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Tax Publishers 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)

Tax Publishers

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)