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TMI Blog2012 (9) TMI 947X X X X Extracts X X X X X X X X Extracts X X X X ..... s reply, submitting, ......your honour had raised two issues as to whether the institution is 100% educational or not and secondly whether the institution is substantially financed by Government. In regard to both these issues we have already submitted detailed note on various activities like Extra Mural Studies, Child Guidance Clinic etc. The institution has been set up specifically fro the purposes of imparting education in respect of social science, and therefore with a view to give better understanding of the curses taught in the institution, these activities are conducted by the institution. Thus you will appreciate that all such activities which are conducted as filed work programs for students are definitely integral to the education activity. The activities are clearly for the furtherance of education only and should be treated as such. An identical view is expressed by Delhi High Court in the case of Jaypee Institute of Information Technology Society vs. D.G. of Income (Exemption) (185 Taxman 110). We therefore have to state that the issue of whether the institution is 100% educational or not is very clear. As regards the issue of whether the institution is subs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ual receipts do not exceed a specified amount. It is not the legislative policy to subject small educational bodies have aggregate annual receipts below the specified limit, to audit either by the Government or by the accountants as defined u/s 288 of the Income-tax Act. 5. The AO, implyingly held, that the benefits of exemption shall not be available to the assessee as per the following computation Applying the above definition, in the case of the assessee, Total Government Grant during the year = ₹ 12,79,13,233/- Total Expenditure during the year = ₹ 22,49,72,584/- 75% of the total expenditure of the institution = ₹ 16,87,29,438/- Therefore going by the above definition (supra) the assessee education institution is not wholly or substantially financed by the Government for the purpose of section 10(23C)(iiiab) of the Income Tax Act, 1961 as the Government grant of ₹ 12,79,13,233/- is less than 75% of the total expenditure i.e. ₹ 16,87,29,438/- of the assessee institution and therefore the benefits of exemption under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee is entitled to the benefit of the aforesaid provision. It is pertinent to note that the said appeal is in which the above observation had been made was dismissed by the Karnataka High Court at the stage of admission itself i.e. the High court did not find any substantial question of law in the matter. This decision was followed by the Karnataka High court in CIT vs. Indian Institute of Management (ITA no.529 of 2008) reported in 196 Taxman 276. 9. The CIT (A), therefore, held: As regards the term substantial I am in agreement with the contentions of the appellant. In the Light of foregoing discussion and respectfully following the decisions of the Karnataka High Court to which a reference has been made in the foregoing paragraphs, I uphold the contentions of appellant and hold that the appellate institution in the present case can be regarded as substantially financed, within the scope of section 10(23C)(iiib) and hence exemption shall be allowed. 10. The CIT(A), therefore, reversed the findings of the AO and allowed the claim, as made by the assessee, u/s 10(23C)(iiiab). 11. Against these observations, the Revenue is in appeal before the ITAT. 12. Befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... financial assistance falls below the stipulated 75%, CAG will still continue to conduct the audit. If the strict interpretation of the AO s order is to be considered, then the moment financial assistance from the Government goes below 75%, the Society or any person, is out of the parameters of CAG. 17. According to us, this could never have been the intention of the CAG. We cannot subscribe to the observation of the AO, when he defines the expression, substantially financed by the Government to mean nearer to 100% or by relying on Explanation to section 14(1) to be not less than 75%. 18. Looking from another angle, that too, strictly following the provisions of the Act, that to claim exemption under section 10(23C)(iiiab), as per clause (vi) of section 10(23C), an approval has to be sought from the prescribed authority (i.e. CCIT or DGIT). If at all the claim of the assessee was questionable, even minutely, the approval would never be given. On the other hand, AO s implied argument that all educational institutions and universities covered under section 10(23c)(iiiab) are required to have their accounts audited from CAG, cannot be accepted, because, had there been any inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Karnataka High Court at the stage of admission itself i.e. the High court did not find any substantial question of law in the matter. This decision was followed by the Karnataka High court in CIT vs. Indian Institute of Management (ITA no. 529 of 2008) reported in 196 Taxman 276. 21. We find that in the case of National Education Society, the Court accepted 36.42% to the substantial finance which entitles the assessee to the benefit of the provisions of section 10(23C)(iiiab). Even in the case of IIM the grant equal to 36.42% was held to be substantial finance by the Government. 22. In the instant case, the grant available was 56.86%, much higher than the grants accepted to be substantial by the Hon'ble Karnataka High Court. 23. With these observations and respectfully following the decisions of the Hon'ble Karnataka High Court, we do not intend to disturb the findings of the CIT(A), which we sustain and as a consequence thereof, reject the appeal of the Revenue. 24. It is strange and interesting to point out that this is a classic case, where the assessee has made inputs towards finances, from its own source and saved tax payers money, but, the AO, in such a ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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