9911796707
TMI Blog2008 (5) TMI 370X X X X Extracts X X X X X X X X Extracts X X X X ..... tate Government and entire property of assets have been created out of the funds given by the Government which are irrelevant for determining whether the institute is wholly and substantially financed by the Government or not. iii) The order of the CIT(A) for the Ay 2003-04 which is in favour of the assessee has not been accepted by the Department and appeal is pending before the ITAT. The issue has not reached finality. 2. The Assessing Officer during the course of proceedings required the assessee to explain as to how the income is exempt Under Section 10(23C)(iiib) when the grants received from the Government is not substantial because income of University or educational institution is exempt Under Section 10(23C)(iiib) in case University or educational institution is wholly and substantially financed by Government. Before the Assessing Officer, the assessee filed a copy of letter written by HRD Ministry to Director of Indian Institute of Management dated 25th October, 2006 in which it was stated as under:- The IIMs are the public institutions and these do not cease to be so by virtue of some of them not receiving Government grants both recurring and non-recurring for a cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g in AY 1999-2000 and 2003-04, the reasons in brief are summarized as under.- (a) Sub-clause (iiiab) of 10(23C) was introduced by Finance No. 2 Act, 1998. Initially it was proposed to withdraw blanket exemption available to educational and medical institutions. A large number of representations were received and it was submitted that such withdrawal will cause hardship to small medical and educational institutions as they will be required to go to the I.T.O. time and again to avail the tax exemption. In view of such representation, the Finance Minister w stated in his speech that all educational and medical institutions which are financed and managed by Government will enjoy the benefit of exemption and in respect of other institutions, the exemption was made available if the receipts do not exceed Rs. 1 crore. (b) Exemption in 10(23C)(iiiab) is on finance and not on receipts. The meaning of finance is that after meeting the expenditure from its own income, the balance requirement of funds is met by the Government. Hence; the institute can be said to be substantially financed by Government. (c) The Government exercises fairly good control over the affairs of the institute. Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned AO submitted that the issue stands covered by the decision of the Tribunal in the case of the assessee for the asst. year 2003-04. 2.5 On the other hand, the learned DR supported the order of the Assessing Officer and stated that the institute is not financed by the Government. 2.6 We have heard both the parties. The Tribunal while disposing off the appeal for the AY 2003-04 in ITA No. 870/Bang/2006 vide order dated 3.8.2007 observed as under: The Assessing Officer himself found that it is an educational institution, which is existing solely for education purpose and not for the purpose of profit. Therefore, the main criteria for the purpose of allowing exemption Under Section 10(23C) have been satisfied and accepted by the Assessing Officer. The Assessing Officer appears to have been confused the other criteria that the institute is only partly financed by the Government; therefore, exemption cannot be granted. The word "wholly and substantially" has not been explained in the Income-tax Act in relation to exemption Under Section 10(23C) of the Act. In common parlance, it would mean that the educational institution should receive substantial grant from the Governmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at institute has been set up by Government and is managed by the Government. There is excess of expenditure over income. The educational institution charge fee as approved by the Government and deficit if any can be met through grants. This is sufficient to say that the institute is substantially financed by Government. 2.9 The requirement Under Section 10(23C)(iiiab) is that institute be wholly or substantially financed by Government. It does not mean that we have to see the financing in each year. Financed here means that the institute was set with the finances made available by the Government. Such requirement is met in this case. After setting up infrastructure, the institute started imparting education and charged fees as prescribed by Government. The Assessing Officer has taken a very narrow meaning of the word 'financed'. When we say that a particular industry has been financed by a bank, then it means that industry was set up with the finance made available by the Bank. 2.10 Section 14(1) of the CAG's Act, 1971 refers that where a body or authority is substantially financed by grants or loans from the Consolidated Fund of India or of any State or of any Union ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 08 in respect of current liability and provisions. The details have been given in Schedule-VI. Such liabilities represent the earnest money deposit, security deposit, caution money, library deposit refundable and accrued liabilities. From the figures as appearing in the balance sheet, it is clear that the finance has been provided by the Government and it cannot be said that the institute is not substantially financed by the Government. Therefore, we have no hesitation to hold that the institute is substantially financed by the Government. 2.14 We have also perused the letter from the Ministry of Human Resource Development to the Director, Indian Institute of Management dated 24th August, 2006. It is mentioned in this letter that the revenue generated by the Institute belong to the Consolidated Fund of India and the Government after a conscious decision has permitted the IIMs to retain and spend the revenue so generated for their maintenance and growth. As per Article 266(3) of the Constitution, no moneys out of the Consolidated Fund of India or the Consolidated Fund of State can be appropriated except in accordance with law and for the purpose and the manner provided in the Const ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
