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Petitioner: Messrs OXFORD UNIVERSITY PRESS VS Respondent: COMMISSIONER OF INCOME TAX
Court Name: Sindh High Court Judge(s): Anwar Zaheer Jamali, Syed Zawwar Hussain Jaffery Title: Messrs OXFORD UNIVERSITY PRESS vs COMMISSIONER OF INCOME TAX Case No.:I.T.Rs, Nos. 228 of 1988, 453, 472, 534 of 1990, 4, 46 of 19'96, 241,398 of 1997,
248, 249, 250, 251, 252, 253 of 1999, I.T.Cs. Nos. 280, 281, 282 of 2003, 486 and 487 of 2004 Date of Judgment:2007-04-19 Reported As: 2007 PTD 1533 Result: Order accordingly Judgment ORDER ' ANWAR ZAHEER JAMALI, J.---In the above titled nineteen I.T.Rs,/I.T.Cs./I.T.As., relating to the assessm ent case of Messrs Oxford University Press (OUP), the only controversy involved is in respect of the interpretation of clause (86) (old clause 55) read with section 14(1) of the IInd Schedule of the Income Tax Ordinance, 1979, and its applicability or otherwise to the case of assessee/OUP, hence we propose to dispose of these cases by this common order. 2. For convenience sake, these cases may be divided into two sets. The first set of cases, being I.T.Rs, Nos. 228 of 1988, 453, 472 and 534 of 1990, 4 and 46 of 1996, 241 and 398 of 1997 (eight cases) are the references made by the Tribunal at the instance of assessee (OUP), relating to their assessm ent cases pertaining to the years 1979-80 to 1991-92, wherein, in substance, it was held that the Assessee (OtJP) was not entitled for the benefit of exemption provided under (old clause 55) now clause (86) of IInd Schedule read with section 14(1) of the Income Tax Ordinance, 1979. The other set of cases being I.T.As. Nos.248, 249, 250, 251, 252 and 253 of 1999, I.T.Cs. Nos.280, 281 and 282 of 2003, 486 and 487 of 2004, (eleven cases), are the references/appeals at the instance, of Revenue relating to the assessm ent cases of the assessee (OUP) for the year 1992-93 to 1999-2000, wherein a contrary view was taken by the Income Tax Appellate Tribunal and consequently benefit of exemption, as contemplated under clause (86) of the IInd Schedule read with section 14(1) of the Income Tax Ordinance, 1979, was extended to the assessee (OUP). 3. The questions proposed in the first set of cases, at the instance of Assessee, read asunder:---
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"Whether on the facts and circumstances of the case the learned Income Tax Appellate Tribunal was justified in holding that the Oxford University Press was established for the purpose of earning profit?" "Whether on the facts and circumstances of the case the learned Income Tax Appellate Tribunal was justified in holding that the income of the applicant is not exempted under section 14(1) read with clause 55 (Now 86) of the Income Tax Ordinance, 1979?" 4. In the other set of cases at the instance of Revenue the questions proposed for the opinion of this Court read as under:-- "(i) Whether on the facts and in the circumstances of the case, the learned Income Tax Appellate Tribunal was justified in holding that the Oxford University Press (Pakistan Branch) engaged in publication and sale of books of self as well as other publishers/writers is exempt from tax under clause (86) of IInd Schedule to the Income Tax Ordinance, 1979 when the assessee has no university or educational institution (in Pakistan) solely for the educational purposes and assessee's all activities are profit oriented? (ii) Whether on the facts and in the circumstances of the case, the learned Income Tax Appellate Tribunal has erred in adjudicating that income of the assessee is exempt under clause (86) of IInd Schedule to the Income Tax Ordinance, 1979, when assessee is neither running a University nor educational institution in Pakistan and is only engaged in profit oriented publication? (iii) Whether on the facts and in the circumstances of the case the learned Income Tax Appellate Tribunal was justified in holding that clause (86) of IInd Schedule to the Income Tax Ordinance, 1979, does not place any restriction in respect of exemption being available to a non Pakistan based educational institution?" 5. From the bare reading of the above reproduced two sets of questions proposed in these reference applications it is abundantly clear that the whole controversy involved in these cases revolves around the interpretation and applicability of section 14(1) read with clause (86) (old clause 55) of the Income Tax Ordinance, 1979. 6. In a nutshell the case of the assesssee is that it is a branch of Oxford University founded in U.K. Having its several branches in other countries of the world, including Pakistan. In Pakistan the said branch of Oxford University designated as Oxford University Press (hereinafter referred to as OUP) is engaged in the business of printing, publication and selling of books in general. Further case of the assessee is that it is also engaged in other educational activities such as free teachers training workshops etc. And all incomes/profits so generated by it are being utilized exclusively for educational purposes. 