In two separate verdicts, the SC ruled that educational institutions seeking Income Tax rebates under Section 10 (23C) must only be imparting education and not making a profit. 

In a similar but separate verdict, the Apex Court held that private trusts, organizations or associations set up for charity cannot claim Income Tax exemption if their charges for providing services are significantly above the cost incurred. The SC laid down a comprehensive test to decide their eligibility to claim Income Tax benefits.

These cases won by IT Dept on Wednesday were argued in SC in February-March 2022 by ASG supported by a team of Income Tax Exemptions officers across the country under the guidance of Principal CCIT (Exemptions) Rashmi Saxena Sahni (IRS IT:1984). Order was reserved and pronounced in these two cases on Wednesday. 

In the case of education trust, the SC made it clear that educational trusts or societies, which seek exemption under Section 10 (23C) of the Income Tax Act, should solely be concerned with education, or education-related activities. Where the objective of the institution appears to be profit-oriented, such institutions would not be entitled to approval. 

The court overruled its earlier judgments which interpreted the expression 'solely' in Section 10 (23C) as the 'dominant/predominant/primary/ main' object. However, it clarified that the law declared in the present judgment shall operate only prospectively. Section 10 of the IT Act exempts from the field of taxation for certain classes of income.

Meanwhile, the judgment in the other case will have major implications for a range of entities like cricket boards, statutory corporations, housing, and industrial development agencies of states, statutory bodies, and agencies that regulate professions such as chartered accountants, trade promotion bodies and even newspapers run through trusts.