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Issues Involved:
1. Whether the institution is 100% educational. 2. Whether the institution is substantially financed by the Government for the purpose of exemption u/s 10(23C)(iiiab). Summary: Issue 1: Whether the institution is 100% educational The assessee submitted that the institution is set up specifically for imparting education in social science, and activities like Extra Mural Studies and Child Guidance Clinic are integral to the educational activities. The Delhi High Court in Jaypee Institute of Information Technology Society vs. D.G. of Income (Exemption) supported this view. The CIT(A) agreed with the assessee's contention that the institution is 100% educational. Issue 2: Whether the institution is substantially financed by the GovernmentThe AO denied the exemption u/s 10(23C)(iiiab) on the grounds that the Government grant of Rs. 12,79,13,233/- was less than 75% of the total expenditure of Rs. 22,49,72,584/-. The CIT(A) disagreed, interpreting "substantially financed" to mean 50% or more, relying on judicial pronouncements including the Karnataka High Court's decisions in National Education Society and CIT vs. Indian Institute of Management, which accepted grants of 36.42% as substantial. The CIT(A) held that the assessee, with a grant of 56.86%, was substantially financed by the Government and allowed the exemption. ITAT's Decision:The ITAT upheld the CIT(A)'s decision, rejecting the AO's reliance on section 14(1) of the Comptroller and Auditor General's Act, 1971, which defines "substantially financed" as not less than 75%. The ITAT noted that the Karnataka High Court had accepted 36.42% as substantial finance. In this case, the grant was 56.86%, thus qualifying as substantial finance. The ITAT dismissed the Revenue's appeal, affirming the exemption u/s 10(23C)(iiiab). Conclusion:The appeal filed by the Revenue was dismissed, and the exemption u/s 10(23C)(iiiab) was upheld for the assessee. Order pronounced in the open court on this day of 26th September, 2012.
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