Educational exemption requires sole educational purpose, and surplus alone does not prove a profit-making object.

Section 10(22) exemption depended on whether the educational institution existed solely for educational purposes and not for profit, assessed on an overall year-wise view. The society's objects and assets remained dedicated to education, and there was no material showing diversion of surplus to members or non-educational use, so collection of fees, donations and loans did not by itself establish a profit-making purpose. The Delhi School Education Act, 1973 was held inapplicable to unaided schools, and mere surplus generation was insufficient unless profit was the dominant object. Exemption was therefore allowed and the denial was set aside.

---

---

Issues: Whether the assessee-society, running educational institutions, existed solely for educational purposes and not for purposes of profit so as to qualify for exemption under section 10(22) of the Income-tax Act, 1961.

Analysis: The exemption under section 10(22) had to be examined each year on an overall view of the matter to see whether the institution existed solely for educational purposes and not for profit. The Society's objects remained educational, its assets were dedicated to those objects, and no material showed diversion of surplus to any member or use for non-educational purposes. The collection of admission fees, donations and loans, by itself, did not establish a profit-making purpose in the absence of proof of diversion or personal gain. The provisions of the Delhi School Education Act, 1973 relied upon by the Revenue were held inapplicable to unaided schools, and the mere generation of surplus was not enough unless profit was the dominant object.

Conclusion: The assessee was entitled to exemption under section 10(22); the denial of exemption was set aside.

---