2021 (12) TMI 541 - AT - Income Tax

Benefit of exemption u/s 10(23C)(iiiac) to the assessee society - when the society is not substantially financed by the government in view of Rule 2BBB of the Income Tax Rules, 1962 - HELD THAT - As in the light of the decision rendered in the case of CIT, Bangalore vs. Indian Institute of Management 2015 (2) TMI 360 - KARNATAKA HIGH COURT and Rule 2BBB inserted by the IT (Thirteenth Amendment) Rules, 2014 prescribing the said percentage at 50% and by referring to the Rule 230(8) of the General Financial Rules, 2017. As passed by the ld. CIT (A) by applying the relevant Rules and law laid down in case of CIT vs. Indian Institute of Management 2015 (2) TMI 360 - KARNATAKA HIGH COURT as the percentage of grant-in-aid to the assessee to the year under consideration is at 50.85% (which is inclusive of interest). Even otherwise, Hon ble High Court has held that the word wholly and substantially financed by the Government cannot be confined only to annual grants, apart from providing annual grant, if Government granted land and invested money in building and infrastructure etc. all that has to be taken into consideration. So, the case of the assessee is clearly covered under Rule 2BBB of IT (Thirteenth Amendment) Rules, 2014 having total grant-in-aid to the tune of 50.85% - in view of the matter, we find no infirmity or perversity in the impugned order passed by the ld. CIT (A), hence the appeal filed by the Revenue is hereby dismissed.

Summary

Issues:
1. Whether the ld. CIT (A) erred in allowing the benefit of exemption u/s 10(23C)(iiiac) to the assessee society when the society is not substantially financed by the government as per Rule 2BBB of the Income Tax Rules, 1962.

Analysis:
The Appellant, DCIT, sought to set aside the order passed by the Commissioner of Income-tax (Appeals)-40, New Delhi, regarding the assessment year 2013-14. The dispute revolved around the exemption u/s 10(23C)(iiiac) of the Income-tax Act, 1961. The assessee, a society providing medical care in liver and related diseases, received funds from the Government of NCT of Delhi. The Assessing Officer (AO) denied the exemption, assessing the total income at a specific amount.

The ld. CIT (A) directed the AO to allow the exemption to the assessee u/s 10(23C)(iiiac) for the year under consideration. The Revenue appealed this decision before the Tribunal. The Tribunal analyzed the facts, the decision of Hon'ble Karnataka High Court, and Rule 2BBB of the IT (Thirteenth Amendment) Rules, 2014. The Tribunal noted that the grant-in-aid to the assessee exceeded 50%, including interest.

Referring to the decision of the Hon'ble Karnataka High Court, the Tribunal emphasized that the term 'wholly or substantially financed by Government' should not be limited to annual grants only. It should also consider factors like land grants, investments in infrastructure, and overall financial support. The Tribunal found that the assessee's case fell under Rule 2BBB, with a grant-in-aid exceeding 50.85%. Therefore, the Tribunal upheld the order of the ld. CIT (A) and dismissed the Revenue's appeal.

In conclusion, the Tribunal's decision was based on the interpretation of relevant rules, the law laid down by the Hon'ble Karnataka High Court, and the percentage of grant-in-aid to the assessee. The Tribunal found no error in the ld. CIT (A)'s order, as the assessee qualified for exemption under section 10(23C)(iiiac) due to substantial government financing, as per Rule 2BBB.