“(i) The requirements for
approval u/s.10(23C)(vi) are : (1) the educational institution should exist
solely for educational purpose and not for the purpose of profit; (2) it
should not be an educational institution wholly or substantially financed by
the Government; (3) it should be an educational institution genuinely existing
for educational purpose and not for the purpose of profit; (4) its aggregate
annual income exceeds
Rs. 1 crore; and (5) it should be approved by the prescribed authority.
(ii) Under the third
proviso, it is made clear that the educational institution is entitled to
apply its income or accumulate it for application wholly or exclusively to the
objects for which it is established and in a case where more than 15% of its
income is accumulated on or after 1-4-2002, the period of the accumulation of
the amount exceeding 15% of the income shall, in no case, exceed five years.
Therefore, it is not as if the educational institution cannot generate any
surplus. Generating surplus and accumulation of income will not disqualify an
institution for the benefits of S. 10(23C).
(iii) Surplus is to be
understood in contradistinction to generation of income with the sole motive
of profit if one has to properly understand the legislative intent of S.
10(23C)(vi). Merely because an educational institution accumulates income, it
does not go out of consideration of S. 10(23C)(vi); it goes out only if
application of income is for the purposes other than education, since the
institution is to be established and maintained solely with the object of
imparting education.
(iv) In the instant case,
going by the accounts, prima facie, it appeared that there was no
question of generation of profit, though there was accumulation of surplus,
but in case the accumulation of surplus was within the parameters, the
assessee was entitled to succeed. In that context, the contention of the
assessee that there was no accumulation of income had also to be considered.”
