Our s.10(23C)(vi) application was rejected because we generate surplus and park it in fixed deposits. Is surplus by itself a ground for refusal?
No, but the answer is no longer the old one. The Chandigarh Bench set aside a rejection founded on surplus generation, parking of funds in fixed deposits and non-filing of returns, and remanded the application to the Commissioner (Exemption) to be decided afresh in accordance with law and with the precedents, including New Noble Educational Society. Generation of surplus year to year is not by itself a bar where the institution is established solely for educational purposes.
Decided by the ITAT (Aakash Deep Jain VP and Vikram Singh Yadav AM, Chandigarh Bench 'A') on 2024-03-28, reported as ITA No. 115/Chd/2020 (ITAT Chandigarh). It bears on section 10(23C)(vi), section 10(23C) of the Income Tax Act 1961, in Capital Gains Exemptions, Charitable Trusts & Exemption and Appeals matters.
This is the shape most live s.10(23C)(vi) approval disputes take: the Commissioner points to accumulated surplus and fixed deposits and infers a profit purpose. The order is useful because it refuses that inference and sends the matter back on the correct legal footing, but it must be read with care. It cites Queen's Educational Society alongside New Noble, and New Noble overruled Queen's on the interpretation of 'solely'. What survives Queen's, and what New Noble para 76(b) itself confirms, is the narrower proposition that a surplus accruing in a given year or set of years is not per se a bar provided the surplus is generated in the course of providing education. What does not survive is any use of Queen's to run a predominant-object argument. So the argument on remand should be that all the institution's objects relate to education and that the surplus arose from educational activity — not that education predominates. Note too that from 1 October 2023 approval work under s.10(23C) has moved into the s.12AB machinery by the Finance Act 2023, so an application pending or fresh now is processed under that regime and not the one described in this order.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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The assessee, a State technical university, applied for approval under s.10(23C)(vi). The Commissioner (Exemption) rejected the application on the grounds that the university was generating surplus, was parking its funds in fixed deposits and was not filing income-tax returns, and concluded that it was not being run solely for educational purposes but for profit. The assessee's grounds contended that this ignored Queen's Educational Society v. CIT and New Noble Educational Society v. CCIT, and pointed out that the Commissioner had himself recorded that Queen's Educational Society permits generation of surplus which must be redeployed into education. The Departmental Representative relied on New Noble to support the rejection.
The appeal was allowed for statistical purposes. The matter was remanded to the Commissioner (Exemption) with a direction to reconsider and decide the application under s.10(23C)(vi) strictly in accordance with law, including due adherence to the precedents and the CBDT circular referred to, preferably within three months of receipt of the order, after giving the assessee a reasonable opportunity, with liberty to raise contentions and file information, and all contentions left open (para 33).
The Bench recorded that the assessee claimed to have established a university solely for educational purposes and sought exemption on that footing, and that the generation of surplus from year to year cannot be a bar to seeking exemption under the provision. It noted that in view of the judgments of the Supreme Court in Queen's Educational Society, Visvesvaraya Technological University and New Noble Educational Society, and of the jurisdictional High Court in Maa Saraswati Educational Trust, the assessee's case needed to be duly considered by the Commissioner (Exemption) (para 32). Since all relevant facts and material needed to be brought on record, it declined to decide the application itself and remanded (para 33).
