Section 10(23C) application Can’t be Rejected merely for Surplus generation

The Indian Institute of Banking & Finance Vs CIT (Exemp.) (ITAT Mumbai)

The issue under consideration is whether rejection of approval u/s 10(23C) on the allegation of institution existing not solely for the purpose of education but for the purpose of profit is justified in law?

In the present case, the nature and character of the assessee is that of a Charitable Institution. The assessee claiming itself to be an educational institution existing solely for educational purpose and not for the purpose of profit. The assessee sought approval of the competent authority for claiming exemption u/s 10(23C), however, assessee’s applications were rejected. Reason for denial of approval primarily is, the assessee cannot be considered to be an Educational Institution, as it does not provide any formal education as is provided in Schools, Colleges, etc. Further, looking at the financials of the assessee and the surplus generated, learned Commissioner (Exemp.) observed, it does not satisfy the condition of “not existing for the purpose of earning profit”.

ITAT states that the assessee is an Educational Institution and created for the purpose of imparting education cannot be rejected considering the fact that it undertakes various courses for imparting education to candidates appearing in banking service. He submitted, the objects of the assessee also make it clear that it is created for the purpose of imparting education. He submitted, sale of books, study materials and holding examinations are ancillary and incidental to the main object of imparting education. Therefore, it cannot be said that the assessee has been created with profit motive.He submitted, the surplus generated is as a result of corpus donation accumulated over the years and not due to any commercial activity carried on by the assessee with profit motive. He submitted, when the assessee has been held to be a Educational Institution and having charitable object without any profit motive by the Tribunal in the earlier assessment years, the concerned authority was not justified in rejecting assessee’s application under section 10(23C)(vi) of the Act. Thus, assessee’s application of exemption under section 10(23C)(vi) of the Act should be allowed.

FULL TEXT OF THE ITAT JUDGEMENT

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