Holding

Section 10(22) exempts only income of universities or educational institutions that actually exist in India for educational purposes and are not engaged in profit‑making commercial activities; a foreign university’s press that merely conducts commercial publishing in India does not qualify.

Summary

Oxford University Press, a branch of the UK university, claimed exemption from income tax for its 1976-77 earnings under Section 10(22) of the Income Tax Act, 1961, arguing that the income belonged to a university existing solely for educational purposes. The Income Tax Officer rejected the claim; the Commissioner (Appeals) and the Tribunal allowed it, but the High Court, on reference, held the press was a commercial entity and not a university exercising educational activities in India, thus denying exemption. The Supreme Court examined the literal and purposive interpretation of Section 10(22), the relevance of the phrase "existing solely for educational purposes and not for purposes of profit," and whether the provision applies to foreign universities lacking Indian educational activity. The Court held that the exemption is confined to institutions that actually carry out educational activities in India and are not engaged in profit‑making commercial operations. Consequently, the press, which merely printed and sold books for profit, could not claim the exemption. The appeals were dismissed.

Issues considered

The proper construction of Section 10(22) of the Income Tax Act, 1961 – whether it applies to foreign universities that do not impart education in India.
Whether the phrase "existing solely for educational purposes and not for purposes of profit" requires the institution to carry out educational activities within India.
Whether the definition of "university" in the University Grants Commission Act, 1956 can be read into Section 10(22).
If a commercial enterprise bearing the name "University Press" can be treated as a university for tax exemption purposes.

Legislation cited

Income Tax Act, 1961s. 10(20A), s. 10(22), s. 10(22A), s. 10(23), s. 10(29)
University Grants Commission Act, 1956s. 2(f)

Subjects

Income TaxSection 10(22)Foreign universityEducational institutionStatutory interpretationLiteral vs purposive constructionProfit motiveCommercial activity

Judgment

A OXFORD UNIVERSITY PRESS
v.
COMMISSIONER OF INCOME TAX

JANUARY 24, 200 I

B . [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
Unil-ersity, engaged in business of printing, publishing and selling books-
Entitlement 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.
D
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.
E
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
G
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.

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
commercial activities are included in the expression 'University' and are ·--T-

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
B 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.
C. 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
a
establishment of 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
is not excluded from the ambit of Section 10(22) in case it is imparting
..
F
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
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 c
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
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
A
578 SUPREME cou1n REPORTS 1200111 S.C.R.

2. It is triie law and now needs no authority that a taxing statute must
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
B Tax Act, 1961.1603-H; 604-BI

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 533 of 1970-
71.

c in l.T.R.FromNo.the82of1984.
Judgment and Order dated 21.12.95 of the Bombay High Court

With

C.A. Nos 534/97, 4406/97 & 7275/99.
D 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.
E
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, I961 (for
short 'the Act"). With respect, I am unable to agree with the view taken in
the draft judgment.

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
G
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 I0(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 I0(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 I0(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 I0(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 B
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
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 D
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
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
/

582 SlJl'RFMI' ('OlJR I Rl:l'ORlS 1200111 S.C.R.

A 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
8 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.

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.
F
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 I0(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. c
Similarly Section I0 (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 D
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.
E
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
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 I0(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:

"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
'C 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
D 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,
[ 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).
F
·'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
G 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
E
to hold that in order to be eligible to claim exemption from tax under section
. 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 I0 of the lncome-
tax 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
Mahapatra, on the other hand, has expressed the view that the assessee is
B not entitled to the exemption from the tax under Section I0(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.
c
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,
D 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
E
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 >.
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.
G
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 I0(22) which reads as under :

H ''I 0(22) Income not included in total income :--In computing the total
_>
OXFORD UNIVERSITY PRESS"· C.l.T. rv.K. SABHAR wAL, .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."
B
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'!
(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 I0(22), by a university or
other educational institutional!
D
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.
-\'.'.. 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 I0 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.

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
B 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.
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,
D 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 I0(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. Would it be permissible G
to read into Clause (22) of Section I0 words which, as such, are not incorporated
ther'!in with a view to come to the conclusion that imparting of education or
providing other educational facilities in India is implied in the provision, is the
question? Can it be said from the language of Section I 0(22), that legislattB"e
intended that even if neither education is imparted nor any other educational
facility is provided by a university or other institution in India, it would still H
590 Slll'i{EME COURT REPORTS f200IJ l S.C.R

A be entitled to exemption of tax? Further, the aspect to be considered is the
effect of use of the words 'in India' in relation to constitution of an authority
as in Section 10(22A), setting up of news agencies as in Section 10(22B) and
establishment of an association or institution as in Section 10(23) of the Act.

The absence of the words 'in India' in Section l 0(22) only leads to a
B conclusion that 'a university or other educational institution' need not be
constituted, set up or established in India to claim the benefit of exemption.
It is not possible to infer anything more than this. While dealing with Point
No. 2, I have already said that Section I0(22) of the Act applies not only
to Indian universities but to other universities as well. Therefore, the
C constitution, setting up or establishment of a university in India to claim
benefit of exemption under Section I0(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.

