M/S. QUEEN'S EDUCATIONAL SOCIETY versus COMMISSIONER OF INCOME TAX

Citation: [2015] 3 S.C.R. 838 · Decided: 16-03-2015 · Supreme Court of India · Bench: T.S. THAKUR · Disposal: Disposed off
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Judgment (excerpt)

[2015] 3 S.C.R. 838. 
A 
M/S. QUEEN'S EDUCATIONAL SOCIETY 
B 
c 
v. 
COMMISSIONER OF INCOME TAX 
(Civil Appeal No. 5167 of 2008) 
MARCH 16, 2015. 
[T.S. THAKUR AND R.F. NARIMAN, JJ.] 
Income Tax Act, 1961: ss.10 (23c) (iii-ad), 10(23c) (vi) 
- Exemption under - Held: Where an educational institution 
carries on the activity of education primarily for educating 
persons, the fact that it makes a surplus does not lead to 
0 
the conclusion that it ceases to exist solely for educational 
purposes and becomes an institution for the purpose of 
making profit - There is difference between the making of 
a surplus and an institution being carried on "for profit" -
No inference arises that merely because imparting 
E education results in making a surplus, it becomes an activity 
for profit - Such surplus would not come within the ambit 
of denying exemption. 
Disposing of the appeals, the Court 
F 
HELD: 1. Section 10(23c)(iiiad) has three 
requirements - (a) the educational institution must exist 
solely for educational purposes (b) it should not be for 
purposes of profit and (c) the aggregate annual receipts 
of such institution should not exceed the amount or 
G annual receipts as may be prescribed. Where an 
educational institution carries on the activity of 
education primarily for educating persons, the fact that 
H 
838 
QUEEN'S EDUCATIONAL SOCIETY v. COMMISSIONER 839 
OF INCOME TAX 
it makes a surplus does not lead to the conclusion that A 
it ceases to exist solely for educational purposes and 
becomes an institution for the purpose of making profit. 
The predominant object test must be applied - the 
purpose of education should not be submerged by a 
profit making motive. A distinction must be drawn B 
between the making of a surplus and an institution 
being carried on "for profit". No inference arises that 
merely because imparting educ.-ition results in making 
a profit, it becomes an activity for profit. If after meeting 
expenditure, a surplus arises incidentally from the C 
activity carried on by the educational institution, it will 
not be cease to be one existing solely for educational 
purposes. The ultimate test is whether on an overall 
view of the matter in the concerned assessment year 0 
the object is to make profit as opposed to educating 
persons. [Paras 5 and 11] [842-D; 854-G-H; 855-A-D] 
CIT v. Surat Art Silk Cloth Manufacturers' Assn. (1980) 
121 ITR 1; Aditanar Educational Institution v. Additional 
Commissioner of Income Tax (1997) 224 ITR 310; American E 
Hotel & Lodging Assn. Educational Institute v. CBDT (2008) 
301 ITR 86; Municipal Corpn. of Delhi v. Children Book Trust 
and Safdarjung Enclave Educational Society (1992) 3 SCC 
390: 1992 (2) SCR 535; S.RM.M.CT.M. Tiruppani Trust v. 
F 
Commissioner of Income Tax (1998) 2 SCC 584: 1998 (1) 
SCR 653 - relied on. 
St. Lawrence Educational Society (Regd.) v. 
Commissioner of Income Tax & Anr.(2011) 53 DTR (Del) G 
130; Tolani Education Society v. Deputy Director of Income 
Tax (Exemption) & Ors, (2013) 351 ITR 184 - referred to. 
Case Law Reference 
H 
840 
SUPREME COURT REPORTS 
[2015] 3 S.C.R. 
A 
(1980) 121 ITR 1 
Relied on. 
Para 8 
(1997) 224 ITR 310 
Relied on. 
Para 9 
(2008) 301 ITR 86 
Relied on. 
Para 10 
B 
1992 (2) SCR 535 
Relied on. 
Para 19 
1998 (1) SCR 653 
Relied on. 
Para 24 
(2011) 53 DTR (Del) 130 
Relied on. 
Para 24 
c 
(2013) 351 ITR 184 
Relied on. 
Para 24 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 
5167 of 2008. 
D 
From the Judgment and Order dated 24.09.2007 of the 
E 
High Court of Uttarkhand at Nainital in Income Tax Appeal 
No. 103/2007. 
WITH 
Civil Appeal Nos. 5168 of 2008, 8962 of 2010, 909 of 
2011, 2919, 2920, 2921, 2922 and 2923 of 2015. 
Ajay Vohra, Dhruv Mehta, V. Giri, Dr. Rakesh Gupta, 
Ashwani Taneja, Poonam Ahuja, Ambhoj Kumar Sinha, 
F Mukul Mathur, S. K. Verma, Arijit Prasad, Gargi Khanna, B. 
G 
H 
V. Balaram Das, Kavita Jha, Anil Katiyar, Namita Choudhary, 
Vipin Gogia, Ashish Agarwal, Jaspreet Gogia, Ashok K. 
Mahajan, John Mathew, Pawanshree Agrawal for the 
Appearing Parties. 
The Judgment of the Court was delivered by 
R.F.NARIMAN, J. 1. Leave granted in the special leave 
petitions. 
QUEEN'S EDUCATIONAL SOCIETY v. COMMISSIONER 841 
OF INCOME TAX [R.F.NARIMAN, J.] 
2. The present appeals relate to a common judgment A 
dated 241h September, 2007 passed by the High Court of 
Uttarakhand, Nainital in two income tax appeals, and a 
judgment of the Punjab and Haryana High Court dated 29'h 
J
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