Trust-Level Exemption Under Section 10(23C)(iiiab) Applies to Educational Societies Irrespective of Individual Institution Funding
Issue Whether an educational society running multiple institutions under a common umbrella is eligible for tax exemption under section 10(23C)(iiiab) of the Income-tax Act, 1961, when certain individual or unaided units exceed the gross receipt threshold or operate independently without separate approval under section 10(23C)(vi).
Facts
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Nature of Assessee: The assessee is a society operating multiple educational institutions.
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Exemption Claim: The assessee claimed tax exemption under section 10(23C)(iiiab) for the assessment year 2009-10.
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Revenue’s Stance: The Assessing Officer denied the exemption, and the Revenue contended that the institutions were run on commercial lines with excess fee collections. The Revenue argued that exemption under section 10(23C)(iiiab) cannot apply to the society as a whole when specific unaided institutions exceed gross receipts of ₹1 crore without obtaining separate approval under section 10(23C)(vi).
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Tribunal’s Ruling: The Tribunal allowed the assessee’s appeal by following its own precedent for assessment year 2008-09, noting the absence of any distinguishing facts or higher forum reversals.
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Binding Judicial Precedent: The High Court in the assessee’s own case for the preceding year (AY 2008-09) established that the exemption under section 10(23C)(iiiab) is evaluated at the trust level rather than being tied to individual institutions under its umbrella.
Decision
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The Tribunal was fully justified in following the binding jurisdictional precedent and allowing the assessee’s claim for exemption under section 10(23C)(iiiab) [Paras 5 and 6].
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Decision ruled in favour of the assessee.
Key Takeaways
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Trust-Level Evaluation: Exemption provisions under section 10(23C)(iiiab) apply to the trust or society as a collective entity rather than being parsed on an institution-by-institution basis.
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Independence from Individual Unit Approvals: The presence of isolated unaided institutions or individual units exceeding revenue limits under a common trust umbrella does not vitiate the overall eligibility of the society if the statutory requirements of section 10(23C)(iiiab) are collectively fulfilled.
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Adherence to Precedent: Consistent judicial findings in an assessee’s own case for prior assessment years hold strong persuasive and binding value when no material changes or higher forum reversals exist.
HIGH COURT OF BOMBAY
Commissioner of Income Tax–(Exemption), Pune
v.
Deccan Education Society
M.S. Karnik and S. M. MODAK, JJ.
INCOME TAX APPEAL NO. 2550 OF 2018†
FEBRUARY 5, 2026
A.K. Saxena, Adv. for the Appellant. Atul K. Jasani, Adv. for the Respondent.
ORDER
1. Heard Shri.Saxena, learned counsel appearing for the Appellant -Revenue.
2. Shri.Saxena would urge that the present Appeal involves the following substantial questions of law:-
| (I) | Whether on the facts and in circumstances of the case and in law, the Hon’ble ITAT is justified in allowing the Appeal filed by the Assessee by relying on the ITAT decision for A.Y. 2008-2009 not appreciating that the A.O. had established the fact that the contributions paid by the donors were quid pro quo for securing admissions in various institutions run by the assessee and the same were neither voluntary contributions nor corpus donations? |
| (II) | Whether on the facts and in circumstances of the case and in law, the Hon’ble ITAT is justified in not appreciating the fact that the institutions of the Assessee are run on commercial lines by collecting amounts in addition to the prescribed fees for admissions and therefore, the Assessee is not eligible for deduction under Section 10(23C) of the Income Tax Act, 1961? |
| (III) | Whether on the facts and in circumstances of the case and in law, the Hon’ble ITAT is justified in holding that exemption under Section 10(23C)(iiiab) of the Act is available to the Society as a whole, without appreciating that the Unaided Institutions under the Assessee Trust with gross receipts exceeding Rs.1 Crore are not eligible for deduction as the Assessee has not obtained approval of the prescribed Authority as required under Sub-section (vi) of Section 10(23C) of the Act? |
| (IV) | Whether on the facts and in circumstances of the case and in law, the Hon’ble ITAT is justified in holding that exemption under Section 10(23C)(iiiab) of the Act is available to the Society as a whole, ignoring that the Institutions under the Assessee Trust are unaided and thus fall outside the purview of Section 10(23C)(iiiab) of the Act? |
3. The Appellant is challenging the order dated 19 th March 2018 passed by the Income Tax Appellate Tribunal–Pune (“ITAT”) in respect of the Assessment Year 2009–2010 thereby allowing the Appeal filed by the Assessee.