D I have no difficulty in accepting the contention of Mr. Dastur, learned
counsel for the appellant, that for the purposes of claiming exemption under
clause (22) of Section I0, source of income is not relevant and, therefore, the
question whether income of press is from sale and printing of books, is of
no consequence and on that ground exemption cannot be denied to the
E appellant. Mr. Dastur has also relied upon the decision of this Court in
Orissa State Warehousing Corporation v. Commissioner of Income-tax,
( 1999) 237 ITR 589. In this case the question involved was about the
interpretation of Clause (29) of Section 10 of the Act. The assessee was in
appeal before this Court against the decision of the High Court opining that
the Tribunal was not justified in holding that the interest received by the
F assessee from the banks on fixed deposits was exempt under Section I0(29)
of the Act. The contention urged on behalf of assessee-Warehousing
Corporation was that regard being had to Section 16 and 24 of the
Warehousing Corporations Act, 1962, all money coming in the hands of he
Corporation have to be deposited in the bank account maintained by the
G Corporation and the same being a statutory obligation, the question of
income, therefore, cannot but be termed to be a part of the functioning of
the unit and as such exempt under Section I 0(29) Rejecting the contention,
th is Co mi said:
•
"Having due regard to the language used, the question of
H exemption would arise pertaining to that part of the income only
)

OXFORD UNIVERSITY PRESS"· C.l.T. [Y.K. SABHARWAL, .!.] 591
which arises or is derive·d from the letting of godowns or the A
warehouses and for the purposes specified in Section I 0(29) of the
Act-as notified above. The statute has been rather categorical and
restrictive in the matter of grant of exemption : storage, processing or
facilitating the marketing of the commodities are definitely regarded as
three different forms of activities which are entitled to exemption in B
the event of there being any income thereform. We do land our
concurrence to the view expressed by the Madhya Pradesh High
Court and record that the event the letting of godowns or warehouses
is for any other purpose or if income is derived from any other source,
then and in that event such a income cannot possibly come within the
ambit of Section I 0(29) of the Act and is thus not exempt from tax. C
The facts· in issue pe11aining to the interest income on fixed deposit
or ascribing the activities of the assessee being termed to be one
integrated activity does not and cannQt arise. Mr. C.S. Vaidyanathan,
Addi. Solicitor General, rightly contended that the language being
clear and there being no ambiguity, the question of there being any
integrated activity and reading the same into the statutes would be D
a violent departure from the intent of the legislature."

After considering some of the decisions, pertaining to the interpretation
of the fiscal statutes, it was said :

"In fine thus, a fiscal statute shall have to be interpreted on the E
basis of the language used therein and not de hors the same. No
words ought to be added and only the language used ought to be
considered so as to ascertain the proper meaning and intent of the
legislation. The court is to ascribe the natural and ordinary meaning
to the words used by the Legislature and the court ought not, under F
any circumstances, to substitute its own impression and ideas in
place of the legislative intent as is available from a plain reading of
the statutory provisions."

Mr. Dastur also brought to notice the decision in Commissioner of
Income-tax v. Uujarat State Warehousing Corpo1~ation ltd., (2000) 245 ITR G

-
I, referring the case of Orissa State Warehousing Corporation to a larger
Bench. For the present purposes. however, the decisions relevant to be
considered are those which examined, in pai1icular, the fiscal provisions from
the angle of ambiguity and the absurd results that may follow, if literal
interpretation is adopted. The case of Orissa State Warehousing Corporation
does not fall in that category. H
592 SUPREME COURT REPORTS [2001] I S.C.R.

A In K.P. Varghese v. lnwme Tax Officer, Ernakulam & Anr., [1981] 4 SCC
173, Section 52(2) of the Act, the inte~pretation whereof came up for
consideration was as under :

"52(2) Without prejudice to the provisions of sub-section (I), if in the
opinion of the lncom~ Tax Officer the fair market value of a capital
B asset transferred by an assessee as on the date of the transfer exceeds
the full value of the consideration declared by the as:.cssee in respect
of the transfer of such capital asset by an amount of not less than
15 per cent of the value declared, the full value of the consideration
for such capital asset shall, with the previous approval of the
C Inspecting Assistant Commissioner. be taken to be its fair market
value on the date of the transfer."

The brief facts were these:

The assessee was the owner ofa house which he had purchased in 1958
D for Rs. 16,500. On December 25, 1965 the assessee sold the house for the same
price of Rs. 16,500 to his daughter-in-law and five of his children. The
assessment of assessee in respect of the assessment year 1966-67 was
completed in normal course and in this assessment no amount was included
by way of capital gains in respect of the transfer of the house since the house
E was sold at the same price at which it was purchased and no capital gains
accrued or arose to him as a result of the transfer. On April 4, 1968, however,
the Income-tax Officer issued a notice under Section 148 of the Act seeking
to reopen the assessment of the assessee for the assessment year 1966-67.
The Income-tax Officer proposed to fix the fair market value of the house sold
by the assessee on 25th December, I 9.'i5 at Rs. 65,000 as against the
F consideration of Rs. 16,500 for which the house w?.~ sold and assessed the
difference of Rs. 48,500 as capital gains in the hands of the assessee. The
Income-tax Officer rested his decision to assess the sum of Rs. 48,000 to tax
on Section 52(2) taking the view that the said section did not required as a
condition precedent, that there should be understatement of consideration in
G respect of the transfer and it was enough to attract the applkability of Section
52(2) if the fair market value of the property as on the date of the transfer
exceeded the full value of the consideration declared by the assessee by an
amot:nt of not less than 15% of the value so declared, which was indisputably
...
the position. The Full Bench by a majority decision did not accept the
contention of the assessee that the understatement of consideration in respect
H of the transfer was a necessary condition for attracting the applicability of
_)

