2015 (2) TMI 360 - HC - Income Tax

Entitlement for the exemption under section 10(23C)(iiiab) - 'wholly or substantially financed by the Government' - Held that - The word wholly or substantially financed by the Government cannot be confined only to the annual grants. Apart from providing annual grant, if the Government grants land, invests money in building and infrastructure and also running the educational institutions all that has to be taken into consideration to decide whether the institution is wholly or substantially financed by the Government. The facts of this case and the material on record clearly establishes that the assessee is wholly or substantially financed by the Government and, therefore, the assessee is entitled to the benefit of exemption under section 10(23C)(iiiab) of the Income-tax Act.- Decided in favour of the assessee.

Summary

Issues involved:
Challenge to order by Income-tax Appellate Tribunal regarding exemption under section 10(23C)(iiiab) of the Income-tax Act, 1961 for an educational institution financed by the Government.

Analysis:

1. Issue: Interpretation of "wholly or substantially financed by the Government" under section 10(23C)(iiiab) of the Income-tax Act.

Analysis: The judgment discusses the conditions required for exemption under section 10(23C)(iiiab), emphasizing that the institution must be solely for educational purposes, not for profit, and wholly or substantially financed by the Government. The court delves into the meaning of "finance" based on various dictionaries, highlighting that it involves providing capital or funds for establishing and running an educational institution, not limited to annual grants. The court emphasizes considering the nature of the institution, its objectives, and how it is financed over time to determine if it meets the criteria.

2. Issue: Application of the interpretation to the case of an Indian educational institution.

Analysis: The case involves an Indian educational institution established with significant support from the Government, including land grants, infrastructure investments, and annual grants for maintenance and growth. The Ministry of Human Resource Development confirmed the institution's status as wholly or substantially financed by the Government, noting that revenue generated belongs to the Consolidated Fund of India. The judgment highlights that the institution's financing extends beyond annual grants, encompassing various forms of support provided by the Government for its establishment and operations.

3. Issue: Resolution of the substantial question of law and granting of exemption.

Analysis: The court resolves the substantial question of law in favor of the educational institution, stating that it is wholly or substantially financed by the Government, thus entitled to exemption under section 10(23C)(iiiab) of the Income-tax Act. The judgment dismisses the appeals challenging the Tribunal's order, concluding that the institution meets the criteria for exemption based on the comprehensive financial support received from the Government.

In conclusion, the judgment provides a detailed analysis of the interpretation of "wholly or substantially financed by the Government" under section 10(23C)(iiiab) of the Income-tax Act, applying it to the case of an Indian educational institution to establish eligibility for exemption. The court's decision affirms the institution's entitlement to exemption based on the extensive financial backing received from the Government, beyond just annual grants, emphasizing the holistic assessment of financial support for determining eligibility.