ITAT Holds Surplus From Textbook Sales as Educational, Not Commercial; Allows S.11 Exemption [Read Order]

The Delhi Bench of Income Tax Appellate Tribunal ( ITAT ) held that the surplus from textbook sales was educational in nature and not commercial, and accordingly upheld the Commissioner of Income Tax (Appeals) [CIT(A)]’s order allowing exemption under Section 11 of the Income Tax Act,1961.

The Revenue-appellant appealed against the CIT(A) order. In this case, Delhi Bureau of Text Books, respondent-assessee, was engaged in publishing and distributing textbooks for students from Class I to VIII in Government and aided schools in Delhi. The books were sold at subsidized rates, and in some cases, distributed free along with school bags to needy students. The society was managed by officials from the Delhi Government's Education Department.

The assessee claimed its activities were charitable and sought exemption under Section 12. However, the Assessing Officer (AO) treated it as a commercial entity, noting a profit of over ₹16 crore from the sale of books, and taxed the income as business income.

In appeal, the assessee argued that it was not carrying out business and was set up solely to promote education. It also referred to past favourable rulings by the Delhi High Court. The CIT(A) accepted the claim, relying on earlier decisions of the High Court and ITAT, and allowed exemption under Section 11. The Department then challenged this relief before the tribunal.

The two member bench comprising Satbeer Singh Godara (Judicial Member) and Manish Agarwal (Accountant Member) heard both sides and noted that the facts remained unchanged from earlier years.It referred to the Delhi High Court’s ruling in the assessee’s case for AYs 2006-07 to 2009-10, where the Court held that earning a surplus from publishing and selling textbooks did not take away the charitable nature of the assessee’s work.

The Court observed that the surplus was used for educational purposes and the core activity continued to be education. It also noted that the assessee had consistently received exemption under Sections 11 and 12 since AY 1971-72 and there was no change in circumstances to justify a different view.

The appellate tribunal also referred to its own earlier decisions in the assessee’s cases for AYs 2010-11 to 2014-15, where similar exemptions had been allowed, following the High Court’s ruling.It further noted that the Revenue’s appeal before the Supreme Court was withdrawn due to low tax effect, and no SLP was pending.

Based on these facts, the tribunal upheld the CIT(A)’s order allowing exemption under Section 11 of the Act. Therefore the appeal of the Revenue was dismissed.

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