OXFORD UNIVERSITY !'RESS v. C.l.T. [Y.K. SABHARWAL • .I.I 593

Section 52(2). The case proceeded on the basis that admittedly there was no A
understatement of consideration and it was a perfectly bona fide transaction.
The contention of the revenue was not that the consideration paid was more
than the stated consideration of Rs. 16,500. The contention was that the
payment of consideration was not a relevant consideration for attracting
Section 52(2) and what was relevant was only the fair market value of a capital B
asset at the time of the transfer which was found as Rs. 65,000 and. therefore.
as on the date of the transfer, it exceeded the full value of the consideration
declared by the assessee in respect of the transfer of such capital asset by
an amount of not less than 15%.

On the aspect of interpretation of Section 52(2) the contention of the C
revenue which found favour with the Full Bench of the Kerala High Court
was that on a plain and natural construction the only condition for attracting
the applicability of the said provision is that the fair market value of the
capital asset transferred by the assessee as on the date of the transfer exceeds
the full value of the consideration declared by the assessee in respect of the
transfer by an amount of not less than 15% of the value so declared. Once D
the Income-tax Officer is satisfied that this condition exists it can proceed to
invoke the provisions in Section 52 sub-section (2) and take the fair market
value of the asset transferred by the assessee as on the date of the transfer
as representing the full value of the consideration for the transfer of the
capital asset and compute the capital gains on that basis. The revenue E
contended that no more is necessary to be proved and to introduce any
further condition such as understatement of consideration in respect of the
transfer would be to read into the statutory provisions something which is
not there; Indeed it would amount to rewriting the section. The argument was
based on a strictly literal reading of Section 52(2).
F
This Court noticed the basic principle of interpretation of statutory
provisions. Noticing the words of Judge Learned Hand, it was said that the
task of interpretation of a statutory enactment is not a mechanical task. It is
more than a mere reading of mathematical formulae because few words possess
the precision of mathematical symbols. We must not adopt a strictly literal G
interpretation of Section 52(2) but construe its language having regard to the
object and the purpose which the legislature had in view in enacting the
provision and in the context of the setting in which it occurs. The literal
construction would lead to manifestly unreasonable and absurd consequences.
It is well recognised rule of construction that a statutory provision must be
so construed if possible that absurdity and mischief may be avoided. It was H
594 SUl'Rl:MJ·: COURT REPORTS 12001] 1 S.C.R.

A held that construction suggested on behalf of the revenue would lead to a
wholly unreasonable result which could never have been intended by the
legislature. It was said that the literalness in the interpretation of Section 52(2)
must be eschewed and the court should try to arrive at an interpretation
which avoids the absurdity and the mischief and makes the provision rational,
B sensible, unless of course, the hands of the court are tied and it cannot find
any escape from the tyranny of literal interpretation. It is said that it is now
well-settled rul!e of construction that where the plain literal interpretation of
a statutory provision produces a manifestly absurd and unjust result which
could never have been intended by the legislature, the court may mod;fy the
language used by the legislature or even ''do some violence' to it, so as to
C achieve the obvious intention of the legislature and produce a rational
construction. In such a case the court may read into the statutory provision
a condition which though not expressed, is implicit in construing the basic
assumption underlying the statutory provision. Bearing in view these principles
the court held that on a fair and reasonable construction of Section 52(2) the
court would read into it a condition that it would apply only where the
D consideration for the transfer is understated or in other words, the assessee
has actually received a larger consideration for the transfer than what is
declared in the mstrument of transfer and it would have no application in case
of a bona fide transaction where the full value of the consideration of
transaction is correctly declared by the assessee. Thus, a condition though
E not expressed, was read into Section 52(2) constituting the basic assumption
underlying the said sub-section.

