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2013 (2) TMI 268 - BOMBAY HIGH COURTBenefit of Section 10(23C)(iiiab) denied - institution substantially funded by government must receive at least 75% of its receipts from government grants - benefit of Section 11 was granted - Held that:- As decided in Educational Institution v/s. Additional CIT [1997 (2) TMI 3 - SUPREME COURT] the decisive or acid test is whether on an overall view of the matter, the object is to make a profit. A surplus may arise in the activity of the trust after meeting the expenditure incurred for conducting educational activities was held not to dis-entitle the trust for the benefit of the provisions of Section 10(23C). The fact that the Petitioner has a surplus of income over expenditure for the three years in question, cannot by any stretch of logical reasoning lead to the conclusion that the Petitioner does not exist solely for educational purposes or, as that Chief Commissioner held that the Petitioner exists for profit. The test to be applied is as to whether the predominant nature of the activity is educational. In the present case, the sole and dominant nature of the activity is education and the Petitioner exists solely for the purposes of imparting education. An incidental surplus which is generated, and which has resulted in additions to the fixed assets is utilized as the balance-sheet would indicate towards upgrading the facilities of the college including for the purchase of library books and the improvement of infrastructure. With the advancement of technology, no college or institution can afford to remain stagnant. The Income-tax Act 1961 does not condition the grant of an exemption under Section 10(23C) on the requirement that a college must maintain the status-quo, as it were, in regard to its knowledge based infrastructure. Nor for that matter is an educational institution prohibited from upgrading its infrastructure on educational facilities save on the pain of losing the benefit of the exemption under Section 10(23C). Imposing such a condition which is not contained in the statute would lead to a perversion of the basic purpose for which such exemptions have been granted to educational institutions. The provisions of Section 10(23C) cannot be interpreted regressively to deny exemptions. So long as the institution exists solely for educational purposes and not for profit, the test is met. Direct that the CIT(A) shall, in determining whether the Petitioner should be granted an exemption under Clause (iiiab) do so, without being influenced by any observations contained in the impugned order of the Chief Commissioner of Income-tax which, to the extent that it holds that the Petitioner does not exist for educational purposes and that it exists for the purposes of profit is quashed and set aside - in the event that the Petitioner is held not to be entitled to the benefit of an exemption under Section 10(23C) (iiiab), the Petitioner would in that event be entitled to the benefit of an exemption under Clause (vi) of Section 10(23C).
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