In Brief
The Supreme Court clarified the correct meaning of "solely" in Section 10(23C)(vi) of the Income Tax Act, which grants tax exemption to educational institutions existing solely for educational purposes and not for profit. The Court held that "solely" means exclusively and to the exclusion of all others—not primarily or predominantly. Educational institutions seeking exemption cannot have objects unrelated to education; all objects must relate to imparting education or educational activities. While incidental surpluses from educational activities do not disqualify exemption, institutions engaged in profit-making activities unrelated to education are ineligible. The Prescribed Authority may examine audited accounts and past patterns to verify genuine educational functioning. The Court overruled earlier judgments applying the "predominant object" test to educational institutions. Registration under state charitable laws is mandatory and relevant for exemption approval. The judgment applies prospectively to give affected institutions time for adjustment.
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