| Court: | Supreme COurt of India |
| Head Notes: | M/s New Noble Education Society Vs The Chief Commissioner of Income-tax and another (Supreme Court) Date-19th October 2022 The three judges bench of Supreme Court in this important case which will have far reaching implications on all the institutions which are claiming exemption u/s 10(23C) in relation to educational and medical institutions in view of the interpretation which the Supreme Court adopted by approving the decision of the Andhra Pradesh High Court which had dismissed the appeal of the petitioner herein by holding that the institution should solely exist for the medical or education as the case may be and if there are other objects as per the constitution document then the institution will not be eligible for approval under the relevant provisions. While holding so , the Supreme Court 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. Ramesh Patodia |
| Law: | Income-Tax Act |
| Section(s): | Section 10(23C)/ 11(4) of Income-tax Act,1961 |
| Counsel(s): | Counsels |
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| Uploaded By | Ramesh Patodia |
| Date of upload: | October 19, 2022 |
The phrase ‘existing solely for educational purposes and not for purposes of profit’ occurring in sec. 10(23C) has long been the subject matter of some debate and discussion. The latest occasion was in New Noble case. The controversy would have ended then there, had the counsel brought to the notice of court the much-acclaimed principle that one need not go any farther if the words of a statute are clear and unambiguous, In the instant case, even a lay man would have said that it simply means “without profit motive”. It is plain that the phrase contains but one condition, viz. that the educational institution exists not for profit but for education alone. Making out two conditions out of it viz. that 1) its object should be education with no other objects thrown in and 2) that it should not exist for profit-making is, in my view, splitting hairs. How does it concern the Revenue if the society which runs a college also runs a choultry free-feeding the public as another charitable activity as long as separate accounts are kept?
Having dealt with hundreds of cases in my official capacity I would say: In India, charity is a rarity.
The phrase ‘existing solely for educational purposes and not for purposes of profit’ occurring in sec. 10(23C) has long been the subject matter of some debate and discussion. The latest occasion was in New Noble case. The controversy would have ended then and there, had the counsel brought to the notice of court the much-acclaimed principle that one need not go any farther if the words of a statute are clear and unambiguous, In the instant case, even a lay man would have said that it simply means “without profit motive”. It is plain that the phrase contains but one condition, viz. that the educational institution exists not for profit but for education alone. Making out two conditions out of it viz. that 1) its object should be education with no other objects thrown in and 2) that it should not exist for profit-making is, in my view, splitting hairs. How does it concern the Revenue if the society which runs a college also runs a choultry free-feeding the public as another charitable activity as long as separate accounts are kept?
Having dealt with hundreds of cases in my official capacity I would say: In India, charity is a rarity.