Simply because the educational institutes yield high returns they could not be term for-property activity and thus the surplus income earned by educational institutes could not be taxed, said the Supreme Court in New Delhi. Earlier the revenue department had submitted a petition under which they had demanded that the educational institutes should remain solely to scholastic endeavors and should not generate high profits, to which the court said that the income couldn’t fall under the Income Tax Act.
A bench of Justice T S Thakur and Justice Rohinton F Nariman said, “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 the conclusion that it ceases to exist solely for educational purposes and becomes an institution for purpose of making profit. A distinction must be drawn between the making of a surplus and an institution being carried on ‘for profit’. It, after meeting expenditure, a surplus arises incidentally... it will not cease to be one existing solely for educational purposes.”
Though, the court has made it clear that the government should take adequate actions to see through the fact that the education is not getting taken over by profit making motive of the money sharks in form of educational institutes that do lies in the country. To these institutes bench made it clear that, “If they are not genuine, or are not being carried out in accordance with all or any of the conditions subject to which approval has been given, such exemption must be withdrawn.”