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2023 (7) TMI 692 - HC - Income TaxIncomes not included in total income u/s 10(23C)(iiiac) - assessee had received a grant - whether the petitioner was wholly or substantially financed by the government of National Capital Territory of Delhi GNCTD ? - Whether interest earned had to be added to the grants? - CIT-A and ITAT reversed view taken by A - HELD THAT - The view taken by the Tribunal and the CIT(A) is wholesome. The provisions of Section 10(23C)(iiiac) of the Act provided for exemption to an assessee, who fulfills the conditions contained therein. This exemption is extended to a hospital or other institution, which receives and treats persons suffering from illness or mental defectiveness or receives and treats persons during convalescence or those requiring medical attention or rehabilitation, and exist solely for philanthropic purposes and not for purposes of profit and is wholly or substantially financed by the Government. The exemption makes it clear that the grant should exceed such percentage of total receipts (and not total income) including voluntary contribution as may be prescribed. The explanation appended to Section 10(23C)(iiiac) was inserted via Finance Act 25 of 2014, with effect from 01.04.2015. The threshold has been pegged at 50%. Notably, the period we are concerned with is FY 2012-13 (AY 2013-14). In the instant case, upon reading the provisions of Section 10(23C)(iiiac) of the Act and Rule 2BBB of the Rules, it is clear that in the given period, the government had to either directly fund the concerned hospital or institute or seek adjustment by factoring in the interest earned on previous grants. In case there was no adjustment, then, the interest, even according to Mr Maratha, would have to be returned to the concerned government for being credited to the Consolidated Fund of India. That being the position, we are of the view that no interference is called for with the impugned order. No substantial question of law arises for consideration.
Issues involved:
Delay in filing and re-filing the appeal; Interpretation of Section 10(23C)(iiiac) of the Income Tax Act, 1961 and Rule 2BBB of the Income Tax Rules, 1962. Delay in filing and re-filing the appeal: The appellant/revenue sought condonation of a delay of 93 days in filing and 244 days in re-filing the appeal. The delay was condoned based on the reasons provided in the applications. The applications were disposed of accordingly. Interpretation of Section 10(23C)(iiiac) and Rule 2BBB: The appeal pertained to Assessment Year 2013-14 and was against an order of the Income Tax Appellate Tribunal. The key issue was whether the petitioner was wholly or substantially financed by the Government of National Capital Territory of Delhi (GNCTD). The provisions of Section 10(23C)(iiiac) of the Income Tax Act, 1961 and Rule 2BBB of the Income Tax Rules, 1962 were central to the case. The respondent had received a grant from GNCTD amounting to Rs. 66 crores, which was 41.78% of the total receipts. The Assessing Officer concluded that the respondent could not claim benefits under Section 10(23C)(iiiac) due to this percentage. Consequently, the respondent's income was assessed at Rs. 20,72,34,969. The Commissioner of Income Tax (Appeals) reversed the AO's view, considering interest earned and a broader interpretation of "wholly or substantially financed by the Government." The Tribunal upheld this view, citing a Karnataka High Court judgment. The Tribunal held that interest should be factored in while quantifying the grant-in-aid received by the respondent. It was noted that failure to consider interest would require remittance to the Consolidated Fund of India. The appellant/revenue disagreed, arguing against including interest in the grant amount. The Court affirmed the Tribunal and CIT(A)'s stance, emphasizing the conditions for exemption under Section 10(23C)(iiiac). The exemption required the grant to exceed a prescribed percentage of total receipts. As the government had to fund the institution directly or adjust for interest earned, no interference with the order was warranted. No substantial question of law arose, and the appeal was closed. Parties were directed to act based on the digitally signed copy of the order.
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