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Issues: (i) Whether a university constituted under the Haryana Private Universities Act, 2006 was an institution existing solely for educational purposes and not for profit for approval under section 10(23C)(vi) of the Income-tax Act, 1961. (ii) Whether actual commencement of educational activities was a prerequisite for approval under section 10(23C)(vi).
Issue (i): Whether a university constituted under the Haryana Private Universities Act, 2006 was an institution existing solely for educational purposes and not for profit for approval under section 10(23C)(vi) of the Income-tax Act, 1961.
Analysis: The statutory scheme in section 10(23C) extends exemption to universities or other educational institutions existing solely for educational purposes and not for profit. The character of the institution had to be gathered from its governing statute, objects and dominant purpose. A university created under the Haryana Act for educational objects satisfied that character, and its receipt of corpus funds did not alter the nature of its objects. The dominant object test applied, and the institution was not shown to have any profit motive.
Conclusion: The institution was held to be a university existing solely for educational purposes and not for profit, in favour of the assessee.
Issue (ii): Whether actual commencement of educational activities was a prerequisite for approval under section 10(23C)(vi).
Analysis: The expression "existing" in section 10(23C) was construed purposively. The approval mechanism was intended to encourage educational institutions and was not confined to institutions already conducting full-fledged teaching. Preliminary steps taken for setting up the university, the prompt application for approval, the development of infrastructure, and the commencement of the law school shortly thereafter showed that the institution was in existence for educational purposes. The requirement was genuineness of the educational object, not prior completion of all academic activity.
Conclusion: Actual commencement of educational activity was not treated as a condition precedent, in favour of the assessee.
Final Conclusion: The refusal of approval was held unsustainable, the order was set aside, and the matter was sent back for fresh decision in accordance with the court's observations.
Ratio Decidendi: For approval under section 10(23C)(vi), the decisive test is whether the institution is genuinely constituted and ing solely for educational purposes without profit motive, and not whether it has already commenced full educational operations.
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