'!
B
(2)
Whether Section I 0(22) of the Act applies only to an Indian C
university!
(3)
Whether impa1ting of education in India is a sine qua 11011 for
claiming exemption under Section I 0(22), by a university or
other educational institutional!
Point No. I :
The plain language of Clause (22) does not suggest that the words
mentioned above qualify only other educational institution and not universities.
D
-\'.'..
Mr. bastur though faintly suggested that it can be argued that these words
do not qualify universities and qualify other educational institutions but E
learned counsel did not argue on that basis. Learned counsel assumed that
the requirement of sole existence for educational purposes and not for purposes
of profit applies to universities as well as to other educational institutions.
Unfortunately, the existence of the so-called universities ostensibly for sole
educational purposes and in reality for purposes of profit is not unknown in
-~
this country. The words to the similar effect have also been used in Clause F
(22A) of Section I 0 of the Act in relation to a 'hospital' -or 'other institution
for the reception and treatment of persons ....... '. The words used in the similar
setting in Clause (22A) are 'existing solely for philanthropic purposes and not
for purposes of profit'. There is no reason to restrict the application of these
words only to 'other institution' and not to 'a hospital' by holding that these G
words do not qualify the words 'a hospital'.
The requirement of existing solely for educational purposes and not for
purposes of profit will also be applicable to be universities and to this extent
I am in respectful agreement with the reasoning of Brother Mohapatra. For
the present purposes, however, as already said, I will assume that sole H
588
SUPREME COURT REPORT~ l2001j I S.C.R.
A purpose of University of Oxford is educational and not profit.
B
Point No. 2 :
The contention urged on behalf of he revenue is that Clause (22) of
Section I 0 of the Act applies only to Indian universities. Section I 0(22) per
se does not stipulate that a university or other educational institution should
be Indian. The only stipulation is the existence of 'a university or other
educational institution solely for educational purposes and not for purposes
of profit'. Mr. M.L. Verma, learned counsel for the revenue contends that the
definition of 'university' as provided in Section 2(f) of the University Grants
C Commission Act, 1956, deserves to be read into Section 10(22) of the Act.
D
Section 2(f) of the University Grants Commission Act, I 956 reads as under:
"'University' means a University established or incorporated by or
under a Central Act, a Provincial Act or a State Act, and includes any
such institution as may, in consultation with the University concerned,
be recognised by the Commission in accordance with the regulations
made in this behalf under this Act."
It is not permis~ible to read the aforesaid definition in Section 10(22) of
the Act. Further if we accept the contention of Mr. Verma that 'a university'
E to claim the benefit of exemption under Section I 0(22) has to be Indian, what
would be the position of 'other educational institution'. It would be absurd
situation where 'a university' to claim benefit of exemption under Section
10(22) will have to be Indian whereas 'other educational institution' to claim
the said benefit need not be so.
F
Let me also examine the contention of Mr. Verma from another angle.
The acceptance of the contention of learned counsel would mean that a 'a
university' to claim the benefit of exemption under Section I 0(22) ought to be
established, constituted or set up in India. The words 'constituted in India',
·set up in India' and 'established in India' have been used in Caused (20A),
G (228) and (23) of Section 10. The relevant portions of these provisions read
as under ;
"I 0(20A) any income of an authority constituted in India by or under
any law enacted either for the purpose of dealing with and satisfying
the need for housing accommodation or for the purpose of planning,
H
development or improvement of cities, towns and villages. or for both:
{
..
OXFORD UNIVERSITY PRESS v. C.l.T. l.Y.K. SABHARWAL, .I.]
589
I 0(22B) any income of such news agency set up in India solely for A
collection and distribution of news as the Central Government may, by
notification in the Official Gazette, specify in this behalf:
Provided that the news agency applies its income or accumulates it
for application solely for collection and distribution of news and does
not distribute its income in any manner to its members.
B
Provided futther that any notification issued by the Central Government
under this clause shall, at any one time, have effect for such assessment
year or years, not exceeding three assessment years (including an
assessment year or years commencing before the date on which such
notification is issued) as may be specified in the notification;
C
I 0(23) any income of an association or institution established in India
which may be notified by the Central Government in the Official
Gazette having regard to the fact that the association or institution
has as its object the control, supervision, regulation or encouragement D
in India of the games of cricket, hockey, football, tennis or such other
games or sports as the Central Government may, by notification in the
official Gazette, specify in this behalf... .. "
From the above provisions, it is evident that wherever the constitution,
setting up or establishment 'in India', as the case may be, was intended by E
the legislature, it said so. The legislature did not say that in relation to Clause
(22) of Section
I 0 of the Act. It is thus evident that the establishment,
constitution or setting up of 'a university or other educational institution' in
India was not intended by the legislature. Thus the contention that Section
I 0(22) applies only to Indian universities cannot be accepted; it applies to all
universities subject to fulfilment of other requirements of the section.
F
Point No. 3 :
This is tlie key question involved in the case. Its answer would depend
upon the interpretation of Section I 0(22) of the Act.