In Commissioner of Income Tax, Bangalore v. J.H. Got/a, Yadagiri,
[ 1985] 4 SCC 343, facts in brief were that the assessee, an individual, was
carrying on business in purchase and sale of groundnut oil and was also
F running an oil mill. He was also an abkari contractor. On June I, 1957, he gifted
away a part of the oil mill machinery, viz., a solvent extraction plant, to his
wife and three minor children. A firm was constituted by the assessee's wife
and another person to the profits of which the three minor sons of the
assessee were also admitted. The mill premises as well as the remaining
G machinery of the assessee were leased out to this firm which carried on the
business of the manufacture and sale of ground-nut oil. The assessee had
also entered into an agreement with the firm under which certain services were
rendered to the firm by way of management. The assessee was entitled to get
commission at the stipulated rates on the purchase of oil cake and sale of de-
oiled cake made by the firm. The assessee himself continued to carry on
H business in purchase and sale of gount-nut cake and oil on a small scale. He
OXFORD UNIVERSITY PRESS v. C.l.T. !Y.K. SABHARWAL . .1.J 595
also continued his business as abkari contractor." The assessee incurred huge A
losses in his individual business in the earlier years which were being carried
forward from year to year upto the assessment year 1958-59. The share
1
income of assessee's wife and minor children from the firm was included in
the computation of the total income of the assessee under Section 16(3) of
the Act for the assessment year 1959-60. The asses see claimed set off of the
loss carried forward from the assessment year 1958-59 against the profits of B
his own business as also the share income of his wife and minor children. The
Income Tax Officer rejected the claim for set off insofar as it related to the
share income of his wife and minor children. In appeal, the Appellate Assistant
Commissioner allowed the set off claimed on the ground that the assessee
himself is deemed to be carrying on the business from which the share income C
was derived b:' his wife and minor children. The Tribunal in the appeal filed
by the revenue, however, held that the assessee was not carrying on the
business of manufacture and sale of oi I during the year under appeal; he was
continuing to carry on the business of oil in general; that the firm did carry
on the same business as was hitherto carried on by the assessee but there .
was no connection between the assessee and the business carried on by the D
firm and they were two different entities and, as such, the assessee could not
be said to carrying on the business out of which the share income of the wife
and minor children arose. Accordingly, the Tribunal held that the assessee
was ncit entitled under Section 24(2) of the Act to claim set off of his losses
against the income of his wife and minor children. The High Court on reference E
held that the share income ofihe assessee's wife and minor children included
in the assessee's total income under Section 16(3) of the Act should be
recorded as business income derived from the business carried on by the
assessee and in that view of the matter, the assessee was entitled to set off
his losses carried forward from the previous year. The question was thus
answered by the High Court in the affirmative and in favour of the assessee. F
The revenue came up with the appeal before this Court. The main question
for consideration was the interpretation of Section 16(3). The said provision
as noticed in Got/a 's case reads as under :

"I 6. Exemptions and exclusions in determining the total income.- G
(3) In computing the total income of any individual for the purpose
of assessment, there shall be included :

(a) so much of the income ofa wife or minor child of such individual
as arises directly or indirectly-

(i) from the membership of the wife in a firm of which her H
596 SUPREME COURT REPORTS [2001) I S.C.R.

A husband is a partner;

(ii) from the admission of the 111 inor to the benefits of partnership
in a firm of which such individual is a partner;

(iii) from assets transferred directly or indirectly to the wife by
B the husband otherwise than for adequate consideration or
in connection with an agreement to live ap~.rt; or .,
(iv) from assets transferred directly or indirectly to the minor
child, not being a married daughter, by such individual or
otherwise than for adequate consideration."
c
Eschewing the literal interpretation, this Court held that where Section -•
16(3) of the Act operates. the profit or Joss from a business of the wife or
minor child included in the total income of the assessee should be treated as
the profit or loss from a "business carried on by him" for the purposes of
D carrying forward and set off of such losses under Section 24(2) of the Act.
The relevant provisions of sub-section (2) of Section 24 material for the
purpose of Got/a 's case as reproduced therein are as under :-

"Where any assessee sustains a loss of profits or gains in any year,
being a previous year not earlier than the previous year for the
E assessment for the year ending on March 31, 1940, in any business,
profession or vocation, and the Joss cannot be wholly set off under
sub-section (I), so much of the Joss as is not so set off or the whole
Joss where the assessee had no other head of income shall be carried
forward to the following year, and
F
(i) where the loss was sustained by him in a business consisting
of speculative transactions, it shall be set off only against the
profits and gains, if any, of any business in speculative
transactions carried on by him in that year;

G (ii) where the loss was sustained by him in any other business,
profession or vocation, it shall be set off against the profits and
gains, if any, of any business, profession or vocation carried on
by him in that year : provided that the business, profession or
vocation in which the loss was originally sustained continued
H to be carried on by him in that year; and
OXFORD UNIVERSITY PRESS v. C.l.T. [Y.K. SABllARWAI.. J.J 597
(iii) if the loss in efther case cannot be wholly so set off, the amount A
of loss not so set off shall be carried forward to the following
year and so on but no loss shall be so carried forward for more
than eight years:"

