Case: New Noble Educational Society v. Chief Commissioner of Income-tax – [2022]
Case No. C.A. No.-003795-003795 / 2014
Authority: Supreme Court of India
Order passed on: 19.10.2022
The appellants have filed application for registration as a fund or trust or institution or any university or other educational institution set up for the charitable purpose of education, under the Income Tax Act, 1961. The registration has been denied on the grounds that the appellant trust was not created ‘solely’ for the purpose of education and they were not registered under the Andhra Pradesh Charitable and Hindu Religious Institutions and Endowments Act, 1987 as condition precedent for grant of approval.
The question in the appeal was whether an institution claiming exemption u/s 10(23C) has to exist solely for the purpose of education or it can have income from other sources as well and connected issues?
Judgement: The three judges bench of Supreme Court in this important case held that the earlier decision in the case of American Hotel and Queen’s education society where predominant test was applied was not appropriate and to that extent these judgements fell in error. Moreover, the Court also interpreted the proviso to Section 10(23C) which is Pari materia to Section 11(4A) as per which a business activity which is incidental to the attainment of main objects was alright and this was interpreted to mean with examples in the judgement. The court held that when an institution allows conferences, seminars, etc to be held and attended by outsiders, then the same will not be covered within the ambit of this exclusion. Similar example was given as to that of hostel being allowed to non-students. Finally, the Supreme Court also held that when any other law is required to be followed by these institutions, non-compliance of such law will also result in denial of exemptions.
The judgement doesn’t cover in detail the objects of general public utility and therefore to extent, the judgement can be said to be mainly concentrating on the institutions governed by Section 10(23C) only.
It is pertinent to note that all these institutions will have to introspect their activity and Constitution documents and they can be said to be lucky that the judgement itself has said that these changes will be applicable prospectively and thus previous assessments will not be hit.
The complete order can be downloaded from this link: https://main.sci.gov.in/supremecourt/2012/25090/25090_2012_1_1502_39247_Judgement_19-Oct-2022.pdf
