TMI Blog2022 (6) TMI 1459X X X X Extracts X X X X X X X X Extracts X X X X ..... onent of government-grant received by the assessee is just 3.50% of the total receipts which is so less that by no stretch of understanding, the assessee can be said to be substantially financed by the Govt . Also looking at submission of Ld. AR that out of the total receipt of Rs. 109 crore, there is a receipt of examination fee of Rs. 58 crore from affiliated institutions and colleges who had in turn received grants from the Govt. as also from certain categories of students who have received grants and scholarships from the Govt. The Ld. AR submitted that the receipt of Rs. 58 crore should also be considered as receipt from Govt. We are afraid to accept this argument of Ld. AO. If the affiliated colleges / institutions / students have received grant or scholarship from Govt., it is those colleges / institutions / students who have been financed by the Govt. and not the assessee. Even otherwise although the Ld. AR has raised this point but there is no material or evidence produced before us to prove that such state of affairs actually exist. Therefore, we are not impressed by this argument of Ld. AR. Thus, assessee is not substantially financed by the Govt. and therefore not e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the State Govt. of Madhya Pradesh. The activities of assessee are to provide education, supervision and maintenance to various colleges and educational institutions as per regulations of the Govt. and to establish, maintain and manage colleges, teaching departments, school of studies, center of studies, to institute degree diplomas, certificates and other academic distinctions, etc. The assessee filed Return of Income declaring a total income of Rs. Nil after claiming exemption u/s 10(23C)(iiiab) of the act. The case was selected for scrutiny and the statutory notices u/s 143(2) and 142(1) were issued from time to time which were duly complied with. The Ld. AO completed assessment u/s 143(3) by order dated 30.12.2016 at a total income of Rs. 35,14,48,991/-, after disallowing the exemption u/s 10(23C)(iiiab). Aggrieved by the order of assessment, the assesse filed appeal to Ld. CIT(A). The Ld. CIT(A), however, dismissed appeal and did not grant any relief. Against the order of Ld. CIT(A), the assessee has filed this appeal and now before us. 4. The primary grievance of assessee emanating from various Grounds is that the Ld. AO has wrong disallowed exemption u/s 10(23C)(iiiab) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion must be allowed in assessment-year 2014-15 under consideration. However, the Ld. CIT(A) observed that the requirements of section 10(23C)(iiiab) are such that (i) the assessee should exist solely for educational purposes and not for purposes of profit, and (ii) it should be wholly or substantially financed by the Govt. Ld. CIT(A) analysed the figures of Incomes and Expenses of assessee and arrived at the same conclusions as made by Ld. AO, viz. (i) the receipts from government grant is only 3.90 crore out of the total receipts of Rs. 109.86 crore which constitutes a meagre 3.50%, and (ii) the assessee has earned a net profit of Rs. 24.68 crore from the total receipts of Rs. 109.86 crore. Ld. CIT(A) also relied upon Rule 2BBB which prescribes that the requirement of substantially financed by Govt. shall be satisfied only if the receipts from government-grant exceeds 50% of the total receipts. With these findings, the Ld. CIT(A) concluded that the assesse does not satisfy the requirements of section 10(23C)(iiiab). Ld. CIT(A) also turned down the contention of assessee that it was allowed exemption in the immediately preceding assessment year 2013-14 and hence the same must be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fee of Rs. 58 crore. Ld. AR submitted that the examination fee has been received from the affiliated institutions and colleges who had in turn received grants from the Govt. as also from certain categories of students who have received grants and scholarships from the Govt. According to Ld. AR, therefore, the receipt of examination fee of Rs. 58 crore is also a receipt financed by the Govt. Ld. AR submitted that once the receipt of Rs. 58 crore is taken into account, the conclusion would be that the assessee is substantially financed by the Govt. 8. Ld. AR, thereafter, made an alternative claim that the assessee has also received registration u/s 12A(1)(aa) read with section 12AA from AY 2019-20 onwards vide Order No. ITBA/EXM/S/12AA/2019-20/ 1016373495(1) dated 17.06.2019 issued by CIT(Exemption), Bhopal. Ld. AR invited our attention to the copy of registration-order. Ld. AR then referred to the section 12A(2) which reads as under: 12A(2) Where an application has been made on or after the 1st day of June, 2007, the provisions of sections 11 and 12 shall apply in relation to the income of such trust or institution from the assessment-year immediately following the