7. Mr. Mazhar Jafri, reiterating in detail the relevant facts of the case of the assessee, as summarized above, has made reference of two Foreign Judgments in the case of Oxford University Press South Africa branch and Oxford University Press India branch. In the first case of the Chancellor, Masters and Scholars of Oxford University v. Commissioner of Inland Revenue, from the Appellate Division of Supreme Court of South Africa in Case No,385 of 1994, dated 30th November 1995 the controversy as regards the status vis-a-vis claim of exemption of income of the assessee (OUP) from income tax in the context of relevant provisions of Revenue Law (Income Tax Act) in the said country was discussed and decided in favour of the assessee. While in the other case of Oxford University Press v. Commissioner of Income Tax (2001 PTD 2484), after examining the relevant provisions of the Indian Income Tax Act 1961, by majority view, it was held that the income of the assessee (OUP) generated by mere activity of printing, publication and sale of books had not entitled it for the benefit of exempting provision viz; section 10(22) of the Income Tax Act 1961. It was further held that the basic requirement of this section is the existence of "educational purpose" which, in other words, means the imparting of education, which has to be in India, with this conclusion relief of exemption was declined to the assessee (OUP).
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8. Mr. Mazhar Jafri has further placed reliance on the following cases from Indian jurisdiction to fortify his claim that assessee (OUP) is entitled for exemption under clause (86) of the IInd Schedule of Income Tax Act, 1979:-- (a) Secondary Board of Education Orissa v. Income Tax Officer Ward "E", Cuttack (1972) 86 ITR 408. .(b) Birla Vidhya Vihar. Trust v. Commissioner of Income Tax Central-I Calcutta (1982) 136 ITR 445. (c) Commissioner Income Tax v. S.T. Xaviers (1990) 184 ITR 284. (d) Additional Commissioner of Income Tax v. Aditanar Education Institution (1979) 118 ITR 235. (e) Commissioner of Income Tax Karnatka-I v. Academy of General Education Manipal (1984) 150 ITR 135. (t) Commissioner of Income Tax v. Doon Foundation West Bengal-VII Calcutta (1985) 154 ITR 208. (g) Governing Body of Rangaraya Medical College v. Income Tax Officer Circle-A Ward-I Kakinada (1979) 117 ITR 284. (h) Additional Commissioner of Income Tax Gujrat v. Surat Art Silk Cloth Manufacturers Association (1980) 121 IT 1. (i) Victoria Technical Institute v. Commissioner of Income Tax (Additional) (1992) PTD 420. (j) Commissioner of Income Tax v. Geeta Bhavan Trust (1995) 213 ITR 296. (k) Commissioner of Income Tax v. Oxford University Press (1996 PTD. 1491). ' In the case of Secondary Board of Education Orissa, the Orissa High Court extended the benefit of exemption to the assessee under section 10(22) of the Indian Income Tax Act, 1961, with the observation that though the assessee was earning profit by compilation, publication, printing and sale of books, but the profits so earned were entered in the board's fund, which was properly controlled and utilized for expansion of educational purpose, and the whole fund was devoted to the cause of education as and when necessary. In the Birla Vidhya Vihar Trust case it was held by the Calcutta High Court that all the objects of Trust were for educational purpose and the educational institution was also used only for this purpose. The benefit of exemption to such income was therefore available to the assessee. In the case of St. Xaviers, the Patna High Court considering the case of the assessee as a registered society which was running a school, allowed the benefit of exemption to the income of the assessee with the observation that the society was solely engaged for educational purposes thus it was to be considered an educational institution for the purpose of such exemption. In the case of Aditanar Education Institution, the Madras High Court held that the assessee was a society with its object to establish, run and manage schools and colleges and thus it was a educational institution within the ambit of section 10(22) of the Indian Income Tax Act, 1961, entitled for its benefit. In the case of Academy of General Education Manipal, the Karnataka High Court held that to avail the benefit of exemption under section 10(22) of the Income Tax Act, 1961, it was not necessary that the assessee should be a school or college where education is imparted, but if it is a education institution or establishment, which is primarily engaged in educational activity, such benefit could be extended to it. In the case of Doon Foundation West Bengal, a judgment from Calcutta High Court it was held that for availing the benefit of exemption under section 10(22) of the Income Tax Act, 1961, it was not necessary that the- educational institution/assessee should be affiliated with some university or board. In the case of Governing Body of Rangaraya Medical College, where it was found that the Governing Body of Rangaraya Medical College was a registered society with the object to manage the college and other educational affairs and its profits were utilized only for the promotion of the object of the institution, such society was allowed exemption under section 10(22) of the Income Tax Act, 1961. In the case of Additional Commissioner of Income Tax Gujrat, a judgment by the Supreme Court of India, it was held that the assessee-Association found with the object of extending and promoting commerce and trade in art Silk Yarn qualified for exemption under section 2(15) of the Income Tax Act, 1961. It was further held where the purpose of a Trust or Institution was to provide relief to the
