TMI BlogClarification on certain issues related to grant of approval and claim of exemption u/s 10(23C)(vi) of the Income-tax Act, 1961.X X X X Extracts X X X X X X X X Extracts X X X X ..... es of profit, shall be exempt from tax if such entities are approved by the prescribed authorities. Such approval is not required in cases of university or educational institutions wholly or substantially financed by the Government [sub-clause (iiiab)] or if their aggregate annual receipts do not exceeds ₹ 1 Crore [sub-clause (iiiad) r.w. rule 2BC]. Thus, while granting approval to entities covered under sub-clause (vi), the prescribed authority has to ensure that the applicant institution must exist solely for educational purposes and not for purposes of profit . These are several Provisos to clause (23C) of section 10 and prescribe, inter alia, various monitoring conditions subject to fulfillment of which only, the exemption can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s criteria i.e. the threshold pre-condition of actual existence of an educational institution under section 10(23C)(vi) , it would not be justifiable, in denying approval on other grounds, especially where the compliance depends on events that have not taken place on the date on which the application for grant of approval has been made. 1.3 However, the prescribed authority is eligible to grant approval u/s 10(23C) (vi) , subject to such terms and conditions as deemed necessary including those falling within the framework of various Provisos to the said clause of section 10. It has also been clarified in the said judgment that the compliance of prescribed conditions can be gauged while monitoring the case and in case of any breach ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ofit'. Perusal of prescribed provisions clearly reveal that mere generation of surplus cannot be a basis for rejection of application u/s 10(23C)(vi) on the ground that it amounts to an activity of the nature of profit making. In fact, the third Proviso to the said clause clearly provides that accumulation of income is permissible subject to the manner prescribed therein provided such accumulation is to be applied wholly and exclusively to the objects for which it is established . Hence, it is clarified that mere generation of surplus by educational institution from year to year cannot be a basis for rejection of application u/s 10(23C)(vi) if it is used for educational purposes unless the accumulation is contrary to the manner pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation of such arrangement, the same should generally not be a ground for denying exemption unless nature of activities of the trust or institution get changed or modified or no longer remain to exit 'solely for educational purpose and not for purposes of profit'. Hence denial of exemption would not be justifiable only on the ground of induction of new trustees or removal of existing ones. 6. Field authorities are advised to keep the above position in mind while dealing with the matters of approval/exemption u/s 10 (23C)(vi). Similar principles would also apply to cases covered u/s 10(23C)(via) of the Act . [F.No.197/38/2015-ITA-I] (Deepshikha Sharma) Director to the Government of India - Circular - Trade N ..... X X X X Extracts X X X X X X X X Extracts X X X X
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