What the courts have decided on section 10(23C)(iiiad), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.
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New Noble Educational Society v CCIT
Supreme CourtHelps department
Our society runs a college but also earns from hostels and events. Can we get 10(23C)(vi) approval?
Only if education is your sole object. 'Solely' means to the exclusion of all others, and the older predominant object test was rejected. Business receipts stay exempt only where the business is incidental to the educational object and separate books are kept, so letting hostels to non-students or hosting outside conferences falls outside that.
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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.
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Manas Sewa Samiti v Addl. CIT
High CourtHelps taxpayer
The Assessing Officer has added our society's donations to our college's fee receipts to push us over the s.10(23C)(iiiad) limit. Can he club them?
No, and that is still so after the 2021 amendment. The Allahabad High Court held the benefit of s.10(23C)(iiiad) is activity-centric: the prescribed limit is tested against the receipts of the eligible institution alone, and the other income of the society running it — donations, subscriptions and the like — is not to be clubbed. The sub-clause was substituted by the Finance Act 2021 with effect from AY 2022-23, so the limit is now five crore rupees and the receipts of all the person's institutions are aggregated; but the aggregation is of receipts 'from such university or universities or educational institution or educational institutions', so income the society receives in its own right still does not enter the computation.
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CDO Jain Education Society v ACIT (CPC)
ITATHelps taxpayerNo later treatment found
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?
No. Where the accounts were in fact audited by a chartered accountant and an audit report was uploaded within time, the choice of the wrong form is a procedural lapse and not a failure of the substantive condition, and exemption cannot be denied on that ground alone. The Tribunal set aside the appellate order and directed the Assessing Officer to verify substantive compliance and, if satisfied, to condone the procedural lapse, allow the exemption and reduce the demand to nil.
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School Managing Society Capt. Gurcharan Singh v DCIT/ITO (Exemptions)
ITATHelps taxpayerNo later treatment found
We missed the s.12AB re-registration, CPC has taxed our entire gross receipts, and we never claimed s.10(23C)(iiiad) in the return. Can we claim it now, in appeal?
Yes, on these facts. The Amritsar Bench held that a school whose annual receipts are well below the prescribed limit is legally entitled to s.10(23C)(iiiad) even though the claim was made for the first time before the appellate authorities, because it is a question of law arising from material already on record. The sub-clause requires no registration and no approval, so the loss of s.11 for want of s.12AB registration does not touch it.
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Bhartiya Shiksha Prachar Samiti v Circle (Exemption), Jaipur
ITATHelps taxpayerNo later treatment found
Our society runs several schools, each under the threshold but well over it in total. Which years can we still claim s.10(23C)(iiiad) school by school?
Up to AY 2021-22, each institution is looked at separately and each has its own limit — one crore rupees, prescribed by Rule 2BC. The Jaipur Bench so held for AYs 2012-13 and 2015-16 and, in the same order, recorded that the Finance Act 2021 changed the position with effect from AY 2022-23, so that from that year the total gross revenue of the person is what is tested against the five crore rupee ceiling.
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.
