2014 (7) TMI 1395 - HC - Income Tax

Benefit of exemption u/s 10(23C)(iiiab) - HELD THAT - The materials on record discloses that the assessee exists only for educational purposes and it has not existed for any private purpose. The institute is controlled by the Board appointed by the Government. Government of Karnataka granted 23 acres of land to the assessee which was valued at the relevant point of time is Rs. 50.00 crores. The institution has been built up by the funds granted by the Karnataka Government and UGC to the extent of Rs. 8.75 crores upto 31.03.2005. Therefore, the assessee being only the owner and subsequently, financed by the Government as per legislative sanction given to the university in Schedule-XXIII is entitled to receive any contribution or grant made by the State Government; University Grants Commission or the Central Government; any contribution made by the Bar Council of India; Bar Council of India Trust or the State Bar Councils etc., The findings of the Tribunal that the assessee is subsequently financed by the Government and therefore, the assessee is entitled to the benefit of exemption u/s 10(23C)(iiiab) cannot be found fault with. Decided against the Revenue.

Summary

The Karnataka High Court, presided by Hon'ble Mr. Justice N. Kumar and Hon'ble Mr. Justice B. Manohar, addressed an appeal by the Revenue challenging the Tribunal's decision to grant tax exemption to the National Law School of India University under Section 10(23C)(iiiab) of the Income Tax Act. The core legal questions were whether the term "wholly or substantially financed by the Government" includes past financial contributions and infrastructure value, and whether the institution must receive all funds from the government to qualify for the exemption.

The court noted that the National Law School exists solely for educational purposes and is governed by a board appointed by the Government. The Government of Karnataka provided substantial support, including 23 acres of land valued at Rs. 50 crores and funds amounting to Rs. 8.75 crores from the Karnataka Government and UGC up to March 31, 2005. The court held that these contributions qualify as substantial government financing, entitling the institution to the tax exemption under the specified section. Consequently, the court upheld the Tribunal's findings and dismissed the appeal, ruling in favor of the assessee and against the Revenue.