Section 10(22)

Section 10(22) — the law in short

What the courts have decided on section 10(22), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Queen's Educational Society v CIT Supreme CourtHelps taxpayerPartly overruled — read this first
  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?
  No. The Supreme Court held that a surplus ploughed back into the institution does not destroy the exemption. What matters is the predominant object: if the institution exists solely for education and not for profit, the fact that receipts exceed expenditure is beside the point. The Court set aside the Uttarakhand High Court's contrary judgment in Queen's Educational Society, approved the Punjab and Haryana, Delhi and Bombay High Court decisions, and restored the Tribunal's view. It reaffirmed Surat Art Silk Cloth, Aditanar and American Hotel and Lodging as the governing tests, while stressing that the thirteenth proviso requires the authorities to monitor actual application of income year by year. Read subject to a date, though: on 19 October 2022 the Supreme Court in New Noble Educational Society v Chief CIT disapproved the reasoning of this judgment and of American Hotel and Lodging so far as it pertains to the interpretation of 'solely', and held instead that all the objects of the institution must relate to imparting education, so the predominant-object test stated here is no longer the test for that word. New Noble para 78 directs that the law it declares operate prospectively.
• Aditanar Educational Institution v Addl CIT Supreme CourtHelps taxpayer
  My society runs a college and ended the year with a surplus. Does that surplus mean we no longer exist solely for educational purposes and not for profit?
  No. The Supreme Court held that if a surplus results incidentally, after meeting expenditure, from an activity lawfully carried on by an educational institution, the institution does not cease to exist solely for educational purposes, because its object is not to make profit. The decisive test is whether, on an overall view, the object is to make profit. The Court also held that a society or trust running an educational institution solely for educational purposes and not for profit is itself an other educational institution, and rejected as unreal and hyper-technical the argument that such a body is merely a financing body.
• Educational Institute of American Hotel and Motel Association v CIT Advance RulingHelps taxpayerSuperseded by amendment
  A foreign non-profit runs hospitality courses in India through a branch and charges licence fees and course fees to Indian institutes. Is that income exempt as an educational institution, and does a surplus destroy the exemption?
  Yes, on the law as it then stood. The Authority ruled that the Educational Institute of American Hotel and Motel Association, a US non-profit working in India under a memorandum of understanding with the National Council of Hotel Management and Catering Technology, was entitled to exemption under s.10(22) on income from conducting courses and certification programmes, providing educational and training materials, conducting seminars and workshops, and training in-house faculty. Its objects barred any distribution of earnings to members or directors even on dissolution, and the activities under its licence agreements and memoranda were purely educational or ancillary to education. Because the first question was answered in the applicant's favour, the question on s.11 became academic. Section 10(22) has since been omitted from the Act.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.