Educational purpose and no-profit test governs approval; incidental surplus alone cannot justify refusal where income supports the institution's objects.

Approval under Section 10(23C)(vi) turns on whether the institution exists solely for educational purposes and not for profit. Incidental surplus does not by itself defeat approval if it is applied wholly and exclusively to the institution's objects, and the authority must assess the predominant object of the trust or society rather than treating other objects, fee structure, or advertisement expenditure as conclusive proof of profit motive. On that test, refusal of approval on the stated grounds could not be sustained. The impugned order was quashed and the application was directed to be reconsidered afresh.

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Issues: Whether approval under Section 10(23C)(vi) of the Income-tax Act, 1961 could be refused on the ground that the educational institution had other objects, earned surplus, maintained a high fee structure, and incurred substantial advertisement expenditure.

Analysis: The controlling test is whether the institution exists solely for educational purposes and not for profit. A surplus by itself does not defeat exemption if it is incidental and is applied wholly and exclusively to the objects of the institution. The authority must assess the predominant object of the trust or society and examine whether the income is being deployed in accordance with the statutory conditions. The presence of other charitable objects does not by itself show a profit motive when the dominant purpose remains education.

Conclusion: The rejection of approval could not be sustained on the stated grounds. The impugned order was quashed and the application was directed to be reconsidered afresh.

Final Conclusion: The assessee succeeded in challenging the rejection order, but the matter was sent back for fresh decision on the application in accordance with the governing test of educational purpose and absence of profit motive.

Ratio Decidendi: For approval under Section 10(23C)(vi), the decisive inquiry is the predominant object of the institution; incidental surplus does not disentitle an educational if its income is applied to its educational objects and the institution is not run for profit.

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