ITAT Grants Tax Exemption to Educational Publishing Trust Under Sections 11 and 12

The Bangalore Bench of the Income Tax Appellate Tribunal (ITAT) has ruled in favour of M/s Rashtrotthana Sahitya and Mudrana Trust and allowed it to continue claiming income tax exemption under Sections 11 and 12 of the Income Tax Act.

The trust is engaged in printing and publishing books and educational literature. The Income Tax Department had denied the exemption for the assessment year 2018-19, arguing that the trust was carrying on commercial activities by selling books and earning revenue from publication work.

According to the department, the trust earned receipts of about Rs. 8,40,28,752 and generated a surplus of nearly Rs. 1,49,15,806 during the year. The assessing officer treated the activity as a business activity falling under “advancement of general public utility” and held that the trust was hit by the proviso to Section 2(15) of the Act. As a result, exemption under Sections 11 and 12 was denied.

The trust challenged the order before the ITAT and argued that its activities were educational in nature. It pointed out that it had been registered under Section 12AA since 1987 and had consistently been treated as a charitable institution in earlier and later assessment years as well.

The trust explained that it publishes books relating to Indian culture, history, science, mathematics, biographies, environment, personality development and other educational subjects. It also highlighted several literary and publishing awards received over the years.

The assessee further relied on earlier tribunal orders and Supreme Court judgements to argue that the tax department cannot take a different stand in one year when similar claims had been accepted in other years after scrutiny assessments.

After hearing both sides, the ITAT observed that the trust’s case was originally selected only for limited scrutiny regarding accumulation of income under Section 11(2). However, the assessing officer went beyond the limited scope and questioned the charitable nature of the trust itself.

The tribunal also noted that in both earlier and subsequent assessment years, the department had accepted that the trust was carrying on educational activities and had allowed exemption under Sections 11 and 12.

Relying heavily on the Delhi High Court ruling in the Delhi Bureau of Text Books case, the ITAT held that publishing and distributing books connected with education amounts to an educational activity. The tribunal stated that education is not limited only to running schools or colleges and that publication of educational books contributes to the development of knowledge and character.

The bench observed that merely earning a surplus from the sale of books does not automatically convert the activity into a commercial business, especially when the institution exists on a non-profit basis, and the surplus is used for its objectives.

The ITAT finally concluded that the trust was engaged in educational activities and not in activities of general public utility. Therefore, the restrictive proviso to Section 2(15) did not apply.

The tribunal reversed the orders of the lower authorities and directed the assessing officer to grant exemption under Sections 11 and 12, including the benefit of accumulation under Section 11(2).

As a result, the appeal of the assessee trust was allowed.