financia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment year: Provided further that no action under section 147 shall be taken by the Assessing Officer in case of such trust or institution for any assessment year preceding the aforesaid assessment year only for non-registration of such trust or institution for the said assessment year: Provided also that provisions contained in the first and second proviso shall not apply in case of any trust or institution which was refused registration or the registration granted to it was cancelled at any time under section 12AA.] 7.2 It is also relevant to reproduce the explanatory notes to the provisions of Finance (No.2) Act, 2014 as given in CBDT Circular No.01/2015 dated 21.01.2015 in reference F.No.142/13/2014- TPL, which read as follows: Para 8.2 Non-application of registration for the period prior to the year of registration caused genuine hardship to charitable organizations. Due to absence of registration, tax liability is fastened even though they may otherwise be eligible for exemption and fulfill other substantive conditions. However, the power of condonation of delay in seeking registration was not available. This clearly goes to prove tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the pendency of appeal was entitled for exemption claimed u/s 11 of the Act. 7.4 The explanatory Memorandum to Finance (No.2) Bill, 2014, which sought to amend section 12A explains the objects and reasons for making such amendments. The explanation makes it clear that it was in order to provide relief to such trusts in respect of which, due to absence of registration u/s 12AA tax liability got attached though otherwise they were eligible for exemption by fulfilling other substantive conditions that the amendment was brought in. That being so, denying such benefit to a trust like the assessee who had obtained registration u/s 12AA during the pendency of the appeals filed against the orders of the assessing authority, by narrowly interpreting the term, 'pending before the assessing officer' so as to exclude its pendency before the appellate authority, will be doing violence to the provisions of the Statute and, as such, liable to be interfered with. Moreover, under the Scheme of the Act, sections 11 and 12 are substantive provisions which provide for exemptions to a religious or charitable trust. Sections 12A and 12AA detail the procedural requirements for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies the requirement of aforesaid Proviso to section 12A(2) and therefore perfectly eligible for exemption u/s 11 / 12. Hence the Ld. AR requested to direct the Ld. AO to allow exemption u/s 11 / 12 to the assessee, if for any reason the exemption u/s 10(23C)(iiiab) is not allowed. 9. Per contra, the Ld. DR strongly supported the orders of lower authorities qua the disallowance of exemption u/s 10(23C)(iiiab). Ld. DR submitted that the receipts from government grant is just 3.50% and therefore the assessee is very far from the entitlement of section 10(23C)(iiiab). Accordingly, Ld. DR requested to uphold the disallowance made by lower authorities. However, the Ld. DR did not make any opposition to the alternative claim of exemption u/s 11 / 12 made by Ld. AR. 10. We have considered rival submissions of both sides, perused the records, considered the provisions of law and judicial precedents. We would first deal with the claim of exemption u/s 10(23C)(iiiab). In this respect, we find weightage in the submission of Ld. AR that the Explanation to section 10(23C)(iiiab) read with Rule 2BBB which prescribe percentage quantum for judging substantially financed by Govt. , have come ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence produced before us to prove that such state of affairs actually exist. Therefore, we are not impressed by this argument of Ld. AR. In the nutshell, we derive this conclusion that the assessee is not substantially financed by the Govt. and therefore not entitled to exemption u/s 10(23C)(iiiab). 11. Now we proceed to examine the alternative claim of exemption u/s 11 / 12 demanded by the assessee. On perusal of the Proviso to section 12A(2) and the decision of Hon ble Co-ordinate Bench of ITAT, Ahmedabad in Shri Bhanushali Mitra Mandal Trust (supra), we agree to the proposition that the assessee is entitled to the benefit of exemption u/s 11 / 12 for the assessment-year 2014-15 under consideration as the requirements prescribed in the Proviso stand satisfied, viz. (i) the revenue had already granted registration u/s 12AA from assessment-year 2019-20, (ii) the assessment-year under consideration is 2014-15 which falls within any preceding assessment year , and (iii) the objects and activities of the assessee remain same. We also find that the Ld. DR did not make any objection to this claim argued by Ld. AR. But however we have to ascertain one important aspect i.e. can we ..... X X X X Extracts X X X X X X X X Extracts X X X X
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