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poor, education or medical relief, the requirement of definition of charitable purpose will be fully satisfied. In the case of Victoria Technical Institute the Supreme Court of India has affirmed its earlier view in the case of Surat Art Silk Cloth Manufacturers Association with the observation that the charitable purpose of assessee is to be judged with the object of the society that it imparts or assist in imparting education in scientific or artistic principles and instructions in manual and other practice in the application of such principles and to assist persons engaged in artistic, industrial or commercial occupations which is an object of general public utility. In the case of Geeta Bhawan Trust, the Kerala High Court had extended the benefit of exemption under section 10(22) of the Income Tax Act, 196], to the assessee with the observation that the relevant provision of statute speaks for university or other educational institution only for educational purpose and not for purpose of profit. What is relevant under this section is that the source of income be derived from an educational institution existing solely for educational purposes. Further it was held that since it was an admitted fact that the surplus or profit was used only for the purposes of the educational institution; and was not distributed, it was not a profit making organization, thus entitled for exemption under section 10(22) of the Indian Income Tax Act. In the last referred case of Oxford University Press the Bombay High Court reversed the decision of the Income Tax Appellate Tribunal which had found the assessee Oxford University Press India entitled for exemption under section 10(22) of the Indian Income Tax Act 1961 as part of Oxford University U.K., on the ground that as university it does not exist in India nor does it carry on its activities of a university in India. The only activity carried by the assessee was that of printing, publishing books and selling the same as well as publication of other publishers and to earn profit. (The judgment in the last referred case of Bombay High Court was maintained by the Supreme Court of India in the case of Oxford University Press v. Commissioner of Income Tax (247 ITR 658 2001 PTD 2482, discussed hereinafter). 9. On the other hand, Messrs A.R. Akhtar and Aqeel Ahmed Abbasi, Advocates for Department have strongly supported the orders of the Income Tax Appellate Tribunal in the first set of cases, wherein the assessee (OUP) was found not entitled for the benefit of exemption in terms of section 14(1) read with clause (86) (Old clause 55) of the IInd Schedule of the Income Tax Ordinance, 1979. They have questioned the legality of the order of the Income Tax Appellate Tribunal passed in the other set of cases, particularly the first order dated 8-10-1998 (followed in subsequent assessment years) whereby the issue of exemption in terms of above provision of Income Tax Ordinance, 1979, was decided in favour of the assessee (OUP). Elaborating his submissions for this purpose, Mr. A.R. Akhtar submitted that the terms established used under clause (86) denote university or other educational institution established in Pakistan, therefore, a University established outside Pakistan or any branch thereof functioning in Pakistan, would not be entitled to avail the benefit of clause (86) of the IInd Schedule read with section 14(1)(a) of the Income Tax Ordinance, 1979. For this purpose he made reference to section 5 of the University of Karachi Act 1950; definition of "University" as provided under section 2(h) of the University Grant Commission Act, 1974 and also functions of the Commission as specified under section 8 of the same Act. He further made reference to the Sindh Private Educational Institutions (Regulation and Control) Ordinance, 2001, to elaborate the definition of "Institution" and other requirements of law, which are to be met for this purpose in terms of the said Ordinance. Learned counsel further made reference to the Higher Education Commission Ordinance, 2002, section 2 whereof defines the word "degree awarding institutions", "Higher Education" "Institution", "Public Sector Institution" and "a University". According to the learned counsel, for examining the true imports and, applicability of section 14(1) read with clause (86) of the IInd Schedule of Income Tax Ordinance, 1979, reference to these provisions of other statutes is indispensable. Expressing his view regarding the actual functioning of the assessee (OUP), learned counsel contended that even if, for the sake of arguments, the status of