Interpreting the aforesaid provisions, it was said:
B
"We have noted the object of Section 16(3) of the Act which has to
be read in conjunction with Section 24(2) in this case for the present
purpose. If the purpose of a particular provision is easily discernible
from the whole scheme of the Act which in this case is, to counter
act the effect of the transfer of assets so far as computation of income C
of the assessee is concerned then bearing that purpose in mind, we
'should find out the intention from the language used by the Legislature
and if strict literal construction leads to an absurd result i.e., result not
intended to be subserved by the object of the legislation found in the
manner indicated before, the if another construction is possible apart
from strict literal construction then that construction should be preferred D
to the strict literal construction. Though equity and taxation are often
strangers, attempts should be made that these do not remain always
so and if a construction results in equity rather than in injustice, then
such construction. should be preferred to the literal construction.
Furthermore, in the instant case we are dealing with an artificial liability E
' .
created for counteracting the effect only of attempts by the assessee
to reduce tax liability by transfer. It has also been noted how for
various purposes the business from which profit is included or loss
is set off is treated in various situations as assessee' s income. The
scheme of the Act as worked out has been noted before.
F
In view of the aforesaid and in view of the attitude of the law-
makers in dealing with this problem as evidenced by the amendment
and in the circular originally issued prior thereto and bearing in mind
that under the scheme of the act where the wife or minor child carries
on a running business, the right to carry forward the loss in the G
running business would be available to the wife or minor child if they
themselves were assessed but the right would be completely lost if
the individual in whose total income the loss is to be included is not
permitted to carry forward the loss under Section 24(2); since that
would be the result of the strict literal construction it is apparent that
that could not have been the intent of the Parliament. Therefore, H
598 SUPREME COURr REPORTS [2001] I S.C.R.

A where Section 16(3) of the Act operates. the profits or loss from a
business of the wife or minor child included in the total income of the
assessee should be treated as the profit or loss from a "business
carried on by him" for the purpose of carrying forward and set off of
such loss under Section 24(2) of the Act."

B Referring to K.P. Varghese 's case (supra) it was said :

"Where the plain literal interpretation of a statutory provision produces
a manifestly unjust result which could never have been intended by
the Legislature, the Court might modify the language used by the
C Legislature so as to achieve the intention of the Legislature and
produce a rational construction. The task of interpretation of a
statutory provision is an attempt to discover the intention of the
legislature from the language used. It is necessary to remember that
language is at best an imperfect instrument for the expression of
human intention. It is well to remember the warning administered by
D Judge Learned Hand that one should not make a fortress out of
dictionary but remember that statutes always have some purpose or
object to accomplish and sympathetic and imaginative discovery is
the surest guide to their meaning.''
)---
In State of Tamil Nadu v. Kodaikanal Motor Union (P) ltd, [1986) 3
E sec 91, It was again said :

"As Lord Denning has said. the Judge has to perform the constructive
task of finding the intention of Parliament, and he must supplement
the written~ord so as to give 'force and life' to the intention of the
F legislature. Primarily, it is always the duty to find out the intention
of the legislature and if it can be done without doing much violence
to the language as we find it can be done in th i:; case, though as we
have noted that when the purpose was writ large in the scheme of the
section 'some violence' is permissible, here we are of the opinion that
the construction put by the assessee cannot be accepted and the
G
contention urged on behalf of the revenue in this case should be
preferred."

The imparting of education is service to the society. From the language
of Section I0(22), it does not appear that without any such service in India,
H the legislature intended to exempt the total income of the assessee. I do not
OXFORD UNIVERSITY PRESS v. C.l.T. [Y.K. SABI-I AR WAL. J.] 599
think that from the language of Section I0(22), it can be said that the hands A
of the Court are so tied that it cannot read into this provision, the requirement
of i111pa1ting education or some other educational activity in this country. A
university or other educational institution which exists solely for educational
purposes and not for purposes of profit though not established in India but
having some educational activity in this country alone would be entitled to
claim exemption. Such a university or educational institution having educational B
activity in India but being established or constituted in some other country
would not be denied the benefit of exemption only on the ground it has not
been established or constituted in India. The imparting of education or
existence of educational activity in India is the basic assumption of Section
I0(22) and the place of the establishment or constitution of a university or C
other educational institution is of no consequence. Similar phraseology has
also been used in Clause (22A) in relation to the income of a hospital or other
institution for the reception and treatment of the ailments referred to in the
said provision. The r:::quirement there is about existence solely for philanthropic
purposes and not for the purposes of profit, Clause (22A) of Section I0 reads
as under : D

"(22A) any income of a hospital or other institution for the reception
and treatment of persons suffering from illness or mental defectiveness
or for the reception .and treatment of persons during cenvalescence
or of persons requiring medical attention or rehabilitation, existing E
solely for philanthropic purposes and not for purposes of profit;"

If the contention urged on behalf oft.he assessee is accepted, it would
result in an university or other educational institution (clause 22) or hospital
._,_ or other institution as contemplated by Clause (22A), without providing in
India any educational or philanthropic activity, as the case may be, claiming F
the benefit of exemption on the ground that such a service is being provided
in some part of the world though in India such body is engaged itself or
through its branch in an activity akin to a business or profit making activity.
The existence of activity, which is in the nature of service to society in India
is implicit in Clauses (22) and (22A) of Section I 0 of the Act. Further, under G
Clause (29) though the words 'Indian law' are not used, but to claim exemption
the authority therein has to be constituted under any law for the time being
in force in 'lndi<(. The word 'India' in relation to law is implicit. It would be
absurd if a person is allowed to claim exemption by saying that it is constituted
under law in force in some other country and there is no requirement under
Section I 0(29) that it should be constituted under any law for the time being H
·:..:.

