2023 (5) TMI 792 - AT - Income Tax

Denial of exemption u/s 10(23C)(vi) - CIT(E) observed the huge surplus which indicates that the activities are conducted with the motive of profit. - Appellant does not exist solely for educational purpose and is involved in commercial activities within the meaning of section 10(23C) (vi) - HELD THAT:- If the objects of the assessee, as claimed, have remained the same since the preceding years, the assessee has modified the way of its functioning and thus cannot be said to be existing “solely” for the purpose of education. It is pertinent to note that in section 10(23C)(vi) of the Act, before the term “solely for educational purposes and not for purposes of profit”, the word “existing” is used.

Therefore, even if for any year the taxpayer is found to be existing solely for educational purposes and not for purposes of profit, the assessee still has to continuously satisfy this pivotal condition each and every year. Section 10(23C)(vi) of the Act is not worded in the same manner as other provisions pertaining to deduction such as sections 10A, 10B, 80IB, etc., which provides for the satisfaction of formation conditions as well as continuing conditions, and the fulfilment of formation conditions are to be tested only in the initial year. We find that other decisions relied upon by the learned AR rendered in assessee’s own case pertains to either exemption u/s 11 or registration u/s 12A, wherein the provisions are not as stringent as section 10(23C)(vi) of the Act.

Since the assessee has been found to be not ‘existing’ solely for the purposes of education, denial of exemption under section 10(23C)(vi) of the Act is upheld. As a result, the appeal filed by the assessee is dismissed.