Law:

Section:

Section 10(23C) of the Income-tax Act, 1961 - Educational institution (Profit motive) - Assessment years 2000-01 and 2001-02 - Whether where a surplus was made by educational institution which was ploughed back for educational purposes, said institution was to be held to be existed solely for educational purpose and not for purpose of profit - Held, yes [Para 19] [In favour of assessee/matter remanded] FACTS â–  The assessee society was engaged in imparting education and had to maintain a teaching and non teaching staff and had to pay for their salaries and other incidental expenses. It, therefore, became necessary to charge certain fee from the students for meeting all these expenses. The assessee filed its return claiming exemption of income under section 10(23C)(iiiad). â–  The Assessing Officer found that assessee had generated some surplus during relevant years. He thus taking a view that assessee-society was running educational institution with profit motive, rejected assessee's claim. â–  The Tribunal noted that the surplus had enabled the assessee to acquire its own property, acquire computers, library books, sports equipments etc. for the benefit of the students. Moreover the members of the assessee society had not utilized any part of the surplus for their own benefit. The Tribunal thus taking a view that profit was only incidental to the main object of spreading eduction, allowed assessee's claim for exemption. â–  The High Court, however, relying upon the order passed in the case of Aditanar Educational Institution v. Addl. CIT [1997] 224 ITR 310 (SC), restored the order passed by Assessing Officer. â–  On appeal to the Supreme Court: HELD â–  Section 10(23C)(iiiad) has three requirements- (a) the educational institution must exist solely for educational purposes (b) it should not be for purposes of profit and (c) the aggregate annual receipts of such institution should not exceed the amount or annual receipts as may be prescribed. Such prescription is to be found in rule 2CA of Income-tax Rules, 1962, being an amount of Rs.1crore. [Para 5] â–  Thus, the law common to section 10(23C)(iiiad) and (vi) may be…