2023 (5) TMI 283 - SC - Income Tax

Exemption u/s 10(23C)(vi) - Commissioner was of the opinion that the activity of the respondent-assessee cannot be said to be solely for imparting the education and, therefore, not entitled to the benefit/exemption under Section 10(23C)(vi) - HC allowed exemption - HELD THAT - In the recent decision of this Court in the case of New Noble Educational Society 2022 (10) TMI 855 - SUPREME COURT it is specifically observed and held by the three-Judge Bench of this Court that for claiming the benefit/exemption u/s 10(23C)(iii)(ab) which is para materia to Section 10(23C)(vi) the activity of the assessee must be be solely for educational purposes and if ultimately it is found that the activity is for profits the assessee is not entitled to the exemption u/s 10(23C)(vi) of the Act. Applying the law laid down by this Court in the case of New Noble Educational Society (supra) the impugned judgment and order passed by the High Court is unsustainable. It is required to be noted that taking into consideration the entire material on record, in fact, the Commissioner, while considering the application of the assessee for grant of exemption u/s 10(23C)(vi) specifically observed and held that the activity of the assessee cannot be said to be solely for imparting the education and that the assessee is indulging into the profit which was found to be 67.81% without depreciation and 44.48% with depreciation. The finding of fact recorded by the Commissioner, as such, not been upset by the High Court in the impugned judgment and order. The present Appeal succeeds. The impugned judgment and order passed by the High Court deserves to be quashed and set aside and is, accordingly, quashed and set.

Summary

Issues involved:
The judgment deals with the issue of exemption under Section 10(23C)(vi) of the Income Tax Act, 1961 for an educational institution engaged in systematic profit-making activities, as well as the interpretation of the term "solely for educational purposes" in determining eligibility for exemption.

Details of the Judgment:

1. Background and Appeal by Revenue:
The Revenue appealed against the High Court's judgment allowing a Writ Petition by the respondent-assessee, which sought exemption under Section 10(23C)(vi) for the Assessment Year 2006-2007. The Commissioner had denied the exemption, citing the respondent's consistent profit-making activities not solely for educational purposes.

2. Previous Court Decisions and Interpretation of "Solely for Educational Purposes":
The High Court relied on previous decisions, including one involving Pinegrove International Charitable Trust, to support its judgment. The Supreme Court clarified the interpretation of "solely for educational purposes," emphasizing that the primary object of an educational institution should be education, not profit-making.

3. Recent Court Decision and Application of Law:
A recent three-Judge Bench decision in New Noble Educational Society reiterated that for exemption under Section 10(23C)(vi), the activity must be solely for educational purposes. In this case, the Commissioner's finding that the respondent's activities were profit-oriented was upheld, leading to the quashing of the High Court's judgment and allowing the Revenue's appeal.

4. Conclusion:
Based on the principles established in previous judgments and the recent interpretation of the law, the Supreme Court allowed the Revenue's appeal, setting aside the High Court's judgment and emphasizing the importance of the educational institution's primary objective being education, not profit-making.