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the assessee is accepted as educational institution/university in terms of the exempting provision of Income Tax Ordinance, 1979, still there is ample material available on record to show that the income derived by the assessee from printing, publication and sale of books is not exclusively used by it for educational purpose and therefore it is a profit earning establishment, engaged in commercial activities other than imparting education. In this context, he also made reference to the order of the Income Tax Appellate Tribunal dated 27-10-1986 passed in first set of cases during the assessm ent year 1979-80, followed in subsequent years, relevant observations from this order read as under:- "(1) Oxford University Press is an organization through which the Oxford University carries on the business of publishing and selling books in general. (2) The sole function of the assessee in Pakistan is selling and publishing books and making the profit and subsequently remitting to U.K. (3) No educational and non-profit making projects have been financed or established by the Oxford University Press in Pakistan. (4) Up to the assessm ent year 1978-79 the assessee has himself offered the income of Press for tax and no such exemption was ever claimed though the facts and circumstances and governing provisions of law had been the same. (5) Since the beneficiary University is not located in Pakistan and no education is being extended on its behalf in Pakistan, the provision of clause 55 of the 'in Schedule of the Income Tax Ordinance 1979 in the presence' circumstances are not attracted. (6) An outcome of the business has always been termed as "Net Profit" in the books of Accounts as the contention that the assessee is not making any profit fails. (7) There is nothing in the statute of the University which encourages such activities in countries other than U.K. (8) Income of the Press in U.K. Is itself being subject to tax in U.K." 10. To add force to his submissions Mr. A.R. Akhtar also made reference to the definitions of words "University" "Establish" "Education" "Educational Institution" "Educational Purposes" from Black's Law Dictionary and other sources. He reiterated that a institution engaged in the commercial activity of printing, publication and sale of books cannot be equated with a educational institution within the meaning of clause (86) ibid. In the end Mr. A.R. Akhtar also referred the case of Camille and Henry Dreyfus Foundation Inc. v. Inland Revenue Commissioner (Law Reporter 1956 AC 39) a judgment from House of Lord where the benefit of exemption offered by the statute was restricted only for the bodies of persons or trusts established in the United Kingdom. According to the learned counsel based on this principle benefit of exemption under clause (86) ibid cannot be availed by the assessee (OUP) in Pakistan, as it is not established in Pakistan within the meaning of said clause. .11. Mr. Aqeel Ahmed Abbasi learned counsel for Department in some other cases endorsed the submissions of Mr. A.R. Akhtar with the addition that admittedly the assessee (OUP) had been remitting a substantial part of their income from Pakistan to its head office in U.K. And for this reason alone the benefit of section 14(1) read with clause (86) of the IInd Schedule of Income Tax Ordinance, 1979, cannot be availed by them as the intention of the law maker by extending such benefit to the assessee cannot be that the income earned in Pakistan, even if remitted abroad, would qualify for exemption under the said clause (86), more particularly when no presumption of its exclusive use for educational purposes can be attached in Pakistan. Mr. Aqeel Ahmed Abbasi also made reference to the case of Messrs Army Welfare Sugar Mills Ltd. v. Federation of Pakistan (1992 SCMR 1652), which interalia, postulate the basic principles of interpretation of exempting provisions of law. Relevant observations read as under:-- "....There are two basic principles of construing a provision of a statute involving exemption from payment of a tax, namely, the first rule is that the burden of proof is on the person who claims
