SC interprets ‘solely’ restrictively to deny tax exemption to educational institutions with multiple objects

This Tax Alert summarizes a recent Supreme Court (SC) ruling in a batch of appeals with New Noble Educational Society vs CIT ^[1] as the lead case (Taxpayers).

The issue involved before the SC was on rejection of taxpayer’s application for approval for tax exemption under Income Tax Law (ITL) on the grounds that (i) educational institution did not solely exist for the purpose of education as required under the relevant provisions of ITL and (ii) it was not registered under applicable state legislations. The SC held that tax exemption cannot be availed by educational institutions having objects other than imparting education/educational activities having regard to the language- “…educational institution existing solely for educational purposes…”. The SC further held that it was mandatory for charitable institutions availing tax exemption to register/comply with mandatory provisions of applicable state legislations.

In addition, the SC also explains meaning and scope of the term ‘education’ as also ‘business incidental to the object’ and provides restrictive meanings thereof. 

^{[1] TS-809-SC-2022}