the matter is remanded back to the ld CIT(E) with a direction to re-consider and decide the application in question preferred by the petitioner under Section 10(23C)(vi) of the Act of 1961, strictly in accordance with law
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Handle my notice → Ask a CA on WhatsAppNo, but the answer is no longer the old one. The Chandigarh Bench set aside a rejection founded on surplus generation, parking of funds in fixed deposits and non-filing of returns, and remanded the application to the Commissioner (Exemption) to be decided afresh in accordance with law and with the precedents, including New Noble Educational Society. Generation of surplus year to year is not by itself a bar where the institution is established solely for educational purposes. This was decided by the ITAT (Aakash Deep Jain VP and Vikram Singh Yadav AM, Chandigarh Bench 'A') and bears on section 10(23C)(vi), section 10(23C) of the Income Tax Act 1961. It is reported as ITA No. 115/Chd/2020 (ITAT Chandigarh). This is the shape most live s.10(23C)(vi) approval disputes take: the Commissioner points to accumulated surplus and fixed deposits and infers a profit purpose. The order is useful because it refuses that inference and sends the matter back on the correct legal footing, but it must be read with care. It cites Queen's Educational Society alongside New Noble, and New Noble overruled Queen's on the interpretation of 'solely'. What survives Queen's, and what New Noble para 76(b) itself confirms, is the narrower proposition that a surplus accruing in a given year or set of years is not per se a bar provided the surplus is generated in the course of providing education. What does not survive is any use of Queen's to run a predominant-object argument. So the argument on remand should be that all the institution's objects relate to education and that the surplus arose from educational activity — not that education predominates. Note too that from 1 October 2023 approval work under s.10(23C) has moved into the s.12AB machinery by the Finance Act 2023, so an application pending or fresh now is processed under that regime and not the one described in this order. If it applies to you, the first step is this: Answer the surplus point with New Noble para 76(b) rather than with Queen's: show the surplus was generated in the course of providing education and was redeployed into education.
The assessee, a State technical university, applied for approval under s.10(23C)(vi). The Commissioner (Exemption) rejected the application on the grounds that the university was generating surplus, was parking its funds in fixed deposits and was not filing income-tax returns, and concluded that it was not being run solely for educational purposes but for profit. The assessee's grounds contended that this ignored Queen's Educational Society v. CIT and New Noble Educational Society v. CCIT, and pointed out that the Commissioner had himself recorded that Queen's Educational Society permits generation of surplus which must be redeployed into education. The Departmental Representative relied on New Noble to support the rejection. The matter was decided on 2024-03-28 by the ITAT (Aakash Deep Jain VP and Vikram Singh Yadav AM, Chandigarh Bench 'A'). On those facts the ITAT held as follows. The appeal was allowed for statistical purposes. The matter was remanded to the Commissioner (Exemption) with a direction to reconsider and decide the application under s.10(23C)(vi) strictly in accordance with law, including due adherence to the precedents and the CBDT circular referred to, preferably within three months of receipt of the order, after giving the assessee a reasonable opportunity, with liberty to raise contentions and file information, and all contentions left open (para 33).
The Bench recorded that the assessee claimed to have established a university solely for educational purposes and sought exemption on that footing, and that the generation of surplus from year to year cannot be a bar to seeking exemption under the provision. It noted that in view of the judgments of the Supreme Court in Queen's Educational Society, Visvesvaraya Technological University and New Noble Educational Society, and of the jurisdictional High Court in Maa Saraswati Educational Trust, the assessee's case needed to be duly considered by the Commissioner (Exemption) (para 32). Since all relevant facts and material needed to be brought on record, it declined to decide the application itself and remanded (para 33). In the words reproduced by the source cited on this page: "the matter is remanded back to the ld CIT(E) with a direction to re-consider and decide the application in question preferred by the petitioner under Section 10(23C)(vi) of the Act of 1961, strictly in accordance with law" The decision followed or applied New Noble Educational Society v. CCIT (2022) 143 taxmann.com 276 — referred to (paras 15, 27 and 32); Queen's Educational Society v. CIT (2015) 372 ITR 699 — referred to (paras 15 and 32), but overruled by New Noble so far as the interpretation of 'solely' is concerned; Visvesvaraya Technological University (2016) 384 ITR 37 — referred to (paras 15 and 32); Maa Saraswati Educational Trust (Himachal Pradesh High Court) — referred to as the jurisdictional High Court decision (para 32).