4. We have perused the impugned order. The issue involved in the present case is denial of exemption under Section 10(23C)(iiiab) of the Income Tax Act, 1961. The ITAT observed that while upholding the order of the AO, CIT(A) had followed the order of his Predecessor for A.Y. 2008-2009. In respect of the A.Y. 2008-2009, the assessee had preferred appeal before the Co-ordinate Bench of the Tribunal. The Co-ordinate Bench of the Tribunal allowed the Appeal filed by the Assessee. Therefore, the ITAT was of the opinion that the Revenue has not pointed out any differentiating feature in the present case and that of the A.Y. 2008-2009 nor placed any material on record to demonstrate that the order of the Tribunal in Assessee’s own case for A.Y. 2008-2009 was set aside by the higher Judicial Forum. The ITAT for the same reason as given by the Co-ordinate Bench of the Tribunal held that the Assessee is eligible for deduction under Section 10(23C)(iiiab) of the Act.
5. It has now been brought to our notice that the order of the ITAT in respect of Assessee’s case for A.Y. 2008-2009 referred earlier was challenged by the Revenue in this Court in CIT (Exemptions) v. Deccan Education Society (Bombay)/Income Tax Appeal No.400 of 2016. This Court by the order dated 26 th November 2018 agreed with the view expressed by the ITAT and held that no question of law arises. The relevant observations of this Court need to be extracted which read thus:-
4. Having heard the learned counsel for the Revenue and having perused the material on record, in our opinion, the central question is whether the exemption under Section 10(23C)(iiiab) is specific to the assessee trust or whether such exemption can be examined by further bifurcating the position of different institutions which are run by the assessee trust. The Revenue’s ground that the assessee trust did not exist solely for the purpose of educational activity, needs to be recorded for rejection. It is by now well settled through various series of judgments of the Supreme Court that an educational institution is not precluded from generating reasonable surplus. Merely because, in the process of running an educational institution, the surplus funds are generated, would not disqualify the institution from being an institution existing solely for the educational purpose. In fact, this was a view taken by the Supreme Court in the case of Aditanar Educational Institution (supra).
5. Section 10(23C)(iiiab) grants exemption in relation to any income received by any person on behalf of any university or other educational institution existing solely for educational purposes and not for the purpose of profit, and which is wholly or substantially financed by the Government. This provision, thus, exempts the income received by a person on behalf of the institutions specifying the requirements of the said clause. The exemption is not relatable to the individual institution run under the common umbrella of a Trust. Therefore, if the assessee trust satisfies the statutory requirement noted above, the exemption provision would apply, irrespective of the fact that in isolated cases of a few institutions runs by such Trust, the requirement may not be seen to have been fulfilled. From the above, it is very clear that it is the trust or the society that has to apply for registration and claim exemption. Had it been the intention of the legislature to grant exemption only to the institutions individually or independently and not to the society as a whole, the language would have been different. The society or trust may run more than one institutions. Therefore, the argument of the Revenue that it should be institution specific and not the society as a whole in our opinion is not correct.
6. Thus, we are broadly in agreement with the view expressed by the Tribunal. No question of law arises. The Income Tax Appeal is dismissed.”
6. For the same reasons, we are in agreement with the view expressed by the Tribunal. No question of law arises. The Income Tax Appeal is, therefore, dismissed.