Law:

Section:

Section 10(23C)(iiiad) of the Income-tax Act, 1961 - Educational institution - Assessment years 2000-01 and 2001-02 - Assessee was an educational society imparting education to children - During relevant assessment years, there was surplus in its account books after meeting all expenses incurred towards imparting education - It invested said surplus in fixed assets like furniture and buildings with a view to expand institution and to earn more income - Whether assessee would be entitled to exemption under section 10(23C)(iiiad) - Held, no FACTS The assessee was an educational society registered under the Societies Registration Act and had been imparting education to the children. The statement of account of the assessee for the relevant assessment years showed certain surplus after meeting all expenses incurred towards imparting the education. The assessee claimed exemption under section 10(23C)(iiiad). The Assessing Officer, following the of the Supreme Court in the case of Aditanar Educational Institution v. Addl. CIT[1997] 224 ITR 310/90 Taxman 528, refused the exemption to the assessee. On appeal, the Commissioner (Appeals) allowed the assessee's claim. The Tribunal upheld the action of the Commissioner (Appeals) holding that any educational institution cannot be run in rented premises for all times without necessary equipment and without paying to the staff engaged in imparting education; that the assessee was not getting any financial aid/assistance from the Government or any other philanthropic agency and, therefore, to achieve its objectives, it had to raise its own funds; and that such surplus would not come within the ambit of denying exemption under section 10(23C)(iiiad). On revenue's appeals to the High Court : HELD The reasons recorded by the Tribunal were hypothetical and against the set up case of the revenue relating to earned profit. The Tribunal failed to appreciate the profit of 30 per cent in the assessment year 2000-01 and 27 per cent in the assessment year 2001-02 of the total receipts. In view of the established fact relating to earned profit, the reasoning given by the Tribunal for granting exemption could not be accepted. The law is…

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