'Edu institutions not entitled for approval under Sec 10 (23C) of IT Act where objective is profit'

New Delhi: The Supreme Court said on Wednesday educational institutions will not be entitled to approval under section 10(23C) of the Income Tax (IT) Act where their objective appears to be "profit-oriented".

Section 10 of the IT Act exempts from taxation certain classes of income.

A bench headed by Chief Justice U U Lalit noted that one of the issues which required resolution in the matter before it pertained to the correct meaning of the term 'solely' in section 10 (23C) (vi) of the Act which exempts income of "university or other educational institution existing solely for educational purposes and not for purposes of profit".

"Where the objective of the institution appears to be profit-oriented, such institutions would not be entitled to approval under section 10(23C) of the IT Act," said the bench, also comprising Justices S R Bhat and P S Narasimha.

It observed, "Education ennobles the mind and refines the sensibilities of every human being and helps us discern between right and wrong by removing the darkness of ignorance."

The bench also noted that in a knowledge based, information driven society, true wealth is education and access to it.

The top court delivered its verdict on a batch of appeals which raised the issue of rejection of the appellants' claim 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 appeals were filed against the judgement delivered by the Andhra Pradesh High Court which had held that the appellant trusts which claimed benefit of exemption under section 10 (23C) of the IT Act were not created 'solely' for the purpose of education.

The apex court held the requirement of a charitable institution, society or trust etc, to 'solely' engage itself in education or educational activities and not engage in any activity of profit, means that such institutions cannot have objects which are unrelated to education.

"In other words, all objects of the society, trust etc, must relate to imparting education or be in relation to educational activities," it said.

The bench also overruled two previous judgements of the apex court to the extent of reasoning and conclusions pertaining to the interpretation of expression 'solely'.