Section 10(23C)

Section 10(23C) — the law in short

What the courts have decided on section 10(23C), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• ACIT v Ahmedabad Urban Development Authority Supreme CourtCuts both ways
  We charge fees for our public utility work. Does that cost us charitable status under s.2(15)?
  Only if the fees are pitched above cost. Charging on a cost or nominal mark-up basis is not trade, commerce or business; charges noticeably higher than cost are. Even permissible commercial activity must be carried on in the actual course of achieving the general public utility object, and receipts from it must stay within 20 per cent of total receipts.
• 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.
• American Hotel & Lodging Association Educational Institute v CBDT Supreme CourtHelps taxpayerPartly overruled — read this first
  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?
  Not on that ground standing alone. The Supreme Court separated the threshold conditions in s.10(23C)(vi) — the actual existence of an educational institution existing solely for education and not for profit, plus approval by the prescribed authority — from the monitoring conditions in the provisos on application, accumulation and deployment of income, whose compliance depends on events that have not occurred when a first application is made. But this decision must now be read subject to New Noble Educational Society (SC, 19 October 2022), which overruled it on the meaning of 'solely' and held, at para 76(f), that its observations suggesting the Commissioner could not call for records apply only to newly set up charities, the proviso to s.10(23C) not being confined to newly set up trusts.
• CIT (Exemptions) v Shree Sai Baba Sansthan Trust High CourtHelps taxpayer
  Our trust is religious and charitable and holds 80G approval. Can the officer tax our hundi collections under s.115BBC?
  No. Section 115BBC(2)(b) takes a trust created or established wholly for religious and charitable purposes out of the charge, except for a donation given with a specific direction that it is for a university or other educational institution or a hospital or other medical institution run by the trust. The Court held that whether the trust is religious and charitable is determined from the trust deed, and that s.80G registration is a separate and independent question which cannot be used to deny that character. Rs 159.12 crores of hundi collections out of Rs 228.25 crores of donations stayed outside s.115BBC(1).
• 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.
• Hidayatullah National Law University v ACIT (Exemption) ITATHelps departmentNo later treatment found
  We are a State university and the Assessing Officer says we are not substantially financed by the Government because grants were under half our receipts. Can we add up the grants of earlier years?
  No. The Raipur Bench held that s.10(23C)(iiiab) carries twin conditions — existence solely for educational purposes and not for profit, and being wholly or substantially financed by the Government — and that the second is measured by Rule 2BBB, which requires the Government grant to exceed fifty per cent of total receipts including voluntary contributions during the relevant previous year. Cumulative funding since inception does not count; the test is year by year, and grants of 47.85 per cent and 9.77 per cent failed it.
• 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.
• 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.
• 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.
• Himachal Pradesh Technical University v CIT (Exemption) ITATHelps taxpayerNo later treatment found
  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.
• CBDT Circular 16/2024 CBDT Circulars & InstructionsHelps taxpayer
  Our Form 10B is years late. Who can condone the delay, and how long do I have to apply?
  Apply within three years from the end of the assessment year concerned. Delays up to 365 days are decided by the Principal Commissioner or Commissioner; delays beyond 365 days go to the Principal Chief Commissioner, Chief Commissioner or Director General. The circular covers Forms 9A, 10, 10B and 10BB for assessment year 2018-19 onwards.
• CBDT Circular 7/2024 CBDT Circulars & InstructionsHelps taxpayer
  Our Form 10AB was rejected for late filing. Does the CBDT let us apply again?
  Yes, but only within the window this circular opened. The due date for Form 10A and Form 10AB was extended to 30 June 2024, and entities whose Form 10AB was rejected solely for late filing or for filing under the wrong section code could file fresh applications within that extended time.
• CBDT Circular No. 2/2024 — audit report filed in the wrong form CBDT Circulars & InstructionsHelps taxpayerNo later treatment found
  For AY 2023-24 my trust filed Form 10B when Form 10BB was the right form. Is there a CBDT relaxation, and what exactly does it cover?
  Yes, but it is narrow. By Circular No. 2/2024 dated 5 March 2024 the CBDT allowed trusts and institutions that had furnished an audit report on or before 31 October 2023 in Form No. 10B where Form No. 10BB was applicable, and vice versa, to furnish the audit report in the applicable form for AY 2023-24 on or before 31 March 2024. It covers only AY 2023-24, only a wrong-form filing that was itself made by 31 October 2023, and the window it gave has closed.
• Statutory position — section 115TD: the exit tax on accreted income, and the Finance Act 2022 extension to a mere failure to re-apply in time CBDT Circulars & InstructionsCuts both waysNo later treatment found
  We simply missed the deadline for the fresh application under s.12A(1)(ac). We have not been cancelled and nobody has rejected anything. Can the exit tax under s.115TD really apply to us?
  Yes. Since the Finance Act 2022, s.115TD(3)(iii) deems a specified person to have been converted into a form not eligible for registration where it simply fails to make the application required by s.12A(1)(ac)(i), (ii) or (iii), or by the corresponding clauses of the first proviso to s.10(23C), within the period specified, where that period expires in the previous year. The consequence is tax on accreted income at the maximum marginal rate, payable within fourteen days of the end of that previous year, in addition to any income tax otherwise chargeable, with no credit and no deduction against it.
• Statutory position — s.115BBDA: the ten per cent charge on a resident shareholder receiving dividend above ten lakh rupees, and why it sat on top of DDT rather than instead of it CBDT Circulars & InstructionsCuts both waysSuperseded by amendment
  My client got a notice charging ten per cent on his dividend income under s.115BBDA even though the companies had already paid DDT. Is that double taxation, and for which years does it apply?
  Section 115BBDA charges a specified assessee resident in India, whose total income includes dividend in aggregate exceeding ten lakh rupees declared, distributed or paid by a domestic company or companies on or before 31 March 2020, to income-tax at ten per cent on the amount of such dividend in aggregate exceeding ten lakh rupees, plus the tax on the rest of his income computed as if the dividend were excluded. Sub-section (2) bars any deduction for expenditure or allowance and any set off of loss in computing that dividend income, and the Explanation excludes a s.2(22)(e) deemed dividend and takes a domestic company, a s.10(23C)(iv)/(v)/(vi)/(via) fund, institution, trust, university or hospital, and a trust or institution registered under s.12A, s.12AA or s.12AB out of 'specified assessee'.

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.