It was decided by the ITAT on 2024-03-28 and is reported as ITA No. 115/Chd/2020 (ITAT Chandigarh). Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 10(23C)(vi), section 10(23C), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeal was allowed for statistical purposes. The matter was remanded to the Commissioner (Exemption) with a direction to reconsider and decide the application under s.10(23C)(vi) strictly in accordance with law, including due adherence to the precedents and the CBDT circular referred to, preferably within three months of receipt of the order, after giving the assessee a reasonable opportunity, with liberty to raise contentions and file information, and all contentions left open (para 33). It arises in Capital Gains Exemptions, Charitable Trusts & Exemption and Appeals matters, on section 10(23C)(vi), section 10(23C) of the Income Tax Act 1961, and was decided by Aakash Deep Jain VP and Vikram Singh Yadav AM, Chandigarh Bench 'A'. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Go through the objects clause line by line and be ready to show that every object relates to imparting education, because that is the test after New Noble and an unrelated object is fatal. Deal with the collateral grounds separately — parking funds in fixed deposits raises the specified-modes condition, and non-filing of returns raises a compliance point; neither is an answer to the character of the institution. Where the Commissioner has decided without calling for or considering the accounts and the factual material, ask for a remand rather than a decision on an incomplete record, which is what the Bench directed here. Check which approval regime applies to your application: the provisos to s.10(23C) for the older applications, and the s.12AB machinery from 1 October 2023 following the Finance Act 2023.
Searched for later treatment; none was found. That is not the same as a source affirming it. The citator returns nothing, and no later decision was found applying or doubting the direction that a rejection founded on surplus, parking of funds in fixed deposits and non-filing of returns must be reconsidered in the light of New Noble Educational Society. What a practitioner should know is what happened after the remand: the university has four writ petitions pending in the Himachal Pradesh High Court against the Commissioner of Income Tax (Exemption) — CWP Nos. 11483, 11484, 11485 and 11486 of 2025 — in which, by orders of 27 July 2026, the Court granted a last opportunity of four weeks to file a rejoinder and listed the matters for consideration on 28 September 2026. Those petitions are undecided; they are directed at the Commissioner, not at this order, so the status of this order is unaffected, but the outcome of the remand is live before the High Court. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The report does not state an assessment year, which is right for an approval application. The order as printed misspells Visvesvaraya as 'Visvescaraya' and cites New Noble by a Taxmann citation string appearing in the order itself. The order refers to a CBDT circular in the direction at para 33 which the extract I read does not identify by number; a later pass should retrieve the paragraphs preceding para 32 to find it. I did not obtain para 34 verbatim; the disposal 'In the result, the appeal of the assessee is allowed for statistical purposes' is taken from the first retrieval only. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was allowed for statistical purposes. The matter was remanded to the Commissioner (Exemption) with a direction to reconsider and decide the application under s.10(23C)(vi) strictly in accordance with law, including due adherence to the precedents and the CBDT circular referred to, preferably within three months of receipt of the order, after giving the assessee a reasonable opportunity, with liberty to raise contentions and file information, and all contentions left open (para 33).
TaxSphere, “Himachal Pradesh Technical University v CIT (Exemption)”, https://taxnotice.vittsphere.com/caselaw/case/himachal-pradesh-technical-university-10-23c-vi-remand-after-new-noble/ (validity last checked 2026-09-08)
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The prescribed authority has refused our s.10(23C)(vi) approval because we have not shown that income was applied the way the third proviso requires. Can it refuse on that ground at the approval stage?
Our society runs a college but also earns from hostels and events. Can we get 10(23C)(vi) approval?
My institution filed its audit report on time but in Form 10B when Form 10BB was the right form, and the CPC has denied the exemption and raised a demand on the gross receipts. Is filing the wrong audit form fatal?
My school makes a surplus every year and puts it back into buildings and equipment. Does that mean it no longer exists solely for education?
