2018 (1) TMI 1701 - AT - Income Tax

Exemption u/s 10(23)(c)(iiiab) - AO held that since no amount has been received from the Government the institute cannot be held to be eligible for exemption under section 10(23)(c)(iiiab) - HELD THAT - As it is not in dispute that the assessee fulfils the twin conditions of a) university or other educational institution existing solely for the educational purposes and not for purposes of profit, and b) which is wholly or substantially financed by the government. as stipulated under section 10(23)(c)(iiiab). Since the assessee is wholly funded and owned by the Govt., the finance are being audit by the CAG, Punjab and the receipts are paid into consolidated fund of the Govt. the assessee is eligible for exemption under section 10(23)(c)(iiiab). Hence we decline to interfere with the order of the Ld. CIT(A). The appeals of the Revenue are dismissed.

Summary

Issues:
- Eligibility for exemption under section 10(23C)(iiiab) of the Income Tax Act.
- Interpretation of the conditions for exemption under section 10(23C)(iiiab) related to government financing.
- Relevance of evidence provided during assessment proceedings.

Analysis:

Issue 1: Eligibility for exemption under section 10(23C)(iiiab)
The case involved an institute of Engineering and Technology claiming exemption under section 10(23C)(iiiab) of the Income Tax Act. The Assessing Officer disallowed the exemption, stating that the institute did not receive any funds from the government, a condition for eligibility under the section. However, the Tribunal, in a previous order, set aside the appeals for reconsideration. In the subsequent adjudication, the CIT(A) deleted the addition based on a letter from the Principal Secretary of the Government of Punjab, confirming that the institute was fully owned and controlled by the government. The Tribunal, after considering the evidence, concluded that as the institute was wholly funded and owned by the government, eligible for exemption under section 10(23C)(iiiab).

Issue 2: Interpretation of conditions for exemption under section 10(23C)(iiiab)
The Assessing Officer contended that the institute must be either wholly or substantially financed by the government to qualify for exemption under section 10(23C)(iiiab). The dispute arose as the institute claimed to be independent and self-sustainable, not substantially financed by the government. However, the letter from the Principal Secretary of the Government of Punjab clarified that the institute was fully owned and controlled by the government, meeting the conditions for exemption under the section. The Tribunal upheld the CIT(A)'s decision based on this clarification and the audit process by the Controller and Auditor General of Punjab, confirming the institute's eligibility for exemption.

Issue 3: Relevance of evidence provided during assessment proceedings
The Assessing Officer raised concerns regarding the timing and relevance of the evidence provided during the assessment proceedings, particularly a letter from the Principal Secretary of the Government of Punjab. The Officer argued that the letter was an afterthought and did not prove substantial financing by the government. However, the Tribunal considered the contents of the letter, which detailed the government's ownership, control, and financial support to the institute. The Tribunal found the evidence sufficient to establish that the institute met the criteria for exemption under section 10(23C)(iiiab) and dismissed the Revenue's appeals.

In conclusion, the Tribunal upheld the decision of the CIT(A) and dismissed the appeals filed by the Revenue, confirming the institute's eligibility for exemption under section 10(23C)(iiiab) of the Income Tax Act.