600 SUPREME COURT REPORTS [2001] I S.C.R.

A in force in India. Clause (29) of Section ·10 reads as under :
"(29) in the case of an authority constituted under any law for the time
being in force for the marketing of commodities, any income derived
from the letting of godowns or warehouses for storage, processing or
facilitating the marketing of commodities."
B
Thus, it is evident that for the purposes of granting exemption the
legislature assumed the existence of educational activities in India by a
university or other educational institution but did not want to restrict the
exemption only to such university or educational institution which is
C established or constituted or set up in India. That seems to be the reason for
not placing limitation as to the setting up of such a body in India. In this view
a foreign university would also be entitled to claim exemption so long as it
was imparting education in India. The basic requirement of the section is the
existence of 'education purpose' which, in other words, means the imparting
of education which has to be in India. A university established in a foreign
"""-
D country is not excluded from the ambit of Section 10(22) in case it is imparting
education in India or has some educational activity in India. It is not the case
of the assessee nor is there any such finding that the assessee is imparting
any education or has any educational activity in India. In this view the
assessee is not entitled to claim exemption. Any other interpretation would J-- -
be absurd and manifestly unjust. The absence or word 'India' in this provision
E is inconsequential. It has to be read into Section I0(22). The literal construction
would lead to manifestly unreasonable and absurd consequences as indicated
above.

For the aforesaid reasons, I concur with the conclusion reached by
F Hon'ble Mr. Justice D.P. Mohapatra that the assessee is not entitled to ;t
exemption as held by the High Court.

In this view, the appeals deserve to be dismissed.

G BHARUCHA, J. These appeals by special leave are filed by the assessee.
They impugn the correctness of the judgment and order of the High Court
at Bombay dated 21st December. 1995 in respect of the Assessment Year 1976-
77 and subsequent orders of the High Court following the aforestatedjudgment
--.r
for the Assessment Years 1972-73, 1973-74, 1974-75, 1977-78, 1979-80 & 1983-
84. The question that arose for consideration in references to the High Court
H under Section 256( I) of the Income Tax Act, 1961 read:
OXFORD UNIVERSITY PRESS v. C.l.T. [BHARlJCllA . .I.] 601

"Whether on the facts and· in the circumstances of the case the A
Tribunal was justified in holding that Oxford University Press, Bombay,
which is part of Oxford University, is exempt under section 10(22) of
the Income Tax Act, 1961 ?"

The question was answered by the High Court in the negative and in R
favour of the Revenue.

The assessee is a branch of the Oxford University Press. which, as the
question itself notes, is a part of the University of Oxford in the United
Kingdom. The assessee publishes books and carries on similar business in C
India. It was treated as a non resident company under the terms of a Notification
issued by the Central Board of Revenue on 3 lst July, 1954 at its request from
the Assessment Year 1952-53 onwards. For the Assessment Year 1976-77 the
assessee returned an income of Rs. 19.94 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 exempt from the D·
payment of income tax by virtue of the provisions of Section I 0, clause (22)
of the Income Tax Act, 1961. The Income-tax Officer rejected the contention
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 Income Tax Appellate Tribunal. The Tribunal dismissed the E
appeal. Arising out of the judgment and order of the Tribunal, the question
aforestated was referred to the High Court.

The High Court stated in the judgment and order under challenge that,
admittedly, the assessee was the Oxford University Press and not the University F
of Oxford, but there was a finding of the Tribunal to the effect that the
assessee was a pa11 of the University of Oxford. In its view, what was
necessary for availing the benefit of the exemption under Section I 0(22) was
that the income should be the income of an University or an educational
institution existing solely for educational purposes and not for the purposes G
of profit. In the context and setiing of clause (22), the word "existing" in the
expression "existing solely for educational purposes and not for the purposes
of profit" meant and referred to the existence of such University or institution
solely for educational purposes in India. In other words, a University or an
educational institution, whether established in India or abroad, had to retain
the character of a University or an educational institution in India, and the H
602 SUPREME COURT REPORTS 120011 I S.C.R.

