The Supreme Court on Thursday ruled that the surplus income earned by educational institutions could not be taxed and also said imparting education should not be termed “for-profit activity” simply because it yielded high returns.

A Bench of Justice T S Thakur and Justice Rohinton F Nariman said, “Where an educational institution carries on the activity of education, 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 the purpose of making profit.”

The court dismissed the plea by the Revenue Department and said, “A distinction must be drawn between the making of a surplus and an institution being run for profit.”

It said the Centre must examine the activities of such institutions to ensure that the purpose of education was not lost in a profit making motive.

“If they are not genuine, or are not being run in accordance with all or any of the conditions subject to which approval had been given, such exemption must be withdrawn,” the court said...........Read more

Source web page: The New Indian Express