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exemption. The second rule is that a provision relating to grant of tax exemption is to be construed strictly against the person asserting and in favour of taxing officer. On the above first rule, reference may be made to the case of Madras Provincial Cooperative Bank Ltd. v. Commissioner of Income- tax, Madras AIR 1933 Madras 489 and the case of Commissioner of Income-tax, Madras v. S.L. Mathias AIR 1939 PC 1. In the above first case, a Special Bench of the Madras High Court, while construing section 10 of the Income Tax Act 1922, held that when an assessee is under a section of the Income Tax Act assessable to income-tax, it is for that person to show that he has been exempted, whereas in the second case, the Privy Council, while construing sections 2 and 4 of the Income Tax Act, 1922, held that there can be no general presumption that exemption from the provision of a subsection is intended as complete exemption from tax and that the distinction is between exempting a class of income in some events and exempting it in all events. 43. In support of the above second rule of construction, reference may be made to the following passages from Sutherland on Statutory Construction, Vol.3, Edition 3 at page 296, Craies on Statute Law Seventh Edition page 431, Crawford on Statutory Construction page 506, and N.S. Bindra on the Interpretation of Statutes, Third Edition at page 488: ' Sutherland on Statutory Construction, Vol.3, Ed.3 at page 296. A "As a general rule grants of tax exemptions are given a rigid interpretation against the assertion of the taxpayer and in favour of the taxing power. The basis for the rule here is the same as that supporting a rule of a strict construction of positive revenue laws that the burden of taxation should be distributed equally and fairly among the members of the society. However, exemptions claimed by the. State or its sub-divisions are usually liberally constructed and the same rule has frequently been applied to exemptions made in favour of charitable organization." ' Craies on Statute Law, Seventh Edition, page 431. "In Smithett v. Blythe. (1830) B. & Ad.509, on a claim for lighthouse dues against the Crown, it was held that the claim was not maintainable as to post packet ships owned by the Crown, although the express exemption was as to ships of war only. It was said that the express exemption raised no implication that the general right to take charges granted by the Act extended to other vessels owned by the Crown." Crawford on Statutory Construction page 506. "258. Exemption from Taxation, Tariff Acts, and laws to prevent fraud on the Revenue Provisions providing for an exemption may be properly construed strictly against the person who makes the claim of an exemption. In other words, before an exemption can be recognized, the person or property claimed to be exempt must come clearly within the language apparently granting the exemption." ' N.A. Bindra on the Interpretation of Statutes, Third Edition page 488. "Since all exemptions from taxation increase the burden on other members of the community, they should be deprecated, except to the extent permissible by the express language of the statutes itself. All exemptions from taxation must be strictly construed and must not be extended beyond the express requirements of the language used. Taxation laws are not in the nature of penal laws; they are substantially remedial in their character and are intended to prevent fraud, suppress public wrong and promote the public good. They should be, therefore, construed in such a way as to accomplish those objects." ' Reference may also be made to the case of Muhammadi Steamship Co. Ltd. v. The Commissioner of Income-tax (Central) Karachi PLD 1966 Supreme Court 828, and the case of Messrs Basvil Spinners Ltd. v. Superintendent, Central Excise and Land Customs, Circle Sheikhupura and another PLD 1988 SC 370." 12. He concluded his submissions with the note that following the dicta laid down in the above case, assessee/OUP is not entitled for the benefit of clause (86) of the 'Ind Schedule of the Income Tax.
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Ordinance, 1979. Mr. Nasrullah Awan, another counsel for the respondents, also endorsed the same view. 13. Replying to the submissions of the learned counsel for the Department Mr. Mazher Jafri has made reference to the orders of the Income Tax Appellant Tribunal dated 8-10-1998, passed in the second set of cases in favour of the assessee. According to him in this judgment the case of assessee (OUP) has been examined in its true perspective and thus a right conclusion has been recorded in its favour. Further submission of Mr. Jafri is that following the ratio of judgment of the Supreme Court of South Africa and reasons recorded by Income Tax Appellate Tribunal in the second set of cases the assessee (OUP) is fully entitled for the benefit of section 14(1) read with clause (86) of the 'Ind Schedule of Income Tax Ordinance, 1979. 14. We have carefully considered the submissions of the learned counsel, perused the file of each case relating to different assessm ent years of the assessee (OUP) and have also perused the relevant provisions of law and the case-law cited at the bar. Regarding the assessment cases of the assessee (OUP) several orders have been passed by the tribunal from time to time and by these orders some appeals of the assessee for the earlier years upto 1991-92 have been dismissed while others have been allowed, but in substance the facts of the case of the assessee for each financial year are almost…
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