A 111co111e 111 respect of which the exemption was claimed had to be income
derived by it in its capacity as a University or an educational institution. If
it did not carry on its activities as a University or educational institution in
India, it could not be regarded as a University or educational institution
existing solely for educational purposes and, hence, the income derived by
it from any other activities would not qualify for exemption under Section
B I0(22). The assessee was the Oxford University Press and not the University
of Oxford. The University of Oxford did not exist in India nor did it carry on
the activities of a University in India. What existed in India was the Oxford
University Press. The only activity carried on by the Press, which was the
assessee, in India was the activity of printing and publishing books and
C selling them as well as publications of other publishers to earn profit. This
activity amounted to carrying on the business of selling or supplying books
for profit. Income made therefrom could not be regarded as the income of a
University existing solely for educational purposes merely because the assessee
claimed to be a part of the University of Oxford, which did not exist in India.
The High Court added, "If it does not exist as a University or an educational
'D institution solely for such purposes and does not carry on the primary
activities of a University or educational institution but merely runs the business
of press in India for printing and publishing books and selling and supplying
the same as well as books published by other publishers for the purpose of
profit, it cannot be held to be a "University" within the meaning of section
E I0(22) of the Act merely by reason of the fact that it is run by a University
existing outside India for educational purposes or that it is a part of such
University ....... If the case of the assessee is that in the true sense of the term
it is a part and parcel of the Oxford University and has no independent
existence of its own and all its income is the income of the said University,
the "assessee" for the purpose of the Income-tax Act would have been the
F "Oxford University" and not the "Press". The Press, as an assessee might
have been entitled to claim exemption in respect of its income under Section
10(22) of the Act if it could establish that the income is the income of the
Oxford University which existed solely for educational purposes." On this
basis, the High Court held against the assessee.
G
Section I0. clause (22) reads thus:

"I 0. Income not included in total income.

In computing the total income of a previous year of any person, any
H income falling within any of the following clauses shall not be included -
OXFORD UNIVERSITY PRESS v. C.l.T. [BHARUCHA. J.] 603
· (22) any income ofa university or other educational institution, existing A
solely for educational purposes and not for purposes of profit."

By reason of Section l 0(22), any income of a University or other
educational institution, existing solely for educational purposes and not for
purposes of profit, is not includible in its total income. A University is the
creation of a Charter or a statute. It is created exclusively for educational B
purposes, and not for profit. An educational institution, while it may impart
education, may yet have a profit motive. Strictly speaking, therefore, the
phrase "existing solely for educational purposes and not for the purposes of
profit" in clause (22) qualifies only the words "other educational institution"
and not the words "a University". But this strict interpretation is of no great C
account for the purposes of this case, and the expression may be read to
qualify both "a University" and "other educational institution". For the
purposes of obtaining the exemption under clause (22) the University must
be "existing solely for educational purposes and not for the purposes of
profit". What this means is that the sole purpose of a University must be to
impart education and not at all to make profit. The word "existing" in the D
context means "being". It has no lo_cational sense. The clause does not say

-- ........
"existing in India" and the words "in India" cannot be read into it. The clause
does not require that the University must impart education in India before it
can qualify for exemption thereunder. The High Court was in error in interpreting
the clause differently. E

The High Court failed to appreciate that the assessee wa:s a part of the
University of Oxford, as the Tribunal had found and the question before it
indicated, and that the income that was under consideration for assessment
was, therefore, the income of the University of Oxford. The "person" that was
being taxed was not and could not be a branch of the University of Oxford; F
it could only be the University of Oxford. That the University of Oxford is
a hallowed institution of learning that exists, or is, solely for educational
purposes is not, and cannot reasonably be, in dispute. That the income is
derived by the printing, publishing and selling of books has no relevance
because it is still the income of an University that exists for educational G
purposes.

It is trite law and now needs no authority that a taxing statute must be
read as it stands: no words may be added, no words subtracted. Further,
learned counsel for the assessee was right in pointing out that where
Parliament had intended the exemption under Section l 0 to be limited in any H
604 SUPREME COURT REPORTS [2001] 1 S.C.R.

A way to the territory of India it had b<!en assiduous in so stating; (see, for
example, clauses 20A, 228, 23, 24, 26 and 29 thereof).

It was submitted by learned counsel for the Revenue that the word
"University" used in Section I 0(22) should be read in the manner in which
it was defined in Section 2(f) of the University Grants Commission Act, 1956,
B that is to say . to mean a University established or incorporated by or under
a Central Act, a Provincial Act or a State Act; in other words, to mean an
Indian University. It is not permissible to read the definition of a word in one
Act into another Act unless the latter Act so requires. It is all the more
difficult when the University Grants Commission Act can by its very purpose,
C namely, to make provision for the coordination and determination of standards
in Universities and for that purpose to establish a University Grants
Commission, apply only to Universities in India. Further, a clause identical to
clause (22) was inserted into Indian Income Tax Act, 1922 by a notification ·-x._.
dated 21st March, 1922 and that clause in the 1922 Act was in terms brought
into the 1962 Act. A definition in an Act of 1956 cannot be read to limit the
D scope of a word first used in an Act of 1922 and then incorporated in an Act
of 1962.

Learned counsel for the Revenue then drew attention to Section I0(22A),
which reads thus :

E "(22A) - any income of a hospital or other institution for the reception
and treatment of persons suffering from illness or mental 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."

