Supreme Court asked for-profit schools and colleges to end tax exemption

- Antenna : Vivek Mehta

- Profit-making medical colleges, private schools, colleges running high-fee courses will lose tax benefits

Charging as much fee as you like has become the trend of educational institutions. No one is willing to guarantee the quality of education. Big profit is their main goal. The Supreme Court has put a brake on them. The Supreme Court has given a historic verdict last week. The profit-making trust-managed organizations will not be able to get the benefit of tax exemption under Section 10 (23) of Income Tax. Under the provision made in Section 10(23-C) of the Income Tax Act, their income is being considered eligible for one hundred percent exemption. In the judgment of the Supreme Court, it has been stated that where the objective of the educational institution is profit-oriented, the demand for the benefit of income tax will not be accepted. In other words, they have been withdrawn the benefit of VeraMafee. Supreme Court Chief Justice Uday Umesh Lalit, Justice S. Ravindra Bhat and Justice P.S. The Narasimha Rao Bench has given the present judgment.

This provision will apply not only to institutions charging huge fees for medical or MBA or engineering courses, but also to all schools charging lakhs of rupees from pre-primary to teach young children. However, with the Supreme Court's ruling, the educational institutions which till now did not have to pay the responsibility of filing the income tax return will have to file the return. Also, tax will have to be deposited from the profit. Yes, along with this, the Supreme Court has clearly stated that this judgment will not come into effect from the previous term, it will come into effect from the next few days.

Educational institutions run under education trusts or societies are not required to show profit separately under Section 10(23-C) of the Income Tax Act. One hundred percent exemption is given in income tax. These same organizations are believed to be making huge profits by charging huge fees in medical. However, there is a rule to spend 85 percent of the income generated during the year for organizations run under charitable trusts. So who will be affected more by the Supreme Court judgment can be known only after a detailed study of the judgment. Earlier Andhra Pradesh High Court also held that only educational institutions which are not involved in any profit making activity can be given the benefit of tax exemption. All activities of these institutions should be purely educational, not profit making. Therefore, the informants feel that the judgment of the Supreme Court will not be applicable to the educational institutions or universities that are not making profit and only provide education.

The Supreme Court's ruling that an educational institution working with the objective of profit cannot be given the benefit of tax exemption may create a controversy regarding the distinction between a profit-oriented organization and a profit-making organization. Profit oriented means an organization with profit motive. But a for-profit organization is different. Thus, some organizations try to escape from the word profit oriented used in the judgment by interpreting it in a different way. The verdict lacks the usual clarity, says an expert in the education sector.