Rejection of exemption under section 10(23C)(vi)
alleging assessee did not solely exist for educational purposes
Facts:
Assessee
an educational body existing over 90 years was denied exemption under section
10(23C)(vi) alleging that they did not solely exist for educational purposes as
warranted to claim the said exemption besides they also earning substantial
royalty income by way of book publication outsourced to other publishing
houses. On higher appeal -
Held
against the assessee that they were not entitled to the exemption under section
10(23C)(vi). On facts, the ITAT found that the assessee did not solely exist
for educational purposes thus denied the exemption.
Applied:
New Noble Educational Society v. Chief Commissioner of
Income Tax, (2022) 448 ITR 594 (SC) : 2022 TaxPub(DT) 6798 (SC)
Section
10(23C)(vi) reads as under -
(vi)
any university or other educational institution existing solely for
educational purposes and not for purposes of profit, other than those
mentioned in sub-clause (iiiab) or sub-clause (iiiad) and which may be approved
by the prescribed authority;
"New Noble Educational Society v. Chief Commissioner
of Income Tax, (2022) 448
ITR 594 (SC) : 2022 TaxPub(DT) 6798 (SC), the Hon‟ble Supreme Court
while examining section 10(23C)(vi) of the Act considered all the previous
decisions and came to the conclusion that a trust, university or other
institution imparting education should necessarily have all its objects aimed
at imparting or facilitating education, for the purpose of claiming the
exemption under the aforesaid section. The Hon‟ble Supreme Court further
in para 51 held that the expression solely is therefore important. The
Hon‟ble Supreme Court also held that the predominant object test laid
down in Surat Art Silk Cloth Manufacturers‟ Association (supra) was in
the context of charitable organisations set up for the advancement of objects
of general public utility and the same was wrongly adopted in subsequent
decisions in American Hotel and Lodging Association v. CBDT, (2008) 301 ITR
86 (SC) : 2008 TaxPub(DT) 2007 (SC) and Queen's Educational Society v.
CIT (2015) 372 ITR 699 (SC) : 2015 TaxPub(DT) 1436 (SC). Accordingly, the
Hon‟ble Supreme Court overruled the decisions rendered in American Hotel
and Lodging Association (supra) and Queen's Educational Society (supra). We
find that the Hon‟ble Supreme Court in New Noble Educational Society
(supra) further upheld that surplus generated in the course of providing
education or education activities is not a bar in claiming approval under
section 10(23C)(vi) of the Act".
Ed. Note:
The predominant test as to whether an institution/trust exists predominantly
for educational purposes has taken a back seat post New Noble Educational
society decision. This is one space where protracted litigation is on the cards
as evident in the case of the 90 year old assessee institution.
Case: Indian Institute of Banking & Finance v. CIT(E) 2023 TaxPub(DT)
3227 (Mum-Trib)