F In the submission of learned counsel for the Revenue clauses (22) and (22A)
cou Id not have been intended to grant the exemption for the benefit of
children and the sick and infirm outside India. Parliament, in his submission,
would not forego tax revenue for the benefit of educating people in the
University of Oxford in the United Kingdom. A construction that would
G enable this to happen was, he contended, manifestly unreasonable and absurd
and could never have been intended. It was, therefore, necessary to read
clause (22) as applying only to Universities and educational insti!utions
which existed in India or, at least, imparted education in India. Our attention
was drawn by learned counsel for the Revenue to the judgments of this Court
in KP. Varghese v. Income Tax Officer. Ernakulam & Anr., [ 1981] 4 SCC 173
H and Commissioner of Income Tax. Bangalore v. J.H. Got/a, Yadagiri, [1985]
oxroRD lJNIVERSITY PRESS v. C.l.T. [BHARUCllA. J.] 605
4 sec 343, in support of the conte1ition. A
In Varghese 's case, the assessec owned a house which he had purchased
in 1958 ,for the price of Rs. 16,500. In 1965 he sold the house for the same
price of Rs. 16,500 to his daughter-in-law and five children. It was not disputed
that this sale was an honest and bona fide transaction and that the
consideration was in fact Rs. 16,500. However, after completion of the B
assessment for the year 1966-67 in the normal course in this manner, the I.T.O.
issued a notice to re-open the assessment on the basis that Section 52(2) of
the 1962 Act was attracted because the fair market value of the property as
on the date of the transfer exceeded the consideration ofRs.16,500 by not less
than 15 per cent. The I.T.O. proposed, accordingly, to fix the fair market value C
of the house at Rs. 65,000. and assess the difference of Rs. 48,500 as capit<:l
gains in the hands of the assessee. The assessee filed a writ petition. It was
allowed, but, in appeal, the Full Bench of the Kerala High Court accepted as
correct the ITO's view. This Court reversed the Full Bench decision, and it
said that if sub-section (2) of Section 52 was literally construed, as applying
to cases where the consideration in respect of the transfer was correctly D
declared and there was no understatement of consideration, it ·Nould result
in amounts being taxed which had neither accrued to the assessee nor were
received by him and "which from no view point can be rationally construed
as capital gains or any other type of income. It is a well settled rule of
construction that the Court should as far as possible avoid that construction E
which attributes irrationality to the legislature." It was also found that, so
construed, sub-section (2) was violative of the Constitution and the Court "
must obviously prefer a .construction which renders the statutory provision
constitutionally valid rather than that makes it void." The Court said in the
course of the judgment, "It is now a well settled rule of construction that
where the plain literal interpretation of a statutory provision produces a F
manifestly absurd and unjust result which could never have been intended
by the legislature, the Court may modify the language used by the legislature
or even 'do some violence' to it, so as to achieve the obvious intention of
the legislature and produce a rational construction''. Accordingly, the Court
read into Section 52(2) the condition that it would apply only where the G
-- _...,,.-
consideration for transfer was understated and it would have no application
in the case of a bona fide transaction when the full value of the consideration
was correctly declared by the assessee.

In Gotla's case, a strict and literal construction of Section 16(3) read
with Section 24(2) of the 1962 Act led to the conclusion that where the wife H
606 SUPREME COURT Rl'l'ORlS [2001] 1 S.C.R.

A or minor child were carrying on a business, while the right to ca1Ty forward
the loss in the business would be available to the wife or the minor child if
they themselves were assessed. the right would be lost if the individual in
whose total income the loss was to be included was not permitted- to carry
forward the loss under Section 24(2). The Court held that this could not have
been the intention of Parliament. If a strict literal construction led to an absurd
B result. i.e .. a result not intended to be subserved by the object of the legislation,
and if another construction was possible apart from the strict literal
construction. then that construction should be preferred to the strict literal
construction. The Court, therefore, held, on a consideration of the scheme of
the Act and the relevant provisions. that the income of the wife and the minor
C children included in the assessee's total income under Section 16(3) should
be regarded as business income derived from business carried on by the
assessee and. in that view, the assessee was entitled to set off his loss carried
forward from the previous years.

Now, learned counsel's submission is that Parliament co~ld never
D have intended to forego tax revenue for the purpose of educating people
outside India; this was manifestly unreasonable and absurd and, therefore,

E
clause (22) should be so read as applying to Universities established in India,
or at least providing educational facilities in India. I find no unjustness,
unreasonableness, irrationality or absurdity in the provisions of clause (22).
It does not strike me as being beyond the bounds of possibility that Parliament
-
should be willing to forego a very small percentage of tax revenue for the
purposes of education, even though it might mean 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. I do not think Parliament could not possibly have
F meant what clause (22) so plainly says. I see, therefore, no reason to read
clause (22) in a fashion that is not literal.

It should be noticed that clause (22A), whkh also gives an exemption
without any limitation as to location, was introduced into Section I0 in 1970.
G It cannot be that Parliament yet again failed to express its true intendment.
If Parliament had meant to provide an exemption with a locational limitation
in clause (22A) it would have made it clear, and it would have amended clause
(22).
----
The judgment and order under challenge cannot stand, and the question
H quoted above must be answered in the affirmative and in favour of the
OXFORD UNIVERSITY PRESS v. C.I.T. [BHARUCHA, J.] 607
. \ . .
assessee. The appeals are allowed accordingly. No order as to costs. A
The view of the conclusions reached by the majority, the appeals are
dismissed.

No order as to costs.
B
ORDER
In view ofthe conclusions reached by the majority, the appeals are dismissed.
No order as to costs.
B.S. Appeals dismissed.